Everyone has heard of Closing Costs, but how many really understand what we are paying for? Title companies are part of those costs, so if you are in the market, pay attention so you know what you are getting!
What does a Title company do?
The most visual job of the title company is to actually close the transaction. Here in Maryland and PA (where Atlas has licenses) we go through a face-to-face Settlement, which means all the parties meet to close the transaction. The Title Company Settlement Officer (or their Lawyer/Notary) are usually the ones who will walk the buyer and seller through all the paperwork on the day of settlement. They ensure the settlement is done properly and legally. This is something they usually charge the buyer for as a Closing Fee.
If they just walk us through paperwork at the table, then why can’t I pick a title company three days before my Settlement?
While the Title company is most visible at the Settlement table, most of their work is done behind the scenes and like most things in life, quality work is not done at the last minute. You want to give the title company as much time as possible. They arrange for title insurance and work to uncover issues with the property. In addition, new laws are taking effect August 1, which require closing documents are providing three days ahead of closing. You may never notice if they’ve done their job properly, but you will find out if they have not.
What is title insurance anyway?
Like any form of insurance, title insurance is coverage should something go wrong. In this case it covers the buyer and buyer’s lender. If the abstract/title search miss a lien of any kind and someone were come after the new homeowner (you) to pay the lien, the Title Insurance company will step in and cover those fees.
What is this Abstract you talk of?
An abstract a condensed history of what can be found in public records about the property and is prepared by the abstractor (interesting superhero name). They will uncover liens and encumbrances. If an un-cleared lien appears, the title company will advise the buyer and seller of the findings. Usually the lien must be cleared before the closing can occur.
Encumbrances? Speak English, man!
An encumbrance is just a fancy word for a mortgage, tax, judgement lien or restriction on use of the land.
What else can a title company uncover?
The title company will also order a survey to determine the exact location and size of the property. The survey will indicate the location of the all buildings, driveways, fences and other improvements (that were added with the proper permits). Usually this is smooth, but on occasion, the survey turns up an encroachment or some other property boundary problem. On one occasion, I had a client find out that the neighbor’s fence and a large portion of their driveway was nearly 5 feet into their new property.
Is the deed to my house like the Title to my car?
No. Unlike your car, after the deed is prepared by the Title company and signed by the Seller, it will be recorded in the local jurisdiction where the property is located. This means if you are dealing with a loved one’s estate, you do not need to locate the deed because the county records (not the DMV, thank goodness!) will prove who owns the house.
Where does all my money go on my day of Settlement?
The title company takes your money and distributes it to pay bills associated with the house. Items that are prorated such as homeowners Insurance, taxes, HOA fees and utility bills. In some of my more uncommon settlements I’ve even seen from child support to credit card payoffs.
How do I pick a Title Company?
You have the right to pick your own title company, so the best thing to do is ask your real estate agent and lender for suggestions. I’ve had legal nightmares resulting in poor abstracting, missed survey issues and bad documentation. Be very selective with your title company. Usually, because we are in the industry and have dealt with the good and bad companies, your agent will know a few companies they can suggest.