What is Title?
Title is a term that describes your legal right to own, possess, use, control, and dispose of land.
What is Title Insurance?
Title insurance is an insurance policy that protects you in case there are disputes with the title of the property. There are 2 different types of title insurance policies: one to protect the bank called the lender’s policy, and one to protect the buyer called the owner’s policy.
The lender’s policy usually provides protection for the amount of the loan, and is usually required by the bank. The owner’s policy is optional, but will cover you (as a buyer) if a claim is made against the title. It usually covers all legal fees to defend and challenge the title to the insurer (you, the buyer), with a deductible.
What Kind of Problems Can Happen With Title?
Title problems, fortunately are rare. But things can and do happen. The main reason to have title insurance is in case of a title defect, or a cloud on the title. This means that somewhere along the line, the seller did not have full authority to sell to the buyer. Thus the buyer does not have full title to the property. Or mistakes happen.
Real Life Example
I was working with a buyer that was purchasing a new construction home. The home was being built on a lot that was split. The old house was on 2 lots and it was subdivided and sold to 2 new buyers. We'll call them Property "A" and Property "B". Here's what happened. My buyers were buying Property B and were closing after the first one was finished and closed. We went to closing and everything happened just fine.
A few months later, they found out that there was a mistake by the builder. The builder accidentally sold Property B to Buyer A, and the builder still owned Property A, and my buyers didn't own anything. This is a case where the builder mixed up the PID numbers and sold the wrong house to the wrong couple.
In this case, Title Insurance took over and reworked all the documents so that Buyer A owned Property A and buyer B owned Property B.
Choosing a Title Company
A title company is where the closing will be held for your home. The closing is where the buyer and seller and agents sit around a table and sign paperwork to transfer the title from one party (the sellers) to another party (the buyers). This is usually when you will take possession of your new home.
There are Title Insurance Companies, and Title Companies.
Title insurance companies issue insurance policies (see above) for buyers purchasing a house. There are a few well-known, national companies, such as Chicago Title, Old Republic Title, Land America, and Fidelity National.
Title Companies are 3rd party insurance agents purchase a policy for you. This is usually also where the closing will take place. These companies are your partner in getting the deal “sign, sealed, and delivered” as far as title goes. There are several common title companies in our area. The first one, Home Title, is affiliated with RE/MAX Results. There is also Stewart Title, Title-1, Chicago Title, and many others. We can provide some guidance as to which Title companies you may wish to consider. Keep in mind that when we give you a list of title companies, we are not paid in any way. We provide this list as a matter of convenience to you, and are based on experiences with prior clients.
Main Criteria in Choosing A Title Company
Since the representative at the title company is also the one that will be closing your home purchase, it is important that they have a good reputation in the community. There are some title companies and representatives that are fantastic, and others... not so much. Ask around, or ask me. When you need a question answered, you don't want to be left wondering if they got your voice mail or email. You just want an answer.
Another aspect to keep in mind is how long that closer has been in the business. The more experience they have, the better they are able to manage your closing.
Location of the title company is also important. In our local market, the buyer's title company is the location of the closing. So in effect, the buyers choose the location of the closing by which title company they choose and where that title company's locations are.
The last thing to keep in mind is the fees they charge. Most title companies fees are very similar, and if you ask, most will match a lower rate. So if you contact 4 or 5 companies, choose your best, and ask to match a lower rate, it can happen.
Another last thing, the closer is in charge of all the fees on the closing disclosure, as well as the escrow funds and the money transfers. They are in charge of cutting disbursement checks as well, plus also they handle the recording of the documents. So selecting the right closer and title company is important. It's not just a cost issue, it's an issue of closing on time and with little drama.