In this article
A title company does two jobs at a United States real estate closing: it examines and insures the title to the property, and in many states it also conducts the closing itself, which means collecting the signatures and the money, paying everyone out and recording the deed. The first job is insurance. The second is a neutral settlement service, and it is the one most buyers and sellers actually see.
This article covers the practice of the United States, where real estate law and insurance regulation are set state by state. It is general information, not legal advice.
Premiums computed from the rate table in Florida Administrative Code rule 69O-186.003; the liens belong to an illustrative worked example detailed below.
What are the two jobs a title company does?
A title company insures the ownership of the property and, where state practice allows, acts as the settlement agent that closes the transaction. The insurance job protects the buyer and the lender against defects in the title that already exist on the day of closing. The settlement job moves the documents and the money.
The National Association of Insurance Commissioners describes title insurance as protection for home buyers and mortgage lenders against losses from unknown title defects that exist before the closing, such as a prior owner's unpaid taxes, an error in a deed, fraud or forgery. The same source notes that title agents may also hold money in escrow and provide closing services for an additional fee. Those two sentences are the whole division of labour.
Which professional runs the closing depends on the state. In much of the West, the Midwest and the South, a title or escrow company conducts it. In a number of eastern and southern states, an attorney must conduct the closing or supervise key parts of it, and the title company's part may shrink to the search, the commitment and the policy, often issued through that attorney acting as a title agent. The work of a settlement agent and of a closing attorney are separate subjects; what matters here is that the title insurance job exists in every one of those arrangements, whoever sits at the table.
What does a title search look for?
A title search looks for anything in the public record that affects who owns the property or who has a claim against it. The searcher builds the chain of ownership from deed to deed and lists every recorded interest that has not been released.
The Texas Department of Insurance lists the records a title agent reviews: deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances and maps. From those records the examiner answers four questions.
- Who holds title today, and did each earlier owner validly pass it on? A missing signature, a deed from one spouse where two owned, or an estate that was never probated breaks the chain.
- What money is secured against the property? Mortgages and deeds of trust, judgment liens against an owner, tax liens, unpaid property taxes, homeowners association charges and contractors' liens all attach to the land or to its owner.
- What rights do other people hold? Easements for utilities or access, restrictive covenants, leases, options and mineral reservations stay with the land after a sale.
- Is anything pending? A recorded notice of a lawsuit concerning the property, or a bankruptcy of the seller, changes who can sign and on what terms.
The search has a cut-off, called the effective date or commitment date. It reflects the record as it stood on that day and no later, which is why the company runs an update shortly before closing and why the period after the cut-off gets its own treatment further down.
A search reads documents. It does not walk the land. Whether the fence follows the boundary, whether a neighbour's shed sits over the line, or whether someone lives on the property without a recorded right is the business of a survey and an inspection, and a policy treats those matters differently unless extra coverage is bought.
What is a title commitment, and how do you read its schedules?
A title commitment is the title company's written offer to issue a policy on stated terms once stated requirements are met. It is the most important title document a buyer receives before closing, because it shows in advance what the policy will and will not insure.
Most commitments follow the form published by the American Land Title Association. The form opens with a notice that the commitment is an offer to issue a policy and not an abstract or opinion of title, so it is not a full report on the property's history. Its obligations run only to the proposed insured named in it, and it ends if the requirements are not met within the period it states. The body is three schedules.
| Part of the commitment | What it contains | What to do with it |
|---|---|---|
| Schedule A | Commitment date, the policies to be issued with insured names and amounts, the interest insured, the current owner, the legal description | Check names, amounts and the legal description against the contract and the survey |
| Schedule B, Part I: Requirements | What must happen before a policy issues: payoffs, releases, documents to sign, proof of authority | Find who must satisfy each item, and by when |
| Schedule B, Part II: Exceptions | Matters the policy will not cover: easements, covenants, taxes not yet due, and matters arising after the commitment date | Read the underlying documents; ask which items can be removed |
The requirements are the to-do list of the closing. A typical list asks for the seller's existing mortgage to be paid and released, a specific judgment to be satisfied, the deed and the new mortgage to be signed and recorded, and evidence that the people signing have authority: a trust certificate, corporate resolutions, letters from a probate court.
