What is a title company?
A title company is a firm that researches legal ownership claims on real estate. Title companies come into the homebuying process after an offer has been made and the property is under contract. They work to protect the buyer from fraud by making sure there are none of the following:
- Outstanding liens (old debts secured by the home)
- Omitted heirs (those who should have inherited the home but didn’t)
- Mistakes in the public record
- Other title issues
For instance, imagine you buy a foreclosed home or inherit a home from a deceased relative. Without a proper title search, there’s no good way to know if there are any liens on the property. If there are, you would be responsible for paying them since you are the property's current rightful owner.
This happened to Debra, a ConsumerAffairs reviewer from Chicago, who inherited a house from her cousin who had passed away. “What I didn’t know was there’s a lien on the house,” she said. “The house is paid off except for the lien. [...] As long as I am in the house I have to pay on the lien.”
What title companies do and how they work
Title companies perform title research and property surveys, issue title insurance and provide other related services.
Perform title searches
The title search looks for items like outstanding mortgages, liens on the property and overdue property taxes. It also ensures utilities are up to date. This is to make sure the buyer won’t have to settle a debt they aren’t responsible for.
Title searches can reveal problems like unknown property liens, undisclosed heirs, forged documents or boundary disputes.
Title searches can reveal problems such as forgotten wills, defective deeds, previously unknown land mineral rights and invalid court proceedings. Some of the most common title issues discovered during a title search include:
- Errors in public records
- Unknown property liens
- Missing or undisclosed heirs
- Forged documents
- Boundary disputes
Issue title insurance
Title insurance protects the buyer and the lender if there's ever a dispute over who legally owns a property. It guarantees that no one else has a legal claim.
Title agencies issue two types of policies:
- Owner’s title insurance: This protects the homeowner against certain title issues. It isn’t required, but it can protect your financial investment in the property.
- Lender’s title insurance: This protects the mortgage company from issues, and it’s paid for by the buyer. Most mortgage lenders require title insurance to protect the amount they lend.
Conduct property surveys
Lenders usually require a property survey to establish property lines and boundaries. The survey will also point out any issues like a neighbor’s fence over the property line. A land title survey generally includes:
- Boundary lines
- Access points
- Water features
- Improvements and structures
- Plottable recorded documents (like easements or utility rights)
- Historical monuments
- Cemeteries
Prepare abstract of title
An abstract of title summarizes the history of the title. Its purpose is to present everything the title company discovered during its research and surveys.
Usually, the abstract of title starts with the initial grant deed. The document includes any relevant information about title history and land data. Changes in ownership, easements, encroachments, encumbrances, liens, litigations, restrictions, tax sales and other legal actions are also recorded.
Act as closing agents
The final closing for a house is often held at a title company office. In this case, someone in the firm acts as the closing agent and prepares all the legal documents, such as loans and title insurance policies. It’s the closing agent’s responsibility to make sure the buyer and seller understand the terms of the sales agreement.
The title insurance company also sends a closing protection letter (CPL) to the lender that protects against fraudulent activity or errors by contracted closing agents working on the mortgage.
Hold escrow payments
Title companies receive and distribute payments related to real estate transactions. The escrow officer is a third party who helps manage the closing documents and payments. Depending on where you live, your officer may be an individual who works for the title company or a licensed attorney.
» MORE: What is escrow?
Do you need title insurance?
Title insurance can offer peace of mind in case there are issues regarding your title, even after public records research.
For example, an estranged family member of your home’s previous owners could claim ownership of the property. Title insurance would cover the expenses (like legal fees) related to settling such an issue. However, title insurance doesn’t cover property damage or loss that results from theft, fire, flood or other disasters.
“If a homebuyer is taking out a mortgage to buy a property, the lender will typically require them to purchase a lender's title insurance policy to protect their investment,” said Shmuel Shayowitz, president of Approved Funding, a multistate lender.
