Title companies insure real estate buyers that once they’ve purchased a property they actually own it. They insure against intentional fraud, such as the renter who pretends to own a property and sells it. They also insure against technical mistakes that might create questions about your ownership of the property after you close.
Prior to the emergence of title insurance companies, buyers hired lawyers to review the legal history of a property, disclose or correct any issues concerning the true ownership of the property, and then write a legal opinion called an “abstract of title” outlining the terms under which the buyer would own the property if they went through with the purchase. In most areas of the country, including Colorado, this research on the history of the property’s title is now conducted by the title company staff. The title company then provides a commitment for title insurance to the buyer and the lender that guarantees that the buyer will own the property under the limitations disclosed in the commitment once they sign the closing documents and pay for the property. Any limitations on the owners right to use the property, will be disclosed in that title insurance commitment.
In Colorado, in addition to their role in investigating and insuring legal title to the property, title companies play a central role in handling money and documents. The title company gathers information on any taxes, loans, water and sewer fees, or home owner association dues that are owed on a property and that need to be paid off at or before closing. They also pull together information from the seller, the buyer and the lender to identify any contractors that need to be paid prior to closing. They integrate all of this with information on the fees that the buyer and seller owe to the lender, real estate brokers, and others who’ve helped them through the process. Prior to closing, they will then produce statements for the buyer and seller, summarizing these fees. They also produce all the documents, other than those provided by the lender, that must be signed in order to complete the sale. The final closing of the sale is conducted by title company staff and then the title company distributes money (e.g., to the lender, to the seller, and to taxing authorities) and records any of the closing documents that need to be recorded with local government offices.
The Title Company Staff
Most buyers who are working with real estate agents have little contact with the title company, other than with the “closer,” the person who conducts the closing ceremony. Still, it’s worth knowing who is involved:
- Title Plant. The local title company offices where we hold most of our closings are usually branches of larger companies. The research required to produce the title commitment, and the title commitment itself, are frequently produced at a central “title plant”. If you have questions about the commitment, or if you need documents that referred to in the commitment, you will often be referred to someone at the central office or title plant for this information.
- Title Examiner. The technical task of analyzing the history of the property’s title, and any “defects” or problems with the title, is carried out by the title examiner. If you (or your lawyer or real estate agent) have serious questions concerning the title to the property, the title examiner is the person that you need to consult. If you are buying a property without the assistance of a knowledgeable attorney or broker, you should try to get the title examiner to clarify any questions that you may have about the title commitment.
- The Closer. In our area, most title companies will assign each file to a closer who, with their assistant(s) and other company staff, will be responsible for pulling together the financial data and the paperwork required to close the transaction. They will then sit at the head of the table at the closing, orchestrating the signing of the documents and providing some level of explanation of what these documents are about. While the closer will typically be the first point of contact at the title company, don’t rely on them for answers to technical or legal questions concerning the title or title commitment. Some are very knowledgeable. Many aren’t. But many will answer your questions whether or not they know what they are talking about. Got to the examiner or your attorney if you have serious questions.
In our market, the seller traditionally pays for title insurance for the buyer, so it is typically the seller who selects the title company. Generally, the title company selected is not going to make a dramatic difference to the buyer. Title insurance policies are standardized nationally, so the title commitment and policy you receive will differ little from one company to the next. In general, companies are differentiated more by cost and service than by the insurance they provide to the buyer. The exception is how they deal with title defects or other issues that arise, whether they are willing to insure over them or whether they expect you to take any risks associated with them.
If you are put in the position of selecting a title company, talk with a local loan officer, real estate broker, or real estate attorney. Get recommendations not only for a company or two, but for specific people within the company who are good at handling transactions. As with loan officers, the specific individuals involved can make a big the difference. Once you’ve gotten recommendations from knowledgeable people, you can then check the fees charged for the title insurance and for conducting the closing.