The exceptions are the limits of the insurance. An exception does not mean something is wrong; a utility easement along the street is an exception in nearly every commitment. It means the policy will not pay for loss caused by that item. The Texas Department of Insurance advises buyers to review the exceptions carefully, to compare the legal description with the survey, and notes that an agent may remove an exception when the problem is cleared or when additional coverage is bought. A buyer's lawyer or agent normally raises objections within the review period the purchase contract allows.
How does a title company cure a defect before closing?
A title company cures a defect by obtaining the document or the payment that removes it from the record, then deleting the matching requirement or exception. Curative work is where most of the effort behind a commitment goes, and most of it is finished before anyone signs.
The common cures are these:
- A payoff and release. For an open mortgage or a lien that is still owed, the company orders a written payoff statement, pays the amount from the seller's proceeds at closing and obtains a recorded release.
- A missing release. A loan paid off years ago may still appear as open because the satisfaction was never recorded. The company traces the lender or its successor and obtains the release, or relies on the procedure the state provides for that situation.
- A name mismatch. A judgment against a person with the same name as the seller is cleared with an identity affidavit showing the seller is someone else.
- A break in the chain. A corrective deed, a deed from a missing co-owner, or a probate proceeding supplies the link.
- A court order. Where no document can be obtained, a quiet title action asks a court to settle ownership. That takes months and usually delays the sale.
How a lien is paid off from the proceeds is a subject of its own. For the title company's role, the point is narrower: a requirement stays on the commitment until the company holds what it needs to delete it, and the closing does not fund while a requirement is open.
What does the owner's policy cover, and how does the lender's policy differ?
The owner's policy protects the buyer's ownership up to the purchase price, and the lender's policy protects only the lender's mortgage up to the loan amount. They are two separate contracts with two different insured parties, issued from the same search.
| Point | Owner's policy | Lender's (loan) policy |
|---|---|---|
| Who is insured | The buyer | The mortgage lender |
| Amount | Usually the purchase price | The loan amount |
| How long it lasts | As long as the owner holds an interest in the property | Until the loan is repaid or refinanced, or the property is resold |
| Required? | Optional | Required by nearly all mortgage lenders |
The duration and requirement rows follow the description given by the National Association of Insurance Commissioners. The Consumer Financial Protection Bureau makes the practical point directly: lender's title insurance covers only the lender's interest and does not protect the buyer's equity, and if someone brings a claim against the home the owner is the first party responsible. An owner's policy is what covers the buyer's own investment.
Under the standard owner's form, the insurer covers loss if title turns out to be vested in someone else, if there is a defect, lien or encumbrance the policy did not except, if the title is unmarketable, or if the land has no legal right of access. Beyond paying a loss up to the policy amount, the insurer pays for the legal defence of the title against a covered claim, which in practice is often the larger benefit.
Who pays for title insurance, and how is the premium set?
Title insurance is paid for with a one-time premium at closing, the borrower normally pays for the lender's policy, and who pays for the owner's policy is set by local custom and by the contract. The premium itself is regulated by each state, in very different ways.
The National Association of Insurance Commissioners notes that in many areas the seller pays for the owner's policy as part of delivering title, and that the point is negotiable. Custom changes from state to state and sometimes from county to county, so the purchase contract is the only reliable answer for a given deal.
On price, some states fix the rate, some require insurers to file their rates with the regulator, and others leave more room for competition. Two states that fix it show how that works.
In Texas, the Department of Insurance sets the premium rate. Its consumer guidance, last updated in 2024, states that every title company charges the same premium for a given policy, that no discount is allowed, and that when an owner's policy and a loan policy are bought together the loan policy is issued for $100. The same guidance tells buyers that escrow fees and other closing charges are not fixed and can be compared between agents.
