Are you confused about all of the parties involved in your real estate transaction? You’re not alone. You probably understand the roles of the lender and a real estate agent, but what about the title company? Let’s take a look at what a title company does and how they fit into the bigger picture of a real estate transaction.
Perform title search
Once there is a contract between a buyer and seller, it will be sent over to a title company to begin the process with a title search. This search pulls the “chain of title,” you can think of this as the property’s ownership history. Additionally, the search will pull any liens or existing mortgages attached to the property recorded in public records. Liens could be from contractors who never received payment or unpaid tax liens.
Clear “cloudy title”
If the title search produces a “clean title,” there are no existing mortgages, liens, or ownership disputes on the property. On the other hand, a cloudy title means there are things to be taken care of before the property passes to the buyer. If liens or mortgages are attached to the property, the title company will order the payoffs for closing. This is a crucial part of the closing process, as it ensures a clear title to the incoming buyer.
Some “Cloudy title” examples:
- A contractor replaced the roof and has not been paid. They file a lien on the property so they can be paid when the house is refinanced or sold.
- A husband sells a property to you and signs off on the deed without his wife. The wife comes back years later and claims the property was sold without her permission and that she has a vested interest in your property.
- A neighbor is taking legal action over a boundary issue on the property.
Coordinate the closing
There are a lot of moving pieces during the closing process. From the time the title company receives the purchase contract, it will be their responsibility to coordinate a successful closing. This means performing the title search, clearing liens, determining ownership, ordering existing mortgage payoffs, requesting fees from any HOAs, ensuring all taxes are up to date, creating closing documents, and coordinating closing signings. If a lender is involved, they will work hand in hand to deliver all documentation needed for the lender’s underwriting process.
During this process, they should remain a neutral party and follow state and federal guidelines.
Hold escrow funds
As part of the buyer’s offer, they will often offer to put down a good faith deposit, also known as the earnest or escrow deposit. This deposit shows their intention to go through with the transaction. As the neural party, the title company can hold on to that money until closing.
Issue title insurance
There are two types of title insurance issued by a title company: a lender’s policy and an owner’s policy. The lender’s policy is issued to the lender to protect them against any title-related issues. These could be back taxes, unpaid liens, ownership disputes, falsified documents, or flawed records that did not appear on the title search. The lender’s policy protects the lenders from these problems just as an owner’s policy, issued to the buyer, protects the buyer.
Disburse funds
Once the closing is finalized and all documents signed, the title company will disburse funds. The sellers will get their sale proceeds, and the realtors their commission checks. This is also the point in the closing process when the title company pays off the seller’s existing mortgage and any other bills, such as a contractor’s lien.
Record official documents
After closing, the title company will record any official documents. These documents are often the deed and the mortgage, but depending on the closing, could also include a death certificate or LLC or trust documents. These documents will be available in public records for you to lookup.
Sunnyside Title – Your trusted title team
Sunnyside Title Insurance is a family-owned and operated Title Insurance and Settlement agency based in Hackensack, New Jersey. They know how important it is to work with people you trust. Their diligence and dedication to providing valuable service have earned them the reputation of being trustworthy real estate partners. They are a full-service title company specializing in residential and commercial transactions.