Title? What’s a Title Company and Why Do I Need One?
If you’re buying a home, you have probably been walked through the process with your real estate agent. They have probably also walked you through what a mortgage lender does and their involvement in the process, but what about a title company? What do companies like Boundary Title and Escrow bring to the table and why do you need a title company?
3 Key Functions of a Title Company
During the steps of home-buying, the title company serves three main functions:
- Finds and eliminates issues that may jeopardize your right to property ownership
- Provides insurance policies to the lender and buyer
- Handles the closing and escrow accounts
Performing a Title Search
The most important part of a title company’s job is to perform the title search. During this step, they search the public records to verify who is the current owner of the property and determine if there are any issues in the chain that could affect your rights to ownership. First and foremost, they want to make sure who is selling the property has the right to do so. This may seem silly and unnecessary, but issues like divorce could complicate who owns the property.
Aside from ownership, they are also looking for any unpaid liens placed on the property, fraudulent documents, and forged documents. They’ll also check the survey and if the property has any easements. All of this information is compiled in a report that is sent to the lender. The lender will then convey any issues that need to be resolved prior to closing.
Titles and Title Insurance
A title is a document that comprises your legal rights to the property you have purchased. A title refers to the rights you have to the property and the deed is the legal document used to transfer the property.
Title insurance is provided to both the lender and the homeowner. Title insurance differs from auto or homeowner’s insurance in that they protect you against things that may happen in the future, while title insurance protects you from things that might have occurred in the past. Title insurance is paid for at the time of closing, rather than monthly like other insurance types.
The lender’s policy protects the value of the mortgage for the time you owe a mortgage on the property. The homeowner’s policy protects you for the length of time you own the home.
While rare, issues can arise after closing that may jeopardize your right to the property. Unknown heirs and property line disputes are just two examples of possible issues. If any issues do arise, the title company will pay your legal fees to defend your right to property in court. They will also reimburse you for equity in the property in case any claims are found to be valid.
Closing and Escrow Accounts
Title companies like Boundary Title and Escrow will handle the closing on the home you are purchasing. They appoint a signing agent or attorney (depending on state laws where you are) to review all documents and finalize the deed and title transfer.
Title companies may hold and manage money in escrow. An escrow account is a savings account managed by a third party (in this case, a title company), which can distribute payouts based on certain conditions. Escrow accounts are common in real estate transactions because lenders want to ensure you can pay certain expenses, like homeowners insurance and property taxes.
Boundary Title is Your North Alabama Title Expert
Whether you’re looking to relocate to North Alabama, purchase an investment property or make a commercial real estate purchase, the experts at Boundary Title & Escrow are here to help. Our years of experience and dedicated team have one goal in mind — to provide excellent service through your transaction. Click here to start an order or get a quote today.
This material is provided as a courtesy and for educational purposes only. Please consult your title professional for specific information regarding your situation.