Question: You previously mentioned that a closing attorney earns a 70% commission on the sale of a title insurance policy.  Why is the commission so high?

Answer: If you were buying a high-definition flat screen television set for your new home, you wouldn’t complain about the markup imposed by the electronics store.   Closing attorneys earn a 70% commission on the sale of a title insurance policy for a good reason: they perform all of the work.  The title insurance company underwrites the risk, but out sources the work to the closing attorneys.

The work includes tasks like researching a property’s title and preparing the title insurance policy.  The attorney also cultivates and maintains relationships with realtors and lenders who provide a steady stream of business, which benefits the title insurance companies.  Finally, if a title claim arises after the closing, the attorney is called into action to fix any outstanding issues.

Title insurance is purchased at a closing for a one-time premium which covers you as long as you own the home.  All lenders require borrowers to purchase a “lender’s” title insurance policy.  Buyers are given the option to spend an additional $500 to $1,000 for an “owner’s” title insurance policy.  The fee fluctuates depending on the home’s value.  This “owner’s” policy protects the owner as well as the lender against title defects.

Two discounts are applied relative to title insurance.  First-time home-buyers receive 10% off their policy premium.  Be sure to inform your closing attorney if the purchase is your first.  Also, a 40% premium discount is assured if you refinance your loan, and present a previously purchased “owner’s” title insurance policy.

Please view title insurance as a long-term decision.  Don’t use the closing attorney’s commission as a basis for your objection to spending the extra money on an important item like “owner’s” title insurance.  The flat screen t.v. can wait.

Attorney James Haroutunian practices real estate law, estate planning in Billerica at 790 Boston Road.  Contact him with questions at 978-671-0711, prioritylaw.com, hlawoffice.com, or email him at james@hlawoffice.com.

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