What Does the Title Company Do in a Tx Real Estate Transaction?
There are many parties to a real estate transaction, some more visible than others. One party is extremely important – the title company. What is the title company’s role? What is the title company’s responsibility? This article will visit these questions. Let’s discuss.
Texas Real Estate Law 101 | by the Real Estate Lawyers in Houston, Tx (832) 509-0445
The Title Company, Generally
In order to thoroughly understand any real estate transaction, one must first understand the role of the title company. The title company serves as a neutral agent for all parties of the real estate transaction, including but not limited to: the buyer, the seller, the lender, the insurance company agent. The title company is present at all stages of the transaction; therefore, one cannot undermine its importance in a successful real estate sale.
The Title Company in Opening Title – Contract Signing & Receipt
When the real estate transaction has been negotiated and settled, the buyer and the seller sign the contract. The contract is then submitted by a party to the agreement (usually the real estate agent) to the title company along with the earnest money payment. Earnest money is the reasonable amount of money to be delivered to the title company with the contract; in the event of a breach this amount will be paid to the seller of the property.
GF Number In Real Estate – Definition
After the title company receives the documents listed above, the company will issue a receipt of the transaction – a copy of which is sent to each party. It is important to note that this receipt will include what is called a guaranty file number (GF Number) which is the number used to identify the file. The GF number is important especially when communicating with the closer.
The process listed above is referred to as “Opening Title”.
The Title Company in Closing – Title Insurance Commitment and the Closer
The individual that is the “middle-man” between all parties to the real estate transaction is called a closer. The closer communicates with the seller, buyer, and lender and moves the parties to the closing.
Immediately prior to closing, the closer is responsible for collecting all documents (loan documents, the deed) and prepares what is called a settlement statement to be presented at the closing. The closing occurs (typically at the title company) when the statement and loan documents are signed by all parties.
After the title company has completed opening title, it will conduct a thorough title search. Once the search is complete, the title company will issue an insurance commitment which is then sent to the parties of the transaction. The insurance commitment will reveal whether the title to the land has any defects or whether other individuals have any interest in the land.
The buyer may reject the commitment but must do so within a limited time frame. If the buyer does not reject the commitment, any defects will be waived.
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The Title Company in Escrow – Escrow Officer
As mentioned above, the title company does not represent any party, but instead, is an agent to all parties to the real estate transaction. One role the title company may play is as an escrow officer. In short, the title company will hold all documents or money that are part of the real estate transaction in accordance to the will of the parties.
This is best illustrated through an example: suppose a seller of the property gives the title company the signed deed while the buyer gives the title company cash for the agreed-to purchase price. The title company will then simultaneously release the funds to the seller and the deed to the buyer.
The Title Company as the Insurance Issuer
The title company may also issue what is called “title insurance”. It is important to note that the company itself does not create policies nor is it liable under the policy; instead the title company sells the policy as an agent of the insurance company and receives a commission for issuing the policy.
The Title Company vs. the Real Estate Attorney
The title company and the real estate attorney are both extremely important in a successful real estate transaction. However, the roles of the title company and attorney differ. As highlighted above, the title company is an agent of all parties to the agreement, while the real estate attorney is only an agent to the client of that attorney. The attorney has the ability to read and analyze legal documents, advise the client, and seek legal action in case of any harm to the client.