Here are a few helpful tips to keep in mind as you shop around for title insurance:
1. Don’t waive your right to choose your own title company.
Your real estate agent may ask you to sign a disclosure form, or an authorization to order title insurance for you. However, you are not obligated to use your real estate agent or lender for title insurance. Regardless of what they might have told you, not all title insurance companies charge the same fees. By state law, they charge the same premiums, but the additional fees can vary. Avoid getting hit with a list of “junk” fees like notary fees, settlement fees, courier fees, wire transfer fees and electronic document fees. Declining their recommendation and doing a little shopping can save you hundreds of dollars at the settlement.
2. Beware of “Controlled Business Relationships.”
Sometimes, real estate agents/brokers or mortgage lenders hold an ownership interest with the “in house” title company. In fact, they may receive a financial incentive for referring your title business to them. Guess who will pay extra in “junk” fees in order to pay for that incentive? You will get your best deal on title insurance by seeking out an independent title company.
3. Don’t wait until the last minute to start shopping for title insurance companies.
If you scramble to get your title insurance, you could end up paying hundreds of dollars in extra and unnecessary fees. Start searching for a title insurance company when you start shopping for a lender. To allow yourself time to compare a few quotes, you should select your title company before you make an offer on a house.
4. Shop around, and make sure your title quotes are complete so that you have a true basis for comparing them!
In Pennsylvania and New Jersey, you should see at least three state required fees on your title insurance quotes whenever you’re borrowing money for a purchase or refinance.
- Lender title insurance premium
- Lender endorsements
- Lender closing services letter
- Closing Fee (New Jersey only), in the amount set by the state.
If these fees are not part of your quote, you’re either speaking with a title insurance company who’s not familiar with the local requirements or they’ve intentionally left the charges off to make their quote more attractive. In either case, you’d be better off selecting another company.
5. Standard vs. Enhanced Homeowner’s Title Insurance Policy
There are two options for title insurance. Standard or Enhanced. The enhanced policies will cost you 10% more, providing all the same coverage as a standard policy, adding limited coverage for defects that occur after you’ve purchased the property. The enhanced policy has limitations and deductibles which make the added expense for the policy unnecessary in most situations.
One of the examples that I hear most often as a benefit of purchasing the enhanced owner's policy is: If your neighbor’s fence is determined to be on your property, with the enhanced policy there’s coverage to relocate the fence. While this is true, there’s also a $2,500 deductible you would need to pay before the policy coverage kicks in.
In certain situations, the enhanced policy might make some sense. Say if you were purchasing a much older home where there were several additions added on over time, the enhanced policy offers limited coverage if a zoning issue were to arise where the previous owners never obtained the appropriate permits required by the local municipality. However, most common claims that are covered under the enhanced policy would also be covered under the standard policy as well.
When trying to decide which policy is right for you, here are a few things to keep in mind.
- If you take out a mortgage, only a Lender Policy is required, and a standard policy is sufficient.
- If you opt for the Enhanced Policy, approximately 85% of the cost differential goes to the person or agency selling you the policy.
It’s your choice. If after considering both options you feel that the enhanced policy isn’t necessary for your situation, don’t buy it.
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