Title Insurance in Real Estate: What Every Agent Needs to Know

Title insurance protects against losses arising from defects in a property's title — problems with ownership history that existed before the policy was issued. Unlike most insurance, which covers future events, title insurance covers past ones. A title company searches public records going back decades to verify that the seller has a clean, marketable title to transfer. The policy then insures against anything that search might have missed: a forged deed in the chain of title, an undisclosed heir with a claim to the property, a clerical error in a court record, or a lien that was never properly discharged. If a covered claim surfaces after closing, the title insurer defends the claim and covers losses up to the policy amount.

Most buyers hear 'title insurance' and assume one policy covers everyone. It doesn't. A lender's policy (also called a loan policy) protects the mortgage lender up to the loan amount. It's required by virtually every lender and is non-negotiable. An owner's policy is separate — it protects the buyer for the full purchase price and lasts as long as they or their heirs own the property. Owner's policies are optional in most states, though strongly advisable. When title insurance comes up in a transaction, make sure your buyer understands they may be paying for a lender's policy at closing without having any coverage themselves. That distinction matters enormously if a title defect surfaces five years after closing.

Title defects are more common than most agents realize, and they range from nuisances to deal-killers. Common examples: a mechanic's lien from a contractor who did work on the property and was never paid; a property tax lien from a prior owner who was delinquent; an easement that was never disclosed and now limits what the buyer can build; a missing signature on a deed from a prior divorce; an estate sale where not all heirs signed the conveyance; and survey disputes where the recorded legal description doesn't match the fence line. Some of these are caught in the title search and resolved before closing. Others surface years later. Owner's title insurance is what stands between a buyer and an expensive legal fight over something that happened before they ever made an offer.

Title insurance costs and who pays them are governed by local custom, not federal law — which means the answer varies significantly by state and sometimes by county. In some states, the seller traditionally pays for the owner's title policy. In others, the buyer pays. In many markets, it's negotiable and addressed in the purchase agreement. The cost itself is a one-time premium paid at closing, typically ranging from 0.5% to 1% of the purchase price depending on the market and the insurer. As an agent, your job is to know the local custom and set expectations early — both for what the policy covers and who's on the hook for it. A buyer who shows up at closing surprised by a $1,200 title insurance charge is a buyer whose agent didn't prep them properly.

A title commitment is the title company's preliminary agreement to issue a policy — subject to certain conditions. It comes in three parts. Schedule A states the basic transaction facts: the insured amount, the legal description, and who's being insured. Schedule B-I lists the requirements that must be satisfied before the policy will be issued — things like paying off existing liens, getting releases from prior lenders, or resolving survey issues. Schedule B-II lists the exceptions — items the policy won't cover, such as existing easements, HOA covenants, or rights of parties in possession. Every agent should review the title commitment before closing, particularly Schedule B-II. If there's an easement that cuts through the backyard or an HOA restriction that limits future use, your client needs to know before they're legally obligated to buy.