The title company is often overlooked in all the hub-bub of a real estate transaction, but it is in fact one of the key players. The title company plays a key role at closing – that final step at which you get the keys to your new. In fact, one of the main jobs of the title company is to make sure the title is clear so that you can actually buy and own your new home. Still, many aren’t aware of the key roles and duties of the title company in the home home-buying process. So we’re here to help gain an understanding of the role of your title company when buying a house in Kauai.
What Is a Title Company?
Primarily, a title company provides several services associated with satisfying buyers’ and lenders’ concerns about a clear title. These services include performing the title search, preparing documentation for closing, and (often) offering title insurance in the case of a claim against the property later. Your title company may also be responsible for conducting and overseeing the closing.
Basically, a title company serves as a sort of compliance officer for the home-purchase transaction. The company is tasked with ensuring that all aspects of the transaction meet the legal requirements and that the transfer of ownership is free from issues and errors. Without the involvement of a title company, the home-buying/selling process wouldn’t be as smooth and would encounter more obstacles.
So now let’s look at some specific services your title company provides when you’re buying a house in Kauai.
The Title Search
First, there is the title search, the main job of the company when you buy a house. The title search involves a thoroughgoing search of the property’s history. In the course of the title search, the company will examine all previous transfers, owners, and liens to ensure the title is clean and capable of being transferred to the new owner.
Here are some of the most common issues that crop ups in the course of a title search . . .
- Unpaid taxes or liens – If a seller is behind on taxes, the IRS may place a lien on the home. In that case, the lien must be paid off in order to clear the title so that a transfer can take place. Other common liens include those for unpaid HOA dues, a home equity line of credit, and, of course, the mortgage, and these too must be paid in full before or at closing for the title to be transferred to the new owner.
- Leases – If the property is currently leased to a third party, the title search will bring this to light.
- Easements – With an easement, someone other than the owner/seller has been granted the right (a non-possessory right) to use the property for a specific purpose, the most common being a right-of-way easement. And this must be cleared up before transfer.
On completion of the search, the title company will put out a report of the findings, as well as an abstract of the title and an opinion of the title confirming or denying its legality If any problems are discovered, the title must be cleared before the home sale can transaction can be finalized.
Issuance of Title Insurance
Next, your title company will issue insurance designed to protect both you (the buyer) and the seller. In addition, as the buyer, you will have to pay for lender’s insurance to insure the value of the mortgage in the event that issues with the title come up in the future. Be aware, though, that this insurance does not protect your investment in the property. Optional in most states is the owner’s title insurance, which does protect your equity in the home if a title issue comes up later.
Because this title business can get fairly complex, it’s a good idea to lean on your Kauai agent’s guidance. To discover more, just call 808-634-4518.
Oversight of Escrow and Closing
Other key responsibilities of your title company are overseeing closing and managing escrow.
The company will manage and protect the requisite important documentation for closing. At closing, both parties typically meet at the title company to sign the pertinent documents to complete the transaction.
The escrow account is money held to safeguard it for availability during the final steps of the transaction. These funds include the earnest money, the down payment, and the closing costs and fees.
Disbursement of Funds
The final step before you get the keys to your new home involves the disbursement of funds. Typically, the lender wires the loan amount to the title company, and you send your portion as well. The title company then disburses the money to the appropriate parties.
Where to Turn for Assistance
If all that your title company does seems fairly confusing and legally complex, that’s because it is. And that’s why it’s important for most buyers to lean on their Kauai agent’s guidance to navigate the process without a hitch. If you’re buying a house in Kauai and want assistance with what your title company does, contact us today at 808-634-4518.