The Mystery of Title Insurance Revealed

Understanding title insurance through the home buying and selling process can seem like a mystery. This article strives to unveil this mystery and be the source to the source for your answers.

The home buying and selling process can seem like a long and daunting prospect. Title insurance seems to be the most confusing or mysterious piece of the process. You’re not alone in that thought. I get asked many questions surrounding title insurance and who pays for it. Through the course of this article, I dive into this topic and strive to unveil this mystery by being the source to the source for these answers. Because of this, the article is lengthy. You may want to use this as a reference whenever questions arise to quickly skim to an answer you need…

You’ve FINALLY found a buyer or home to buy; and just signed a contract. What happens now? In a nutshell, once a contract is signed by the seller and buyer, the title company typically takes over from there to deposit the escrow, ensure a clean title, and work towards completing a smooth closing. A good real estate agent will also help facilitate or communicate to their client every step in this process in an effort to help provide that “smooth experience” in closing.

The title company’s main responsibilities include:

  • Holding the earnest money deposit in an escrow account — if applicable
  • Running a title search and performing an examination of the title
  • Working to clear any potential title issues
  • Ordering any necessary payoffs, estoppel letters, municipal lien search, survey, etc.
  • Preparing all necessary documents to clear and transfer title
  • Coordinating the day and time of the closing with all parties involved in the transaction
  • Facilitating the signing and notary of all required documents
  • Recording the necessary documents after signing
  • Issuing any title insurance policies

As you can tell from the list above, a good title company is critical in handling the many steps to get to a closing; AND in ensuring a smooth closing transaction meeting.

Who picks the title company to use, the buyer or seller?
Since the seller customarily pays for the new owner’s title insurance policy in many Florida counties, it’s only right for them to be able to select the title company to use.

The buyer customarily pays for and chooses the title insurance company in the following counties:

  • Miami-Dade
  • Broward
  • Sarasota
  • Collier

Whoever is paying, it’s important to do research first in selecting a good title company that will not only ensure a smooth process, but also help keep the costs/fees down. That said, the party not paying for the owner’s title insurance policy can make a counteroffer that includes a new proposed title company if they’re passionate about using a specific closing firm.

Also, sometimes a real estate agent may have a relationship with or preference for a certain title company. As the client responsible for buying title insurance, you may go with that suggestion or select your own preferred title company.

Remember, the goal is to close the transaction. Anything is negotiable. Always keep this in mind in order to work towards a closed transaction, aiming to be a win-win for all parties involved whenever possible. When issues arise, a good real estate agent is seeking for negotiations that will lead to a closed deal. Ultimately trying to SAVE the deal towards an amicable result if possible. They do have your best interest in mind.

Who directs where the earnest money deposit is held?
Same person who picks the title company.

What is title?
Title means ownership. When you are purchasing a home you are really purchasing the title, which means you have the right to occupy and use the space. A party entitled to ownership of the property must be able to show that he/she has acquired such right, or risk losing the property to another claimant. An owner must be able to provide evidence of ownership, which is shown with two methods:

1. Actual notice of ownership is provided by physical possession.

2. Constructive notice, also called legal notice, is achieved by recording documents in the public records. Recording a document has the same power as showing it to the entire world.

Why protect title?
Marketable or merchantable title to real property is title that is free from litigation and defects, enabling an owner to hold it in peace and sell it to a person for its fair market value. As mentioned before, there is only evidence to support the claim. To determine whether or not title is good and merchantable, the record of ownership must be traced back for a period of time necessary to assure that no outstanding or unresolved claims exist against the title.

What is a title search?
Since many types of documents may affect the title to the property, a search of ALL such documents must be conducted. This is performed by the title company selected. All documents that could potentially negatively impact title includes mortgages, judgements, divorces, deaths, births, tax liens, and others. Notations are made regarding any documents that could affect the title. This process is called the title search. A title that is found to be negatively impacted for whatever reason is called a defective title.

