Title insurance was estimated to be a $16 Billion industry in the US in 2018. But is it necessary? And who pays the cost at closing?
Title insurance in Utah for many is frequently an afterthought when it comes to any real estate transaction. After all, you’re likely more concerned with getting the best value for your property and ensuring that all your inspections are up to date. And when it comes to stipulations such as warranty deeds and title insurance, most people assume they’re simply necessary evils that make up those mysteriously calculated closing fees.
Except technically, title insurance isn’t legally required by state or federal law. However it is customary, particularly in Utah. And the vast majority of (if not all) lenders will insist on a title insurance policy as a condition to issuing a loan. And if it’s required both by lenders and general protocol, you should be clear just why many buyers might choose to invest in title insurance—and what it could mean for you as a seller.
What Is Title Insurance?
Title insurance refers to insurance designed to protect buyers against any loss resulting from misleading information about the condition of land or property described in a title such as easements, boundaries and descriptions and anything that the property is securing such as mortgages, a judgement, liens, property taxes, city utilities, water rights, bankruptcy information, and more. While some of these occurrences seem rare, many are very common such as mortgages and property taxes.
One of the important and common things a title insurance policy in Utah protects you from is knowing all the past mortgages have been paid in full. When a mortgage is paid off in Utah, the mortgage holder records what is called a reconveyance deed. The company issuing the title insurance will do the research necessary to make sure there are no outstanding mortgages on a property they are insuring. If they miss something and there ends up being an old mortgage on a property you bought that was not paid at closing, your title policy will cover your loss.
Another great example of one of the more common liens in Utah is a mechanic’s lien, which occurs most frequently when a contractor has worked on significant improvements to a home and the seller of the house has not paid the contractor. In Utah, contractors legally have the right to file a lien against property for unpaid fees. Title insurance protects buyers from any forfeiture or seizure as a result; and are typically calculated based on the value of a property.
Other common instances title insurance is designed to protect against can include:
- Forgery and impersonation
- Lack of capacity or legal authority of a party
- Failure to co-sign by a legally entitled party, such as a co-owner, heir or spouse
- Erroneous or inadequate legal descriptions
- Lack of a right of access
- Errors resulting from inaccurate recording
A good title insurance policy in Utah will always protect you to insure you have a clear title when you buy a house.
Who Pays For Title Insurance At Closing?
This is one of the more confusing aspects about title insurance due to the fact that there are two types of title insurance policies—owner’s policies and lender’s policies. With the former, it’s expected that the seller will purchase the owner’s policy for a buyer to ensure a clean and non-faulty title. This is especially true if the transaction is a for-cash transaction, bypassing a lender altogether.
A lender’s policy, on the other hand, is purchased by the bank originating the loan to ensure they are the first to be paid should a borrower default on any lien (what’s known as a first lien position.) And while they are two separate policies (and again, not legally required), it’s generally customary for a lender to request both.
As mentioned, it is typical for the seller to pay for an owner’s policy and the buyer usually pays for the lender’s policy. However, if you are selling your house to a we buy houses type of company, the buyer will many times pay for the seller’s policy.
Title Insurance In Utah
In Utah, title insurance is overseen by the Title and Escrow Commission of the State Department of Insurance. And while it is typical for the cost of insurance to be calculated based on the value of a home, title companies are not required by law to charge the same amount. Luckily, Utah is a “file and use” state—meaning all providers are legally required to have their rates on file at the Insurance Department, which helps to allow for fair and competitive rates.
What If There’s An Existing Lien Against My Home?
Depending on the type of lien, you’ll likely find that it’s next to impossible to sell your home unless it’s paid off in full—particularly in the case of property tax and mortgage liens. Again, while property title insurance is not obligatory, virtually every mortgage lender will insist upon it; as will most buyers. No bank will be willing to issue a loan on a property with an unpaid lien.
The easiest option to avoid issues at closing is of course to pay off any lien or levy in full. While that is easier said than done if you’re in a financial pickle, there are other options you might not have considered.
One viable and easier solution is to avoid paying the lien altogether by selling your home “as is” to a your reputable Utah house buying company at GaryBuysHouses.
Not only are we willing to settle any property title disputes, we can work with you to pay off any outstanding liens and close in as little as 3-10 business days from today. Furthermore, we will cover expenses such as inspections that can otherwise prove to be an additional financial burden to you.
Always close at A Title Company
The Title Company is there to research the title to a property for any and all encumbrances that may be against the property and then issue a policy to protect a buyer and or the lender.
When Gary Buys Houses buys a property, we pay the fees including title insurance in Utah.