In Texas, the choice of a title company is freely negotiated between the buyer and the seller. In the past, the seller has traditionally paid for the title policy, due primarily to the seller’s contractual obligation to pass good title to the purchaser.  However, with the market moving to a 'Seller's Market' we are seeing more Buyer's offering to pay for this policy since this enhances the strength of the offer in competing offer situations.

It makes sense therefore, that the party paying for the policy should be able to choose the provider. However, since the buyer will be the beneficiary of the title policy even when the seller pays, they have every reason to demand that the title insurance be closed and backed by a company they feel is reputable and trustworthy.  Both sides hold reasonable arguments for their ability to choose. But the reality is, neither the buyer or the seller wants to lose the deal over an argument as to what company shall act as closing agent. At some point, sellers and buyers are able to reach a mutual decision on an acceptable title company without tanking the deal.

So What is Title Insurance Anyway?

Depending upon the the type of the policy, this insurance protects either the new owner, or the lender, in situations where a dispute arises about who holds legal title to the property. Should it later be proven that the title passed to the owner was invalid, title insurance will cover the cost of the property.

Owner's Policy

While these policies are not required they are recommended. This policy will protect you, the purchaser of the property.  Factors that can contribute to an invalid passing of title can include encumbrances with a prior debt or lien, or issues affecting the value of the land, such as access to the land. This final situation can occur when one's only method of entering and exiting their land is through the land of another, such as a driveway that crosses another's property.

Lender's Policy

This type of policy protects the lender. Lenders require a home buyer to obtain this type of policy in order to obtain a mortgage and will become part of your closing costs on the loan.  These policies offer the same protections as an owner's policy, such as the protections against invalid title, but cover the lender's interests instead of yours.

It is advisable for homebuyers to obtain both types of policies, especially if there is any possibility of a clouded title.  The Texas Department of Insurance sets rates for these policies.  Policy forms in Texas are also standardized. This means the policy language is the same, regardless of which company sells the policy.

It’s still important that you read your policy carefully because different companies may describe their coverage exceptions differently. Pay special attention to Schedule B of the policy, which explains any limitations, exclusions, exceptions, and special conditions. You may want to discuss these exceptions with an attorney before you close on a real estate deal.

Limitations

Check the policy’s legal description of the land against your survey and your earnest money contract. Title insurance generally does not protect against boundary disputes with neighbors. This coverage is available for purchase for an additional premium.

A title policy does not guarantee that you will be able to sell your property or borrow money on it, or that you won’t lose money if you do sell it.

It is also important to note that these policies are not the same as homeowner's insurance.  They do not protect the homeowner against fires and natural disasters. An additional policy would be required if such protections are desired. 

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