Title companies are frequently used entities in the real estate business. Not only do they do the necessary research to make certain that real estate property titles are legitimate and offer title insurance to prove it, but they also often maintain escrow accounts – meaning they can hold the money needed to close (as a third-party on behalf of the transacting parties) to ensure all monies are only used for settlement and closing costs. Basically, title companies provide services but also a neutral ground between the parties of a real estate transaction (ie. the agents, the insurance companies, the lenders, the buyers and the sellers).
When it comes down to closing time, the title company will provide a closing agent to bring together all the necessary closing documents (ie. contracts, deeds, insurance(s), and disclosures) and explain them to all parties involved in the transaction. They’ll collect closing costs, distribute monies to appropriate parties and correctly file and report completed documents quickly and accurately.
They will also provide the new owner and mortgage lender title insurance policies (which protect respective parties from lawsuits or claims against the property that can result in disputes over ownership and title related issues). Think about the purchase of a vehicle – the owner has possession of the title. With a property, it is a similar concept but land ownership dates are usually a lot longer (consider that land is immobile and doesn’t go away) meaning it could (and usually does) have an extensive history involving many parties (ie. past owners). Every property has a history that follows it, and that’s just the start of it. Throw in cases of fraud, forged signatures on deeds, unknown property heirs, liens, and documentation errors over time, you’ll be glad the title company has verified legitimacy of your property’s title with a bill of “clear title.”
Why is title insurance necessary? The correct question should be, “Who would buy a property without it these days?” If someone came to you with claims to the property you just closed on and challenged your right to title… imagine the nightmare you’d have to face defending your case without title insurance. To protect yourself from the worst case – you losing your home – it is highly recommended you purchase owner’s title insurance. Keep in mind, the title insurance you purchase covers your entire ownership and is passed to your heirs.
Here are some things you might not know about title insurance:
- You have the right to choose your provider.
- You can also ask your lender or real estate professional for advice or help with getting quotes.
- In some states it is customary for the seller to purchase the policy on your behalf. (FL is one of them, save only a few counties. Although RESPA prohibits home sales conditionally on the use of a specific title company, if sellers pay for the owner’s policy, they may insist on choosing a preferred title provider.)
- Your mortgage lender will require lender’s title insurance to cover their investment. It will cover the amount of the outstanding loan.
- You should also consider purchasing an owner’s policy which will typically cover up to the purchase price of the property. Additional coverage options may be available.
- The fee typically comes in the form of a one-time premium paid at the closing table. (Unlike most insurance policies.)
- Even new construction needs coverage. (Even if your home is brand-new, the land isn’t.)
When purchasing a home with land under it, it’s a good idea to obtain clear title. A title company will do the research for you and provide you with an owner’s title policy you should very seriously consider purchasing (remember, it is customary for sellers to cover these policies in most parts of Florida anyway). And you should always feel free to contact your title company to get answers to your questions, whether about title searches, title abstracts, title insurance, escrow accounts or closings.
Since there are often many hands involved in a single real estate transaction, it’s a good idea to choose a title company that you feel comfortable working with during the length of your transaction.
Here are some quick tips to choosing the right title company for you:
- Choose one that comes referred
- Choose one that communicates with you the way you like to be communicated with
- Choose one that can show you their experience in successfully closing real estate transactions