The Role of a Title Company

Title companies provide title insurance services to buyers, sellers, lenders and developers, essentially anyone who has an interest in real estate. Services vary throughout the country, depending on local practices and laws. In Connecticut, title companies perform and insure title searches. A title search involves searching public records to ascertain if the seller has the legal right to sell the property. In other states, attorneys conduct title searches.
Title companies conduct a chain of title, which is a review of the owner history of the property, checking for who purchased the property, who sold it, and when. They perform judgment searches to determine whether there are any general liens against the property, as well as tax searches to verify the present status of taxes.
Some title companies conduct on-site inspections to verify lot size, the location of improvements, and evidence of unrecorded easements.
They issue a “Commitment of Title Insurance” to lenders after completion of the title search and they receive instructions and documents for the closing. Title companies also prepare a final Settlement Statement.
As a neutral third party agent of the principals—buyer, seller, lender, and borrower—the title company helps with the transfer of ownership by ensuring that the terms of the transaction are completed.
Another important role of the title company is to issue title insurance. Although a title search is conducted, it’s nearly impossible to guarantee a title is clear of hidden defects, such as mistakes in interpretation of wills and other legal documents, impersonation of the real owner, forgery, missing heirs, falsification of records and confusion stemming from similar names. Title insurance guarantees the title as reported.
Should hidden defects surface at any time challenging an owner’s rights, the title company will defend the title, in court, if necessary, and cover the owner’s losses up to the full value of the policy.
Indeed, a title company can be crucial to the process of buying a home. Your attorney typically takes care of ordering the title search and oversees your purchase of title insurance, which mortgage lenders typically require.