Title company

A title company does three things in a property transaction: it searches the record, it insures against what the search might have missed, and in most cases it runs the closing.

The search#

An examination of the public record to establish who owns the property and what is attached to it — mortgages, judgment liens, mechanic's liens, easements, restrictive covenants, unpaid taxes and assessments, and any break or ambiguity in the chain of ownership.

In Minnesota that means the county recorder for abstract property or the registrar of titles for Torrens property, and the search differs meaningfully between the two systems.

What the search produces is a title commitment — a statement of what the insurer will cover, and a list of the requirements and exceptions that stand between the current state of title and a clean one.

The insurance#

Search is careful and it is not perfect. Forged signatures, undisclosed heirs, errors in indexing, defects in a decades-old conveyance — none of these necessarily appear.

Title insurance covers that residue. Two policies exist and they are not the same thing: the lender's policy, which the lender requires and which protects only the lender, and the owner's policy, which protects the buyer and is a separate purchase.

A buyer who declines the owner's policy has paid for insurance that covers somebody else.

The closing#

In most residential transactions the title company also acts as closing agent.

It holds the earnest money, receives the loan proceeds, calculates the settlement figures, pays off the seller's existing mortgage and any liens, disburses the balance, and records the deed and new mortgage.

That combination of roles is why the choice matters. The same firm is establishing what encumbers the property, insuring against error in that determination, and handling everyone's money.

Choosing one#

Frequently negotiable, and often just accepted from whoever suggested first.

Title fees vary between firms, and the buyer commonly pays for the owner's policy — which is a reasonable basis for choosing the provider. Local custom varies and it is often written into the purchase agreement, so it is a term to address at offer stage rather than at closing.

Wire fraud#

The single most important practical point about dealing with any closing agent.

Wire instructions sent by email are the most attacked point in a residential transaction. Fraudsters monitor email threads, wait for the closing date, and send convincing revised instructions.

Confirm wire details by telephone, using a number you looked up independently, never a number contained in the email. Once funds are sent to a fraudulent account they are effectively unrecoverable, and the loss falls on the person who sent them.