When purchasing a home, there are many entities involved: buyers, sellers, realtors on both sides, mortgage companies, home inspectors, appraisers. And then there’s one more — the title company. Many people don’t understand the role of title companies, much less the importance of choosing a reputable one. I’m here to share the ins and outs.
What Does a Title Company Do?
Title companies verify the legitimacy of real estate titles and are also responsible for issuing title insurance for properties. This insurance protects lenders and owners from lawsuits against the property resulting from disputes over the title. In many cases, title companies also maintain escrow accounts and handle the final closing on the home. After closing has taken place, the title company files titles, deeds and necessary paperwork with appropriate entities.
How Does a Title Company Verify a Title?
Title companies conduct a thorough search of property records to ensure that the current owner’s claim of ownership is authentic. This search makes certain there are no partial owners who could later stake claim to the property. The title company also searches for outstanding liens, mortgages or unpaid taxes, as well as other restrictions, easements, etc. Before issuing the insurance, the company prepares an abstract, or summary, containing their findings, as well as a title opinion letter stating their recommendation.
Why Do I Need Title Insurance?
Title insurance policies protect lenders and owners against claims or fees that could arise from ownership disputes. There are two types of title insurance. Owner’s title insurance protects the property owner from disputes, and lender’s title insurance protects the lender. Homeowners pay for both types of insurance upon closing.
Here’s an example of how your title insurance protects you. Pretend you bought a house and a year later a man steps up and claims he is the rightful owner. After thorough investigation, it comes to light that he is telling the truth. If the title was indeed wrong, your title insurance policy should pay you the value of your home, as well as pay the lender the amount they lent you to purchase the home. Kind of important and worth it, right?
Choosing a Title Company
In many cases, realtors or mortgage lenders have title companies they work with frequently and will recommend to you. However, it’s within your right, and a smart thing to do, to research some on your own. Ask friends and families who they used and discuss their experiences. Check Better Business Bureau ratings of some local companies, and call companies and ask questions. Some questions you may ask include:
- What are your fees?
- How many years have you been in business?
- Do you have any references?
- What are some typical exclusions to title policies?
- Can you tell me a little about your research process?
- How frequently can I expect to interact with an agent?
Buying a home can be an exciting, yet complicated process. Your title agent, like your realtor, home inspector and mortgage broker, should be there to answer questions and simplify the journey. If you’re looking for a realtor in the Northern Virginia area, I’d love to chat with you. I partner with my clients to create the smoothest experience possible!