What Is the Purpose of a Title Company?
Email To Friend | share this article | Posted by Anna on July 31st in General.
Just recently, a close friend of mine purchased a home in Canada. Having previously worked in a title company, I was interested to learn how the process worked in another country. I was surprised to learn that all real estate transactions are handled through either a lawyer or a notary, for about one-third of the cost of a title company’s fees here in the States. What is the purpose of a title company, and why do we not opt for the less expensive route that appears to be working just fine for Canadians?
The main purpose of a title company is to provide title insurance to the homeowner. The title company examines public records for any liens against the property or other problems that can later arise and affect your claim to ownership. They will research past deeds, mortgages, liens, claims, maps, tax records, CC&Rs, court judgments, divorces, and marriages. In addition to the initial research, the insurance will cover any legal fees that may arise if something does come up in the future. The title company also coordinates the whole sale process during what is called the escrow period. They work with the mortgage company, the realtors, buyers and sellers to ensure that everyone does their job to complete the legal transfer of property. Once all papers are signed, they submit the deed to be recorded with the county records office.
So is it worth having a title company and title insurance? My personal opinion is yes. Although my friend laid out a lower initial investment, she purchased the property at face value with no insurance against future problems. Although the lawyer disclosed all information that was known about the property, no one did an extensive search into its past as a title company would have done. Homeownership is such a big responsibility, why not be as protected as possible?
July 31st, 2008 at 2:32 pm
I agree with the article stating that title insurance was worth the cost I will add that at least into the seventies it was common only to get a title opinion from a local attorney who had examined the title. The local bank or savings and loan association would rely upon this opinion in making and securing their loan. I did quite a few title opinions during that time. Then one day I get a call from some bank in New York City saying that they were considering making a loan and they didn’t know my work and how much malpractice insurance did I carry. As financing of loans spread beyond the borders of a local community there was a need to show the far away lender that they had a first lien security interest in the property and if not there was at least some financially reliable institution willing to stand behind that judgment. That is when title insurance became almost a necessity for for financing property. (In fact in the few states that I follow, state banking laws require either title insurance or some form of equally expense title assurance and for a loan to be sold to Fannie Mae or Freddie Mac it must be insured - with a couple small exceptions.)
So it has been because we have moved the financial market (for home loans) from the local community to world wide where ever that title insurance is pretty well mandated.
As to the Canadian practice (as well as many other countries) there are completely different laws for creating, perfecting, recording of liens and different forms of assurances that derive from them.
For the consumer the the questions becomes “If I have a title claim against my property can I collect from the seller of the property, the lawyer or other person who examined the title or a solvent title insurance company?” And it the money I am paying or saving worth the risk?
August 2nd, 2008 at 2:38 pm
Hi Frank,
Thank you for taking the time to share the historical information and for your additional insight. That is a good point regarding the localization of the lending process verses marketing the loans worldwide.