Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
Ordering a title search and purchasing title insurance is an integral part of buying a condo, a co-op, and a townhouse in New York City. These can protect you from potential problems that you may be responsible for if left unresolved. Read on to learn why it’s necessary to get title insurance and how it can help you. How much is title insurance in NYC and who pays for title insurance in New York? Whether you are researching the potential closing costs you will pay or are simply learning terms mentioned by your real estate attorney, one of the fees you are likely to encounter is title insurance. We will reveal the cost of title insurance in New York State.
Let’s assume you just bought your condo in New York City. But suppose after you close, you find out that the prior owner of your condo died and left behind several liens against your property due to failure to pay taxes and HOA fees.
Well, you probably have to pay the outstanding costs. Therefore, the mortgage lender could care less that you didn’t cause the liens and may go after you to pay the unpaid debt attached to the apartment. And the lender is legally within their rights to do so.
Every prospective homebuyer needs to have a licensed title search conducted during the closing on the house to make sure there are no defects that can negatively affect him or her down the road.
But a title company can’t always catch all the defects in a title. This is why you need title insurance to protect you from inconsistencies that happened prior to your ownership.
A title—also called a real estate title—is a series of reports and documentation that serves as evidence that you own or have the right to own your condo, co-op or townhouse in New York City.
Title insurance is a type of indemnity insurance that is fairly common in the United States. In fact, the main purpose is to protect against financial loss from any defects in the title of real property that may result in the loss of ownership by future claims.
Therefore, title insurance is required if the real property is being purchased with financing from a mortgage lender.
Title insurance protects a homeowner against any errors, defaults, and defects that may have happened before he or she owned the apartment or because your title search failed to identify them at the time you purchased the home.
These include unpaid property taxes, liens, forged title documentation, and unpaid debt caused by the previous owner of your apartment. Title insurance also protects your rights as an owner after you close on the purchase of your property.
Let’s say somewhere down the line after you have purchased your home you discover that the seller had bequeathed your property to their grandchildren in a newly discovered will.
No. Owner’s title insurance isn’t required, but it’s highly recommended to have to protect the interests of a homeowner. Nevertheless, you can’t sidestep it. It’s a closing requirement for NYC buyers who purchase a home in New York City with a mortgage.
The mortgage lender will require you to get title insurance along with a title search if you are purchasing a property with a mortgage.
In short, it’s to protect the lender. And typically, you can’t close without title insurance. Title insurance is one of the largest closing costs for homebuyers in New York City.
If you buy a home all-cash, it’s up to you whether or not you should get it. But even then you shouldn’t risk it. A missing heir may suddenly appear after you buy the property.
For example, unpaid property taxes by the previous owner or liens against a property are two potential issues that title insurance protects you (and your bank) against. While not an insignificant cost, a mortgage company probably won’t lend you money without it.
If you are buying a co-op in the city you won’t be required to buy title insurance. That’s because a co-op apartment is not considered real property. You buy shares of a corporation that owns the entire apartment building and these shares provide you with a proprietary lease.
As such, you don’t have real property rights. Therefore, if you are financing the co-op with a mortgage, you aren’t required to get title insurance.
However, your real estate lawyer will protect you by conducting a co-op lien search on your behalf. While less common and not required, there are insurance policy options available for buyers in co-ops called leasehold title insurance. This is an added layer of protection if you like to feel more secure. Just ask a title agent.
Title insurance consists of two parts. These are the lender’s policy and the owner’s policy.
The lender’s policy covers the lender’s interest in your property and also covers the purchase price. The policy protects the lender and title claims that affect the lender’s loan to you. It also protects the lender against any outstanding liens and other defects associated with the property. If a lawsuit against the lender occurs, the policy will compensate the lender.
The owner’s policy protects the homeowner. It protects the full sales price of the apartment in the event you somehow lose equity. It also protects you from fraud, errors, and disputes that may come about, as well as any legal fees attached to these encumbrances. The coverage doesn’t decrease over time.
Since a title company can’t always catch every error in a title, here’s what title insurance for the owner or homebuyer covers:
Your real estate attorney will help you get title insurance, as it is an integral part of the closing process and the contract documentation. In NYC, it is customary for your real estate attorney to help you organize title insurance as part of his/her guidance through the contract documentation and closing process.
Real estate attorneys typically select the title company as they know whom to trust. You also have the right to select the title company if you have someone you prefer.
Most NYC attorneys will select a title company from a preferred list of title insurance companies that they know and trust. To be safe, it is always smart to ask your attorney to disclose if they have any conflicts of interest with the title company – such as an ownership interest. As a buyer, you have the right to select the title company if you prefer.
Title insurance is expensive. It will cost you thousands of dollars. In fact, it is one of the largest closing costs for those who are buying a condo or a townhouse in New York City. There are a fixed fee and a variable fee that adjusts with the purchase price.
To be specific about how much the title insurance rates will cost, it will be around 0.4% to 0.45% of the purchase price. But the exact amount will vary by the title insurer and the specifics of each sale. Unlike say a health insurance policy, title insurance is not paid month to month but rather one time by the homebuyer during closing. That may be hard to pay for some homebuyers but note that the cost can be rolled into all the fees involved during the closing.
As always, the NestApple Team is here to help if you have any questions. You can reach us at firstname.lastname@example.org