Q: Where I live in Ohio, real estate transactions usually seem to close at title insurance agencies. Why is that?
A: The answer is mostly a matter of economics and tradition. It is expensive for banks to maintain closing staff and to commit space just for closings, space that might be used for other purposes. Years ago, title insurance companies and their agents, who were doing the public records searches anyway, began taking on the closing responsibilities as well, and that tradition continues today. Also, there are those lenders who don’t have a local presence, but who do their business either online or through brokers; the title agency becomes their local connection with their customers.
Q: Are all title agencies about the same?
A: Yes and no. All title agencies write title insurance for large national or regional title insurance companies. Consumers should use title companies with good reputations and experience. Often the lending institution or Realtor can be helpful in identifying a company. The insurance policies issued by all Ohio agencies are based upon forms approved for Ohio.
Q: What services do title agencies provide?
A: Title agents thoroughly examine each title to determine if there are any flaws in the title or reasons for concern regarding the transfer of the title. The title agent also reviews the closing documents and is responsible for having such documents executed properly and for having certain documents properly filed. Title agents are responsible for disbursing funds in a timely fashion, such as paying off mortgages and other liens that affect the customer’s title. Title insurance also may provide a way to close a transaction when there are certain title deficiencies that the title insurer is willing to cover.
Q: How do I insure that I have a “good” title agency?
A: You can ask questions. It is becoming increasingly common for banks, real estate agents or lawyers to have an ownership interest in a title agency. You should be made aware of any such ownership arrangement. You also should ask about the agency’s experience or length of operation, and about the qualifications of its personnel. Ask if any claims have been made against the titles that this agency has previously insured. And finally, find out whether the entire closing process is being insured on your behalf by the title insurance company, or if only the title is being insured. Without that additional coverage, which is provided as “closing protection coverage,” consumers risk not being fully protected.
Q: What is closing protection coverage?
A: Closing protection coverage is a type of insurance that protects any borrower, seller, lender or other title insurance applicant in case settlement funds are lost due to mishandling or failure to comply with written closing instructions. You can acquire closing protection coverage when your title insurance policy is issued out of the real estate transaction. All parties to the transaction (seller, buyer, lender) must be offered this coverage, but it benefits only the party who asks for it, assuming the premium is paid.
Q: Must I use a title agency?
A: No, but it makes good sense to be sure you are receiving a clear title to the property you are buying, and title agencies can provide an efficient mechanism for doing this. Your attorney may also be able to provide you with these services, as might others involved in the purchase process. The important point to remember is to have the title researched and insured so you know of any encumbrances against the property. If any flaws in the title are discovered, you can then seek to have such flaws corrected in order to have marketable title transferred. Your lender may also require you to use a title agency to close the loan transaction.
This “Law You Can Use” column was provided by the Ohio State Bar Association. It was originally prepared by Delaware attorney Quentin R. Haines and updated by Delaware attorney G. Scott Miller.