Ask Andrew: Settlement Companies
By: Andrew Goodman
Q: What does a settlement company do and how should I go about choosing one?
A: Real estate settlement companies, also known as title companies, work with buyers, sellers and lenders to facilitate the terms of a real estate contract. They’re also available to work with current homeowners and lenders when the owner of a home is looking to refinance or obtain a new mortgage on a property.
A settlement company is typically working behind the scenes of a real estate transaction until settlement. However, throughout the real estate process they’re working to arrange a lender or buyer Title Insurance Policy, draw up the final documents and legal forms for your mortgage or property transfer, collect all final signatures, transfer funds, file the legal documents at the courthouse and more.
Think of a settlement company as the final piece to the puzzle. They are the entity that puts everything together and manages the closing process.
In Maryland, the buyers have the right to select their own settlement company. Your Realtor or loan officer are a great referral source for settlement companies. The law prevents real estate settlement companies from paying brokers a referral fee so you should trust that your Realtor or loan officer is recommending a settlement company based on their past experiences of successful transactions and reputation.
Price is the first thing most buyers think about when selecting a settlement company. However, settlement company fees don’t differ much from one company to another. There are only a few fees from the buyers’ side of the transaction.
Title Insurance: This is based on a percentage of the loan and not determined by the settlement company. Please refer to one of my previous columns for further explanation, as there is a Lenders Policy and an Owners Policy.
Title Exam: This is an examination of past deeds, wills and trusts to make sure the title has passed correctly to each new owner.
Abstract Title Search: This is a history of title to a particular parcel of real estate, which summarizes all conveyances and encumbrances affecting the property. This is used to originate the title insurance policy.
Deed Preparation: This is the document that legally transfers the property to the buyer.
With exception of the title insurance, all other fees should total roughly $800-$900.
Choosing a settlement company is crucial. They are typically the last folks you deal with during a real estate transaction and you want to make sure that they don’t ruin that special moment for you.
Choose a settlement company that goes out of its way to make the moment special for you and more importantly, make sure the process goes smoothly.