What do they do?
If you are about to purchase a home, part of the closing process will be waiting for the title company to do their job. Throughout this process, you're sure to ask yourself, "what does a title company do?" Here's a summary of their role in the home buying process.
The Title Search
The title is the document that states that you own a property. When you are interested in buying a property, it is the title company's job to research any potential problems that could arise in your attempt to seek ownership of the property. This has to be done before you sign the title and thereby become the legal owner of the home.
Some of the potential issues that the title company will look for include outstanding mortgages and other liens. For instance, the title company will make sure there are no unpaid property taxes on the home that you would become responsible for when you take ownership.
A title search will ensure all relevant Homeowners Association (HOA) fees have been paid so that you don't become responsible for those, and they'll also make note of any easements. Easements are previous agreements that might give another person or entity a right to use part of the land for a certain purpose. For instance, there may be an easement allowing the power company to drive onto the back of your property and access their power lines at any time.
Surveys
The title company is also typically responsible for conducting a property survey. This involves having a surveyor come map out the land and ensure there are no encroachments. An example of an encroachment would be if a neighbor has built their garage a foot or two over the property line, resulting in part of it being on your land.
Issuing the Abstract of Title
After the title search and survey, the next thing the title company will do is issue an abstract of title. This is a legal document that lists all previous owners of the property. It is usually issued alongside another document called the title opinion. A title opinion basically states that the title company has done their work, and based on that work, you are legally able to take ownership of that property. You will have to sign the abstract of title and title opinion as a part of the closing process in order to become the home's next legal owner.
Issuing Title Insurance
Title insurance is, by default, issued to the lender. It basically ensures that the lender is protected if there should be any easements, encroachments, or liens that are discovered after the fact and interfere with your ability to own and pay on the home. If someone challenges your claim to the home's title, this insurance protects the bank.
There is such a thing as a title insurance policy for owners, but it is something you have to separately seek out and sign up for. This kind of policy protects you, as the buyer, if someone were to challenge your claim to the home's title. For example, if someone were to come forward and demonstrate that they are owed $20,000 as a lien against your home, owner's title insurance would protect your equity and pay off that lien.
Hopefully, you now have a better understanding of the answer to the question, "what does a title company do?" These companies play an important role in the home buying process. They protect you as the new owner, and they also protect your bank.
