Real Estate Title Insurance

Who usually pays for title insurance?  and …   Who picks the closing/title agent?  As an Orlando Real Estate Lawyer, these are two of the most common questions I get from Buyers and Sellers during contract negotiations.  This is how I usually explain it:

Homeowner’s Title Insurance

realestate400In residential transactions, the Seller almost always pays for the title search and the owner’s (i.e. the buyer’s) title insurance policy, although, technically, it is a negotiable item.  And, generally, the party paying for the title search and the owner’s title insurance policy is entitled to select the closing/title agent, although that, too, is a negotiable item.  The Buyer (via the closing/title agent most often selected by the Seller) always pays for any simultaneous issue of the loan title policy insuring the buyer’s mortgage for the benefit of their lender.  The lender may also request specific endorsements to the policy. However, those costs are typically small compared to the premium for the owner’s title insurance policy.

SELLER PAYS FOR:

  • Title Search
  • Owner’s Title Insurance Premium
  • Select’s Title Agent/Closing Attorney

BUYER PAYS FOR:

  • Loan Title Policy
  • Endorsements required by Lender
  • may be charged a closing administrative fee

Commercial Real Estate Title Insurance

Like residential matters, it’s commonly accepted in commercial transaction that the party paying for the title search and the owner’s title insurance policy is also entitled to select the closing agent/title agent.  Also, as in residential matters, that party is most often the Seller and, again, typically the Buyer will pay for a simultaneous issue loan title policy insuring its Lender’s mortgage and for any endorsements required by its Lender.  However, these items are negotiated much more often in a commercial setting than in a residential one, for several reasons.

 

First and foremost is, of course, the cost of the title insurance premium.  Depending on the purchase price of the property, the owner’s title insurance premium can be a significant amount, making it worth the effort to negotiate who will pay for it in larger transactions.

 

Second is the desire to control the course of the closing.  In some cases, perhaps it’s anticipated that the closing will be complicated or contentious for some reason, either the Seller or Buyer places a premium on the right to select the closing/title agent and is willing to pay for the owner’s title insurance policy in order to do so.  By selecting the closing/title agent of its choice, the Buyer or Seller can select their own attorney, who may also serve as the escrow agent for the Buyer’s deposit, ensure the timely delivery of the title commitment to the Buyer, prepare the closing documents and so on, thereby maintaining a degree of control over the preparation, manner, timing and place of closing.

 

Third is simply the desire to direct the title premium to your attorney as a means of paying for their title and other services.  Often the attorney collecting the title premium will discount their attorney’s fees somewhat to compensate, at least in part, for the title premium they are going to collect in addition to their attorney’s fees.  If that’s the case, it becomes possible for the paying party to gain control of the closing by selecting their own attorney as closing/title agent, while at the same time paying somewhat less than the full cost of both the attorney’s fees and the title insurance premium.

 

Of courses, the best of both worlds is to negotiate for the other party to pay for the title insurance but still agree to let you select the closing/title agent.  That doesn’t happen very often but is not unheard of, especially when one of the parties is less sophisticated (i.e. hasn’t read this article!) than the other or really doesn’t care who the closing/title agent is.

 

In loan closings, such as refinances, where there are only a Borrower and Lender involved, typically the Lender selects its own attorney as the closing/title agent, although the Borrower is required to pay for the Lender’s attorney’s fees and the loan title insurance premium.

 

Florida Title Insurance

To recap, the general rule where in the State of Florida is that, in most real estate transactions, the Seller pays for the title search and the owner’s title insurance premium, selects the closing/title agent and, therefore, controls most aspects of the closing.  However, in commercial matters, generally, and in larger or more complicated matters (either residential or commercial) where the cost of the title insurance itself and the ability to control the closing become more significant factors, the parties are much more likely to negotiate a different result.

About Brad Hester

Former Florida dairy farmer turned real estate attorney; Architecture and MBA degrees from University of Florida ('87 and '90) (Go Gators!!); Law degree from University of North Carolina-Chapel Hill ('00) (Go Tarheels!!); Now practicing law at Frank A. Hamner, P.A., in Winter Park, Florida.

Comments

  1. The lender may also request specific endorsements to the policy. However, those costs are typically small compared to the premium for the owner’s title insurance policy.

  2. Very nice blog.Thanks for the valuable contributions to this site. Have good works.Thanks for your help.

  3. amazing blog…..

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