What Does a Title Company Do?
The objective of a title company is to ensure that the present owner may legally transfer ownership to the house buyer — in other words, that the seller has the right to sell the property. We’ll go over how a title firm determines legal ownership and how the title is transferred in this blog.
The Title vs. The Deed
A deed and a title are not the same document, despite their similarity. A deed is a legal document that is used to transfer property from one owner to another. On the day of the close, it is signed. The title is a document that states who owns the land and whether or not the deed is transferable.
When you buy a new home, the title company’s role is to ensure sure the title is clear of any potential ownership claims before transferring possession. A title search is used to do this.
What Makes Up a Title Search?
The title search looks for possible roadblocks to ownership transfer. It decides whether others have rights to the property. A title search also looks for:
- Outstanding Mortgages or Other Liens: Before the title may be transferred, all liens must be paid off. This can be at or before closing. The liens may include home equity lines of credit, outstanding tax liens, or a loan for a home improvement project.
- Unpaid HOA Fees: If HOA payments are not paid, the consequences vary; some HOAs specify that they can foreclose on a house if there are overdue dues. HOA payments must be paid before the title may be transferred, regardless of the situation.
- Judgments: It’s possible that a judgment will be attached to the property rather than the prior owner. Unpaid contractor fees and a judgment in the contractor’s favor are one case of this.
- Property Survey: A survey may be ordered by the title company to see whether there are any encroachment concerns and to ensure that the home is within its bounds.
Preparation of an Abstract and a Title Opinion
An abstract of title is a document that summarizes the property’s ownership history, including items like inheritance and court cases.
The title company writes an opinion of title, which is a legal document. It expresses whether the seller has a clear and legitimate claim to the property and whether or not they are comfortable insuring the title. It’s worth noting that title insurance, also referred to as a lender’s title policy, is always required by a lender.
However, an owner’s title policy is not required but highly recommended.
Is Getting Owner's Title Insurance Right for You?
Consider these things before purchasing optional owner’s title insurance:
- A large list of prior owners raises the possibility that information was overlooked during a previous title search, and a previous owner may still possess the property.
- If you can’t afford to hire a lawyer to fight other people’s claims to your property. Even if the claim is without validity, the legal expenses associated with pursuing it might be costly.
- You may rest certain that your money is always safe. Even if it turns out that a prior owner has a valid claim, you’ll have enough money to purchase a new home.
Now that you understand the essentials of what a title company does, you may confidently acquire a mortgage. If you have any questions or want to start the mortgage process, don’t hesitate to call!