7 Title Insurance Tips and Secrets
- Secret # 1 - Simultaneous Policies - If you buy a home and buy an owner’s abstract of title insurance policy for $100,000 AND you obtain financing to buy the house, the lender will require their own title insurance policy. This title policy is called a simultaneous title policy which means that you pay full price for the owner’s title policy and you get the simultaneous title policy for a promulgated rate cost of only $25. Many title companies increase the cost beyond $25 to $250 or more. Knowing this tip can save you hundreds of dollars at every closing.
- Secret # 2 - Promulgated Rate - Title insurance promulgated rates are the lowest title insurance premium a title company is allowed to charge. That is, the state sets a minimum rate and title companies have to charge a rate that is the same or higher than this promulgated rate. It would benefit you, the consumer, to know what the states promulgated rate is in order to see how much you are being charged over the minimum rate. Know what the promulgated rate is in your state and don’t pay more than this minimum rate. As a title company, we believe that charging more than this rate is not justified for our clients. Unfortunately not all settlement agents feel the same way. Closing costs vary substantially. That is why the new RESPA laws were established in order to make the market more competitive and fair for the consumer.
- Secret # 3 – Escrow Agreements and Deposits - You should always use an escrow agreement which stipulates in the event of a default by one party (buyer or seller), what the procedure and instructions are for the title company or attorney and how they should manage the escrow deposit and release of the escrow deposit. When you receive proof of deposit for your buyers (if you are a seller), you want to make sure that the title company has received cleared good funds into their escrow account. For this reason, you should make sure that all deposits are in cleared funds only. Never accept personal checks if you do not know the buyer and that their funds will clear. A stop payment can be issued on cashier’s checks or printed fraudulently. Always insist on a wire transfer of funds in order to ensure that the deposits are cleared funds. The same applies to the funds required for closing. Always use wire transfers if you want to be safe.
- Secret # 4 - Reissue Rate Credit - If the seller can produce to the buyer, a title policy that was issued in the past three years, then the title company can provide a reissue rate that can be as much as a 40% discount on the new title insurance policy. Always ask the seller if they have a copy of their original title insurance policy if the property was purchased by them in the previous three years. You can receive this reissue rate credit for your new owners’ title policy. The actual amount of the credit is the same amount regardless of whether the policy is one, two or three years old. If the title policy is older than three years, then you will not be able to receive the reissue rate credit. In the case of a refinance, you can get a reissue credit if you can provide a copy of your title policy regardless of when you purchased the property. It is imperative that you store your title policy in a safe and secure place such as a safe.
- Secret # 5 – Can you prepare your own Deed? A common issue that we see when it comes to title examination is the use of deeds that are purchased at the local store. While these deeds are valid and can be used, you need to keep a few important things in mind. When you first purchase a property you are taking legal title. Why would you jeopardize your equitable interest in the property by preparing a fill in the blank document from the local store? There are many title companies and or attorneys that would prepare a deed for a minimal expense to you as the consumer. This is especially true if you have an existing relationship with them. Should you decide to prepare one of these yourself, please keep a few items in mind. All deeds should include the name of the grantor (seller) and grantee (buyer). Deeds should include the marital status of all parties involved. The complete legal description and parcel identification number should be included in the deed. Please do not copy the legal description from the county property appraiser’s office website as this is usually an abbreviated version. Finally make sure the deed contains a signature of the grantor (seller), two witnesses and a notary.
- Secret # 6 – Controlled Business Arrangements - A Controlled Business Arrangement is where a bank, real estate broker, real estate agent, mortgage broker, or title company may have an agreement with each other to provide their services to their clients for a referral fee in return. While this is not illegal or necessarily unethical, you always want to ask the question “Do you have a controlled business arrangement with anyone involved in this real estate transaction?”. This is especially important with real estate because you want to make sure that your best interest is being protected. Unfortunately, some individuals are more concerned about getting their referral fee as opposed to representing their client’s best interests. Please note that it is a violation of Florida Bar regulations for an attorney to pay a referral fee to any person other than another attorney.
- Secret # 7 – Do you Interview your Title Company? Do you interview your Title Company before you choose them to handle your business? If not then you should try and ask these questions the next time you have a real estate closing. • Ask them if they are experts in their field, or if they are just a "middleman" company that refers their business out to another firm to actually issue your policy. • Take a look at the company's name or website address for a clue if they are a real company. There is so much fraud you want to make sure you are dealing with a reputable company. Do they have a database of satisfied, well- known customers, or just a list of anonymous "testimonials" that could have been written by anyone? Ask them to supply you with verifiable references. If they can’t, chances are they don’t want you to find out something you shouldn’t. I would suggest calling at least two of their customers to verify the company’s integrity. • Will they actually follow through on your transaction, or just skip town leaving you to start at the beginning? Are they ethical and do they implement world class business practices? Do they have an actual phone number that dials through to a live person or a virtual assistant?
Each state has different laws and regulations governing title insurance, if it applies. Be sure to seek legal advice in the appropriate state where you are buying or selling. All information provided herein is copyrighted by Kevin Tacher and Lex Levinrad.
Contact Kevin Tacher of Independence Title to obtain an abstract of title for your home purchase.