What Does a Title Company Do?
Not to be confused with a deed, which is a legally binding document used to transfer property from one owner to the next, a title is documentation that explicitly states that you own the property. In the homebuying process, title companies verify that the real estate title gets properly passed to the homebuyer to guarantee title insurance. If someone makes a claim to a property, title insurance will protect the lender and potentially the owner as well as maintain your escrow accounts at closing. While the title company insurance process is thorough, here is what you need to know about the role that title companies play in the homebuying process.
What Happens Before Title Companies Issue Title Insurance?
Before insurance is granted, title companies perform title searches. The goal of the search is to review potential obstacles and ensure a seamless transfer of ownership. These obstacles can include:
- Outstanding Mortgages: Homeowners usually have a mortgage tied to the property, exceptions being that the home is owned without any debt. For a title to be smoothly transferred, outstanding mortgages will need to be paid off at closing.
- Liens: Other payments on your property, such as a loan for solar panels, must be paid off or removed before closing. Liens can also include unpaid taxes. For example, if you didn’t pay a contractor for work on your home, then unfulfilled payments exist. Liens for unpaid taxes must be solved before a sale.
- Homeowners Association Payments: Take a look at your HOA contract. Any liens or additional dues need to be taken care of before moving forward with a title.
- Restrictions: If certain rules are in place, like age limits to live in a community, transfer of property ownership will be more difficult.
- Leases: A title search will find if a property is rented out to others.
After title companies do their search, they will survey the property to ensure no infringements or damages exist for a smoother transition. From there, two documents are prepared:
- Abstract of Title – a legal document that summarizes the ownership and property history.
- Opinion – a document written by the title company that states a valid title to the property exists.
What Is Title Insurance?
After proper preparations, title insurance steps are next. Two types of title insurance exist:
- Lender’s title policy: Protects the mortgage lender with the title if the house is lost in a property dispute. If a lender opts for mortgage payments, this is required when buying a home. It does not protect any existing home equity.
- Owner’s title policy: Protects the overall property investment. This is an optional form of insurance that protects home equity. It’s recommended for homes with a long history of owners since it can help if a past owner reclaims your home.
How Do I Find a Title Insurance Company?
Mortgage companies work with area title companies and can help recommend a good one to you. Fortunately, most of the title companies in the Central Florida area are excellent. If you are a homebuyer looking to close on the home of your dreams, Butler Mortgage can help. With 25 years of experience, we understand how extensive the homebuying and title insurance process can be and want to help you be successful every step of the way. Call us at 407-931-3800 or fill out our free consultation form online.