What the Heck is Title Insurance? And Other Important Stuff

What Does a Title Company Actually Do?

Many home buyers and sellers get a little shell-shocked when it comes to the closing process in a home deal. The fees, the paperwork, the time... it can all add up to a lot of stress and confusion, during what should be a joyous and happy time. 

The question many people often ask is, "What does a title agency do? And why do I need one?"

So, what is title and what does a title company actually do at a closing? To answer the most basic of questions, title is essentially the birth certificate and lineage of ownership of the land itself, stretching back since before statehood.  According to Zillow.com, in its simplest form, "A title company makes sure that the title to a piece of real estate is legitimate and then issues title insurance for that property. Title insurance protects the lender and/or owner against lawsuits or claims against the property that result from disputes over the title." In other words, the title company generally acts as the combined agent of the insurance company, the buyer, the seller, and any other parties related to a real estate transaction, such as mortgage lenders.

The title company reviews title, issues insurance policies, facilitates closings, and files and records paperwork.  However, in addition, our agency is attorney owned which allows either overall legal resolution, or even specific representation of a single party in the transaction if necessary.

While we hope that clears up some confusion, here are answers to some of the top questions we get asked from our customers. 

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What is Title Insurance?

Title insurance is an insurance policy that covers the loss or restriction of ownership interest in a property due to legal defects and is required if the property is under mortgage. The most common type of title insurance is a lender's title insurance, which is paid for by the borrower but protects only the lender.

There are two main types of title insurance: owner’s title insurance, which protects the property owner from title issues, and lender’s title insurance, which protects the mortgage company. Once the title is found to be valid, the title company will likely issue a title insurance policy, which protects lenders, or if purchased, owners against claims or legal fees that may arise from disputes over the ownership of the property.  While owner's insurance is not required, it is highly recommended based on the many issues that can possibly arise.  Some state statutes allow big discounts for the purchase of both lender and owner policies, as opposed to just a lender's policy.

How Do You Pick a Title Company?

While we hope you pick us for your title needs (hint, hint), it is always good to talk to your realtor about recommendations for a title company. If you are selling your home FSBO, then ask for suggestions from peers. At HK Title, we are attorney owned and operated, which makes the closing process for all parties involved more seamless and less stressful.

Coverage is essential. If you buy an owner’s title insurance policy, make sure you get one with as few exclusions as possible, having the title company explain each, and that it covers the full purchase price of the home.  We also have some of the most competitive closing costs in the Bay area (shameless plug over). 

What Does a Title Company Charge?

The cost of title insurance depends on the value of the property and varies greatly depending on the state. The average title insurance policy carries a one-time premium of about $1,000, which covers all upfront work and ongoing legal and loss coverage. However, premiums vary substantially, for most states premiums are set by statute or rule and are calculated by the value of the property, so they can be as little as a few hundred dollars to tens of thousands. The good news is that the premium is a one-time fee you pay at closing, not an ongoing expense.

When Do You Meet With the Title Company and How Often?

You will most likely talk with your title company throughout the sale/purchase process. Most title companies maintain an escrow account, the exceptions mostly being multi-million dollar sales, so the agent will reach out to you for deposit and disbursement details. If your title company handles your closing, you will meet with them at the closing as well.  Our firm offers remote closings as well for those buyers or sellers that are out of the area. 

Regardless, communication is key!  You should work with a title company who keeps an open line of communication and holds non-traditional business hours in order to make themselves readily available... like we do. (Last shameless plug, we promise!) . With good connection, easy access, and efficient service, title insurance should be the last thing you think about when celebrating a sale or a new purchase at closing.  A good title company should provide a worry-free experience from start to finish and that is our ongoing goal.