What Does a Title Company Do?
At a real estate closing, a property is legally transferred from one party to another. Closings almost always occur at a title company or a law firm with a title department. A title company has responsibility to make sure that all the documents related to the ownership of a property are in proper order before the real estate transaction closes.
Conducting a Title Search
Title companies will conduct a title search to find out if the person selling the property is legally able to do so. Court records are reviewed to ensure all liens and judgements on a particular property have been satisfied. After the court records have been reviewed, the title company will issue an opinion letter as to whether the property has a clear title. If the title is not found to be clear, the closing cannot proceed.
Issuing Title Insurance
To ensure buyer hold proper and legal claim to a property title, title companies will issue title insurance. These policies cover the owner and lender if legal disputes concerning ownership of the property arise. Since the title company has conducted a title search prior to the close of a real estate transaction, no such issues should arise. In reality, documents occasionally get overlooked or claims are made that can threaten the interests of the owner and lender after the property changes hands. If problems do arise, the title insurance company will compensate the affected parties.
Maintaining Escrow Accounts
When money is deposited by either side of a real estate transaction (binder, monies for repairs, etc.), title companies are charged with holding the money in an escrow account. With the title company acting as an impartial third party, neither the buyer or seller can claim the money was for a purpose other than closing the real estate transaction.
Recording the Deed
A deed or title for a property shows legal ownership for said property. After the close of a real estate transaction, the title company is responsible for seeing that the deed is recorded with the local courthouse. Technically, a buyer does not own a piece of real estate until the deed is recorded. Once recorded, lenders and other parties my apply liens against the real estate.
Closing the Transaction
Title companies preside over the signing of all documentation required for closing a real estate transaction, including all transfer and loan paperwork. The title company acts in the interest of all parties to the transaction. The title company will oversee the exchange of funds between the buyer, seller, and lender (if one is involved). After the closing, the title company will see that all necessary legal documents are recorded with the local courthouse.