Generally if finance is required for the purchase of the property, the lender will take out title insurance to protect their investment. The particular risk to a lender is the marketability of the property on foreclosure and so these types of mortgagee policies cater for factors relating to marketability more specifically than an owners title insurance policy. However, while often indeterminable, it may be interesting for the borrower to note if the cost of this insurance is passed on in the cost of funding.

Title insurance is a matter usually handled by a legal representative upon the instructions of their client, but these representatives and others such as real estate agents, lenders or brokers are prevented from insisting that a particular insurer is used. The decision is that of the owner, and they are protected by the Real Estate Settlement Procedures Act (RESPA) to this affect.

Share the Costs

The convention of each state or county is one individual to that particular jurisdiction; however an agreement between vendor and purchaser to share the cost of title insurance is usually the most amicable manner to handle the transaction. Often the motivation for purchasing will be relevant, as a saving may sometimes be enjoyed if the purchaser has the intention to resell the property in the forseeably immediate future.

In this situation, a binders policy may be purchased from the insurer, and apart from providing the usually coverage, will specify a predefined time period for indemnity to take effect. After the property has been resold, a refund on the premium is returned to the previous policy holder when a new policy is purchased on the same property.

Premiums however are paid in advance and prior arrangement for this specific type of policy is required.

Often a seller will obtain the services of a title insurance company to perform searches to verify the title prior to marketing the property for sale. If the purchaser enquires as to the identity of this insurer, they may be afforded a discount in title insurance as the relevant searches have already been performed.

Some contracts for sale insist on a mandatory title insurance policy for the lender, while allowing the matter to be at the discretion of the purchaser. Given the formidable risks the purchaser stands to endure in regard to unexpected defects in title, it is advisable to ensure specific owners title insurance is in place.

Indeed it is often the case that a title insurer will offer the lender and the owner simultaneous coverage under a combined policy. Offering economies of scale and marked efficiency, given that this form of policy complies with statutory requirements and also the terms of the contract for sale, this may offer a cheaper alternative to the purchase of separate policies, which may be with different insurers of title.

Another advantage for purchasing title insurance is found in that some states allow the purchaser of title insurance to decide which party performs the settlement of the transaction and obviously is therefore afforded the freedom to specify the terms required or modify and alter existing terms in the policy.

Considering the relatively small expense in comparison with the purchase price of the object of the policy, it appears that the purchaser ought to exercise their right to specify and be familiar with the terms of insurance by which they will benefit should any threat to clear title materialize.

Resources:

http://www.firsttitle.eu/our_service_by_profession/mortgagetenders1.aspx

http://www.travelersguarantee.com/iwcm/guarantee/products/title/home.html

http://www.kiplinger.com/basics/managing/insurance/title.html