What is a Title Company?
Let’s first start off by identifying what a Title Company actually is…
According to the “text book” definition, a Title Company is: A company that checks the property’s title for any liens,
fixes any problems, and facilitates a smooth closing of the property while ensuring that the purchase is processed correctly.
Now, that’s the best text book definition I could find. However, it would probably be best if I dive right into a quick story of how I used a title company to buy my first home.
What Is The Purpose Of A Title Company?
When I finally decided on the home I wanted to buy, the next step was to do go to my closing. After identifying all the parties in the transaction, the title company performed a title search. This is extremely important. Just like it says above, this is basically where the title company checks the properties title for any liens or claims that could have an adverse effect on the actual closing.
You always want to have a “free and clear” title before you buy a home. This means that any liens against the property such as, mechanical liens, second mortgages, back taxes, etc. are paid off in full or that the debt is pardoned by the lien holder. Although the liens were generated from the seller and its their responsibility to take care of them, the buyer should never buy a home without a “free and clear” title. Once the deed transfers from the seller to the buyer, the buyer is legally considered the Home Owner and is responsible for taking care of the 1st Lien (Mortgage), as well as any other liens against that property. It doesn’t make too much sense to do a title search after you buy the home.
So the good thing for me was that the title came back “free and clear”.
Next we needed to go to closing. At the closing we filled out tons of paperwork. There was so much that it was a bit overwhelming and at times difficult to understand. However, the good old title company was there to answer any questions I had. As I was sifting through the paperwork, I ensured to ask questions in regards to anything I didn’t understand. This made things a lot easier. As long as my questions were being answered, I was confident and content with my closing. A confused mind always says, “NO!” However, the title company was there to orchestrate the entire transaction.
What Is Title Insurance and why should I get it?
Another thing a title company does is they issue title insurance. According to wikipedia, Title insurance protects an owner or lender’s financial interest in real property against loss due to title defects, liens, or other matters. It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.
This was important for my wife and I to get because if the title company missed anything while doing their title search, we would have some type of protection. When title companies do the research to find liens, back taxes, etc., they can go back as far as 60 years. Maybe even further, who knows…. But you definitely want to work with a Title Company that has a stellar record of being accurate and easy to work with.
Do Title Companies work with Investors?
Title Companies work with Investors like myself all day. However, you have to find an “Investor Friendly” title company. Some title companies do not approve of some of the creative ways that investors can get a deal closed. It has nothing to go with legality. It is completely legal for Investors to use non-traditional ways to close a deal and it has been practiced for years. However, some title companies just have certain policies that would cause an Investor to look elsewhere. A lot of investors are involved in simultaneous closings. They close the transaction with they seller and immediately after, they close the transaction with the buyer. Therefore they can quickly create a win-win-win situation for everyone involved.
The purpose of an investor is to put the buyer and the seller together by providing creative solutions to common problems. These are typically problems such as buyers who are sick of renting, have poor credit, are looking to get assistance with a great deal on a home, etc. Also sellers who don’t want to pay a commission by selling their home through and agent, sellers who are behind on their mortgage payments, facing foreclosure, have little or no equity, tired of being a landlord, disappointed with their real estate agent, job transfer, death in the family, etc. Now, the investors intent is to of course make a profit. However they understand that in order for them to make a profit, they must solve the problem of both the seller and the buyer. This is a business transaction and they are looking to again, create a win-win-win situation for everyone involved.
What is the purpose of a title company? Simply put, it is to make the closing process as smooth and painless as possible. The smoother the better. I once considered doing title searches on my own, but I quickly learned to leave it to the experts. You’re intent whether your a seller, a buyer, or an investor is to get the deal closed. There is no need to do everything yourself. Let the title company help you orchestrate this transaction, so you can move on with ease.