What Does a Title Company Do?
As a real estate attorney in Michigan, I’m often asked what the difference is between using a real estate attorney and a title company in a real estate transaction. Title companies ensure that a legal title to a property or piece of real estate is legitimate. A title insurance company or a title agent searches public records to ensure there are no issues with titles. They’ll verify a property’s legal claim of title and confirm all liens on the property about what’s valid and what’s not. They also insure the previous owners and present ownership interest in a piece of real estate. Title search fees vary.
There are different types of title insurance, and title agents will issue a policy for that property. This is usually for the amount of the sale price or for the amount of the mortgage. A title insurance policy will protect the new owners of a property or the partner lenders. They do this to protect against a lawsuit or undiscovered claim to ownership against the property that evolves from disputes between parties over property ownership.
So, you should get title insurance if you’re going to get a mortgage or you’re going to sell a piece of property to a buyer who wants to ensure that you are the legitimate owner of this property. Getting a real estate attorney is not mandatory, although having title insurance is not optional.
You can have parties who are no longer on title, but they may have a legitimate claim against the property. This is what title insurance will protect against. Title companies also help with closings between a buyer and seller or lender.
Title Company Process
Title companies handle the money exchanged between the parties. They file and record the documentation with the county records (county recording office). They also coordinate with municipalities as well. So a property transfer affidavit gets filed with the city, not with the county.
Valid Claim of Title
Issues about valid claims of titles pop up regularly. And while a title agent may have experience on the title process and how to correct many minor issues, they usually don’t have a law degree. They cannot provide legal advice to parties in a transaction when more serious legal issues arise, and these title issues can affect the transfer of ownership rights. This is where attorneys, real estate attorneys, come into play.
What Does a Real Estate Attorney Do?
Common questions I get concern restrictive covenants in a deed. Which covenants or promises are valid and which aren’t? What if a title to a property gets clouded? Will an escrow holdback affect the legal rights of either party? These questions are ones that only a real estate attorney can provide legal answers to. Only a licensed real estate attorney in the state in which the property sits can answer these questions.
Realtors, as well as buyers and sellers and mortgage lenders, all benefit from working with attorneys as the attorney will review the sale agreement. They also answer legal questions about the contract or the negotiations, and how that might affect a property’s title.
Attorneys are the only professionals that can give a legal opinion on how a party can hold title to a property. So there’s many questions, such as, what’s an acceptable exemption, or an exception to a title policy? What’s your legal obligation to your lender when you’re in the closing process of financial transactions? What are the legal rights of the buyer or the seller?
It is optional to hire a good real estate attorney to review your legal documents before you close and you want to have one to prevent legal problems in the future. So while it may be optional, it should be a mandatory item on your list when you’re buying or selling a piece of property.