What Does a Title Company Do? Full Guide for Buyers, Sellers, and Real Estate Pros

A title company verifies ownership of a property, identifies liens or legal issues, issues title insurance, manages escrow funds, prepares closing documents, and records the deed to legally transfer ownership. Their role ensures the real estate transaction is accurate, compliant, and secure for both buyer and lender.

Why Title Companies Matter

Real estate transactions are high-value and high-risk. A small oversight in paperwork or ownership history can jeopardize the sale, delay closing, or expose buyers and lenders to financial loss. The title company exists to prevent those problems.

Unlike banks, agents, or attorneys, the title company is the neutral entity that brings together public records, legal compliance, closing logistics, insurance protections, and financial disbursement into one coordinated process.

Without the title company, the sale of a home would be dramatically slower, legally uncertain, and far more expensive for everyone involved.

Core Responsibilities of a Title Company

Below are the primary duties and protections provided by a modern title company.

1. Title Search

A title search examines public property records to confirm legal ownership and identify liens, unpaid taxes, or competing claims.

The title search is often the first step after a buyer goes under contract. It examines decades of public documents including:

• deeds
• mortgages
• foreclosure filings
• tax assessments
• liens and judgments
• divorce and probate records
• boundary surveys
• easements and zoning restrictions

The goal is clear: determine if the seller can legally transfer the property and whether anyone else has a financial or legal claim to it.

2. Clearing Title Issues

Title companies resolve title defects so the property can transfer legally and without future disputes.

Common title defects include:

• unpaid taxes
• contractor or mechanic’s liens
• undisclosed heirs
• unreleased mortgages
• child support liens
• judgment liens
• name misspellings in records
• forged documents
• recording errors
• boundary disputes

If left unresolved, any of these issues could prevent closing, void the sale, or expose the buyer to claims.

3. Title Insurance

Title insurance protects the buyer and lender from financial loss caused by unforeseen claims or defects in the property’s title.

Unlike auto or health insurance, title insurance is paid once at closing and lasts for the life of ownership.

Two policies are typically issued at closing:

• Owner’s Policy protects the buyer
• Lender’s Policy protects the lender’s security interest

These policies protect against hidden problems such as:

• fraud
• unknown heirs
• unresolved liens
• defective deeds
• clerical errors in public records
• forged signatures
• conflicting wills
• identity errors
• unrecorded claims

For lenders, title insurance is mandatory. For cash buyers, it is optional but highly recommended.

4. Escrow & Funds Disbursement

A title company acts as the escrow agent, holding funds and disbursing them only when contract conditions are satisfied.

Escrow protects both sides of the transaction. Funds commonly held include:

• earnest money
• down payment
• lender wire funds
• tax prorations
• agent commissions
• mortgage payoffs
• HOA or municipal fees

Once all legal requirements are satisfied, the title company distributes funds accurately to each party.

5. Closing & Document Coordination

Title companies prepare, review, and manage closing documents to finalize the transfer of ownership.

Closing packages include:

• settlement statements
• lender disclosures
• loan documents
• tax and insurance records
• deed and affidavits
• compliance forms
• payoff authorizations

The title company ensures each document is accurate and compliant with state, lender, and regulatory requirements. They also notarize required signatures and coordinate with real estate agents, lenders, and attorneys.

6. Recording the Deed

After closing, the title company records the deed and mortgage with the county to make the transfer legally binding.

Once recorded, the buyer becomes the official owner of the property under the law. Failure to record properly can result in disputes, clouded ownership, and legal exposure for lenders.

Who the Title Company Represents

A title company does not operate as a traditional advocate for either side. Instead, it is a neutral facilitator. However, different parties rely on the title company differently:

• Buyers rely on clean title + insurance
• Sellers rely on accurate payoff + compliance
• Lenders rely on lien priority + insurance protection
• Agents rely on smooth closings + reduced fallout

A strong title partner reduces transaction risk for everyone involved.

How Title Companies Protect Buyers

For buyers, title companies reduce financial and legal exposure. Without title insurance, buyers could face:

• lawsuits from alleged heirs
• unpaid taxes from previous owners
• claim disputes
• surprise liens
• boundary conflicts
• paperwork errors

In extreme cases, a buyer without title insurance could lose ownership altogether.

How Title Companies Protect Lenders

Lenders require title insurance because the loan is secured by the property. If ownership fails, collateral fails. The lender’s policy ensures they remain first in line against competing claims.

What Actually Happens at Closing

Closing day is the final mile of the transaction, but also the most document-heavy.

The title company ensures:

• identities are verified
• documents are executed correctly
• loan disclosures are compliant
• insurance requirements are satisfied
• signatures are notarized
• funds are disbursed
• deeds are recorded
• lenders receive collateral documentation

Once complete, keys change hands and ownership transfers.

Costs and Fees: What Does a Title Company Charge?

Title company fees vary by state, transaction size, and policy type. Common charges include:

• title search fee
• closing/settlement fee
• notary fee
• recording fee
• escrow fee
• policy premiums

Some states regulate rates. Others allow market competition.

Choosing a Title Company: Factors That Matter

When comparing title providers, consider:

• speed and communication
• accuracy of documents
• technology and digital closing capabilities
• escrow security
• transparency of fees
• lender and agent relationships
• ability to resolve title issues quickly

For agents and lenders, a skilled title partner increases certainty and reduces extensions, amendments, or fallout.

Frequently Asked Questions

Do buyers choose the title company?
Depends on the state. In many states either the buyer, seller, or lender influences the decision.

Do cash buyers need title insurance?
It is not required, but highly recommended due to risk.

How long does the title process take?
Anywhere from days to weeks depending on record complexity.

Is a title company the same as escrow?
In some states they are separate. In others, the same company performs both roles.

Final Summary

A title company verifies property ownership, clears title defects, issues title insurance, manages escrow funds, coordinates closing, and legally transfers ownership through recorded deeds. Without the title company, real estate transactions would be slower, riskier, and less secure for everyone involved.