When potential homebuyers find their dream homes, they're often too busy dreaming about paint colors or new furniture to worry about title insurance.
However, a title policy is an important protection that helps defend buyers (and their lenders) from future property ownership claims, surprise liens or otherwise cloudy titles.
Homebuyers usually purchase title insurance as part of their real estate closing costs, and they often take the first insurance company suggested to them by the seller, says Rafael Castellanos, a managing partner at Expert Title Insurance Agency, in New York.
Unfortunately, many buyers get sticker shock when they realize how much title insurance is.
"The fees are generally about 1 percent of the loan amount," he says.
The good news is that buyers can save hundreds of dollars off policies if they are willing to ask questions and get independent guidance, Castellanos says.
Here are four ways buyers can save money on their title insurance policies:
1. Shop around for the best deal. Title insurance includes a two-part process. First, there is a search of a property's title history to determine if there are any errors or problems with the deed. Second, an insurance policy is underwritten to protect the buyer if a problem is later discovered, Castellanos says.
In several states, insurance providers are allowed to set their own rates, which means the insurance premiums can vary widely. But homeowners won't know which title companies offer the best rates unless they search around, Castellanos says.
A good place to start searching is the website of the American Land Title Association, which provides an online search based on geography.
Another option is to ask an independent attorney for help in understanding local regulations, costs involved and insurance company recommendations, Castellanos says.
"Buyers need someone who has an independent thought and who is well-versed in real estate," he says. "The best person for that is often an attorney."
2. Negotiate the add-on fees. While some homeowners can shop around for rates, this may not be an option in states where insurance is highly regulated.
However, in nearly all cases, there are ancillary fees involved with purchasing these types of policies. Usually, these can be negotiated, Castellanos says. This is regardless of the insurance regulations involved, he says.