Buying your first home can be overwhelming. There is so much to learn – especially new vocabulary – you need to ask your Google Home or Echo Dot what all of the new words mean. While it might seem frustrating or daunting, you really should invest the time to better understand the process to protect yourself. You are about to write the biggest check you have ever written and sign more documents than you ever thought possible, so it is best to understand what is and who are involved in helping to make this dream a reality.
What is a Title Company?
First let us begin with understanding what a real estate title is. A title is what shows you own the right to a piece of property. If you have the title, you can access that piece of property. Having the title means you can also transfer that property to another party. The title (which is often confused with the deed) is the legal document that transfers ownership of the property from one party to another. When a person owns a piece of property entirely (when you own that property outright and have no loans against it), you will have the deed and the title. A title company therefore, does the work to ensure the title is valid and free of any issues, such as property disputes. Title companies provide multiple services during a real estate transaction. Once you’ve made an offer on a house that has been accepted, you will be contacted by a representative from the title company from time to time through the closing.
A title company can be hired by either the buyer or the seller. It depends on the common practice in the area where you are looking to purchase your home. Speak to your real estate agent about the common practice in your area. The expenses related to the work performed by the title company is also up for negotiation between the buyer and the seller.
Benefits and Services
The Title Search: The title company will perform the title search (also referred to as the title review or examination), which consists of an in-depth investigation into the history of the property. The historical records cover previous owners, restrictions on the property or if there were ever any liens or demands on the property. Your mortgage lender will not issue a mortgage without a completed title search. You may wonder why this history is important. This search is what is needed to prove there are no other claims of ownership over this property, enabling the transfer from the seller to you.
Title Insurance: One of the other most important services the title company will offer is Title Insurance. After demonstrating their due diligence and demonstrating the title is free of issues that could stall the purchase, the title company will issue title insurance guaranteeing just that. This insurance protects you – the buyer.
Escrow Agent: Don’t panic – yes, escrow is one of those new vocabulary words, and about one year into your new home you may forget what it means. Escrow refers to an impartial third party that holds onto a portion of the funds used to purchase your new home for a temporary period of time. This is a portion of the funds that no one can touch until the sales transaction is final – at the closing.
Closing Agent: The title company you work with may also provide services related to the closing. They will make sure that both the selling party and buying party sign everything they need to sign and that all documents are properly filed. During the closing process, they will also ensure that all of the money in escrow are distributed appropriately. There is often a lot of money changing hands during the closing. The funds are often used for closing costs, the down payment, etc. Then you have the seller who needs to repay the balance on their mortgage of the home they are selling to you, pay the remaining property taxes, and pay any fees they owe their real estate agent or broker. The title company figures out all of the financial transactions taking place during the closing and then ensures all of the funds are properly exchanged. In addition, this the title company will collect all the signatures on all of the closing documents. Lastly, the title company ensures the deed and mortgage are filed at the registry office in the county where you are purchasing your home, which them becomes public record.
While the home buying process can be confusing and the language overwhelming – make the most of the experience. You are embarking on a new adventure and you will work with several people very closely for a short period of time. The title company will help you make your dream a reality. Happy house hunting!