You wrangle with a lot of issues when you're buying or selling real estate. That's where a title company can help. A title company can take a lot of stress out of a real estate transaction by handling the closing from soup to nuts. They manage the important roles of preparing documents, collecting and doling out money to pay off sellers and lien holders, and recording new mortgages, deeds and lien releases.
Title companies crank out general contract and disclosure forms for buyers and sellers who want to save sales commissions. Sometimes, real estate agents also use pre-printed sales forms handed out by title companies. A title company puts the lid on a deal by corralling buyers and sellers together for their John Hancocks on closing documents. They also organize the final tasks to transfer property ownership, such as paying off existing liens and forking over purchase prices.
A buyer's good faith deposit can be tucked away in a title company's escrow account and credited later to closing costs. Money for other things like taxes, water bills, and property repairs can also be socked into escrow. Usually, escrow instructions have to be in writing since verbal ones can spell trouble with misunderstandings. Buyers and sellers can whip up their own written escrow agreements, or dial up a lawyer to give their deal a legal edge.
Title companies issue insurance policies to real estate buyers when the title changes hands. These policies put companies on the hook to cover post-closing losses or claims made against the property titles. The companies don't do this lightly: they will research public land records for liens, mortgages or other title clouds before issuing a policy. A seller generally pays the cost of a buyer's policy. It remains in force until property title changes hands again.
Title companies also take the worry out of getting legal documents recorded. They get property deeds, mortgages, and lien discharges, recorded in the county land record offices. The title agent gathers up the county recording fees at closing and makes certain documents are registered and returned to the right parties. For example, a new home buyer gets the original, recorded deed back after closing. His mortgage company gets the first recorded mortgage for safe-keeping.
Title insurance premiums are the title companies bread and butter. They are generally figured against sales amounts, so the pricier house, the pricier the policy. A title policy for a $100,000 property is around $900, however prices vary. Some title companies clip customers with additional document preparation and closing fees, which run around $350. A title company may waive these fees if a party has a lawyer or real estate agent to help lighten the workload.
Maggie Lourdes is a full-time attorney in southeast Michigan. She teaches law at Cleary University in Ann Arbor and online for National University in San Diego. Her writing has been featured in "Realtor Magazine," the N.Y. State Bar's "Health Law Journal," "Oakland County Legal News," "Michigan Probate & Estate Planning Journal," "Eye Spy Magazine" and "Surplus Today" magazine.