Every title company can write title insurance. The company is in business because some insurance underwriter agreed to let that company be its agent. Because the company can legally write title insurance for a title insurance underwriter, the company is in a position to do those closings that title insurance companies may legally do.
A title company is legally permitted to prepare only those documents which are required for the issuance of title insurance. They are legally permitted to do a deed and those documents necessarily implied by the deed when they write owner’s title insurance. They are permitted to prepare the Mortgage, the Note, and those documents necessarily attendant to the preparation of a Mortgage when they write a mortgagee policy. That is all. They are not permitted under any circumstances to prepare a Contract between parties. I have said in these articles many times that the Contract is the most difficult ingredient in a real estate closing. Lawyers and real estate agents are trained to prepare Contracts, not title insurance agents. In addition, any closing which goes beyond the preparation of real estate documents cannot legally be done by a title insurance company. Examples include any personal property conveyance or Security Agreement, Non-Competition Agreements, and the myriad documents and agreements that should be required in any business or commercial closing.
With this understanding of what title insurance companies may legally do, does it make a difference which company does your closing?
The answer is without doubt and absolutely, yes. Neither insurance agents, nor underwriters, are all the same. A license to write title insurance is not nearly as difficult to obtain as a license to write other kinds of insurance, or as a license to practice law. Most underwriters have a voracious appetite for premiums. They know that most mistakes made by closing agents don’t have anything to do with the chain of title and therefore probably will not create a claim on the title policy. Therefore, if someone has worked at a title company or law office for a year or so and has become legally authorized to serve as an agent, that person can find an underwriter. The certification requirements are simply not very strict.
Please don’t misunderstand. There are some title agents with years of experience and meticulous personalities who are wonderfully suited as closing agents. There are others with poor levels of experience or with casual, undisciplined personalities who are dangerous as closing agents.
Everyone, and every company, will make mistakes. So how should you select a closing agent? Here are some questions that should help.
1.Does the company have sufficient personnel to monitor and catch errors and to fix them if they occur?
2.Does the company have sufficient history and assets to defend itself and your closing if something goes wrong?
3.Is qualified management and advice quickly available?
4.What is the degree of control on money? (Is the closer the same person who signs checks and verifies his or her own calculations?)
It is unlikely that claims against a closing agent will be just against the closing agent. The parties and their real estate agents are very likely to be defendants in those claims as well. Therefore, the real estate agent who believes he or she should take a closing to the closing agent with the cheapest quote is playing Russian Roulette with his client’s closing. But at least in roulette the chances of disaster are about even. In closings, the cheapest quote is likely to come from a source with the least to lose, the least supervision, and if this article is correct, the highest probability for a problem.
There is no better way to express your love of the profession than by making careful choices that affect your client.