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What Does a Title Company Even Do Anyway?

Updated: Apr 2, 2021

What does a title company even do anyway? They seem to be mysterious entities. Simply put, they are the glue that holds the transaction together.

So… why does the title need to be reviewed? Isn’t it the person that listed the house as ‘for sale’ and is currently living in it? Not necessarily. Read on to find out more about what a title company actually does and why they are extremely important.

First thing’s first they make sure the current owner of the property has legal title.

This step seems boring but is VERY important. The seller cannot sell a property if they do not own legal title for it, because...well...they don’t own it. While issues cut and dry like that don’t usually happen, it is nice to know if anyone else out there has a claim to the property that you don’t know about.

Before I go any further I need to explain the difference between title and a deed. A deed is a document which transfers ownership of a property to someone else. Whereas a title is a document that says who actually owns the property. They are similar but it is important to know the difference.

Anywho, the title company searches through the records to see if there are any other claims to the property. This is done because if there are other claims, unpaid taxes, secret wills, etc. you want to know about it and negotiate a better deal for yourself.

Title insurance is then given to protect your ownership of the home.

When the title comes back clean they will issue you what is known as title insurance. This protects you against monetary losses from any future outside claims against the title. For example, if you buy a house, get title insurance and 5 years later the previous owner’s long-lost Uncle Jethro comes forth with a legal and real claim on the property, you lose the house but get your money back. Helpful, right?

The title company will act as an escrow agent until the transaction is completed.

They will hold on to all monies that pertain to the transaction until they are released by written consent of the buyer and seller. It is really helpful to have them do this so you (or your realtor!) doesn’t have to keep track of it all. The amount of money that is debited and credited is very high with real estate so it is nice to have a professional do all the tabulating.

The title company will then act as a closing agent and facilitate the final transaction.

Everyone will meet together at the title company’s office and make the swap. All documents are generally visible before you meet together so no one gets blindsided by secret requests. Once the documents are signed and the keys are exchanged the monies are released to escrow accounts and/or to the pockets of the sellers and everyone goes home happy.

So how do I find a title company?

Ask friends, family, or even your realtor for some recommendations. Just so you know what you are going to get, many are reviewed online by Google, so make sure you check that out. The costs of a title company’s services vary greatly, so do your due diligence and find the right one for you.

Well, that is it. I knew very little about title companies before I got into real estate, so I hope this helps you navigate the world of home ownership a little easier!


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