Title Company

what is title company when investing in US real estate

Why is a Title Company important when buying Real Estate in the United States?

Title companies are a great American invention that reduce the risks when investing in Real Estate in the US.

Until 1868 when purchasing Real Estate in the United States, the buyer had no protection against legal issues during and after the transaction. Following a ruling of the Pennsylvania Supreme Court, in which the court fired the agent who was supposed to review the deal from any liability, the angry property owners promoted legislation that would regulate the purchase process and buyers would be able to minimize legal risks in the deal.

In 1876 the first title company was established.         

The role of the title company is to minimize the legal risks involved in a Real Estate transaction in the United States, for example when purchasing a house for investment purposes. In order to ensure this the title company carries out the following activities:

  • Checks the legality of the deed of the property (drafted in the United States).
  • Among other things, the title company checks whether the seller is indeed the owner of the property, examines historical inheritance orders and court decisions regarding the property if there are any.
  • Issues insurance to the buyer to cover any legal problems that may arise in the future.
  • In most cases, the title company is not the insurer itself, but serves as an insurance agent issuing a policy for the purchaser. If the customer takes out a mortgage, the title company also issues them with an insurance policy, reducing the risk and allowing for better terms.
  • Examines the property to see that it is free of liabilities and liens.
  • Among other things, the company checks whether there are unpaid taxes or additional debts on the property, whether it is exempt from liens and additional checks specific to the location of the property. At the end of the inspections, the company issues a report to the buyer, stating the legal status of the property and any liabilities if there are any.
  • Serves as a trustee for funds.
  • The buyer transfers the purchase money to the title company, which then gets passed on to the seller when the purchase is complete and in accordance with the tests performed. If the buyer receives credit for the purchase of the property, the lender’s money also goes to the title company.
  • Acts as an agent to close the deal.
  • Upon completion, the company issues the deed to the purchaser and now the property belongs to the buyer with all legal risks reviewed and insured.

How much does this service cost when you buy a home in the United States? For most transactions, the cost of title company services range from $ 400-800.

*The information contained in this post has been provided by Lend A.I. Ltd. (and/or its affiliates) for information purposes only, and as such, this post shall not be interpreted as legal, tax, professional, or commercial advice. While every care has been taken to ensure that the content is useful and accurate, Lend A.I. (and/or its affiliates) gives no guarantees, undertaking or warranties in this regard, and does not accept any legal liability or responsibility for the content or the accuracy of the information so provided, or, for any loss or damage caused arising directly or indirectly in connection with reliance on the use of such information.

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