When you buy or sell a home in the San Francisco East Bay, you’ll find that the title company plays many important roles in the transaction. So what does the title company do, and what are their “escrow services?”

 

The title company has several important roles: It issues a title insurance policy for the property that is changing ownership, it holds and maintains the escrow account, and it acts as a neutral third party that facilitates the transfer of ownership.

 

The company provides title insurance, which protects the buyer’s and the lender’s interests in case there are unknown or undisclosed issues that come to light after the sale is complete. It’s not a legal requirement, but lenders insist on it. Even in an all-cash transaction, forgoing title insurance is very unwise!

 

After the seller accepts the buyer’s offer, the agent will open an escrow with the title company (typically of the buyer’s choosing), then the buyer will deposit their earnest money into the escrow account. The escrow officer will be available to answer questions and help everyone involved understand the proceedings.

 

During the escrow period, the title company will conduct a thorough title search on the property. This involves examining public records, verifying the ownership history, and any other potential issues that could affect the property's title. Most searches don’t uncover issues, but if they do, common challenges may include:

 

• Unpaid property taxes

• Other tax liens

• Mechanic’s liens

• Lis pendens

• Deeds that were not properly recorded

• Easements

• Claims of adverse possession

This search may also uncover special building restrictions, encroachments or the existence of special assessment zones relating to sewer districts, other infrastructure or community interests. Some of these are funded by property taxes, so they’re good to know about early on. It’s not unusual to see CC&Rs that have been long forgotten and ignored.

 

It wasn’t until September 2021 that the California State Legislature passed AB 1466, which outlawed discriminatory language in CC&Rs and required local county governments to examine and remove this language. Up until that time racially restrictive covenants, though unenforceable, were shockingly pervasive.

 

It’s important to read and understand the Preliminary Title Report as soon as it’s available. Some of the language can be technical or dense, so consult your Realtor or escrow officer for clarification.

 

Based on the results of the title search, the title company issues title insurance policies. There are two types of title insurance: lender's title insurance and owner's title insurance. These policies provide financial protection in case any undiscovered title issues arise after the transaction is completed.

 

In Northern California, the title company usually serves as an escrow agent, holding funds in a secure account until all conditions of the transaction are met. This ensures that neither party has access to the funds until all contractual obligations are fulfilled. Once the lender deposits the loan funds to the escrow account, escrow closing can proceed.

 

In other parts of California, it's customary for escrow and title to be handled by separate entities. Nationally, these are often handled by attorneys and settlement services.

 

The title company coordinates the closing process. This includes preparing, notarizing and completing the closing documents by both seller and buyer. The closing statement will show all the financial details of the sale, the prorations of property taxes, HOA dues and any other periodic expenses. The title company will also oversee the disbursement of funds to the appropriate parties, pay off liens, real estate commissions and distribute proceeds to the seller.

 

When the escrow closes, the title company will immediately transmit the documents to the recorder's office in the county where the property is located. This will officially record the change of ownership in the public record.

 

The title company acts as a neutral intermediary between the buyer, seller, lender, and other parties involved in the transaction. This impartial role ensures that the process is fair to all parties. It’s important to note that, should a dispute arise, the title company has no opinion on how that dispute is resolved. All parties to the transaction must agree before any funds are released.

 

Would you like more information about the escrow process and how it works? Reach out - Red Oak would love to help.