The Investor’s Guide to Private Real Estate Fund Annual Reports

Between the moment a private lender approves a loan and the moment funds hit a borrower’s account, a title company handles most of the work that keeps the transaction safe. It doesn’t lend money, own property, or set the interest rate — but without it, no private real estate loan closes cleanly. Every loan LBC Capital funds passes through the same sequence: title search, escrow, insurance, and recording. Understanding what happens at each step demystifies closing day and shows the checks built into every properly structured transaction.

What a Title Company Actually Does

A title company performs four distinct jobs in a loan closing. It searches and examines the property’s ownership history for defects or competing claims. It issues title insurance — specifically a lender’s policy that guarantees the lender’s lien position. It coordinates escrow, holding funds and documents until every closing condition is satisfied. And after closing, it makes sure the new deed of trust is recorded with the county and gets the resulting documents into the lender’s hands. Each function depends on the one before it — a rushed title search undermines the insurance built on top of it, and insurance means little if the deed of trust never gets properly recorded.

The Title Search: Building the Chain of Title

Before issuing insurance, the title company examines the public record. An examiner traces ownership backward through recorded deeds, prior deeds of trust, liens, judgments, mechanic’s liens, easements, and restrictions. How far back the search goes isn’t fixed by law — 30 to 60 years is the common range for a full chain-of-title search, and the title company sets the depth based on the property’s history and the underwriting requirements of the insurer standing behind the policy. In California, each of the state’s 58 counties maintains its own recorder’s office, so the specific process and turnaround time vary somewhat by county even though the underlying legal framework is statewide.

The Preliminary Title Report

The search produces a preliminary title report: the current owner of record, every recorded encumbrance, and every exception the title company plans to carve out of its coverage. This is the document a lender’s underwriting team reviews before funding — it’s where a forgotten second mortgage, an old mechanic’s lien, or an unreleased prior deed of trust would surface before it becomes the lender’s problem.

Escrow: The Neutral Third Party

In California, escrow is handled either by the title company itself or by a separate licensed escrow company, both regulated under the state’s Escrow Law through the Department of Financial Protection and Innovation. The escrow agent holds all funds and documents until closing conditions are met, then disburses according to instructions — never before. For a private loan, that means the lender wires funds to escrow, the escrow agent confirms the title insurance is ready and the deed of trust is signed and notarized, and only then does money move: payoff to any prior lender, closing costs to vendors, net proceeds to the borrower. LBC Capital’s closings follow this same sequence — funds don’t release until every condition is independently verified, not just approved on paper.

Title Insurance: The ALTA Lender’s Policy

The policy a title company issues to a lender follows a standardized ALTA format used industry-wide, which is what lets lenders in different states compare coverage on consistent terms. An ALTA lender’s policy insures the lender’s lien position specifically — it protects the loan amount against title defects that existed but weren’t discovered before closing, not the property’s market value. It’s a one-time premium paid at closing, and coverage runs for the life of the loan (or until it’s paid off or refinanced), which is different from a homeowner’s policy that protects the buyer’s equity indefinitely.

The Settlement Statement: Who Gets What

Before or at closing, escrow prepares a full accounting of every dollar moving in the transaction — loan amount funded, origination fee, title insurance premium, escrow fee, recording fees, property tax prorations, payoffs on existing liens, and the borrower’s net proceeds. It’s worth being precise about what to call this document: for owner-occupied residential mortgages, federal law requires a specific “Closing Disclosure” governed by strict timing and format rules under TRID. Most private real estate lending — loans on investment property, fix-and-flip projects, and commercial buildings — is made for business purposes and is exempt from that requirement, so what the lender and borrower actually receive is a settlement statement or closing statement prepared by escrow. It covers the same ground and both parties still review it closely, but it isn’t the same regulated form, and calling it a “Closing Disclosure” overstates which rules actually apply. Reading that statement line by line matters — it’s where an origination fee actually gets confirmed against what the loan commitment promised, and a mismatch there needs an explanation before funds move.

Recording: When the Lien Becomes Legal

Once funds are disbursed, escrow sends the executed deed of trust to the county recorder. That moment — not the date the loan was originated or the funds were wired — is when the lender’s lien becomes legally effective and its priority date is set. California follows a race-notice rule: under Civil Code Section 1214, an unrecorded conveyance is void against a later purchaser or lender who records first in good faith. Practically, that means if two liens end up recorded on the same property, the one recorded first wins, regardless of which loan closed first in spirit. The title company’s search reduces the risk of a competing lien slipping in in the gap between the search date and the recording date, and the title insurance policy is what actually covers a lender if something does slip through.

Recording priority isn’t a technicality — it’s the entire reason a first-lien position is worth anything. If a loan ever goes into default and heads toward foreclosure, it’s the recorded deed of trust, not the signed loan agreement, that determines who gets paid first from the sale proceeds.

Post-Closing: What the Lender Keeps

After recording, the title company delivers the recorded deed of trust bearing the county’s recording stamp, the final ALTA lender’s policy effective as of the recording date, payoff confirmation letters from any prior lienholders, and a final title update confirming no new liens landed between the search and the actual recording. A lender stores these — directly or through an independent document custodian — as the permanent proof of its secured position.

Judging Title Company Quality in Private Lending

Not every title company handles a private lending closing equally well. Worth checking before a closing: is the company licensed and bonded in the state where the property sits, does it carry adequate errors-and-omissions coverage, does it have examiners who know that specific county’s recording quirks, and has it actually closed commercial deed-of-trust transactions before rather than only residential purchases. A title company that treats a private commercial closing like a routine home sale is the most common source of avoidable delay.

Frequently Asked Questions

Does the title company work for the lender or the borrower?

Neither, formally — the title company and its escrow arm are supposed to be neutral. In practice, the lender’s title insurance protects the lender’s lien position specifically, while the borrower typically pays for it as a closing cost. Both parties rely on the same underlying title search and recording process.

What happens if a title problem is discovered after closing?

This is exactly what the lender’s title insurance policy exists to cover. If a defect existed before closing but wasn’t caught — an old lien, a forged prior deed, a recording error — the title insurer is financially responsible for defending the lender’s position or covering the resulting loss, up to the policy amount.

Why does the recording date matter more than the loan closing date?

Because California’s recording statute determines lien priority by whoever records first, not by whoever funded first. Two loans can close on the same day, but if one deed of trust reaches the county recorder before the other, it takes senior position — which is why a title company’s speed and accuracy at the recording step directly protects a lender’s place in line.