The Role of the Title Company
To many buyers and sellers, the role of the title company is a bit of a mystery. Exacerbating the issue is the fact that their role can vary by state, region, or even county!
In California, the buyer usually specifies which title company they wish to use when making an offer. Alternatively, they can let the seller choose. Either way, both parties need to feel comfortable and have confidence in the title company selected. In Placer County and surrounding areas, title companies play several key roles in real estate transactions.
They Conduct Title Searches
One of the most important duties of a title company is performing a title search of public records relating to the property. The title search provides information regarding the history of the rights and interests the property, such as who bought the property, who sold the property, and the dates of these transactions.
The title search also determines if there are any other latent defects to the title (often called “exceptions and exclusions”), such as a lien, judgement, or unpaid taxes. In addition, searches discover if there are any easements, leases, or other restrictions that might be an issue for the buyer.
Once the title search is complete, the title company produces a report of their findings, called the Preliminary Title Report. This report lists any exceptions or exclusions that could potentially stall the sale of the home or give rise to future fraudulent ownership claims.
They Issue Title Insurance
Another key role of the title company is issuing title insurance. Title insurance is essential because it protects buyers from the possibility that the seller (or previous sellers) did not have free and clear ownership of the property. If a title search was done correctly, there should be no issues with a buyer taking possession of a property. However, it is practically impossible to guarantee a title is clear of all hidden problems resulting from issues such as undisclosed heirs or forgotten wills. As with most insurance policies, title insurance offers valuable protection. The cost of title insurance depends largely on the size of the loan and the state in which it is issued. The good news is that it is a one-time premium.
They Act as an Escrow Agency
Title companies often act as escrow agencies. In fact, in Northern California the person at a title company who manages a transaction is called an escrow officer. The title company holds the funds in an escrow account until all the conditions of the sale have been met. They handle the transfer all related documents from one party to another, and ensure that all funds, including closing costs and down payments, are paid and properly disbursed.
They Act as the Closing Agent
Another role of local title companies is to act as a closing agent during settlement. In some states there is a “closing meeting,” where both buyer and seller are present. The title company then acts as a mediator between the selling and the buying party, ensuring that all necessary documentation is signed, distributed, and recorded. In Northern California, the buyer and seller have separate “signing” appointments. The title company ensures that all documentation is signed and distributed. The title company then sends the pertinent documentation to the county, where it is recorded, thus closing escrow and completing the transaction.
Title companies are unbiased—their goal is a successful transaction for the buyer, seller, agents, and lender. Buyers and sellers should take advantage of the wealth of information and experience escrow officers possess and should not hesitate to contact them with questions during a transaction.
Debbie Austin is a realtor associate with Keller Williams, Roseville and has been helping clients buy and sell property in the area for over 15 years. If you have a specific real estate question you wish to see addressed, contact Debbie at debbieaustin@kw.com or debbieaustingroup.com.
