What Is a Title Company Anyway?
Who Are These Title People?
You most likely have either attended a closing at a title company, or know that this is the place where real estate closings happen, but do you know exactly what they do? In this article we'll get into what goes on behind the scenes, and let you know what it is that they do, so that you can be a more informed consumer.
Basically they serve three primary functions, first is to perform a title search, second is to offer title insurance, we'll get into this shortly. The third is to reconcile and close the transaction, basically to balance the books and disburse funds to all interested parties.
Some Title Companies are independent and some are owned by large title insurance companies. In many states, such as Massachusetts, a lawyer who places an emphasis on real estate conveyance will perform all the duties of a Title Company.
The first and often considered the most important function is to perform what are called title searches. This entails going through county records to verify who owns the property and to see what liens are currently on the property.
Liens can come from current and previous mortgages, back taxes, state and federal taxing authorities, contractors whom are owed money and so on.
Title represents ownership of a property. If you are on title then you have an ownership stake. Title insurance, as it sounds, protects you as an owner of a property, from some unforeseen circumstance that may have some impact on your ownership. An example of this might be where there is some type of lien against the property that the seller is either unaware of, or intentionally withholding. Yes this does happen.
There are hundreds of possible circumstances that can cause a title defect, even after the property has changed hands. We don’t mention this to scare you, we mention this to make you aware of just how important it is to purchase owner’s title insurance when you buy a property. The lender will always require coverage, your protection is optional. Most title companies will offer owner’s coverage by default, if you don’t see your coverage in the GFE or Closing Documents, simply ask and they will add it for you.
While Lender’s Coverage requires a new policy each time the property is financed, Owner’s Coverage remains in force for as long as you own the property, you’ll only need to buy it once.
Reconciliation and Closing
In a typical home finance transaction, be it either a purchase or a refinance, several things happen that a title company is involved in. The first is to check the compliance and accuracy of documents from all parties. There are laws that need to be adhered to with regard to whom gets disclosed what and when. They make sure that transfer of ownership is done correctly.
The second step is to receive and escrow funds from the lender, usually via bank wire, and then disburses them out to the appropriate parties. Then, after all documents have been signed and the transaction is complete, the title company will deliver applicable documents to the recording body, such as the county. While much of the process is done electronically these days, including signing, certain documents must be recorded with hand written signatures.
Who do Title Companies represent?
While it is the job of the title company to go through your closing documents with you, they aren't your advisers, they can and will explain what each document is but they cannot advise you on legal matters beyond that. This is extremely important to understand and to emphasize that you do really need, especially when you're buying a home, your own attorney.
Don't worry, you won't need to go out and find a good title company on your own. At Poli Mortgage Group, we work with seasoned title providers that have vast amounts of experience and expertise. We have worked with these providers for years and you can be assured that they are the top people in their field.
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