What Does a Title Company Really Do?

A title company, also known as an abstract company, is a third party used in the sale of real estate. Essentially, their job is to make sure that the transactions between the buyer and seller are not interlaced with potential problems when it comes to the deed or title. Unknown issues can arise later when buying or selling a property. Having a third party that is well versed in the legal aspects of real estate helps to avoid finding out later that there was a problem.

When a title company gets involved there will be an initial search to ensure that there are no hidden issues from the local authorities. If there are significant tax or lien problems this could complicate things for the buyer. There is also a title search that is done, which ensures that the seller is actually the legal owner of the property and that there are no outstanding liens from outside the local area.

While it is rare, there is always the potential for unforeseen claims against the home's title to arise. This can happen for a variety of reasons, including an uncollected debt that required a lien from a previous owner or situation. By investigating the chain of the title the abstract company is able to provide you with direct information regarding the history of ownership of the home. This can be a crucial step, especially when purchasing foreclosed or inherited properties.

The title company is also responsible for offering you insurance on the title. Many lenders still require this even after an abstract has been completed and there are no claims against the property. In the event that a claim ever arises and the property is legally held over for the claimant, the insurance would protect you and the lender from financial loss.

Most companies like this also supply escrow services. It is highly recommended that escrow services are used because it negates any future suggestion that closing costs were charged but not used for the closing of the property. To ensure proper use of the funds it is often recommended to allow the money to sit in a third party account who can oversee the proper distribution of the money.

Using a title company helps to protect both the buyer and the seller from any potential fraud, misuse of funds, and claims that have the potential to financially devastate an individual. While most homes go through a sale without incident, this is simply one issue that you would not need to worry about. There are many different concerns when buying property. A clear title and proper use of funds should not be one of them.