• Everything you wanted to know about title insurance
District of Columbia
Maryland
Virginia

Closing Costs by the Numbers

As a rule of thumb, tack on 3% to 6% of the purchase price to account for closing costs. In our scenario, we used a purchase price of $500,000 and a conventional loan of 20% to illustrate how closing costs are broken down.

As you can see from the donut charts above, taxes make up the bulk of closing costs for purchases in Maryland, Virginia and the District of Columbia followed by title fees. That's why it's so important for homebuyers to shop for title services. If math is not your forte, try our free iOS and Web app to calculate your total cash to close.

About 30% of Closings Hit Title 'Snags'

About 30% of Closings Hit Title 'Snags'

Title agents discover an issue with title in roughly 1 in 3 closings. Most title issues are resolved pre-closing, but about 5% result in a title claim.

Oftentimes, buyers and sellers never have to hear about the behind-the-scenes curative work that goes on pre-closing. This is because most consumers choose to purchase an owner's title insurance policy.

Title Industry at a Glance

Title Industry at a Glance

Title insurance is a billion-dollar industry, but unlike property and casualty insurance, the bulk of premiums written go toward paid losses (claims) and operating expenses.

Most types of insurance (i.e., health, life or auto insurance) cover future incidents, and the bulk of those premiums go toward claims. Title insurance is about loss prevention, which requires a lot of up-front leg work: searching, identifying and eliminating risks that could lead to a title claim.

THE STACKED BAR CHART offers a snapshot of the title industry nationwide between 2004 and 2014. The dark blue bar shows how title premiums-written dropped as the Great Recession set in and have slowly rebounded since. The orange bar shows that claims-paid have stayed fairly constant (just below $1 billion on average), and there was a slight uptick in claims paid during the Great Recession when many foreclosures were on the market.

The fuchsia bar shows the title industry's operating expenses, which were quite a bit higher prior to the Great Recession. Many title agents downsized or closed their doors all together during the worst of it, which lowered industry operating expenses. At the same time new government regulation and advancements in technology have led to much streamlining of the industry.

Finally, the bright green bar represents adjusted net income for the title industry. In 2008 and 2010, the industry operated at a loss while the other nine years the industry profited.

  • Ways to save at closing

    Title charges are the largest chunk of closing costs and can vary by hundreds of dollars.

    Learn more

  • What are closings costs?

    The real estate closing process involves loan steps, legal steps and title steps.

    Learn more

  • What is title insurance?

    Insure your legal ownership just like you'd insure the building, but for lots cheaper.

    Learn more

A tale of two deeds

Think your financial stake is safe once you close on your home? Ask this District homebuyer who came home to find his front door padlocked with a note: "Call Me ASAP! You Should Not Be in This House!”

***

EVERYONE TOLD ME THAT BUYING and renovating a house would be more work than I anticipated, and I believed them. But I never expected it to take triple the most amount of time I could conceive.

None could have anticipated that in fewer than two years, I would spend my life savings remodeling it and end up suing a Texas LLC for $2.7 million and title.

After six months of shopping, I found a three-story rowhouse with a basement in a neighborhood developing so fast, The New York Times published an article about it.

The house had not been meaningfully renovated since 1895. I plotted and planned for 18 months, installed new windows and completed other maintenance so I could live there.

After the architect drafted plans and I obtained permits, we gutted the house to remove all of the plaster, plumbing, wiring, and wooden framing. Of course, there, in the deepest depths of the remodeling is where my nightmare begins.

***

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My contractor didn’t just call me during the middle of an important work meeting. He called, he left emails, and he texted; my phone was exploding.

"Ownership is an ephemeral security; I believed a fiction that no one can take from me my control over material objects. I was wrong."

I learned from my contractor that, while I was at work, the Maryland agent of a company I'll refer to as the "Texas LLC" padlocked my brand new, steel front door to the upstairs, broke into my basement, pounded signs in my yard selling my house, and hung more signs on a nearby light post.

He jammed a business card between the padlock and my door that read, “Call Me ASAP! You Should Not Be in This House!”

In the cab ride home, I felt like I was going to crawl out of my own skin trying to figure out what happened.

My fingers could barely dial the number on the card from my apoplexy, but I reached one of the Texas LLC’s agents. She knew my house. It must have been notorious around the office because she knew enough to tell me that the Texas LLC had bought my house at a tax sale in 2006, that their tax deed was superior to my mortgage deed, and that they owned my house.

She referred me to the lawyer who was handling the tax deed, but only the paralegal was available to take my call. He emailed me the District of Columbia Superior Court default judgment and order directing the mayor to issue a deed for my house to the Texas LLC.

Seeing the court orders crushed me. By invading my house, I believed the Texas LLC had taken from me every material good for which I had worked and suffered my entire life.

By asserting that now it owned all of my property and all of my money and all of my toil, the Texas LLC forced me to confront, over the days ahead, the reality that ownership is an ephemeral security; I believed a fiction that no one can take from me my control over material objects.

I was wrong.

I called my title company who referred me to my title insurance underwriter (who knew that these were different companies?).

The underwriter immediately hired council. After two months without response to our attempts to contact the Texas LLC and resolve our dispute amicably, my title insurance underwriter's council and I sued for $2.7 million.

***

IN ENGLAND AND AMERICA, we have been litigating title for a thousand years, so I expected that a formula would determine title to the house.

Indeed, D.C. Code § 42-1207, passed only six years before my situation arose, plainly resolved the case in my favor.

Generally, if a buyer has no notice that someone else owns the house, by recording or otherwise, that buyer is a bona fide purchaser whose title is superior even if the prior owner had sold the title to or lost the title to someone else. In my case, my house’s prior owner had failed to pay his property taxes.

The District just wants its taxes, so it allows other people to pay outstanding property taxes, and if the property owner does not repay the new taxpayer, that other person can obtain title by filing a lawsuit.

"I called my title company who referred me to my title insurance underwriter (who knew that these were different companies?). The underwriter immediately hired council."

In almost all circumstances, the property owner redeems the property by paying the new taxpayer, and, in D.C., with 18 percent accrued interest. But in my situation, while the Texas LLC paid the previous owner's property taxes, the previous owner had not redeemed. So the Texas LLC had filed a lawsuit to obtain title to my house.

Under the common law, that lawsuit would have given me notice of the outstanding claim on title, but D.C. Code § 42-1207 required the Texas LLC also to record a piece of paper, a notice of lis pendens, with the clerk and recorder, so title companies could easily uncover other claims to title.

The Texas LLC’s lawyers had not completed this step, which is why no flags were raised during the initial title search when I bought the house. Just the same, I was a bona fide purchaser, and my title was superior to the Texas LLC’s title.

When all parties appropriately assess litigation risks of a case, parties usually settle to avoid the attorney and expert fees from litigation. This case was no different.

Once the Texas LLC understood the case, it agreed to settle. It sought its property taxes from the District, and my title insurance paid me about $7,000 in my hard losses for a ruined front door and lost income from an inability to rent my rooms as I had planned.

***

About 18 months after the Texas LLC’s agents broke into my house, the judge signed the order quieting title in my name.

My nightmare was over.