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What Does a Title Company Do in a Real Estate Transaction?

There can be a lot of hands involved in a real estate transaction, and it can be hard to keep up with all of them. So what is a title company and what do they do?

A title company is a third party that is hired by a mortgage company to ensure a home’s title is clean with no encumbrances. They will provide research and insure the title to the home, along with managing the closing. The title company can also act as the closing agent and escrow agent on some occasions. 

They will also conduct a title search to ensure that the seller has the legal right to sell the property without any title issues. The search will also show unpaid taxes, real estate liens, or any other problems that the buyer should be aware of. In order for a real estate transaction to go through properly, a clear title is a requirement. 

Mortgage lenders also require a title search to protect their interests and give the new owner peace of mind that there are no title defects. 

What is the difference between a title and a deed?

The title is a document that says you have ownership and rights to a property. If you are a part of the title, you’ll also sign documentation related to the mortgage (whether you are on the loan or not). 

On the other hand, a deed is a document signed at closing to transfer the property from one person to another. The title & deed are two of the most important closing documents that will be signed for a home sale to occur.

Let’s take a deeper look at the role a title company plays.

Preliminary Title Report 

When escrow is opened on a hone, a preliminary title report will be generated. This report will include the owner’s name, the legal description of the property, and any listed exceptions to the title policy. An escrow officer will also be assigned to the file and will be able to answer any questions. 

Once the initial survey is complete, they may ask for the property to be surveyed. This will ensure that the boundaries of the property are where you believe them to be and that the structures on the land are within those boundaries. The surveying company will also check to see if any neighboring properties are causing issues with the property being purchased. 

Obtaining the Abstract of Title

Once all of the research information has been obtained, the title company will issue what is known as the Abstract of Title. This is a summary of everything they have found during their search. It will include the basic history of ownership and any issues that have been discovered.

This is important to moving forward on the sale of the home. Most lenders will not move forward until they are re-assured that the title is free and clear. And, potential buyers do not want to jump through the hoops of appraisals, inspections, and other buying costs only to find that they will not be able to close because of a title issue.

Formulating the Title Opinion Letter

Once the abstract of the title is issued, they will do some final checking then issue a title opinion letter. This letter is legally binding and confirms the information found in the search. 

Ready to get started?

Enlist the help of a real estate agent to guide you through the process and make sure that you are in the best position possible. 

Team Melton has over 50 combined years of real estate experience to assist you through every step of the process. Contact us today to get started on selling your home!

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