During your home hunting, you have probably come across many people and organizations; real estate agents, home sellers, mortgage lenders, and others. A title company is an entity you may not be familiar with, and it’s time you learned!
We’re here to help explain what a title company is and overall title company responsibilities, so you are better prepared when purchasing your home.
Let’s start with the basics.
What is a Title Company?
A title company is a third party that helps move along the home buying/selling process in a smooth manner. It researches property titles, issues title insurance, holds funds in escrow, and acts as a closing agent.
What is a Title?
A title is documentation that shows who owns the property or asset. It says that whoever owns the property has the right to use it and do what they want with it. When buying a property, the title needs to be “clear” or not have any liens or claims on it.
What Are the Responsibilities of a Title Company?
Title companies are responsible for many important steps in the homebuying process, from doing title research early in the process, to closing on the home.
Title Research
When buying a home, you want to make sure no one can make claims on it down the line. It sounds like an impossible situation, but that could happen to you if you buy a house with title issues. That’s where the title company comes in. It makes sure there are no problems with the title that could prevent the sale of the property.
Common title problems include:
- Liens on the property
- Public records errors
- Encroachment with neighbors
The title company investigates potential problems by reviewing public records or by conducting a title search.
Issuing Insurance
Title companies also issue title insurance to buyers. Title insurance protects homebuyers and mortgage lenders if there is an issue with the title. For example, after you purchased the house, someone may come forward and say they have a claim against the house; They may even sue you.
Title insurance covers the cost of fixing the title issue, or it gives you money if you lose the property. Coverage is usually about $1,000, but it depends on the price of the home and what state you live in.
Escrow Account Management
If you haven’t heard of escrow before, a simplified definition is it is a third party that holds funds for the buyer and seller. Title companies and escrow work together in that title companies are usually the ones that have an escrow account. This means that title companies also do escrow work like holding the escrow deposit and dispersing funds at closing.
Oversee Closing
Another responsibility title companies have is to oversee the closing on a home. Sometimes an attorney may do the home closing process instead of the title company; it depends on where you live.
As the closing agent, the title company has the responsibility of drafting documents, obtaining the buyer’s and seller’s signatures, making sure that all documents are sent to the right people, and distributing funds to all parties.
Title Company Fees
Title company fees are part of the costs when closing on a home. The title company closing costs in California are about 2 to 5 percent of the home’s purchase price and include a list of fees and services you have to pay.
Title company fees include:
- Cost of services provided
- Escrow fees
- Title company closing costs
- Cost of title insurance
- Title search fee
Options for Title Companies
When it comes to picking a title company, you can do the research yourself or use the company your real estate agent or mortgage lender recommends. If you want to choose a title company, then make sure to take into consideration their reputation, cost, and location.
Take a look at online reviews for the title company; Are they positive? negative? Are there no reviews? Ask family and friends who recently bought or sold a home for any recommendations on a title company they used. With cost, you’ll want to see if the company charges high prices or if it charges extra fees for its services. Location is also important. You won’t want to drive across town and spend lots of time in traffic to sign forms.
Easier Than Ever Escrow
Want a simpler escrow process? Contact us at New Venture Escrow. We can help sell your home or help you buy a new one. Have more questions about the real estate process? Our resources are great for familiarizing yourself with everything you need to know!
