ABOUT TITLE IN TEXAS
Tell the truth – do you really know what title insurance is? Why
most people should have it? Why it costs what it costs?
Most people don’t. When I tell people at parties that I’m in the
title business, I get a vague “Ohhh …that must be interesting …”
uttered in pointedly uninterested tones. I have a theory that no
one knows much about title because they assume it’s a dull inaccessible subject only engaging to us geeks who do it. Like
lawyers and their “collateral estoppel.” I don’t know what that is
… on purpose … don’t want to know.
But keep in mind, title companies handle some of the most significant transactions in people’s lives and there really are moments
of excitement, so read on …
So, what exactly do title companies do anyway?
Title companies do all of the following and more: research the
history of title to a property before the purchase; issue a report
(“Title Commitment”) on the status of title and any limitations on
use of the property; work with all parties to satisfy the terms of the
sales contract; close the transaction; record documents at the
courthouse; disburse funds and issue a title insurance policy to
protect the new owners and their investment against future claims.
And you thought this would be dull. Seriously, title commitments
are about history, geography, law, and a vision of the future, all
in one densely worded document. Closings can be like courtroom dramas with last-minute witnesses and weighty decisions.
Title claims each tell a little story, ranging from the basically
humdrum to the truly fascinating. As property changes hands,
each transfer is an opportunity for error which could affect
whether the buyers own what they think they own. Errors can be
as simple as confusion of similar names, or as exotic as forged
documents, missing heirs, invalid marriages, missing spouses, lost
wills, and forged identities. See, I told you it gets more interesting.
If the title process seems more banal in your experience, it’s probably because your title company is doing a good job. The best
title companies resolve the dramas behind the scenes, so
customers have an experience more like watching golf than
participating in a wrestling match.
How much does it cost for all that?
This part is really pretty simple. In Texas, title companies are
regulated by the Texas Department of Insurance, which defines
what premiums are charged, how funds may be held and disbursed,
and hundreds of other procedures. All title companies charge the
same premiums, all consumers pay the same premiums, and no
one gets a better rate by shopping around or by the size or
number of transactions. Title companies also charge escrow fees
for processing transactions and pass through some costs for tax
certificates, document preparation and recording, and couriers.
There are a few important things to understand when comparing
Texas title insurance fees with other states. First, one common
observation is that premiums are higher here than elsewhere.
That’s true in some cases, but that’s not the whole picture. When
you compare all fees, you find that many other states with lower
premiums are making up the difference (and then some) in higher
Second, in some unregulated states, bigger customers can
negotiate rock-bottom premiums, leaving individual consumers
paying much higher rates. It’s a similar dynamic to the California
energy crisis of a few years ago. Energy companies were dereg-ulated and large energy consumers negotiated preferential rates
as volume customers. That left individual consumers paying
exorbitant rates to offset those volume discounts. Texans who
purchase title insurance are guaranteed equitable treatment,
paying no more or less than anyone else.
Finally, title insurance in general is a different animal from other
types of coverage. A title premium is a one-time fee – title companies don’t benefit from annual renewals like health, homeowner
and auto insurers. Also, that one-time payment covers the cost of
all the services mentioned above, not just an insurance policy.
Service, service, service.
So we can’t discount, can’t rebate, can’t attract a customer by
any means associated with price advantage. That leaves title
companies with service as the only arena in which we can
compete with each other. Our success depends on a shared
understanding that everyone in the transaction needs it all to
work. If we’re on our game, all competing interests come together
for an (ideally) uneventful closing.
So, yes, if we do our jobs well, it all might seem a little dull. And
we’ll probably never see a TV drama called “Title!” and I’ll never
be at a party where someone says, “You’re in title insurance? Tell
Kara McGregor is Senior Vice President of Business Development
for Austin-based Independence Title Company