Buying a home is a complex process. Homebuyers will interact with real estate agents, loan officers, home inspectors, appraisal experts and other professionals throughout the homebuying process.
One of the more quizzical steps for some homebuyers can be the last one. During the closing of the real estate transaction, you will work with a title company to complete the process.
Homebuyers will be given the keys to their new home once the title documentation process is complete. In some cases, homebuyers can mix up the title and deed. A deed is used to transfer property whereas a title states ownership.
During the closing process, the title company ensures the real estate title is properly passed to the new owner. Title insurance will provide protection in the unlikely event that another person makes a claim to the property. It shields both the lender and new owner during the escrow process.
The lender’s title policy comes in play if a property dispute arises. Owner’s title policy, which is an optional form of insurance, protects against the entire investment and home equity. It is mostly used if the property has a long history of ownership.
Before the title company issues title insurance, it will conduct a thorough search of the property’s history with the objective of finding any possible hurdles to the sale. The title company’s job is to make sure nothing goes wrong and the final steps of homebuying go off without a hitch.
During title search, a few red flags can appear. A lien is one possibility. If the previous owner installed solar, for example, it’s possible that the property has a lien on it until the solar panel financing is handled. Liens can also be issued to property owners for unpaid taxes or unpaid bills that arise from home repair and other contractor work.
An active mortgage will appear as linked to the property. For the title process to proceed, the outstanding mortgage must be paid in full on or before the time of closing.
Residences within a homeowners’ association can also be flagged for liens for outstanding dues. Before closing, any liens and dues must be taken care of.
Leases can also appear in the title search report. If the previous owner rented out the property, there’s a chance information about rental transactions will pop up too.
Once the research into the property’s title ends, the title company will survey the property and look for damages. The report and inspection will lead to the abstract of title and opinion. The first document summarizes ownership and property history and the second verifies that the property has a valid title.