“Service isn’t something we talk about… It’s what we do”
What is a title company? What do they do?
Purchasing a home, for most people, is the largest financial venture they will ever undertake. The professional services of a title company should be secured to accurately handle this complex transaction.
While many people think of the title company as simply coordinating the settlement process, their job begins well before that. The title company will do a “title search” which involves searching real estate records in the county where the specific piece of property is located. A title search will determine the legal owner of the property; reveal any mortgages, liens, judgments, or unpaid taxes that will have to be cleared before the property can be sold; and detail any existing easements, restrictions, or leases affecting the property.
Once the search has been completed, a “commitment of title insurance” is prepared for the lender and/or the prospective buyer. The title commitment distinguishes all issues that need to be completed and discloses any problems that need to be corrected in order for the buyer to receive a “clear title”. The title company undertakes correction of any problems to produce property with clear title and thru their underwriter issue a policy of title insurance covering the lender and the buyer. Once these things are done the parties are ready to exchange paperwork and “close” the deal.
Additionally, the title company generally acts as the settlement/escrow agent. This is less costly than choosing another company, and some lenders do their own settlement or closing. The closing is necessary to sign and exchange all the documents necessary to convey title, secure the lender, and explain costs to each party. This is done by preparing a closing statement. The closing statement will include the mortgage lender’s charges, charges for preparing documents, the title company’s fees, recording costs, and the amount of the payoffs to release any existing mortgages, pro-ration of city and county taxes, real estate commission fees, survey fees, and any other costs associated with the deal.
At closing, the title company will collect purchase money and closing costs from the buyer, in addition to closing costs from the seller. Once both parties have signed their particular documents and approval is given by the lender, the title company will record the legal documents (deed, mortgage, assignments, etc.) at the county courthouse. The lender will then wire funds to the title company to pay all expenses of the transaction, paying off any existing mortgages, and paying the seller their net proceeds of sale. All of this is done per the lender instructions, in accordance with the closing settlement statement.
What is a title?
A title is the evidence, of right, that a person has to the ownership and possession of land. It is possible that someone other than the owner has a legal right to the property. If that right can be established, this person can claim the property outright or make demands on the owner as to its use.
What is title insurance?
Many people are unaware that most real estate is encumbered to some extent and a significant amount of real estate is subject to title defects of varying degrees. Sometimes buyers of property are told to disregard obtaining a title insurance policy; that it is an unnecessary expense. On other occasions they are referred to title agencies which are unfamiliar to them and who write policies on companies (underwriters) whose financial stability may be questionable. Such advice could be risky and costly in the long run. You can and should choose the title agency that will provide this important and complex service dealing with not only one of the most costly purchases you will ever make, but securing your home. The objective of title insurance remains the same as it has always been – to help the parties in real estate transactions determine their rights and interests and assure the land transfer is expeditious and secure. Protecting the parties involved in real estate transactions is the reason the product of title insurance was developed. In this country, matters affecting ownership and other real estate interests are entered in public records. Before a transaction is completed, a title search of the records can be made in an effort to locate potential problems so that they can be rectified and the sale can proceed. The cost of title insurance is insignificant (generally 1% of purchase price) in relation to the risk for which you are protected. It is a one-time cost incurred at closing and customarily shared equally between sellers and buyers. There is no ongoing premium charges after closing. Its cost is a modest amount to pay for a lifetime of protection which includes all legal fees and court costs should an action be brought either on your behalf or against you because of an insured title defect or encumbrance.
Do I need title insurance?
Most definitely! Title insurance is a means of protecting yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim.
What makes a title defective?
Any number of problems that remain undisclosed after even the most meticulous search of public records can make a title defective. These hidden “defects” are dangerous indeed because you may not learn of them for many months or years. Yet they could force you to spend substantial sums on a legal defense, and still result in the loss of your property. These are just a few examples of what can make a title defective and why you need title insurance.
- Documents executed under false, revoked or expired powers of attorney
- False impersonation of true land owners
- Undisclosed heirs
- Improperly recorded legal documents
- Failure to include rights in another not appearing of record and not disclosed by survey
- Defective acknowledgments due to improper or expired notarization.
- Mistakes and omissions resulting in improper abstracting
- Forged deeds, mortgages, wills, releases of mortgages and other instruments
- Duress in execution of wills, deeds and instruments conveying title
- Errors in tax records
My lender requires title insurance. Will it protect me?
Not necessarily. There are two types of title insurance. Your lender likely will require that you purchase a lender’s policy. This policy only insures that the financial institution has a valid, enforceable lien on the property. Most lenders require this type of insurance, and typically require the borrower to pay for it.
An owner’s policy on the other hand is designed to protect you from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner’s title policy covers the full cost of any legal defense of your title..
How much does title insurance cost?
The one-time premium is directly related to the value of your home. Typically, it is less expensive than your annual auto insurance. It is a one-time only expense, paid when you purchase your home. Yet it continues to provide complete coverage for as long as you or your heirs own the property.
When should I contact a title company about purchasing title insurance?
Call American Title Associates Agency as soon as you and the seller sign the earnest money contract. With a brief summary of the details, our team of title experts will begin a search of the public records and issue a title commitment. Because there are a number of steps we must take to make certain that we know all we can about the title, it is wise to get the ball rolling as soon as possible.
Should I shop around for title insurance?
Yes. Under federal RESPA regulations, borrowers are encouraged to shop all products associated with their purchase. Lenders are required to provide a list of title agencies which they approve and to give you 10 days in which to compare and make your decision. A seller can not require you to go to any specific title agency.
Who picks the title agency?
Under federal law, any loan which is secured by federal funds, the borrower chooses the title agency. This is contrary to many real estate purchase agreements in Ohio, however the seller can not mandate the title company. If they do, they are subject to paying up to 3 times the costs of closing.
Can the title agency handle the closing also?
Yes. Most title agencies who search the title and prepare the title insurance will also handle coordination of the closing. This is usually less expensive and less complicated than having 2 title agencies involved. Some lenders do the closing in-house and have a lower fee associated with this service.
What do I need to bring to closing?
You will need to bring copies of a valid drivers license for each person who will be signing documents. If you do not have a valid drivers license, a photo state ID or some form of photo ID is required. Some lenders require 2 forms of ID, so it is a good practice to bring a second form along. This could be a work or school ID or a social security card. These will need to be copied at the title company. If you as the buyer have not provided proof of insurance, then you will need to bring your homeowners’ insurance declaration page and proof of payment. Any money owed in an amount over $1,000. must be in the form of a wire transfer.
What happens after signing the documents and closing?
Upon lender approval of the signed documentation, the title company will record the deed and any mortgages at the recorders’ office in the county where the property is located. The title company then pays all unpaid bills associated with the transaction. Funds are wired to pay off mortgages and the seller receives their sale proceeds. The home is officially transferred/conveyed to the new owner. All utilities should be changed over and arrangements for moving are made.