Posted by Kristine-CA on May 05, 2004 at 17:07:01:
Carl: your understanding of binders for title purposes is the same as mine. I’ve purchased binders on all my purchase escrows (whether or not I was paying for the actual policy). Then upon re-sale, the binder policy saves me money. Since, I’m usually flipping, this is a savings of $400 - $700 per deal.
One more point. The binder policy fee is based upon the title policy fee, which was based on the selling price. So the binder only covers a title policy for the original selling price. If you sell for a higher price, the title company will charge you the difference between the two fees minus the binder fee.
At least this how it’s been working for me.
Sincerely, Kristine
What is a Binder on Title Insurance? - Posted by DE
Posted by DE on May 05, 2004 at 11:32:53:
Can anyone tell me what a binder on title insurance is? Thanks for any help.
Re: What is a Binder on Title Insurance? - Posted by Randy (SD)
Posted by Randy (SD) on May 05, 2004 at 11:56:21:
A “binder” on title insurance is a commitment issued by the title insurance company that they have researched the title on a specific property, identified any and all underlying liens and specify what requirements must be met to convey a clear title to the new owner and how that title will be conveyed (for example a Warranty deed from “Sam A. Seller” to “Bill E. Buyer”). A mortgage from “Bill E. Buyer” to “Dewy Screwem and How” in the amount of $2 much, secured by the land described in schedule A in the title commitment (which contains a legal description of the property).
This assures the lender there are no superior liens to their first mortgage, and satisfaction of any mortgages for liens presently on the property.
Re: What is a Binder on Title Insurance? - Posted by Carl CA
Posted by Carl CA on May 05, 2004 at 11:49:01:
DE,
Binders are new to me, although I have a fair amount of experience in REI.
A binder is a policy that you purchase in addition to your normal title insurance policy that will save you some money when you ultimately sell the house. They usually run about 10% of the cost of the normal title policy, and have a lifespan of about 2 years. The binder prevents the title insurance company from having to search title back to the beginning of time when you sell. In a traditional transaction, the seller (you) need to provide title insurance to the buyer upon sale.
An example:
I purchased a house for cash where I covered all closing costs. I bought a title policy because the seller was not a terribly financially responsible man (he hadn’t filed his taxes in 5 years). My intention was to sell the house quickly, so my title agent suggested that I purchase a binder ($60) in addition to the normal title policy ($585). When I ultimately sell, it will be my responsiblity to provide clear title to my end buyer. Since I have the binder, my title company will only have to search title back to the date of the binder, or my purchase date. This results in less time and risk for the title company, therefore a cheaper policy I need to purchase when I sell. Savings are not significant, but why walk away from a few bucks?
Carl
only ‘kind of’ correct… - Posted by Steve
Posted by Steve on May 05, 2004 at 16:06:31:
although I can be wrong from time to time 
NOTE I work for an insurance firm and have worked for a title insurance firm as well. But the “can be wrong” still stands…
A binder is either an oral or written statement by an insurance company telling the insured that he/she has immediate insurance protection during the period it takes to issue a policy.
Meaning a binder states that you are covered even though you don’t have a policy. Insurance firms will do this from time to time if they issue policies for set dates. For example: Firm A only issues policies from 1/1 - 12/31. If you come around on 10/3 and need coverage, Firm A will issue you a binder under 12/31 and then issue you a policy at 1/1. It’s a retroactive thing the insurance firm will do.
As far as the statement “The binder prevents the title insurance company from having to search title back to the beginning of time when you sell.” wasn’t true at my previous firm. If they had ever insured the property, that’s as far back as they would go. So if they wrote the coverage in 1992, title insurance firm-1 did in 1995, and title insurance firm-2 did in 1997, my old firm would only go back to 1992 as they still insured from 1992 back…
Hope this makes sense.
Re: only ‘kind of’ correct… - Posted by Carl CA
Posted by Carl CA on May 05, 2004 at 16:27:23:
Steve,
Thanks for joining the discussion. I put a error and omission disclaimer on my post as well - I’m humble enough to admit I still have plenty to learn.
The binder I purchased, as I understand it, is a separate instrument from the title policy. When I sell the house, my title insurance company will sell me a new title insurance policy for much less than a “full” policy, because I purchased the binder when I took title. Assuming I go back to the same title company to purchase the new title policy at sale, am I correct in believing that the binder will play a role in reducing my cost? My title agent tells me so. I’m hoping you’ll tell me the same.
Binding coverage (for hazard insurance, for example) over the phone is a different animal than the “binder” on the title policy. Is it not? Maybe I’m not making myself clear.
Carl
oops… - Posted by Steve
Posted by Steve on May 05, 2004 at 19:05:17:
as my wife would say “Steve you don’t know much and what you do, you don’t know well” 