Title insurance isn’t something most people know about – until they’re in the throes of buying a home and signing a stack of papers in a lawyer’s office. The insurance is meant to protect your lender, in case any legal battle surfaces over your right to own the property. A second, optional, title policy is meant to protect you, the homebuyer.
But a WBUR investigation found that the person who sells you both policies is reaping 80% of the cost, which runs at several thousand dollars. In Massachusetts, that person is your real estate lawyer. And there’s no requirement for lawyers to disclose that they’re making money on the insurance.
Here are five key takeaways from the story:
1. In Massachusetts, only real estate lawyers can be title agents.
In most cases, your real estate agent or mortgage broker will recommend a real estate lawyer to handle your closing. You don’t have to hire that attorney; you can hire one you know and trust.
The lawyer makes sure the title search on your property is accurate and files papers with county officials. 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 the closing.
2. The second policy is technically “optional,” but most people buy it.
If you get a mortgage, it’s mandatory to buy title insurance for the lender, in case anything goes wrong with the title later. The second policy, for you, is optional. But most lawyers will strongly recommend you get it, because the first policy protects the bank or lender, not you.
3. You can ask your attorney what percentage they make on the title policies.
Lawyers earn commissions on both the lender’s title policy and the optional home buyer’s policy. Their standard split is 80%. That’s in addition to other fees for representing you and handling the title and settlement. (Lawyers no longer have to disclose on mortgage documents how much they earn on the title policies. If you ask and a lawyer refuses to tell you, let us know.)
4. Most title records are available online, but you still want a professional to check them when you buy a home.
Though rare, problems with titles can crop up. If you’re curious, you can find public property records at masslandrecords.com. But you’re paying your lawyer to make sure a search is thorough.
5. Massachusetts regulators don’t oversee title insurance or keep track of rates for consumers.
There’s no help available on title rates at the state’s Insurance Division, which regulates other types of insurance like vehicle and medical. You can look up rates on various calculators available online. But in general, real estate lawyers recommend their preferred insurer.
No one wants to feel unprotected when they’re making as huge an investment as buying a home. The question is why the insurance costs so much, and why regulators in the state don’t do more to protect consumers.
With reporting from WBUR's senior investigative editor Christine Willmsen and investigative fellow Laura Kraegel