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Typically, title companies act as third parties between a buyer and a lender, researching a property’s chain of title. This research ensures the title of the home you purchase is free and clear. Problems with titles may include liens, unpaid property taxes, multiple inheritors of a home, and more. While working with a title company is not required by law, mortgage lenders require a title search as a condition of issuing a loan.
Title Company Services
A typical title company offers the following services:
- Title search to identify the property’s true owner
- Holding funds in escrow
- Property surveys
- Discovery of encumbrances
- Title insurance issue
- Closing statements preparations
- Closing oversight
The cost of title services varies by state and often depends on the extent of services required. The more complex the title search and issues encountered, the higher the service fee. Costs also depend on your state’s Department of Insurance regulations.
What is Title Insurance?
One of the most important functions a title company serves is issuing title insurance. There are two title insurance policy types.
- Lender Policy
A lender’s title insurance policy design protects a lender from any title defects that can affect mortgage loan security. The mortgage amount defines the policy, and its value decreases as it’s paid off.
- Owner Policy
An owner’s title insurance policy is not always a requirement. However, it’s a safeguard for homeowners against any future claims to the property and is widely recommended. Even if a lender has a title policy, the buyer should retain an owner’s policy to protect their interests. Coverage lasts the length of time that the buyer, or their heirs, has an interest in the property.
Choosing a Title Company
Many home buyers choose their title company via recommendations from their real estate agent or real estate attorney associated with the purchase. You don’t have to use the recommendation and may select a different title company. Title companies can be national, state, or locally owned, so rates and fees vary. Ensure your chosen company is properly licensed and accredited in your state. Ask the following questions:
- How long has the company been in business?
- Who is your underwriter?
- How much liability insurance do you carry?
- What is the ratio rate of title claims to customers?
- How do you protect against escrow fraud?
- Have you had any claims?
- How do you resolve title search challenges?
- How long will the process take, and who will be responsible for my title search?
- How much title insurance coverage do you recommend and why?
What Exactly Does a Title Company Do?
There are some common situations that a title company can discover and help to fix, including the following:
- Unknown heirs
- Fraudulent transfers
- Restrictions like easements or rights of ways
- Previously unpaid taxes
- Prior mortgages
- Wake-up court judgments
Real Estate Attorneys and Title Companies
Real estate attorneys often work with title companies in real estate transactions to ensure a smooth and successful process. For instance, when the title company provides the title commitment to the buyer’s attorney, they will review it to ensure the title is clear and transferable. The real estate lawyer will also review any exceptions or issues noted in the commitment and work with the title company to resolve them before closing.
Whether you are a buyer or seller in a real estate transaction, a real estate attorney can provide legal advice and review and explain the contract terms, assist with negotiations, and advise on legal issues that may arise during the transaction.
You may have your real estate attorney attend the closing to ensure all documents are correctly executed. This oversight may include the deed and any necessary transfer documents. A real estate lawyer may also review and explain the closing statement, ensuring all fees are correct.
A real estate lawyer can represent their client’s interests in resolving issues if a dispute arises during the transaction or after the closing. This representation may include negotiating with the other party or representing the client in court.
Overall, the real estate attorney works with the title company to ensure transactions are legally sound and protect their client’s interests.
What About Title Theft?
The digital age and access to online information make it easier for home title theft. A person can illegally steal your identity, transferring your home title into their name to steal property or money. It can happen in several ways:
- Fraudulent Refinance
A person withdraws your home’s equity, leaving you with another mortgage. Using your identity, they steal money based on your home’s value. Theft may also occur by accessing your equity through a home equity line of credit (HELOC), creating enormous debt for which you are responsible.
- Forged Deeds
Thieves can forge deeds to sell uninhabited properties like vacation homes or rental buildings.
- Fake Refinancing
A scammer may present homeowners in financial hardship with a fake refinancing proposal. At closing, the homeowner signs paperwork, not knowing the paperwork they sign is for a home sale making the scammer the new owner.
Real Estate Attorneys and Title Theft
A real estate attorney can help protect your home’s title from being stolen or compromised. Title theft can be deterred with proper oversight.
Your real estate lawyer can conduct regular title searches to ensure no unauthorized changes or property ownership transfers occur. Routine title searches are particularly useful to individuals with multiple properties. Your real estate attorney can also review public records like property deeds and mortgages, ensuring their accuracy and checking for fraudulent activity.
Real estate attorneys can provide legal advice to protect your identity and personal information from theft and offer useful tips on monitoring your credit report and bank accounts for suspicious activity. They can protect you against any losses that can occur as a result of title theft.
Retaining one of our real estate attorneys to work with your title company ensures the transaction is legal and that you have the necessary title insurance for your situation. If there are financial claims or liens against your home, your policy will cover legal fees and defend your right to remain there.