WHAT DOES A TITLE COMPANY DO IN A REAL ESTATE TRANSACTION?

A title company plays a pivotal role in a real estate transaction, serving multiple critical functions to ensure the smooth transfer of property ownership. Here are the main responsibilities and tasks of a title company:

1. Title Search: The title company conducts a thorough search of public records to identify any issues or "clouds" on the property's title. This includes checking for any unpaid taxes, unsatisfied mortgages, judgments against the property, or restrictions limiting the use of the land.

2. Title Insurance: After the title search, the title company typically provides title insurance. There are two types of title insurance policies:

- Lender's Policy: Required by most lenders, it protects the lender's interest in the property against any undisclosed title issues.

- Owner's Policy: Protects the property owner against any hidden defects in the title, even if they come to light after the transaction is completed. This insurance remains in effect for as long as the owner or their heirs have an interest in the property.

3. Escrow Services: Title companies often act as escrow agents in a real estate transaction. As an escrow agent, the title company holds onto funds and important documents (like the deed) until all conditions of the sale are met. Once all the terms are satisfied, the company disburses funds and transfers the property's deed to the new owner.

4. Closing Agent: In many transactions, the title company also serves as the closing agent, meaning they facilitate the final steps of the purchase process. They'll ensure that all documents are signed and recorded and that all funds, including closing costs and down payments, are correctly distributed.

5. Recording: After the closing, the title company ensures that the new deeds, mortgages, and other necessary documents are correctly filed with the local county recorder's office. This public recording solidifies the buyer's legal ownership of the property.

6. Issue Settlement Statements: The title company prepares a statement for both the buyer and the seller, detailing the financial transactions enacted in the sale. This includes the sale price, any credits or debits, and the final amounts owed or to be refunded.

Using a reputable title company is crucial because any mistakes in the title search or document handling can cause significant legal and financial headaches in the future.