Splitting Title: Shared Responsibilities of a Buyer and Seller
In some real estate transactions, the buyer and seller may choose to split title services, meaning each party works with their own title company. This division of responsibility can ensure that both the buyer’s and seller’s interests are fully represented. However, it also means that each title company will have specific duties to fulfill throughout the process. Below is an outline of the responsibilities left to be conducted by both title companies when splitting title services between the buyer and seller.
1. Title Search and Examination (Buyer and Seller)
Both the buyer's and seller's title companies will conduct separate title searches to verify the legal ownership and status of the property. The seller’s title company typically handles the initial search to ensure the title is clear for sale, while the buyer’s title company conducts an independent title search to confirm that there are no undisclosed liens, claims, or title defects.
Seller's Title Company Responsibilities:
Ensure the title is clear of liens or encumbrances.
Provide the buyer’s title company with the preliminary title report.
Address any title issues that arise from the seller’s side (such as paying off mortgages or removing liens).
Buyer’s Title Company Responsibilities:
Conduct a separate and independent title search for the buyer.
Confirm that the title is free of any issues or claims that might affect the buyer’s ownership.
2. Title Insurance (Buyer and Seller)
Once the title is determined to be clear, both the buyer’s and seller’s title companies will issue title insurance policies to protect their respective clients. Title insurance is one of the key protections in a real estate transaction, ensuring that if any undiscovered title issues arise after the sale, both the buyer and lender (if applicable) are protected financially.
Seller's Title Company Responsibilities:
Provide the seller with an owner’s title insurance policy.
Ensure the seller's interests are protected against claims after the sale.
Buyer’s Title Company Responsibilities:
Issue lender’s title insurance (if the buyer is financing the property).
Offer the buyer an owner’s title insurance policy to protect their future interest in the property.
3. Escrow and Disbursement of Funds (Buyer and Seller)
Title companies often handle escrow, acting as neutral third parties that manage the exchange of funds during the transaction. If the buyer and seller are splitting title services, both title companies may coordinate to manage the escrow process. The seller’s title company will typically handle the seller’s proceeds, while the buyer’s title company will manage the buyer’s funds, including the mortgage if applicable.
Seller's Title Company Responsibilities:
Hold the seller’s earnest money or down payment in escrow.
Disburse the proceeds of the sale to the seller after closing.
Buyer’s Title Company Responsibilities:
Manage the buyer’s funds in escrow (including deposits and mortgage payments).
Transfer funds to the seller’s title company once all conditions are met.
4. Closing and Document Preparation (Buyer and Seller)
When splitting title services, both title companies will work together to prepare the necessary documents for closing. This includes the settlement statement, the deed, and other critical documents that ensure the transaction is legally binding and complies with local, state, and federal regulations.
Seller's Title Company Responsibilities:
Prepare the deed and ensure it is signed by the seller.
Provide the final settlement statement, ensuring all costs related to the seller (such as real estate agent fees and mortgage payoffs) are accurate.
Review and ensure that all documents related to the sale are properly signed and executed.
Buyer’s Title Company Responsibilities:
Review the final settlement statement to confirm that all costs related to the buyer (such as closing costs, lender fees, and down payments) are accurate.
Coordinate with the lender to ensure that all loan documents are in order.
Ensure that the buyer signs all required documents, including the loan agreement (if applicable).
5. Title Transfer and Recording (Buyer and Seller)
After closing, both title companies will work together to ensure that the title is legally transferred to the buyer and that the deed and other necessary documents are recorded with the local county office. The buyer’s title company will handle the recording of the deed, while the seller’s title company will ensure that the title is clear.
Seller's Title Company Responsibilities:
Ensure that the deed is properly executed by the seller.
Provide the executed deed to the buyer’s title company for recording.
Assist with the release of any liens or mortgages on the property.
Buyer’s Title Company Responsibilities:
Record the deed with the county to officially transfer ownership to the buyer.
Ensure that the title is free of any issues before recording.
6. Final Disbursements and Closing Out (Buyer and Seller)
After all documents are signed and the title has been transferred, the title companies handle the final disbursements and closing out of the transaction. This includes paying off any outstanding mortgages, compensating real estate agents, and distributing funds to the seller.
Seller's Title Company Responsibilities:
Distribute the seller’s proceeds from the sale after any liens, agent commissions, or other obligations are settled.
Provide any remaining funds to the seller after closing.
Buyer’s Title Company Responsibilities:
Finalize any loan payments or additional closing costs.
Ensure the buyer has received all final documents, including the deed, settlement statement, and title insurance.
Coordinated Effort Between Both Title Companies
When the buyer and seller split title services, communication and coordination between both title companies are essential. Each title company plays a distinct role in representing their client’s interests, but they must work together to ensure the sale is legally compliant, the title is clear, and funds are appropriately distributed.
By dividing the responsibilities, both the buyer and seller can feel more confident that their respective interests are protected throughout the real estate transaction. The coordination between the two title companies also helps ensure a smooth and legally sound process from initial title searches to the final transfer of ownership.
