Home buying is one of the largest investments most people will ever make. It can be a first-time homebuyer or an experienced investor; the process is quite complex, starting with financing and negotiating terms and eventually signing on the dotted line. Of all the aspects that play a critical role in the buying process, Title Company gets the least attention.
But what does a title company do? Why should homebuyers work with one? Let’s break it down.
A title company plays a very critical role in checking whether the property you are buying carries a clean and marketable title. The “title” to property simply refers to the legal right of ownership to the property, and it is the job of the title company to ensure that that right is free from any defects that may adversely affect ownership.
The primary roles of a title company include conducting a title search, issuing title insurance, and facilitating closing. Each of these functions is aimed at protecting the buyer (and lender, if applicable) from all future disputes over the property’s ownership and other claims.
One of the very first and most important tasks a title company performs is a title search. It is a comprehensive investigation into the history of the property to ensure that the seller is the rightful owner and that no one else has any legal claims on the property.
During a title search, a title company reviews public records, such as deeds, mortgages, liens, and judgments, for any problems that may arise in the sale. Issues commonly found during a title search include the following:
A title search can reveal potential issues that may surface later on. As a result, a title company can pay attention to these issues well before closing and enable buyers and sellers to address them before closing.
Once the title search is completed, the title company will issue title insurance. There are broadly two categories of title insurance: owner’s title insurance and lender’s title insurance. In most cases, the buyer would pay for the owner’s title insurance, but the lender would usually insist that they also obtain a lender’s title insurance policy.
This would safeguard the buyer against unforeseen issues that may not be detected from the search done on the title prior to the closing of the purchase. In case the claim of interest arises after closing, such as a long-lost heir comes out with a valid legal right to the property. It will also cover legal defense costs against the purchase title, and it may be reimbursed for other potential monetary losses as well.
This safeguards the lender’s investment in the property. If the title is not valid following the sale, it will recover all the losses incurred by the lender. It does not cover the buyer. It is a one-time premium that is paid at the time of closing. With the help of title insurance, you can rest assured that your property is legal to you and that no unwanted legal disputes are popping up.
The title company also facilitates the closing process, which is the last phase of buying or purchasing a house. They include the following:
Now that we have learned what a title company does, let’s dive into why homebuyers should always use one.
The most obvious reason to use a title company is to be certain that the property you are purchasing has a clean title. If a title search isn’t done, you might unknowingly purchase a property that has legal issues not resolved, like unpaid debts or ownership disputes. Such problems can cause a war of litigation over money or even, in the worst case, loss of property.
Title insurance provides comfort to the home buyer as he is aware of being protected from any forthcoming title problems and being financially safe. In case of a claim against your ownership, title insurance can cover the legal cost incurred in the process of defending your property rights and refund your financial losses.
A title company assembles all the documents that will be required at closing and ensures everything is in order. Any home closing can be complex, but the title company will manage all of the logistics to ensure that both parties are always on the same page so that the entire process flows smoothly. Delays and last-minute surprises are minimized because of this.
Title companies are staffed by experts who know all there is to know about the title process. They can provide you with assistance when getting through this somewhat confusing step of the home-buying process. They can answer your title-related questions about closing costs and other issues involved with the transaction.
If you finance the home purchase through a mortgage, you can bet the lender will require you to use a title company. The bank needs to know that the property has a clear title as a protection for their investment; otherwise, financing might be impossible without a title company.
A title company would ensure that the property you will be buying has a proper and undisputed history regarding ownership. A title company takes you through all sorts of details, including a complete title search, title insurance, and closing logistics. In this way, when you entrust your investment to a title company, it ensures that future legal headaches are kept at bay, and finally, peace of mind is gained that the process of buying the property will go through hassle-free. So, in real estate transactions, it is really the right professionals who can make all the difference.