Should I Buy Title Insurance? Washington, DC Home Purchase Question

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On top of the price of purchasing a home itself, there will be additional costs incurred along the way that are important to note. On the lower end, these fees include:

  • Home Inspection Fee ($350-600, paid directly to inspector at time of service)
  • Appraisal Fee ($400-600 paid directly to lender during contract period)
  • Real Estate Brokerage Administrative Fees ($195-395, paid at settlement)
  • Mortgage Origination Fee (dependent on size of loan and program used)
  • Title Examination Fee ($400-900 paid to title company at settlement)

Of the 5 fees listed here (this is not a complete list), the latter 3 are part of your closing costs as a buyer. Total closing costs for a home purchase in Washington, DC can range anywhere from 2-3% of the sales price and are added on top as part of your transaction.

The bulk of your closing costs as a DC buyer will be the cost of Lender and Owner’s Title Insurance and the District of Columbia Recordation Tax. The recordation tax is paid at settlement and is at the time of writing:

  • 1.1% of the purchase price for homes sold for $399,999 and below
  • 1.45% of the purchase price for homes sold for $400,000 and above

What is Title Insurance

First American Title, one of the country’s largest underwriters of title insurance policies describes the process of examining title and issuing title insurance this way:

When a property is financed, bought or sold, a record of that transaction is generally filed in public archives. Likewise, records of other events that may affect the ownership of a property, like liens or levies, are also archived. When you buy title insurance for your property, a title company searches these records to find – and remedy, if possible – several types of ownership issues. First, the title company searches public records to determine the property’s ownership status. After this search, the underwriter will determine the insurability of the title. Even the most skilled title professionals may not find all problems associated with a property, though. Some risks, such as title issues due to filing errors, forgeries, or undisclosed heirs, are difficult to identify. So after the title company finishes its searching, it also provides a title insurance policy that will help protect you from a variety of issues that might be uncovered later. If you take out a mortgage loan when you buy your property, your lender will require a loan policy of title insurance. This protects the lender’s interest in your property until your loan is paid off or refinanced. On the other hand, an owner’s policy of title insurance insures your ownership rights to the property. Even though you’ll pay for this policy only once, your coverage will last as long as you own your home.

What Does Title Insurance in Washington, DC Cost? 

The simple is rates vary but not by a great deal. According to the most recent costs comparison chart issued by the DC Department of Insurance, Securities, and Banking, rates for reissue policies (policies for resale properties where title insurance was already in place) vary from $1.65-2.70 per insurable $1,000 increments up to a sales price of $1,000,000. You can secure this discount by reminding your realtor to ask for the seller’s title insurance policy at time of contract from the listing agent. Most title companies offer helpful calculators that will produce reliable estimates although any estimate should be verified with the company itself. This is not a comprehensive overview of what goes into calculating insurance costs and you should secure an estimate to determine how much you can expect to pay for title insurance.

Shopping for Title Insurance

Unfortunately, it isn’t as easy as you would think to shop around for title insurance as most title companies underwrite policies from certain insurance providers. The best way to project costs for title insurance is to shop when it comes to selecting the title company (also referred to as settlement agency) at the initial stage of writing your sales contract. Your realtor should help by recommending trusted title companies who offer excellent service and reasonable rates. Many title companies offer credits that will cover part of the cost of their title examination fees which could save you hundreds of dollars upfront. It’s important to note that while an attorney working for the title company, that does not mean that they represent you and are able to provide legal services. A lot of friendly title attorneys do provide advice but any information received should be verified and be used for informational purposes only. Remember, the choice of title company is yours alone, not that of your realtor or the seller and their agent.

Should I buy title insurance?

So, back to the question, should you buy title insurance for your Washington, DC home purchase? While lender’s title insurance is required if you are securing a loan for the purchase of the home, owner’s title insurance is optional but may be a great idea. Though the title company has a financial interest in selling you the policy, it often makes sense to protect the equity you have in your financial investment and protecting yourself against unforeseen issues that may arise

Craig Sacks of National Capital Title & Escrow in Washington, DC describes a possible scenario here:

Owner’s title insurance is optional. Most articles on the topic overlook the every day issues faced at the time of sale and how the owner’s title policy proves instrumental.

The most commonly applied benefit of owner’s title insurance arises when an owner goes to sell and the title search uncovers a defect. On average, 1 in 4 title searches have some type of defect like a prior owner’s laon that isn’t properly released. An unreleased loan can impede a sale. When the seller has an owner’s title insurance policy, the underwriter of the police can issue a letter of indemnity allowing the new title insurer to insure without exception to the defect identified (unreleased loan) and the owner to sell as planned. This is the most commonly applied benefit of the owner’s title insurance and should not be overlooked as it comes into play on a very regular basis

Be sure to talk to your realtor extensively about the benefits of title insurance and insist on being able to speak to the title company you are considering using for your purchase of all of the benefits associated with carrying this protection. It may not always be used, but most find that they are very glad they have it if an issue ever did arise.


For more information on title insurance, selecting a title company to work with, or for information on the home purchase process, contact me at [email protected] or at 202-378-0567.

 

 

 

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