Buying or selling a home, for most of us, is the largest financial endeavor they will ever undertake. You need to secure the services of a title company to efficiently and accurately handle this complex transaction.

The title company will do title search which means searching the real estate records in the county where that particular piece of property is located. A title search will (1) determine the legal owner of the property; (2) reveal any mortgages, liens, judgments, or unpaid taxes that will have to be satisfied before the property is conveyed; and (3) detail any existing easements, restrictions, or leases that affect the property and possibly the use of the property.

After the title search is completed, if a title insurance policy is to be issued on the property, it will prepare a “Commitment of Title Insurance” to the lender and/or the prospective buyer. The title insurance commitment will set forth all things that need to be completed and any problems that need to be corrected and/or resolved before the purchaser can receive “good title”. The title insurance company will complete all the necessary documents and will undertake to correct any problems. Once these things are done the parties are ready to exchange paperwork and have a closing.

The purpose of the closing is to sign and exchange all the documents necessary to convey title, secure the lender, and deal with collateral issues such as leases, rights-of-way, etc., and to explain in an orderly manner the costs to each party. This is done by preparing a closing statement or what is referred to in the industry as a “HUD 1”. The closing statement will include the mortgage lender’s charges, charges for preparing documents, the title company’s fees, recording costs, and the amount of the payoffs to release any existing mortgages, pro-ration of city and county taxes, real estate commission fees, survey fees, and any other costs associated with the deal.

At closing, the title company will collect the purchase money funds from the buyer and lender as well as the settlement costs from each party. With these funds, the title company then pays all of the expenses of the transaction, payoff any existing mortgages, and pay the seller the net proceeds of sale. All of this is done in accordance with the HUD 1 settlement statement.

After the closing, the title company will record the legal documents (deed, mortgage, assignments, etc.) at the county courthouse and then return the original documents to the correct party. New owners receive their deed which should be stored in a bank lock box or other secure location. The lender receives the original mortgage documents which they hold until the loan is paid in full. Once the loan is paid, the lender will “release” their lien against the property at the courthouse and will forward the original mortgage documents to the home owner. This is when the homeowner can enjoy the “burning the mortgage” ceremony.