What are Title Companies and What Do They Do?

A title company is a third party that works for both a buyer and the lender, as they are responsible for researching and insuring the title of the home you are purchasing. The title company will issue you an insurance policy that will protect you from unforeseen liabilities, which is an important step in the closing process.

In this article, we will discuss what a title company is and what they are responsible for.

Chain of Title Is Researched

Title companies are responsible for researching the "chain of title," which is the history of the home's ownership. For example, a simple search from a title company can easily uncover a second owner of the home before you close on the mortgage only to find that 50% of your home is owned by someone else. A title company will also keep an eye out for preexisting liens, as well as ensure that all the property taxes are paid in full.

A Property Survey Will be Performed

The title company that you choose to work with will conduct a property survey. Surveys are required for buyers to close on a home in many states to ensure that the home occupies the space that is present on the title. When the research is complete, the company will provide you with a report called a "title abstract." Both you and your lender will receive a copy to review before closing on the home, though it is not your insurance title policy. That will be a separate document that you will receive from your agent.

Title Insurance will be provided

Title companies will provide two different kinds of title insurance policies: one for you as the buyer and one for your lender. As your lender has a financial interest in your property, title insurance will protect them as it does for you. Typically, the seller of the home will pay for your title insurance policy, and you will pay for your lender's policy. Unlike other insurance policies that require you to pay a monthly or yearly premium to maintain your coverage, you have to pay title insurance when you close on the property, meaning that you will be covered as long as you are the owner of the home.

Establish the Holder of the Title

It is important to work closely with your title company to ensure that the wording on your title describes accurately who has the right to transfer ownership. The phrasing of the title will also affect how you pay property taxes and fees if you sell your home down the road. Whether you are married or not, your title company will help you to understand what is best for you and what the title will say.

Help to Manage the Closing

Title companies typically manage the closing process of your home, with the service known as a "settlement." They will appoint a signing agent or real estate attorney to review closing documents and finalize the title and deed transfer.

Funding will be Organized

Title companies will hold and help to manage money in escrow, with the assistance of an escrow agent. An escrow account in the world of real estate is a savings account that is managed by a third party that is responsible for distributing payouts with certain conditions in place. Escrow accounts are very common in transactions in real estate as mortgage lenders want to ensure you have enough money for particular expenses. Parties involved in the purchase of the house will need to send or receive funds that are related to the transaction. We recommend working closely with the agent from your title company as they can assist you in the transfer of funds through convenient and safe methods.

What Issues Can Title Companies Uncover?

Title companies are skilled at finding issues that can keep a home from being sold legally. The following problems include:

• Liens.
• Fees or works performed that were not paid.
• Heirs or undisclosed owners that have claims to the property.
• Special assessments of the property.
• Loans that are outstanding on the home.

If there are issues uncovered by the title company with the property, they will notify both the buyer and the seller.

Conclusion

A title will show who has owned the property in the past, containing a detailed description of the property and showing if there are liens on it. Your title company is a neutral third party that is hired by you through a lender that will research and ensure the title of the home that you are interested in buying. They will also manage the closing of your home. Working closely with a trusted real estate agent who can help you with finding the best lender and therefore title insurance company can aid you in smooth sailing on closing on the house of your dreams. Trust the real estate professionals at Benchmark Realty to guide you in finding and settling down in the home of your dreams in the many beautiful, historic urban neighborhoods that make up Nashville, TN, today.