When buying or selling property, the settlement statement and closing disclosure itemize various title-related service fees and title insurance premiums charged by the title company or settlement agent. But who exactly pays these title insurance fees at the real estate closing?
Who pays title Insurance fees at closing?
In Illinois, title insurance fees at closing are typically split between the buyer and seller. The seller usually pays for the owner’s title insurance while the buyer covers the lender’s title insurance if a mortgage is involved. The buyer also typically handles the closing or settlement fee, recording and filing costs, and any necessary courier fees.
Here is a more detailed overview of common title fees and who typically pays what portion:
1. Title Insurance Premiums
There are generally two title insurance policies issued for a transaction – owner’s title insurance that protects the legal owner or buyer, and lender’s title insurance that protects the mortgage lender if the property is being financed.
Owner’s Title Insurance:
This policy safeguards the buyer’s legal claim to the property against defects. Standard practice is that owner’s title insurance is paid for by the seller in Illinois. Premiums vary based on the home’s sale price and coverage selected. It’s a one time fee and is valid as long as the buyer or their heirs own the property.
Lender’s Title Insurance:
If the buyer utilizes mortgage financing, then they pay for the lender’s policy. This insures the lender against losses due to title defects affecting the property used as collateral. Lender policies typically cost significantly less than the owner’s premium. This is also a one time fee, valid for the duration of the loan.
2. Title Search and Examination
The title company conducts extensive research into the property’s legal history to uncover any prior liens, easements, deed inconsistencies, pending legal action, or other title defects ahead of closing. In addition to the property search, lien searches are also conducted on the parties to the transaction (seller and buyer).
Fees assessed for the title examination vary, but are usually paid by the seller. Customs vary greatly by state and even individual counties. In Illinois, for example, many title companies do not charge a separate search fee, but include the search in the cost of the title premium. Your Real estate lawyer can advise on local norms for this fee.
3. Closing or Settlement Fee
These are administrative fees charged by the title or settlement company for their work facilitating the real estate transaction. This includes facilitating the signing of all legal documents, disbursing funds to all interested parties, recording the deed, and other closing tasks.
While in many states the settlement fee is split between the buyer and seller, in Illinois this fee is customarily paid for by the buyer. The exception to this is in cash deals, when the fee gets split evenly between buyer and seller. The amount of the settlement also varies in Illinois based on the sales price..
4. Recording and Filing Costs
These are charges paid to the local county clerk’s office for officially recording the new deed transferring property ownership, the mortgage documents if a loan is involved, and any other related legal filings that must be recorded together with the main transaction.
By tradition, recording fees are paid by the buyer in the real estate deal. Mortgage documents also generate additional filing fees.
5. Courier Fees
If documents must be expedited between parties via messenger or overnight delivery, the title company may charge a courier fee or overnight mailing cost. This is normally split between the buyer and seller, or paid by whichever party specifically requested or required the expedited courier service.
Title insurance, title searches, settlement administration, recording and courier fees comprise total title costs on a purchase or sale. While ultimately negotiable, standard practice generally defines the allocation of these fees between buyers and sellers.