Once you enter escrow, you’ll usually be put in contact with an escrow officer from the title company. But what does this professional do for you?
Simply put, the escrow officer is tasked with, first, making sure the property’s title is clear, and then issuing title insurance. The title company will also hold funds in escrow during the transaction and make sure that all aspects of the sale are conducted legally and with the safety and security of the buyer and seller in mind.
Today, I’ll share some information about each of these steps so that you have a better understanding of the title company’s various roles during your own home buying or selling experience.
First, there’s the matter of the title search. As I mentioned before, one of the earliest jobs of the escrow officer is to make sure the property’s title is clear. This involves looking for previous liens, claims of ownership, or judgments against the property.
Liens, if you aren’t already aware, signify the legal right of a creditor to take possession of a property in the event that the owner doesn’t pay their debt. If you were to, for example, take out a $600,000 mortgage loan and stop making payments, the lender would be within their legal right to foreclose on you and take back your house, or sell it to get their money back.
Contractors who do work on a property will also sometimes put a mechanics lien on the title. The title company will search for both of these kinds of liens, as well as IRS or tax-related liens.
In addition to this search, the title company will also provide a property survey that determines the boundaries of the land the home sits on, and whether there are any encroachment issues, easements, or right-of-ways. After this, the title company will prepare an Abstract of Title, which is a summary of their findings, and a Title Opinion letter, which is a legal document that speaks to the validity of the title.
Once the title company ensures they can convey a clean title, they will issue the title insurance policy. The purpose of this policy is to cover your and your lender’s losses in the event that someone turns up at your door with a document proving that the previous owner’s grandfather stole the house from them.
There are two types of title insurance: the owner’s policy and the lender’s policy. The owner’s policy is optional and protects the property owner. The lender’s policy, meanwhile, is a requirement. In San Francisco and San Mateo County, the buyer pays for both insurance policies. In Santa Clara County, the seller pays.
After this comes the escrow process, itself. Escrow is the process in which the buyer and seller deposit funds and give documents to a neutral third party, the escrow company, who holds these items in trust until the close of escrow. Most of the time, you will work directly with an escrow officer. This person will coordinate the deposits and document signings, and basically make sure that all the fine details are taken care of. In the Bay Area, buyers may choose which title company they’d like to work with, though they typically default to their Realtor’s suggestion.
It’s important that you work with someone who is sharp, responsive, and very good with their job, as any mistakes made during the escrow process can cost you dearly.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.