Title Insurance

Title insurance comes in two common figures: Owner’s title insurance and lender’s title insurance. Owner’s title insurance is given for a one-time fee, when the property is purchased. Owner’s title insurance lasts as long as you or your heirs have ownership in the property. The reasoning behind the purchase of owner’s title insurance is that the owner will be protected should title issues arise, that may have not been looked at in the original title search. Under these policies, any future legal costs that might come up are covered.

Extended owner’s coverage, as the name indicates, provides additional title insurance coverage. An extended title insurance policy will often protect against such additional defects as building encroachment, property tax liens, subdivision violations, and more. This self-protecting form of title insurance could cost you an additional 30% to 50% above a common policy. It may seem pricey, but extended coverage is usually the prudent way to go, especially when legal issues might be a concern, such as a builder bankruptcy.

Lenders title insurance, which is also referred to as a Loan Policy, is required by your lender when financing a home. Should a problem with the title emerge, the lender is protected. You pay up front and it lasts until the mortgage is paid off. Similar to private mortgage insurance, lenders title insurance is created to protect the lender, and not necessarily you.

Title insurance is purchased with a one-time premium due upon close of escrow. Who will pay for the home title insurance policy is decided by your county. In some cases the buyer will pay while in others the seller pays. Sellers and buyers often devide the cost within a buyer’s policy. Whereas, the lender’s policy is most often paid by the buyer. According to bankrate.com, the U.S. average title insurance cost adds up to $663.

The high level of referral fees accepted within the industry has had its share of controversy over recent years. The typical consumer really has no idea where to begin when seeking out a title insurance agent, so it is common for lenders, brokers and the like to introduce these relationships. These introductory referral costs are illegal, according to the Real Estate Settlements and Procedures Act (RESPA), but due to regulatory difficulties such relationships are still around in today’s market. A good solution to this problem would be to require lenders to buy their own title insurance policies, as they’re the ones that are really being insured. Though, it’s probably not likely. If you’re looking for the best title insurance rate it could be worthwhile to search out a competitive title insurance quote, though some states actually set the title insurance rates, so you will want to check with your specific state.

A common misconception is that new homeowners do not need real estate title insurance. This is not the case, as they might be the first owners of the home, they are not likely the first owners of the property. The property could still have defective title or liens from previous ownership, which could cause issues. Also, there is the possibility that the builder has liens against him and the property, due to an unsatisfied subcontractor, or the like. Home property title insurance protects in these circumstances as well.

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