How Lawyers Work with a Title Company?
It’s essential for the lawyers for both the buyers and sellers to work with the title company in advance of settlement and at settlement. Cooperation and planning can mean the difference between a smooth settlement and scrambling to finish the settlement on time. Faulty planning can even mean the settlement is delayed or cancelled.
What is title insurance?
Buyers normally hire a title company to obtain title insurance for their property. Buyers need to feel comfortable that after they move into their home, no claims will begin by the creditors, lienholders, or by people claiming the property really belongs to them. Title insurance means that once the title company Oks the title, that the title company insures the home against subsequent claims.
To protect themselves, title companies search the court records and other relevant documents and filings The aim of the search is to determine all possible claims against the real estate.
The role of the title company at settlement
Title companies regularly also handles the settlement transactions. To prepare for settlement, the title company:
- Works with the mortgage loan company to get all the necessary paperwork that the buyer must sign at settlement
- Works to get all the necessary federal and state real estate protection documentation that the buyers sign at settlement
- Gets payoff statements from any known creditors, judgment holders, and lienholders
- Works with the lawyers for the buyer and seller to resolve any outstanding issues
- Gets payoff statements from any utility companies
- Gets payoff amounts for any property, school, or other taxes that are due on the property
The title clerk prepares the settlement sheet. The settlement sheet is an accounting of all the funds the buyer and seller are each due and the amount each party to the sale owes.
The title company role after settlement
After settlement, the title company then files all the necessary papers with the appropriate recorder of deeds and other agencies. It also sends back the signed papers to the mortgage company. It also pays the creditors the amounts on the payoff statements or any negotiated sums.
How the buyer’s lawyer works with the title company
The buyer’s attorney should speak with the title company representative well in advance of the settlement. The lawyer’s focus is essential three-fold
First, the lawyer wants to know if there any legal issues that affect the ability of the buyer to obtain clear title to the real estate. Possible issues may include the ability to qualify for the mortgage loan. The mortgage company, for example, may need proof of added buyer income or proof that certain debts were paid.
Second, the attorney works with the buyer to make sure a pre-inspection was conducted. If there is a need for additional repairs, the buyer’s lawyer informs the title company that repairs are an open issue and lets the title company know the amount to pay for the repairs.
More on how the buyer’s attorney works with the title company
Third, the lawyer reviews what open issues the seller has such as money due any creditors. Knowing any seller problems in advance can help if any negotiations are needed with the seller. Advance knowledge also lets the lawyer explain to the buyer the risks that the sale may be delayed or may not go through.
How the seller’s lawyer works with the title company
The role of the seller’s lawyer are in many ways the reverse of the role of the buyer’s lawyer. The seller’s lawyer reviews with the title clerk on:
- Any open issues such as a prior death or divorce that might affect title. Many times, the seller can then work to get the necessary documents to show the seller is the sole owner or that the open claims are invalid.
- Any creditor or other issues. If the title clerk doesn’t get the payoff statements for any sums due, the seller’s lawyer should get those payments. Sometimes, the seller’s lawyer will negotiate with the creditor by explaining that the creditor only gets paid if the sale goes through.
More on how the seller’s attorney works with the title company
If there are any easement or land rights issues. Usually, utilities such as the electric company have the right to enter a home or the land to make necessary repairs. If private people have easements, then the right of those easements to continue after the property is sold may need to be negotiated.
- Repairs. The seller’s lawyers review any complaints by the buyer’s attorney that money is due for repairs. The seller may arrange for an independent contractor to provide an estimate or repair costs. Often, the seller will negotiate an escrow amount for repairs
The role of the lawyers at and after settlement
- The lawyers for both the buyer and seller help the title clerk by explaining what any legal documents that have to be signed mean. The attorneys also help review the settlement sheet so that each side gets the right amount – and the settlement sheet balances.
- The buyer’s attorney then checks with the title company that the necessary deeds and mortgages were properly filed. The seller’s also checks to see if they are any outstanding complaints.