How much does a title search cost in Florida?
The cost of a title search in Florida is typically the seller’s responsibility and ranges anywhere from $150 – $1500, depending on the type of property it is – residential or commercial. The fee will be a separate line item on the Settlement Statement, which outlines all the related costs and specifies who pays which fees.

What is title insurance?
Title insurance provides financial protection against losses sustained as the result of a defective title. It is NOT a guarantee of good title and does not give the purchaser of the insurance an opinion of title.

There is no Florida law that requires that title insurance be obtained.

How does title insurance protect me should a claim arise?
If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense — and pay all court costs and related fees. Also, if the claim proves valid, and the policyholder should lose the property as a result of the defective title, they’ll be reimbursed for the actual loss up to the face amount of the policy.

Mortgage lenders will insist on a borrower obtaining a mortgagee (lender’s) title policy before making a loan. This policy protects the lender by paying the unpaid balance of the loan if the borrower should lose title to the property as the result of a title defect.

How much does title insurance cost in Florida?
The cost of title insurance varies based on the purchase price of the property. Unlike other insurance premiums, which must be paid annually, a title insurance premium is paid one time only at settlement. Florida’s title insurance premium is based on a promulgated rate calculation, which is determined by the state of Florida.

The link below is a Florida title insurance calculator that should give you an idea of your costs. For a final, more accurate charge please consult the title company you’re using.

Florida title insurance calculator

What is a closing?
Following your final walk-through of the property, a closing, also known as “settlement” or “escrow,” is when all necessary documents are signed, the title to a property is transferred from seller to buyer and the keys are exchanged. The closing is typically held in the title company’s office and involves the completion and execution of all documents to finalize the transaction between buyer and seller.

The Closing or settlement agent is the person handling all the details of your title search and closing. They will be the person to walk you through signing all the needed paperwork at the closing meeting.

In addition, all financial issues are settled at closing — referred to as closing costs — proceeds are sent to the seller and the necessary documents are filed in the public records, which successfully transfers the title.

What are closing costs?
Closing costs (also referred to as settlement fees) are all the fees required to close the real estate transaction. They can include:

  • Loan points
  • Loan origination fees
  • Private mortgage insurance (PMI)
  • Title insurance
  • Attorney fees
  • Closing fees
  • Recording fees
  • Surveying fees
  • Property taxes
  • The balance of your down payment
  • And more

Prior to closing, review your final Settlement Statement to ensure all the calculations are correct, including credits for past deposits and any other agreed upon buyer and seller credits. Also recheck all lender, title and escrow fees to make sure they’re accurate.

This is a high-level overview; the tip of the iceberg, if you will. Again, I’m striving to be the source to the source with this information. If there’s anything else I can add or if you have general questions, please contact me. Otherwise, for any deep-dive type questions please refer to a lawyer or title company for more specifics.


Courtesy of Title Partners of South Florida, Inc., Full Service Title, Florida Real Estate Sales Associate Pre-License book by Warren F. Todd provided by Ed Klopfer Schools (c) 2015.

Author: Ivy Cowgill, VIP Realty Group, Inc.

"You enjoy the sunsets, let me take care of the details..." Ivy Cowgill is a licensed Florida Realtor® who is passionate about helping you achieve the SW Florida lifestyle of your dreams. Ivy grew up in the Des Moines, Iowa area and is a graduate of Iowa State University and Jones International University; spending the first half of her professional career as a corporate woman focused on providing exceptional customer service in the training arena. Ivy is also a certified Interior Designer, home staging expert, has been in the property management business for 19+ years, and a member of the National Association of Professional Women, The National Association of Realtors, and the Royal Palm Coast Realtor Association. After spending approximately a year looking for her own forever home in SW Florida and meeting challenge after challenge, Ivy decided to reinvent herself and become a Realtor® in order to help her clients experience a seamless process with exceptional customer service wrapped in an informative style. “Let me devote myself to the details so that you don’t have to in your pursuit of living your dream in sunny paradise!”

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