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Who pays for title insurance?

Posted by parkejo (My Page) on
Wed, Aug 20, 08 at 12:08

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!


Follow-Up Postings:

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RE: Who pays for title insurance?

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.


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RE: Who pays for title insurance?

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.


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RE: Who pays for title insurance?

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!


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RE: Who pays for title insurance?

"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.


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RE: Who pays for title insurance?

The warranty deed warrants the title.


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RE: Who pays for title insurance?

Around here the buyer pays it.


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RE: Who pays for title insurance?

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?


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RE: Who pays for title insurance?

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.


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RE: Who pays for title insurance?

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.


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RE: Who pays for title insurance?

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.


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RE: Who pays for title insurance?

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


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RE: Who pays for title insurance?

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.


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RE: Who pays for title insurance?

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.


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RE: Who pays for title insurance? More

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 Owners 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.


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RE: Who pays for title insurance?

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


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RE: Who pays for title insurance?

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.


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RE: Who pays for title insurance?

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.


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RE: Who pays for title insurance?

"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.


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RE: Who pays for title insurance?

"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.


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RE: Who pays for title insurance?

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).


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RE: Who pays for title insurance?

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.


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