Purchasing a Binder Can Help Insure Savings on Title Cost

The buyer of a property who anticipates reselling it within 1–3 years can save a significant amount in title charges by purchasing a binder.* A binder is a temporary contract in which the title company agrees to issue a specified policy within a certain period of time. The binder must be requested before the property being purchased closes escrow. The fee for a two–year binder is 10% of the basic rate for a full title policy. This is in addition to the applicable fee for an Owner’s Policy (usually paid by the seller). The use of a binder in your transaction can result in a significant savings when the property is resold.

Example: $1,000,000.00 – Initial Sales Price

Buyer plans to sell within three years for $1,200,000.00

In this case, the basic rate is $2,210.00. The binder fee is an additional $221.00, or 10% of the basic rate. The buyer sells the property two years later for $1,200,000.00. The basic rate for a ALTA Homeowners Title Policy at that price would be $2,695.00. The buyer now pays the difference between the two basic rates, i.e., $2,695.00 – $2,210.00 = $485.00.

With Binder

Initial Binder Fee – $221.00
Paid at Time of Resale – $485.00
Total Binder Fees – $706.00

Without Binder

ALTA Homeowners Policy Rate – $2,695.00
(Amount that would be paid for a policy with no available binder credit)

Total Savings

ALTA Homeowners Policy Rate – $2,695.00
Total Binder Fees – $706.00
Total Savings – $1,989.00

Binder Extension

The Binder may be extended for a term of one year at 10% of the applicable rate, based upon full value of the initial sale provided said extension is purchased prior to the expiration of the second year.

*Issued by Old Republic National Title Insurance Company