Who Chooses the Title Company: Buyer or Seller?
Understand the pivotal decision of selecting a title company in real estate and its impact on your property transaction.
A title company acts as an impartial third party in real estate transactions, ensuring a secure and legal transfer of property ownership. It addresses legal and financial aspects of a property sale. Understanding its functions helps buyers and sellers navigate these complex transactions.
Role of a Title Company
A title company performs several functions to ensure clear property ownership transfer. It conducts a thorough title search, examining public records for liens, encumbrances, or defects on the property’s title. This search confirms the seller’s legal right to transfer ownership and identifies potential issues like unpaid taxes, legal judgments, or undisclosed easements.
Following the title search, the company issues title insurance policies. An owner’s policy protects the buyer from financial loss due to title defects, and a lender’s policy safeguards the mortgage lender’s financial interest. Title companies also serve as escrow agents, holding funds and documents until all sale conditions are met. This includes managing earnest money deposits and ensuring proper disbursement of funds at closing.
Who Typically Makes the Choice
The party choosing the title company varies by local custom and who pays for services. In many regions, the home buyer selects the company, especially if paying for title insurance. However, the seller might choose it in other areas, or it could be a negotiated point.
Federal regulations, such as the Real Estate Settlement Procedures Act (RESPA), influence this choice. RESPA prohibits sellers from requiring buyers to use a specific title insurance company if the buyer pays for any portion of the policy. This ensures buyers retain the right to choose their own service providers, even if a seller or real estate agent suggests a company. The decision ultimately comes down to who is financially responsible for the title services, as this party has more influence.
Factors Influencing the Selection
Several considerations guide title company selection. Recommendations from trusted sources, like real estate agents, lenders, or acquaintances, help identify potential companies. Cost is another factor; while title insurance premiums are often regulated, other fees can differ. Comparing quotes is important.
Reputation and experience are important considerations. A company with a proven track record, local knowledge, and expertise in resolving complex title issues offers reliability. Convenience, including office location, service efficiency, and communication style, impacts the overall experience. Some companies offer technological solutions, like online portals or remote notarization, to streamline the process.
Why the Choice Matters
Selecting a title company impacts the real estate transaction. A reputable and efficient company ensures a smooth closing, coordinating document preparation, signatures, and fund distribution. This minimizes delays and keeps the transaction on schedule.
A title company protects against future legal issues related to the property’s title. Through thorough title searches and insurance, they safeguard buyers and lenders from losses due to undiscovered claims or defects. Neutral handling of escrow funds provides security and confidence to all parties.