For many farmers, the winter is a time of reflection on the prior year’s yield and preparation for the growing season ahead. This reflection and preparation phase might involve thoughts of expansion for the upcoming year, whether through the purchase of assets from an older generation as part of the farm transition process, the purchase of additional real estate from an unrelated third party, or the construction of additional improvements/facilities on the farm. Whenever real estate is purchased or mortgaged, the issue of title insurance arises.

Title insurance is a form of insurance that protects the holder from financial loss sustained due to defects in title to the property, such as non-ownership of oil/gas/mineral rights or an easement on the property. Unlike most types of insurance, title insurance protects against title defects that have occurred in the past, rather than events that might affect title in the future. This type of protection is essential to lenders relying on the property as collateral. For this reason, if you purchase a tract of real estate and obtain financing for the purchase, a lender’s policy of title insurance will be required as part of the transaction and will be paid for by the buyer as part of the closing costs.

An owner of real estate can also purchase an owner’s policy of title insurance based on the fair market value of the property, regardless of whether a lender is involved in the transaction. An owner’s policy is particularly beneficial when the purchased property was previously owned by an unrelated third party and the history of the title to the property is unknown.

Title insurance is regulated by the Pennsylvania Insurance Commission, which sets the cost for the one-time premium based on the sale price or the mortgage amount, whichever is higher. For example, insurance rates for a half-million dollar property are approximately $3,000 – $4,000 and for a million dollar property are approximately $5,000 – $6,000, plus a few hundred dollars for endorsements.

Mette, Evans & Woodside’s title agency, South Central Agency, is a full-service settlement company and issuer of First American title insurance. Our title agents, as well as the attorneys in Mette, Evans & Woodside’s agricultural practice group, can handle all of your real estate closing needs, as well as help you to assess your need for title insurance, and, if necessary, issue the required policies.