What is title insurance?
Real estate has been around a long time and has been bought and sold for decades and sometimes centuries. With each sale there is usually a record of the transaction that is filed in the public records, which in most counties in Pennsylvania is maintained by the Recorder of Deeds. Also, through the passage of time, each owner may have encumbered the real estate with a lien such as a mortgage or given away certain rights such as through an easement.
When title insurance is requested, a title search is conducted which examines the prior history of the real estate to determine if the title is marketable and can be validly conveyed by the seller. After this search, the underwriter determines the insurability of the title.
While underwriters, title companies and attorney who perform real estate closing are skilled to determine the issues related to real estate, sometime issues not discovered. These issues can include matters such as title issues due to filing errors, forgeries, or undisclosed heirs which sometimes are difficult to identify. A title insurance policy protects a purchaser from a variety of issues that might be uncovered later.
Who decides who is going to be the settlement agent and issue title insurance?
Usually, the buyer in a sale and the homeowner in a refinance decides. The general rule is that whomever pays gets to decide who to pay.
Frequently, buyers are not told this fact and often pressured to use a title company or settlement service of their realtor’s choosing or even sometime the lender’s choosing. If this happens, it is strongly recommended a buyer get a second opinion as the fees charged by the company not chosen by the buyer includes inflated fees and costs.
How much does title insurance cost?
In Pennsylvania, an owner’s title insurance policy is based on the sales price and a lender’s title insurance policy is based on the amount of the loan. The title insurance rates are regulated by the Pennsylvania Department of Insurance and will be the same amount throughout the state.
While title insurance is regulated by the Department of Insurance and the rates are the same no matter who does your transaction, not all companies are the same.
Henderson Law Offices is an approved attorney so we do not charge the full amount for the title insurance like title companies or settlement companies do.
For example, the cost of an owner’s policy for the purchase of real estate in Pennsylvania for $100,000.00 would be as follows:
- Title Company: $1,025.00
- Real Estate Settlement Company $1,025.00
- Title Settlement Service Provider: $1,025.00
- Henderson Law Offices $401.00
Henderson Law Offices does not receive any portion of the insurance policy like a title company or settlement company does so the cost to purchase the same coverage with Henderson Law Offices is less. In the above example, a purchaser would save $624.00
How often are title insurance premiums paid in Pennsylvania?
Once at closing. There are no other fees and the insurance policy will be in effect for as long as the purchaser owns the property and in the case of a lender for as long as the lender has a valid lien on the property that was insured by a title policy.
Why should I purchase title insurance?
The short answer is to reduce risk when purchasing an asset of considerable value.
When a real estate transaction involves a lender, either a purchase or refinance, the lender will require it and the purchaser / homeowner will have no choice but to purchase lender’s title insurance.
In regards to purchasing an owner’s policy, this is typically done when real estate is purchased and is a minimal charge if a lender’s policy is also being purchased.
Irrespective of the benefit of purchasing a policy at a low price, an owner’s policy protects a purchaser against certain issues in the chain of title such as ownership issues, public record errors, fraud and defective recording instruments so that when a policy is issued, the insured purchaser does not have to worry about what happened before.
An owner’s policy ultimately reduces risk when purchasing real estate and is strongly recommended.
Is title insurance necessary for new construction?
Title insurance is strongly recommended for new construction properties because the underlying land has to be searched to discover any potential title issues from prior owners and potential liens If title issues are not discovered during the title search, an owner’s title insurance policy will help to defend any threat to ownership rights in the future.
Why would the lender require a new title insurance policy when refinancing?
An owner’s title insurance policy is attached to the property whereas a lender’s title insurance policy is attached to the mortgage. During a refinance, the current mortgage is satisfied and a new mortgage takes its place. Therefore the initial lender’s title insurance policy is no longer effective and a new one needs to be issued for the new loan. This will still be necessary whether the refinance is with the original lender or a new one.
What is an owner’s title insurance policy?
A basic owner’s title insurance policy provides essential protection against common claims.
An owner’s policy generally covers the following:
- Claims against your ownership of a property
- Mistakes in the public record
- Unknown heirs claiming ownership
- Forgery and/or fraud
- Defective document recording
What is an enhanced title insurance policy?
An enhanced title insurance policy gives upgraded coverage compared to a basic title insurance policy. The policy is available to a natural person, not a commercial or legal entity who purchases a one to four personal family residence. The enhanced owner’s policy provides coverage that goes above and beyond what a standard owner’s title insurance policy offers.
The additional coverage will add an additional premium to the policy of 10-20%. The exact amount depends on the jurisdiction in which it’s issued.
Examples of additional coverage include insurance for building violations or zoning violations. Most residential purchases do not require enhanced coverage but the few that do, this is an option for extended coverage.
An Enhanced title insurance provides the same coverage as the owner’s policy stated above coverage as well as the following:
- Liens against the property
- Zoning issues
- Lack of property access
- Encroachment of structures on the property
- Subdivision violations
How can I learn more about calculating title insurance?
Call Henderson Law Offices for a free consultation regarding the whole process at 724-887-4544.
Information can also be obtained by using online calculators to determine the cost.
Here are two calculators:
Conestoga Title Rate Calculator
Remember to determine of title insurance for Title Companies and Settlement Companies, the policy that is selected is a Standard Owners, Standard Lenders or Stander Simultaneous Policy. To determine the cost of title insurance for Henderson Law Offices, please select the Approved Attorney Policies for Owners, Lenders or Simultaneous and compare.