Owner’s title insurance refers to a policy that safeguards the interests of owner in cases related to the title of a house. These issues may include forgery, deed errors, encroachments, liens or lawsuits, etc.
There are two major categories of Title Insurance:
- Owner’s Title Insurance: A homeowner’s title insurance safeguards the buyer against any property title-related issues.
- Lender’s Title Insurance: A lender’s title insurance policy protects the mortgages lenders against any property title defects.
Want To Know More? Here’s everything you need to know about Insurance Titles.
What is Owner’s Title Insurance?
An owner’s title insurance is a policy protecting the buyer and his transactions from any property-related issues.
It covers cases of lawsuits against the owner by a third-party entity, claiming rights to the house. The policy is not mandatory, but is highly recommended.
The policy remains valid until an individual or his heirs own the property. The type of coverage can either be standard or extended/ enhanced.
- Standard policy: It provides protection to the new homeowner from claims to the title, liens or lawsuits, frauds from policy, from third-party intruders.
- Extended or Enhanced policy: This policy provides all the standard coverage with additional perks of protection. They include unrecorded liens such as estate tax liens, survey, and boundary questions, post-policy forgery and frauds, etc.
All policies could differ with respect to title companies, but they follow a similar set of rules.
What Does an Owner’s Title Insurance Cover?
The policy of title insurance for homeowners generally covers the following issues:
- Errors in Deed: Small errors or mistakes in legal name and other details can render the ownership as unclear. It also flags the whole document as a false deed.
- Forgery: Forged signatures and altering other significant details of the property can generally prove threatful to the whole deed.
- Encroachments: Any irregularity in terms of boundary trespassing or fencing disputes or outbuilding by a third-party,threatening the owner’s rights to the property.
- Liens or Lawsuits: These are legal statements filed against the property of which the new homeowner might be unaware of. These may possibly include evasion of property taxes, fines or debts directly connected with the house by its previous owners.
- Undisclosed Heirs: Someone else that may have not disclosed their identity, claiming direct rights to one’s property, for eg. a Utility Company. They remain hidden from the new buyers up until they own the property.
In such cases, a third-party entity has the motive of claiming direct rights to the newly brought property against the new owners.
Difference Between Owner’s and Lender’s Title Insurance
|Owner’s Title Insurance||Lender’s Title Insurance|
|The policy intends to protect the buyers.||This policy protects the lenders.|
|It is not mandatory.||It is mandatory for the purchase of a property via a mortgage loan.|
|The coverage may differ based on its different types and packages.||The lender’s title insurance policy’s coverage decreases as the loan is paid back.|
|It remains functional for the owner as well as his heirs.||Its tenure is depleted as soon as the loan ends.|
Who Pays Owner’s Title Insurance?
The owner is generally the person obliged to pay for the owner’s title policy. The title insurance as well as that of other typical closing costs fees are negotiable but vary depending on different states.
In some states, sellers may also be involved in making payments for lenders’ title insurance. For example, the buyer pays for title insurance in Virginia, while in Nebraska and South Dakota, this payment is divided equally between the buyer and seller.
👉 Who Pays for the Closing Costs: Read further to know who pays for the closing costs.
How Much Is Owner’s Title Insurance?
The owner’s title policy generally costs up to 0.4%-0.5% of the total sale price of the property. The average cost of the title insurance which includes the owner’s, the lender’s and the title search fees constitutes around 1% to 1.2% of the house sales price.
The title insurance cost varies between a few hundred to several hundred dollars per policy, but it differs from state to state and also on the price of your home.
The factors that affect the cost of a title insurance premium mainly include the title search, examination and expected costs of any prevailing title defects.
In states like Florida and Texas, the title insurance premium costs are fixed by the government itself, whereas in New Mexico and California, the premiums are flexible and can be negotiated and shopped around.
👉 How Much does Title Insurance Cost: Click here to know more about the Title insurance cost.
Is Owner’s Title Insurance A Rip-Off?
An owner’s title policy could feel like a waste of money at some point, but that could similarly be the opposite if a scenario of someone claiming the rights to your house years after you bought it, comes barging in through the doors.
Although title insurance has got a bad reputation as being an add-on, when the situation demands, there’s no substitute. It allows the new homeowners to force-skip any past horrors regarding the title of their property that might come back to haunt them in the form of lawsuits.
Is Title Insurance too Expensive?
No! That is certainly not the case regarding title insurance if a similar expense namely homeowner’s insurance is taken into consideration.
Unlike homeowner’s insurance, title insurance is a one-time payment. Paying more than $10,000 per year for owner’s insurance, which has important perks can safeguard you from issues in the near future.
However, title insurance’s one-time payment can protect you from title defects of your property at a mere $1200-$1500, which safeguards you as well as your heirs.
Hidden and Junk Fees
Title companies used to have FedEx fees, wire charges, and documentation charges in addition to the premium fees.
But in some states like Florida, the government has now clearly restricted the title companies from charging these as addons and must be included in the settlement fees as a whole.
However, some states might still have some hidden or junk fees, which depend on the title company which the homeowner opts to deal with.
Do You Need an Owner’s Title Insurance Policy?
In short, the answer is YES.
The policy will proactively save you from every past mishap related to the title of your newly acquired property, which was hidden from you at the time of closing on the house.
A single owner’s policy safeguards you as well as your heirs.
Things to Consider while Buying Owner’s Title Insurance
For a new homebuyer whilst opting for an owner’s title policy, the things to take into consideration are:
- Shop around: A number of title companies with alternate cash offer are always present nearby. So it becomes better for the new homebuyer to choose from.
- Negotiate and Bargain: Homeowners can always negotiate the terms and know in detail about them. You can also bargain the prices if the government does not fix them as in the state of Florida.
- Combine, if possible: Buying owner’s and lender’s title insurance from the same title company can substantially reduce the total premium cost.
Frequently Asked Questions
1. What is title fees?
Title fees are a part of closing costs. They include the charges for carrying out the title search of the property, attorney and notary services, settlement fees, etc. If you want to know how much you will need to pay as closing costs, use Houseo's closing cost calculator.
2. How much does the whole title insurance cost?
When bought together, the lender's title and owner's title policies usually cost about 0.5% to 1.0% of the home's purchase price. The premium rate is based on the location of the property and the mortgage amount. In some states, title insurance premiums are regulated by the state, while in others, the policies are competitively priced. They can even go as high as $1,000.
3. Do you need a Owner's title insurance for a refinance?
No, only a lender's title insurance is required from the side of the lender while applying for a refinance mortgage.
- How to Buy a Home: Read this blog to understand the steps for buying a home.
- When to Buy a House: Want to buy a house and wondering when you should take the plunge? Read this blog to understand the best time to check out the real estate market.
- Companies That Buy Houses for Cash: Check out the companies that buy houses for cash.
- Closing Costs for Seller: What are the closing costs as a seller? Get to know the real deal as a seller and the best practices.
- Closing Costs for Buyer: What are the closing costs as a buyer? Get to know the real deal as a buyer and the best practices.
- Real Estate Disclosures: Check out the seller disclosure requirements in each state.
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