The idea of “title insurance” is something that always gets mentioned when it comes to the homeownership process – but it’s something that few homeowners (especially first-time home buyers) really have a handle on. It’s natural to be a little bit confused, especially with all of the paperwork and terminology that comes along with homeownership!
The bottom line when it comes to title insurance? Title insurance is a critical part of homeownership, and knowing the basics of title insurance can be very helpful when it comes to navigating the process and saving a significant amount of money along the way.
Let’s step back for one quick second and address one of the fundamental questions: “What is title insurance?” Put simply, title insurance helps to protect you – the home buyer – from anything that could go wrong when it comes to the property title transfer process in homeownership. It’s an essential part of the process. There are dozens of things that can go wrong with the title process, everything from a long-lost relative coming forward to claim the property to old debts and liens that might pop up out of nowhere.
Title insurance offers the home buyer peace of mind to let them know that their purchase will be secure (safe and sound, as the song says). Unfortunately (as many home buyers discover too late), without some scrutiny and some questions that need to get asked, many buyers might get stuck paying a whole lot of money for their title insurance. That’s something that can easily get avoided – and we’re here to help you with some advice.
Here’s our list of five ways to save money on your title insurance:
- Ask the seller to actually pay for the title insurance themselves. This is the simplest way to save a few dollars on your title insurance – and, frequently, its the most effective. If you’re in a position of power over the seller, or if the situation seems right, it might be beneficial to you to ask the seller to put down the money for the title insurance themselves. This can be a part of the negotiation outright, or it can be brought up at a certain point later in the process. Either way, if the seller is “motivated” to get the deal done as quickly as possible, they might be completely open to actually pay for the title insurance themselves. Try using this simple argument if you’re looking for the seller to pay for the title insurance: since you’re assuming all the risk with the title insurance (and any errors wouldn’t be your responsibility), why shouldn’t they be the ones to pay for the title insurance in the end? You might be surprised at how effective (and how money-saving) this argument would turn out to be.
- Look around for the best title insurance option out there. Beware of what your lenders “suggest” when it comes to the title insurance company. The lender might have their “preferred” option (one that might be very lucrative for their own purposes), but there’s an excellent chance that that “preferred” option the lender presents to you might not offer the best rate. The bottom line? You don’t have to go with the option that the lender gives to you. Frequently, they might not offer the best deal at all. Don’t limit yourself to what they say. Go ahead and shop around. Talk to a wide range of title insurance companies, see what they’re all about, and get a good sense of their general competencies, services offered, and price range. After you’ve done your research and your comparisons, make your choice – and go with the one you feel the most comfortable with (and the one that is the most affordable).
- Don’t just go with the rate presented to you. Remember, shopping for title insurance on your home buyer purchase is a lot like shopping for a car – you have the power in the relationship. After all, this is a negotiation and not a take-it-or-leave-it price. If you don’t like the amount that the title insurance company presents to you for all the various “fees” involved in the process, you absolutely do not need to take that price. Instead, try to work with the title insurance company. Tell them that you’ve found a better rate elsewhere, and see if they’ll match (or better) the place that you’ve found.
- Try “bundling” the insurance with other essential services. Another way to save money on title insurance? Try to “bundle” the title insurance that you require for the home with the title insurance that the mortgage lender requires for the home. This is called the “simultaneous rate issue” (stay with us here, this may get a little confusing). More often than not, title insurance must actually include two separate policies – the first, to protect the homeowner, and the second to protect the lender. Odds are you’re paying for both anyways – so if you can get a deal that presents a reduced rate for both of those policies, you can end up saving a lot of money when you write out that check. Most of the time, the lender will be extremely open to working on this “simultaneous rate issue” with the seller. Ask about this specific policy as soon as you can to get the ball rolling. If you do this, it won’t only save you a lot of time when it comes to shopping around for different title insurance options – it will also save you a lot of cash, too.
- Don’t forget about the reissue rate! Sure, this might sound like Office Space-type corporate speak, but it’s very important. This is especially important for those people purchasing a relatively new house (usually, something that the seller purchased ten years or so before the transaction starts). The logic actually makes a lot of sense with the “reissue rate” idea: basically, since the house has a relatively brief history (and therefore not too many transactions to sift through when it comes to those potential problems), the odds that something might derail the homeownership process are probably quite low. After all, how many bad/unfortunate things can happen to a house over a decade or so? Thus, this “reissue rate” – if applied – can reduce the amount of money that you might owe for the title insurance by a pretty good discount amount (generally around 40%, although the rate can go all the way up to 60% or down to approximately 25%). However, since this “reissue rate” naturally reduces some of the money a company can make … well, they’re not always too excited to actually advertise this option. The solution? Be sure to ask about a reissue rate for your home as soon as possible in the process.
Looking for more information on title insurance or anything else that might come along with the homeownership or real estate process? Stay tuned to LemonBrew for valuable resources on everything home buying! Check out our engaging, comprehensive blog, featuring articles on everything from property title searches and mortgages to real estate agents and title fees. At LemonBrew, our mission is to build a trusted relationship that leads to a satisfying and memorable home buying outcome – for everyone.