A title company usually plays a large role in the formal closing. However, many people are left wondering what does the title company actually do. Title companies work to help sellers transfer their titles, and help buyers take possession of titles. In addition, they also conduct title searches for any existing claims on properties, prepare title insurance for sellers, and maintain necessary escrow accounts for sellers and buyers.
Title Companies have to do extensive research of records to verify the seller’s right to transfer ownership. The purpose of all this research is to discover claims or defects that may limit the owner’s right in transferring the property. During the transaction the title company will usually hold what is called an escrow account. This account contains the funds needed to close on the home, they are held to ensure that there is money at time of closing. At the time of closing a settlement agent from the title company will bring all the necessary documentation, explain it to the parties, collect closing costs and distribute monies to the appropriate parties.
Title companies also issue title insurance, there are two types, owners title insurance and lenders title insurance. Owner’s title insurance is your assurance of protection against economic loss if a title defect is ever discovered, and a claim is filed against your property. In the event that a claim is filed against you as owner of your property, the title insurance will cover your legal expenses, court costs and related fees. If the claim against the property is valid, then the title insurance company will reimburse you for your loss up to the amount of the policy. The other type is lender’s title insurance, which protects the mortgage company. The home buyer, will pay for the lender’s title insurance when you close on the house. It is a good idea to get owners insurance as well as buyers title insurance to cover all parts of the transactions.
The last job of a title company is to ensure that the new titles, deeds and other documents are filed to the appropriate entities to properly transfer ownership. Picking a good title company is crucial to ensure a smooth purchase of a home. It is important to find a company who will take their time, and do their due diligence to check that everything is known about the property you are about to purchase.