Title company

Key Takeaways

• A title company does two jobs: it examines the public record for the property being sold and reports what it finds, then it insures against covered defects the search did not resolve.
• In Washington, title insurers are regulated by the state insurance commissioner under chapter 48.29 RCW, not by the Department of Licensing that licenses brokers.
• RCW 48.29.160 requires a title insurance agent to own or lease and maintain a complete set of tract indexes for every county where it does business.
• RCW 48.29.210 bars a title company from giving a fee, kickback, or other thing of value to induce the placement or referral of title insurance business.

What It Means

A title company does two jobs that students tend to lump together. The first is investigative. It searches the public records for the parcel being sold, assembles what those records show about the Title, the liens, the easements, and any competing claims, and reports the result before closing. The second is insurance. It issues a policy that pays covered losses if a defect surfaces after the sale.

The order of those two jobs is the whole point. A title company is not pricing an unknown risk the way an auto insurer does. It reads the record first, then insures what is left, and it lists everything it will not stand behind as exceptions. When a title company declines to insure over something, the refusal is itself useful information: the record shows a problem serious enough that a company in the business of accepting title risk will not accept this one.

Across much of Washington the same company also closes the transaction. It holds the funds, prepares the documents, and gets the deed recorded, which is why buyers meet it in two roles at once. The coverage it sells is Title Insurance, written as separate owner and lender policies.

How It Works in Washington

In Washington, a title company is an insurance company first. Chapter 48.29 RCW governs title insurers, and RCW 48.29.010 states that the chapter relates only to title insurers for real property, while carving out persons who prepare and issue abstracts of title and certify their correctness so long as they do not guarantee or insure the titles. Certificates of authority, rate filings, and agent licensing all run through the state insurance commissioner rather than through the Department of Licensing.

Two requirements shape how the work gets done day to day. RCW 48.29.160 provides that to be licensed as an agent of a title insurer, the applicant must own or lease and maintain a complete set of tract indexes of the county or counties in which the agent will do business. That privately maintained index, usually called the title plant, is what lets an examiner trace a parcel fast enough to produce a Title Insurance Commitment on a normal closing timeline. RCW 48.29.190 then governs the Escrow side of the business: a title company handling closings must keep adequate records of all transactions, including an itemization of receipts and disbursements, and must keep client funds in a separate escrow account at a recognized Washington state depositary, segregated from the company's own funds and deposited no later than the first banking day following receipt.

RCW 48.29.210 is the section brokers get tested on. A title company may not give any fee, kickback, or other thing of value as an inducement for placing or referring title insurance business, and may not give anything of value to a person in a position to refer or influence the referral of that business except as the commissioner's rules permit.

Example

Rosa is buying a Tacoma duplex from Ken for $529,000. Cascade Title runs the record search from its county tract index and issues a commitment two weeks before closing. The commitment lists two exceptions: a utility easement recorded in 1987, and an open $12,400 judgment lien docketed against a person with the same name as Ken.

Cascade will not insure over the lien until the identity question is settled, so escrow is instructed to hold $12,400 of Ken's proceeds at closing. Three days later the examiner confirms the judgment belongs to a different person with the same name, the exception comes off the commitment, and the $12,400 is released to Ken with the rest of his money. Rosa's owner's policy issues for the full $529,000 purchase price.

The easement stays as an exception because it is a real recorded interest, not a mistake. Rosa's agent had also mentioned that Cascade offers a $50 gift card for every closing sent its way. That offer is the part of this transaction that would draw a regulator's attention, because RCW 48.29.210 prohibits giving a thing of value to induce the referral of title insurance business.

Common Mistakes and Exam Traps

• A title company is not the same thing as title. Title is the ownership; the title company is the business that examines and insures it.
• Examining and insuring are separate services. A search report tells the buyer what the record shows, while the policy is what pays if something the record showed was missed.
• In Washington, title companies answer to the state insurance commissioner under chapter 48.29 RCW. The Department of Licensing regulates brokers and firms, not title insurers.
• Referral gifts are not a gray area. RCW 48.29.210 prohibits giving a fee, kickback, or other thing of value to induce the placement or referral of title insurance business, so a broker cannot be rewarded for steering closings.