A title company typically acts as a compliance officer after you have sold or bought your home. They will work throughout the process to ensure the entire transaction is legal and there are no errors about ownership. Title companies are an essential part of the sale or refinancing of a home. Without the full administrative support of a title company, the full process of buying and selling a home would be a complicated and challenging process.
Complete The Title Search
The first role of the title company in the sale of a home is to conduct a search of the history of the property. This will include a search of all previous liens, transfers, and owners to ensure that the title is fully clean and available to be transferred to a new owner. While there are not typically issues with titles, the following are some of the most common that will show up during a title search.
1) Leases – Is the property under a lease to another party? If it is, the title search will reveal this, even if the agent or seller neglected to do so.
2) Liens and Unpaid Taxes – In the event of a sale of the property, all liens and taxes must be fully paid for a clear title. Typical liens include unpaid HOA dues, home equity lines of credit, as well as a mortgage. Any fees will need to be paid in full at the closing for the title to be transferred over to a new owner.
3) Easements – An easement allows another individual the right to enter or use your property for a purpose. This is a non-possessory right, simply meaning that the individual does not possess or own the property, they only have access to it. One of the most common forms of an easement is a right of way easement, in which another individual is offered the right to pass through a property. This is typically seen in the way of shared driveways, in which one neighbor owns the property of the driveway has been built and the other is allowed to pass through the property.
When a title search is complete, the title company will offer a full report on their findings. A mortgage company will not issue a mortgage without this essential step in the title process. A title search and report will reveal any potential claims and problems that could lead to future litigation. By ensuring a clear title before the sale of a home, the mortgage company and buyer are thoroughly protecting their investment. After the title company has released their findings, they will create an abstract of title, which is a summary of the report in addition to a title opinion letter, which will either confirm or deny the legality of the title.
Issue Title Insurance
The next step of the title company is to issue an insurance policy that wull protect both the lender and the buyer. Lender’s title insurance is required and will be paid for by the home buyer to insure that the value of the mortgage if there are any potential problems with the title.
Oversee Escrow and Closing
The final essential responsibility of the title company is to oversee the closing of the sale of the home and manage the escrow. The escrow account helps to safeguard the financial aspect that is required for the purchase or sale of a home, and will include earnest money, down payments, as well as any other fees and closing costs.
The title company will mange and protect all of the documents that are necessary for the closing, which will typically include all legal paperwork, deeds, and title. When you are prepared to close on the home, all of the parties will meet with the title company to sign the documents, under the careful guidance of the title company, and complete all final documentation, funding, and transfer of the title.
Disburse Funds to the Appropriate Parties
The closing of the home will require the proper disbursement of the closing funds. The lender will take this opportunity to wire the loan amounts to the title company. As a buyer, you will be required to send your portion of any closing funds to the title company.