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    Title Companies – What do I need to know?

    Did you know that over 13 industries can be involved in a real estate transaction? These include the Broker, Title Company, Home Inspector, Pest Inspector, General Contractor, and the list goes on. Two of the more elusive, yet most important contributors to the deal are the Escrow and Title Companies. These organizations are responsible for researching the current title (and hopefully finding that it is clear), insuring the lender and/or buyer against title fraud, preparing loan-fee documents, collecting fees, recording, and disbursing funds.

     

    Here is a little bit of information on what these organizations do and who gets to choose the company where these services are performed.

     

    Escrow Agents

     

    The Legal definition of an escrow agent is “a person or entity holding documents and funds in a transfer of real property, acting for both parties pursuant to instructions. Typically the agent is a person (commonly an attorney), escrow company or title company, depending on local practice”. Since the escrow agent must, by definition, be a neutral entity, no single party has the right to choose an agent that is rejected by the other party or parties involved. However, in practice, the escrow agent is often associated with the Title Company chosen by the buyer (or seller depending on the terms of the contract).

     

    First, escrow is opened when the escrow agent receives mutual escrow instructions of the principles (buyer and seller).

     

    The escrow holder will receive and/or examine important documents such as

    • Preliminary Report
    • Requesting Demands and/or Beneficiary Statements
    • Structural Pest Control and Other Reports
    • New Loan Instructions, Instruments, and Related Documents
    • Fire Insurance Policies

     

    At the end of the deal, the escrow agent will make all proration’s (e.g. property taxes and insurance premiums) as instructed by the principles of escrow and complete the accounting details. He/she will then inform the principles that the sale escrow is ready to close.

     

    This escrow agent then orders loan funds from the lender(s), and when auditing the file for closing, will account for all funds and determine that the principals have complied with the escrow instructions.

     

    He or she will also request the recording of necessary instruments and subsequently confirm the recording of those instruments.

     

    Finally, the escrow agent prepares the closing or settlement statements for the buyer and seller, disburses all funds, and delivers instruments and related documents to the principles or other entitled parties.

     

    Title Companies

     

    The role of the title company is to inspect title and issue a title insurance policy. First, they investigate the property’s history of ownership, or chain of title, and identify encumbrances on the title. If they find any liens or other encumbrances, the title company works to clear them. They summarize their findings in an abstract of title.

     

    Most lenders require a survey or house location drawing of the property. If a survey is necessary, the title company will place the order, with the buyer’s authorization, and review for any potential problems. If issues arise, they notify the real estate agent and lender immediately. The survey is given to the buyer at settlement.

     

    The title company also issues title insurance, which guarantees that title is free of encumbrances. It is the buyer’s responsibility to buy enough title insurance to protect the lender against any loss due to an encumbrance on title. The buyer can also buy title insurance to cover his or herself. There are various levels of coverage, and some items are not covered, thus it is important to understand the details of any given policy.

     

    Title Disputes:

     

    Issues with title include but are not limited to errors in public records, unknown liens, illegal deeds, missing heirs, forgeries, undiscovered encumbrances, unknown easements, boundary / survey disputes, undiscovered wills, and false impersonation of the previous owner. Title insurance protects the lender and buyer from future claims on the property resulting from these kinds of title issues, within the limits of the policy. It is important that buyers know what their policy does and does not cover and feel adequately protected against the risk of disputes of title.

     

    Title insurance companies defend against lawsuits attacking the title, or in the case of a covered loss, reimburse the insured up to the policy limit. It protects the buyer/lender against losses from problems that arose before purchasing the property. Additionally, the company will defend the injured party in court if there is a claim against the property and will pay for covered losses.

     

    Choosing a Title Company

     

    Section 9 of RESPA (federal law) prohibits the seller of a residential one-to-four unit property from requiring the buyer to buy insurance from a particular title company (see more here). Therefore, if the buyer is purchasing the insurance policy for the lender, for his- or herself, or some combination thereof, then he/she may choose the title company he/she prefers. This is important because, should a dispute of title arises, the buyer is dependent on the title insurance policy and company for protection.

     

    If the seller is to pay for the title insurance policy, as specified in the Residential Purchase Agreement, then the seller gets to choose the title insurance company.

     

    Buyers (or sellers) want to consider the premium cost of the title insurance policy. The buyer can shop around for a lower insurance premium rate online at sites including EasyTitleQuote.com and FreeTitleQuote.com. We’ve also listed local title companies and their rates (in case you don’t want to fork over your email address). However, when choosing a title company, the buyer (or seller) should keep in mind that lower premiums does not always mean lower costs. If a title insurance premium is notably lower than the market rate, this should be a red flag to look more closely at whether the company is providing customary core title and closing services. Cut-rate premiums may indicate a lack of experience, a lack of financial and accounting controls, inferior title searches and examinations, or a substandard source for property data. If possible, one may find it beneficial to choose a local title company. Real estate transactions are nuanced and local title companies are more likely to have valuable local knowledge.

     

    Because title companies issue insurance, you want to make sure the title company you choose has a favorable Financial Stability Rating®. Here is a website you can use to do this: http://www.demotech.com/fsr.aspx

     

    Other considerations include: local expertise, service standards, market conduct and commitment to the community. Consumers can also consult yelp, google, and the Better Business Bureau to check for reviews on title companies.

     

    Title Insurance Companies and Rates in Santa Cruz County

    First American Title

    http://www.firstam.com/title/ca/santa-cruz/resources/documents/rate-schedules/index.html

    Stewart Title

    http://www.stewart.com/santa-cruz

    Old Republic Title

    https://www.ortconline.com/Web2/ProductsServices/InformationServices/FeeNavigator/Default.aspx

    Title Companies and Rates in Santa Clara

    Fidelity National Title

    http://ratecalculator.fntg.com/default.aspx?brand=fntic

    Old Republic Title

    https://www.ortconline.com/Web2/ProductsServices/InformationServices/FeeNavigator/Default.aspx

    First American Title

    http://www.firstam.com/title/ca/santa-clara/resources/documents/rate-schedules/index.html

    WFG National Title Insurance Co.

    https://www.titlehoundonline.com/OrderPlacement.aspx

    CornerStone Title

    https://www.cornerstonetitleco.com/TFE.aspx

    Title Companies and Rates in Monterey

    Old Republic Title

    https://www.ortconline.com/Web2/ProductsServices/InformationServices/FeeNavigator/Default.aspx

    First American Title

    http://www.firstam.com/title/ca/monterey-san-benito/resources/documents/rate-schedules/index.html

    Chicago Title Insurance Co.

    http://ratecalculator.fntg.com/default.aspx?brand=ctic

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