Your Guide to the Title and Closing Process

The Title Company's Role

The title company is your partner in real estate transactions, serving as an independent third party that manages the complex process of transferring property ownership. Your title company ensures that real estate transactions are completed accurately, securely, and in compliance with all legal requirements. 

The importance of a title company in property transactions cannot be overstated. They represent both the buyer and the lender to safeguard their interests throughout the process. For buyers, the title company ensures that they are actually purchasing what they think they're buying, free from unexpected encumbrances or issues. For lenders, the company verifies that their collateral (the property) is exactly as represented and legally secure.

The title and closing company performs three main functions.

Title Services

The title company conducts a thorough search of public records, typically going back 30 years, to uncover any potential issues with the property's title. This could include outstanding liens, easements, or other encumbrances. Once identified, they work to resolve these issues, ultimately conveying a clear title to the new owner. The title company also issues title insurance to buyers and lenders to insure against hidden risks to the title. 

Financial Management

The title company acts as a neutral party handling all money movement in the transaction. This includes collecting funds from the buyer, managing payoffs of existing mortgages or liens, and disbursing proceeds to the seller and other parties involved. The title company also collects and holds earnest money deposits until closing. 

Closing Logistics

The title company also manages all aspects of the real estate closing process, from preparing and reviewing documents to facilitating the signing. After closing, they handle crucial post-closing tasks such as recording the new deed with local authorities and sending necessary documentation to the lender.

The Title and Closing Process

Transferring property ownership is much more complex than signing a contract, writing a check, and exchanging keys. While every transaction is unique, they all follow a similar series of steps. This process typically takes 3-6 weeks to complete for financed transactions. 

Step One: Signed Purchase Agreement

The title and closing process begins when the buyer and seller sign a purchase agreement. This legally binding document outlines the terms of the sale, including the purchase price, closing date, and any contingencies. Once signed, it signifies that both parties are committed to the transaction, triggering the next steps in the process.

At this point, the real estate agent contacts the title company to initiate the title and closing process. The agent typically provides the title company with a copy of the signed purchase agreement and any other relevant details about the transaction. 

The title company then creates a file for the transaction. At Bluegrass Land Title, we use Qualia settlement software to manage all of our transactions. All parties involved in the transaction will be invited to join Qualia Connect, a secure messaging portal that provides all parties with instant access to information about the file. 

Step Two: Data Gathering

Once the file is created, the title company will begin by collecting essential information.

• Confirming title holders: The title company will need to verify who will be on the title. Buyers cannot add individuals to the title at the closing table.
• Clarify closing options: In the event that all parties cannot be present for an in-person closing, remote closing options are available. 
• Obtain seller authorization forms: These forms give the title company permission to gather necessary information about the property and any existing mortgages. These are essential for requesting payoff statements from current lenders, accessing HOA information, and obtaining other relevant property records.
• Collect partial Social Security numbers: The title company will need the last four digits of the Social Security numbers from all the buyers and sellers. This information is used to accurately match names when searching for potential liens or other issues.

Collecting and organizing essential information early in the process sets the stage for a more streamlined experience in the later phases of the closing process. 

Step Three: Title Search and Exam

A title search is a comprehensive examination of the public records related to a property. This step identifies issues or claims against the property that could affect the buyer’s ownership rights or the lender’s security interest. A title search must be completed before issuing any form of title insurance. 

During this step, the title company will conduct a 30-year Property Search. This process includes reviewing public records for the past 30 years to trace the property’s ownership history and identify any recorded documents that could affect the title. 

Documents searched may include:

• Deeds (warranty deeds, quitclaim deeds)
• Mortgages and mortgage releases
• Liens (tax liens, mechanic’s liens, judgment liens)
• Easements and rights-of-way
• Plat maps and surveys
• Wills and probate records
• Divorce decrees
• Foreclosure documents

The title company will also conduct a name search to identify any liens, judgments, or other claims that are associated with the current owner’s name and, in some cases, previous owners. This search extends beyond the property itself and will identify any personal obligations that could potentially attach to the property, such as unpaid child support, tax debts, or bankruptcy filings.

