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Seller Must Have Title Insurance


By Ilyce R. Glink and Samuel J. Tamkin

Summary: A seller wonders if they still need title insurance to sell their home if the house is paid for. Sam and Ilyce explain the basics of title insurance and tell the owner why they must buy it.

Q: A real estate agent recently prepared for us an assessment of the local market and told us what price he thought we’d get for our home.

In this assessment, he also listed the expenses we could expect to pay during the sale. One expense was for title insurance. He said we "couldn't avoid" buying title insurance.

Why should I purchase this insurance when my house is paid for?
(article continues below useful links)

A: Unfortunately, your agent is probably right. In many places, a home seller has the burden of proving that he or she has good title to the home. The common way to prove you have good title is to buy title insurance.

Title insurance companies provide the service of searching the public records and furnishing a report called a title insurance commitment. The commitment outlines who owns the property and what, if anything, affects the title to the property. Some of the items that may appear on a title commitment are mortgages, other liens, recorded easements, homeowner association declarations and restrictions.

The cost of title insurance varies greatly from state to state. Depending on whether the state regulates title insurance, the cost is higher or lower. For example, title insurance on a $100,000 home in Illinois would run about $600. In Texas, a similar policy would cost $1,171.

The big mistake is for you to think of title insurance as a real insurance policy. Instead, think about it as a cost of selling your home. Because what you’re really doing when you buy that policy is proving to the buyer that you have the right to sell it.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website




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