Home Security: Understanding and Negotiating Title Insurance

A title insurance policy should help reveal some of the following things for a buyer:

• who really owns property;

• whether the owner really has the right to sell their interest in the property

• whether there are restrictions on how property can be used.

If the policy fails to disclose an impediment that affects the value of the property, the title company may be liable.

To understand a title policy and learn how to negotiate it changes, prospective buyers should talk to a real estate professional, such as an attorney. 

See Home Security: Understanding and Negotiating Title Insurance by Judon Fambrough of the Real Estate Center at Texas A&M University.

To gain strategic and economic advantages from a title company, buyers should request certain items from the sellers in the sales contract. The possibility of getting each depends on whether it is a buyers' or sellers' market. For example, a buyer should ask the sellers to provide a residential owner's title policy from a title company selected by the buyers. 

The article Home Security: Understanding and Negotiating Title Insurance by Judon Fambrough of the Real Estate Center at Texas A&M University analyzes real estate contract forms, and makes more recommendations about tactics buyers can take with title companies and sellers. 

Home Security: Understanding and Negotiating Title Insurance offers some pointers for people buying title insurance, reproduced in full below.

1. The policy insures legal access to the property. However, legal access does not mean vehicular access. A mere pathway to the property satisfies the legal requirement. There is no endorsement for residential property that insures vehicular access. The problem becomes more apparent in unplatted subdivisions.
2. When negotiating the sales contract, include an option to change title companies if the initial one will not, or cannot, extend the coverage desired by the buyers. While all the title policies are the same, title companies are not.
3. Ask for copies of all the restrictions affecting the use of the property as shown in schedule B of the title commitment. Make sure no prohibitions appear that may restrict the buyers' desired use of the property.
4. Finally, make sure the legal description shown on the contract and in the policy corresponds with the property actually viewed. The title policy does not guarantee that the property viewed matches the property described and insured.

Direct all inquiries regarding title insurance to your local title company or attorney.