The real estate purchase agreement is signed, and now you are into the closing phase. While the specific language may vary, one of the contingencies contained in the agreement is some form of requirement regarding the ability to obtain title insurance. It’s time to work on getting that commitment, and fulfilling the contingency so that you can get this transaction closed.
First a quick disclaimer: this process can be different depending on state and, more importantly, depending on which stakeholders are part of the process.
The first step in the title process is choosing a title company.
There are a number of factors that might affect what company you choose. In a one-off consumer transaction, a local company with deep local expertise may be a good fit. On the other hand, for experienced buyers and sellers, with a larger footprint and more transactions, an organization licensed in multiple states with more flexibility may be the right way to go. We spend time talking about the pros and cons of different kinds of title companies in this article.
A final consideration should be the types and amounts of fees charged by the title company. If these are not listed, it may be worth inquiring with each company you are considering regarding fees and costs.
Once you’ve selected a title company and delivered the requested documentation, someone at the company will order a title search. The title search will be conducted, either by the company itself or through a third-party search vendor, and will generate a report regarding the state of the title and any defects, liens, or encumbrances currently on the title.
Once the search report is returned to the title company, it will be analyzed. Once the title search has been analyzed, the title team will collaborate with a title underwriter on the title insurance commitment. The commitment is the title insurance company’s offer to issue a title insurance policy under certain conditions stated therein. This article has an in-depth breakdown of commitment letters if you want to learn more.
One of the conditions in the commitment, also known as the requirements, will be that certain defects and encumbrances are cleared prior to escrow closing and the policy being issued.
Once the search has been analyzed and the commitment letter has been received, the clearing process can begin. The steps taken by the closing team to clear title will depend on the defects or encumbrances being cleared. For example, tax or other liens may require payments to be made out of the closing proceeds. On the other hand, a right of way or easement that is not allowed per the purchase agreement may require obtaining a release of that encumbrance from a third party.
This part of the process can take time as the practical work of clearing title continues. It is important to be patient with the process. Once all defects and encumbrances required by the title commitment to be removed have been cleared, the transaction can close and buyer’s title insurance policy can be issued.
The title clearing process, especially when combined with the title insurance and commitment process, can be one of the bulkier and more time intensive processes in closing. Even after everything is known regarding the title, the process of removing those issues can take time and significant effort depending on what was revealed.
It is important to understand that your team is working diligently to clear all issues and get you to closing. The more patient and helpful you can be in the process, the more likely your transaction will reach the finish line with minimal issues.
The information provided in Peak Title Professionals, does not, and is not intended to, constitute legal advice. All content is for general informational purposes only and is not intended to provide a complete description of the subject matter. Specific processes will vary based on applicable law. The title and closing process will be handled by a third-party attorney to the extent required by law. Product offerings vary by jurisdiction and are not available or solicited in any state where we are not licensed.
