First Purchase - Closing Costs

[Aaron Hunt]

Hey Guys, 

Really appreciate any responses and guidance here.

This is my first investment purchase, property is in Livermore California, and we are in closing.  As I type this,  I am reviewing the disclosures from the lender and I see the following:

Title - Closing/Settlement/Attorney Fee for $1,625 Title. The Purchase price is 656K

Question: Does this seem right? I am not sure what this fees is for and seems a bit high to me. (I will ask the lender, but I wanted to inform myself before I speak to them)

[Peter Walther]

Originally posted by @Aaron Hunt:

@Dennis Maynard Thank you, I have learnt so much on this topic :). 

A question that begs asking is, if the Title company guarantees no encumbrances on the property, then an owners title Insurance sounds superfluous... no ? 

I searched up on the forum and everyone recommends buying the owners title Insurance though? So, I am probably going to go ahead and do the same but, seems rather redundant if the title company is already charging you to do the verification.

Some clarification, first, the term "title company" is nebulous.  Generally there is a title agent and a title underwriter.  The agent issues a title policy on behalf of the underwriter.  The risk premium collected to pay for the policy is split between the agent and the underwriter based on the percentage agreed to between them in their agency agreement. If I recall correctly in CA generally the split is 80% for the agent and 20% to the underwriter.  Sometimes the "agent " is owned by the underwriter and then underwriter keeps the whole premium.  If the agent is independent it may issue policies on behalf of one or more underwriters though generally the premium will be the same, the difference is that the requirements to issue the policy may be more or less stringent depending on the underwriter.

In addition, a title policy does not guarantee you have a "clean title", it is a contract of indemnification where the underwriter agrees to reimburse the Insured for a loss caused by title being other then as insured, subject to the insuring provisions, exclusions and exceptions from coverage and the conditions and stipulations of the policy.  This simply means the underwriter does not promise you have good title or that you even have any title at all.  All it does is promise to repay the Insured for an actual loss related to a matter covered by the policy according to terms of the policy.