Ask Renee: What do Closing Companies Do?

Hello, this is Renee Han with Caine Premier Properties, and this is part of a series I call Ask Renee, where I address some of the more commonly asked about real estate related questions. So for today's segment, what I wanted to cover, and I often get asked about, is, you know, what exactly does a closing company do? And let me start by saying there are two entities that can do it, handle a closing for buyers and sellers. One is a title company and one is an attorney that offers title and closing services. Um, in either case, what you need to know is in Collier County, the buyer selects the closing company. If the buyer selects a title company, you cannot have two title companies closing a transaction. What do I mean by that? If a buyer selects, let's just say, First American Title for their closing, the seller can't go choose another title company. The seller could choose to go with an attorney, or they could choose to use the same title company. Title companies make their money by offering title insurance. Therefore, if the buyer uses that title company, that title company is handling the close because they're making money. They're getting paid by the title insurance. A seller doesn't buy title insurance, and therefore the title company wouldn't make any money. I know that's confusing, but the key to remember is if your buyers select a title company, you can either use that title company or you can hire your own attorney, but you cannot hire a separate title company. With that said, let me talk about what the title process is, what these closing companies will do on your behalf. The first thing they're going to do is a title search. That's where they're going to research the title of the property through a title abstract, which provides a history of the property and its ownership and change in ownership if that's the case. Their job is to examine the title, clear any liens or claims, and flag those and help get them cleaned so that the new buyer receives a clear and marketable title for their property. The second thing they do is they help orchestrate the survey. If you happen to be taking a mortgage out on the property, most lenders are going to require a survey, um, and which serves as a drawing that outlines the property lines and, and the placement of any of the personal property, the home, and other things— fences, polynice— on that property. Um, the title company will order the survey with your authorization as the buyer and review any potential problems. The third thing they do is they help to work on collecting and documenting property taxes for closing purposes. So they will verify with the county tax collector that the property taxes have been paid. They're going to check and make sure if there's any outstanding balances, they know which portion goes to the seller's responsibility and the buyer's responsibility. Similarly, they do the same thing with the homeowner association. So they'll do what's called an estoppel from the homeowner association to find out what's already been paid by the seller and what's remaining to be paid by the buyer, and doing any prorations of money owed on either side of that. The next thing the closing company will do is to work on title insurance policy. So they prepare the insurance commitment for the lender's title insurance if there is a lender, and they'll also do the owner's insurance policy. So one thing to keep in mind mind, I'm not going to go long on this. Title insurance is only covering the individual who took out the policy. So if there's a mortgage, the lender has a title insurance policy, but that does not cover the buyer. That's why the buyer also needs to have their own title insurance policy. The next thing they do is they work on, if there's a mortgage, any loan documents that are required for closing. So they'll coordinate with the mortgage lender to receive the loan documents that are going to be needed for signatures for closing. Once closing happens, they also get those signed documents back to the lender for their approval before releasing any mortgage funds, um, towards the purchase of the home. They also manage a good part of the closing process, so they make sure that all the required closing documents are signed by both parties. After closing, they'll disburse any monies collected at settlement, pay any vendors, for example, Perhaps you purchased your insurance, home insurance, but you did it as a bill back at closing. They'll make sure that vendor gets paid. They will also make sure on the selling side that any real estate professionals get paid as a part of that transaction. They're handling the payoff and release of any existing mortgages on the property, and again, they're working to prepare loan documents to be returned to the lender. The last thing they do as a part of the closing process is recording. So they take responsibility for making sure that all documents are properly recorded in the county courthouse, such as the new deed, the mortgage. They also ascertain the release of any existing liens on the property. So I just wanted to share briefly, um, in just over 5 minutes, what does a closing company do. I will sometimes get asked because people think it's just a matter of signing paperwork and they don't fully, um, perhaps appreciate the magnitude of what those closing companies do. So again, this is Renee Hahn with Caine Premier Properties, and I'm here to help you with all of your real estate questions and your needs.