Washington State Real Estate Practice Exam

Which party usually pays for the title insurance policy in a real estate transaction?

1. The seller

2. The buyer

3. It can be negotiated as part of the sale

4. Neither party pays for it

The correct answer is: It can be negotiated as part of the sale

In real estate transactions, the payment for the title insurance policy can indeed be negotiated as part of the sale agreement. This flexibility is a common practice, as both buyers and sellers may have differing preferences or local customs regarding who pays for the title insurance. Title insurance protects against potential claims or defects in the title to the property, which can arise after the sale is completed. Since the party that will be relying on the title's validity—the buyer, in most cases—often has a vested interest in securing this protection, they might be willing to pay for it. However, sellers might also agree to cover the cost as a negotiating tactic to make their property more appealing. In some regions, it is customary for one party to cover this cost, but it can vary widely based on the local market conditions and practices. This allows both parties to have a say in the negotiations, making it possible for them to come to a mutually beneficial agreement. Knowing that this aspect of closing costs can be negotiated is crucial for anyone involved in a real estate transaction, as it emphasizes the importance of communication and collaboration between buyers and sellers.