Why do you need to screen your next title insurance company or real estate attorney more carefully? What due diligence should all property buyers and professionals be conducting on title insurance partners?
Title insurance companies are rarely vetted by their clients. Once individuals think about it, they may realize how crazy this is, given what is on the line, and how much work they often put into researching and checking out other parties in the process. This applies to all buyers, investors, mortgage professionals, new home builders, and sometimes even sellers. The title company or real estate attorney makes all the difference in a transaction. After all, they are the ones that get it closed. They are also in charge of managing all of the funds.
How Bad Can the Wrong Title Insurance Company Be?
Choice of title company can be extremely important when it comes to earnest deposits. Home buyers want to choose an escrow provider that will facilitate the rapid and full return of any deposit monies should the deal collapse. If this happens when money is deposited with a seller’s real estate agent, there is a high likelihood the Realtor will pursue the money as their commission even though the deal didn’t close. However, there are many other ways in which it matters too. Some of these can be far more important. Examples of poor choices have led to mortgages not being paid off on sales or refinances, or insurances and taxes not being paid. This cannot just lead to massive bills, but put the entire investment at risk of loss.
Your Right to Choose a Title Insurance Company
Those that are depositing money into escrow or are ordering title services including insurance have the legal right to choose their own title company or real estate attorney. In some counties and transactions, the seller may actually be required to provide and pay for some title services. Even in these cases, the buyer can also select their own representation. It may mean adding costs to the transaction, but depending on how much is at stake it may be worth it. The bottom line is that individuals cannot be forced to use a specific company.
It is smart to ask for referrals. This can definitely make the process of shortlisting and vetting firms easier. Real estate transactions go far, far smoother and faster when the coordinating partners are already comfortable working with each other. For example; mortgage lenders and title companies. However, a referral doesn’t always mean that the referring party has done their due diligence. They could be working with, or testing out someone new. So how do you vet and screen a potential provider?
Experience
This should go without saying. The title side of the business is definitely one of the most complicated and important to get right. You don’t want to be the guinea pig.
Reputation
Some will choose their title service providers based upon price, kickbacks, or income from affiliated business arrangements. Others choose to focus on working with those with a solid reputation for doing the business the right way, and ethics. If a company will compromise in one area, why wouldn’t they compromise somewhere else that will negatively affect you? You need a title partner that will be around when you need to make a claim, will add to your own positioning, and won’t land you in hot water for their shady practices.
Financial Stability
Continuing on from the above, you’ll want a title company that is financially sound enough to stick around.
On Time Closings
If you don’t close on time there can be a lot at stake. Deposit money, and the entire transaction, along with everything invested in it, and all of the pending profits, can be in jeopardy. So choose a title company with an attitude of going the extra mile to make deals happen, and that will be willing to close anytime, anywhere.
Comfortable with Your Process and Strategy
Whether you are flipping houses, wholesaling or building a development, finding a title company which is comfortable with your vision is critical. Some are overly conservative or just aren’t up to date on current practices, and can be very difficult to work with. Have a conversation before you get started.
Doing Their Jobs, After the Fact
Getting to the real estate closing is actually just the first step in the job of a title company or real estate attorney. Deeds need to be filed, satisfaction of mortgages obtained, debts paid, and property taxes paid. In some horror stories these items haven’t been done, only for new owners to find out they are facing foreclosure due to the failures of these companies to perform their duties.
Auxiliary Services
What other services do they provide? One investor recently took to the online real estate forum Bigger Pockets after a title company told him “you don’t need an attorney.” This may seem odd, and it can always be wise to have your own attorney. However, in many places a title company will have attorneys on staff that will provide extra services inexpensively or free, as part of the package. This may include negotiating liens, solving title issues, tracking down absentee sellers, reviewing contracts, and even arranging 1031 exchanges.
