By: Clark, Campbell, Lancaster & Munson, P.A.
Q: What is title insurance, and do I need to purchase it when buying a home?
A: Title insurance is essential for buyers and protects you from title issues that may not be known when you purchase. Before closing, the title company or attorney handling the transaction (known as the “closing agent”) provides a title commitment to the buyer. The commitment, based on a title search, indicates that the closing agent will issue an insurance policy assuring good, marketable title to the property. The policy insures up to the purchase price.
A title insurance policy typically protects against oddities or defects in the history of property ownership (the “chain of title”), including failure of a spouse to sign a deed conveying his or her ownership interest; long-lost heirs of previous owners claiming interest in your property; or unsatisfied or unreleased prior mortgages, taxes, judgments, or other liens. The commitment will contain exceptions limiting the buyer’s coverage. Having an attorney review the commitment prior to closing is wise.
In Florida, usually the seller pays for the “owner’s policy”, which protects the buyer. The standard form “As Is” Residential Contract for Sale and Purchase, which is the most common used in Florida, allows the seller to designate the closing agent, with the seller paying for the title search and owner’s policy.
In Florida, standard rates for title insurance are (a) $5.75 per $1,000 of coverage up to $100,000, (b) $5.00 per $1,000 from over $100,000 up to $1,000,000, (c) $2.50 per $1,000 from over $1,000,000 up to $5,000,000, (d) $2.25 per $1,000 from over $5,000,000 up to $10,000,000, and (e) $2.00 per $1,000 for over $10,000,000. For example, a seller would expect to pay a premium of $575 for an owner’s title insurance policy insuring a purchase price of $100,000. Homeowners should hold onto their policy documents after closing, because in certain circumstances, a cheaper “reissue rate” may apply if the seller can locate his prior policy.
For a general overview of the title insurance process, including the lender’s title policy, refer to our May 8, 2014 article written by real estate shareholder Michael Workman, available at theledger.com.
The August 27th edition of “The Law” will cover legal issues related to service providers, contractors, or employees who fail to do work when paid in advance.