You’re buying a home in WA State, and the question of title insurance comes up. Who is on the hook for this cost, the buyer or the seller?
Title insurance is a unique type of insurance that protects homeowners and lenders from costs relating to title claims or disputes. In Washington, as in many states, it is usually the seller who pays for the buyer’s title insurance policy, while the home buyer is typically responsible for purchasing the lender’s policy. However, this can vary.
How Title Insurance Protects Homeowners and Lenders
Whenever a home is bought or sold in Washington, government officials will create a record of that transaction. These records are generally filed in the public archives. In some cases, a house might also have records relating to liens, levies, or other events that affect the ownership of the home.
As a home buyer, the last thing you want to do is purchase a house that has some kind of claim or dispute associated with it. You want to buy a house that is “free and clear.” And that’s where title companies come in.
When you purchase a title insurance property for a home you are buying, the title company will closely examine all available records pertaining to the property. Specifically, they are looking for potential ownership issues, and they will attempt to remedy any issues they discover.
Despite the thoroughness of this process, there is always a chance that problems could arise later on down the road. And that’s where the title insurance policy comes into play. This special type of insurance offers some degree of protection from financial losses stemming from title-related issues.
Who Pays in Washington, the Buyer or Seller?
So, who pays for title insurance in Washington State – the buyer or seller? While this can vary from one transaction to the next, it’s customary for the seller to pay for the buyer’s owner policy, and the buyer typically pays for the mortgage lender‘s policy. But, as with many closing costs, these things can be negotiated between buyer and seller.
To recap, there are two different kinds of title insurance policies:
- The lender’s policy is required in most home-buying scenarios when a mortgage loan is being used. This policy protects the lender’s financial investment/interest in the property, typically until the loan is either paid off or refinanced.
- The owner’s policy is paid for by the buyer and is usually optional. In most cases, the cost of the owner’s title insurance policy is paid only once, though the coverage lasts as long as you own the home. While coverage and specifics can vary, this is usually how it works.
According to the American Land Title Association:
“An Owner’s Policy is typically issued in the amount of the real estate purchase price, and remains in effect for as long as the owner, or his or her heirs, retains an interest in the property. In addition to identifying risk before a transaction is completed, the Owner’s Policy will pay valid claims and all defense costs against attacks on the title.”
This means if you have to go to court to defend your right to your home, the title insurance policy helps defend your rights and covers the legal costs associated with the battle.
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