Title insurance is insurance against loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. Typically the real property interests insured are fee simple ownership or a mortgage.
Standardized forms of title insurance exist for owners and lenders. The lender’s policies include a form specifically for construction loans, though this is rarely used today.
The owner’s policy insures a purchaser that the title to the property is vested in that purchaser and that it is free from all defects, liens and encumbrances except those which are listed as exceptions in the policy or are excluded from the scope of the policy’s coverage. It also covers losses and damages suffered if the title is unmarketable
The policy also provides coverage for loss if there is no right of access to the land.
The Lender’s policy is sometimes called a loan policy and it is issued only to mortgage lenders. Generally speaking, it follows the assignment of the mortgage loan, meaning that the policy benefits the purchaser of the loan if the loan is sold.
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Who pay for Title insurance?
Title insurance costs vary greatly, depending upon the geographic area in which your home is located, the home’s purchase price, and the type of coverage that you get. In many states it is customary for the Seller to provide the Buyer with an owner’s policy of title insurance. It is then the responsibility of the Buyer to purchase the policy of title insurance covering the lender. Customarily, the two policies of title insurance are issued “simultaneously” by the same title company and the Buyer profits from obtaining a discounted or “simultaneous issue” rate on the lender’s policy.
The payment for title insurance is a negotiable item. Regardless of local custom, if you’re in a strong buyer’s market, the sellers may offer (or you could ask them) to pay your title insurance costs in order to put the deal together. If, conversely, you’re bidding against several other buyers for a particularly desirable house, you’d be smart to sweeten your offer by paying for title insurance, even though local custom prescribes that sellers pay for it.
When purchasing property from a builder, you may find that the Builder is paying a special rate of only $25-$35.00 for the Owner’s Policy of title insurance and you will be paying a full non-discounted rate for your Lender’s policy. This is a common practice in many states in new construction.
You might want to try negotiating with the Builder on the payment of title insurance fees. Ask what rate you will be paying for the lender’s policy of title insurance. If you are being required to pay the full, non-discounted rate, you may be able to negotiate and arrange for the Builder to pay for a portion of this higher rate.
Although many builders may insist that it is customary for the Buyer to pay for all title insurance closing costs in new construction, keep in mind that title insurance fees are negotiable. Be sure to make your negotiations with the Builder clear before you sign the Purchase Agreement. |
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