Who pays for title insurance?

parkejoAugust 20, 2008

We are closing on the house we are selling tomorrow and going over the HUD statement. It says that we are paying for the title insurance. Does the seller normally pay or is it by state? The reason I ask is that 4 years ago when we sold our last house the buyer was responsible for buying title insurance. This is in the same state. Insight in this topic would be much appreciated!

Thank you for reporting this comment. Undo
frog_hopper

It may vary by location as to what is customary. Here, we have purchased it as buyers, but not as sellers. Since title insurance is optional and protects the buyer and/or lender, it would seem fair that the buyer should pay for it, in my opinion.

Like just about everything else, who pays is negotiable.

    Bookmark   August 20, 2008 at 12:15PM
Thank you for reporting this comment. Undo
lyfia

In TX it is negotiable, but common that seller pays it. Here it is stipulated in the contract.

I'm guessing you can find it in your contract too.

    Bookmark   August 20, 2008 at 12:46PM
Thank you for reporting this comment. Undo
parkejo

I called the title insurance company today and they said in the area the seller pays. I guess we will have to suck it up. It has been about 4 years since we bought this house. I started reading up on title insurance and I guess we are at least eligible for a reissue rate if we provide our current policy. I think it might save us a couple hundred dollars.

Every little bit helps!

    Bookmark   August 20, 2008 at 12:53PM
Thank you for reporting this comment. Undo
dbabin

"Since title insurance is optional and protects the buyer and/or lender, it would seem fair that the buyer should pay for it, in my opinion"

Well, with my buyer hat on, the seller should not be selling something that he is not willing to warrant title on and part and parcel of that is backing that up with a title policy if that is customary in the location of the sale.

For a lender title policy, no doubt that it should be on buyer's dime as the buyer made the decision to finance the property, and thus need the lender policy.

    Bookmark   August 21, 2008 at 12:09AM
Thank you for reporting this comment. Undo
frog_hopper

The warranty deed warrants the title.

    Bookmark   August 21, 2008 at 6:00AM
Thank you for reporting this comment. Undo
sue36

Around here the buyer pays it.

    Bookmark   August 21, 2008 at 10:55PM
Thank you for reporting this comment. Undo
dbabin

A warranty deed from a seller that dies, goes bankrupt, is judgment proof or does not have sufficient assets equal to the value of the title conveyed is a useless piece of paper. What good is a successful lawsuit if it won't cure the title defect?

    Bookmark   August 22, 2008 at 3:04AM
Thank you for reporting this comment. Undo
justnotmartha

The seller pays for and provides for their buyer an Owner's Policy which insures the buyer that, at the moment the deed is recorded, they are receiving the property free and clear of all liens. The buyer, if they are getting a loan, provides at their expense a simultaneous lender's policy that insures their lender they are the first and only lien on the property. This is the same policy that is issued to a lender for a refinance.

    Bookmark   August 22, 2008 at 10:25PM
Thank you for reporting this comment. Undo
brickeyee

Having the buyer purchase the title policy gives them a direct contract with the insurer.
It means you can go after them directly if an issue arises.

The same problem can occur with any seller paid for requirement.
The buyer now has no direct relationship with the provider, but will have to pursue the seller, who then may pursue the provider.

I want hooks directly into anyone that affects my ownership or the condition of the property.

    Bookmark   August 24, 2008 at 9:12AM
Thank you for reporting this comment. Undo
justnotmartha

Title insurance does not work in that manner. A claim against the owner's policy would be made by the new buyer to the insurer, who could, if applicable, go after the seller for their own reimbursement. It makes no difference who pays for it, the policy is what the policy is. An owner's policy protect the person who is was issued for - the new buyer.

    Bookmark   August 24, 2008 at 11:38PM
Thank you for reporting this comment. Undo
terriks

justnotmartha is correct. In most lender financed transactions two policies are purchased. The seller pays for the "Owner's" policy, and the buyer pays for the "Lender's" policy.

Here is a link that might be useful: Title Insurance Q & A

    Bookmark   August 25, 2008 at 10:47AM
Thank you for reporting this comment. Undo
brickeyee

So title insurance is different than every other contractual vehicle in the US?

While the title insurance company will generally stand behind the policy, like any other contract vehicle you are in a stronger position if YOU paid for the service.

Most title insurance companies make a large amount of money since actual title defects are relatively rare.

When a serious one does occur the title insurance company will weight the costs of perfecting the title against paying off the policy.

