What A Title Company Does

Dated: 03/07/2017

Views: 630

By Rick Albright, Associate Broker
The M Real Estate Group

Whether you are buying or selling real estate, a title company is an important element in the transaction. They provide a number of services important to the transfer of title. Most important among these is researching the title, issuing owners title insurance, facilitating closing, and providing escrow services.

Researching the Title

When you buy a home, you are given a title or deed to the property as proof of legal ownership. Sometimes there is a hidden mistake in a prior document that may give someone else a valid legal claim against your property. A title company researches a property’s chain of title and identifies issues with that chain to be resolved before a new owner takes possession. Research for the title policy can uncover the issues to resolve before title insurance and a new title can be issued. Some of the issues that may be uncovered when researching the title include:

• False impersonation of the true owner of the property

• Forged deeds, releases or wills

• Undisclosed or missing heirs

• Instruments executed under invalid or expired power of attorney

• Mistakes in recording legal documents

• Misinterpretation of wills

• Deeds by minors

• Deeds by persons supposedly single, but in fact married

• Liens for unpaid estate, inheritance, income or gift taxes

• Fraud

Title Insurance

Once the clouds on a title have been resolved the title company provides a title insurance policy. For the buyer, title insurance protects against loss, and for the seller it helps to prevent future legal complications. Title insurance is substantially different from other types of insurance coverage. Title insurance emphasizes risk prevention rather than risk assumption, so the coverage offers the best possible opportunity to avoid claims and losses in real estate transactions. The majority of the title insurance premium goes toward the exhaustive research and due diligence work done by the title company upfront, while a small percentage goes toward the payment of claims. Title insurance is charged only once at closing, where other forms of insurance typically require monthly or quarterly payments. The choice of a title company can be negotiated between the buyer and the seller. Who pays for the title policy is negotiable as well. Sellers often pay for the title policy, due to their contractual obligation to pass a clear title to the purchaser. Title insurance is not required by law, however almost all lenders will require a lender's title insurance policy as a condition of the loan. In addition, buyers should always insist upon an owner's title policy to protect their equity in the property. An owner's policy will protect the buyer by paying for any legal fees involved in defending a claim to the title, provide protection from financial loss due to claims against the title to your home, pays for legal costs if the title insurer has to defend your title against a claim, and pays for successful claims against the title to your home covered by the policy, up to the face amount of the policy.

Escrow and Closing

Once the research is complete and the insurance ready, the title company provides escrow services to fund disbursements as well as purchase contract execution and property ownership transfer at the closing. The buyer, seller, lender, and settlement agent each bring various documents and monies to the settlement agent who facilitates the closing where the purchase is funded and title passed.

The Seller:

• Deposits the executed deed to the buyer with the settlement agent.

• Deposits evidence of pest inspection and any required repair work, if applicable.

• Deposits other required documents such as tax receipts, addresses of mortgage holders, any state or federal required documentation, etc.

• Fulfills any other conditions specified in the instructions including their negotiated share of closing costs

The Buyer:

• Deposits the funds required, in addition to any borrowed funds, to pay the purchase price with the settlement agent.

• Deposits funds sufficient for home and title insurance.

• Arranges for any borrowed funds to be delivered to the settlement agent.

• Deposits any deed of trust or mortgages necessary to secure loans.

• Approves any inspection reports, the preliminary report for title insurance, etc., called for by the purchase and sale agreements.

• Fulfills any other conditions specified in the instructions including their negotiated share of closing costs

The Lender (if applicable):

• Prepares loan document package for buyer/borrower.

• Deposits proceeds of the loan with the settlement agent.

• Directs the settlement agent on the conditions under which the loan funds may be used.

The Settlement Agent:

• Opens the order for title insurance.

• Obtains approvals from the buyer on the Preliminary Report/Title Commitment, pest and other inspections.

• Receives funds from the buyer and/or any lender.

• Prorates taxes, rents, etc.

• Disburses funds for title insurance, recording fees, real estate commissions, lien clearance, etc.

• Prepares an estimated statement or HUD settlement statement, as required, for each party, indicating amounts to be disbursed for services and any further amounts necessary to close.

• Records deed and loan documents, delivers the deed to the buyer, loan documents to the lender and funds to the seller, closing the escrow.

• Issues final closing statement/HUD settlement statement and forwards to buyer, seller and lender.

The title company provides valuable services to the buyer, the seller, and the realtor. It is good business not only to use the title company, but to understand what they do.

Thanks to the Fidelity National Title company website, the Realty, Wikipedia, and other websites for providing information that made this blog possible. A special thanks to Cari Payne of Fidelity Title in Albuquerque for her informative presentation on title company services to The M Real Estate Group.

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Rick retired from a career as a teacher/librarian and has bought & sold homes in the Albuquerque area as both a homeowner and investor for over 40 years. His interest in homes and real estate stems from his childhood as an Air Force dependent and overseas teacher who lived in 38 homes before settling down in the Manzano Mountains outside Albquerque, New Mexico. His interests include how homes are built, building with alternative materials, planning homes with the future in mind, and solutions to the homeless problem. He has an MA in education, is an experienced researcher, and has taught research skills at both the high school and college level.

Carl F. (Rick) Albright
Associate Broker
The M Real Estate Group

Phone: (505) 358-9537

Email: [email protected]

Website: homeinabqnm.com

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