Title companies play a key role in real estate closings. While their exact duties can vary by state and municipality, title companies typically research the property’s title, help address potential title issues, and coordinate the documents and funds needed to complete the transaction. Their work helps ensure the property’s title transfers properly to the new owner and the funds involved in the sale are distributed to the correct parties. 

In many cases, the title company also serves as the settlement agent and conducts the closing appointment. 

Read on for a closer look at what a title company does during a real estate closing.

What Is a Title Company?

A title company is a business entity that provides services related to the ownership and transfer of real estate from one party to another. One of its primary roles is researching the property’s ownership history (title) to identify potential issues (title defects) that could affect the homebuyer’s ownership rights. 

What Does a Title Company Do Before Closing Day?

Much of a title company’s work takes place in the weeks and days leading up to the closing appointment. These tasks may include:

Conducting a title search

A title search involves a thorough review of public records to confirm ownership rights to the property. This process identifies factors that could affect the legal transfer of the title (title defects), such as:

• Outstanding mortgages or liens against the property
• Judgements
• Unpaid taxes
• Easements
• Errors in public records
• Missing heirs
• Improperly probated wills

The goal of a title search is to identify and address any such issues before the transaction closes. In many cases, title defects must be resolved before closing can occur.

Resolving title issues

If an issue is discovered during the title search, the title company may work with the appropriate parties to help resolve the title defect. The resolution process depends on the nature and complexity of the title issue, but it may involve steps such as:

• Correction of clerical errors
• Payment or release of liens
• Legal proceedings (when necessary)

Arranging for title insurance

Title companies may issue title insurance policies or work with a title insurer to provide coverage. There are two primary types of title insurance policies associated with real estate:

• Lender’s title insurance – Protects the lender’s financial interests should the mortgage become unenforceable.
• Owner’s title insurance – Protects the homeowner’s financial interests in the event certain title defects are discovered after closing.

Coverage and benefits depend on the specific policy and may include exclusions and exceptions.

Coordinating payoff details

If the seller has an existing mortgage or other debts secured by the property, the title company may obtain payoff details and coordinate payment for those obligations with the proceeds of the sale.

Preparing closing documents

The title company helps assemble the documents needed to complete the real estate sale. Depending on the transaction, this may include:

• Deed
• Settlement statement
• Title insurance documents
• Payoff statements
• Other required settlement forms

Coordinating the closing appointment

The title company may collaborate with the homebuyer, seller, lender, real estate agents, and other parties to ensure the closing requirements are completed. They may also schedule the closing appointment, confirming that all necessary documents have been prepared and are ready for signing on closing day. 

What Does a Title Company Do on Closing Day?

During the closing, the title company’s representatives present the documents needed to complete the transaction to the buyer or the seller. They also typically:

• Facilitate document signing
• Receive and handle closing funds
• Confirm closing requirements are met
• Prepare funds for disbursement

What Happens After Closing?

Once all documents are signed and all requirements are met, the transaction can proceed to recording and fund disbursement. The title company’s representatives will generally ensure the necessary documents are recorded and distribute the transaction proceeds. They may also send recorded documents to the appropriate parties and provide the buyer with the recorded deed and title policy (when applicable). 

Ultimately, a title company coordinates key aspects of the real estate contract, including the property’s title, the funds involved in the sale, and the legal transfer of property ownership. To learn more about real estate closings in Virginia, contact the team at Linear Title & Escrow.