If you are in the real estate business, then you must have paid for title insurance. Real estate investors often question what title insurance really is, and reasons for its requirement. Another concern is how they can save money on title insurance.
The Title Search
When you are selling a property, the Title Company or attorney then performs a title search. They follow the chain of title as far back as 50 years and trace ownership through deeds listed in public records. They also check against mortgages previously recorded and liens that have been released. Once the documents have been reviewed, the Title Company or attorney then sets out to prepare a ‘title insurance commitment’.
The Title Insurance Policy
This insurance policy is not like the usual insurance policies that you might come across. It covers events in the past as well. For instance, if a previous occasion might put the current ownership in jeopardy, then the title insurance company will in fact defend the claim and pay for any damages with relation to the property. Keep in mind that this insurance policy is not one that takes care of claims based on any events that take place after the issuance of the policy.
Ask for a ‘Re-issue’ Rate
Title insurance policy coverage commences from way back then until the date of the transferring of the title of the property. This means that the longer you own the said property, the more you will have to pay in terms of policy costs. Therefore, the shorter the time you own a property, the risk of a claim against the title is very small. For cases like this, insurance companies will then offer the owner “re-issue” rates. This rate offers the title insurance policy at a discounted rate if another policy on the very same property was issued during the last few years.
Try a ‘Hold-Open’ Policy
When buying a property with the intention of selling it within the year, make a request to the title insurance company to give you a ‘hold open’ policy. This enables the issuance of a policy on a second transfer of the property instead of one on the first transfer. Normally, the seller pays for Title Insurance and in this case, you can pay only the additional 10% required and save 90% when you sell the property.