A conveyance of real estate with some exceptions is made through a warranty deed. In such deed, the grantor (seller) guarantees, among other things, that their title is good, i.e. marketable, and the seller/grantor is obligated to defend their title against all claims, even those that pre-date their ownership.
Many property owners believe their title is marketable, however, unless they have had a recent title search conducted on the real estate, including a search for things such as unrecorded liens, there may be one or more instruments creating an encumbrance that have been recorded against the real estate since taking title, whether they acquired title a few days or many years ago. Also, someone or some entity could rightly (a creditor filing a legitimate claim) or wrongly (a fraudulent deed or mortgage) record an instrument against the subject property the very day of closing. While this latter event is, in our experience, rare, it is possible, and a title insurance policy is designed to, as much as possible, cover such events and, alongside the owner, defend the title to that property. Without an owner’s policy of title insurance, the hapless seller is left to defend the title to the property they conveyed, at their sole expense.
Who pays for the title policy premium and related closing expenses?
This matter is a subject for negotiation between seller and buyer at the time they are working out the contract details. In much of Florida, the seller pays for the title policy and related title expenses, however, depending upon the circumstances surrounding the negotiations, there is nothing to prohibit the buyer from paying these costs. It is important to note, however, that whoever pays these costs also gets to choose the settlement agent, i.e., title agency or closing attorney. Whoever is entitled to choose the settlement agent may not seem to be of much importance, however, we believe the seller should pay the costs of the title policy and related services because that title company (underwriter) will stand with them should the need ever arise to defend the title.
How much will the policy premium and related services needed to provide title to the buyer cost?
It depends on the selling price of the subject property. Unlike automobile and property casualty insurance that one pays every year, the title policy premium is a one-time cost that ensures the buyer for the period they are the property’s owners. There are other costs related to the title insurance, e.g., title search, permit/lien search, settlement agent’s fee. These costs vary between settlement agents but not by very much, several hundred dollars, and like the title premium, they are a one-time charge per transaction.