Iowa?s state-run system is by far the cheapest in the nation?and the most effective Of all the paperwork and hassle that goes into closing on a new home purchase, one of the most overlooked is also one of the most costly?title insurance.
A lot of homebuyers don?t even know they need title insurance until the end of the homebuying process, a time when most people just want to get the process over with. The price tag, which can run north of $2,000 in some states, doesn?t seem like a lot in the context of a six- or seven-figure transaction, so a lot of homebuyers just go along with it.
But title insurance doesn?t need to be nearly as expensive as it is. Given the availability of online records, providing a title guarantee is as easy and cheap as it?s ever been. The exorbitant cost is the result of a title insurance cartel that sets its own prices, doesn?t give consumers choice, and gives kickbacks through a web of affiliated companies. Meanwhile, Iowa?s state-run title insurance agency, Iowa Title Guaranty, provides the same service for a flat rate of $110 for mortgages up to $500,000 in a market where the median home price is $131,600, according to Zillow. Iowa also has the lowest claim rate of any state, in some years falling below 1 percent.
?There is no point [to title insurance],? said Robert Hunter of Consumer Federation of America. ?What keeps it going is the vested interests who are ripping off people in the process. You got a lot of powerful players who like the...