In Florida, the rate is set by rule in the Florida Administrative Code. The premium is $5.75 per thousand dollars of coverage up to $100,000, then $5.00 per thousand from $100,000 to $1 million, with lower rates per thousand on the portions above $1 million. The same table applies to an owner's and a mortgage policy bought alone, and a mortgage policy issued simultaneously with an owner's policy carries a minimum premium of $25 for coverage up to the owner's amount. Endorsements and other charges come on top.
Computed from the bracket rates in Florida Administrative Code rule 69O-186.003. Reissue rates, endorsements, search and settlement fees are not included.
The chart shows the one thing a rate table hides: doubling the coverage from $1 million to $2 million adds $2,500 of premium, a little under half of the $5,075 the first million costs, because the rate per thousand falls above $1 million. Rules change, so the current rate should always be confirmed with the state regulator or the title agent before it goes into a budget.
On choice of provider, the Consumer Financial Protection Bureau points out that under the Real Estate Settlement Procedures Act a seller may not require a buyer to purchase title insurance from a particular company as a condition of the sale, and that a borrower can usually shop for the title provider separately from the mortgage.
What is the difference between a title agent and a title underwriter?
A title underwriter is the insurance company that issues the policy and pays the claims; a title agent is the local firm that does the search, writes the commitment, conducts the closing and issues the policy on the underwriter's behalf. Most people who say "the title company" mean the agent.
The split explains several things on the paperwork. The commitment and the policy carry the underwriter's name and are countersigned by the agent, and the standard commitment form is not valid without that countersignature. The premium is shared between the two: Florida's rate rule, for instance, states the minimum share of each premium bracket that the insurer must retain, 30% on the first $1 million of coverage. Some underwriters also close transactions through their own offices, without an independent agent in between.
The split also matters after closing. A claim under a policy is made to the underwriter, following the notice procedure written in the policy conditions, and the Texas Department of Insurance stresses that the insured should notify the company promptly when a lien or an adverse claim appears, since delay can jeopardise the claim.
A title agent's closing work is not automatically insured by the policy, which covers title rather than the handling of funds. In many states an underwriter can issue a closing protection letter, a separate undertaking toward the lender or the buyer for certain losses caused by the agent's handling of the closing. The National Association of Insurance Commissioners includes those letters among the questions it suggests consumers ask when choosing a title provider.
What does the title company do on closing day?
On closing day the title company, acting as settlement agent, checks that every requirement is met, has the documents signed, receives the buyer's and the lender's funds, pays every party and sends the deed and the mortgage for recording. It acts on written instructions from the buyer, the seller and the lender, and takes no side between them.
The sequence is short and strict. Before the day, the company updates the search, collects payoff statements, prepares the settlement statement and coordinates the figures with the lender. At the table, or by remote signing where the state allows it, the parties sign the deed, the loan documents and the affidavits the company needs to delete its requirements. Once the money is confirmed in the escrow or trust account and the lender authorises funding, the company disburses: the seller's old loan, the liens, the taxes, the brokers, the recording office, its own premium and fees, and the balance to the seller.
Payment is the part other articles already treat in detail, so only the outline belongs here. The company pays out from good funds held in a separate escrow or trust account, according to the signed settlement statement, and state rules decide when it may release the money in relation to signing and recording. Because the instructions for wiring money are a known point of exposure, a careful office confirms them through a telephone number obtained independently, and expects its clients to do the same.
After the table, the company records the documents, sends the old lender its payoff and tracks the release, and then issues the policies. The owner's policy usually arrives weeks after closing, which surprises buyers who expected it in the closing package. It is dated back to the recording of the deed.
What happens between closing and recording?
Between closing and recording there is a gap, during which the buyer has paid but the public record still shows the seller as owner. Anything recorded against the seller in that interval, such as a new judgment or a second mortgage, could in principle attach to the property before the buyer's deed appears.
Title companies manage the gap with three tools. They run an update of the record, often called a bring-down, immediately before closing and again before recording. They have the seller sign an affidavit stating that no new liens, loans, lawsuits or unrecorded agreements exist. And the policy itself takes part of the risk: modern standard forms cover defects, liens and encumbrances that arise after the commitment date and before the insured deed is recorded, so that the exposure sits with the insurer rather than with the buyer.
