In a real estate transaction, one of the many line items included within closing costs will be the title insurance premium. When you’re representing buyers and sellers in a real estate transaction, it’s important to not only understand what these line items mean, but to be able to explain how they’re paid, and who is responsible for paying them. 

Below, we’ll break down the basics of what line items might appear in your client’s closing statement, which party is responsible for paying and why title insurance is essential to every transaction. 

What title fees are paid at closing?
The first fee for an owner’s title policy that you will see is a title search. This is an extensive search that typically costs around $350 on average, but this can vary. The settlement fee, sometimes called a closing fee, includes all of the administrative costs that go into the actual transfer of title and closing. It generally covers escrow fees, survey and notary fees, deed prep fees and other costs associated with a title search. 

The lender’s title insurance is something that may be required by the borrower’s mortgage company. This policy protects the lender in the event of title issues and covers the loan’s entire term. It is sometimes bundled with the owner’s insurance. Owner’s title insurance is the policy that protects the owner from any overlooked claims, liens or other issues with the title that may come up after closing. 

Who is responsible for paying the title insurance premiums?
There’s no universal rule about who covers title insurance costs — it usually depends on local customs and the terms negotiated in the real estate contract.

1. Seller responsibility: In some states, including Illinois and Wisconsin, it’s customary for the seller to pay for the owner’s title insurance policy, which protects the buyer from potential title issues. This is often seen as part of the seller’s responsibility in providing a clear title.

2. Buyer responsibility: In other areas, the buyer may be responsible for purchasing their own owner’s title policy. Additionally, buyers are typically responsible for the lender’s title insurance policy, which protects the mortgage lender’s interest in the property.

2. Shared responsibility: The cost of title insurance may be split between the buyer and seller, depending on negotiations or specific local practices. Some contracts may outline a cost-sharing agreement to balance expenses between both parties.

How much is title insurance?
The one-time cost of a title insurance premium is based on the value of the property. Title insurance costs also vary by state, typically ranging between 0.5% and 1% of the sale price. For a detailed explanation of how title insurance rates are determined, check out: “What Goes into Calculating a Title Insurance Rate?”

Is title insurance necessary?
Title insurance may not always be required, but it’s essential for protecting both buyers and sellers. Without it, you risk inheriting debts, losing your home, or even part of your property. 

Choosing the right title insurance provider is just as important as the cost. Landtrust Title is here to guide you every step of the way. Still have questions? Contact us today to get connected to a trusted title professional.