Imagine two complete strangers meeting in a random parking lot, one with a briefcase full of cash, the other with a piece of paper called a deed. As they look each other up and down, one slowly hands over the briefcase, while the other slowly hands over the deed, until they are each holding both. As they stare eachother down, they finally each let go of the cash and deed and go their separate ways. Sounds like a back-alley drug deal, right? But without escrow and title companies, that is exactly how a real estate transaction would feel. Seriously, it’s a LOT of money! So….how do you get through this process while feeling safe that the other party is going to hold up their end of the deal? A title company.
When you buy a home, one of the closing costs that you’ll see is for the escrow service or title company. Escrow can be a scary term for some people. But I promise it’s actually nothing to have nightmares about and it’s absolutely worth paying for. In fact, the title company’s role is specifically designed to protect you. It acts as a neutral third party that holds money and important documents to ensure that both the buyer and the seller do exactly what they promised. And that protection makes the title company’s service worth its weight in gold!
Here are 3 ways that the title company protects you:
1)They prevent fraud
The biggest obstacle to any real estate transaction is trust. The buyer has to trust that the seller will bank their money and hand over the deed. The seller has to trust that the buyer will take the deed and hand over the money. This level of trust is a lot to ask from two total strangers, creating a big possibility for fraud. However, a title company takes all of this risk away from both parties – making fraud nearly impossible. The title company protects the buyer from fraud by holding funds until the seller sends the deed and it protects the seller by holding documents until the buyer sends the money. Neither the buyer nor the seller has to trust each other, they only need to trust the title company.
2) They hold the buyer’s deposit – also known as EARNEST MONEY
When a home is purchased, most buyers will put down an initial money deposit of 1%. This earnest money deposit shows the sellers that the buyer is serious and it also activates the contracts between both parties. The title company protects the buyer by ensuring that the seller doesn’t keep the deposit if the buyer backs out of the deal before any of the deadlines set forth in the contract. It also protects the seller by ensuring that the buyer doesn’t reclaim the deposit if the buyer backs out of the deal after one of those deadlines.
3) They keep payments from going to the seller prematurely
Throughout the homebuying process, there are lots of important contingencies in the contract that must be met before the seller gets paid. The buyer may request repairs after the inspection, the bank will need to give final approval on the buyer’s loan, the buyer may even have a home to sell before they agree to purchase the new one. Title companies protect the buyer by ensuring that all of these contingencies are met before the seller gets paid so the buyer doesn’t pay for a home that doesn’t meet their expectations. They also protect the seller by ensuring that all of these contingencies are tracked and documented as they are met so the buyer can’t come back later and claim that something wasn’t done.
I understand that most people feel overwhelmed when they see each item in the list of closing costs. I also know that the last thing you want to do is pay more than you have to… But using an Tittle company is imperative because it protects you – as a buyer, a seller, or both! Throughout the transaction I work closely with the title agent to make sure that all contingencies and deadlines are met, and I ALWAYS review the closing cost worksheet with my clients, line by line, so that they know and understand exactly what they are paying for.
So…..If you’re thinking about making a move, I can help you through the entire process. Just send me a message or text me at 406-697-4294. And I will give you the help and guidance that you need. 😀
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