Having clear title is crucial to any real estate transaction. Yet, as the buyer, it can be hard to grasp what exactly title is and how it affects the sale. With that in mind, I brought in an expert to help clear things up. I spoke to Nate Baker, founder and CEO of Qualia, a real estate tech company, to talk about the importance of choosing the right title agent and how this move can make or break your transaction.
Here’s what he had to say:
Tara Mastroeni: Can you briefly explain what title is?
Nate Baker: “Title” refers to the legal right for someone to own and use a property. It also refers to the legal documents that show a property’s history of ownership and generally define the property’s boundary lines, as well as how it’s permitted to be used.
Mastroeni: What role does a title agent play in the transaction?
Baker: The title agent plays one of the most important roles in helping facilitate the closing from start to finish. Title agents not only work to make sure the seller has proper ownership of the property they’re selling (clean title, as noted earlier), but they also help the buyer get title insurance to protect them in the event that the title of their home is called into question after the purchase is completed.
Additionally, title agents work with the lenders, real estate agents, buyers, sellers and all the other transaction participants to make sure the necessary documents get filled out, signed, and filed correctly. In many states, title agents are also directly responsible for ensuring all of the money — which can often represent someone’s life savings — is transferred correctly.
Mastroeni: Why is it so important to choose a title agent? Who does the choosing?
Baker: Generally, the buyers and sellers defer to their lenders and real estate agents to choose a title agent, as they have likely developed a relationship with a title agent they know and trust.
Choosing a trustworthy, responsible and reputable title agent is important for a variety of reasons. First and foremost, they’ll be coordinating one of the largest purchases of your life. If they don’t have solid processes or technology in place that enables them to avoid mistakes, your closing can be delayed — or even worse, your purchase may not be done correctly, which would impact your legal rights to the property.
In extreme cases, where title agents also manage the disbursement of funds, issues can arise due to mistake or fraud and the funds could be put at risk. For example, according to the FBI, nearly $1 billion was diverted or attempted to be diverted from real estate transactions in 2017. These attempts often come through Business Email Compromise scams, where a hacker defrauds the transaction parties through email. A good title agent will use a secure communications platform that avoids relying heavily on insecure email communications.
Mastroeni: What are some signs of a good title agent?
Baker: A good title agent does two things well: They coordinate the transaction efficiently and they provide remarkable customer service.
There has been heavy investment in technology for lenders and real estate agents for years. However, until recently, there has not been much attention paid to technology that supports the title agent’s —and buyer’s — closing experience. By leveraging modern, cloud-based technology title agents have become much more efficient.
Those that have switched to modern technology are able to easily and securely communicate with their clients, keep them updated in real time about the status of their closing, and avoid unnecessary errors that happen all too frequently when their own internal processes are overly burdensome.
Mastroeni: What are some red flags of a not-so-good title agent?
Baker: It’s pretty easy to identify a title agent who will not provide you with the closing experience you deserve. A home closing should be something you celebrate, not dread.
Some red flags to look for include if they refuse to make it easy to communicate securely, failure to provide clear guidance on the different stages of your closing process, or have received a pattern of complaints from previous clients regarding the accuracy of their work.
Mastroeni: How would someone go about finding a good title agent?
Baker: Your real estate agent or lender should have relationships built with various title agents, as they work very closely throughout the closing process. If you trust your team, you’re likely to trust their choice of agent. Additionally, many title companies have reviews available online for buyers and sellers to reference ahead of time and discuss with their realtor and lender if they have any questions.
Mastroeni: Is there anything else that you think buyers should know about title?
Baker: By some estimates, upwards of 30% of all land titles have defects — meaning ownership may not be clear or there are actions needed to be taken to make it so. Buyers should educate themselves as much as they can about the process before it starts.
Buying a home can be a stressful experience, but it doesn’t have to be. Take time to learn some of the vocabulary so you understand what all of the people working with you on your home purchase are doing, and never be afraid to ask questions as they arise.
Because ownership of a piece of property isn’t easily tracked simply by looking at who lives there (i.e., renters), title helps to make it clear who owns a specific piece of land. These property ownership records are filed with local government offices so that it is clear who is the rightful owner each time the property is bought and sold.
Having title that’s free of any issues, where you can trace back all previous ownership records is called having “clean title.” It’s a requirement for most sales because it ensures that the home you’re buying will actually be yours.