Title companies important, if unseen, part of the process

When it comes to real estate transactions - and things go well - you should hardly know a title company is even involved.

“We're a very important part of the real estate transaction process,” said Randee Slings, production-operations manager at Iowa Title Co. in Cedar Rapids, “but the property owner usually has very limited access to us. We normally deal with lenders, attorneys and realtors.”

Each state handles real estate titles differently - Iowa follows the abstract and opinion system to determine clear title for a piece of real estate. Title companies do research and update real estate abstracts within the county they're located to identify challenges that could limit property use or cause financial loss.

According to Slings, before the buyer comes to the closing table, title companies generally discover problems in 1 out of every 3 real estate transactions.

“As title companies, we're the keepers of the records for real estate,” said Patrick Malone, vice president and director of business development for Peoples Abstract Co.

Peoples Abstract is part of the Title Resource Network, which has locations throughout the Midwest, including Cedar Rapids.

Although all information gathered for an abstract also exists with the county government, information there is indexed by last name. To determine the history of a piece of property, it has to be traced back through titleholder names.

Title companies, however, index by legal description so that property information can be retrieved quickly and accurately.

Regardless of whether it's a residential or commercial property, the process works like this: A piece of real estate is placed on the market, and a buyer makes an offer and signs a purchase agreement.

Before the buyer invests in the property, they need to know the status of the title and whether the person selling the property is the actual titleholder. Are there mortgages against the property? Judgments or liens? Is the zoning correct?

It's the title company's job to uncover all of this data, noted Steve Anderson, a member manager at Hawkeye Title Services in Iowa City. In the past year, his title company worked on

1,300 abstract continuations/updates and created 350 new abstracts to replace lost abstracts or for new pieces of property.

At the point of a signed purchase agreement, the title company receives a request to update the abstract. The title company receives the abstract from the titleholder - or whoever has it at the time - and the abstract is updated.

“We store 34,000 abstracts, so chances are good that we may have it,” said Slings of Iowa Title, which has locations in Linn, Polk, Dallas, Warren and Scott counties.

Several title companies also store abstracts, free of charge.

Once the real estate transaction is closed, the deed, mortgage and leases are filed, and the abstract goes back to the title company one more time for any final updates.

A title company doesn't make any sort of legal determination about a piece of property. Instead, they provide lawyers with a clear picture of the property and the titleholder.

“We do the research and send it to the attorney via an abstract. The attorney makes a legal opinion as to what needs cleared up, who holds title, and what needs to be done at the closing,” Slings said.

To update these abstracts, title company employees conduct research in a variety of places, then bring the information they find back to their offices to add to the property's legal description.

“We have an enormous database that's basically all public records in Johnson County that pertain in any way, shape or form to real estate information,” Anderson said.

Using information from public records held by the city or county recorder, treasurer, auditor, assessor and zoning, title companies update abstracts to include information about the chain of title, as well as anything that serves as a lien against the real estate - judgments against the titleholder, including claim actions, divorce actions, etc.

“Any time anything is filed with Johnson County, we add that to our database within two days so we can give an accurate reporting of anything that affects a piece of real estate,” Anderson said.

Conducting research such as this can sometimes lead to some interesting discoveries.

Slings said she's seen situations in which the person who thought he or she was the titleholder actually wasn't. Lori Fedler, a member manager at Hawkeye Title, noted that she's uncovered Indian burial sites and access easements that show where wagon trails used go cut through property.

Despite what many might think, when the economy goes south, title companies still have work to do.

“We do research for attorneys and lenders so they can perform things like foreclosure actions and bankruptcies,” Slings said.

Low-interest rates also keep title companies busy with abstract updates for refinancing.