The answer to that question is unequivocally YES! When you decide that you want to buy a home, what do you believe are the two most important things to consider? That’s easy, who are you going to use as your REALTOR® and who will help you with your loan. Well, you missed the third and maybe the most important partner in the transaction, your title company. We always think of the REALTOR® and the Loan Officer (Lender) but rarely do we think about the title co.
What does a Title Company do?
Title companies are vital to the real estate process and generally perform three key functions: They determine and eliminate issues that might jeopardize your ownership rights; They provide insurance policies to protect the homeowner and the Lender from any issues; and they handle all of the closing details, including the money involved in the transaction and paperwork for filing. That’s some pretty important stuff!
Title Companies determine and eliminate issues that might jeopardize your ownership rights and provide insurance policies that protect the homeowner and the Lender. They provide the title search and the title insurance necessary for your home purchase. The title search looks for title defects like errors in public records, unknown liens and forgeries. Your title insurance policy will protect you against any past title defects if they arise in the future.
When buying a home and using financing, the title company issues two policies. One is a Lender’s Policy and the other is an Owner’s Policy. The Lender’s Policy protects the Lender and the Owners Policy protects the homeowner. Once an Owner’s Policy has been bought, it’s good until the end of time. Title Companies can also handle, examine and insure cash transactions and issue stand alone owner’s title insurance policies while protecting the buyers from all of the pitfalls and liability exposure.
The last key function that a title company handles is all of the closing details, money involved and paperwork for filing. Generally after a title co does a search and determines that they are willing to insure the purchase transaction, that info is sent to the Lender. Once the Lender clears the loan, they send closing instructions to the title co. The title co then takes the closing instructions and puts all of the info into forms that are signed at closing for settlement. Some of these forms are filed with the state and county in which the purchase happened in order to ensure the Owner has a legal right to the property and it’s completely documented. In addition, all of the money involved in the transaction is collected and disbursed by the title co. Oftentimes, as we mentioned earlier, the title company is an afterthought. Given the amount of info they handle and process with direct influence on your purchase transaction, they should be considered a much more important cog in the wheel of buying a home!
Who should I pick?
I’m buying a home. Which title company should I choose? We’ve addressed above why this is such an important decision. We believe in the saying that, “real estate is local.” Only a local title company, operating near you and the property you’re looking to buy or sell has the truly deep knowledge of the local real estate customs and regulations. Generally, people working at your local title company live in or near the same communities as you, and are committed to taking care of their new neighbors, even after closing.
Too many homebuyers are paying high closing costs because of the proliferation of broker affiliations with title companies and joint venture operations between real estate brokers and title companies. When title companies pay money in exchange for client referrals, which is the general idea for these structures arrangements, they pass these costs along to the homebuyer and seller in the form of higher title fees. This is yet another reason why choosing a truly independent title company matters so much. With all of this being said, there are a lot of local choices out there. Take the time to do some research and speak to someone at the title company. Normally, if all things check out, you get a good feeling from them after speaking to them and they’ve been referred to you by someone you trust, then they are probably the right fit!