<h2What Does a Title Company Do?</h2<pA title company (or closing attorney in some states) performs two critical functions in a real estate transaction: they conduct a title search to ensure the property can be legally transferred to the buyer, and they manage the closing process by preparing and coordinating all closing documents.
For FSBO sellers, the title company also serves as the neutral third party who holds earnest money in escrow and disburses funds at closing.</p<pThe title search involves examining public records to verify that you have clear, marketable title to the property — meaning there are no outstanding liens, judgments, unpaid taxes, or ownership disputes that would prevent the transfer.
If the title search reveals any issues, the title company works to resolve them before closing.</p<h2Title Insurance: Owner's vs.
Lender's Policy</h2<pTitle insurance protects against defects in the title that were not discovered during the title search.
There are two types: the lender's title insurance policy, which the buyer's mortgage lender requires and which the buyer typically pays for, and the owner's title insurance policy, which protects the buyer's ownership interest.
In most states, it is customary for the seller to pay for the owner's title insurance policy, though this is negotiable.
Owner's title insurance is a one-time premium paid at closing, typically 0.5 to 1 percent of the purchase price, and it protects the buyer for as long as they own the home.</p<h2What to Look for in a Title Company</h2<pWhen choosing a title company, look for experience with FSBO transactions specifically.
Not all title companies are accustomed to working directly with sellers rather than through an agent, and some may be less responsive to FSBO sellers who do not bring them repeat business through an agent relationship.
Ask whether they have experience with FSBO closings and whether they can guide you through the process without an agent.</p<pAlso consider their fee structure.
Title companies charge a closing fee (also called a settlement fee) that typically ranges from $300 to $800, plus the cost of title insurance.
Get quotes from at least two or three title companies and compare their total fees.
FSBOHub's vendor directory includes title companies that specialize in FSBO transactions and offer competitive rates.</p<h2When to Open Escrow</h2<pOpen escrow with your chosen title company as soon as you have a signed purchase agreement.
Provide them with a copy of the contract, the earnest money deposit, and contact information for both parties.
The title company will begin the title search immediately and keep both parties informed of progress.
Starting this process early gives the title company maximum time to resolve any title issues before your closing date.</p<h2The Closing Process</h2<pApproximately one week before closing, the title company will prepare the closing disclosure, which itemizes all costs and credits for both buyer and seller.
Review this document carefully and compare it to your original purchase agreement.
On closing day, you will sign the deed and other transfer documents, the buyer's funds will be wired to the title company, and the title company will disburse your net proceeds after paying off your mortgage and any other liens.
The entire closing appointment typically takes 30 to 60 minutes.</p