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Title Insurance: Who Pays for It?

Monday, July 18, 2022

In 2021, 23% of all home sales involved cash buyers. Cash homebuyers can forego inspections, appraisals, and title insurance, leading to faster closings. 

If you're selling your house, there is a chance you might sell to a cash buyer. If you do, you might avoid some of the typical closing costs. 

However, the chances of selling to a cash buyer are slim, so you'll likely have to pay for some closing costs. But what about title insurance? Will you pay for it, or will the buyer pay the costs?

Keep reading this guide to learn about title insurance and who pays for it when selling a house.

What Is Title Insurance?

Title insurance is an insurance policy with one purpose: protecting a home's title. People who purchase homes buy title insurance policies to protect against home title defects

Title insurance isn't the same as property insurance, yet both are vital when buying real estate. If you have title insurance, the policy covers the costs of settling a problem involving title defects.

For example, your policy protects you if you buy a house and discover a lien on the title years later. Your policy pays for the lien and legal costs involved with settling the lien. 

What Are the Two Policy Types?

Title insurance comes in two main types. 

The first type is owner title insurance. An owner's title insurance policy might be optional when buying a house, but every homeowner needs to buy whether required or not.

An owner's policy protects the person purchasing a house. When they buy an owner policy, the policy covers their costs if they encounter problems with the home title. 

The second type is lender title insurance. A lender title insurance policy is typically mandatory when someone buys a house unless they pay cash. If they pay cash, they won't have a lender requiring this insurance.

The purpose of a lender's title insurance policy is to protect the lender. If a problem with the title arises, the lender won't have to worry about the costs or losing money. The policy covers all the costs. 

Who Pays for Each Type?

As you gather more title insurance information, you might still wonder who pays for it. The person paying for the insurance coverage depends on the policy type.

The lender's title insurance policy is something the homeowner generally pays for it. Therefore, when you buy a house with a loan, you must pay the costs of the lender's policy.

On the flip side, the home seller generally pays for the owner's title insurance. 

Therefore, in a typical home sale, both the buyer and seller typically pay for the title insurance required for the sale. 

Contact a Title Company to Learn More

Are you buying a house? If so, you need title insurance for protection. 

If you're looking for a reputable title company you can trust, contact us.

Heartland Abstract offers excellent policies and coverage you can count on when buying a house. Visit our site or call us for more information if you live in Pennsylvania. 

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