If you’re investing in real estate, you’re probably paying too much for title insurance on every real estate transaction, and you didn’t even know it. Here’s a simple way to saving hundreds on title insurance that most people are never told.
Title insurance is one of the most expensive closing costs in a real estate transaction. It’s usually required by a real estate buyer because it ensures that the buyer will not be responsible if another party has a future claim on the property. If somewhere down the road, someone argues that they have an interest in the property, your title insurer will deal with it.
As a real estate investor, you may pay for title insurance when you are buying a property. If you are selling a property, the new buyer may negotiate that you pay for their title policy, as well. That makes title insurance a significant closing cost on almost every closing, and unfortunately, too many are paying too much for it.
I spend a substantial amount of time each week pouring over the closing statements of the deals of the people I mentor. In almost every case, I find places my student is being charged more in closing costs than necessary. Over the last decade, I’ve adjusted hundreds of closing statements, saving the folks I mentor a ton of money.
Why You’re Paying Too Much
The reason why the buyer, the seller, or both are usually paying too much in closing fees is because there is very little training and knowledge on the subject and the parties adding the fees to the closing statements (brokers, loan officers, title companies, and attorneys) have very little financial incentive to help educate buyers and sellers.
To make matters worse, what usually happens is that the buyer, the seller, or both grow weary of the transaction by the end and they take say, “I don’t care anymore, I just want to close this thing.”
Combine a lack of knowledge with just wanting to get something down, and it’s a recipe for over-paying. At the closing, the buyers and sellers sign the closing documents and accept whatever is written on the HUD1 Settlement Statement as etched in stone. And they pay hundreds, if not thousands, of dollars in extra fees.
All title companies should tell the party purchasing the title insurance what I’m about to reveal. Sadly though, far too many don’t. This simple tip can slash the cost of title insurance by hundreds of dollars.
How to Stop Paying Too Much
Here’s how you stop paying too much for title insurance…
Provide the title company with a copy of the existing title insurance policy on the property. By providing this policy, they will reduce the cost of the new title insurance policy they are going to issue. And since nearly every property has an existing title insurance policy, this means you should get this discount on just about every deal you do.
It’s that simple. Isn’t that the way it works with real estate? The truth is often hidden but, when you get to it, you make better decisions and more money with greater ease.
Where do you get the existing title insurance policy? The best place to find it is in the big, thick folder of closing paperwork the property owner got when they bought the property. If it isn’t in there, find the phone number of the title company from that closing paperwork and call them. Sure, this task may take some extra time to complete, but it’s worth hundreds in savings to you and any reduction in closing costs is usually pure profit in your pocket.
If you’re an experienced real estate investor, you may be mentally calculating all the deals you’ve closed where you didn’t employ this simple technique. Ouch! Better late than never. If you’re just getting started, the good news is you don’t have to learn this lesson the hard way. You’re learning from the experience of others. Well done.
Share your story. Where have you been hit with exorbitant closing fees? Have you been paying too much for title insurance?