Title Documents We Collect and What They Are
What are the documents needed to complete Title work and what do they cover?
Title documents collected, reviewed, and approved by the lender
- Title Commitment with a 24-month chain of title
- Verification of property taxes
- Preliminary Closing Disclosure or Settlement Statement
- Errors and Omissions
- Wire Instructions
- Closing Protection Letter
- Survey (lender and state dependent - not always required)
What is each document?
Title Commitment with a 24-month chain of title: A lengthier document outlining all of the liens, defects, burdens, and obligations that are relating to the subject property. It also lists the loan amount, purchase price of the property, and who is insured on the loan.
Verification of Property Taxes: A document that shows the amount of property taxes due each tax period for the subject property. This can be in the form of a tax certificate or a previous bill. This document allows us to determine if there are outstanding property taxes owed by the seller before you take ownership of the property. It also confirms that the lender is not over or under collecting property tax payments in your escrow account.
Preliminary Closing Disclosures or Settlement Statement: A first draft of what you will sign at closing. It includes all closing costs, and is prepared by your closing company. Similar to your loan estimate, it is not the final version of your closing costs. It is submitted to the lender so they are able to incorporate the accurate values for title-related fees and taxes owed by both the buyer and seller. It is then balanced and finalized before closing.
Errors and Omissions: A document outlining the insurance that covers the closing company settling the loan.
Wire Instructions: A one or two-page document showing the wiring information and instructions for the closing company. It includes information such as the closing company’s bank and account numbers. During closing, funds are wired to the closing company from the borrower. The wired funds include your down payment, closing costs, and money from the lender that is required to complete the transaction.
Closing Protection Letter: A signed letter by the title company used to guarantee protection to the lender against non-compliance issues that may arise, such as fraud or negligence, on the part of the closing agent. Note: In New York state, closing protection letters are not required.
Who Prepares each Document?
The preparation of each document is dependent on what state your subject property is in, and if the title company is acting as both the title agent and the closing agent. In certain states, like New York, there is a third group involved called a “bank” or “lender” attorney, who represents the lender at closing. Check out the table below to see who prepares each document!
|Document||Preparer if Non-Attorney State||Preparer if Attorney State||Preparer if NY|
|Title Commitment with a 24-month chain of title||Title Company||Title Company||Title Company|
|Verification of Property Taxes||Title Company||Title Company||Title Company|
|Preliminary Closing Disclosure or Settlement Statement||Title Company||Title Company OR Closing Agent||Lender/Bank Attorney|
|Errors and Omissions||Title Company||Title Company OR Closing Agent||Lender/Bank Attorney|
|Wire Instructions||Title Company||Title Company OR Closing Agent||Lender/Bank Attorney|
|Closing Protection Letter||Title Company||Title Company OR Closing Agent||Lender/Bank Attorney|
Who Is Involved and How Does a Title Company Operate?
Typically, the title process starts soon after the purchase contract is signed, but the timeline is also state-dependent. Title work is ordered by the title company through their title insurance provider. There are five or six major title insurance providers. Fidelity, First American, Old Republic, and Stewart make up about 80% of the market share. The title insurance provider’s underwriter will process the title to make sure any unusual exceptions or issues with the land or survey are noted in the exceptions section of the title commitment.
Once the title commitment is written, it is the title company’s responsibility to prepare the remaining documents listed above. Of course, when there is an escrow company and a title company—similar to what occurs in attorney states—the responsibilities tend to fall in line with the table above. Morty then submits these documents to the lender.
After the lender reviews and clears all of the documents, the title company’s settlement agent is the main point of contact. This can often be the same person that handles the initial document processing, but at larger companies, or situations where there is a separate escrow officer, this is a different person.
The settlement agent handles the scheduling of the closing with the borrower and other interested parties. They are also responsible for balancing the final closing disclosure with the lender in order to provide a final cash to close number to the borrower and making sure the lender’s wire is balanced. Typically, balancing occurs right before the closing, so settlement agents tend to work in order of closing date. Settlement agents are responsible for making sure the amounts being collected for escrows, prepaids and title fees are correct. They are also the best contact for any questions about the “why” behind these numbers on your final closing disclosures.
Once final docs are signed and funds are received, the settlement agent is responsible for disbursing funds to all interested parties (real estate agents, mortgage broker, insurance company). After the funds are disbursed, the settlement agent confirms everything else is set for recording and makes sure the closing is recorded in the local municipality’s records.