What is a title company and do I need one?
What a Title Company Does
A title company searches public records for liens, judgments, and other claims against the property. It can issue title insurance that protects you if a hidden problem comes up later. It also prepares settlement documents and records the new deed.
The company acts as a neutral party that holds earnest money and closing funds until everything is ready. This protects both the buyer and seller from one side walking away with money too early.
- Title search and examination
- Title insurance for the buyer
- Escrow of earnest money and closing funds
- Recording the deed with the county
Do You Need One?
In many states, a title company or real estate attorney handles the closing, and this is normal. Rules vary, so the requirement depends on where the property is located. Ask the seller or a local attorney which process applies.
Even when it is optional, title insurance is worth comparing because one hidden lien can be expensive to fix. Get quotes from a few companies and read what each policy covers.
Title insurance is usually paid once at closing rather than every year. An owner's policy protects against certain past problems, but it does not cover every possible issue. Read the exclusions and ask the company to explain what is covered before you commit to a purchase.
Common mistakes
- Skipping title insurance to save on closing costs.
- Using the seller's chosen title company without asking about fees or conflicts.
