What is Title?
Title is the legal right to own, use, and transfer real property.
When you hold “title” to a property, you have lawful ownership and the ability to sell, lease, or transfer that property to others, subject to any recorded rights, restrictions, or obligations attached to it.
Because ownership rights can be affected by past events, title companies research public records to confirm ownership and identify matters that may impact the property, such as:
- Mortgages, deeds of trust, or other liens
- Easements
- Property taxes
- Covenants, conditions, and restrictions (CC&Rs)
- Other recorded claims or interests
After this review, title insurance may be issued to protect buyers and lenders against certain unknown or undisclosed issues that could affect ownership.
In short, “title” represents your ownership rights in real property, and title insurance helps protect those rights.
What is Title Insurance?
Title insurance is a policy that protects property owners and lenders against certain financial losses resulting from defects in title to real property.
Unlike most types of insurance, which protects against future events, title insurance is based on a review of public records prior to closing and provides coverage for certain issues that may already exist but are unknown at the time of purchase (or loan).
These issues can include:
• Undisclosed liens or encumbrances
• Errors or omissions in public records
• Unknown ownership claims (such as undisclosed heirs)
• Forged or improperly executed documents
• Lack of legal access to the property
• Other covered defects affecting title
In a typical real estate transaction, a title company examines public records to identify matters affecting the property and works to resolve issues when possible before closing. The title insurance policy then provides protection against certain covered risks that remain.
Title insurance is typically issued in two forms:
• An owner’s policy, which protects the buyer’s ownership interest in the property
• A lender’s policy, which protects the lender’s security interest in the property
Title insurance is purchased with a one-time premium at closing and provides coverage for as long as the insured retains an interest in the property (for an owner’s policy) or for the life of the loan (for a lender’s policy).
In short, title insurance helps protect ownership rights by identifying and addressing title issues before closing, and by providing coverage for certain hidden risks that may be discovered later.
What is Escrow?
Escrow is a neutral, third-party service that holds and disburses funds and handles key documents in a real estate transaction, based on the parties’ written instructions, until the agreed conditions are met.
An escrow company does not represent the buyer or the seller. Instead, it acts as a neutral stakeholder and follows written instructions to help the transaction close properly and securely. During escrow, the escrow company typically:
- Holds funds, such as earnest money and loan proceeds
- Receives and coordinates signed documents
- Works with lenders, real estate agents, and title professionals
- Pays approved liens and fees at closing
- Disburses proceeds to the appropriate parties
- Records documents that transfer ownership
In short, escrow helps ensure that money and documents are released only when the transaction requirements have been satisfied, providing protection and peace of mind for all parties involved.