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!

Is it worth getting a survey done?

When purchasing a property, there are many different expenses, some of which seem to overlap. One expense that is frequently questioned is whether or not it’s worth paying for a location drawing, boundary survey, or saving the money and going with no survey at all. Reputable title companies will require a property survey or location drawing for single family home purchase closings. Why is it required? Oftentimes the Lender requires that the Lender’s Title Insurance policy does not take exception to survey matters and in order to do that, a survey is needed for review. In addition, a survey or location drawing, ordered by a title company tends to be significantly less expensive than ordering one after you’ve bought the home. Most title companies have relationships with surveyors already and b/c they send them a large amount of business, savings is passed onto the buyer. You’re also going to get a copy of the survey at settlement and not only is it a cool thing to have but it can be useful when putting up a fence or if some type of conflict arises with a neighbor about where your property ends and theirs begins.

Are there any risks?

As we become more and more reliant on technology for everything related to real estate, cyber fraud has become a significant security threat. Any time large sums of cash exchange hands, you must be super careful and vigilant. B/c of these threats, title companies will only send wiring instructions to clients via email, in a secured format, and only when requested. As a buyer or a seller involved in a real estate transaction, you can take some precautionary steps to avoid issues. Always verify wire instructions by calling your contact at the title company and/or bank directly. Pay attention to email addresses and make sure a fraudster isn’t trying to mimic one with just a small change that you may not notice. However, just being aware that this is a problem and being super careful is half the battle.

Bottom Line

Mr Lister Realty cares about our clients, our buyers and sellers. We know this type of information is crucial in making good decisions when you decide to buy or sell. Title Companies are very important in making your sale or purchase a success. We want our clients to have as much information at their fingertips as possible. We thank Bret Devich, Owner at Definitive Title, for providing insight into the importance and responsibilities of a title company.