The Complete Guide To Title Fees
Purchasing a home incurs costs as part of the process. Closing costs typically represent around 3% - 6% of the purchase price for home buyers. Among the main costs is the title fee.
In this article, we'll explain title fees, who pays them, and how much they cost.
What Are Title Fees?
A property's title refers to its right to ownership and use. There are several fees associated with closing costs, including title fees. Title companies are paid for reviewing, adjusting, and insuring property titles .
The title company is responsible for performing a title search to identify any potential issues with the title, such as encumbrances or liens. If any changes need to be made, the company can make them and ensure that what they found is accurate.
Depending on your situation, you may incur various fees associated with your title. It can be confusing to know how much your closing costs will be if you're unfamiliar with them. You'll know what to expect once you're approved for a mortgage.
List of Title Fees for Mortgages
Title fees cover a wide range of expenses related to titles. Depending on a buyer's or seller's personal circumstances and the agreement they signed, a buyer or seller will pay different fees. Below is a list of common fees, what they cover, and how much they cost in ballpark figures.
Title Search Fee
Conducting a title search involves examining public records related to the property to determine its owner. During the search, any claims or liens on the property will also be revealed, including ones the current owner may be unaware of.
The cost of a title search can range from $75 - $200, depending on factors like the property's location. The current owner usually pays this fee as part of their selling costs.
Title Settlement Fee
Title companies charge closing fees to cover administrative expenses associated with closings. The individual costs of the title fee may or may not be listed by title companies.
In addition to the title settlement fee, there are generally escrow fees, survey fees, notary fees, and other costs associated with title searches. There is also the possibility that another fee, such as attorney's fees, can be included in the settlement fee. Fees vary depending on the service.
Lender's Title Insurance
Having the lender's title insurance protects the lender from any claims on the property. There is no protection for the buyer, only for the lender. The title company may still have to clear the title, even if everything appears in order. You are usually required to purchase a lender's title insurance from your mortgage lender.
A bundle of owner's title insurance and this policy is usually purchased together. In most cases, this fee is a one-time payment ranging from 0.5% to 1.0% of the sale price. For instance, it is possible to pay $2,250 for title insurance on a $300,000 home.
Owner's Title Insurance
Similar to the lender's title insurance, the owner's title insurance covers the owner from any liens or claims on the title that the title company overlooked.
Suppose a relative of the previous owner shows up with a deed claiming the home is theirs within two years of your purchase. In that case, the owner's title insurance will protect you. In that case, you would lose the entire house and still be obligated to pay the mortgage.
However, owner's title insurance is a recommendation, not a requirement, unlike lender's title insurance. In the long run, it will save you thousands of dollars compared to if an unknown claim appears on your title later on. Your title insurance policy remains in effect for the lifetime of your house, unlike that of your lender.
You must pay attorney fees if you hire a real estate attorney (as is required in many states). In addition to the legal fees, the attorney reviews the property's title as part of the review process.
Abstract and Recording Fees
A title search abstract summarizes the title search conducted by the title company. Detailed information on the search and related official documents is compiled and communicated concisely. The cost for updating an abstract of a title can range between $200 and $400, and it can be as high as $1,000 plus if an entirely new abstract of a title needs to be created.
The cost of recording deeds and other official documents with your county's public records is referred to as the recording fee. This charge averages around $125 nationwide.
Where To Find Your Title Fees
A couple of documents contain information about title fees and closing costs:
- Closing disclosure: Any closing costs you incur, including title fees, will be listed in an itemized breakdown.
- Loan estimate: Your lender will provide a loan estimate to determine your total closing costs, title service fees, and how much cash to bring to closing.
The title fees are included in your Loan Estimate (LE) , a legal document that summarizes your mortgage's features, costs, and risks. Within three days of receiving a new application, lenders are required to provide an official Loan Estimate. Make sure you ask about it if you have yet to see one.
Who Pays The Closing Costs - Buyer or Seller?
The answer varies depending on where you live. The seller customarily pays title insurance to the buyer. In contrast, the buyer pays the lender's title insurance to the owner. Additionally, the buyer usually pays for title searches and recording fees. Other times, it's the other way around. It is possible to negotiate who pays these fees regardless of where in the county you are located.
What Is The Average Cost Of Title Fees?
There are differences in title fees between companies and locations. Depending on what is included, they may also differ. There is a general range of 3% - 6% in closing costs, of which title fees account for a large part.
Can Title Fees Be Negotiated?
Title fees can be negotiated. The government sets many title fees at the state and local levels. There is, however, a possibility of negotiating who pays them.
The seller may be willing to cover all or part of the closing costs if the conditions are right. As a result of these concessions, the seller receives a higher price. It's an agreement a seller makes to cover certain costs.
Are Title Costs Worth It?
Many pieces must come together when transferring ownership of a home. To ensure you own the property fully and undisputedly, executing the title transfer process is important.
Despite any fees associated, you will gain confidence and legal proof that the property and house are yours. Ensure you fully understand these fees and see where they can be negotiated with your real estate agent and attorney.
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