Buyer's Fund in Escrow Pays for Title Insurance

  Question: In a recent column, you said that the buyer of a home pays for the cost of an owner’s title insurance policy issued to the buyer. In the standard purchase contract for a home, however, the seller pays for the cost of the owner’s title insurance policy issued to the buyer, and the buyer pays for the cost of their lender’s title insurance policy issued to the buyer’s mortgage lender. Were you confused? Doesn’t the seller pay for the owner’s title insurance policy issued to the buyer?

  Answer: You are correct — sort of. The standard purchase contract does require that the seller pay for the owner’s title insurance policy issued to the buyer. In actuality, however, the buyer’s funds paid into escrow by the buyer pay for both this policy and the title insurance policy for the buyer’s lender. At closing, the seller is charged on the settlement statement for the cost of the owner’s title insurance policy, and the buyer is charged on the settlement statement for the cost of the buyer’s lender’s title insurance policy. This practice of the seller “paying” for the owner’s title insurance policy is based more on custom than logic. When you buy a car, would you expect the car dealer to pay for your automobile insurance policy?