Understanding the Role of Title Agents and Title Companies in Florida

An Introduction to Understanding the Role of Title Companies in Florida

In Florida, title companies and title agents play a critical role in facilitating real estate transactions.

The following information provides an outline of what title companies and title agents do, how they operate within the legal framework, and why their services are so important to the real estate industry.

What is a Title Company and Title Agent?

A title company provides services related to examining and insuring the title to real estate property – whether it’s a residential or commercial closing.

A title agent, sometimes referred to as a title examiner or title officer, is the designated person at the title company who researches the title record and focuses on the legal aspects of the property.

In Florida, Attorneys do not require additional certification to provide title agent services. However, non-attorney title agents must hold a license issued by the state of Florida to perform their duties on behalf of the title company.

The main function of the title company or title agent is to perform a title search and examination thereof, procure title insurance and render closing services for a real estate transaction.

Essentially, their role is to ensure that the title to real estate property is transferred from the seller to the buyer effectively, validly and free of any encumbrances.

Typical Roles of Title Companies and Title Agents

What is a Title Search and Examination?

Title searches and the examination of the results is the main function of a title company and title agent. This process involves an in-depth search and review of public records to verify the legal ownership of the real property and to identify any encumbrances, liens or valid claims that may affect a buyer’s interest in the property.

The steps involved in the title search and examination process are as follows:

Chain of Title: Title companies must establish the chain of title of the property to ensure that there are no “breaks” in ownership of the property and that the current seller has clear title and the right to transfer the property.

Lien/Encumbrance Search: Thereafter, the title company identifies any outstanding liens, such as mortgages the need to be paid off, tax liens, or judgments against the property or seller. These encumbrances will need to be addressed prior to the property being transferred/sold to the buyer.

Easements/Permits/Restrictions: The final portion of the title company’s task is to review the title/lien search for any easements, which are rights of way granted to 3^rd parties to use the property, or restrictions that will impact the use of the property. Title companies sometimes also identify any open or outstanding permits on the property.

What is Issuance of Title Insurance?

After the title search is completed and any pending issues, such as lines or outstanding mortgages, are addressed then the title company and title agent issue the title insurance policy during or shortly after the closing. It offers financial protection and security to owners and lenders that will be compensated for losses due to title defects. In Florida, there are two main types of title insurance policies – owner’s title insurance and lender’s title insurance.

Owner’s title insurance protects the buyer in the real estate transaction against future claims or disputes over ownership that arose prior to the transaction itself. This policy is paid for one time at closing and then remains effective for as long as the buyer (or their heirs, in most cases) own the property.

Lender’s title insurance protects the lender or mortgagee’s financial interest in the property. Almost all lenders will require lender’s title insurance as a condition to lending money or approving a loan. Similarly to the owner’s policy, it is paid for at closing, but it only lasts until the loan/mortgage is paid off.

What are Closing Services?

The final stage of a real estate transaction is the closing process which is handled by the title company and its title agent. During the closing process, the title company prepares all the necessary documents, which usually includes the transfer deed, the settlement statement and loan documents for financed purchases.

The title company also serves as a fiduciary and holds and disburses funds pursuant to the terms of the governing purchase agreement. This step includes not only collecting purchase funds from the buyer or lender, but also paying all other parties such as the seller, existing mortgage payoffs, lien/title search companies, etc.

Coordinating with both the seller and buyer, along with their respective realtors, and the lender is oftentimes challenging when trying to ensure a smooth and timely closing.

However, it’s a pivotal stage in the closing process and requires substantial efforts behind the scenes by the title company and the title agent.

Subsequent to the signing of all documents to confirm the closing, the title company must submit documents for recording with the county in which the property is located. In Florida, deeds must be recorded in order to be valid against creditors and subsequent purchasers. As a result, it is important that the deed is recorded as soon as possible after the closing.

Licensing for Title Agents in Florida

Title agents and title companies in Florida are governed by state laws and administrative orders and is overseen by the Florida Department of Financial Services which supervises the licensing and regulation of title agents.

While attorneys in Florida may serve as title agents, non-attorney title agents must meet several requirements to become licensed within the state. These requirements include:

• Completion of pre-licensing education
• Passing the Florida Title Insurance Agent Examination
• Undergoing and passing a criminal background check
• Submission of an application to the Florida Department of Financial Services, which includes submission of proof of completion of the prior items

After becoming licenses, title agents must complete continuing education requirements to maintain the validity of their license. They are also required to stay updated on changes in the Florid laws and regulations regarding title insurance.

Regulatory Compliance

In addition to becoming licensed and completing continuing education courses, title companies and title agents must comply with certain Florida state regulations such as (1) protecting the interest of the buyers in real estate transactions by ensuring and promoting transparency, (2) management of escrow accounts to prevent fraud or misappropriation of funds, (3) maintaining accurate records of all transactions handled by the title company.

Failing to comply with these ongoing requirements may result in adverse disciplinary actions such as fines being imposed or even the revocation of the company’s or agent’s licenses.

Why are title companies and title agents crucial in a real estate transaction?

The main purpose of a title company or title agent is to ensure that the title being transferred to a buyer is free and clear. This is very important for both the buyers and the lenders to avoid potential financial losses.

In the event a claim does arise, the title insurance that is issued by the company and agent, provides financial protection to the buyer or lender. Without this protection, each real estate transaction could potentially pose significant financial risks to lenders and buyers, thereby crippling real estate markets. Title insurance policies usually cover legal fees, settlement costs and potential losses, which provides a sense of security to all involved.

Real estate transactions are inherently complex and may include coordinating amongst several parties, various documents, and adhering to any legal requirements. Title companies and title agents help to streamline the process in efforts to avoid delays and to make sure the transaction is completed timely and accurately.

Conclusions on Title Companies in Florida

In Florida title companies and title agents are indispensable to the real estate market. Their roles are expansive and important, and they ensure that every buyer and seller is confident and secure at the conclusion of every transaction.

Whether dealing with first-time home buyers, experienced investors, or those seeking to secure a mortgage, engaging a reputable title company and licensed title agent is crucial. Understanding the role of a title company and title agent helps buyers and sellers navigate the complexities of their role in any given real estate transaction. To learn more about how we may be able to assist with your real estate transaction needs, contact us to speak with our experienced professionals.