Title insurance is a form of indemnity insurance designed to protect homeowners from financial loss and any legal expenses that arise from a claim against a property from before it was purchased. These claims may arise because the previous owner neglected to pay taxes or because a contractor says he did not receive payment for work completed on the home (mechanics liens), for example. Therefore, it is different from other types of insurance because it protects you from incidents that occurred in the past rather than future events.
Other common examples of claims that could potentially arise from before a property was purchased include disagreements over property lines, disputes over whether the seller had the proper right to sell the home, and discovery of undisclosed liens, encumbrances, or lawsuits against the property. Previously undisclosed heirs to a property may also cause a title to be deemed defective. A title claim may occur several months or even years following the purchase of your home, so it’s important to always be protected. Title insurance is also just a one-time payment made at closing, rather than a premium that is paid monthly.
Who Is Responsible For Paying For Owner’s Title Insurance?
With regards to owner’s title insurance, the seller of the policy will typically pay the costs issued to the new homeowner. Mortgage lenders are also required to have title insurance, however. The homeowner generally pays for the lender’s policy. Additionally, if you are the homeowner, your escrow funds ultimately pay for both policies.
The reality is that there are often several factors that determine who pays for owner’s title insurance. Here is a close look at three of these factors.
Type Of Market
If you are seeking to purchase a property in a seller’s market, you will likely be responsible for paying for owner’s title insurance. In real estate terms, a “seller’s market” is one that is characterized by more buyers than sellers (high demand/low supply). Since the summer, many parts of the United States have become seller’s markets amid the COVID-19 pandemic, as home sales have soared and bidding wars among homebuyers have become more intense. In a seller’s market, sellers possess substantial pricing power.
Environment Where Home Is Located
The answer to the question, “who pays for owner’s title insurance?” varies by state and, in certain cases, from one county to the next. In Virginia, for example, the homebuyer is responsible for owner’s title insurance, while survey expenses are negotiable. In states like Florida and Michigan, the seller pays for title insurance and in Nebraska and South Dakota, this payment is divided equally between the buyer and the seller. Average premiums for title insurance also vary by state, as do averages for other types of closing costs. An experienced real estate agent can provide you with more detailed information on this subject.
The question of who pays for owner’s title insurance may also be settled upfront in a contract between the homebuyer and the seller. This agreement may also specify how and when the homeowner should pay for other fees upon closing. Sellers will often enlist the help of a real estate agent to create a purchase agreement. This type of professional, along with a title agent, can help minimize the risk of lawsuits and other legal disputes in the future. Fees are typically included in the creation of such an agreement, although they may also be included in the seller’s commission fee.
The cost of title insurance varies from one state to the next. However, research website CourtHouseDirect.com notes that you may expect to pay between $1,000 and $4,000 for this type of insurance.
Work With Our Experienced Title Insurance Professionals
Reach out to the experienced professionals at Mathis Title Company in Fairfax, Virginia for more information on who is responsible for paying owner’s title insurance. We provide high-quality legal advice to homeowners located throughout Fairfax County.
During the sale and purchase of a home, our team will hold the funds being transferred in an escrow account before title transfer and closing. After the title order has been approved, we will begin a title search to ensure a clean title transfer. We work with several trusted underwriting companies as part of this process. We offer both basic and extended owner’s policies.
The team at Mathis Title includes attorney Robin Mathis, who has more than 35 years of experience in real estate settlement services, and title agent Ann Andreatos, who has 14 years of experience. Our extensive legal background will allow us to provide you with high-quality assistance.