When you’re house-hunting, you’ll hear the phrase ‘title company’ quite a bit. But what is it exactly, and what does a title company do to help the home buying process be safe and secure?
If you’re buying a home, it’s essential that you know the answer to this question and understand the role title companies play in real estate transactions. This article will answer common questions homebuyers have about title companies and provide an overview of their services.
What Is A House Title?
A house title is a document that shows legal ownership of a property. The person who holds the property title for a particular house is considered the homeowner. They can decide to transfer it or sell it anytime if they have satisfied all outstanding debts and mortgage payments.
The title also proves that the owner has paid all required property taxes on their home, giving both the homeowner and potential buyers peace of mind. Additionally, it is known as a deed, and in most cases, it is held by title companies.
Is A Title The Same As A Deed?
When you’re buying a home, you need a title. But that’s not all there is to it. Don’t forget about the deed!
A title is a legal document that states you are the owner of your house. Without it, you have no proof that the home is yours. You can’t get a loan, and you can’t sell or rent out your home without it. Make sure you get a copy of your title when you close on your home and keep it somewhere safe.
On the other hand, a deed is a document that transfers ownership of your home from yourself to another person. You need to sign a new deed when you sell your home, or the transaction cannot occur, so make sure you sign carefully!
Important Functions Of A Title Company In Home Buying
A title company provides important functions when you’re buying a home. They help identify any issues with the property title, ensure a smooth closing and provide necessary services to both buyers and sellers.
Your real estate agent or mortgage lender will ask you to choose a title company when you buy a house. This is a vital step in the home buying process because it’s very likely that this will be the person overseeing the details of your purchase transaction.
Here’s what you need to know before choosing a title company—and what a title company does to your real estate transaction.
The Title Company Conducts A Title Search
If a buyer decides to purchase a property, the next step is to conduct a title search. A title search reviews public records to verify that a property is being sold under its correct ownership without any liens or other restrictions. When you type in the address of your dream home on Google Maps and click on the home icon, you can see some of the records used in this process.
Furthermore, a title search will show if there are any outstanding debts against the property, such as an unpaid mortgage loan, homeowners’ association dues, or tax liens. These debts must be paid before the transaction can close, if there are any.
If they’re not paid off before closing, they become your responsibility once you buy the home. The seller may agree to pay these debts at closing; however, that obligation should be spelled out in any agreement between you and the seller.
The Title Company Manages The Closing Process
Buying a home is a process you’ll be walking through for the first time. Getting an expert on your side can help.
A title company will manage the closing process and ensure all documents are complete and in order. Moreover, they also communicate with all parties involved, prepare a HUD-1 settlement statement, and hold the escrow funds until they have to be disbursed to all parties involved.
Also, the title company manages the escrow account, which will contain all of the money used during the closing. This includes the buyer’s down payment, seller’s proceeds from the sale, and other fees or charges related to purchasing your home.
The title company will manage the escrow account until it comes time for you to close on your new home. At this point, you’ll go over your document package with them and sign everything needed for closing day. Then you’ll get your keys!
What Does A Title Company Do For The Seller?
Title companies may seem intimidating, but they can offer the homeowner many benefits. But what does a title company do for the seller exactly? The roles and responsibilities of a title company for the seller include:
Represents The Seller’s Interests At Closing
Your title company will provide you with a settlement statement that outlines everything that needs to be paid at closing, including the purchase price and any legal fees or commissions. At the close, they will disburse funds accordingly and take care of any other paperwork required by your state or local jurisdiction.
Releases The Seller’s Lien
The title company will make sure it releases your existing mortgage (or other liens) once all closing documents have been signed and reviewed. They may be required to record that release in public records because some states require such filings to be made within 30 days of closing.
They forward the proceeds to you as determined in your purchase agreement. If there are any funds due to settlement costs, they’ll deliver those along with a final document once completed.
Handling Deed Transfer
A title company handles the deed transfer from your name into theirs or an entity name designated in your purchase agreement (such as an LLC). This can vary by state but typically involves both parties signing off on multiple documents for the public record, making it official!
What Does A Title Company Do In A Refinance?
When you refinance your mortgage, a title company will perform much of the same work as when you buy a property. This includes researching the title to ensure that no new liens have been placed on the property since you purchased it and that old liens have been released. The title company also ensures that your lender’s interests in your property are protected by filing another lien against the home.
In addition, in a refinance, they may be responsible for collecting and distributing funds at closing. Also, they prepare new paperwork such as a deed or mortgage.
A new survey is required when transferring property ownership through refinancing in many states. If this is true in your area, the title company can arrange to have this done as part of its services.
A Title Company Issues Title Insurance
Another common question from home buyers is ‘what does a title company do regarding insurance?’. A title insurance company issues title insurance for property owners. This type of coverage protects you against any issues that may arise with the title to your home or other pieces of real estate.
