How To Choose A Title Company

Question: Do you have any guidance on choosing which Title Company to work with when buying or selling real estate?

Answer: Title companies handle the legal side of the transaction such as ensuring the buyer has clear ownership, reviewing and recording the deed, issuing title insurance, and preparing paperwork for the buyer and seller to sign at closing. They operate in the background of transactions and usually the less you hear from them, the better. They are not legal representatives of either party and objectively support the buyer and seller.

In Virginia (and DC/MD), buyers select the title company. In some cases, a seller may want to use their own firm/attorney and will request a “split settlement” but that is less common and should be done for a good reason.

Most people don’t know a title attorney or get a referral from a friend, so how do you go about choosing your title company?

Your Real Estate Agent

You shouldn’t be hiring a real estate agent because they’re the first person to raise their hand to meet you at a property you found online. Among the reasons you hire an agent should be because you trust their advice and want access to their network of professionals who are relevant to a real estate transaction.

Your agent should be the first person you turn to for a recommendation on the title company. He/she has likely worked with dozens or hundreds of title companies before and hopefully has one or two to recommend.

It’s perfectly fair to ask your agent why they’re recommending a specific title company.

Fees

The highest fee associated with a title company is title insurance and those prices are set by the insurance company, not the title company. Different title companies work with different title insurance companies, but rates are similar (or identical) amongst them. If you see big differences in title insurance between two title companies, one may be quoting a basic vs enhanced coverage (buyer’s choice).

I rarely see discretionary fees charged by the title company vary by more than a few hundred dollars. You can always find a cheaper option for title services, but the legal support on a real estate transaction worth hundreds of thousands or millions may not be a smart place to save a few hundred dollars and risk quality of service.

Location

It’s important to use a local title company who is familiar with local real estate and tax practices, not just licensed to practice here. I use one title company (Universal Title) for Northern VA transactions and one title company for Washington DC and Maryland transactions (District Title).

Attorney Experience

Most sales follow a pretty standard, predictable process that inexperienced title companies/attorneys can handle but occasionally something unexpected comes up that requires experience/expertise to identify and resolve an issue. If problems do surface, having access to an experienced local title attorney can be the difference in whether or not the problem is even identified, whether a sale closes, and/or how much time and stress it takes to resolve the issue.

Back-Office Support

The quality and experience of the support staff is equally as important as the attorney. Look for a title company who has experienced processors who have been with the company for a while. Title companies who can afford to cut fees below their competition likely do so by not having a full supporting cast or not paying to hold onto experienced processors.

Insurance Provider

One of the key roles of a title company is that they issue title insurance, which protects your ownership interests in the property from any future claims. Most title companies have one insurance company they issue policies for such as First American, Old Republic, and Chicago Title.

Most buyers are indifferent about their title insurance provider, but you may want to confirm who the title company uses to do some background on them such as size (market share) and how long they’ve been in business. I generally prefer larger insurers who have been in business for a long time.

If you’d like a recommendation on a title company in the DMV, don’t hesitate to reach out to me at Eli@EliResidential.com.

Question: We are planning to buy a home in the DC area sometime in the next 12-24 months and want to make sure we take that time to prepare. What should we know before buying a house that we can get started with now?

Answer: Whether you’re a first-time buyer, experienced buyer relocating from out-of-state, or moving locally here’s a list of things I review and plan out with clients before getting into the full swing of house hunting:

Local Customs, Requirements, Timelines, and Contracts
The home-buying process varies greatly across and within states. I think the most important thing you can do as a buyer is take an hour at the beginning of your buying process to become educated on the process, timelines, and key contractual terms/obligations in the area(s) you plan to search. This is also a good way to meet and vet different real estate agents early on to get a feel for who is willing to spend time with you up-front on education and planning vs pushing immediately for a sale.

Choose the Right Financing, Get Pre-Approved
Not all lenders offer the same loan products so it’s important to identify a lender who not only provides high quality service, but also has access to loan products that fit your profile (down payment, credit score, job industry, etc). Real estate agents, friends, and co-workers are all great sources of recommendations.

