Commercial real estate transactions are complex, involving numerous parties, significant sums of money, and legal and regulatory requirements. In this complex environment, a title company plays a crucial role in ensuring a smooth and successful transaction.
In commercial real estate transactions, a title company provides services to verify the authenticity of a property’s title and ensure the seller has the legal right to sell. To verify the property’s title, a title company thoroughly searches public records related to the property. It looks for outstanding mortgages, judgments, or other liens on the property that could cloud its title.
In this blog, we will discuss the importance of a title company in commercial real estate transactions.
The commercial real estate transaction process is complex and often comes with many unknowns. Whether you are a buyer or seller, you want to ensure your investment is safe from unforeseen issues. Thankfully, title insurance is available to help cover these concerns.
It is a form of protection that protects buyers and mortgage lenders from losses due to unforeseen issues in the title. A title insurance company searches public records to find and remedy liens, ownership disputes, and other issues that could derail the property purchase. The cost of the policy is typically a part of the total closing costs for residential and commercial properties. However, the price tag can be higher for commercial properties because these purchases are often larger financial investments than residential ones.
Unlike residential real estate transactions that involve individuals, commercial real estate purchases involve legal entities. This is a significant distinction because the risks involved in commercial purchases are much higher than those in residential transactions.
In commercial real estate transactions, the buyer and seller must work closely with a trustworthy third party who will manage the sale and ensure that all necessary documents are in order. This is called escrow.
Escrow is an important aspect of any commercial real estate sale because it protects both parties from unforeseen complications and provides accountability for the sales process. It is also beneficial when the sale needs to be completed in stages because funds can be released gradually as milestones are met.
During the course of a commercial real estate transaction, you must work with an experienced and reputable title company. They will conduct a title search to determine the current owner and identify any liens or other encumbrances.
They will also provide a preliminary title report to you and your lender. This report will include a list of liens and other encumbrances against the property.
The company will also conduct a thorough property survey. This is a necessary step in all residential and commercial real estate transactions. A title company can also look for and examine liens or judgments against the property filed by previous owners, such as unpaid mortgages or outstanding property taxes.
These items must be paid before the sale or refinance of the property. Once the company identifies these issues, they will work to resolve them. This will save you time at closing and avoid dealing with these problems later on.
As the name suggests, a title company ensures that a property’s title is free of defects or other issues that could impact the buyer’s ability to use the home. This is done through a thorough title search and property survey.
The title company will also inform the mortgage company if there are any unpaid taxes or real estate liens on the property. This is to protect the lender’s investment in the property and prevent them from losing money on their mortgage loan.
Aside from that, a title company will conduct due diligence to ensure the property is worth what a mortgage company is lending to a buyer. This can be difficult without a thorough investigation.
In addition, a title company will often hold and manage an escrow account to hold money until the closing occurs. This is a common requirement of lenders and helps ensure that the buyers have enough money for all their expenses until they close their loan.
In conclusion, a title company plays a crucial role in commercial real estate transactions. Their services ensure that the buyer receives a clear title to the property and that the transaction is completed legally and efficiently. With the potential risks involved in commercial real estate transactions, a title company’s services are essential in protecting the buyer’s investment and ensuring a successful transaction.