Title insurance protects you from unresolved defects in the title when you buy a new piece of property. It’s an important part of the buying process, but not one that most buyers think a lot about in advance. For example, you might not be aware of who should pick out the title insurance company involved in your purchase. You must work with a reliable, experienced insurer so that you get the protection you need.
Title Insurance Comes In Two Forms
There are two different types of title insurance. The mortgage provider receives lender’s title insurance to protect the value of their loan. The buyer receives owner’s title insurance. This protects the buyer from potential defects like liens and encumbrances. With title insurance, the buyer cannot be held liable for such problems.
Title Insurance: Federal Laws
In property transactions where the buyer pays for the title insurance, the seller cannot demand that the insurance be purchased from a specific company. This rule is laid down in federal law, specifically, section nine of the Real Estate Settlement Procedures Act (RESPA). Violating RESPA is a crime punishable by fines; the cost to the violater is typically three times the cost of the title insurance.
Note that the RESPA rules do not apply if the seller agrees to pay for the title insurance. Also, the rule applies only to the selection of a title insurance company. The seller is still free to insist on the use of a particular closing agent.
In this region, the buyer pays for title insurance in the majority of property transactions. As noted above, both tradition and law dictate that the choice of insurance company is up to whichever party pays for the insurance. In some contemporary purchases, though, the buyer can put paying for the title insurance into negotiation and get the seller to pay for it. This deal is more likely to be accepted when the seller is eager to close the deal. Buyers that take this step are essentially forfeiting the right to pick their title insurance company.
The Importance Of Trust With Your Title Insurance Company
Brokers and real estate agents typically work with the same title insurance companies on most of their sales. As a buyer, you are not obliged to take their recommendations on insurance company selection. Most buyers don’t enter into a home purchase with any strong preferences regarding title insurance companies, but this choice is important enough to do some research.
In Minnesota, there are some potential discounts to consider. Bundling both the lender’s and owner’s title insurance with the same company can reduce the price of both. Providing the previous owner’s policy can also earn you a discount.
Choose The Right Title Insurance Company
When you’re paying for your own title insurance, you have the right to work with an insurer you trust. The right company for you might not be the same one providing the lender’s insurance. In the end, what is most important is that you feel confident in the title protection provided to you by a reputable insurance company.