Title is one of the most important things to understand about real estate in Chicagoland and around the country – and it’s also one of the most commonly misunderstood concepts, as well.
To put it briefly, title is the broad term used to describe who has the legal ownership of, and thus the right to sell, a certain piece of property. Before, during, and even after the sale of a home, there are certain types of issues can arise – such as forgotten liens, land use disputes, or obscure claims of ownership – which may mean that the seller does not have clear title to a piece of property, jeopardizing the validity of their sale. In fact, according to data presented by Homelight, title issues may account for up to 11% of closing delays.
This is where title agents come in. Working on behalf of title companies, title agents can help research the history of a property, in order to help establish a clean title for the seller, and move the transaction forward for the buyer. Typically, in Illinois, the title agent or title company will be responsible for three key aspects of the real estate transaction:
- Performing a title search
- Issuing title insurance
- Maintaining escrow accounts and assisting with closing
Let’s explore each of these important responsibilities in a little more depth:
1.) Title Agents Perform an Exhaustive Title Search
In order for a sale to be valid, the seller must have “clear title” on the home. This means that there cannot be any issues affecting their ownership, and, by extension, their ability to transfer the property to a new buyer.
In order to ensure that the sale will be legitimate and binding, a title agent performs an extensive title search on the property. During the title search process, title agents review property records, land surveys, historical documents, and other public information, all to establish that the seller has full ownership rights to the property, free of liens, encumbrances, or other title defects.
Broadly speaking, during a title search, agents look for common issues such as:
- Unpaid liens
- Outstanding mortgages
- Personal bankruptcies
- Unpaid taxes and other debts
- Judgments associated with the property
- Encroachments, easements, and other land issues that could affect a seller’s full ownership claims
- Defective deeds, fraudulent documents, or other contract issues
- Property disputes arising from probate issues
- Pending legal actions against the seller
If a title agent discovers problems during the title search, they must present this information to the parties involved in the transaction. In some cases, the seller may work to remedy these issues, or the buyer and seller may terminate or delay the sale.
If the search comes up clean? At this point, the title agent issues a summary of their findings, and presents a formal title letter, which indicates the validity of the title and enables the sale to move forward.
2.) Title Agents Issue Title Insurance to Buyers
Even though title agents perform thorough searches and reviews, it’s entirely possible for there to be something that these expert researchers missed along the way, or for new information to come to light at some point down the line.
Title insurance is typically put in place in order to protect buyers and lenders from those unfortunate situations. It offers assurance and peace of mind to buyers, and security to their lenders, giving them some protection against title disputes or issues even after the title is transferred.
Broadly speaking, there are two types of title insurance, for these two different parties – that is to say, title insurance policies for lenders, and title insurance policies for buyers.
- Lender’s title insurance: This type of policy protects the mortgage lender. Because it offers assurances that the lender is making a secure, reasonable investment, this type of title insurance is typically required as a condition for receiving a loan. The costs are paid for by the buyer.
- Buyer’s title insurance: This type of title insurance policy helps protect the buyer’s ownership rights to the property, in the event that there are complications or legal challenges to the validity or legality of the new owner’s title. In Illinois, this type of policy is said to be optional. Typically, in most transactions, the sellers cover the costs of this insurance for the buyer, as a sign of good faith.
3.) Title Agents Maintain Escrow Accounts
Because of their objective and impartial status, title agents and title companies are often brought in to serve as escrow officers, meaning that they might manage the escrow accounts involved in the sale of the property.
At this stage of the process, the title agent’s role is to oversee the funds involved with the home sale (such as earnest money deposits, or closing costs and fees), making sure that this money is safeguarded and used appropriately by all parties.
In some cases – particularly if the title agent is an attorney – they may also help facilitate and oversee the closing process and settlement, bringing the necessary documents to the closing table, overseeing the collection and distribution of funds, and filing important paperwork such as deeds and new title documents.
Have Any More Questions About the Real Estate Process in Chicagoland?
Establishing title and securing title insurance are among the many steps that go into successfully completing a real estate transaction. For buyers and sellers alike, it’s incredibly important to consider all of the actions you can take to protect yourself at every step of the way.
Have any more questions? Looking for help making sure that your “t’s” are crossed and your “i’s” dotted? The Gunderson Law Firm is here. We offer a full range of real estate legal services, and our attorneys are also title agents for some of the top title insurance companies in the world. Our team can answer any questions you have about title insurance, title examinations and disputes, and so much more.
Our attorneys and staff bring unparalleled expertise and insight to the table, reinforced by years of experience and long-term connections throughout Chicago’s real estate, finance, title, and insurance industries.
Have any further questions about title, or any other aspect of buying or selling a home in Chicagoland? Don’t hesitate to drop us a line or give us a call to get the conversation started.