Few homebuyers even consider who will provide the title and settlement services for their purchase transaction. They already have enough on their minds, and these generally are viewed as a routine “back-office” services that are pretty much the same no matter who provides them. There is some truth to that perception, but it helps to be aware of the services the title company will perform on your behalf.
The title company will provide title insurance and settlement services for the transaction. Title insurance rates are set through regulation and approval by the Pennsylvania Department of Insurance. The title insurance premium you pay is based on the amount of your mortgage loan and the sale price of the property.
The mortgage lender requires title insurance coverage for the amount of the loan. Additional coverage also is provided to the buyer for their interest as the new owner of the property. While owner’s coverage is optional, it is a relatively small additional charge and well worth the protection, as it covers your full financial interest in the property for as long as you own it.
Title insurance protects you against claims that others may make against your property, and includes payment of any legal fees that may be incurred in your defense. Among other things, it insures clear title, marketability, and reasonable property access. Exceptions to coverage are set forth in the title commitment issued for the transaction.
A search of the public record is performed to identify recorded liens and encumbrances on the property you are purchasing. Usually the only liens that appear will be any mortgage(s) and judgments that have been placed on the property for the present owner. Any liens for unpaid taxes and municipal services also will appear.
The term “conveyancing” refers to services required to determine and ensure that the seller will pay or satisfy all recorded liens and encumbrances on your new home, and that the seller is paid up-to-date for all “lienable” expenses such as property taxes and any applicable municipal services (e.g., sewer and water). The title company also may investigate the possibility of other potential liens, claims, or challenges to the buyers’ or sellers’ full rightful ownership and capacity to take or convey title. Written payoff statements will be obtained for recorded mortgages and other liens, which will be paid from the sale proceeds at closing unless otherwise cleared prior to closing. Payment status of all property taxes and applicable municipal service charges will be verified, so they can be charged to the seller for the full time period up to the closing date.
The title company will conduct the closing, or “settlement”, of your transaction. While sometimes a party may use a power of attorney, typically the buyers and sellers and their respective real estate agents will personally attend the closing. The title agent conducting the closing will prepare a settlement statement showing all funds being deposited to the title company’s escrow account, and the sources of those funds. The settlement statement also breaks down amounts being paid from these escrowed funds, for what they are being paid, and to whom. The buyers sign their mortgage loan documents, and the sellers sign the deed conveying the property to the buyers. While the closing is intended to be relatively simple and involve mainly just these formalities, sometimes special outstanding issues ultimately are resolved at closing as well.