What You Should Know About Title Insurance

Title insurance typically is a mandatory, large cost for those seeking a home purchase or Florida refinance - often in the $1,000-$2,000 range.

But is it priced too high for what you get?

Equally important: Do referral relationships among realty brokers, title agents and Florida mortgage companies restrict price competition, create anti-consumer conflicts of interest and discourage buyers from shopping for lower-cost title insurance and closing service options?

The Government Accountability Office, a non-partisan watchdog agency, made an in-depth examination of the title industry during the past year and came up with some unsettling findings:

• “Multiple characteristics of current title insurance markets, as well as illegal activities by a number of those involved in the marketing of title insurance, suggest that normal competitive forces may not be working properly, raising questions about the prices consumers are paying.”

• Unlike most other forms of insurance, where claims paid by the insurer often amount to 70 percent or more of the dollars collected, in title insurance the claims amount to just 5 percent of premiums. Where’d the rest go? Title agents pocket up to 90 percent of your premiums.

• Although in many states, premiums are set to reflect the work that title agents perform to check public records and remove any clouds on the title chain, agents also tack on separate charges for title searches, analysis of the abstracts, and a variety of fees.

The GAO acknowledged that title insurance is an important service that “provides real benefits to consumers and mortgage lenders by protecting them from undiscovered claims against property that they are buying or selling.”

But most home buyers are vulnerable when they’re required to purchase coverage: They don’t know where to shop for the best deal.

The American Land Title Association, which represents title insurance companies and agents nationwide, welcomed the GAO’s study of the industry but disagreed with its findings on price competition and affiliated businesses.

In an interview, Ed Miller, chief counsel and V.P. for public policy, said, “We argue that there are a large number of agents competing pretty fiercely for business” - and they offer real choices on pricing and services for consumer who shop.

Bottom line for the Florida mortgage loan seeker: Don’t roll over when it comes to title and settlement services. Be aware you can shop for lower-cost alternatives. Find them and save hundreds of dollars.

SOURCE: Detroit Free Press