For someone in New York buying a home, commercial property or who may be refinancing a mortgage, all title insurance is NOT created equal!
As a quick primer title insurance is backward looking, purchased for the purpose of protecting owners of real property and the lender that may have provided financing. Title insurance ensures the fact that when a buyer/mortgage refinancer closes, there are no encumbrances that could in any way raise a question concerning their absolute ownership rights in the property!
This fact renders title insurance completely different from forward looking insurance such as health or auto that is protecting the owner against some future and unknown occurrence.
Points To Ponder When Comparing Two Title Insurance Providers!
- Claims experience
- ‘Junk’ fees
Whether insurance is backward or forward looking, a policyholder wants to be 100% sure that were a claim ever to arise that the financial strength of the insurance underwriter is strong and will never pose a problem relative to its ability to pay.
For the sake of argument therefore, let’s assume that the underwriter your attorney (for a purchase) or financial institution (for a mortgage refinance) works with is one of the financially strongest and highest-rated insurers in the marketplace.
If the underwriter being used is one of the best, is the title insurance company chosen to provide your title insurance policy now rendered irrelevant?
The answer to that question is no, because in addition to underwriter the policyholder also needs to think about the frequency with which the title insurance company that they may be planning to use has experienced claims based on their work. Never or almost never? That is the answer that you want to hear.
Assuming that the answers you receive for the first two sets of criteria, underwriter and claims experience come back satisfactorily, the choice of title insurance provider is still not irrelevant!
The relevance of the company chosen is that while the title insurance premium will be the same regardless of the firm that you use, the other fees involved in your transaction, also known as ‘junk’ fees, can and likely will vary widely among firms!
So if a consumer is comparing two firms that have similar underwriters and comparable claims experience, why not choose to use the one with the lowest fees so that the money stays in the consumers pocket instead of the title company’s bank account?
What Can A Purchaser Or Refinancer Do To Protect Their Own Best Interests?
Beyond asking questions about underwriter and work product of the title insurance provider, these are some steps that can be taken to make sure that you, as the consumer, are not being taken advantage of.
Some title insurance rules of the road…
- In a purchase transaction ask your attorney for a title bill in advance and then ask another title company for a sample title bill based on the location of your property, the purchase price and the mortgage amount. Then compare the two and if there is a large difference do not be afraid to question that fact!
- In a mortgage refinance do the same comparison by providing a second title insurance company with the location of the property and the mortgage amount. Also, depending on the age of the mortgage being refinanced the borrower may be entitled to a reissue rate that is less than the normal premium and depending on various parameters a CEMA (Consolidation Extension and Modification Agreement) may be possible as well that will reduce the mortgage recording tax that is due. Ask the questions!
- Finally, understand that while a borrower or property owner may not be asked, it is their right to choose the title insurance provider that they would like to use!
In the comparison below Company ABC is an actual firm in the NYC/Long Island region with the name disguised (Bill is dated May 2016)…
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