A title search tells the story of a property through public records. But this story also has to be read and interpreted. Throughout the title search and examination process, the title company will identify potential issues with the title such as:

• Outstanding mortgages or liens
• Unpaid property taxes
• Easements or use restrictions
• Boundary disputes
• Errors in public records
• Fraudulent or forged documents

These potential issues, known as defects, must be cleared before closing. 

Step Four: Title Clearance

After the title search is complete, the next step in the closing process is title clearance. During this phase, the primary role of the title company is to deliver a clear title that is free of defects to the homebuyer. To do this, the clearing team works to remove any defects or issues from the title. 

This process includes:

• Verifying name matches: To ensure that all of the liens are accurate, the clearing team will match all names with the last four digits of the Social Security number. This is especially helpful in the case of family names or more common names. 
• Resolving liens: Any liens must be removed from the title before closing. For example, if a tax lien is found, the title company will work to ensure it’s paid off before closing. 
• Clarifying past transactions: This step ensures that all previous ownership transfers were properly executed and documented. For instance, in the case of an inherited property, the title company would verify that all heirs have properly signed off on the transfer.
• Obtaining necessary payoffs: All existing mortgages or other financial obligations tied to the property must be resolved. For example, the title company will contact the seller’s current mortgage lender to get the exact payoff amount needed to satisfy the loan at closing.

The clearance process often requires collaboration with various external entities. This might include communicating with government agencies to resolve tax issues, coordinating with attorneys to clarify legal matters, or engaging with homeowners associations to address any outstanding dues.

Throughout the clearance phase, the title company acts as a problem-solver and mediator, working to resolve issues as efficiently as possible. The time required for title clearance can vary depending on the complexity of the issues revealed during the title search.

Step Five: Closing the Transaction

As the clearance process concludes, the title company begins preparing for the final stage: closing the transaction. This phase involves careful preparation of documents and coordination of the actual closing day activities.

Preparing for Closing

Before closing, the title company prepares the closing package, which includes the Closing Disclosure and other essential documents needed for closing. The Closing Disclosure (CD) is a document that details all of the fees and charges of a real estate transaction. According to federal law, the CD must be distributed three days before closing.

The title company will also prepare or collect other documents that are needed for closing, including:

• The deed
• Title documents, including the title insurance policy
• Proof of homeowner’s insurance from the buyer
• Powers of Attorney (if any parties are unable to attend the closing in person)

Closing Day

The transaction is finalized and property ownership is transferred on closing day. The title company plays a critical role in facilitating this event. At closing, your escrow officer will guide all parties through the signing process, ensuring that each document is properly executed. They will also be available to explain each document and answer any questions from the buyers, sellers, or their agents. 

Additionally, the title company will collect the necessary funds for closing from the buyer, which may include the down payment, closing costs, and other prepaid items such as property taxes or homeowners insurance. 

After all documents are signed and funds are collected and disbursed, the property ownership is officially transferred to the buyer. 

Step Six: Post Closing Tasks

After closing, the title company completes several tasks to finalize the transaction. These tasks include: 

• Managing Payoffs and Disbursements: The title company distributes funds according to the closing statement. This includes paying off the seller’s existing mortgage, covering fees and costs, and disbursing the seller proceeds.
• Recording Documents: The new deed and mortgage are recorded with the appropriate government offices. This step legally transfers property ownership to the buyer and registers the new mortgage.
• Transfer Lender Documentation: The lender will receive copies of documents that were signed at closing, including the recorded mortgage, the lender’s title insurance policy, and other required paperwork. 

These post-closing tasks ensure the transaction is properly documented and all parties receive the necessary information and funds.

Smooth Transactions from Start to Finish

The title company's primary role is to ensure a smooth transaction and coordinate all of the details so you don't have to. At Bluegrass Land Title, we understand that buying a home can be stressful, so our goal is to manage the transaction and make closing day straightforward and comfortable for all parties involved. 

We believe that clear communication throughout the entire process is key to a successful closing. Throughout the title and closing process, all parties should:

• Be proactive: If you have questions or concerns about anything in the process, be sure to let the title company know immediately.
• Respond promptly: If the title company requests documentation or gives you a call, please call us back as soon as possible.
• Keep us informed: If any aspect of your transaction changes, let us know right away.

From the signed purchase agreement to the final recording of documents, we're here to guide you through each step of the closing process. If you have questions about this process, don't hesitate to contact us. We're here to help make your real estate transaction as smooth as possible.