Spring 2005

TITLE INSURANCE -WHO PAYS?

Custom in the area, not established rules determines who pays the title insurance premium. For example, custom within 60 miles of St. Louis dictates that the buyer pays the cost of title insurance. On the other hand, custom in the Illinois region east of St. Louis and in the Kansas City region provide that the seller pay the cost. In other areas, it's a toss up.

The reason given where the buyer pays the cost is that the insurance protects him from any past adverse claims against the real estate. On the other hand, where the seller pays the cost, the rationalization is that the seller is responsible to protect the new owner from any past adverse claims.

The cost of title insurance is based upon the sale price of the real estate. For example, a $100,000 title insurance policy may cost about $500. A $20,000-policy"'- may cost about $620 and a $500,000 policy could cost $1,100 to $1,200. Rates may vary slightly among title insurance companies.

Sometimes problems arise if a buyer and a seller get 'hung up" on opposing customs. Here is one that we recall.

Several years ago we represented a seller of a farm in Pike County. The tenant wanted to buy and the seller reduced the price to him by $27,500. The sale contract signed by the seller stated that the buyer would pay the title insurance costs of $750. The tenant refused to sign. He was told that the custom in his area was for the seller to pay for the title insurance. The seller refused, sighting the custom in his area was for the buyer to pay. While the buyer (tenant) agreed that the purchase price was a bargain, he refused to pay the title costs. He said it was the "principle of the thing."

Two weeks later we sold the property to a neighbor for $27,500 more money. The neighbor paid the cost of the title insurance. The tenant not only lost a "good deal", but the new owner terminated his farm lease.