What Does a Title Company Do?
A title company is the neutral third party that facilitates the closing of a real estate transaction. They perform the title search, issue title insurance, hold earnest money in escrow, prepare closing documents, and ensure that funds are properly distributed to all parties at closing. In states that don't require attorneys at closing, the title company runs the entire process from contract to keys.
For wholesalers and investors, the title company is one of the most important relationships in the business. An investor-friendly title company understands assignments, double closings, entity structures, and the speed requirements of investment transactions. A title company that primarily handles retail transactions may struggle with or refuse to handle wholesale deals.
What a title company does step by step
1. Title search and examination
The title company searches public records to verify the property's ownership history and identify any claims, liens, judgments, easements, or other encumbrances that could affect the transfer. This search typically goes back 20-50 years and covers county records, court filings, tax records, and federal lien databases.
2. Title insurance
After the title search, the title company issues a title insurance policy that protects the buyer (and the buyer's lender, if applicable) against any defects in the title that weren't discovered during the search. Title insurance is a one-time premium paid at closing, not an ongoing expense. It protects against hidden claims, forged documents, undisclosed heirs, recording errors, and other title defects.
3. Escrow services
The title company holds all funds in escrow -- earnest money deposits, option fees, and the buyer's closing funds -- until all conditions are met for the transaction to close. This neutral third-party role ensures that neither the buyer nor the seller can access the other party's money until the deal is complete.
4. Closing coordination
The title company prepares all closing documents, coordinates signing schedules, calculates prorations (property taxes, HOA dues), prepares the settlement statement (formerly HUD-1, now the Closing Disclosure for financed deals), and ensures all required documents are properly executed.
5. Recording
After closing, the title company records the new deed with the county clerk's office, making the transfer of ownership a matter of public record.
Finding an investor-friendly title company
Not all title companies are created equal for investment transactions. Here's what to look for:
- Handles assignments: Some title companies won't process assignment of contract transactions. Your title company should handle these routinely.
- Handles double closings: Same-day double closings require specific escrow procedures. Not every title company can or will accommodate them.
- Speed: Investor deals often need to close in 14-21 days. Retail-focused title companies may take 30-45 days. Find one that can move fast.
- Entity experience: If you buy or sell through an LLC, the title company should be comfortable with entity transfers, operating agreements, and resolutions.
- Communication: Your title company should proactively update you on title search progress, flag issues early, and be reachable when you need them.
The best way to find investor-friendly title companies is to ask other active investors in your market. Attend local real estate investor meetups, ask in Facebook groups specific to your city, or ask the top-producing wholesalers in your area who they use.
Title company vs closing attorney
Some states require an attorney to handle real estate closings instead of (or in addition to) a title company. These are called attorney-closing states. In these states, the attorney performs the title search, prepares documents, and oversees the closing. Even in title-company states, some investors prefer to have their own attorney review contracts, especially for complex transactions like double closings or creative financing deals.
Title company costs
Title company fees are part of your closing costs and typically include a title search fee ($150-$400), title insurance premium (varies by state and purchase price, typically 0.5-1% of the purchase price), escrow fee ($300-$700), document preparation ($100-$300), and recording fees ($50-$200 per document). Total title company costs on a $150,000 transaction might be $1,500 to $3,000.