• Debbie Ferraro

Who Pays for Title Insurance, the Buyer or the Seller?

Updated: Sep 29, 2021

small black cardboard house clip and key with brown paper tag with insurance written on it

When property is sold, whether residential or commercial, title insurance is one of the costs associated with the transaction. It is one of the many closing costs that typically accompany the exchange of real estate.

Who pays for title insurance, the buyer or the seller? It mostly depends on the state and county where you live.

What is Title Insurance and Why is it Needed?

The title for a property lists ownership. Whenever property exchanges hands, the title is transferred to the next owner. Before a property can be sold, a title search must be conducted to ensure that the property legitimately changed hands with each transaction and that the seller is the rightful owner. Even if a thorough property search is conducted and everything appears to be in order, something could come up, such as a person who claims ownership of the property with proper documentation. This could lead to loss of the property and significant financial losses as well.

Some examples of what title insurance covers:

  • False impersonation of the true owner of the property

  • Forged deeds, releases, or wills

  • Undisclosed or missing heirs

  • Instruments executed under invalid or expired power of attorney

  • Mistakes in recording legal documents

  • Misinterpretations of wills

  • Deeds by persons of unsound mind

  • Deeds by minors

  • Deeds by persons supposedly single, but in fact married

  • Liens for unpaid estate inheritance, income or gift taxes

  • Fraud

Is Title Insurance Required?

Title insurance protects the buyer and the lender if the property is being purchased with a mortgage. If the buyer is paying cash, title insurance is not necessarily required, but is still a wise option. Title insurance offers protection to the buyer in the case that someone else claims ownership of the property.

If the buyer will be taking out a mortgage to finance the purchase, the mortgage lender will require title insurance to protect themselves from financial losses if property ownership were to be contested.

Are There Laws that Dictate Who Pays for Title Insurance?

In most areas, there are not strict laws regarding who pays for title insurance. In most cases, it falls to what is customary in the county or state where the real estate closing will take place. For example, in the state of Florida, it is customary in most counties for the seller to purchase title insurance. But there are a small handful of counties where it is customary for the buyer to purchase the title insurance.

In the state of Virginia, the buyer usually pays for title insurance. But in Tennessee, the responsibility customarily falls to the seller. In Maryland, the seller would pay for the buyer’s little insurance policy, but the buyer would be responsible for the lender’s policy. As you can see, it varies greatly from state to state, which means you would need to find out what is customary where the property is located.

Can Responsibility for Title Insurance Be Negotiated?

In many cases, who pays for title insurance is negotiated between the seller and the buyer. Offering to pay for title insurance can be an incentive for a seller to accept an offer from a certain buyer. A seller may offer to pay for title insurance in exchange for a higher purchase price from the buyer. Closing costs in general are typically part of negotiations between buyers and sellers.

Still Have Questions? American Guardian Title Can Help

Whether you’re buying or selling property, if you have questions title insurance in a real estate transaction, contact American Guardian Title. We provide title insurance to all parties involved in the exchange, including the buyer, seller, and lender. We offer a standard policy and an enhanced policy. The standard policy is based on the sales price of the home at the time of closing, and does not escalate in value with the home’s appreciation over time. The enhanced policy does offer an escalation as the value of a home appreciates. Under an enhanced policy, the homeowner may be able to recover up to 150 percent of the original purchase price.

Contact us or call (833) 331-8476 or (813) 331-3010 today to discuss your title insurance options. We look forward to offering you financial protection for your real estate transaction.