There are many steps to take when you purchase a house. The process of a title search and title insurance, however, is often the least understood. Here's what you need to know about what goes on at the title closing company.
What does a title closing company do?
A title company is a business that specializes in the preparation of real estate documents, including title insurance. The company may also facilitate the closing process, act as an escrow agent, make sure that taxes and insurance premiums are paid, and provide other services related to the closing of a real estate transaction.
What is title insurance?
Title insurance is a type of insurance that protects the homeowner and their lender from financial losses if problems later arise questioning the title to the property. The policy may also provide coverage for certain claims that arise from forgery, fraud, or undisclosed liens.
Why is title insurance important?
Title insurance is important because it protects the lender and/or homeowner from losses that may occur as a result of problems with the title to the property. If someone tried to claim at a later date that they have a legal interest in the house, the new owner can simply refer to their title insurance policy as proof. In the worst-case scenario, the policy will protect the new owner and their mortgage company financially from any loss.
Who orders title insurance?
The listing agent orders the title insurance when all contingencies have been released. In other words, when the home inspection and appraisal are complete and the buyer is ready to proceed with the purchase of the home.
Who pays for title insurance?
The buyer generally pays for the title insurance policy at closing. It is important to note that if the seller can provide the original title insurance from when they purchased the house to the title closing company, it will make the process both easier and less expensive for everyone.
What does a title search entail?
A title search is an examination of the public records to determine the ownership history of a piece of property and to identify any outstanding liens or encumbrances that may exist. In other words, the title examiner is looking for any old mortgages that are unpaid, any liens on the property from unpaid contractors, IRS tax liens, or quit claim deeds giving another person partial ownership of the property. Furthermore, the title closing company is looking to confirm that the seller is the actual owner of the property and has the legal right to sell it.
If you're buying a home, make sure you understand the importance of title insurance and a title closing company.