Getting the best deal on title insurance
If you’ve ever purchased title insurance, chances are you went with the company recommended by your real estate agent. But by shopping around, you might have been able to save yourself hundreds of dollars.
Don’t be surprised, however, if you feel pressured to go with a specific title company. State authorities have repeatedly sanctioned title insurers for giving illegal gifts and kickbacks to real estate agents, lenders and builders to steer business their way.
You are the one paying for title insurance, and federal law guarantees your right to pick your own provider. Here are some tips to help you get a good deal.
Compare prices online: Last October, the California Land Title Assn. launched TitleWizard, www.clta.title wizard.com, which allows consumers to compare rates from 83 title companies. A recent search showed a $512 difference between the highest and lowest prices for an owner’s policy on a $500,000 home, plus a $491 difference on a policy to cover refinancing a $400,000 loan.
The rates are listed by default in less-than-useful random order, but you can rank them from lowest to highest by clicking on the “title policy rate” column heading.
Shop early: By the time most people even think about title insurance -- when signing a home purchase contract -- it’s too late to shop around. The title insurer needs to be named in the contract. So start shopping for title insurance as soon as you begin shopping for a home, or as you’re preparing to put your home on the market.
Know what you are buying: There are two types of title insurance policies: one to protect lenders and one for owners. If you need a loan to buy a home -- and who doesn’t? -- the lender will insist that you pay for title insurance to protect its investment.
The owner’s policy covers the buyer for the amount of the purchase price. In Southern California, the seller customarily pays for this policy.
If you refinance, you must get a new lender’s policy but not a new owner’s policy.
To get a lender’s rate on the TitleWizard site, select “purchase.” To get an owner’s policy rate, select “sale.”
Ask about discounts: If the property has been sold or refinanced within the last five years, you are probably eligible for a “short-term rate” -- typically a 20% discount -- since it is unlikely new problems have arisen in the short time since the last title policy was issued. On TitleWizard, check the box that asks about recent sales or purchases.
Some companies offer discounts for senior citizens, first-time home buyers and for homes in a new subdivision. Title insurers will also usually charge less if they issue both the owner’s and lender’s policies in a particular transaction -- known as the “concurrent” rate.
Be sure to ask the title insurer about all possible discounts.
Know the companies: Because of interconnected ownership and underwriting affiliations, there’s less choice in California title insurance than it might appear.
A consumer who randomly calls Ticor Title, Chicago Title and Security Union Title might be suspicious to find they all offer the same rate. That’s because they’re all owned by Fidelity National Financial Inc., the nation’s second-largest title insurance firm.
Among other affiliations, LandAmerica Financial Group Inc. owns Lawyers Title, Gateway Title, Commonwealth Land Title, United Title and Southland Title; First American Corp. owns United General Title Co. and part of CornerStone Title; and Orange Coast Title Co. owns California Title.
There are dozens of smaller, independent title companies in California, but while they may do the title search themselves, they will ultimately have the policy issued -- or “underwritten” -- by one of the major firms. Some independent firms are affiliated exclusively with one underwriter; some deal with multiple companies.
So, when shopping, be sure you’re comparing different companies.
Be sure you’re comparing the same coverage: Banks will sometimes ask for extra coverage -- known as endorsements -- on the lender’s policy. When comparing costs, be sure to ask each insurer for the same coverage.
Make the other party pay: Anything is negotiable. When you make a home purchase offer or a counter-offer on a home you’re selling, stipulate that the other party pay for both title insurance policies. If you’re dealing with a motivated seller or an eager buyer, they just might agree to it.
Consider doing without: The risk of a title-related problem is so low that J. Robert Hunter, insurance director for the Consumer Federation of America, said people should think about not buying an owner’s policy.
That advice may not be practical in Southern California, since home sellers here customarily provide the policy (and good luck trying to sell your house if you refuse to pay for title insurance). But in other locales, including the Bay Area, the buyer traditionally pays for the title insurance, so this may be an option there.
“Everybody has a different level of tolerance of risk,” Hunter noted. “If you can’t sleep at night, well sure, go ahead and get it. But just understand it’s not a good economic risk.”
Be prepared to complain: If you think you’ve been treated unfairly by a title insurance company, call the California Department of Insurance consumer hotline at (800) 927-4357.