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What is a title company?

The process of buying real estate can get confusing very quickly, which is why real estate professionals and lawyers exist. They are there to help homeowners–especially first-time homeowners–navigate the pitfalls and complications of the real estate business. Unfortunately, sometimes even figuring out what kind of help you need can be confusing. The average homeowner might not know the difference between a real estate agent and a real estate lawyer, much less what more specialty organizations like title companies are. We turned to our real estate professionals to help answer the question: what is a title company, anyway?

What is a title company?

A title company is an organization that specializes in researching property titles, meaning who has legal ownership of the land. Real estate histories can get quite complicated, and the person you are trying to buy property from may not actually have the right to sell it. And if they don’t, it’s entirely possible that they might not even know that there’s another legitimate claim on the land. A title company will research a plot and find all potential owners. Without a title company, someone else with a lien against the property could come after you for money. They also often host and supervise the final closing, serving as an escrow agent.

What is a title company NOT?

A title company is not your advocate. They are not there to help you; they are there to research the property and establish ownership of it. Sometimes their verdict will work out in your favor, but they are a neutral party between you and the seller.

When do you use a title company?

Using a title company is always a good idea, because you cannot close on a piece of property unless the person selling it has the right to do so, and only a title company can guarantee that. In most cases, you will find that banks refuse to finance a property without the go-ahead from a title company, so if a bank is involved in your real estate transaction you will definitely need one.

There are no real drawbacks to using a title company, except the cost of their fees. If you can afford one, it is in your best interest to do so. And while you’re at it, hire a property inspector, a surveyor and a termite inspector, too. That way, you’re protected from all the nasty surprises that can crop up after a real estate deal has been signed.