You’ll also want to get a pre-approval from at least one lender, one that actually reviews and verifies your financial documents, income, and employment instead of just running credit and reviewing an information sheet. This will decrease the chances of you being rejected from a loan, allow the lender to provide the most accurate recommendation, increase your leverage in contract negotiations, and reduce the amount of work required of you once you’re under contract.

Don’t Forget A Monthly Budget
I find that most people qualify for more than they actually want to spend, especially dual-income buyers, so budgeting is important. The biggest mistake most buyers make is budgeting strictly around the sale price, which is often driven by the amount you have for a down payment. It’s just as important to set a monthly budget for total housing expenses including mortgage, taxes, insurance and if applicable Association fees and/or mortgage insurance. Your lender can help you project monthly expenses at different price points based on different down payment amounts.

Do You Want Representation?
Determine if you want to have a real estate agent representing you in the transaction (breaking news…I highly recommend it) and, if so, what level of service you’re looking for. In most cases, the seller pays commission to their representing broker and the buyer’s broker, so representation often comes at little or no cost to buyers.

Push Yourself on Your Criteria
It’s very easy to come up with your top 3-5 criteria for a home and rare for most couples to disagree on the short list, but push yourself/yourselves to rank your top 10-12 criteria. This list can and will change as you search for homes, but it pushes you to think about more than bedroom count, schools, commute, and an open kitchen. This is especially valuable for couples. Just because you have the same taste in music, food, and TV shows that brought you together, doesn’t mean you’re on the same page about housing criteria.

Cash Needs + Savings
You need cash savings to pay for your down payment + closing costs of 2.5-3% of the sale price (in the DMV). Within a few days of your offer being accepted, you’ll have to transfer 1-5% (negotiable) of the sale price into an escrow account as deposit to secure the sale. You’ll spend about $1,000 out-of-pocket between contract and closing on inspections and the appraisal. Don’t forget how expensive moving is either, so keep enough savings for incidental moving expenses, new furniture, painting, etc. You should aim to haver 3-6 months of emergency savings tucked away after everything is paid for.

Other Key Providers
Most buyers are familiar with the role real estate agents and lenders play in the transaction, but don’t forget about the importance of working with a quality title attorney and home inspector. Your agent should be able to make a great recommendation.

How Long Will You Live There?
This is probably the most underrated conversation for buyers to have when they’re setting a budget and determining criteria. Your home-buying strategy should look very different if you’re planning to own for 3-5 years vs 10-12 years so give it serious thought and be realistic.

Deadlines and Lease Terms
Figure out if you have any strict deadlines for the move and iuf there are direct or indirect costs of buying before or after that deadline. It can be difficult in a low-inventory market to time a purchase, so make sure you’re aware of the pros and cons of purchasing before or after your deadline. If you’re renting, make sure you find out the cost of early termination or if month-to-month leasing is an option.

Reason for Your Purchase
I still haven’t met somebody who asks for a bad investment when they buy a house, everybody wants their home purchase to be a great investment, but you have to define what a great investment means to you. Does it mean your home appreciates in value well above the market over a certain period of time? If so, you’ll likely be in under-developed areas or in a house nobody else wants. Does a great investment mean you wake up every morning so happy with your home and neighborhood that the money is a secondary concern? I often remind clients that sometimes the best investment is buying a house that allows you to live there longer and eliminates one or more real estate transactions in your lifetime. In other words, the value you get out of being in a home for 10 years vs 3 years far surpasses a small increase in your budget.

I hope this list is helpful not just for local DC Metro readers, but for anybody getting started with their home search and wondering what you should know before buying a house. These are the conversations and steps I take with my clients every day to make sure they’re prepared, educated, and have the right strategy in place before we even step foot in a house together. I’m sure I left a few things off this list, but this should get you 95% of the way there. Feel free to give me a call or send me an email at Eli@EliResidential.com for the 5% I missed.