How Title Companies Protect Real Estate Transactions
Kerubo Ondieki
What are Title Companies?
Title companies make sure a property is legitimate and grants title insurance to said property. Title companies also supervise escrow accounts to protect lenders and buyers from
Who uses them?
A title defines who has ownership rights of a given property, this can be a person or a business entity. Ownership includes explicit, implicit, and hidden concerns regarding a property.
A title company offers a number of services relating to a property title including title insurance (to protect against unforeseen encumbrance), property information, and surveys including plat maps and chains of ownership, and home warranties. Title companies provide such paperwork as proof of clean title before payment changes hands and ownership is transferred.
How do title companies get involved?
Before people sign any serious paperwork for the purchase of property, they "Title Report" from Title Companies to see all and every detail about such property. The report is acquired in what is commonly known as a Title Search.
During this phase, they explore the history of the property, including potential liens or unresolved mortgages, and that property tax and utility payments are current. All of the previously mentioned factors have to be settled before any legal transfer of the title to the buyer in order for them to become the rightful homeowner.
After the title search follows the property survey where the title company accounts for the property lines of a piece of land. This is often in line with the plat maps shown on Title Reports. If there is no conflict with the property lines, then the title company will let the buyer know at closing.
However, if there is any overlap in property lines, the title company would relay that information to the buyer's real estate agent and lender; this is important because if the property lines extend more or less than initially believed, the price of a property would be affected proportionately.
Following the property search is the title opinion letter: here, the title company states that the property is available and ready for the buyer to purchase.
After this stage, the buyer will then buy Title Insurance from their title company to protect themselves against any potential conflict in title ownership; by doing so, in the event that the buyer should not have been sold the property and are not the owner, they will be reimbursed the money they have paid on a property by the title company. This is a critical part as it eliminated any chances of corruption or land grabbing.
Being protected by Title Insurance, if you have purchased a home and someone else claims to own the title to the property, your policies will reimburse you or represent you in the court of law.
Title companies will also help the buyer choose a home warranty company that works for them. The home warranty company will aid a new homeowner in replacing, repairing, and/or servicing major household appliances, saving the homeowner inordinate amounts of money if they had done so independently. Title companies only recommend home warranty companies to buyers if a listing agent of the buyer's agent has not already done so.
Towards the end of the transaction, sometimes title companies simultaneously work as an escrow agent and a settlement agent. They prepare all of the legal documents; the title deed, loan documents, tax certificates, title insurance policies, etc., and interpret them to both the buying and selling parties, fulfilling the role as a settlement agent.
If they act as an escrow agent, they collect money from both parties, transfer money to either lenders or vendors. Then after all signatures have been collected and verified, title companies take the documents to the court to be filed, finalizing the transaction.
Overall, title companies are an essential part of a secure deal on a property. They protect both the buyer and the seller in the transaction and absolve potential conflict, acting as a perfectly impartial third party.
