What Do Title Companies Do?
There are six steps that take place when transferring a land title. It is the title company’s job to manage the six step process:
Step 1: The order is received
The process begins when the title company receives a real estate earnest money contract, or agreement to close. The contract is “receipted” by the title company, which includes acknowledging receipt of the contract and any earnest money received. An escrow account is then set up on your behalf and the earnest money is deposited for holding until the closing.
Step 2: Ad Valorem Tax Check
Next, various taxing authorities are contacted to determine what taxes (if any) are owed on the property, and/or that all taxes have been paid. The base rate for each taxing authority is also obtained so the taxes for the current year can be prorated between the buyer and the seller.
Step 3: Title search and abstracting
Copies of all the documents relating to the property are then gathered from various public records. A complete ownership history of the property is created so the examiner can see a step-by-step transfer of ownership from its original patent to the current owner.
Step 4: Examination
The examiner then identifies the current legal owner and any debts owed on the property by following the flow of ownership evidenced in the documents gathered by the abstractor. In order for the title company to insure the new buyer as the only claim to ownership, the examiner must confirm each previous transfer was handled correctly and legally.
Step 5: Commitment
Once the examiner determines current ownership and has identified any issues affecting the property, a Commitment for Title Insurance is created and delivered to all parties involved in the transaction, including the seller, buyer, lender, realtor, and attorney(s). The buyer should review the commitment and identify any objectionable title exceptions and any other issues affecting the property that were not known or disclosed to the buyer during purchase negotiations.
Step 6: Settlement
The desired event for the seller and buyer is to “close” the transaction. This involves the escrow officer bringing together all the involved parties and overseeing the execution of the documents necessary to facilitate the sale, such as the deed, new mortgage, etc.. The title company will facilitate recording of all recordable documents and then disburse money to the parties who will receive funds. After closing, the terms of the contract are typically fulfilled and the transaction is complete
Step 7: Issuance of the Title Insurance Policies
After the transaction has closed and funded and the documents have been recorded at the courthouse, the title company issues the title insurance policy. The owner policy of title insurance is issued to the buyer, and the mortgagee policy of title insurance is issued to the lender. This is all done in accordance with the terms and conditions of the commitment for title insurance.