- Texas title insurance rates are set by the Texas Department of Insurance.
- Necessary endorsements can add to the cost of that policy.
- A good closer is one who understands that he or she needs to figure out a way around the hurdles in place and get the deal closed.
Its been a busy time here in Texas and, as a result, we have covered a lot of topical issues the last few weeks. And, as we lead up to the election in November, there is no doubt we will be covering a lot of local issues.
But for this week, we are going to wade back into some legal issues. Specifically, I want to talk a little about title insurance in Texas. While it is extremely important, unfortunately title insurance can be costly. But what is that cost? And how is it determined? That’s what I am writing about this week.
Texas Department of Insurance Sets Title Insurance Rates
One issue that we have in Texas – and that many commercial real estate investors notice when they are buying property – is that the cost of a title insurance policy is pretty high. I have written previously about how important title insurance policies are. Title insurance gives a property owner and lender peace of mind to know that, if there is an issue with your marketable title, the title insurance company is obligated to protect your rights.
But, as I wrote above, that peace of mind does not come cheap, unfortunately. Title insurance rates are set by the Texas Department of Insurance (“TDI”). It starts with the base rate. This is the basic cost of the initial title policy. And often endorsements are set up as a percentage of the base rate. The base rate determination is not a simple calculation. For purchases of properties over $100,000, the base rate is calculated as follows:
|Policy Range||Subtract||Multiply by||Add
|$100,001 – $1,000,000||$100,000||0.00527||$832
|$1,000,001 – $5,000,000
|$5,000,001 – $15,000,000
|$15,000,001 – $25,000,000
|$25,000,001 – $50,000,000
|$50,000,001 – $100,000,000||$50,000,000
|Greater than $100,000,000||$100,000,000
So, for example, the base rate on a $4,826,600 policy would be calculated by first subtracting $1,000,000 to get to $3,826,600. Then that number is multiplied by 0.0043 to total $16,569.18. Finally, you add $5,575 to get to a total base rate equal to $22,144.
As you may know, in Texas the base rate for a policy is generally paid by the seller. That is just for the buyer’s title policy. Of course the buyer’s lender is going to want its own title insurance policy. But when the lender policy is issued at the same time as the buyer’s policy then the lender’s policy only costs $100 for a simultaneous issue.
Needed Endorsements are an Additional Cost
I’ve written previously in this blog that there are a number of endorsements that you will want to add to your title policy. These include but are not limited to:
- Coverage for minerals, encroachments, and restrictions;
- An access endorsement; and
- A contiguity endorsement.
These endorsements will also increase the cost of a policy. Some of them are a flat fee and some can be set as a percentage of the base rate calculated above.
In addition to the increased costs that endorsements add, a few years ago, I wrote about a potential credit that is important to remember. If you are refinancing a property within the last seven years, you are entitled to a credit on the new loan policy. As a result, the base rate will be reduced by a percentage of the premium.
How to Find a Good Title Company
So as you can see, while necessary, title insurance can be expensive. And it is set by the TDI so there is no variance between issuers. When determining what title company to use, therefore, you want someone who understands how important it is to get a deal done. A good closer always understands that the parties want to close the deal and we all need to figure out how to get there. Nobody wants to have to walk away from a deal because the title company cannot close.
This is where I think Bukowski Law Firm shines as a title fee attorney. Because we are commercial real estate investors ourselves, we understand how important closing the deal is and work vigorously to figure out a way to make sure that happens.