What is Title Insurance?

Your title insurance policy is a contract between you (the owner of a parcel of land) and a title insurance company which guarantees you a particular set of facts concerning the land described.

How long does the insurance contract run?

Your owner policy of title insurance runs for as long as you or your heirs own the land and for a period of twenty-five years after the sale of the land with respect to warranties of title made to subsequent purchasers.

How much is the cost of title insurance in Texas?

The cost of insurance in Texas is fixed by the Texas State Board of Insurance on an annual basis and is an "all-inclusive" cost which includes the cost of the title search and examination, title report (title opinion), issuance of title commitments and policies, receiving documents, the supervision of the closing itself and other related matters. The premium is based on the sales price of the loan amount for the property.

Is title insurance coverage available to insure the location of the boundary lines of the property and the location of improvements built upon it?

The standard title insurance policy issued in Texas can be amended to provide additional insurance coverage. The buyer of a residential property can increase the policy coverage by paying an additional 5% of the policy premium. The amount is slightly more for commercial property and vacant land. This is a one-time fee paid when the policy is purchased, and the coverage lasts as long as the policy is in force. In order to provide this greater coverage, the title insurance company will require the delivery of a survey of the land for examination. If acceptable to the title insurance company, the policy will be amended so that coverage is provided to assure the location of the property boundary lines and that there are no improvements extending over the property lines or into easements on the property. The policy will not insure that the owner has a specific number of square feet of property, as the area calculations made by later surveyors may differ.

Who usually pays for the title insurance premium in Texas?

In most of the State, it is customary that the seller pay for the purchaser’s owner policy of title insurance is sometimes a matter of negotiation and in many instances is paid for or partially paid for by the purchaser.

Who usually has the right to choose the escrow agent and title insurer?

In Texas, the company that acts as the escrow agent usually provides the buyer with a policy of title insurance. Neither the buyer nor the seller has an absolute right to make this selection. As with all things in the typical contract, this issue must be resolved through negotiation between the parties. As a practical matter, however, when the buyer makes an offer to buy the seller’s property, it is the buyer that has the first opportunity to specify the company to be used as the escrow agent. The buyer may contend that he will be the insured under the policy, and therefore he should be allowed to choose the insurer. The seller, on the other hand, usually pays the policy premium and can argue that he should be able to choose where he wants to spend his money. There is no state or federal law that gives the right to choose to either party. The Real Estate Settlement and Procedures Act (RESPA) does prohibit a seller from requiring a buyer to use a specific service provider as a condition of the sale if the buyer must pay for those services.

It is my owner policy of title insurance transferable to a new owner of my property?

The answer is NO. However, any warranties of title you make when you sell are automatically covered for the twenty-five year warrantor’s protection described above.

What is meant by escrow in Texas?

The title insurance company or title insurance agent also acts as an independent third party or as a neutral medium between seller, purchaser and lender. The title insurance company or title insurance agent has responsibilities to both the seller, purchaser and lender for honest dealing and is accountable to all sides as a neutral stakeholder. The title insurance company or title insurance agent receives the purchaser’s money, note, mortgage and other loan documents and any other papers required for the transaction and also receives from the seller the deed and any other forms to be delivered from the seller to the purchaser. These items are held until the completion of all requirements of the contract and lender and then delivered to the appropriate parties to fully complete or "close" the transaction. The title company as an escrow agent is NOT the agent of any party to the transaction — it is the "agent" (so to speak) for the "deal" or the transaction itself.

What is the difference between a "title insurance agent" and a "title insurance company"?

Title insurance agents are independent companies which perform complete title services such as abstracting, examination, closing, recording and disbursement of escrow funds. A title insurance agent represents one or more title insurance companies which assume the risk of the title insurance policies issued for the title insurance company by its agents. Title insurance companies in Texas also perform closing functions, usually through subsidiary companies.

What is Closing?

The day you go to the title or escrow company, sign your name on the dotted line, hand over a check and prepare to take ownership of your new home. It's also the day that you and the seller will pay "closing" or settlement costs, an accumulation of separate charges paid to different entities for the professional services associated with the buying and selling of real property. It's too often a day filled with uncertainty and stress. To help you better understand this confusing subject, the Land Title Association has answered some of the questions most commonly asked about title, closing and closing costs.

What services will I be paying for when I pay closing costs?

You will usually be paying for such things as real estate commissions, appraisal fees, loan fees, escrow charges, advance payments such as property taxes and homeowner's insurance, title insurance premiums, pest inspections and the like.

How much should I expect to pay in closing costs?

The amount you pay for closing costs will vary; however, when buying your home and obtaining a new loan, an estimate of your closing costs will be provided to you pursuant to the Real Estate Settlement Procedures Act after you submit your loan application. This disclosure provides you with a good faith estimate of what your closing costs will be in the real estate process. An itemized list of charges will be prepared when you close your transaction and take title to your new property.