A step-by-step guide on how the title process works in a real estate transaction.
1. Property Identification & Offer Acceptance
Once the buyer identifies a property they’re interested in purchasing, they make an offer to the seller, usually through their real estate agent. If the seller accepts the offer, both parties sign a purchase agreement outlining the terms and conditions of the sale.
2. Opening Escrow & Title Order
The buyer typically deposits earnest money into an escrow account, demonstrating their commitment to the purchase. The buyer’s agent or lender (if applicable) orders a title search from the title company.
3. Title Examination & Research
The title company conducts a comprehensive examination of public records related to the property, including deeds, mortgages, court records, tax documents, and other relevant files. Once the title search is complete, the title company prepares a report detailing the property’s ownership history and any issues that they uncover that could affect the property’s title.
4. Clearing Title Issues
In the event that the title search uncovers any issues – such as outstanding liens or property boundary disputes – it is essential to work with an attorney-owned title agency to resolve these matters. The real estate attorneys will negotiate with creditors to settle outstanding liens, coordinate with neighboring property owners to clarify easement rights, provide legal guidance to clear up any encumbrances, or take whatever steps necessary to clear the property’s title. Once all issues are resolved, the title company issues a Clear Title certificate, indicating that the property’s title is free of any significant defects.
5. Municipal Requirements
The title company works to satisfy all municipal requirements required for the title transfer. The requirements vary for each location, so the title company will reach out to the local authority to determine what their closing requirements are. This can include obtaining dye tests, property certifications, lien letters, occupancy permits, etc. The title company then files all necessary paperwork to complete these items.
6. Title Insurance
The buyer nearly always purchases a title insurance policy. Lender’s title insurance is required by most lenders, and Owner’s title insurance is optional, but highly recommended for the buyer. Unlike other forms of insurance, title insurance protects borrowers and lenders from issues that occurred in the past rather than issues that may arise in the future. The title policy is issued at closing.
7. Preparing for Closing
The title company coordinates with all parties involved – the buyer, seller, real estate agents, lenders, and attorneys – to schedule a closing date. The buyer receives a Closing Disclosure from their lender, detailing the final loan terms, closing costs, and other financial aspects of the transaction.
8. Closing and Transfer of Ownership
At the closing, all parties gather (either in person or virtually) to sign the necessary documents, including the deed, bill of sale, and mortgage agreement. The title company ensures that funds are property distributed. Once signed, the documents are submitted to the county’s recorder’s office to officially transfer ownership and record the new deed and mortgage.
With that, the title process is complete, and the buyer is now the legal owner of the property!