From today’s Globe:

The reason for title insurance is that someone else may have a claim on your property, such as an unpaid contractor, an heir of the last owner, or a neighbor who thinks the fence is in the wrong place. Since a mortgage loan is secured by the property, the lender’s policy protects the lender against such claims. And the owner’s policy protects the owner.

The premium is paid once, at closing.

Title insurance is the biggest scam this side of Enron. It’s ridiculous how much money gets paid out for the policy. Or, should I say, it’s ridiculous how much is paid out in commissions.

Yes, I realize I get paid on commissions, too, and (some) people think real estate agents don’t earn their commissions.

But your typical closing attorney doesn’t do ANYTHING to get a title insurance policy; he/she just picks a policy from the many agencies who solicit his/her policy, types the agency’s name into the appropriate space on the HUD-1 settlement statement, and then waits for the checks to clear.

It is unbelievable.

A much-more in-depth story needs to be written on the whole thing; the Globe article is a start.

(I would love to hear from an attorney who can give me any good reason that an owner should pay the commission on any title insurance policy.)

Should you take out title insurance? Well, you’ll have no choice but to pay for the lender’s policy. Should you take out your own? Maybe. Should you buy it through the closing agent, who pockets two commissions? Absolutely not.

More to come.

Source: Title insurers face criticism over pricing: Do you really need an owner’s policy? - By Binyamin Appelbaum, The Boston Globe

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