What Is Title Company?
A title company does three things: (1) runs a title search to find liens, encumbrances, and ownership defects, (2) issues title insurance so you're protected if something surfaces later, and (3) coordinates the closing—collecting funds, paying off liens, and recording the deed. Typical cost: $1,000–$3,000 depending on sale price. Never skip the title search—an undisclosed lien can cost you the property.
A title company researches a property's ownership history, issues title insurance to protect against defects, and facilitates the closing by holding escrow and recording the deed.
At a Glance
- What it is: Company that searches title, issues title insurance, and runs closings
- Why it matters: Protects you from liens, ownership defects, and boundary disputes
- Typical cost: $1,000–$3,000 for title search + insurance
- Two policies: Owner's policy (protects you) and lender's policy (protects the bank)
How It Works
Title search process. The company reviews public records—deeds, mortgages, judgments, tax records, court filings—to trace the chain of ownership and find any liens or encumbrances. Common defects: unpaid mortgage, mechanic's lien, tax lien, judgment, boundary dispute, heir claim, forged deed. The seller must clear these before closing, or the title company won't issue insurance.
Title insurance. One-time premium at closing. Lender's policy protects the bank's interest; owner's policy protects you. Covers defects the search missed—undisclosed liens, forged documents, errors in the chain of title. Unlike other insurance, it's backward-looking: it protects against past defects, not future ones.
Closing and escrow. The title company (or its escrow officer) holds funds, pays off liens, disburses fees, and records the deed with the county. You sign the closing-disclosure, deed, and mortgage. They handle the rest.
Choosing a title company. You often have the right to choose—don't default to the seller's or agent's pick without shopping. Get 2–3 quotes. Compare total fees (search + insurance + closing). Ask about their error rate and how they handle problems.
Real-World Example
Marcus in Memphis. Marcus is under contract on a $247,000 duplex. The title search reveals a $6,200 mechanic's lien from 18 months ago—a prior owner's contractor never got paid and filed a lien. The seller claims they didn't know. The title company won't issue clear title until the lien is released. The seller negotiates with the contractor and pays $5,100 to settle. Closing is delayed 12 days. Title insurance cost Marcus $1,100. Without the search, he would have inherited the lien—and either paid it later or faced a cloud on title when selling. The closing-disclosure showed the title fees; Marcus reviewed it 3 days before closing and caught no errors.
Pros & Cons
- Protects you from undisclosed liens and ownership defects
- One-time premium—no ongoing cost like other insurance
- Coordinates closing so you don't have to track funds and recording yourself
- Lender requires it anyway—owner's policy is cheap add-on protection
- Adds $1,000–$3,000 to closing costs
- Title search can delay closing if defects are found
- Some title companies are slow or error-prone—choose carefully
Watch Out
- Shop around: You can often choose the title company. Get quotes—savings of $500–$1,000 are common.
- Read the title report: Don't assume "clear" means no issues. Review the report for encumbrances—easements, covenants—that might affect value or use.
- Wire fraud: Scammers send fake wiring instructions. Always call the title company using a number you looked up yourself—never from email—to verify wiring details before sending funds.
- Mechanic's liens: Contractors can file liens after work is done. A title search catches recorded liens, but work done right before or after closing can create new ones. Consider gap coverage or a final lien waiver at closing.
Ask an Investor
The Takeaway
A title company is your last line of defense before you own a property. They find liens, encumbrances, and ownership defects the seller might not disclose. Title insurance protects you if something slips through. Shop for quotes, read the title report, and never wire funds without verifying instructions by phone. One undisclosed lien can cost you the property or years of litigation.