Title deed & title insurance in the US
Are you curious about the legal matters behind buying a home and how to protect yourself? Learn about title deeds and title insurance, and how these processes work in the US.
The property buying process in the US
Buying a property in the US takes a considerable amount of time, energy, and money, but having a good understanding of the essential steps along the way can help make the process more efficient and less costly, and ensure that you have suitable legal protection. Some of the important steps toward property ownership include: finding a property, getting preapproved for a mortgage loan, reaching an agreement with the seller (signing the contract of sale and depositing money into an escrow account), and getting the property inspected. These steps must be completed before you can begin the closing process, which includes property appraisal, the title deed, and title insurance.
This article will cover all the basics of the title deed and title insurance process to help you become an informed buyer! Continue reading to learn about title deed basics, the process of transferring a title deed, title insurance basics, and the process of getting title insurance. We’ll provide you with a list of popular title companies in the US and let you know how we can help.
Title deeds explained
A title deed is a public record of who legally owns a property. It’s a physical document that includes the rights, uses, and privileges that go along with ownership of that property. The title deed gives you ownership rights to the structure and the land that it’s built on (aka the property lot). When someone decides to sell their property, they must transfer over the title deed to the buyer or the buyer’s lender so that they can obtain legal ownership of the property.
Not only does the title deed signify ownership, but it also usually provides the buyer with some protection in the form of covenants (legally binding promises) and warranties made by the seller. These protections are helpful because the title deed for a property can have defects, that is, omissions or errors that affect the legal claim of the current owner. In some cases, defects can allow someone else to claim an interest in the property. While protection is important, it’s not necessarily included in the title deed since protection varies depending on the type of title deed, which the seller is responsible for choosing.
The most common types of title deeds include:
General warranty deed
Seller makes multiple covenants and agrees to protect the buyer against any prior claims and demands regarding the land
Special warranty deed
Seller accepts responsibility for any defects in the title deed that arose during their ownership of the property
Less protection than a general warranty deed
Quitclaim deed (aka a non-warranty deed)
Seller makes no warranties or promises regarding the title deed
Quality of the title deed is solely determined by the quality of the seller’s title deed
Seller provides no legal protection
Special purpose deed
Generally used in court proceedings and offers little protection
Examples: administrator's deed, executor's deed, sheriff's deed, tax deed, deed in lieu of foreclosure, and deed of gift
So the title deed, whatever type it is, transfers over from the seller to the buyer during the closing process. If the buyer can finance the property purchase entirely by themselves, then they will have full ownership of their title deed. However, if the buyer takes out a mortgage loan through a lender or banker (as the majority of buyers do), then the title deed will reside with the lender or banker until you pay your mortgage loan back in full.
How to transfer a title deed
What parties are involved?
As mentioned above, the title deed transfers over from the seller to the buyer during a property purchase transaction, or from the seller to the lender/banker if a loan was used to finance the purchase. While a seller and buyer can technically do the process by themselves, most often a third party called a title company will be employed to write the title deed, assist both parties during the transfer, and provide all necessary documents. The title company also assists in the closing procedure, providing settlement services and ensuring that the deed is recorded with the local government. A title company is often recommended to the buyer by their real estate agent, lender, or real estate attorney. When a mortgage loan is used to finance the purchase, the lender or banker requires that the buyer hire a title company during the title deed process.
Requirements
The title deed is usually a fairly short document, but must legally contain a few elements. The title deed doesn’t need to be completed using any specific form as long as it contains the essential information.
The following must be included in the title deed:
Names and addresses of the buyer and seller
Data regarding the buyer
The purchase price (i.e. consideration clause)
An adequate description of the property: property type, boundaries, and relevant details
Necessary legal language
Granting clause - transfers ownership and lays out the buyer’s rights
Signature of the seller(s)
Completed in front of a notary public
Given that the above information is present, the title deed must be delivered to the buyer. The deed must be accepted by the buyer and they may also be required to sign the document.
Procedure
Once the title deed has been written, signed, and accepted, there are still some additional steps. Since title deeds are public records in the US, the deed must be filed with your local government. The registration of deeds isn’t done on the federal level in the US, but by each county, town, or state government. Most often, each county has its own Register of Deeds department to which you must send all deed documents and corresponding fees. If you have a title company assisting you, they can help with this process. To find your local Register of Deeds, you can visit Deeds.com or simply look up your official county government website. Then you can figure out if your county requires you to go in person to register the deed or you can just send the deed documents and payment to the listed address.
Since the majority of people finance a property purchase with a mortgage loan and must enlist a title company to help out, let’s look at what else this company does during this process. One of their main functions is to transfer property rights, but they also conduct a title search to uncover any past issues that may cause future problems or disputes in the legal ownership of the property. They search public records and the property’s transaction history to identify the true owner and find any issues that may challenge the legal standing of the new title.
