What does a title company actually do?

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What does a title company actually do?Paying for the services of a title company comes as a surprise to many first-time homebuyers. Can’t you just look up the names of the previous owners yourself? What does a title company do that’s worth another line item of closing costs?

A title company specializes in researching real estate title information so that when you buy your property, you can be confident that it’s truly yours. At the same time, it looks for outstanding mortgages, leases, easements and anything else that might affect your ability to claim full, rightful ownership.

Your title company will probably also oversee a property survey to document the exact boundaries of the land your home sits on. That’s an interesting process in and of itself; you’ll discover whether or not the home lies perfectly within those boundaries or whether it encroaches on neighboring properties—or vice versa.

After all this research, the title company prepares what’s called an abstract of title, which is a summary of its findings—like a mini-history of the times your property has changed hands. It also issues a title opinion letter that legally certifies the title’s validity.

The title company also issues title insurance for your property, protecting you and your lender against lawsuits and claims if someone disputes your claim to the title. The escrow accounts that hold the money to be used for settlement and closing costs on your home are also frequently held by the title company. And once you’ve completed the purchase of your home, the title company makes sure the new titles, deeds and documents get filed with the right entities.

Choosing a reputable title company seems like a stab in the dark for most first-time homebuyers.

Your best bet: Ask for recommendations from your real estate agent and anyone you know and trust who’s recently bought a home.

Vet your finalists the same way you would any company you’re preparing to do significant business with. Make sure the company has experience (check how long they’ve been in business), and check to see if any complaints have been filed against them with the Better Business Bureau.

Posted in: Mortgages & Home Buying, Personal Finance
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