The commitment, by contrast, excepts those same matters until the requirements are met. That is why the exception for matters arising after the commitment date appears on almost every commitment, and why its removal at closing, sometimes documented by a marked-up commitment or a written gap undertaking, is something lenders and buyers' lawyers ask for.
What does title insurance not cover?
Title insurance does not cover defects created after the policy date, defects the insured created or knew about and did not disclose, the matters listed as exceptions, or problems that have nothing to do with ownership. It insures the legal title, not the physical property and not the value of the deal.
The Texas Department of Insurance gives the practical list. A title policy is not homeowners insurance: fire, flood and theft are outside it. It generally does not cover:
- problems that arise after the policy is issued, including those caused by the owner's own unpaid mortgage or taxes;
- violations of zoning, building, land-use or environmental laws;
- the rights of someone occupying the land, which an inspection would reveal;
- boundary disputes with neighbours, unless additional coverage is bought;
- restrictive covenants that were disclosed, and anything else listed in Schedule B.
Two consequences follow. First, a clean policy does not mean a clean property: a buyer still needs the survey, the inspection and the zoning check suited to the use intended. Second, the exceptions are negotiable only before closing. Once the policy is issued with an exception in it, loss from that item belongs to the owner.
A worked example: two old liens found and cleared before closing
In this worked example, a search on a $450,000 Florida purchase finds $20,162 of liens the seller had forgotten, and the title company clears both from the seller's proceeds so that the buyer's policy issues without them. The figures are illustrative, except for the premiums, which follow Florida's rate rule.
The assumptions: a house sells for $450,000. The buyer borrows $360,000 and brings $90,000 plus closing costs. The seller owes $212,300 on an existing mortgage. The contract puts the owner's policy on the seller and the lender's policy on the buyer. The brokerage commission is 5% of the price, $22,500, and the seller's other closing costs total $3,400.
- The searchThe examiner finds the seller's $212,300 mortgage, as expected, and two items nobody mentioned: a judgment recorded four years earlier against the seller for $18,400, and a municipal code-enforcement lien of $1,150.
- The commitmentSchedule B, Part I lists three payoff requirements: release of the mortgage, satisfaction of the judgment, release of the municipal lien. Schedule B, Part II lists a utility easement and the subdivision covenants, which stay.
- The payoff figuresThe judgment creditor's written payoff comes to $19,012: the $18,400 judgment plus $612 of accrued interest. The municipality confirms $1,150. Together the two forgotten liens cost $20,162.
- The settlement statementThe company adds both payoffs to the seller's side. The seller's deductions become $212,300 + $19,012 + $1,150 + $22,500 commission + $2,325 owner's premium + $3,400 other costs = $260,687.
- Closing and fundingAfter a final update of the record shows nothing new, the parties sign, the funds arrive and the company pays the old lender, the judgment creditor and the municipality directly. The seller receives $450,000 − $260,687 = $189,313.
- Recording and policiesThe deed and the new mortgage are recorded, the three releases follow, and the company issues a $450,000 owner's policy and a $360,000 lender's policy. Neither policy lists the judgment or the municipal lien.
The premium arithmetic is worth seeing once. The owner's policy on $450,000 costs $575 for the first $100,000 at $5.75 per thousand, plus $1,750 for the remaining $350,000 at $5.00 per thousand, which is $2,325. The lender's policy, issued at the same time for $360,000, is charged the $25 simultaneous-issue minimum before endorsements, so the two base premiums total $2,350. Bought alone, a $360,000 mortgage policy would cost $1,875 at the same table, which shows why the two are normally issued together.
Without the search, the buyer would have taken a house carrying $20,162 of someone else's debt, and the judgment creditor could have pursued the property. With it, the seller nets $189,313 instead of the $209,475 expected before the liens surfaced, the difference being exactly the $20,162 paid to clear them, and the buyer's title starts clean.
