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Why Does Title Insurance Cost So Much When You Don't Even Need It?
Why does title insurance cost so much when you never need it? Good question! The real question is, do you need it, or not? When you purchase a new home, the last thing you need is another expense - so exactly what do you get for your money? Let's look at what you are buying - a home, one of the most expensive things people ever purchase. You've purchased home owner's insurance to protect you in case of a fire or other disaster, and flood insurance to replace your loss to water damage. The title to your home - you're going to insure that? A piece of paper that says you own your home, and you need insurance for it? Yes, you do. The title to your home is more than a piece of paper - it's a record of the fact that you own it. The deed which you signed at your real estate closing records the exact dimensions of your lot, where the lot is situated as compared to other lots and landmarks in the area, and any restrictions or easements that may apply to your lot. The title to your property shows that you have ownership of what is shown on the deed. The title also shows any mortgages that might be against your property, as well as any judgments. Of course, your expect to find a mortgage against your property, that's how you're buying it, right? But what about judgments? If you're purchasing a newly constructed home, and one of the contractors was not paid for his work, he can file a lien against your property. This will show up on the title, and that is what makes title insurance so important. Title insurance will insure that your property is clear of any previous judgements or mortgages, and if something shows up after you've purchased your home, the title insurance will take care of it for you. Let's say that your purchase a home, but through some error in paperwork, the previous owner's mortgage was not paid in full. The bank of the previous owner still has a claim on your home - even though you've purchased it and have a new mortgage on it! If the bank is unable to get the previous owner to pay the mortgage, that bank has the legal right to assume ownership of your brand new home. Title insurance is protection from having a similar situation happen to you. If you've purchased title insurance, the title company will negotiate with the bank and previous owner to settle the matter without you ever needing to worry about it. Title companies work diligently to prevent this type of situation from occurring, but mistakes still happen. But if the mistakes don't happen often, why spend the money? Exactly - because mistakes do happen. Sometimes accidently, but quite often on purpose. Fraud is a problem - a couple getting a divorce may be having a nasty dispute, and one party may decide to sell the house without the other's knowledge. Your new home, which was sold through fraudulent means, doesn't belong to you any more. How much money is it worth to you not to lose your home? It doesn't cost as much as you think. National averages show that title insurance can be purchased for between $3.50 and $3.75 per $1000 of the price of the house. So for $1000, you could insure a home that cost between $350,000 and $375,000, depending on the actual price your title company charges. Is $1000 too much to pay to protect your home, when you're paying $350,000 or more to purchase it? It doesn't seem like too much now, does it?
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Contributor's Note
Mobile Settlement Services, Inc. is a Pennsylvania Title Insurance company that does settlements at customer's locations in the 5-county Philadelphia area without additional fees. (Other areas with a small fee.)
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