You’ve found your dream home, made an offer and applied for a mortgage. But have you given any thought to the cost of title insurance? This all-important policy usually is purchased as part of closing costs and defends buyers and lenders from future property ownership claims, surprise liens and other potentially costly complications with property titles. It can be costly, however, with the fees running about 1 percent of the loan amount. Here, RISMedia offers four ways to cut the cost of a title insurance policy.
1. Shop around for the best deal
Title insurance involves a two-part process. First, a search of a property’s title history is conducted to look for errors or problems with the deed. Then, an insurance policy is underwritten to protect the buyer if any issues are discovered. In several states, insurance providers are allowed to set their own prices, which means the insurance premiums can vary widely. Homebuyers won’t know which title companies offer the best rates unless they shop around. A good place to start comparison-shopping is the website of the American Land Title Association (alta.org), which provides a search engine based on geography. Another option is to ask an independent attorney for help in understanding local regulations, costs involved and insurance company recommendations.
2. Negotiate the add-on fees
In states where insurance is highly regulated, title insurers don’t have much wiggle room on their rates. So, homebuyers won’t find much difference in premiums from one company to another. However, in nearly all cases, extra fees are part of the transaction when you buy a title insurance policy. These add-on expenses include mail and courier charges, copy fees, and costs for searches and certificates—and these charges can be negotiable, even when the insurance premiums are not.
Experts say you often can reduce these costs simply by calling the title insurance company and asking to have some of the fees removed.
3, Ask for the ‘simultaneous issue rate’
Homebuyers purchase title insurance to protect themselves. Meanwhile, their mortgage company likely will require that a separate insurance policy be issued in the lender’s name. It is typically the borrower’s responsibility to pay for both. Although the two insurance policies are independent of one other, borrowers can buy them together and save as part of the ‘simultaneous issue rate.’ As a result, the total title cost for both policies is usually a lot less than if they were purchased independent of each other. Always be sure to ask for this discount.
4. Ask the seller to pay for your policy
When a local real estate market favors buyers over sellers, homebuyers may have the confidence to ask sellers to pay for title insurance. That used to be an unusual request; however, in a buyer’s market, sellers are motivated and may be more willing to negotiate. However, don’t lose sight of the overall goal, which is to close the sale. There are many other concessions buyers can ask for in a deal—such as a reduced purchase price or a home warranty—that save even more money than having the seller pay for title insurance.