Because the process of buying a home can be detailed and complicated, the real estate agent is there to help navigate their client through the process, all while helping them get the best deal possible.
Title insurance is one of those line item charges that few homebuyers really understand. And as their realtor, it is your responsibility to make sure that they understand exactly what this covers, especially in the event they are trying to save a little extra money by trying to decline the title insurance.
First off, if they are using a lender, they are most likely going to be required to at least purchase the Lender’s policy of title insurance.
In regards to the Owner’s policy, what may seem like a frugal decision to try and save a few bucks could end up costing your clients many times that in legal fees or “fixing the problem” in the event that one arises and they had initially opted out of that coverage.
What if your client purchases a home that recently had some work done, perhaps something like repairs to a roof or foundation, for example. Let’s say your client purchased the house but opted out of the Owner’s Title Insurance. Because there would then be no title search done on this property, there would be no way of knowing if that contractor was never paid in full and so he placed a lien on the property. This can spell not only big trouble for the new homeowner, but it can also translate into a lot of unexpected out of pocket expenses on paying the outstanding bill and/or legal fees.
It’s a hard lesson to learn when you’re trying to pinch pennies and save a few bucks, when in reality, the coverage lasts a lifetime and the cost more than covers your piece of mind.
Keep in mind that when purchasing title insurance, homeowners have the final say in choosing which company to go with. Although their lender or mortgage professional may suggest or recommend a company that they usually use – go ahead and do your homework – shop around, make some calls and ask for quotes, ask questions.
Because title insurance rates are regulated by state insurance departments, and title insurance companies are regulated by the Consumer Protection Financial Bureau (CPFB), the rates may vary slightly, but should be fairly well aligned with each other.
For more information on title insurance and why real estate agents have a duty to make sure their clients are educated as to the financial consequences of not purchasing this insurance, please contact Cumberland Title, matthew@cumberlandtitle.com or 207-899-4900.