Home purchases are likely to be the most significant investments many people make. With that said, it is vital to ensure that the terms of ownership are accurate and clean so as not to cause problems down the road.
Two Types Of Insurance Policies
There are two types of title insurance policies available for purchase. The first is called an Owner’s Title Insurance Policy, and the second is called a Lender’s Title Insurance Policy. Each protects you differently, and each has its own cost.
There are subtle differences between the two types of policies. Still, they both offer similar protections to you as a homeowner or to your lender as your mortgage holder.
Read on to learn more about the coverage provided by each policy and how you can protect yourself when buying a house.
An owner’s title insurance policy protects the buyer against risks to the property, including issues with the property survey, encroachments from neighboring lots, and liens on the property from unpaid taxes or legal costs. Title insurance is critical when the previous owner received foreclosure proceeds or had their mortgage forgiven.
In addition, an owner’s title policy also protects against some unknown risks like fraud that were not identified in the search process. Title insurance is paid for once at closing but remains in effect as long as you own your home. It represents one of your best assets in a real estate deal.
A lender’s policy protects the lender’s investment in your mortgage and covers any problems related to your loans, such as fraud or missed payments. This policy requires the lender to ensure that the loan is valid.
Moreover, the lender’s policy will likely cost you a few hundred dollars, but it’ll protect their investment in your home. You are not eligible for a refund on this policy because it only covers errors related to the mortgage itself—not issues with your house’s title.
What Is A Title Insurance Premium?
A title insurance premium is a one-time fee paid at closing. The premium amount varies depending on where you live, how much your home is worth and other factors.
Like most forms of insurance, title insurance protects you against risk. In this case, it’s the risk that someone else has a claim to your property or that there are defects in the paperwork related to your property.
How Much Does It Cost To Hire A Title Company?
Title companies are primarily paid at closing. So, unless you’re working with your real estate agent to write an offer on a home, you probably won’t be paying anything up-front to get the title search process started. Instead, the seller pays for the entire thing.
Once you’re ready to close on your home, several fees will be associated with your title company services. Most of these are negotiable, and it’s essential to ask your real estate professional what they typically negotiate for their clients to stay competitive in your area.
How To Choose A Title Company?
There are several factors to consider when choosing a title company, so we’ve put together this shortlist to help you ask the right questions.
- Ask your real estate agent for a referral. Most agents have worked with many different companies and will be able to give you some insight into who they work best with.
- Look at the company’s reputation. Check their ratings on sites like Yelp or Google Reviews or see if they have any reviews on their website.
Ask about the legal fees involved in working with them.
What To Expect From A Good Title Company?
When you’re buying or selling a home, there are a lot of details to keep track of. One of the most important is the title company you choose.
The title company’s job is to make sure that the house you want to buy is available for sale. Therefore, check whether there are any liens against the title and record the ownership transfer with your local property office. They take care of all these details so that you don’t have to worry about them.
A good title company will:
- Be reliable and trustworthy. You’ll want to work with someone who can be trusted to handle all the sensitive financial information involved in buying or selling a home.
- Have a reputation for being fast, efficient, and thorough. You don’t want your transaction held up because someone missed something in your paperwork (or because they didn’t know you needed specific paperwork). A good title company will make sure everything is in order before closing.
- Have competitive rates for their services. A good company will be upfront about how much it will cost you to use their services and how long it will take from start to finish (if anything is holding up your deal, they’ll let you know).
A professional title company can significantly increase your chances of closing the deal. They’ll help you avoid common pitfalls, and they’re more likely to find problems before they snowball into major issues.
Because they often have direct contact with the agents involved in a real estate transaction, they can help ensure that nothing is missed, saving you time and money. And because they work with so many different types of buyers, they’ll know how to guide you through the process from beginning to end.
Do you want to purchase or sell a property? Get in touch with a qualified real estate agent who will be looking out for your best interests now. HomesbyArdor has assisted hundreds of individuals in achieving homeownership, and they can assist you as well! Visit their website to see all of the listings they have available.
Kris Reid is the CEO of Ardor SEO, a company that helps real estate professionals get more leads and customers to predictably grow their business.
Over the years, Kris acquired extensive knowledge of SEO and its practical applications in various industries, with the main focus on real estate.
In 2021 Ardor launched the Icons of Real Estate Podcast to share proven strategies from the top producing icon agents with the real estate community.
After obtaining the real estate license in 2022, Kris joined eXp Realty and launched Homes by Ardor, the platform that was built to be the fastest way to buy or sell a house. Homes by Ardor also provides leads for its partner companies and realtors.
Buy and Sell Your Property in One Place
Our team of experienced real estate agents and user-friendly platform will help you streamline the process of buying or selling your home