what is it a "Title company" and why is it so important in our deal?


A title company makes sure that the title to a piece of real estate is legitimate and then issues title insurance for that property. Title insurance protects the lender and/or owner against lawsuits or claims against the property that result from disputes over the title.

Title companies also often maintain escrow accounts — these contain the funds needed to close on the home — to ensure that this money is used only for settlement and closing costs and may conduct the formal closing on the home. At the closing, a settlement agent from the title company will bring all the necessary documentation, explain it to the parties, collect closing costs and distribute monies. Finally, the title company will ensure that the new titles, deeds and other documents are filed with the appropriate entities.

Here’s what potential home buyers need to know about title insurance.

How Does a Title Company Determine That a Title is Valid?

The title company makes sure a property title is legitimate, so that the buyer may be confident that once he buys a property, he is the rightful owner of the property. To ensure that the title is valid, the title company will do a title search, which is a thorough examination of property records to make sure that the person or company claiming to own the property does, in fact, legally own the property and that no one else could claim full or partial ownership of the property.

What is Title Insurance?

Once the title is found to be valid, the title company will likely issue a title insurance policy, which protects lenders or owners against claims or legal fees that may arise from disputes over the ownership of the property.

There are two main types of title insurance: owner’s title insurance, which protects the property owner from title issues, and lender’s title insurance, which protects the mortgage company. You, the home buyer, will pay for the lender’s title insurance when you close on the house, but it’s also a good idea to make sure you have an owner’s title insurance policy as well.

How Do You Pick a Title Company?

Look for a title company that has years of experience doing this (have they done hundreds or even thousands of these kinds of transactions?). Contact the Better Business Bureau to determine whether the company has any complaints against it.

You should also shop around for the best premium rates in your area; if you buy an owner’s title insurance policy, make sure you get one with as few exclusions as possible and that it covers the full purchase price of the home.

When Do You Meet With the Title Company and How Often?

You may meet with or talk to an agent from the title company on multiple occasions. First, you may decide to meet with a few agents from title companies before you buy your home to help you decide which company to go with.

If the title company maintains an escrow account for you, the agent may reach out to you to provide details on that account or you may contact him with questions.

If your title company handles your closing, you will meet with a settlement agent in person then. At this time, the settlement agent will explain all the documents related to the settlement before you sign anything. And, of course, if something goes wrong with regards to the title, you will likely meet with one of their agents then.

Consumers should feel free to contact their title company at any time to get answers to their questions on title searches, title abstracts, title insurance, escrow accounts or closings.