Why Sellers Pay for Buyer’s Title Insurance
Sellers often ask us why they have to pay for the buyer’s title insurance when they sell their Jacksonville real estate. Especially if they had title insurance on the home when they first bought it. There’s one very important reason. Attorney Charley Wood of Attorneys’ Title Services gives us a simple explanation here.
I sometimes get this question from sellers: “I received title insurance when I first purchased my house. Why do I have to pay for buyer’s title insurance when I sell?“
It’s not common, but I have seen someone challenge ownership of a property after the sale. A neighbor thought he owned part of the property that my customers had purchased free and clear. Fortunately no formal claim was made. And the title insurance company assured my customers that they were protected.
If a claim had been filed, the title insurance company would have defended my customer’s interest in court and paid court costs and attorneys’ fees.
If the claim had been valid, the underwriter of the insurance would either pay the cost of the claim up to the amount of the policy or undertake the responsibility and expense of correcting the situation. My customers had even increased the amount of their policy just in case this very thing was to happen.
Who Pays for Title Insurance?
The way that title insurance operates in Florida is by location. This is a negotiable part of a real estate contract. But it’s so common for the seller to pay for the Owner’s Title Policy that many Florida forms are already written with this cost assigned to the seller.
What is Title Insurance?
It’s basically reassurance. The seller is reassuring the buyer: “I have the right to sell you the property. And when you buy it, you’ll have the right to own it free and clear.”
The buyer can feel confident buying from the seller. He’ll be protected from any future judgments, liens or encumbrances. And he can be assured that all past mortgages and liens have been satisfied.
Two Types: Owner’s Policy and Lender’s Policy
The title insurance we just described above is called the “Owner’s Policy.” The current seller purchases a policy to protect the new owner.
The second kind of title insurance is the Lender’s Policy. This policy is subject to the mortgage that the buyer uses to purchase the home. So of course, it’s only shown on a closing statement when there is a loan involved in the purchase.
Why are there two charges on my closing statement?
The owners' policy and the lender's policies are completely separate. The lender’s policy just provides a separate policy for the lender that they do have a first mortgage on the property (or a second mortgage or whatever mortgage it is).
And it’s a completely separate. And those policies only last for the life of the mortgage. So when the mortgage is paid off it goes away.
How Long Does My Insurance Last?
The title insurance policy covers the person purchasing the property for the lifetime that the person owns the property.
So if something comes up years down the road and someone challenges the ownership or a past judgment out there was posted attached to the property that policy will protect it for that period of ownership.