What is title insurance and why do you need it as a buyer?
When a house goes under contract and into escrow, the title insurance company or the closing attorney will run a title search on the deed of the property to make sure there are no outstanding loans, liens, clouds, or defects against the title of the property.
Once they clear any outstanding loans or defects, they’ll issue a title insurance policy that guards the lender and the borrower against any clouds or liens that may materialize in the future. Either they’ll guard you in the event of a lawsuit or they’ll pay any claims that are filed against you.
If you’re getting a mortgage, you need a title insurance policy. If you’re paying cash for a property, getting a title insurance policy is an option, but you should still get one.
The cost of a title insurance policy is monitored by the state, so it should be about the same no matter where you choose to close. For a $300,000 transaction in Davidson County, you can expect to pay about $1,600 for the lender’s policy and about $80 for the buyer’s policy. There could be a re-issue credit if there was recently another policy in place that’s less than 10 years old. If the seller can provide proof of that, you get a little bit of a discount.
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If you’re getting a mortgage, you need a title insurance policy.
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Who pays for the title insurance policy? It depends. It’s a negotiable item in our purchase and sale agreement—you’ll see a blank space that asks for who pays for the cost of title. The buyer can pay for their own title insurance, the seller can cover the cost, or it can be split.
Historically, in Davidson County, if you’re buying a new construction house or a foreclosure or short sale property from the bank, the buyer covers the cost of the title insurance. If you’re buying a resale property, the seller covers the cost of the policy.
Lately, the market has gotten so hot in Davidson County that if you want your offer to stand out, it’s sometimes a good idea to offer to pay for your own title instead of asking the seller to do it.
I’m a real estate agent, not an attorney, so if you have any more specific questions about title policies and how they work, you should consult with an attorney.
If you have any more questions for me about our Davidson County market, don’t hesitate to reach out to me. I’d be happy to help you.