Title insurance isn’t something most people know about — until they’re buying a house and signing a stack of papers in a lawyer’s office. The insurance is intended to protect your lender, in case a legal battle surfaces regarding your right to own the property. A second, optional title policy is intended to protect you, the homebuyer.
But a WBUR investigation found that the person selling you the two policies reaps 80% of the cost, which amounts to several thousand dollars. In Massachusetts, this person is your real estate attorney. And lawyers aren’t required to disclose that they make money from insurance.
Here are five key story points:
1. In Massachusetts, only real estate attorneys can be title agents.
In most cases, your realtor or mortgage broker will recommend a real estate attorney to handle your closing. You don’t have to hire this attorney; you can hire one you know and trust.
The attorney ensures that the title search on your property is accurate and files the paperwork with the county authorities. If there’s a problem with the title — like a tax lien against the seller or a contested will involving the property — it’s your attorney’s job to resolve it before closing.
2. The second policy is technically “optional”, but most people buy it.
If you get a mortgage, it is mandatory to have title insurance for the lender, in case something goes wrong with the title later. The second policy, for you, is optional. But most lawyers will strongly recommend that you get it, because the first policy protects the bank or lender, not you.
3. You can ask your attorney what percentage he earns on title policies.
Lawyers earn commissions on the lender’s title policy and the homebuyer’s optional insurance policy. Their standard distribution is 80%. This is in addition to other fees to represent you and manage title and settlement. (Lawyers are no longer required to disclose on mortgage documents how much they earn on title policies. If you ask and a lawyer refuses to tell you, let us know.)
4. Most title deeds are available online, but you always want a professional to check them when buying a home.
Although rare, problems with titles can occur. If you’re curious, you can find public property records at masslandrecords.com. But you pay your attorney to make sure the search is thorough.
5. Massachusetts regulators do not oversee title insurance or track rates for consumers.
There is no help available on title rates from the state insurance division, which regulates other types of insurance like auto and medical insurance. You can look up the rates on various calculators available online. But in general, real estate lawyers recommend their preferred insurer.
No one wants to feel unprotected when making an investment as big as buying a home. The question is why insurance is so expensive and why state regulators aren’t doing more to protect consumers.
With reporting by WBUR investigative editor Christine Willmsen and investigative colleague Laura Kraegel
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