Title & Ownership March 13, 2023

What Does the Title Company Do?


Earnest Money
I wanted to talk about what the title company does through the purchase or sale process. I got this question when I was meeting with some first time buyers, and it’s a good question that I hadn’t really thought about. Obviously I have a video for title insurance and I’ll link that, so they’re going to provide you a commitment to provide title insurance, so that’s good.
But they do a lot of other things in the process. I just wanted to run through some of the important things that they do. First of all, they are typically, not always, it depends on the contract and the state and a bunch of different things, but for the majority of times in Colorado at least, they are going to collect cash, or your check and hold onto your earnest money. And the reason that’s nice is to have an unbiased third party hold onto that because obviously if somebody gets miffed in the process, you wanna make sure one person doesn’t have access to keep that. So you have an independent third party as a title company holding onto that money, obviously to give it back to one person or the other. They have requirements there signing an earnest money release form of both parties, all that jazz.

Recorded Document Search & Easements
Second thing is going to be pulling recorded documents in the process of giving you a title commitment. In the process of them preparing that for you, they’re going to pull anything that is publicly recorded relating to that property. So whether it be a loan that someone has, a mechanics lien that could potentially cause issues, any clouds on title, any gaps in ownership as far as, seller A, selling it to buyer B, selling it to C, C to D, etc. Any gap in ownership could present a title concern or potential title concern for you. So they’re gonna research that. They’re going to provide any recorded information regarding the plat map for the neighborhood.

So, here’s the second filing of that builder and then for that neighborhood, and maybe you or your legal description is lot 12 block 17. So here’s block 17, I am block number 12, which is the third from this corner of the street. All right, that matches where the house physically is, everything checks out. So sometimes those plat maps will have street frontages on them. If there was a survey or an ILC publicly recorded, they’ll provide that for you. If there are deed exceptions or covenants that convey with the deed. Let’s say you buy a landlock property and you have an easement on someone else’s property that’s recorded or vice versa, someone has a driveway that runs through yours because there’s this landlocked, then that’s gonna show on your survey if that’s recorded or it will be listed in your title commitment as well. So there’s a lot of information about your property and what you’re buying that is in that title commitment. So read it, have your realtor review it for you. They should be doing that anyway, but if not, say, “Hey, you told me that I got a title something, what is that? Go through it with me. What am I buying?” So they do all of that.

Settlement Statements & Disbursements
They will also collect and divvy out the final closing numbers. So the loan, the lender says, “Here’s all the charges I’m putting against, here’s what the buyer is paying me to do the loan.”  They’re gonna look at the contract that you wrote up. So at least here in Colorado in the contract you can say, the seller is paying for the HOA status letter, buyer is paying for the HOA record change fee, the seller’s paying for the water transfer fee. Well who’s paying for the real estate closing fee? Is that getting split down the middle? All that stuff. They’re gonna look at that contract and say, “Who’s paying what?” So seller, here’s your settlement statement. Here’s all the fees that you’re being charged, money that you’re walking away with and total it up for you. Buyer, same thing. They’re gonna prepare all of that for you. Your realtor should be checking that and going through it with you, but they’re gonna do that for you as well.

Closing Documents
Then they are going to present the closing package. So they’re going to go through the loan documents with the buyer and say, okay, your lender wants you to sign this page. Here’s what this says. They’re gonna present that to you and you can ask them questions. They do it all day every day. They know what all the forms say. So ask them, “Hey, what am I signing? What does this really mean?” They’re going to do the real estate closing for you. They’re gonna record your deed to make sure that it’s actually public record that yes, you bought this property, you wanna make sure that gets recorded. So they’re gonna do all of that stuff and they’re also gonna give you the title insurance on the home after you actually become the owner and everything closes, they’re gonna send you that title insurance policy.

So anyway, they do a lot of little things that people don’t realize that are actually really important and kind of get overlooked, but you wanna know what you’re buying. Hopefully that answers the question a little bit more. I know the title companies are kind of like, well, I know who they are and kind of what they do, but I’m not quite sure. So maybe that clarifies it a little bit. But if you have any other questions or comments, please feel free to reach out to me