Title charges, including title insurance premiums, are among the largest of the closing costs that buyers pay when closing on the purchase of a home.
Title insurance is not required by law in the State of Virginia. Nonetheless, your mortgage lender will likely require it as a condition of the mortgage loan, and it is often prudent for buyers of property in Virginia to protect themselves by purchasing an owners’ title insurance policy at the time of settlement.
Risks Covered By Title Insurance
Once the settlement of the sales transaction has been completed, ownership of the property normally becomes vested in the buyer. The buyer’s ownership, however, could be in jeopardy if someone asserts an ownership interest in the property that was not discovered during the title search performed prior to closing and settlement. The buyer will likely not know about the claim until a third party brings a lawsuit against the buyer challenging the ownership interest.
Examples of the types of third-party claims that could form the basis of a lawsuit against the owners include:
- An heir of a former owner asserts an ownership interest in the property based on a will that was not known at the time of the sale.
- A contractor hired by a prior owner or the general contractor of new construction was not paid and a mechanic’s lien is filed against the property.
- A former owner failed to pay gift or inheritance taxes and a judgment or a tax lien is filed against the property.
- The chain of title includes a fraudulent, invalid, or forged deed.
Without title insurance, the buyer must bear the cost of defending against these claims. If the buyer loses, the buyer could also lose the property and be left with nothing. With an owner’s title insurance policy, the buyer’s risks of loss are significantly reduced. The title insurance policy will cover the buyer’s costs of defending against such claims and if the buyer loses, the policy will compensate the buyer for the loss.
Types Of Title Insurance Policies
As previously noted, the buyer’s mortgage lender will likely require a title insurance policy on behalf of the lender. This is called a lender’s title insurance policy.
The lender’s policy serves as security for the lender’s loan on the real estate in the event a third-party claimant prevails in asserting a competing ownership claim in the property. If the third party is awarded ownership of the property, the lender’s collateral is wiped out. The title insurance will cover that loss for the lender.
The other type of title insurance is an owner’s title insurance policy. An owner’s policy protects the equity interest of the owner (rather than the lender) against the risks described above for so long as the buyer or the buyer’s heirs have an ownership interest in the property.
How Much Does Title Insurance Cost?
In Virginia, the buyer usually pays for title insurance. The cost of title insurance is based on the value of the property. Generally, you can expect the cost of an owner’s policy to run a few hundred dollars.
The cost of the lender’s policy is additional. It is the standard practice in Virginia that the property buyer pays for the lender’s title insurance policy. It is often cheaper to buy an owner’s policy along with the lender’s policy at the time of settlement on the property.
The cost of an owner’s policy also depends on whether the buyer wants a “standard” owner’s policy or an “enhanced” policy. The standard policy is based on pre-purchase risks, and the enhanced policy will cover risks that arise after settlement. An enhanced policy runs about 20 percent more than the cost of a standard policy.
How Do You Choose A Title Company?
Under Federal law, the buyer has the right to select the title company which frequently serves as the “closing agent”. The closing agent handles all of the responsibilities and services that are necessary for the transaction to settle.
Chief among the responsibilities of the closing agent is the issuance of the title insurance policy. The transaction cannot complete settlement if the closing agent cannot issue a title insurance policy.
When choosing a title company, you should consider four things:
Reputation: Ask people you know and trust who have had recent experience with real estate transactions to recommend a title company they were satisfied with.
Experience: Consider the experience of the title company you are considering. The title company staff should be knowledgeable and courteous. Ask about the extent of their experience in transactions similar to yours, their relationships with lenders, and efficiency in handling possible title problems.
Location: You should plan on having to make personal visits to the title company’s office on more than occasion prior to closing. Select a reputable company located near your home or place of work.
Fees: Fees charged by title companies can vary considerably, so shop around.
Contact The Title Experts At Mathis Title Company For More Information
At Mathis Title Company, the experts have years of experience with Virginia property transactions. They pride themselves on their excellent reputation, and they provide their services at competitive rates. Contact them for more information about their title services.