What Are Title Insurance Policies? And How Can You Save Money When Buying One

I recently met with a potential seller who had a great question regarding title insurance policies.  When they originally bought their home, they purchased a title insurance policy.  If they sell their house, they’ll purchase another title policy.  They wanted to know why they had to pay for a title policy when they bought their home and then again when they sold it?  To answer this, we need to define the two types of title policies.

Owners Title Policy

In Santa Clara County it is customary for the seller to pay a one time premium for the new buyer’s title policy.  The amount of the title policy is based on the sales price of the property.  The owner’s policy indemnifies the buyer against loss and provides a defense in the event of claims against the buyer.  Coverage last as long as the buyer remains on title.

The Owner’s Title Policy protects the new homeowner (buyer) from:

1. Fraud associated with the title ownership
2. Liens existing against the property at the time the policy was issued
3. Mistakes in the public record that are not caught before the sale
4. Inaccurate or conflicting wills and trusts related to the title
5. Missing heirs who suddenly appear and claim to own the property
6. Forged or misfiled deeds and other documents
7. Errors or flaws in the title that are not discovered in the initial title examination

Lender’s Title Policy

In Santa Clara county it is customary for the buyer to the pay for title insurance premium for the Lender’s policy on the home loan.  The amount of the policy is based on the amount of the loan, not the purchase price of the property and covers the lender’s interest in the property if any of the above (1-7) occur.

Click on Title Wizard’s “who pays the costs” to find out who pays for title costs (based on the county where the subject property is located).

Comparison Shopping for Title and Escrow Services

There used to be several title companies in Los Altos, but with the downturn in the real estate market several offices consolidated into other locations or closed business altogether.  Consumers can ask their real estate professional for a reputable title and escrow company and/or go to Title Wizard to compare title and escrow fees and services.

Lastly, below are tips that the Title Wizard web site recommends when comparing title and escrow fees, policies, coverages etc.

• Always ask about any limits in coverage and review all the services that are included in a policy. The least expensive policy may not cover all your needs.
• Always check the amount on the policy and be sure that coverage begins on the day you close the transaction and take ownership.
• You may be able to save money based on: the type of property you are buying (e.g., single family house, condominium), the age of the property, how recently the policy was issued and whether you have a history with the insurer.
• Be sure the policy describes all the property that is being purchased.
• If you are refinancing, your bank or other financial institution will most likely require you to buy lender’s insurance. Ask your title company about any special discounts for “reissuing” a lender’s policy.
• If you are buying a home that was built recently, be sure that your title policy covers claims made by contractors who may not have been paid for supplies or services.

Should you have any real estate questions, please feel free to contact me directly at 650 917-4250 for a private conversation.