What are title fees and how much are they?

Title fees cover the cost of transferring ownership of a property to another party. They are a significant part of your closing costs when buying a home. Title fees cover legal needs such as title searches, insurance, and administrative costs associated with ensuring a clean transfer.

Knowing what your title fees and closing costs will be is helpful when purchasing a home, as is understanding who pays for them.

Key takeaways:

• Title fees are required to ensure a clean legal transfer of ownership and to protect the buyer and the seller from unknown claims on the property.
• Title fees include the title search, title settlement, lender’s title insurance, owner’s title insurance, attorney fees, abstract fees, and recording fees.
• Customs vary depending on the location of the home, but the buyer and seller can negotiate who pays the title fees in a transaction.

What are title fees?

In real estate, the title shows who legally owns a property, which includes the right to possess it, use it, or sell the home. Title fees are part of your closing costs and are paid to a title company for adjusting, reviewing, and insuring a property’s title.

The title company also conducts a title search, which should expose any potential legal problems or competing claims to ownership. Encumbrances or liens are common issues that must be resolved for a clean title transfer.

The fees for a title search will vary depending on the property, its location, and your individual circumstances. Going through the process of mortgage approval can provide you with a ballpark estimate of potential costs here. However, should you encounter any issues with the title, the actual costs may be higher.

How much are title fees on average?

Title fees vary by title company, the location of the property, and the services the title company performs. Homebuyers can expect to pay 3% – 6% of the home’s total purchase price in closing costs. For instance, on a $500,000 home, you might expect to pay between $15,000 – $30,000 in closing costs.

Types of title fees

Title fees generally refer to the overall cost of title-related services. Let’s look at the average title fees that you can expect to pay at the time of closing on a property, what these expenses cover, and the typical costs associated with the purchase.

Title search fee

A title search is an investigation into a property’s public records to verify legal ownership. Such a search can also reveal liens or encumbrances on the property that must be addressed before the title can be transferred.

For a residential property, the average title search costs $75 – $200, depending on factors such as the property’s location. If a property requires a more thorough search of historical records or is complicated by other factors, the cost can exceed $300. Responsibility for paying the title search fees can fall to either the seller or the buyer, depending on local tradition or custom. Make sure to negotiate who pays this fee and include that information in your purchase agreement.

Title settlement fee

The title company also charges a title settlement fee – sometimes called a closing fee – to cover the administrative costs associated with closing. Individual title companies may break out such fees into individual components.

The title settlement fee typically covers:

• Escrow fees related to the handling and disbursement of funds
• Survey and notary fees
• Deed preparation fees and other costs associated with a title search

The settlement fee also may account for attorney’s fees related to the transaction.

Lender’s title insurance

Lender’s title insurance protects the lender from any claims that may arise on a property that’s up for sale. Mortgage lenders generally require lender’s title insurance.

A lender’s title insurance policy offers coverage for the entire term of the loan. But if you refinance your loan (effectively replacing your existing loan with a new one), you’ll also need to purchase a new policy as well.

Lender’s and owner’s title insurance are generally purchased together. In exchange for receiving insurance benefits, you’re charged a one-time fee that typically ranges from 0.1% to 2% of the purchase price. Sticking with the above example of a $500,000 home, you might expect to pay a $5,000 title insurance fee.

Owner’s title insurance

Owner’s title insurance protects the owner against any liens on the title or overlooked claims that may arise after the sale closes. The policy should cover up to the purchase price of the home.

Although owner’s title insurance is optional, it’s highly recommended. The policy remains in effect until you sell the home or refinance it.

Again, as lender’s and owner’s title insurance are typically sold as a package, you can expect to pay around 0.1% – 2% of the purchase price for these policies.

Attorney fees

If you hire a real estate attorney – it’s required in some states – you can expect to pay those fees as well. Expenses cover any charges associated with a lawyer reviewing paperwork associated with the sale, including the title.

As a typical benchmark, attorneys charge an average of $500 – $1,500 as a flat fee for the work, depending on the complexity of the closing. Alternately, lawyers may charge you hourly at rates of $150 – $500 or more per hour.

Abstract and recording fees

An abstract is the title company’s summary of title search results. It includes the details found in the search and any official related documents. To update a title abstract generally costs $200 – $400. It can cost $1,000 or more to create a new abstract of title.

Recording fees cover the filing of the deed or other government documents required for the sale. You should expect to pay around $125 for these costs.

Where to find your title fees

Multiple documents present homebuyers with information on title fees and overall closing costs:

• Loan Estimate. Your lender will provide this document within 3 business days of receiving your mortgage application. It estimates your loan terms and closing costs, with a line-by-line breakdown of expected charges, including title fees.
• Closing Disclosure. Your lender will provide you with this document, which includes a breakdown of all your final loan and closing costs, at least 3 business days before closing. It will include the final title fees you must pay at closing, as well as how much cash you need to close the sale.

Title service fees can be found on the second page in Sections B or C of your Loan Estimate or Closing Disclosure. If you buy owner’s title insurance, you’ll find that fee in Section H of your Loan Estimate.

If you see title services listed in Section C, you are not required to use the provider that your lender chooses. You can review and compare competing title service providers to determine who offers the best price available.

Who pays the title fees at closing?

The buyer often pays the title fees at closing. However, who pays the cost usually is negotiable between the buyer and seller.

In some parts of the country, it’s customary for the seller to pay the owner’s title insurance fee and the buyer to pay the lender’s title insurance fee.

Regardless of local custom, a buyer and seller can negotiate who pays which fees. This should be included in the purchase agreement.

For instance, if conditions are favorable, a buyer may be able to negotiate for the seller to cover all or a portion of the closing costs, including title fees. When a seller agrees to pay the closing costs for a buyer, it’s an example of a seller concession. Such concessions might come into play, for instance, if a property owner has been sitting on a home for a long time or needs to quickly unload it.

Are title fees negotiable?

If you’re paying the title fees, you can choose the title company. This gives you the chance to shop around to find the best deal on title fees.

The bottom line: Understanding title costs

Title fees and closing fees provide assurance and legal proof that proper due diligence and steps have been taken to assign and record the property in your name. As part of the process, note that you’re also free to work with your real estate agent or attorney to review these fees and determine which ones are negotiable.

To get started estimating potential title fees as well as down payment and closing costs upfront, simply reach out to begin the mortgage approval process today. If you’re interested in learning more, you can also give us a call at (833) 326-6018.