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Buying or refinancing a home can mean you’ve got a lot on your plate. I bet title insurance isn’t one of them.
The home buyer – or home re-financer – generally leaves it up to their lender to take care of all the details, and title insurance is actually a pretty big detail. For instance, if the title company finds a title defect or other such issue, it could actually prevent the closing from happening. And that’s a pretty serious complication. In fact, one out of every 3 title searches reveals some kind of title defect that gets fixed before the transaction closes.
The title company hired to handle the closing actually contracts with an underwriting company to issue the insurance policies that will pay to defend you in court if anyone challenges your title, and to compensate you if you lose in court.
Here are 6 questions to ask to make sure you’re making smart choices:
1) Are the prices negotiable? For the most part, prices are basically regulated and you’ll find most of your area title companies charging comparable rates. But call around, ask what they charge. It never hurts to ask. A smart consumer will look for a company that has a history of performing quality title searches, and will also most likely be around for the next 10-20 years if there is a problem.
2) What coverage do I need? The average policy is pretty standard and protects against such things as fraud, undisclosed heirs, forgery, and spousal claims. If you want additional coverage, that will obviously boost the insurance cost. It’s also possible that your lender may require – for example – an endorsement if you have an ARM (adjustable rate mortgage) that guarantees they are first in line to be paid if the home goes into foreclosure.
3) Do I get a choice in title companies? Yes, absolutely. You may find that the seller, your lender, or even your real estate agent may suggest a title company to you – or – they may just pick one for you. But the bottom line here is that you get the final say. Do your homework and call around. Find a company that will answer all of your questions, give you piece of mind that they do quality work and have a stellar reputation, and is charging a rate that you feel comfortable with.
4) Is my money safe? It is pretty mind blowing to think of the amount of money that passes through a title company in a given day, week or month. It’s also pretty astounding how savvy cyber criminals can be these days when it comes to wire fraud and other acts of cybercrime. Ask your title company what precautions and processes they have in place to do their part in preventing this from happening to their customers.
5) In addition to the insurance premium, what other charges might I encounter? Consumers tend to approach a new home with an open wallet if it’s their “dream home” and they really want it. But when it comes to hearing the title insurance quote, they balk at it. What should be considered is that this insurance is actually protecting this large and precious investment that you’re making. Definitely call around to compare rates, but remember to also ask what other fees will apply on top of that. Other fees include those to file the deed with the Registry of Deeds, fees associated with getting payoffs, mail away fees of a party cannot attend the closing in person, Fed Ex costs, just to name a few.
6) Is my title company a neutral third party? Some title companies are owned by real estate firms, lenders, and even builders. Yes, these arrangements are legal when properly structured and disclosed, but some consumers prefer not to tread into waters where a potential conflict of interest may exist. Therefore, ask if the referred company is an affiliated entity. If it is, a good question to ask is if they are providing a level of service that is consistent with industry standards as well as similar to that of competing closing and title companies charging comparable fees.
So be prepared, do your homework, and make some phone calls. And remember, any good title company will be happy to answer each and every question you have in a way that you understand it. Find a company that makes you feel like a welcome part of the process, where you feel comfortable, and most of all where you trust the people handling what is most likely your largest and most expensive transaction in your life.
As always, Cumberland Title encourages you to ask any questions you may have, and to check out our informative YouTube series of short videos aimed at homebuyers.