If you’re in the middle of buying a home, you’ve likely hired a number of professionals along the way. Apparently, completing the contract on the biggest purchase of your life requires lots of expertise from a variety of sources—who would’ve thought?—and the title company is just one of them. If you’ve been paying close attention to your title company’s work and you’re not pleased with what you’ve seen, switching to another title company may be your best bet. But can you do that after signing the sales contract, and if so, how do you get started? Here’s what you need to know if you’re considering changing your title company after you’ve already signed the sales contract.
Before you can really judge your title company and decide if you’re getting your money’s worth, you should know what the professionals there are supposed to do for you. The main reason you need help from the title company is to ensure that the home you’re buying is not already owned by another person or entity other than the seller. This is why the first task the title company will do is a title search, which will bring up all property records for the house.
At this point, this title company will be able to see if there are any liens, outstanding mortgages, unpaid taxes, or judgments against the property. If so, these will have to be addressed and cleared up before you can legally buy the house. But if the title search doesn’t bring up any surprises—such as someone else claiming partial or full ownership of the house—then the next step is getting title insurance.
This is typically required by the lender when you buy a house, since title insurance will protect the lender against any lawsuits that claim there is an issue with the title. Of course, in theory, completing the title search should help prevent title issues down the road. But sometimes mistakes happen, and title complications may be missed during the search. Title insurance provides another layer of protection for both you and the lender.
In fact, your title company can help you with two types of title insurance policies. One is lender’s title insurance, which protects the mortgage company if there are problems with the title. This is usually required by the lender before you can close on the house. The other type of policy is owner’s title insurance, which will protect you if it turns out the title was wrong and someone else is considered the owner of the house. As you might imagine, this kind of situation can get confusing at best—and downright disappointing at worst. That’s where insurance comes in!
If it turns out the house belongs to someone else and you happen to have owner’s title insurance, the policy will pay you the value of the house. Meanwhile, the lender’s title insurance policy will pay the mortgage company the amount of the loan. While owner’s title insurance is not typically required, it’s recommended for most home buyers.
Not only does the title company team conduct the title search and set up title insurance for you, but it often also maintains your escrow account. This way, you have a neutral party in charge of the account to make sure the money in it is only used for closing costs. Then, on closing day, the title company can distribute the money as needed. Also on closing day, the title company usually gets signatures on closing paperwork and records certain documents with the local recording office. As you can see, the title company has some crucial tasks to get done before you can close on your house, which is why it’s so important for you to be happy with the team you chose.
Now that you know what your title company is supposed to be doing, you can judge what kind of job yours has done so far. For example, has your title company been meeting deadlines and keeping you updated on the tasks that are getting done? The title search is supposed to be done after the seller accepts your offer but before closing day. So if it’s been months and you haven’t heard a word about it, it may be time to contact the title company. You don’t want to wait until closing day is right around the corner to find out that the title search wasn’t done, or that there are title issues to resolve.
In fact, communication is just as important as meeting deadlines. Not only should your title company complete essential tasks on time, but the professionals who work there should be keeping you informed on their progress. If there’s been little to no contact months into your home buying journey, you might need to find a new title company to get the communication and customer service you deserve as a home buyer.
Finally, make sure the title company’s fees are in line with the average costs. This can vary depending on location and the cost of your house, so consider getting some quotes from local title companies to get an idea of the average. But in general, buying a lender’s and an owner’s title insurance policy together will likely cost about 0.5% to 1% of your home purchase price. If your cost of title insurance seems to be much higher than this, it may be time to shop around for a different title company.
If you’re realizing you’d be better off with a different title company, don’t be afraid to switch—even if you’ve already signed a sales contract! You can typically still make the change, including after your earnest money deposit has been given to the title company. But how? Start by getting the seller’s consent, which shouldn’t be hard since he or she likely doesn’t care which title company you use.
Once the seller has agreed to the change, it’s time to sign an addendum that you’ll add to the home sales contract. If your earnest money deposit was already sent to the old title company, your new company will contact them to set up a wire transfer—so you don’t have to worry about arranging this yourself. It’s that simple!
Generally, you shouldn’t fire your old title company until you’ve chosen a new one that can do a better job for you. So if you’re still trying to figure out which title company to hire, start by asking for recommendations from friends and family who have bought or sold a house recently.
Of course, your real estate agent can help, as he or she likely has a favorite title company or two. Just make sure your agent has actually worked with the title company and is recommending them based on experience—not simply for incentives that the company might offer him or her.
Once you have some recommendations, research each title company. You want one that’s been in business for years so the team has the experience necessary to help you with your home purchase. You should also find out how many employees each title company has, as you want a team that’s large enough to offer plenty of assistance—but not so big that you get lost in the crowd of clients! Finally, you should compare the costs of title companies in your area to make sure you get a good rate.