New York State property buyers over-spent on title insurance by an estimated $155.3 million, according to a new report.
The costs piled up because too many people believe title insurance rates are set by law, said Daniel C. Price, co-founder, of OneTitle, a direct title insurance underwriter that conducted the study.
“There is a misconception that title insurance rates are set by law,ˮ said Price. “As a result, even knowledgeable attorneys — who often end up making the selection — are unaware that lower cost alternatives exist, and therefore fail to inform their clients how much they can save.
“This is in contrast to other major expenses in buying and selling real estate, like brokers’ fees, mortgages and lawyers’ fees, for which residential and commercial buyers understand they can shop around and save a lot of money.”
The OneTitle survey covered 182,487 individual real estate transactions recorded throughout New York State during 2015, from starter homes to large commercial transactions, across every city and town. Using data captured from tax and transaction records, the study included purchases totaling $140.2 billion and weighed the potential for savings through readily available lower cost title insurance options.
Failure to select lower cost title insurance options cost New York State real estate buyers $851 on average per transaction, or 27 percent of the average cost of title insurance and related fees.
According to OneTitle, on the average transaction under $200,000, buyers could save 33 percent of their total title-related closing costs, giving them back, on average, one percent of the purchase price of their home.
For the largest transactions, the lost savings was well over $100,000 per transaction.
The study calculated total title insurance cost — including premiums and fees — using prevailing industry rates and fees for each of the 182,487 transactions and compared those to a benchmark incorporating OneTitle’s lower filed premium rates.
The median purchase price of real estate in the state last year was $206,000. The average price was $768,050.
The survey found that high cost title insurance premiums and fees impacted residents of every county.
While the largest potential savings were in Manhattan ($28.1 million) and Brooklyn ($15.2 million), the savings in upstate counties could be nearly as large: Erie County was 5th in excess title costs ($9.4 million). Monroe and Onondaga Counties also made the top ten.