“However, this policy only covers the lender's interest, not the homeowner,” Shayowitz said. “To protect their own interests as a homeowner, it's advisable to obtain an owner's title insurance policy. This policy ensures that you have legal ownership of the property and protects your investment in case of title-related issues.”
» COMPARE: Best mortgage lenders
How to choose a title company
Title companies do a lot of important work during the homebuying process, which makes finding the right company critical.
“Start by researching title companies in your area,” Shayowitz said. “Look for companies with a solid reputation for professionalism, reliability and customer service. You can check online reviews and ask for recommendations from your real estate agent or friends who have recently purchased property.”
Here are a few factors Shayowitz says you should consider when comparing title companies:
1. Location
It’s best to choose a title company where you live.
“Choose a title company with experience in handling real estate transactions in your specific location,” Shayowitz said. “Local expertise is valuable because title issues and regulations can vary from one area to another.”
Your lender or real estate agent should already have experience working with at least one title company in your area. You can also check with the American Land Title Association (ALTA) if there are certified title companies in your area.
» MORE: How to find a real estate agent
2. Cost
There are many costs associated with title companies. Some costs include endorsement fees, title search fees, deed preparation fees and other certificates.
“While title insurance rates are typically regulated and similar among providers, service fees can vary,” Shayowitz said. “Request a detailed estimate of all costs involved in the transaction.”
3. Customer service
While researching and contacting title companies, you should also consider the level of customer service you receive.
“Ensure that the title company you choose is responsive and communicates clearly throughout the process,” Shayowitz said. “They should be readily available to address your questions and concerns. Ask about their due diligence practices to ensure that they identify and resolve any problems before closing.”
Once you have an idea of which title company you want to go with, you can ask for references from previous clients.
“Speaking with others who have worked with the company can provide valuable insights into their professionalism and competence,” Shayowitz said.
4. Closing services
Think about whether you need any additional services, like closing services.
“Some title companies also offer closing and escrow services,” Shayowitz said. “Consider whether you want a one-stop shop for your real estate transaction or if you prefer to work with a separate escrow agent.”
FAQ
When do you meet with the title company?
You typically meet with the title company at closing since their duties and fees are a part of the closing process.
How much does a title company usually charge?
Title company fees are a part of a home’s closing costs and typically vary by company. A title search fee, abstract fee and recording fee may cost anywhere from around $100 to $400 each, though costs could be much higher if a new abstract of title needs to be made.
Who pays for title insurance?
The buyer typically pays for title insurance. Title insurance typically costs around $1,000 per policy, though this can vary depending on where you live, the purchase price of the home and other factors.
What happens if a title company makes a mistake?
What happens if a title company makes a mistake depends on your contract. For example, if a lien was missed, the title company might pay the lien to get it removed. Still, you could then have a subrogation claim against you for that amount. Depending on your state, you may be able to hold the company liable and sue for negligence. Generally, if your title company has made an error, your best bet is to consult with a real estate attorney.
What is the difference between a title and a deed?
A title is the legal proof that you own a property. A deed is the legal document that transfers the ownership of a property from one entity to the next. A deed is a physical piece of paper that is signed by both parties, whereas a title is more of a concept.
What is a title commitment?
A title commitment, which is sometimes called a preliminary title report or a binder, is the document a company makes as a promise to issue title insurance. When you buy a house, you get the title commitment just before closing day.
Bottom line
In real estate, title companies are responsible for ensuring that the title to a property is legitimate. They make sure the seller has a legal right to sell the home and that the buyer isn’t buying a home with any outstanding liens on it. Title companies also sell title insurance to protect the buyer and lender from any title issues down the road.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Consumer Financial Protection Bureau, “What Is Lender's Title Insurance?” Accessed Nov. 22, 2025.
- Consumer Financial Protection Bureau, “What Are Title Service Fees?” Accessed Nov. 22, 2025.
- U.S. Department of the Treasury, “Exploring Title Insurance, Consumer Protection, and Opportunities for Potential Reforms.” Accessed Nov. 22, 2025.
