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The Insider Secrets of Title Insurance

May 12th, 2008 by Kaushik Adhikary

Image by Ric e Ette via FlickrIt is estimated that Americans spend more than $16 billion annually for title insurance when buying, selling or refinancing their homes. Only few people are aware of these expenses, in the form of TITLE Insurance.Title insurance is not just like other insurance or home insurance that protects(financially) your home structures and contents by accepting premium.

Title insurance is a kind of insurance where you’re to pay an one-time premium with no deductible. Title insurance protects your ownership to the house and property against- 1. Fraud, 2. Encroachment, 3. Errors or omissions in deeds and in public records, 4. Mistakes in examining records, 5. Zoning infractions, 6. Liens for unpaid taxes or contractor’s dues, 7. Conflicting wills and missing heirs who suddenly appears and claim, alongside with other defects that may arise in future selling.

Title insurance is part of virtually every real estate transaction. It also covers all legal and claim expenses in restoring the title for the home buyers or lenders. Its true that the title insurers are cheifly held responsible for offering trips, gifts, and even cash kickbacks to real estate agencies, lenders and builders. Experts say, consumers, not even realizing so, go with a recommendation from one of those source and thats the insider secrets of title insurance.

“Consumers of title insurance often tend not to get the best deal because they’re not the ones who end up selecting which title insurance policy they will end up buying,” California Insurance Commissioner Steve Poizner said in an interview.”Unfortunately,what’s happened in this industry is there’s been a lot of illegal kickbacks and incentives that have been paid by the title industry to others to steer business in a particular direction,” Poizner said.

Typically there are two types of title insurance-1# Protection to the home buyer; and 2# Protection to the mortgage lender.In California, the cost of coverage of such protection would come around $1,200 to $2,000 for a $500,000 home. In Southern California, premium for the policy is normally paid for by the seller whereas in the San Francisco Bay Area, the buyer usually pays.In case of lender, the buyer is required to pay for.

For a house with a $400,000 mortgage, the policy would usually cost $500 to $600. First American Corp. is the nation’s leading title insurer.This type of Insurers market their products to real estate agents, lenders and builders, instead of the party paying for it.It is probably because agents, lenders and builders have the most influence over the title insurers.

Such type of marketing policies sometimes result in cash rewards and gifts, although federal and state laws forbid giving anything of value in exchange for referrals in a real estate transaction.A report published in 2007 by the U.S. Government Accountability Office found 58 federal and state investigations into illegal payments by the title insurers that’s resulting in more than $100 million in fines and penalties during the previous four years.

According to Department of Insurance records, in the last three years, California’s four largest title insurers have been ordered to pay about $49 million in penalties and refunds for illegally giving cash and gifts to reward real estate agencies, lenders and builders.

In 2005, state investigators found that First American had given tickets to a sporting event. The company spent thousands of dollars on food and beverages for real estate agents’ events and paid for chartered fishing trips, riverboat dinner cruises and trips to the Del Mar racetrack.

Fidelity National Financial Inc., LandAmerica Financial Group Inc. and Stewart Title Guaranty Co. have also been sanctioned for funneling millions of dollars to realty agencies, builders and lenders.