Lower rates are coming to a title company near you! That’s big news in the real estate title business. Title insurance, like the housing market, doesn’t follow the laws of gravity. What goes up doesn’t always come down.
“This is a historic time for Texas title insurance,” Paul McNutt Vice President and General Counsel of Title Resources told a group of escrow officers last week. “Rates are going down effective for all policies after September 1. Overall, the rates are decreasing 4.9 percent.”
As a state-regulated industry, all title companies in Texas must charge the same for real estate title insurance. Every few years, the Texas Department of Insurance (TDI) reviews statistical data from title insurance agents and underwriters to see if a rate increase or decrease is warranted.
This rate reduction is due to several factors including the rise in real estate values, profits made over the last 5 to 10 years and increased efficiency. “It is in the best interest for every consumer to be charged reasonable rates,” McNutt explained. “This is a regulated environment with periodic review. The profits were good and therefore the rates should be decreased. This is in keeping with the regulatory terms.”
That explanation may help reduce the sting of what amounts to a pay cut to title agents.
There have been both rate increases and decreases over the years, but mostly drops in the title insurance rates over the past 25 years in Texas. The new rates apply to all Texas real estate transactions that close after Sep. 1st, including sales and refinances.
Let’s take a look at how this affects the average real estate transaction. Title insurance rates are based on the price of the property. These figures are based on a cash sales price without any lender required endorsements.
Sales price of $150,000 currently: $1,152 after Sept 1, 2019: $1,096
Sales price of $500,000 currently: $3,091 after Sept 1, 2019: $2,940
Sales price of $1,000,000 currently: $5,861 after Sept 1, 2019: $5,575
The rate changes made by TDI include a few changes to other rate rules as well. In addition to the 4.9% decrease in the basic title insurance rate, they have amended rules R-5, R-8 and R-20.
Changes to Rate Rule 8 are a bonus to those refinancing their current property. The change provides for a 50 percent credit on title insurance for refinancing within the first four years of the original purchase and a 25 percent credit for refinancing between four and eight years. The rule requires that there must have been a previous loan policy issued on the property.
“This is a big win for the consumer on their home refinance loans,” added McNutt. “Under the new rates, they are saving much more because of both the rate change and we are increasing the credit on refinances.”
Rate Rule 5 applies to policies over $5 million, so most residential properties are not affected. It allows for a discount to be given when a loan policy is issued within 90 days of the owner’s policy, for the same property, provided the ownership has not changed.
Rate Rule 20 expands the construction credit for developers of large construction projects over $5 million deals. If that relates to you, contact your title agency for details.
Texas is one of the few states that has regulated title insurance rates. Rates vary in other states and sometimes vary within each state depending factors such as the county, the purchaser’s credit scores or amount of their down payment. In many states, the title insurance rates are lower. However, title-related closing costs are higher, making the total costs to close much higher in those states. In addition to the title insurance policy, closing costs can include transfer taxes, mortgage tax, documentary taxes, etc. … none of which we have in Texas.
The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem.
Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Allegiance Title at Preston Center, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.