Whether you are buying or selling real estate in Florida, one of the most important aspects of the transaction is to determine who will pay for the title insurance policy. Is there a fixed answer or are the parties allowed to sort out between themselves? Read on to discover.
What is Title Insurance? – Understanding the Concept
In real estate law, the term “title” refers to the ownership of a property. When someone holds the title of a property, that person has the “bundle of rights” associated with that property’s ownership, including:
- Derivation of income
Hence, a clear title is the foundation of real estate ownership. Any “clouds” affecting a property’s title can jeopardize one’s ownership rights, such as liens, judgments, unpaid taxes, easements, unknown heirs, and other title defects.
A title insurance policy helps property owners and lenders to protect their rights from claims other parties or creditors might have on the property’s title. Before the policy is granted, the insurance company will proceed with a title search.
The title search is an in-depth exam of public records to evaluate the state of the title at the time of the transaction. After the title search, the company will issue a title report. Any title defects found must be settled before the policy is approved.
In essence, the purpose of a title insurance policy is to protect the owner’s interest in the property if someone challenges the title. In such cases, the insurance underwriter will pay all related costs and losses that may result from the dispute (up to the policy’s limit).
Lender’s Policy vs. Homeowner’s Policy – What is the Difference?
In Florida, you can find two forms of title insurance – the lender’s policy and the homeowner’s policy. When someone borrows money to purchase a property in Florida, the lender will likely require the borrower to purchase lender’s insurance.
This way, the lender’s interest in the property is protected from unexpected title issues until the borrowed amount is fully paid back. This aspect tends to lead some property buyers to failure, as they think a lender’s policy is sufficient to protect them.
However, the lender’s policy will not protect the owner’s interest in the property. To protect his or her rights to the title, the new owner of the property must purchase a homeowner’s policy.
Who is Responsible for Title Insurance in a Florida Real Estate Deal? – The Verdict
Florida law has no provisions specifying whether buyers or sellers are responsible for paying title insurance. Considering it is an optional element in the transaction, the parties must negotiate to determine whether the buyer or seller will handle the policy’s payment.
On rare occasions, the parties involved in a real estate deal may negotiate to split payments between both parties. However, this type of arrangement is highly unusual.
As the title holder at the time of the transaction, the seller customarily pays for the homeowner’s insurance. However, the local custom tends to determine who pays for a title insurance policy. For example, buyers are expected to purchase title insurance in Miami-Dade County, Broward County, Sarasota County, and Collier County.
Should I Pay for Title Insurance in Florida? – Immediately Contact Jurado & Associates, P.A.
A well-versed lawyer from Jurado & Associates, P.A. is willing to guide you through a seamless real estate transaction. Call us today at (305) 921-0976 or email [email protected] to schedule a consultation.