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What Is A Title Company?

By Elizabeth R. Elstien

"What is a title company?" you may ask when purchasing a home for the first time. A title (or escrow) company is a neutral third party in the real estate transaction where the buyer and seller deposit funds, documents, and any written instruction such as the purchase contract and addendums. A title company also provides title insurance, which is coverage for specific losses due to problems with the title (ownership) that occurred before you owned the property. Based only on the written instructions agreed to in writing by both the buyer and seller, a title company makes sure that all conditions have been met to allow the buyer to take title and close the sale. From cash sales to FHA loans and 1030 exchanges, a title company handles all transaction types.

Once both parties involved in a sale mutually agree in writing (such as signed the purchase agreement and any addendums), the buyer's real estate agent opens an escrow account by depositing the earnest money and purchase contract with the title company and specific escrow officer chosen to handle the transaction. This is when the escrow company starts working on the transaction.

The buyer and seller should mutually agree on a title company and escrow officer to use in a real estate transaction, which is written in the purchase contract. Sometimes a seller may request a certain title company and/or escrow officer for any variety of reasons, such as less expensive fees. That is fine, as long as both parties agree in writing.

However, a buyer who is purchasing a property using a federally related mortgage loan, cannot be pressured by the seller into using a particular title company as Section 2608(a) of the federal Real Estate Settlement Procedures Act (RESPA) states this choice is the buyers. According to this RESPA section: "Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance.

When choosing or negotiating a title company for the purchase contract, check the fees each company charges. Settlement transaction fees differ from company to company and some even have additional transaction costs that get passed down to the buyer and/or seller. Each company should be willing to provide their fees when requested. If a title company refuses your request or stalls, don't use them. Real estate settlement transaction fees must be provided when requested.

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About The Author

Elizabeth R. Elstien has worked in real estate for over 15 years as a real estate...

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