According to Tennessee REALTORS, buyers looking for their next property have plenty of options, with over 32,000 homes listed on the market in Tennessee as of October 2022. But before you put in or accept an offer, you may wonder about what costs you will be expected to pay. For example, you may be curious about who pays for title insurance in a real estate transaction. The answer varies, depending on what you and the other party agree to.
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What Is Title Insurance?
Title insurance protects homeowners and lenders against issues that may arise with the house. Like car insurance, the policyholder pays a premium, and in exchange, the insurance company agrees to cover the costs of named issues outlined in the coverage contract.
There are different kinds of title insurance policies, such as owner’s and lender’s policies. The owner’s policy covers specific issues concerning the homeowner’s interest in the property. In contrast, the lender’s policy protects the bank’s or mortgage company’s interest in the home, namely, the mortgage.
How Do I Get Title Insurance in a Real Estate Transaction?
Title insurance companies issue title insurance in Tennessee. You get title insurance by submitting a request to a title insurance company and providing information about the parties and the transaction, typically by submitting the real estate contract and other materials as requested.
Before the title company agrees to issue a policy, they perform a title search to ensure that the person selling the property has a “good and marketable title” in the real estate. The title company does this by searching the historical property records and ensuring that there is an unbroken link between buyers and sellers throughout the years. In addition, the title agents check to make sure that there are no outstanding liens or debts on the property, such as mortgages. If there are, these need to be paid in full and addressed before the closing.
Who Pays for Title Insurance in a Real Estate Transaction?
When negotiating a home sale, the parties can choose who pays for what part of the title insurance. For example, the seller may pay for the owner’s policy, and the buyer may pay for the lender’s policy. It depends on the situation and what the parties agree to in writing.
The direct cost of the title insurance premium is only a portion of the title fees charged by most title insurance companies. Other charges include the cost of performing the title search and the title settlement fee.
How Much Does Title Insurance Cost in Tennessee?
You are responsible for many different charges when buying or selling real estate. You are probably already facing costs for inspections, repairs, and real estate agent commissions, so you are probably wondering how much title insurance will cost.
Unfortunately, there is no set fee structure for the cost of title insurance in Tennessee. Each company has its own method for charging for title insurance. As we discussed, there are also multiple types of fees imposed by title insurance companies.
The title insurance company may charge a flat rate for some services, such as the title search, but a percentage or tiered rate for others, like the title settlement. Again, it depends on whether the title company is handling the closing and the procedures that it follows.
Do I Need to Get Owner’s Title Insurance in Tennessee?
You are not required to get title insurance, but it is customary to do so and generally advisable. If someone brings a lawsuit that questions your property ownership, title insurance can help you protect your interest in the home.
While these issues are rare, they do happen more frequently than many people think. And when they do, hundreds of thousands of dollars are often on the line. Having a title insurance policy can help you or your family fight to keep your home or cover legal fees.
Another issue with lawsuits regarding title ownership is they tend to happen years down the road, well after you purchased your property. Ensuring you have title insurance right from the start can help you set yourself up for success if a claim challenging your interest in your home is brought years later.
Batson Nolan PLC: Real Estate Attorneys You Can Count On
Buying or selling a house can be an exciting but overwhelming process. Making or securing an offer takes a lot of work, and once an offer is accepted, additional work begins. You create and give away important legal rights when you buy or sell a house. If the contract, deed, or other important documents are not drafted correctly, it can lead to costly issues. Whether you are buying or selling a property, real estate attorneys can help you understand your legal obligations and protect your rights.
Our attorneys have decades of experience serving as legal advocates for home buyers and sellers during real estate transactions. We also represent homeowners in real estate disputes. Contact our Tennessee lawyers today to schedule a consultation if you have questions about title insurance in a real estate transaction.