If you’ve been looking into buying or selling a home, you’ve probably encountered the words “title company”. Once upon a time in America, a conveyancer was used to handle real estate transactions – one of their tasks was to assess whether or not the seller had full ownership rights to it. Nowadays, it’s the title company’s job to check the seller has all the rights needed to sell the property. Let’s find out exactly what the title company’s role is, and how that impacts you as a buyer or seller.
What is a house title?
A house title is the record of ownership of a property. It’s not the same thing as a deed, which is something that attests you own your property once the sale is over. The title is a detailed record of who has ever owned the property, and it also presents a description of the property. Lastly, it displays any liens on the property.
What is a lien?
In real estate, a lien is proof of a legal right to seize and sell the property if a contract is not honored. For example, when you take out a mortgage on a home, a real estate lien will be systematically put in place, and written up on the house title. A lien could also be:
- A home equity line of credit or a loan to pay off equipment such as solar panels
- Unpaid homeowners association dues
- Judgments or unpaid tax liens
- Restrictions, such as a certain age limit to live in a community
- An easement, which is the authorization to use space for parking for example
What does a title company do?
A title company is a third party that operates on behalf of a lender and a buyer. Their job is to look up the title of a home and make sure the buyer is allowed to sell.
This is of crucial importance because a seller could be buying a home that they don’t actually have the full rights. For example, the home could also belong to another family member, if inherited. If you buy that home, the family member could then request his share of the home, and you would have to buy them out, or worse, go to court to resolve the matter.
What is a chain of title?
A “chain of title” is the complete history of the property’s ownership. Title companies look for existing liens and other shares of ownership, preventing the seller from making a mistake before the sale goes through. They ensure that property taxes are paid and that no one is expecting payment for work on the home for example.
How much does a title company cost?
The purchase agreement between a buyer and a seller will determine who pays the title fees. Title fees are usually a part of the closing fees when buying/selling a home, which amount up to 2% – 5% of the home’s sale price. These fees may include:
- A title search fee ($75 – $200)
- A title settlement fee
- The lender’s title insurance, which is between 0.5% – 1.0% of the sale price
- Owner’s title insurance
- Attorney fee
- Abstract fees ($200 – $400)
- Recording fees ($125)
The bottom line
A sale of a home requires so many steps. A title search is very important, for all the reasons explained above. If you’re a buyer, you’ll want to have full ownership of the property once bought. The only way to ensure that is by going through a title company. Here at Wasy Homes, we can help you navigate all these complicated milestones when buying or selling a home – feel free to contact us anytime.