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Title Agency vs. Title Company: Is There a Difference?

Monday, July 13, 2020

With several parties at play, buying a home can be a complicated process. During the ‘closing’ or ‘settlement’ of a property, you might expect the buyers and sellers, the brokers and lawyers, and the settlement agent in charge to be present. 

But, other participants oversee both before and after the 'closing' phase - a title company and title agency.

If you’re confused about the role these parties play in the closing process, and how they differ, read on.

Title Insurance

If you don’t know what title insurance does, the role of a title company or agency might be confusing. Title insurance protects the lender, but can also protect the home buyer, from defects in a property’s title. 

Lenders always require title insurance. However, it's optional for home buyers. Nonetheless, purchasing title insurance is always recommended.

Title insurance protects policyholders from financial losses or legal obligations that occur through title defects, concealed liens, and other issues outlined in your policy. 

Defects can occur when blunders are made in public records or during the title search, and aid you if you need to defend your title.

Someone could claim your property and prove the seller never had the authority to transfer the ownership rights.

This could result in extortionate legal fees, and you might have to move out. This is where title insurance is worth its weight in gold because it covers your costs for this eventuality.

The Participants at Play

You'll find the following participants involved in title insurance:

The Title Company

The title company is tasked with searching for issues that could arise during title transfer. They ensure proof of ownership can be safely passed to the buyers.

For example, their searches investigate:

  • Outstanding mortgages: These need to be paid off before the property is transferred.
  • Other existing liens
  • Unpaid homeowner association dues
  • Restrictions (such as a certain age that might be required to live in a community)
  • Easements (agreements that, although you own the property, you give another person rights to use the land for a purpose, such as parking or passing through.)
  • Leases (is the property rented out for a specified term?)

Title companies may also order a property survey or drawing of the property to discover potential encroachments. These can verify whether the home is within its set boundaries or whether neighbors’ extensions encroach on the land. 

Once everything is clear, the title company directly issues title insurance to purchasers, lenders, and developers, and directly underwrites the title. In America, there are four major title companies.

Aside from these, several regional companies can also write title insurance covers. A title company might be present as a participant during a real estate closing.

The Title Agency

Title agencies act as subcontractors to the title company. They represent the company in a real estate transaction and underwrite a title before the title company issues the insurance.

Across America, there are hundreds of small title agencies that will attend closing instead of the title company. Homebuyers can usually choose which title agency and company they want to work with. 

The Settlement Agent

It is the settlement agent who runs the closing process of a property. This participant might be a real estate agent, lawyer, mortgage broker, home builder, or bank. However, the title company or title agency may also act as a settlement agent.

Settlement agents ensure all the papers are correctly signed, payments are exchanged, and funds released. They also ascertain whether the lender’s title insurance is executed.

At this stage, the settlement agent will also offer home buyers to purchase a title policy also.

Title Agency vs. Title Company - What’s the Difference?

With the above in mind, let’s recap the main difference between the title company and title agency (or settlement agent).

The Title Company is responsible for finding out the background of a title and ensuring the home buyer can purchase a clean title with full rights to the property.

The Title Agency or Settlement Agent helps the home buyer complete all necessary paperwork to make them the rightful property owner. 

While these are two separate entities with different responsibilities, settlement agents often work for title companies. Homebuyers have the choice to shop around.

They don't have to accept the title agent chosen by the title company. In fact, you might save money by using an independent agent.

However, there are benefits to choosing a settlement agent that works directly with the title company. For instance, it makes communication more manageable, as all your paperwork is handled in one place.

Your real estate agent may recommend a title company and title agency that they have experience working with. Often, these will be more expensive than what you might find on the market.

When it comes to closing, however, dependability and reliability are crucial, and you may wish to invest in the best title agent for a hasslefree closing.

Buy a Property with a Clear and Free Title

The risk of having your property rights contested is a nightmare scenario for any prospective homeowner. So, ensure you purchase a property that's free and clear by choosing a title company and title agency that look after your best interests.

Heartland Abstract has over 70 years of combined experience in the industry. Our title insurance firm can assist you throughout the entire buying process. Talk to our friendly team today to see how we could help!

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