    Bookmark   August 25, 2008 at 5:59PM
Thank you for reporting this comment. Undo
frog_hopper

The seller pays for the "Owner's" policy, and the buyer pays for the "Lender's" policy.

Blanket statements like that are very misleading. Conventions vary from community to community, and unless it is prescribed by law, everything in a real estate contract is negotiable.

We have been involved as buyers and/or sellers in four pieces of property (three different contracts) in the last year. In every case, the buyers purchased their own title insurance, except for one piece for which the buyers didn't want title insurance.

    Bookmark   August 25, 2008 at 9:21PM
Thank you for reporting this comment. Undo
frog_hopper

This is a direct quote from a PDF in the link provided in terriks's post.

Melanie and Bill Murphy, grudgingly paid out $950.00 to purchase OwnerÂs title insurance on a
$250,000.00 home they were buying in Richmond, Virginia.

So even the example shows a case of the buyers purchasing an owner's title policy.

    Bookmark   August 25, 2008 at 9:30PM
Thank you for reporting this comment. Undo
terriks

Geez, picky, picky. In my post I did say "in most lender financed transactions", not "ALL lender financed transactions".

    Bookmark   August 26, 2008 at 9:21AM
Thank you for reporting this comment. Undo
frog_hopper

You also said justnotmartha is correct. She posted:

The seller pays for and provides for their buyer an Owner's Policy which insures the buyer that, at the moment the deed is recorded, they are receiving the property free and clear of all liens. The buyer, if they are getting a loan, provides at their expense a simultaneous lender's policy that insures their lender they are the first and only lien on the property. This is the same policy that is issued to a lender for a refinance.

The rest of us are saying that isn't always the case. It varies.

    Bookmark   August 26, 2008 at 1:52PM
Thank you for reporting this comment. Undo
brickeyee

The other weakness of many title insurance policies is the payoff is limited to the value when the policy was issued.

You purchase a house for $200,000.
The lender policy covers the mortgage of $160,000.
The owners policy covers the remaining $40,000.
Ten years later the property is worth $300,000.

A title problem arises.
The title insurance company is on the hook for the the mortgage balance after 10 years, and the additional $40,000 owners policy.

Add to that legal costs of defending the title, and they may just pay off.
You get $40,000, the lender gets the mortgage balance, and you no longer own anything.
Tough luck about the increase in value.

Here is your $40,000.
Go find another house.

There are title policies that increase the payoff, but like everything else they cost more for the additional risk.

    Bookmark   August 26, 2008 at 7:31PM
Thank you for reporting this comment. Undo
berniek

"There are title policies that increase the payoff, but like everything else they cost more for the additional risk."

How true and the best point made sofar.
Title insurance covers the original purchase value, not todays market value.
To get todays value, owners need to update their title policy, just like the old home owners insurance policy.

    Bookmark   August 26, 2008 at 8:21PM
Thank you for reporting this comment. Undo
justnotmartha

"You purchase a house for $200,000.
The lender policy covers the mortgage of $160,000.
The owners policy covers the remaining $40,000.
Ten years later the property is worth $300,000."

This scenario is incorrect in that there would, in most cases, be two policies issued. Each is paid out on separately to the person making the claim. An owner's policy for $200k affords the claimant $200k in recovery. A claim against the lender's policy would not affect that.

    Bookmark   September 2, 2008 at 2:31AM
Thank you for reporting this comment. Undo
brickeyee

The owners policy may not be written or the total value of the property, there is a reason they are cheaper.

The insurance company is NOT going to pay off twice on the same property (once to the mortgage holder and again to the owner).

    Bookmark   September 2, 2008 at 8:15PM
Thank you for reporting this comment. Undo
justnotmartha

Unfortunately, I have to disagree. Two payouts can, and have, happened on the same property with simultaneously issued lender/owner policies. The lender's policy is the 'cheaper' here, as it is issued simo. with the owners. This could very from state to state, though.

    Bookmark   September 3, 2008 at 2:01AM
Sign Up to comment
More Discussions
How to prepare for refi appraisal
Refinancing my home. What's the best way to prepare...
quercus2
Moving to make room for mom?
My mother is getting to the age where she should not...
paintedpeggies
How soon is "too soon" to select a realtor?
Not planning to sell until about this time next year....
lori_inthenw_gw
"discount" for all-cash, no contingency offers?
I understand that the answer "depends". However,...
nosoccermom
Why would nosey realtor say these things?
It is clear my house lacks a wow factor. I over de-cluttered...
belfastbound
People viewed this after searching for:
© 2015 Houzz Inc. Houzz® The new way to design your home™