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What Does A Title Company Do In A Real Estate Transaction?

Updated: May 9, 2023

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If you are buying or selling real estate, there is a good chance that, at some point, someone will mention a title company. After all, they are one of the key players in making your transaction happen smoothly. But with so many people involved in the process, it can be confusing as to who does what.

From the receipt of earnest money to the closing and funding, what does a title company do in a real estate transaction? Let’s talk about it.

The Title Search

A title shows who owns a specific property. Everything about the property involved in the transaction, including any defects, will be attached to it and that owner. So, before transferring the title to the buyer, the title company will perform a title search to ensure that it is free and clear. This is one of the first steps taken - especially because if there are any issues, the sale may be halted entirely. This search is looking for things such as any outstanding mortgages on the property, existing liens, unpaid taxes or tax liens, unpaid HOA fees, judgments, liens, easements, encroachments, etc. that may be an obstacle in transferring the property.

The title company will also review the chain of title to ensure that the person selling the property has the right to do so. This review is of the full history of the property’s owners, looking for any other owners, forgeries, or fraudulent deeds that could present a problem in the sale of the property - or afterward.

Once this is complete, the title company will prepare a document known as an abstract of title which gives a history of the property’s ownership as well as any issues that may have been discovered during the title search. It will give either the go-ahead to move forward with the real estate or require certain actions to be taken before they’d be willing to offer a title insurance policy.

Provide Title Insurance Policies

Title insurance is a necessary step in buying a piece of real estate - and you purchase it from a title company. They offer two types - an owner’s policy to protect the buyer/new owner and a lender’s policy to protect the lender. If anything was missed in the title search or if someone appears claiming ownership rights to the property after the closing, title insurance can help both financially and legally.

Settlement Services

There is a lot that goes into a closing, such as bringing together all the documents that need to be signed and making sure they are drawn up properly and organized. Further, the closing needs to be scheduled at a time that works appropriately for the parties involved, including a signing agent or real estate attorney. All of this is handled by the title company.

Escrow Services

Title companies handle escrow services, too. They hold on to earnest money in escrow, as well as any various funds as required by the lender and in other situations. This is held until all of the conditions of the sale are met and then monies are transferred to the appropriate parties at the proper time.

Learn More About Title Services at Endeavor Title

As you can tell, title companies play a large role in real estate transactions. Learn more about what we do from the experts at Endeavor Title.

Contact us today at (410) 666-3780.

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