Owning property is a valuable asset. Valuable assets are often protected by legal documents to ensure both buyer and seller are getting the most out of the transaction. As you navigate through the process of buying and selling real estate, working with a title company will eventually come into play. While they are synonymous with real estate transactions, many individuals aren’t aware of their role and how important they are to the closing process. Title companies work closely with the property title and perform research critical to protecting the investment.

The Importance of a Clear Title 

All the work a title company completes involves the property’s title. Understanding the essential role the title has in property ownership clarifies why title companies are not just part of the closing process, but they are critical to success. 

A title is a document that gives the owner the right to possess, control, and engage with their property. As the property is bought, sold, or passed on through wills, the single title will receive a new owner but only represent the individual property. The county clerk keeps records of the information noting date, ownership transfers, and other details. Some of the details can challenge the right to ownership and possibly create a financial burden for the current proprietor. 

Potential Defects on a Property Title 

Anything on a title that could negatively impact ownership is commonly referred to as a “defect.” Defects can appear as an unpaid judgment, fraud, or lien. A lien is quite common, so let’s use that as an example. A lien is when a mortgage lender decides a borrower hasn’t met the requirements of their loan agreement and puts a claim on the property. The owner of that property is financially responsible for that outstanding balance. It gets tricky when the outstanding balance accrued before you came into possession of the real estate. The balance is attached not to the borrower but the property itself. So, if it is bought and sold with a lien attached, the lien will become the new owner’s responsibility. Having a lien removed would require you to pay off the debt in full or settle. 

What a Title Company Can Do 

Title Research 

It’s possible to bypass defects by running a thorough search on the title’s history. Conducting this research is just one of the many things title companies do for buyers. They will review all documents and information attached to the property and present a report. The report will outline any information that they find. If there is a lien or outstanding taxes, you will know before you complete the purchase. In most instances, the title company can help you decide if these issues are rectifiable and how to go about getting them removed. 

Get Title Insurance 

Buying commercial or residential real estate is costly. A considerable investment that often sees between 9.5% and 10.6% ROI. With that in mind, you want to do what you can to keep it protected. Title insurance, while not a requirement in the state of Tennessee, offers a lot of support. Its primary responsibility is to provide financial assistance if a defect creeps up after you purchase the property. The insurance kicks in to cover the legal costs and reimburse you if you were to lose the home. Your title insurance company would recommend or possibly provide coverage for title insurance. All of which will be addressed and signed-off during the close.

Help With Escrow 

As two parties are processing a transaction, primarily when large sums are involved, a third-party will fulfill the obligations of completing the sale. It assures the payment of one party to another and disburses the funds once all the paperwork is completed. Placing the money in escrow allows the buyer time to perform due diligence on the property, and the seller reassurance that the buyer has the means to complete the purchase. As a buyer, you can choose your escrow company. Often, title companies have the ability to act as an escrow to streamline the process and make closing simple.  

Be Your Closing Company 

A closing company steps in to help with all the finalization. Buying and selling real estate is engulfed in legal documents. They are hard to navigate on your own. A closing company will help. If you choose wisely, you can get a title company that will work with you throughout the process and also act as your closing company. They can make informed recommendations and explain in detail the paperwork you are signing and what is expected of you every step of the way. It’s the responsibility of a title company to know and follow the rules, regulations, and industry compliances. Choosing a title company as a closing company ensures outstanding attention to detail. 

Whether you are buying a property in Nashville, Murfreesboro, or Smyrna, you have the right to choose your title company. At Hyde Park Title & Escrow, we offer a comprehensive range of title and closing services. From research to maintaining escrow accounts, we are with you every step of the way. 

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