24 Aug The Scoop on Title Insurance

Title insurance is something most people encounter only once or twice in their lifetime.  This mysterious entity, title insurance is frequently misunderstood. Do you really need to have this insurance? What does it do for me?  MASH Realty Services is here to give you the scoop on title insurance, and help shed light on this elusive industry.

Title Insurance expert Jonathan Philips answers some of the most common questions.

As a licensed real estate agent and broker for over 10 years, Jonathan Philips is no stranger to title insurance.  Prior to opening and running his successful real estate brokerage, Jonathan began his career at First Coast Title Services, Inc., his father’s business, which has been a staple in Jacksonville for over 25 years.

A “Cliffs Notes” Version of Title Insurance

As Jonathan explains, title insurance basically means you are paying someone to run a search, to make sure the property you are about to buy is only owned by the people you are buying it from.  It ensures that no one else has any rights to the property.

A title search also digs up any issues that could be of concern before those issues become yours.  For example, a survey (drawing of the property lines) may show that the property you are trying to buy does not actually have the backyard you thought it did.  Perhaps it will uncover an easement (example: for utilities that cannot be built upon) or an encroachment (part of a neighboring property that crosses the boundary line onto your property – or vice versa).  It may seem really nice of your neighbor to build their pool on your property, but it will cause big problems when one of you wants to sell.

The goal of title insurance is to make you aware of any issues before you buy a property.  It can take some time for the process to happen, but it is well worth the wait to buy the property free and clear so you don’t have to worry.

Am I required to have title insurance?

If you are borrowing money, lenders require you to have title insurance.  If you are purchasing a property with cash, it is not required, but highly recommended.

What happens if a Title Issue is Found?

If an issue (or “cloud” on title) is discovered, the first piece of advice is “Don’t Panic! Listen to your title insurance professionals and many times these things can be resolved.”  The process of closing will most likely be delayed, if you still want to proceed, but sometimes all it means is that a signature is needed to free something up.  It may have been a clerical mistake from another agency.  Or it could, in fact, be a bigger issue which causes you to rethink the whole purchase.  Either way, it is best to have the knowledge up front.

What if I buy the property WITHOUT Title Insurance and find an issue?

If you buy property without title insurance and someone else has rights to the property, you’re in a bad situation.  Jonathan’s advice, “Hire a real estate attorney.”

What if I buy property WITH Title Insurance and later find an issue.

You’re in luck!  That’s what title insurance is for.  First, having purchased title insurance to begin with, the chances of this occurring is very slim.  Secondly, there is now someone for you to go back to who will figure out what the issue is and how to resolve it.

Do I get to choose the Title Insurance Company?

Whichever party pays for the title insurance policy gets to choose the company.  Typically, this tends to be the seller, but it is not always the case.  Many times, realtors have companies they like to work with, but that does not mean you are required to use their agency.  It’s o.k to shop around.

How much does title insurance cost?

Jonathan reminds you to be cautious when calling and asking, “What is your Closing Fee?”  Many agencies will offer a fee that seems to be a great deal, but “title services” are a combination of many fees, and a seemingly lower fee up front may actually end up costing you more because they only quoted you the one fee you asked for.  When shopping for rates, ask for the following:

• Title Search and Examination Fee
• Document Preparation Fee
• Closing Fee

Some agencies include all these items in their “Title Services” fee, which will make their rate appear higher, when in fact it is really the lower cost choice. You must clarify that they lumped all of the above fees into one package.

Additionally, there will be a title insurance policy premium, whose price is set by the state (promulgated).

Last, there will be wire fees and courier fees, which should be the actual cost of those services. Some title companies include a couple of wire fees and courier fees in their “title services” fee because it is very rare to not have wire fees or overnight delivery charges.

Are there any title insurance discounts?

There are two possible credits when purchasing title insurance:  Re-issue Credit and Substitution Credit.

Re-issue Credit is given when you sell your current home within 3 years of purchasing it.  The discount is based on the amount of your prior policy.  You do not need to go through the same title insurance company as before. All you do is simply provide your Owner’s Title Insurance Policy to the title company handling the sale of your home.
Jonathan’s pro-tip:  You can also receive this credit anytime you refinance for as long as you own your home.

Substitution Credit is given when you refinance your mortgage using the same lender, or for loan amounts exceeding $250,000 with any lender.

Ask MASH Realty Services if you have questions about taking advantage of these credits.

Need more info?

We hope this helped you understand tittle insurance and the importance of it when purchasing property.
If you have other questions, reach out to our expert Jonathan and he is happy to share his knowledge!