The settlement industry plays a critical role in the real estate closing process. Virtually every real estate transaction includes a title search, regardless of whether a mortgage lender is involved, because it’s crucial to confirm a property is eligible for sale.
Title companies are essential to real estate, though many buyers and sellers are unfamiliar with their role. By exploring their role, homebuyers, sellers, and industry professionals can gain clearer insights into the closing process and learn how these companies help safeguard against fraud.
What is the title industry?
The title industry focuses on verifying property ownership. Key players in the title industry include title companies, title agents, underwriters, and attorneys, all of whom work to identify any potential claims or liens against a property. This is essential to any real estate transaction since an individual may not legally sell their home to another person if there are previous claims or liens against the title.
Moreover, if a seller does manage to sell to a buyer despite the home having a lien or previous title claim, the buyer cannot assume ownership, resulting in potentially expensive litigation. Ultimately, the title industry works to protect property ownership by ensuring home sellers are the legal title holders and buyers will legally receive the title upon transaction completion.
The essential role of title companies in real estate transactions
According to data from the American Land Title Association (ALTA), clearing a standard title takes an average of 22 hours of work. More difficult title clearances may take up to 45 hours.
However, this significant workload is essential because the deep audit of public records ensures accurate property ownership and chain of title. Liens, easements, previous title claims, and other potential issues can drag out a closing or even force a real estate transaction to fall through.
Title companies and title insurance agencies help prevent title-related legal disputes and claims to facilitate a smooth and secure closing process.
Protecting property rights
For many Americans, a house is the biggest investment they’ll ever make. Therefore, it’s vital to hold a clear title.
If clients don’t hold one, they won’t be able to sell the home later, and they may find themselves caught in an expensive legal battle if someone else makes a title claim later on. The clients might even lose the house.
Title companies help safeguard homebuyers’ investments by identifying undisclosed heirs or unpaid taxes that need addressing before selling. With fraud prevention software like Closinglock, title companies can also help sellers and buyers avoid fraud and other illicit activity that can put homebuyers at risk.
Supporting trust and transparency in real estate
Real estate is a high-stakes game. With large sums of money changing hands, title professionals provide essential security and confidence. Title companies facilitate safe, legal transactions and support a healthy real estate market by ensuring buyer and seller confidence. Although title fraud remains a concern, the rigorous safeguards implemented by title companies help mitigate risks and maintain trust throughout the homebuying process.
Title companies may also serve as educators in the real estate business, helping buyers and sellers better understand how property ownership functions, where there are risks, and why title searches are so imperative in the closing process.
Adapting to modern challenges in the industry
In 2024, 28% of title companies reported experiencing at least one attempt at seller impersonation fraud. One Closinglock customer, Flying S Title & Escrow of Montana, caught three seller fraud attempts in one month. Another, Capital Title Insurance Agency, stopped seven attempts valued at $2.1 million. As the increasing sophistication of AI and fintech makes it easier for scammers to carry out complex fraud attempts, seller impersonation and other types of fraud have risen.
The title industry is at the forefront of wire fraud prevention and real estate security. By leveraging technology, title companies can mitigate the risk and create a more robust title-clearance process. Fraud prevention software like Closinglock can analyze patterns, flag potentially fraudulent activity, and facilitate secure transactions through an easy-to-use platform. Moreover, title companies have emerged as leaders in educating other real estate industry players on potential threats and have helped streamline property transactions.
Recognizing the value of title professionals
The behind-the-scenes work done by title companies protects the integrity of any real estate transaction, giving real estate agents and their clients peace of mind when fraud is more rampant than ever.
In the high-stakes world of real estate, failing to clear the title properly can lead to major financial issues, significant conflicts over ownership, and distrust in the market. As the title industry works to mitigate fraud and ensure each property may legally and efficiently change hands, it builds faith in the market. Private property ownership is a foundational tenet of our society, and the work done by title professionals supports healthy communities and economies by empowering new buyers to safely and legally acquire property and sellers to profit from their investments.
The work of title companies is an indispensable part of any real estate transaction. With that understanding, real estate professionals can increase their success by choosing trustworthy and innovative title partners that maintain the highest security standards.
Protecting your investment with Closinglock
Closinglock is trusted by hundreds of title companies and law firms to power and protect real estate transactions from the escalating threat of fraud while improving workflow efficiency. Its wire fraud prevention software includes identity verification, document exchange, and eSigning to keep transactions secure, all in one platform. Closinglock is the only company that offers a Good Funds compliant payment tool that allows buyers to conveniently send their deposit or cash-to-close funds via their desktop or mobile device and is covered up to $2.5 million under the industry’s highest insurance policy. Request a demo today.