The home-buying process is a complex one with many things to understand and many people involved. Most people understand what the job of the home inspector is, and what their realtor is doing for them, but other people involved in the process have a role that seems a little unclear. Many wonder what exactly their title company does for them. Though the title company role seems a little mysterious, it is crucial in protecting you from unforeseen legal issues whether you are buying a home here in Texas or anywhere else.
What Is a Title Company?
The title company coordinates the title search, insurance and other research and documentation to be sure that the title to your property is transferred correctly and legally from the seller to you. The research and information that they gather helps prevent unpleasant surprises and unforeseen circumstances during your real estate transaction.
What Does a Title Company Do?
The title company does three very important tasks for sellers and home buyers. Their job begins with a title search. In the real estate business, the title to a parcel of property refers to the legal rights and interests pertaining to it. Performing a title search provides information regarding the history of interest and rights to your home such as who sold the property, who purchased the property and the dates of the transactions. A thorough title search will discover if there are any defects in the title. Defects can include such things as: • Lines of credit • Judgement • Demands • Secondary or Junior mortgages • Liens • Unpaid taxes • Special assessments • Other legal issues A title search will also investigate easements or other restrictions that could become an issue. If property lines are called into question, the title company may order a survey.
Once the title company has completed the title search they will create a report of their findings. this report will list any issues that could potentially delay the sale of the home or create potentially fraudulent future ownership claims. An abstract title is created and is based on the results of the title search. At this point the title company issues a title opinion letter, a legal document that indicates whether the title to the property is valid.4
Title insurance companies also issue title insurance. Most of the time when a title search is done correctly there are no issues with you taking title to your new home. Even when a title search is done correctly, unforeseen circumstances can come up such as previously unknown land mineral rights, defective deeds, invalid court proceedings, forgotten wills and undisclosed heirs.
Title insurance protects home buyers from these remote possibilities. This insurance guarantees that the title is valid as reported and recorded. Those risk factors are very rare, the protection offered by title insurance is valuable for keeping the buyer from experiencing great loss.
Title companies serve as escrow officers and closing agents. They make sure that all of the funds including closing costs and down payments get paid and are properly dispersed. Closing your mortgage can be a complicated process, with many signatures needed. The title company often manages the many documents and signatures needed to close your mortgage, so they are often your closing agent. They also act as the mediator between buyers and sellers during the closing meeting and ensure that all the documentation is properly signed and recorded.
Bottom Line: Title Companies Help Protect Your Investment
In a nutshell, title companies protect you and one of the biggest Investments of your life. Title issues do not happen very often, but they can be devastating and cost you your home in the event they occur. A title company protects you from often invisible and very expensive potential problems that can jeopardize the ownership of your home.