What Is Title Insurance and Who Pays for It in Virginia?

What is title insurance, and who pays for it in Virginia?
Title insurance protects against problems with who owns a home, such as an old unpaid lien. It is paid once, at closing. In Virginia, local practice, not the law, decides who pays, so it can be part of the negotiation between buyer and seller.

The Mike Webb Team (Mike and Claudia Webb, RE/MAX Allegiance) helps homeowners in Arlington, Northern Virginia, Maryland, and Washington, DC get their homes ready to sell and sold.

A home's ownership history can hide problems, such as an unpaid lien, a recording error or a claim from a past owner's heir. For a one-time premium, the insurer protects you against certain future losses from title defects, liens and similar claims. Coverage begins when the sale is recorded in the local land records. Source: Virginia State Corporation Commission, Bureau of Insurance, Title Insurance Guide.

• A lender's policy protects the lender's loan. Most lenders require it.
• An owner's policy protects you, the buyer, against the kinds of claims listed in the policy. It is your choice, and it is the one that protects your own money in the home.

The Consumer Financial Protection Bureau explains the difference in What is owner's title insurance?

The Virginia Bureau of Insurance says local practice, not the law, decides who pays the premium, and that buyer and seller can negotiate it. That makes it worth asking early. Your contract and your Closing Disclosure show who pays and how much. Read Buyer Closing Costs in Virginia Explained and What Do Sellers Pay at Closing in Virginia?

Before closing, the settlement or title company searches the public records to confirm the seller can sell and to find any liens or claims that must be cleared. The insurance covers certain problems that a careful search can still miss.

An owner's policy usually covers the purchase price. The lender's policy is based on your loan and ends when the loan is paid off. The owner's policy lasts as long as you or your heirs own the home. It does not pass to the next owner when you sell.

You can usually shop for a title company separately from your lender. The CFPB says the total is usually lower when the same company writes both the lender's and the owner's policies. You may also get a discount, called a reissue credit, if the seller bought an owner's policy before. Ask your settlement company.

The title company and the seller work to clear it, for example by paying off an old lien from the sale proceeds. Some issues can delay closing, which is one reason to start the title work early.

Do I have to buy an owner's policy?
Your lender will require its own policy, but the owner's policy is your choice. Ask what it costs before you decide.

Is title insurance a monthly bill?
No. It is a one-time premium paid at closing.

Does a cash buyer need title insurance?
There is no lender's policy without a loan, but many cash buyers still choose an owner's policy.

Call or text Claudia at 703-350-3884 or visit claudiawebb.com.

The Mike Webb Team, RE/MAX Allegiance. Arlington, Virginia. Equal Housing Opportunity.