“Closing” is the final part of the buying process where all necessary documents are signed, money is exchanged, and house keys are given out. Also called “settlement,” this stage includes the buyers and sellers, their brokers, and attorneys, as well as a person in control of the procedure (the settlement agent). The title company and title agency are additional players before or during the closure.
In this post, we will define some key roles as they all play a factor in the closing process.
Title insurance protects the mortgage lender in case there’s a problem with the title of the house. For instance, another party files a claim against the property.
On the other hand, the buyer may also have this; however, it’s optional. Meaning, you can choose not to have title insurance although it’s recommended since it might protect you from financial losses or potential damages caused by a bad title.
Title insurance is always required by lenders, but buyers are free to opt-out.
If you want to learn more about title insurance, how it works, and whether you need it or not, click the link to read our recent post about it.
The parties involved in title insurance are the following:
Is the title company the same as the settlement company? The answer is no.
Purchasers, builders, developers, and lenders can obtain title insurance directly from and be directly underwritten by a title company, such as IndyLegal. One thing to note is that the title company may or may not be involved in the real estate closing.
Usually, the title company frequently acts as an independent agent for a title insurance business and issues title insurance policies on its behalf. While an underwriting firm receives the actual insurance premium and assumes the risk of any loss under the policy, the title company just facilitates the paperwork for issuing the policy.
To learn more about what we offer here at IndyLegal and how we can help you, you may call us at 317-214-6023 or click this link.
A subcontractor who represents the title company in a real estate transaction is known as the title agency.
Before a title business releases the insurance coverage, a title agency underwrites the title. In place of the title corporation, one of the many small title agencies that exist across the U.S. will attend the closing. Purchasers of real estate can select the title agent or title business they want to work with.
When it comes to the policy, any flaws that are discovered throughout their investigation will be covered by this coverage. The price of insurance is frequently incorporated into the closing fees for a property, and the majority of lenders need title insurance before a sale is completed.
So, what does a settlement company do?
The settlement agent is in charge of the closing procedure.
The title agent or title business, as well as a real estate agent, mortgage broker, builder, lawyer, or bank, may serve as the settlement agent. Their role includes but is not limited to ensuring that all necessary documents, including the loan agreements, are signed, money is transferred, and escrow payments are released. They also give the homebuyer the option to purchase a title policy and guarantee that the lender's title policy is carried out.
Take note that the title company, title agent, and settlement agent might be a single participant or from different organizations.
A real estate agent, mortgage broker, home builder, or a bank are examples of settlement service providers. A settlement agent or title agent may be an independent third party or an affiliate of one of these entities.
An affiliate is a company with one or more service providers that receives compensation from the agent, who in this case is the settlement service provider. Although the Real Estate Settlement Procedures Act (RESPA) forbids them, referral fees and kickbacks in the real estate industry nevertheless exist.
To persuade the house buyer to choose the associated agency for settling/closing the transaction, the affiliated agent may provide a kickback in exchange for a referral from a settlement service provider. The settlement service may occasionally own a portion of the settlement or title agent.
A settlement agent that works independently of a settlement service provider is not connected to them and doesn't get paid extra for referring clients. Instead of using kickbacks, independent agents gain business due to the caliber of their services. Due to the referral fee that is incorporated into an associated agent's cost structure, consumers typically pay less for the services of an independent agent.
Independent agents do not perform one-stop shopping agreements and other cooperative ventures with settlement service providers. The fact that independent title agents make underwriting decisions based on good principles and without being influenced by referral fees is another advantage of their independence. Remember that the risk of a bad title does not fall on the kickback beneficiary; rather, the title agent is accountable for those risks.
You have the right to request an independent title agent rather than one who is affiliated with or suggested by a settlement service provider.
IndyLegal proudly serves buyers and sellers, banks and lenders, builders, developers, commercial agents and brokers, real estate brokers, and relocation companies in Indiana since 2008. If you want to learn how we can serve you better, contact us today.
Caroline Soriano