Real estate is a complex business with many steps that can often confuse first time homebuyers or sellers. Read on for a quick and simple guide to understanding real estate title and escrow services:
What is title?
Title refers to all your legal rights to own, use and dispose of land. It includes all previous land ownership, uses and transfers. To transfer real estate property from one party to another, legally, a title search must take place, which comprises of the following three elements:
- Rights and interests published in public records
- Rights and interests that are unrecorded but exist
- Rights and interests that are hidden
Title insurance protects against the possibility of future loss, should your legal rights be compromised. Title insurance exists to protect both the lender and owner. The lender’s title insurance policy protects its interest in the property for the mortgage loan and the owner’s policy protects the homeowner for the value of the property.
Read more here about why you should have title insurance.
What is escrow?
Escrow is when a neutral third party holds on to funds during a sale, transfer, or lease of a property with another party. They deliver money, a written document or item of value to a neutral third person, i.e. the escrow officer. In real estate, it is used as a way to protect both parties during the real estate purchasing process.
It is imperative that a neutral third party handles the transfer of funds when a real estate transaction takes place. All conditions of the sale must be met prior to the money and property transferring hands. The escrow officer must have the necessary information and documentation to close the transaction. Once the closing takes place, the property’s title is then transferred under the terms of escrow and the title insurance policies are issued.
For a full guide to the commercial escrow process, read more here.
Who chooses the title and escrow services company?
Generally, the selection of the title and escrow services company is recommended by the buyer’s real estate agent, but the buyer has the right to work with another firm. A seller’s agent may also make a recommendation, but the seller cannot require the buyer to work with a specific firm. Some rules can vary from state to state.
Landmark Title’s team of title and escrow service experts are available to assist with your residential and commercial real estate transactions. If you have any questions or would like to learn more about the services we provide contact us today.