Buying a home is probably the most significant investment a person will make in their lifetime. Protecting your investment is equally as important. Title insurance protects a Buyer’s and Lender’s rights to the property as well as potential claims or outstanding debts from prior owners. In Florida, The Office of Insurance Regulation determines the premium rates for title insurance. This is known as the “promulgated rate” and is generally based on the purchase price (or loan amount) for the real property. The title policies that are issued at closing are called an Owners Title Insurance Policy (“Owner’s Policy”) and Lenders Title Insurance Policy (“Lender Policy”).
With mortgage rates still hovering around 4%-4.5% most Buyers are obtaining financing before rates begin to gradually increase. Analogous to a Buyer protecting their investment by obtaining an Owner’s Policy, a Lender also requires the same protection. When obtaining a loan to acquire real property the Lender will require a Lender’s Policy equal to the loan being provided. If the Owner’s and Lender’s Policy are obtained at the same time covering the same land, the Lender’s Policy (generally the lesser of the two policy amounts) may be issued by paying a substantially reduced rate called a “simultaneous issue rate” rather than paying for another title premium based on the promulgated rate associated with the loan amount (assuming the loan amount is less than the owners policy amount).
In addition, Lenders will require endorsements to the Lender’s Policy to provide for additional coverage. The most commonly used Lender endorsements are the following: Florida Form 9 (restriction violations, mineral rights, encroachments into easements), Alta 8.1 (Environmental Protection) , Alta 4.1 (Condominium), Alta 5.1 (Planned Unit Development), and Florida Construction Loan – Update Endorsement. Endorsement prices can range from a minimum of $25 to 10% of the policy premium promulgated rate. The type of loan and the property being secured by the loan will dictate the type of title endorsement required by the Lender. Most Buyers are not aware that they are also entitled to obtain additional endorsements (the cost of which is similar to Lender endorsements) to their Owner’s Policy. The most common Owner’s endorsements are the following: Navigational Servitude Endorsements (generally utilized on waterfront property) and Alta 9.1 (Restriction violations, mineral rights, encroachments into easements).
The information referenced above should be discussed with your real estate attorney at the outset so that a Buyer understands their rights and costs associated with the real estate transaction to avoid unnecessary surprises at the closing table.
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As always, we recommend consulting with your local real estate attorney should you have any questions.
Berlin Patten Ebling, PLLC
Article Authored by Jamie Ebling, PLLC firstname.lastname@example.org
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