What is a title company?

In real estate, a title company is a third party whose primary role is to transfer the title from buyer to seller and provide title insurance. The title is the legal way of saying you own a right to your house.

In a home sale, the title needs to be moved from the seller to the buyer to establish their ownership of the property. A title company takes care of this task from start to finish, handling everything from completing legal documents to researching the property through a title search.

What does a title company do?

A title company’s responsibilities include the following:

1.Conduct a title search

The goal of a title search is to confirm that the current owners have a right to sell the property. If they don’t, the future home buyer could run into legal issues down the road, should someone else later claims to be the owner. For example, the title company will make sure the owner didn’t forge a property deed or that the house is subject to an inheritance claim from a faulty last will and testament.

A title search involves reviewing property and land records to make sure there are no liens, unpaid taxes, or other restrictions on the home. At the end of the process, the prospective buyer gets a title report and opinion letter detailing the current ownership details of the property and any issues that need to be resolved for the sale.

→ Learn how much a title search costs

2. Conduct a property survey 

When purchasing a home, it’s key to know where the home’s boundaries lie and what rights you’ll have as the new owner, versus your neighbor. The title company will verify property lines and confirm any easements, which would allow someone else to access your grounds, through a property survey. 

→ Learn more about property surveys

3.Issue title insurance

While title searches are quite extensive, there’s always a small chance that an ownership claim pops up down the road, which is why your title company offers title insurance against these defects and clouds on the title.

There are two types of title insurance:

• Owner’s title policy: Protects the buyer
• Lender’s title policy: Protects the lender

The lender requires title insurance to protect their investment in the house, while the homebuyer gets an owner’s title insurance policy to protect their own personal stake in the property. 

In many areas, the seller will arrange insurance for the buyer (owner’s title insurance) during the sale. 

→ Learn more about getting title insurance

4. Coordinate closing

Many title companies also help facilitate the home sale by providing real estate settlement services, acting as a neutral mediator between the buyer and seller during the closing process. 

The title company will typically pair you with a dedicated closing agent, which may be an escrow officer or real estate attorney, who will be your point person from the day you sign the sales contract, all the way to your closing date.

Your closing agent will: 

• Prepare any necessary paperwork
• Arrange your closing date logistics
• Handle communication with third parties like your HOA
• Give you a closing disclosure statement with a final breakdown of your costs a day before closing

On your official closing date, your closing agent will manage the escrow account by collecting and distributing sale funds among the parties involved including the buyer, seller, real estate agents, and mortgage lender. They will also record any final deeds and transaction documents required by your county.

How much does a title company charge?

The title company makes money by charging fees, and the bulk of a title company’s fee comes from the title insurance premium. This is usually a one-time fee, and the exact cost of your premium will depend on the price and location of your home.

For example, Texas has a set pricing structure for title insurance, so your premium will cost the same everywhere and you won’t get a better deal by shopping around, as you would with other types of insurance.

Otherwise, many title companies offer a significant discount if you get both your lender’s and owner’s title insurance from the same company.

Your title fee also includes:

• Tax certificate charges
• Escrow fees
• Recording fees
• Delivery expenses

How to find and choose a title company

When you buy a home, your real estate agent, attorney, or lender recommend or help you pick a title company. Reach out to your agent to understand what’s the norm for transactions in your area. 

If the seller or someone else involved in the transaction already has a particular title company and title agent in mind, make sure that the agent is licensed and has experience.

If you have no leads and need to find a title company yourself, consider asking your real estate agent and friends and family for any recommendations. Do your own research to ensure that the company is reliable and qualified. 

If you’re working with Orchard to buy or sell a home, we make the transaction seamless by working with our title partner, Orchard Title. They offer a convenient and personalized closing process that’s powered by superior technology and customer support.