When buying a home, one of the many key steps, if not the most important step, is obtaining the title. Unlike a car title, it isn’t a physical document, but a concept used to grant and establish a property owner’s right to own, use, and sell a piece of property.
These rights may be limited by easements or liens on the property, and a home cannot be sold unless proper title is confirmed. This title search is usually handled by a title company that combs through public records to establish clear title and make sure there are no legal issues with a property’s title.
Title searches take anywhere from 10 to 14 days and often reveal no issues. But what if you hit a snag and run into legal or financial problems with a sale? Title searches aren’t infallible, and your new home could end up costing you more than the purchase price, putting you on the hook for thousands out of pocket you didn’t plan for.
There are lots of issues that can result in a bad title, from liens, unpaid property taxes, contested wills, code violations, even a seller who doesn’t have any legal claim to a property. You must resolve these issues before moving forward with the purchase.
That’s where title insurance comes in.
What is Title Insurance?
Title insurance is a policy that protects home buyers and mortgage lenders from damages or financial losses caused by a bad title. Most of these policies cover the common claims filed against a title, such as liens, back taxes, and conflicting and contested wills. It covers the homeowner for as long as they own the property.
What Does It Cover?
There are two types of title insurance: owner’s title insurance and lender’s title insurance. Owner’s title insurance covers things like conflicting ownership claims, lawsuits and liens, flawed public records, and outright fraud. Lender’s title insurance protects the lender from these same problems and is paid for by the borrower.
How Do You Get Title Insurance?
The purchase of title insurance is initiated through the closing agent once they have completed the purchase agreement for the property. A lender’s policy as well as an owner’s policy are often required together to make sure everyone is adequately protected. The cost of owner’s title insurance ranges from $500 to $3,500, depending on your state, the insurance provider you choose, and the home’s purchase price. This price is included in your closing costs.
How Are Title Insurance Costs Calculated?
Title insurance costs are calculated by multiplying the home’s purchase price by the rate per thousand used by the insurance company. This is the going rate that is used for every thousand dollars that is calculated for the value of your home.
For example, say the rate is 0.6% for every thousand, and you’re buying a home for $300,000. The title insurance costs would be $1,800.
Some title insurance companies use a bracket-style premium structure. For example, homes up to $100,000 will have a lower percentage per thousand than homes with a value of $100,001 to $1,000,000. Therefore, it pays to shop around and ask the various companies you contact how they calculate their title insurance rates.
Florida Title Insurance Calculator
Many real estate professionals skip the math by using the Rabideau Klein Title Insurance Calculator to figure out title insurance costs for their clients. The free tool can be bookmarked, providing a go-to for Florida real estate brokers and agents who want to save time and eliminate human error.
Contact Florida Bar Board-Certified Attorneys David E. Klein, Esq. and Guy Rabideau at Rabideauklein.com. They have the expertise and experience you need to ensure that your interests are protected throughout your real estate transactions in the Town of Palm Beach, across the Palm Beaches and throughout Florida. Contact Rabideau Klein today to discuss the legal implications of your Florida property transactions.