There are a lot of people involved in any real estate transaction.
More than anyone probably thinks about.
Some are in the front of the house, working with buyers and sellers. And some are behind the scenes making the donuts.
A Title Company is probably the most critical ‘behind-the-scenes’ player; in control of the outcome of the transaction for everyone, though most people don’t understand what the title company is doing or why they’re even there.
We work silently in the background like little elves, and people just get their toys and play with them and don’t know about us elves. That makes us sad elves because we don’t often get to see happy faces of those who receive our gifts.
The Top 4 Things a Title Company Does That You Probably Don’t Know
➢ Title is just like a home inspection
You know why you need a home inspection: there could be something physically wrong with the property. It would be foolish for someone to not identify problems or potential problems before investing money.
Title insurance does the exact same thing as a home inspector, except even more critical. Home inspection identifies problems you can see. Title identifies problems you can’t see and then fixes them.
And problems you can’t see exist on almost every single property. Debts attach to real estate and behave differently in each state, county and sometimes municipality.
You know about the big stuff like mortgages and taxes. What about parking tickets? Gas bills? Fines for not cutting the grass quickly enough? Personal credit card debt? An auto accident?
These are all things that could attach to real estate depending on the circumstances and the location.
And just like a home inspector, not all title companies are equal when it comes to the quality, speed and accuracy of identifying and evaluating these problems.
➢ Landing a plane without air traffic control
Does not sound like something I want to do.
There are so many parties in a real estate transaction, all going their own way – someone needs to direct traffic.
Loan officers, mortgage processors, two Realtors, buyers, sellers, inspectors, appraisers, attorneys.
A lot of things happen that need communication and coordination and the title company is in the middle of all of it. A Realtor’s job is to sell, show houses, know the market and negotiate to contract. A loan officer’s job is to finance and lend money. Title companies sit in the center, handling documents, money and officiating the flow and conclusion of the transaction.
To remove title and escrow from a real estate transaction would be to remove air traffic control from airports and let pilots figure it out on their own. Keep me off that plane.
➢ Accountant, bank and treasurer
All money flows through the escrow company (which is the same as the title company in most states). Every penny. Deposits, buyer’s funds, seller’s proceeds, Realtor’s commissions, mortgage lender funding, taxes, unsecured debt, utility bills owed at settlement, county and state taxes and fees… everything.
Everything from buyers and mortgage lenders goes into the title company and everything to be paid out comes from the title company. This is a not-so-small balance sheet and you might be surprised at what can go wrong and how good and careful title companies have to be.
Not to mention safe-guarding everyone’s money and keeping it free from fraudsters (a huge and aggressive problem) including a buyer and seller’s life savings.
➢ Title drives buyer and seller happiness
From the time a property is ‘under contract’ until settlement happens, most communication and logistics are managed by the title company. This means that – though buyers and sellers spend most of their time during the sales process with their Realtor – once under contract, the outcome of success is largely not in the Realtor’s hands.
There’s quite a bit of work to do once a property is under contract. This is where the transaction really starts, and a real estate transaction has a lot of moving parts and hidden risks.
Who handles all of these logistics and who manages communication, debts against property and all of the money really matters to buyers, sellers and to Realtors and Lenders ability to extract referrals from clients they worked hard to land.