Q: Can you tell us what exactly is a title company and why I need one when I purchase a house? Doesn’t the mortgage company do all of that?

A: A title company ensures that a home’s title is clean with no encumbrances. They provide research and insure the title to the home a buyer is purchasing, along with managing the closing.

Q: Some people come in and say to me, I don’t want to use a title company, I want to use my lawyer. Can you talk about the difference in doing that?

A: In the first instance it is always the borrower’s choice of who they want to use to do the title. The title company does work on their behalf and ours. If they come in and say they want to use “ABC Title Co” and we have worked with them before and had issues with them, we may not have them on our approved list. If there are no issues, we just have to get them approved, which is certainly something easy that we can do. The thing with the title company is, that it’s their job to primarily ensure that the borrower is getting a free and clear title and the sellers have conveyed that clearly through the proper channels and documents, and we as the lender are the first lien of record and the strongest.  The title company can’t allow for any other mortgages or taxes, or any condo associations not to be paid. That all has to be addressed by the title company. The difference between an attorney and a title company really isn’t any difference at all. Title companies tend to have attorneys on staff and title companies are very prevalent in NH. MA is a title attorney state, you have to be an attorney or have an attorney on staff to be able to do title work. NH doesn’t have that requirement. NH is trying to do that but we aren’t there yet. The reason there is no difference is that if I am an attorney and I am doing a deal for ABC Lender and we find a title problem, they can’t then fix the title problem unless it’s within the scope of the job. So, if it’s major and they have to do a prorate they then have to send it to a prorate attorney, Let’s say there is a discrepancy or a disagreement between the parties they can’t then arbitrate the issues between the parties because they are only hired to do a title. It is not a case of hiring an attorney because they can handle everything, there are limitations because it really depends on exactly what they were hired to do.

Q: Do the fees vary between the title companies?

A: Not really that much. There are certain fees that are dictated by the state and they don’t vary at all, such as recording fees and transfer taxes. Title insurance is rated by the state so the insurance department regulates them.

Q: Do you have to have title insurance?

A: If you are getting a mortgage, yes, you absolutely have to have title insurance. You do not have to have owner’s title insurance but it is highly recommended and a lot of companies won’t do the transaction if you don’t buy it now.

Q: Can you tell me why that is?

A: The thing about the way the title world works is the title company information is only as good as the people who provide it. When I say that, I mean, the town giving the tax information, the condo association giving the dues or condo fees, or the mortgage company giving a proper payoff for the mortgage, and the information from the registry being recorded. The title companies are only as good as the information given to them. You have a clear title based on what is known and the information given to me, I am conveying a clear title. That is why title insurance comes in and protects all those things that are not known or can’t be found. 

Q: You mentioned quit claim, can you tell us what that is and the difference between that and warranty deed?

A: Yes, a quit claim deed basically says, I am giving any interest I have to Joe Smith, he is taking it with whatever I have done. Whether I have a mortgage, taxes, or dues. I give no representation as to the state of the title and he accepts it with all of those issues, mortgage, taxes, and dues. A warranty deed says that to the best of my knowledge, I have disclosed everything I need to know about the property to you and I know nothing else I am not telling you. A quit claim title is as effective as a warranty deed.

Q: Sometimes buyers get a little nervous when they see a quit claim deed. Is there a need to worry?

A: I also hear that. Buyers think the sellers are hiding something. That isn’t true. There is a seller’s disclosure sheet, same thing with title, if they fail to disclose something you can be responsible for that at a later date. The title insurance company is going to come in and fix the issue and then they will subjugate and find out who is responsible for this. They will figure out if the seller knew there was a problem with the septic system, for example. You have to own what you did or didn’t do. The one other deed to be aware of is a fiduciary deed. That means that the person signing is acting as an agent of the seller. The only time you will see this is in the case of a trust or an estate.

Q: How long does it take to go through this process with the title company?

A: They really act on the timeframe of the transaction. They will look a the closing date and work backward. If you need a fast turnaround, it is a cash deal, they Wik probably be able to do it. If there is an issue with the title ad notification has to go to the seller, in writing. At that point, the seller then has 30 days to fix the problem. So, obviously, if there is an issue with the title then that will delay the closing. If they are unable to fix the title within that time frame, the contract becomes null and void and the deposit isn’t at risk. All parties can also agree to extend the time to fix the title issue.

Q: We have talked about underwriters in regards to mortgage lenders, we also have underwriters within the title world. Can you explain the difference and what underwriters do in regards to the title?

A: An underwriter in a title company is a different entity than in a mortgage company. They aren’t one-n-the same. The title company is an agent for several underwriters. The title company researches the title and presents the property (title-wise) to the underwriter. The underwriter then says, yes, I will write insurance for this property. The risk is on the underwriter, not the title company. Unless the title company misses something and the underwriter may cover it, the title company may be on the hook for it. It is all risk mitigation. 

Q: Who gives the clear to close? Is it the title company or is it the mortgage company?

A: We, as the lender are the ones who give the clear to close. We have to put everything together and make sure it is all in order. I have been in transitions where a title company has said to the buyers, ok, you are clear to close. Tn the buyers call me and say, yeah, the title company has said we are clear to close, so can we close tomorrow. I have to explain that the mortgage company has a few more steps to take. Unfortunately, both agencies use the same terms. I wish they would come up with a different phrase. Maybe use the phrase, the title is clean, not clear.

Q: There is a lot of communication back and forth and there could conceivably be a lot of people talking to the buyer. I’m sure can cause some confusion. Who actually does the communication with the buyer?

A: The true and honest answer is whoever the real estate agent wants. There are some agents who say,  I don’t want to know unless there is a problem and you just tell me how you are going to fix it. There are other agents who say, don’t talk to my people unless I know what is going on, they are my clients, I am going to handle it, I need to prove my value here and I don’t want you talking to them unless I approve. The transaction experience is really what the agent wants it to be because they are your clients. 

Q: What else should a borrower or a seller know in regards to a title company?

A: The title company will need to collect a lot of the same information like the mortgage company, names, addresses, and SS#’s. The reason for this is that I as the mortgage company can not provide that information to them. It is private, so they have to ask for it. It isn’t that we aren’t communicating with each other, it is simply a. Matter of privacy. And as far as the seller’s side goes, we don’t have that information at all so the title company has to ask for it.

Q: Some sellers don’t want to give out this information. How is that handled?

A: Simply put, if they want to get their money, they will have to give their social security number to the title company. Additionally, if the property is in a trust, the money will have to go to the trust. It can’t be given to you personally.

Q: Can you go over the last part of this process that brings us to closing?

A: The title company will notify the mortgage company that the title is clear (clean) and then the mortgage company will then notify the buyer when they are clear to close. The title company will receive the packet from the mortgage company and do the actual closing.

Q: Does the mortgage company attend the closing?

A: They don’t have to attend and a lot don’t attend. I personally like to go to the closing because I can answer any questions the buyer has regarding the mortgage. The real estate agent doesn’t have the mortgage information and that could pt then in a position of not having the information they would like. This could cause the closing to take longer than necessary or even be delayed. I want to make sure the borrower is comfortable and has what they need. Being present at the closing sometimes avoids calling with questions that I could easily answer by being present.

We have covered different types of lenders, the process of securing a mortgage, the title company, and getting to the closing table. In Part 4 we will be talking about homeowners insurance.