Tell the truth – do you really know what title insurance is? Why most people should have it? Why it costs what it costs?
Most people don’t. When I tell people at parties that I’m in the title business, I get a vague “Ohhh …that must be interesting …” uttered in pointedly uninterested tones. I have a theory that no one knows much about title because they assume it’s a dull inaccessible subject only engaging to us geeks who do it. Like lawyers and their “collateral estoppel.” I don’t know what that is … on purpose … don’t want to know.
But keep in mind, title companies handle some of the most significant transactions in people’s lives and there really are moments of excitement, so read on …
So, what exactly do title companies do anyway?
Title companies do all of the following and more: research the history of title to a property before the purchase; issue a document (“Title Commitment”) that shows how the title can be insured; work with all parties to satisfy the terms of the sales contract; close the transaction; record documents at the courthouse; disburse funds and issue a title insurance policy to protect the new owners and their investment against future claims.
And you thought this would be dull. Seriously, title commitments are about history, geography, law, and a vision of the future, all in one densely worded document. Closings can be like courtroom dramas with last-minute witnesses and weighty decisions. Title claims each tell a little story, ranging from the basically humdrum to the truly fascinating. As property changes hands, each transfer is an opportunity for error which could affect whether the buyers own what they think they own. Errors can be as simple as confusion of similar names, or as exotic as forged documents, missing heirs, invalid marriages, missing spouses, lost wills, and forged identities. See, I told you it gets more interesting.
If the title process seems more banal in your experience, it’s probably because your title company is doing a good job. The best title companies resolve the dramas behind the scenes, so customers have an experience more like watching golf than participating in a wrestling match.
How much does it cost for all that?
This part is really pretty simple. In Texas, title companies are regulated by the Texas Department of Insurance, which defines what premiums are charged, how funds may be held and disbursed, and hundreds of other procedures. All title companies charge the same premiums, all consumers pay the same premiums, and no one gets a better rate by shopping around or by the size or number of transactions. Title companies also charge escrow fees for processing transactions and pass through some costs for tax certificates, document preparation and recording, and couriers.
There are a few important things to understand when comparing Texas title insurance fees with other states. First, one common observation is that premiums are higher here than elsewhere. That’s true in some cases, but that’s not the whole picture. When you compare all fees, you find that many other states with lower premiums are making up the difference (and then some) in higher ancillary fees.
Second, in some unregulated states, bigger customers can negotiate rock-bottom premiums, leaving individual consumers paying much higher rates. It’s a similar dynamic to the California energy crisis of a few years ago. Energy companies were deregulated and large energy consumers negotiated preferential rates as volume customers. That left individual consumers paying exorbitant rates to offset those volume discounts. Texans who purchase title insurance are guaranteed equitable treatment, paying no more or less than anyone else.
Finally, title insurance in general is a different animal from other types of coverage. A title premium is a one-time fee – title companies don’t benefit from annual renewals like health, homeowner and auto insurers. Also, that one-time payment covers the cost of all the services mentioned above, not just an insurance policy.
Service, service, service
So we can’t discount, can’t rebate, can’t attract a customer by any means associated with price advantage. That leaves title companies with service as the only arena in which we can compete with each other. Our success depends on a shared understanding that everyone in the transaction needs it all to work. If we’re on our game, all competing interests come together for an (ideally) uneventful closing.
So, yes, if we do our jobs well, it all might seem a little dull. And we’ll probably never see a TV drama called “Title!” and I’ll never be at a party where someone says, “You’re in title insurance? Tell me more!”