2 Title Insurance Policies?

I recently purchased a new townhome in California.

When I went to sign the papers at close of escrow, they listed 2 title insurance policies that I was paying for, which seems like a scam to me.

My question is, is it legal to make the buyer of a property pay for the lender's title insurance policy as well as the owner's?

Thanks for any information you may be able to provide.

Julie

[JETX]

Originally Posted by hockeygirl1

My question is, is it legal to make the buyer of a property pay for the lender's title insurance policy as well as the owner's?

The buyer is liable for the cost of title insurance, not the seller.

How did the title company explain the two policies when you asked them??

They claimed that it was normal for there to be 2 policies (I think it's overkill). They said that it used to be that the builders paid for one and the buyer for the other, but it is now customary in CA for the buyer to pay for both. They made it sound like the builder used to absorb the cost of one policy, but not anymore (which makes sense because builders are passing on costs to buyers that they used to pay for, like MELLO ROOS).

My main beef is that there are two policies. Why do you need 2 policies covering essentially the same thing?

Thanks,

Julie

[JETX]

Originally Posted by hockeygirl1

Why do you need 2 policies covering essentially the same thing?

From the California Department of Insurance:
"Title companies usually issue two types of policies: an owner’s policy that insures the buyer for as long as he or she owns the property, and a lender’s policy that insures the lender’s security interest has priority over the claims that others may have in the property. This protection is limited to the value of the property. In many states, including California , both the buyer and the lender maybe covered under one policy."
Source: [url]http://www.insurance.ca.gov/CSD/Brochure/Residential/TitleInsurance.htm[/url]

I would assume then that these 'two policies' are likely the buyer AND the lenders policies.

[HomeGuru]

Yes, the 2 policies are not the same.

[nextwife]

If you were paying cash, you would neither need nor get two policies.

One policy, the "Owner's policy" insures YOUR ownership interest against covered title defects.

The "Lenders policy" is a policy that insures the lenders interest in the real estate that the mortgage creates. Simply put, the lender will not give you a mortgage unless they have a lender's policy. So must pay for it, just as you must pay for an appraisal. If you were paying cash, this policy would be unnecessary and you would NOT be charged for one.

The protocal of "who pays for what" title policy DOES vary from market to market. In my market, the seller almost always pays to provide the owner's policy. It is considered his reponsibilty.

[HomeGuru]

Thanks for setting things straight.