If you live in Texas, both the buyer and the seller can opt to negotiate for their choice of title company. The seller used to pay for the title policy due to the seller being contractually obligated to provide a good title to the buyer. However, that is no longer the case. Now, there are more buyers that tend to pay for the title policy because it improves the strength of their offer when there is competition, especially as it moves to a seller’s market.
Who Chooses the Title Company?
In most cases, the party that pays for the title policy can choose the title company provider. Since the buyer benefits from the type of title policy they receive, even if the seller pays for it, the buyer has the power to demand that their title insurance be backed by a company that is reputable and trustworthy. They also must ensure that the title insurance is closed. Both sides have their reasons for wanting to choose their choice of company, but both parties do not want this to lead to a loss deal. So even if there is a disagreement, then both the buyer and seller will come to a compromise or agreement at some point.
In this article, we will discuss who pays for title insurance in Texas and what the process behind it is.
What is Title Policy in Texas?
In certain scenarios, where a potential dispute occurs about which party holds the legal title to the property, the type of title insurance can protect either the lender or the new homeowner. If the title did not successfully pass to the homeowner, the title insurance and policy covers the total cost of the property. In this case, the home buyer is not the person who pays title insurance in Texas.
Is title insurance required in Texas?
The owner’s policy is not required, but it is recommended for homeowners because it protects you as the buyer of the property. There are a handful of contributing factors that may cause an invalid title passing, like encumbrances that have issues that affect the value of the land, access to the land, or prior lien or debt. For example, there could be an issue with accessing the land, such as the only way to enter or exit their land is through the land of someone else, like a driveway that crosses the property of another.
If you are wondering who pays owner’s title insurance, it is the home buyer who places their money into the home buyer’s escrow funds.
The lender’s policy is made to protect the lender because it mandates the home purchaser to acquire this type of policy to acquire a mortgage. This eventually becomes the closing costs for the buyer on their loan. This lender’s policy provides the same protections as the owner’s policy, like the invalid title. However, the major difference is that it protects the interest of the lender instead of the buyer.
Make sure to read through Schedule B of the policy because it goes over the exclusions, limitations, special conditions, and exceptions. Before closing the deal, you want to speak to an attorney to ensure you understand everything.
Similar to the owner’s policy, the homebuyer is the one who pays the lender’s title insurance.
Make sure to cross-check the legal description of the policy against your earnest money contract and survey. But who pays for the survey in Texas? It can be negotiated, however, the seller typically does.
It is important to note that title insurance usually does not protect boundary disputes with your neighbors. Keep in mind that this protection can be bought as a separate premium.
A title policy does not guarantee that you can borrow money or sell your property. It also does not ensure that you will not lose money if you decide to sell it. It is freely negotiable from the buyer and seller about who pays for the title policy in Texas.
These policies also are different from homeowner’s insurance. The title insurance does not protect the homeowner against natural disasters or fires. You can purchase additional protections for these scenarios.