If you’re buying or selling a home, you’ll need the service of a title company. So what does a title company like Title Partners of South Florida do in a real estate transaction?
In short, we protect the interests of everyone involved in the transaction. Whether you’re buying or selling a property, providing financing or you’re a real estate professional, we’ll ensure that all requirements for a smooth closing and clear title are satisfied.
If you’re preparing to refinance your existing mortgage or purchase a new home with a loan, your mortgage lender should require you to find a title company to work with fairly early on in the loan process.
If you’re not familiar with the home buying, selling or refinancing processes, you may not be certain what a title company actually does.
The title company is one of the most important third parties you will work with throughout the entire transaction.
A title company provides three core services:
1. Research the Property’s Title History
Early in the process, the title company will begin researching the property’s title history and will issue a title insurance commitment. This title commitment will show all of the property’s owners as well as the requirements to transfer clear title to the property. Ultimately, the title commitment should show a clean, unencumbered line of ownership that leads to the current owner.
If the title history research shows that the current owner does not own the property legitimately or that there may be a dispute or other issues with the title, work is completed to generate a clean title (“clear title”).
2. Facilitate the Closing Process
The title company also facilitates all aspects of the closing. This involves preparing the title documents they need to close, researching the current payoff figures and creating a Closing Disclosure and/or ALTA Settlement Statement. The Closing Disclosure and/or ALTA Settlement Statement shows all of the financial transactions related to the closing, such as the lender’s fees, title fees, hazard and flood insurance fees, real estate fees, taxes, escrows, payoffs and other miscellaneous fees involved in the closing based on which type of property you’re buying or selling.
The title company will handle all financial disbursements related to the closing, including sending wires or preparing checks for all of the vendors who will be paid for their services at closing.
3. Issue Title Insurance
A final service offered by the title company is the preparation of a title insurance policy for the lender and/or the Buyer. The title insurance protects the lender and/or buyer from financial liability in the event there is a dispute over the ownership of the land or a lien later on. These types of disputes can create costly legal fees and could also strip the property’s ownership from the buyer. Title insurance, in accordance with the policy, will pay for these legal expenses and for any loss if one occurs.
More Specifically – What Does a Title Company Do for You During The Closing Process?
Here are ten important steps a reputable title company will take care of for you when you buy or sell a home:
1. Verify Property Tax Status and Payments
It’s the title company’s duty to verify the current status of all property taxes. To avoid any dispute over taxes and unpaid bills, they:
- Check with relevant government agencies and districts which impose taxes to ensure that both state and local property taxes have been paid.
- Prorate bills and taxes based on settlement dates and billing periods on the settlement statement.
2. Order a Property Survey (if a single family home or townhome)
Many lenders will ask for a survey or a location map of the property. A title company will:
- Order a survey with the buyer’s consent.
- Review the survey to discover any issues that can occur during the closing process or afterward.
- Notify the agent, lender and buyer instantly if any issues come up during the survey.
- Hand over the survey to the new buyer on the settlement date.
3. Order Estoppel Letters from Associations
If you are purchasing or selling a condo, townhome or single family home with an association, the title company will order an estoppel letter from the association(s) which will advise the title company of the following;
- Financial status of the account.
- If there are any violations against the property.
- If there are any special assessments due or pending.
- If the utilities are paid by a master meter or to the city.
4. Order Payoffs from Lenders, Judgment Creditors and/or Lien Holders
If any outstanding mortgages, judgments or liens show up during the title company’s initial title research, they will order payoffs and disburse the funds at closing to be sure they are paid in full and satisfied.
5. Order a Municipal Lien Search from The City
This is an important search to determine if there are any open permits, code violations or delinquent utility accounts against the property. Any one of these items could become costly issues after purchasing a property. Imagine finding out after a closing that a permit was opened with the city for an addition or repair made to the property and it was never given a proper final inspection and the permit was never closed out. If you signed an as-is contract, this could be a very costly issue for you.
6. Make Sure The Seller Is Legitimate And Has The Right To Sell The Home
The title company does extensive research and verifications to determine that the seller is who they say they are and has the right to sell you the property.
Imagine that the title holder died and their son said he wants to sell the property to you. However, you didn’t know that he had two sisters and a brother. Do they need to be involved?
What if a corporation owns the property? Does the person selling it to you have the right to do so on behalf of the corporation?
These are just a couple of the issues title companies look into in order to determine that the seller has the right to sell you the property.
7. Make Sure All IRS Requirements Are Satisfied
Have you ever heard of FIRPTA or FinCEN or a 1099-S? Don’t worry if you haven’t. A title company makes sure all of these requirements are met for during a real estate closing.
8. Manage Escrow Accounts
During the real estate transaction, a title company holds vital documents and deposits until the completion of the closing process. The escrow account protects the lender, buyer and seller.
9. Issue Title Insurance Policies
One of the most important services a title company provides is issuing title insurance policies for the lender and the buyer. The lender’s title insurance policy protects the mortgage company’s investment. The owner’s title insurance policy protects buyers from any hidden risks, unexpected claims or fraud. Both insurance policies provide coverage against financial losses due to title defects and legal costs.
10. Manage Lender Documentation and Coordinate The Closing
At Title Partners of South Florida, we obtain all loan documents from the lender for closing. With the appropriate loan documents, we’re able to complete the Closing Disclosure and ALTA Settlement Statement. We also prepare the title deed and documents required to comply with federal and state laws. Then, we reach out to all parties and coordinate the closing. At closing, we provide full explanations of all documents to all parties involved before signing takes place.
We ensure the closing experience is seamless for all parties and everyone receives what they’re owed. We also collect all outstanding fees, premiums and commissions and disburse them appropriately. At closing, we pay off any existing mortgages, liens or judgments on the property and send the loan documents back to the lender. Finally, we ensure all documents, such as the mortgage and new title deed, are filed with the court.
As you can see, a title insurance company is a critical player in the real estate transaction, providing important services to all parties. When you are selecting a title insurance company to work with, you may want to consider getting recommendations from friends and family, as well as your real estate agent, for a title company/escrow officer to work with. You may also want to consider searching online to compare reviews of local title insurance companies on popular business review sites like Google My Business or Yelp.
If you are located in or looking to move to the Florida area and have any more questions about how title companies work, feel free to reach out to us online get a free, no-obligation title insurance quote or give us a call at (954) 566-6000.