As an agent, you know firsthand that one more additional fee or expense at a home closing can be overwhelming or exhausting to the client(s). We get it. They probably don’t want to tack on one more fee or cost when all they want to do is settle into their new purchase. However, as their advisor throughout the home buying process, we can’t stress enough how important it is for home buyers to go through the one-time fee of title insurance before closing on their home.
You might be asking yourself “What is title insurance?” and that’s 100% normal. Or maybe you already have a concept of title insurance but want some more detail about it. Essentially, owner’s title insurance is a policy that protects the property rights of the home buyer. For a one-time fee, title insurance protects the home buyer’s legal claims to the property.
Why do you need to know about owner’s title insurance?
You’re more than just an agent, you’re the main point of contact for a homebuyer to go to for virtually every question and concern during the home buying process. So when the discussion of owner’s title insurance comes up, here are a few reasons why you should discuss owner’s title insurance with your client(s) and ensure they are protected by purchasing title insurance:
1) Owner’s title insurance protects your clients from liens.
We’re going to use this example from ALTA (American Land Title Association) to put this into perspective: Say, for example, your client recently purchased a new home from a builder, but the builder failed to pay the roofer. Wanting to be paid, the roofer filed a lien against the property. Without owner’s title insurance, your client would be responsible for paying this existing debt—meaning they’d be paying the roofer out of pocket instead of purchasing something nice for their new home, like new living room furniture. This is just one example of how owner’s title insurance protects homebuyers’ from various significant risks. With owner’s title insurance, your client would be protected from certain legal or financial responsibilities. *Courtesy of ALTA.org.
2) Owner’s title insurance has lasting value.
With a low, one-time fee – typically 0.5% of the purchase price of the home – owner’s title insurance protects home buyers financially for as long as they own the property. Basically the value of title insurance and the one-time purchase of it lasts the home buyer for as long as they own the home. Title insurance protects the home buyer and any heirs from inheriting existing debts or claims to the property they are purchasing.
3) State regulations & the CFPB (Consumer Financial Protection Bureau).
Not all states treat title insurance costs the same. In fact, each state is responsible for regulating its own costs for title insurance. The CFPB (Consumer Financial Protection Bureau) also regulates closing and settlement practice which can impact title insurance. State laws and local real estate customs can affect title insurance industry practices, so we highly recommend doing your research as an agent/realtor. Policies for the party that pays for owner’s title insurance can vary state-to-state and can also vary within a state.
If you need additional information or help, check out Home Closing 101.