The title company also controls the closing process of the property purchase. They finalize the mortgage, hold money deposited by the buyer in an escrow account until the agreement is concluded, prepare the closing documents (including the Closing Disclosure), and register the deed with the county government.
Fees
Each county has its own fees when it comes to registering your title deed. Typically, there’s a base fee of around $15-30 for the document, a title transfer fee, and additional expenses depending on the type of deed. Look up your official county government website and search for title deed registration fees to estimate how much it will cost you.
When a lender or banker requires the use of a title company, most often the buyer will be responsible for paying for their services. Title services begin at around $1,000 but can be more than $1,500 depending on what services are required and the extent of the title search.
Title insurance explained: why is it necessary?
You may have heard the term title insurance if you’ve done past research on the title deed process. Title insurance is insurance provided by a title company that covers lenders, bankers, and buyers from financial loss related to defects in the title deed of a property. When a buyer takes out a loan, their lender or banker will require them to buy the lender’s policy title insurance to protect their interests.
There are two types of title insurance:
Lender’s policy
Protects the lender against title defects. Required by the majority of mortgage lenders. The coverage decreases as the buyer pays the mortgage back.
Owner’s policy
Protects the owner (buyer) of the house against future claims to the property. Insures your ownership rights to the property. Not required, but strongly recommended. The coverage increases as the buyer pays the mortgage back.
As a buyer, you should consider negotiating with the seller to have them buy your owner’s policy title insurance as part of the Sales and Purchase Agreement (SPA) before you sign a sales contract on the property.
In general, title insurance protects against:
Ownership claims from another party
Errors in the title deed (e.g. incorrect signatures)
Falsified documents
Errors in title deed records
Conditions that reduce the value or enjoyment of the property
Any outstanding lawsuits or liens (legal claims to obtain property access if debts aren’t paid, usually from mortgage or equity loans)
Unlike most types of insurance, title insurance protects you against claims from past issues that may arise to cause problems in the future. The title company will undertake a title search and look at past records to offer you an insurance policy that can protect you from issues that may be uncovered.
How to get title insurance
What parties are involved?
Title insurance is usually provided by an escrow or closing agent that works for a title company, the same company that conducts a title search and helps the buyer and seller during the process of writing and transferring the title deed. While a title company may be recommended by an agent or lender, the buyer (as the party that usually pays for the services) can hire whichever title company they want.
Requirements
Since the title company is in charge of this process, there are no additional requirements. They will complete a title search and examine past records to provide you with an adequate insurance policy.
Procedure
After the title company conducts the title search and ensures that the title is cleared, they send a title commitment to the buyer and lender. This commitment outlines the title insurance terms of the lender’s and owner’s policy insurance (if the buyer has requested both). These terms are only in effect after the purchase agreement is signed by the buyer and seller, and the deal is closed.
Fees
The good thing is that, unlike most insurance policies, title insurance is a one-time fee and provides coverage for as long as the buyer (or their heirs) owns the property. The cost of title insurance is often regulated by a state’s Department of Insurance. Owner’s title insurance is usually around $500-$3,500, with the cost varying based on the state in which the property is located, the insurance provider, the price of the property, and the amount of coverage the policy provides. Lender’s title insurance is typically around $1,000 but can also vary based on the factors listed above.
Title companies in the US
It’s clear that title companies can be very helpful throughout the entire title deed and title insurance process.
Here are some of the most-popular title companies in the US you can consider using:
Doma (formerly North American Title Insurance Company)
Onward to property ownership
You’re now better informed on the specifics of title deeds and title insurance. You know what they are, why they’re important steps during a property purchase, and the processes you need to follow for both (from requirements to fees). Transferring a title deed and getting title insurance might not be the most exciting parts of buying a property, but they can give you peace of mind in the long run. If you ever need to get a copy of your deed, you can check with your local Register of Deeds office. Some counties even have online registries for easier access. Once you own the title deed for a property, you are the legal owner! We can also help you become familiar with the property buying process by learning more about the property appraisal process in the US.
Before you’re ready to go through the steps outlined in this article, you need to find a property and apply for a mortgage loan. Kredium has resources that can help you find your dream property by exploring the latest real estate projects in California, Florida, and Texas, or the top real estate developers in the US. We specialize in mortgage brokerage services, helping US citizens, residents, and non-residents find a personalized mortgage loan program. Our offers include a variety of non-qualifying mortgages for foreign nationals, and we also have international services to help you find a property abroad and get an international mortgage loan.
There are so many ways our experts can help you save money and time along the way to property ownership—all you have to do is get in touch!
Photo Credits:
Mina Živić | Kredium
Photo by Kindel Media | Pexels
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