Many people have never heard of title insurance, especially when it’s your first time buying or selling a house. Because the entire process of transferring property is complicated, it is important you know what you are getting into. Let’s talk a little more about what title insurance is, who handles the insurance and if you need to be concerned with it.
What is Title Insurance?
Title insurance isn’t like health or car insurance where you pay a premium on a recurring basis. Title insurance is paid for one time during the property sale at closing. It’s a one-time fee and then it’s over.
Think of title insurance more like a protection policy. It keeps the homeowner and lender safe in the event that there is any loss or property damage due to legal issues. It doesn’t protect you like a homeowner’s policy would. This means there is no coverage against things such as natural disasters or fire.
Instead, title insurance keeps you safe from:
- Property title errors
- Encumbrances
- Property liens
Like any insurance policy, title insurance has fine print regarding what will and will not be fixed. For the majority of homeowners, title insurance is enough to keep them protected. There’s no need to shop various companies for your coverage.
Is Title Insurance Necessary?
There is no requirement mandating you to get insurance during the purchase of a home. While it is not a requirement, we highly recommend you cover all your bases. Title insurance will protect you from the situations that don’t happen often, but could.
For example, if the ownership of the home were challenged, your title insurance would take over. If buyers discover the deeds aren’t right, your title insurance will take over.
While it is rare, this can happen when a person sells their home that is jointly owned without the consent of the other party. You don’t want to be left with nothing if it turns out the sale wasn’t valid.
There are also times when taxes are misunderstood and there are unknown encumbrances that weren’t outlined properly during the sale.
Who Pays?
In good faith, the seller of the home typically pays for the title insurance for the buyer. This is to declare that everything in the house deed is accurate. The lender for the buyer will want to see the insurance policy to ensure they are covered before the lender will grant the money for a mortgage.
Generally, the fees are going to come from the buyer’s escrow costs. Then, the record of the insurance shows in the closing paperwork given to the seller.
As far as closing costs are concerned, the buyer usually pays most of the fees. Things such as service fees, escrow fees and inspection fees need to be paid for the mortgage lender to be satisfied.
Normally, the fees don’t exceed five-percent of the sale price of your house. Rarely, the closing costs will be passed to the seller of the home. This is based on the circumstances of the sale. Buyers can offer a price while keeping the fees in mind which means there is less profit given to the seller.
When the home isn’t in good shape, fees for inspection might also be put back on the seller. Some parts of the closing costs are open for negotiation. In the end, most often the buyer and the seller both end up paying for some aspects.
The division of fees is something that is worked out between the two parties before the closing of the sale.
How Long Does the Entire Process Take?
Once the buyer is approved by the mortgage lender, closing begins. Just waiting for a buyer to get approval can take some time and many people make offers they can’t get loans for. When this occurs, the closing process doesn’t begin because the seller needs to find a new buyer.
Some buyers are able to get pre-approval and that makes for an easier process.
When the buyer does obtain approval from the lender, the closing process will take up to 45 days. As long as everything is in proper order, you just have to wait. There could be things that come up during the wait that slow down the entire process.
Sometimes, this occurs because the lender obtains information they didn’t know previously regarding the buyer. This could be an issue with the credit, an unpaid debt, a change in marital status or new liens and judgments placed on either party in the agreement.
When these instances occur, closing can last longer. If these changes are major, you might even end up with the process stopping completely. That’s why it’s important that both the seller and the buyer remain honest from the beginning.
Selling Your House without Closing Costs
Home investors, like Integrity Homebuyers, want to close on properties quickly. That’s why we will pay for all the closing costs out of our own pocket. When we determine the value of your home, we included all the costs that will be part of the closing. Our offer will also include the money we need to invest in the property on repairs. Then, you receive the cash based on the fair market value minus these expenses.
The difference is that you don’t have to wait the 45+ days until the closing process is complete. Furthermore, you don’t have to invest time trying to find the right buyer for your home; we handle all of that for you!
Working with Integrity Homebuyers is your quickest way to get cash fast. We handle the lenders, title insurance issues and anything else that may arise from the sale. All you have to do is collect the cash.
If you are ready to get started, why not contact us for a quick and fair offer? We are here to serve you.
We Buy Houses in Maryland and Washington DC
