Why Title Insurance?

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The state of Texas regulates the sale of title insurance, such as the premiums are based on the sale price of the property and the premiums may not be discounted by the title companies.

Most sellers view the title insurance premiums as an unnecessary cost of sale, which benefits the buyer only. In fact, providing title insurance to the buyer is equally important to the seller.

Transfer of real estate in the state of Texas must be evidenced by a “deed”. Types of deeds include: special warranty deeds and general warranty deeds, are a few of the most common. The TREC contract forms require the seller to provide the buyer a “general warranty deed”. This type of deed is a unilateral contract evidencing the seller’s warranty of title to the buyer. The warranty period goes all the way back to the Texas land grants in the 1840’s. In the event a “cloud on title” surfaces at the time of the buyer’s future sale, the buyer has the legal right to sue the seller for breach of warranty of title to the property. Title insurance helps define the seller’s risk with respect to his warranty of title.

Accordingly, such insurance is beneficial to both buyer and seller. Sellers benefit considerably when providing title insurance to buyer.