Benefits of Title Company and Title Insurance in Home Buying Process

Home buying process involves multiple people whose roles you might find difficult to understand, especially title companies. A title company lays a vital role in the process of closing property and protect the buyers and sellers protect from unforeseen legal issues.

Let us get to know about title company and title insurance in detail.

What is a title company?

A title company helps to ensure if the components of a real estate transaction are legal and problem-free. A title company does this by researching, careful coordination, and title insurance. They make efforts to ensure that a title to a piece of property is transferred legally from the seller to the buyer.

What are the duties of a title company?

Title companies protect real estate transaction through following tasks:

Title search

Title companies perform a sophisticated real estate title search through their review departments. These departments review public records related to real estate and inform all interested parties to the status and title of the property. Such information is usually provided to each party through title report or commitment of title insurance. Title companies also provide title research information related to foreclosure and other kinds of legal action involving real property.

Closing agent

Title companies often play the role of closing agents for real estate transactions. It means the title company acts as an agent to each party involved in the transaction. As an agent, the title company obtains the signature of all parties on the closing documents, receives and distributes payments to conveyance transaction. Once all the parties sign the documents, the title company record the required documents, like deeds, mortgages, etc. in the local county land records office.

Escrow officer

A title company also acts as an escrow officer in real estate transactions. An escrow officer typically holds documents and money which are part of transactions as per the instructions of the parties. Similarly, in a real estate transaction, the purchaser hands over the required money to the title company and the seller give a signed deed of the property to the title company. The company, thus, acts as an escrow office and releases the deed and the money as per the written instructions of the buyer and the seller.

Insurance issuer

Title companies issues title insurance policies on behalf of title insurance companies. In the majority of cases, a title company which issues the policy is not the insurance company. Instead, it acts as an independent agent of the insurance company and receives a commission for issuing the title policy. The actual premium of title insurance goes to the insurance company which bears the risks of any loss under the policy. The title company just facilitates the paperwork for issuing the insurance policy.

Why do buyers need title insurance?

It is necessary for a buyer to get title insurance so that they can make sure that they are not responsible for a loan attached to the property they are purchasing. A lien to the property can be attached by a contractor if they are not paid for the job. When someone purchases a home on loan, the lender uses the home as collateral. If the same house is old, the loan needs to be paid off. If a loan, lien, judgment or any other encumbrance is still owed on the home, the new buyer will have to remove that before the home can be sold. A lender needs to certain things to be taken care of and make sure that they do not lose money they loaned the buyer.

This is how a title company plays a crucial role in a real estate transaction.