Title Insurance 101

by Tom Thumb
(Trenton, MI)

Hey Joe,

Here's another question for you about who pays for the Title Insurance?

It is not really about rehabbing houses,

but before I can rehab a house I have to buy it,

and when I am done rehabbing it, I have to sell it.

I've bought and sold 10+ houses so far...

Why do I always end up paying for Title Insurance, whether I'm buying or selling?

When I buy a house the seller puts in the addendum that I have to pay for the title insurance.

Then when I sell the house after rehabbing it, my buyers always wants me to provide evidence of clear title.

I want to protect myself from unknown property title issues but, it seems like I'm getting it coming and going (if you know what I mean).
---

Answer by Joe Trometer

Usual and customary charges are no longer usual in this real estate market!

Yes, I do know what you mean...

With more than 30 years holding my real estate license, years of Realtor® continuing education to uphold the laws and ethics; what used to be fair, usual, and customary charges, are now negotiable.

In many cases, as you are experiencing; what sellers used to pay, are now being paid by the buyers.

Of course that point can be argued or negotiated, but that house will be sold fast if you hesitate on the seller's terms, in my experience.

It's happen to me on several occasions until I finally learned my lesson: "What used to be normal with buying houses, no longer is!"
I lost a few deals standing firm on the old principles.

If you're buying houses for rehabbing; the sellers are typically distressed home owners, real estate investors, or they're vacant bank owned homes for sale.
In these cases, the prices of the houses are drastically reduced for a quick sale.

In many sales with distressed home owners and investors selling off their property, there's no extra money or profit to pay for the closing cost. Therefore, the seller asks the buyer to pay all closing costs including the title insurance.

Same with the bank owned homes for sale...

...Those foreclosed home prices are drastically reduced for a quick sale.

For instance, the bank house I just bought was Twenty-Two Cents on the Dollar.
I haven't seen home prices this cheap since I first started buying houses in the 1970's.
Amazingly I picked up a $160,000 for $35k. That is a super fantastic deal!

Now then, buying a fantastic house for a super low price does have a few little tricks (techniques) in the purchasing process as to who pays for what.

Bank house sellers have pre-written addendums that state the conditions of their sale; a break down of the costs explaining what closing costs they will pay, and the costs passed on to the buyer.

In the past and still today on Purchase Offers, there is a line for buyers to add conditions for negotiation... Any special conditions and or expenses the buyer is asking the seller to perform can be added to the Purchase Offer.

You could ask the seller to pay for the Title Insurance but more than likely, they'll reject your offer.

What I found out...


  • Banks are rarely negotiable on houses they have listed for sale in the first 30-days.

  • In some cases they're not negotiable at all until they decide to drop the price a few thousand dollars.

  • Still, they don't change the addendums or the conditions of their sales, only the price.


Distressed houses are selling fast and everything sells, no matter what the condition of the property, when the price is right.

Bottom line, you can try to negotiate... And lose the deal!

Or...

Simply figure your buying and selling closing costs into your final selling price.

Example: Free shipping isn't free at all!
The shipping costs are simply added to the sale price of the item being sold.
The reason that technique is being used is because there is an increase of sales with the illusion that a particular cost is free.

Maybe you can use that selling technique in your business...

What do you think?

Hope this helps you.

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