What Does a Title Company Do, and What is Title Insurance?
Quarterly Update October 2019
Whether you’re buying or selling, a title company plays an integral part in transferring a home from one owner to the next. But if you’re new to this process (or even if you’re not), you may wonder “what exactly does a title company do?” Let’s take a look!
A title company makes sure the title to a piece of real estate is legitimate, issues title insurance for the property, and ensures the title and all other necessary documents are filed with the appropriate entities. (Typically the city/county/state where the property is located). The process of making sure a title is legitimate has several steps:
1-Chain of Title – A title company will research all historical transfers of the title, beginning with the original owner. The goal of this is to make sure that the seller legally owns the property.
2-Tax Search – Then, they’ll check on the present status of real estate taxes against the property. Any unpaid taxes must be paid by the seller before title insurance can be issued.
3-Name and Judgement Search – Next they will check for any unsatisfied judgements against the owner, as well as any liens, mortgages, or other issues that can impact ownership. These need to be taken care of by the seller before title can be transferred.
4–Title Insurance and Closing – After any issues are cleared up, title insurance can be issued, and the closing can be scheduled. In most cases, closing will take place at the title company’s office.
What is Title Insurance?
Now that we understand what a title company does, let’s look at title insurance. Title insurance protects the lender and/or homeowner against disputes over the ownership of the property (outstanding liens, encumbrances, fraud, etc.). Title insurance policies cover losses and legal fees that could arise out of such problems. There are two types of title insurance:
1 – A Lender’s policy protects the mortgage company. Nearly ALL lenders require it. This policy covers the lender for defects in the title that become known after the property has been financed. It remains in effect until the loan is repaid or the property is resold or refinanced.
2 – Though an Owner’s policy is not required, it is highly recommended. This policy is issued to a home buyer. It protects them from title defects that occur before the purchase which become known after the purchase. It remains in effect until the title is transferred to a new owner.
We hope this sheds some light on the role of a title company in your home sale or purchase. Our team has great relationships with all of the local title companies and can help you pick the right one for you when the time comes to buy or sell. It’s part of our service to our clients. Give us a call, text, or email when you’re ready to buy or sell – we’re here to help!
Zenith City Group – 218-390-1132, firstname.lastname@example.org
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