What Are the Factors That Affect the Cost of My Title Insurance Policy?

The real estate industry is rife with lingo and terms you might be unfamiliar with, especially if you’re buying a home for the first time. Closing costs, earnest money, title insurance — what are these fees, how much will they set you back, and how are they determined?

Simply put, almost every element of your closing costs depend on the final selling price of your home and the amount of your mortgage. At least three days before the closing process begins, you should receive a closing disclosure document, five pages of extensive information about your loan terms, property tax and home insurance payments, HOA fees, and an itemized list of your closing costs.

On page 2 of this document, you’ll notice section C, which lists entries from your title company for administrative fees, title clearance, and insurance. What factors affect the cost of this policy, what are the other associated charges, and is title insurance even worth it? Let’s dig deeper.

Title Insurance, Explained

While title insurance is not required in either Wisconsin or Illinois, it’s a relatively inexpensive policy, with a one-time premium, that will protect your interests during the entire time you or your descendants own the property. 

According to the Wisconsin Office of the Commissioner of Insurance, when you buy property, you acquire the title, which represents legal ownership and a package of rights for you to use the real estate in a reasonable manner. The same is true in Illinois according to the Illinois Department of Insurance.

Before you close on a house and the deed is transferred, your title company will perform an in-depth title clearance search. This is a thorough inspection of the public records and other resources to ensure there are no encumbrances or clouds on the property’s title. The most common title defects include:

  • Clerical errors
  • Fraud and forgery
  • Unsatisfied liens
  • Unpaid taxes
  • Unknown or missing heirs
  • Court judgments
  • Undesirable easements
  • Unforeseen encroachments

Even in this digital age, mistakes can happen when it comes to transferring titles and filing legal documents. Wire fraud and other real estate scams are proliferating steadily. Unpaid taxes, mechanic’s liens and long-lost relatives making a claim on your property aren’t extremely common, but they do happen and you should still take steps to protect one of your biggest investments. 

Title insurance keeps your assets safe from any losses that result from these unknown defects. Your policy obligates the insurer to defend your claim to the property in a court of law — and to pay out if you lose the claim, up to the full value of your coverage limit. 

Factors Affecting Your Title Company Costs

You’ll only pay your title company once during the closing process, and when you purchase title insurance, your property is covered until you or one of your heirs sells it. 

However, if your real estate appreciates in value, as it most likely will, you may want to add an inflation rider. For a small additional amount paid at closing, you can make sure your title insurance coverage increases along with the value of your home. Talk to us about your options regarding enhancing your title insurance policy to cover appreciation.

The premium is calculated in large part based on the property’s purchase value and your mortgage loan amount. Many states have regulated title insurance costs, so your location also has a big effect on your total title company costs at closing. 

Hot housing markets like Chicago and Madison are seeing home values skyrocket, so the average closing costs have risen as well. 

The age of the home plays a part in your title company fees as well. For a historic property, the title search is much more time-consuming than for a newly built home, involving an intensive dive into county records, property taxes, and financial judgments. If the title has changed hands many times and has a lengthy chain of title, this will also increase the cost of the title search and settlement. 

Your title insurance company also performs many crucial duties during the closing process and acts as a liaison between the lender, brokers, attorneys, real estate agents, the buyer, and the seller.

This closing agent reviews all related contracts for accuracy and corrects any issues, as well as reviews every detail involving taxes, fees, commissions, and other closing costs. They’ll also assist you with closely examining your closing documents for any errors and or junk fees

Find the Right Team 

Whether you’re a first-time home buyer or an experienced real estate investor, it’s vital to work with a comprehensive team that will ensure you’re always making the right decision. 

At Landtrust, we have all the resources you need to make your home ownership dreams come true. We’re seasoned professionals with unique local expertise and a full spectrum of services from licensed agents, attorneys, underwriters, and closing officers.

If you’re considering buying a new home, commercial property, or investment real estate, we can help. Reach out today to see how!

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