What Does a Title Company Do?

When you buy or sell a home, you may hear the term “title” several times during the transaction. But what does a title company actually do?

Simply put, a title company helps verify who legally owns a property and identifies potential issues that could affect the transfer of ownership.

What Does a Title Company Do?

Before closing, the title company researches the property’s ownership history. This process can uncover liens, unpaid debts, judgments, ownership claims, or other issues that may need to be resolved before the property can be transferred.

The title company may also provide title insurance, which can help protect the buyer and lender against certain covered title problems that may arise after closing.

Why Is Title Important?

Imagine buying a home only to discover later that someone else has a legal claim to the property. Title work is designed to identify potential problems before the transaction closes.

The title company works with the buyer, seller, lender, escrow officer, and real estate professionals to help ensure the transaction can move forward with clear ownership.

What Is Title Insurance?

Title insurance is different from other types of insurance because it primarily protects against certain existing title defects or claims, rather than future events.

There are generally two policies:

• Lender’s title insurance protects the lender’s financial interest in the property.
• Owner’s title insurance protects the buyer’s ownership interest, subject to the policy’s terms, conditions, and exclusions.

Your title professional can explain what coverage is available and what each policy provides.

The Bottom Line

The title company may work mostly behind the scenes, but its role is essential.

Title work helps establish who owns the property, identify potential problems, and provide protection through title insurance.

Your real estate agent helps guide the transaction, while the title and escrow professionals handle important parts of the ownership and closing process.

Next in our Who’s Who in Real Estate series: What Does an Escrow Officer Do?