First-time homebuyer? Congratulations! This is an exciting time in your life, but it can also be overwhelming and confusing (which you probably already know by now). Well, there’s so much to do, so many papers to sign, not to mention the listings you must scour through. One of the most important, albeit underestimated, steps is choosing a title company.
So, what’s a title company? What does it do? In short, a title company researches your property title in a title search and provides title insurance. In this post, you’ll learn everything there is to know about a title company and why you need one when buying a home. Read on.
What is a Title Company?
Consider this: your first home is probably the most important investment you’ll make. What if someone turns up a decade later to claim the property you bought with sweat and blood?
A title company is an independent entity that specializes in researching and ensuring the ownership of real estate. When you buy a home, you want to be sure you are buying a property with a clear and marketable title. An encumbered title to your home makes all the difference because it guarantees ownership, and there are no liens.
A lien on a property means there’s a public record of a legal claim against that dream home for unpaid debt, such as utilities or taxes. Such claims can lead to costly lawsuits or even kill your joy of first-time home ownership.
To avert all this pain, a title company will thoroughly search public records to ensure that there are no liens, encumbrances, or other legal issues that could affect your ownership rights. In addition, the title company provides title insurance, which protects you against lawsuits or claims against the property that result from disputes over the title. Simply put, you not only protect your treasured asset but also your peace of mind!
Why Do You Need a Title Company When Buying a Home?
You never hear people talk of title companies when shopping for a home, yet this is one of the most important components in the home purchase process. To appreciate the need for a reputable title company for your first home search, take a look if it:
- Protects your investment: By providing title insurance, the title company helps protect you and your lender from any legal issues arising after the sale. This can include claims from previous owners, unpaid taxes, or other liens against the property. Without title insurance, you could be responsible for paying these debts, which could be very costly.
- Legalizes the sale: Another reason you need a title company is to ensure the sale is legal and valid. A title company will review all the legal documents involved in the sale, including the deed, mortgage, and other contracts. They will ensure everything is in order and the sale can proceed without any legal issues.
- Helps in the closing process: Your title company manages the closing on your home by offering the settlement. The company has a signing agent or real estate attorney who prepares documentation, reviews closing documents, and finalizes the deed and title transfer.
- Manages Funding: A title company may hold and manage money in an escrow account. An escrow account is a savings account managed by a third party, which is the title company in the case of home purchases. The company distributes payouts under certain conditions.
Tips to Choose the Right Title Company for Your Home Purchase
In a home sale, both the buyer and seller have representation from a title company. You don’t have to use the title company recommended by the other. Choosing the right title company makes all the difference in guaranteeing a smooth and stress-free home-buying process.
Here are some factors to consider when choosing a title company:
- Reputation: Look for a title company with a good reputation in your area. Ask friends and family members for recommendations, and read online reviews to understand their track record.
- Experience: Look for a title company with experience in the local real estate market. They should deeply understand the legal and regulatory issues that can arise in your area.
- Customer Service: Look for a title company that values customer service. You want to work with a company that is responsive to your needs and concerns.
- Price: While price should not be the only factor you consider, looking for a title company that offers fair and transparent pricing is essential.
Common Title Problems and How a Title Company Can Help Solve Them
Many common title problems can arise during the home-buying process. These can include:
- Liens and Encumbrances: A lien is a legal claim against the property arising from unpaid debts, taxes, or other financial obligations. An encumbrance is a legal restriction on the property, such as a zoning restriction or an easement. A title company will search for these issues and help resolve them before the sale.
- Boundary Disputes: A boundary dispute is a disagreement between neighbors over the location of a property line. A title company can help resolve these disputes by reviewing the legal documents and working with local authorities to establish the correct boundary.
- Fraudulent Transactions: Unfortunately, there are cases where a property has been sold fraudulently without the true owner’s knowledge or consent. A title company will perform a thorough search to ensure the seller has the legal right to sell the property.
Other issues that may emerge from a title search by a title company include:
- Special assessment tax on the property.
- Outstanding loans on the home.
- Unpaid fees for work performed.
- Undisclosed owners or heirs with claims to the property.
The Benefits of Working with a Title Company
Working with a title company has many benefits, including:
- Protection: Title insurance protects you and your lender from any legal issues arising after the sale.
- Peace of Mind: By working with a title company, you can have peace of mind knowing that your investment is protected and that the sale is legal and valid.
- Expertise: A title company has the expertise to handle all the legal and regulatory issues involved in the home-buying process.
- Convenience: A title company will handle the closing process, which can be complicated and time-consuming. By working with a title company, you can focus on other aspects of the home-buying process.
Final Thoughts
Your first home is a big investment, affecting your finances for many years. You need the best protection and assurances for an investment of such magnitude. Your title shows who previously owned the property and reveals any liens and encumbrances on the title.
Being a neutral third party, the title company goes in-depth and researches widely. The company insures the title of the home you’re buying, which is the best protection you can get. Better still, these professionals manage your home’s closing and ease the otherwise stressful process. For the best experience when closing on your home, hire a title company with a good reputation, experience, and a commitment to customer service.
Are you getting dizzy from all the steps, terms, and paperwork in the home-buying process? Why not take a break and equip yourself with all the necessary information? Luckily, the best first-time home-buying online course is here to help you fully prepare for the journey.