You’re preparing to buy a house, and you thought you knew all the real estate jargon. A mortgage is a type of loan used to purchase a home, closing is when the sale of the property takes place, and a lien is an unpaid debt on a piece of property. Check, check, check! But here’s a tough one: What is a title company and what does it do for the buyer?
What Will My Title Company Do?
A title company actually performs a few of the most crucial steps in the process of buying real estate.
Your title company will:
- Research the property to pin down any potential threats to your ownership rights
- Protect your investment by providing title insurance to you and your lender
- Facilitate the closing
Title services are a key element of the home buying process, but, more importantly, they are required if you are taking out a mortgage. Even if you’re paying cash, certain jurisdictions may still require title insurance.
What is a Title Search?
Before your title company will issue you insurance, they need to know everything they can about the property and its ownership history. This means combing through public records and looking for any indicators that the seller may not have the legal right to sell you the property. Once your title agent determines the potential issues, they’ll draft a title report or a title commitment containing their research to send to your lender.
Some issues your title agent will be looking for:
- Fraudulent or forged documents
- Complications with previous property transfers
- Current mortgages or other liens – think unpaid taxes or unpaid debts to a contractor
- Whether the property is part of a homeowners association
- Any rights-of-way or easements that could prevent you from building on sections of your property
What is a House Title and What is Title Insurance?
A house title is a legal right to ownership of a property, which includes the right to sell or modify. It is also totally abstract. If you were envisioning a printed certificate, you’re thinking of the house title’s distant cousin, the deed, which is the legal document that transfers the title from one party to another.
Title insurance is insurance provided by your title company, with one policy for the lender and one for the homeowner. The lender’s policy will protect the value of the mortgage for as long as the lender holds the mortgage, and the homeowner’s policy will protect you for as long as you own the home.
For the homeowner, this means that your title company will defend your claim to the property in court in case of any issues that could arise after the property is transferred from one owner to another. This could be anything from errors in public records to an unknown heir suddenly appearing.
How Much Does Title Insurance Cost?
The cost of title insurance will typically be a percentage of the amount of the mortgage or sales price. In the state of Alabama, pricing for title fees are regulated by the state. Regardless of the amount, title insurance will only be paid once when closing and will cover you as long as you own the property.
Once it is determined that the title is clear, your title company will oftentimes also serve as the settlement agent that facilitates the closing. This will include reviewing all documents with you at your closing and preparing the deed and property transfer.
For Your Title Needs, Look No Further Than Heights Title
You’ll need a title company that’s detailed, accurate, and committed to providing the best quality work every time. Heights Title services the greater Birmingham Metro area and Tuscaloosa and is honored to be your resource for all your title needs. Whether you’re relocating, investing in residential real estate, or making a commercial real estate purchase, Heights Title has the knowledge and integrity that you can depend on.
This material is provided as a courtesy and for educational purposes only. Please consult your title professional for specific information regarding your situation.