Hawaii Pre-Licensing National Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

A title company plays a vital role in real estate transactions primarily by conducting a title search and providing title insurance. The title search is crucial as it involves examining public records to determine the legal ownership of the property and to identify any issues that may affect the title, such as liens or encumbrances. By ensuring that the title is clear, the title company protects both the buyer and the lender from potential disputes over ownership after the sale closes.

Moreover, title insurance is important as it offers financial protection against any future claims or legal challenges related to the property’s title, covering issues that were not discovered during the title search. This insurance is typically a one-time premium paid at closing, ensuring peace of mind that if a title defect arises later, the title company will defend the title or compensate for losses.

The options related to selling the property, negotiating closing costs, or providing financing do not accurately reflect the primary responsibilities of a title company, as those tasks are typically handled by real estate agents or mortgage lenders. Understanding the specific functions of a title company is essential for anyone involved in real estate transactions, as it clarifies the importance of title integrity in the buying and selling process.