What are normal title fees 400-500k house?

Question

In the past, I have purchased homes and title costs are normally 700-1200$ for homes between 100-250k (California/Missouri/Kansas).

For a 420k house (Chicago), I am purchasing they have the total at 3500$, seems like a lot of ancillary costs but wanted to hear other feedback. I am going to look around on Monday. Not sure if this matters but this is an assumable VA loan.

The breakdown:

Environmental protection Lien- 180

Alta loan policy- 550

Alta 9- 180

Deed- 60

Mortgage- 60

Recording service fee- 15

Loan policy fee- 3

Title idemnity service fee- 175

Settlement/closing fee- 1750

Policy- update search

Electronic delivery fee- 40

Chain of title- 250

Closing protection seller- 25

Closing protection buyer- 25

Overnight delivery fee- 40

Jonathan Klemm · Answer

Hey @Charles Granja - I am here in Chicago with you and typically we see about 1% depending on title company.  Always try to use Investors Title Services (https://investorstitleservices...) they almost always are lower than your typical title company.   My friend/mentor @Joe Mueller started it a while back specifically for investors.

Happy to make an introduction if that would help.

Nate Sanow · Answer

That could be true (do not need representation) but welcome to the world of title insurance.  All types of title companies are terrible at explaining the WHY behind why things are the way they are.  They almost make it sound like it has to be this way for legal purposes with the county / state that records the transfer of the deed, when in fact they really are doing it because it is a requirement of whoever is the underwriter for the title insurance policy.  In other words, that is what you are paying for, even if it doesn’t seem like it.

I do believe in title insurance, I wish it was cheaper, but I will always be glad I have it in the event that I need it.

Nate Sanow · Answer

On average it’s a little less than 1% in my state.  I am guessing your policy update is your title insurance update - is there not a charge there?  You didn’t have a number.  I know Illinois is an “attorney state” which I don’t have experience in, as we are a title company / escrow state here in OK.  I do know that irregardless of that, any escrow company is usually considered an agent of an actual title insurance company, similarly to a Farmers / State Farm / Geico for general insurance,  but a little more nuanced than that.  I guess the simple answer is finding out some of the formulas to their pricing, usually title companies in my area have some fees on their website and have a weird formula for the title insurance policy, but like I said it usually comes out to a little under 1% for the buyer - the seller has some flat fee expenses to pay too which is usually “customary” here in OK.  I know in TX it was more customary for sellers to pay for most closing expenses in most cases when they were coming out ahead on the sale…that maybe has changed…so it depends a lot state by state for sure.

Brie Schmidt · Answer

@Charles Granja

Purchase   Price

$420,000

Recording Charges

$150

Transfer Taxes

$3,150

Title Fee

$3,300

Charles Granja · Answer

Thanks for the feedback. That's a really great guess, the land has existed for more than 21 years. I see that you have worked in the industry for a long period of time, besides your amazing analysis do you have any data that you can provide to the discourse pertaining to what % of people actually have issues with clouded title? Or what % of the cost is attributed as profit/loss when an insurance company makes a determination on their pricing model? I am unsure if you are a seasoned investor but I have found multiple that are active on biggerpockets and do not get owner's title insurance for relatively new-build properties.

Besides a potential Indian-native laying claim to a property or a ballistic missile destroying my property, I wonder what else makes owner's title insurance a good investment when I plan to circulate the property after 5-7 years.

There was recently a discussion from a seasoned investor on biggerpockets that does not have home insurance for any of his properties and he has so far saved 300k which he has used to reinvest. It seems that him and many others do not agree with value propositions pressed by insurance companies and it seems to be a unique perspective, likely gained from data and not opinion.

Peter Walther · Answer

I'm going out on a limb here, but I suspect the land you're buying has been around for a little longer than 21 years, so I also suspect there have been more than two owners since it was created.  In my opinion, title insurance is one of the best insurance values you can buy.  Ask how much your homeowner's insurer or auto insurer would charge as a onetime premium to cover you for as long as you have an interest in your house or car as happens with title insurance.  I think your agent would have a hard time stopping laughing.

Charles Granja · Answer

In my situation, there have only been 2 owners to this property, one owned the property for 20 years, the other for 1 year. I may be glad but if the chances of it happening are less than 1/1000 of a %, I'm not sure its worth the cost. I get the minimum deductibles on my insurance because I am required to have insurance, I don't necessarily have insurance because I am worried about my houses burning to the ground.

If you made an investment and determined your risk was low, would you spend the same amount of money as you would have on something that you determined was high risk?

Nate Sanow · Answer

If an ex-wife or brother or someone from the sellers past that said they were on tilte came after your ownership and you were in court and 500k was on the line, you’d be glad you had title insurance.

Charles Granja · Answer

This is an interesting perspective, I have also always gotten title insurance but I am beginning to question whether it is actually worth it or not.

What are normal title fees 400-500k house?

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