HOME-GARDEN

At Home Living: The role of the title company

Linda A. Thompson-Ditch

A title company can be a key player in the home buying process. The work they provide gives the property’s new owners peace of mind that no past issues regarding ownership will come back to haunt them in the future. Plus, the company also helps everyone through the closing process.

In this area, the REALTOR® listing the house is typically the one who contacts the title company, though occasionally the buyer or lender may take the first step. Jeffrey Amrein, Executive Vice President and General Counsel for Capital Title Insurance Company noted, “Sometimes that is done when the house is first listed and before the house has even sold. This is called a preliminary title report, which is useful for two reasons. First, any title problems or defects are identified early in the process so the parties can work on a resolution of the title problems. Second, it can facilitate an expedited closing if for example the buyer has loan approval or is paying cash, since the title has already been searched that part of the process has been completed.”

A title company does a search to make sure the property is owned by the person who claims to be the owner, and that no one else can claim ownership. The company will look closely at property records to see the history of ownership. They will also look for any financial claims against the property. This process is done not only for a home sale, but also for a refinance, second mortgage, home equity loan, construction policy, and foreclosure.

What are some of the issues that may arise in a title search? Kyle Mead, Vice President and Chief Examining Attorney for Lawyers Title of Topeka answered, “Liens, which can ‘attach’ like a barnacle to the owner’s or buyer’s interest in a property. Common examples are unpaid child support or spousal maintenance judgments, equity judgments from a divorce, or county, state or federal tax liens. If a property is being sold from the estate of a deceased person, or through a bankruptcy, there are sometimes other legal requirements for the sale to be completed.”

Amrein also noted, “Believe it or not, sometimes forgeries or fraud schemes are detected in the title search and examination.” Other possible issues to a clear property title include, “clerical mistakes in the public records, Scrivener’s Errors [a mistake by the preparers of a document], previously undisclosed heirs with claims against the property, and a forged deed that transfers no title to real estate.”

Once the title is clear and ownership is confirmed, the title company will issue title insurance. This policy, paid for by the home buyer, will protect against any future claims on the property. It is a standard requirement in most property sales contracts.

“Title insurance is not strictly required, like auto insurance is, for example” Mead explained. “However, if a buyer is getting a loan and mortgage, the lender will nearly always require a Policy of Title Insurance to cover their interest. This Loan Policy is NOT a protection for the buyers, per se. The title process, concluding with an Owner’s Policy, is the buyer’s assurance that they are purchasing property from someone entitled to sell it, for example, and that there will not be issues which could challenge their ownership and enjoyment of their real estate.”

Amrein recommended, “Use a locally owned Title Insurance Company so that if there are any issues or problems, they can be addressed by someone with a local connection to the community.” He also added, “It helps to select a title company with an in-house attorney, which can help to expedite and resolve any closing issues or concerns that may arise.”

Besides performing the title search and issuing the insurance, closing agents for title companies(also called closing officers) conduct the closing on the property. Plus, they manage the escrow account that holds any funds from earnest money or a deposit until the time of closing. Bills from any home inspections, surveys, etc, are sent to the closing agent to be taken care of at the closing. On the day of the closing, the agent will walk everyone through the paperwork to finalize the sale.

Mead said, “The title company is a neutral third party, in a sense working for both sides, to receive money and documents, and to make sure that those documents and money are properly recorded and disbursed. The title company closing officers also prepare and preserve your ‘paper trail’ to memorialize the financial details.”