The Interim Binder

Download Article in PDF Format

Q. What is the Purpose of the Interim Binder?

A. It allows a purchaser of real property to re-sell the same property and have title insurance at a fraction of the cost.

Q. What is the Cost of the Interim Binder?

A. This is the formula: The original seller pays the basic policy fee. The buyer pays an additional 10% of the sellers schedule insurance rate for the Interim Binder.

Q. Can a trust hold title to Real Property?

A. No: the Trustee holds the property on behalf of the Trust.

Here is an Example:

Buyer purchases property for $100,000 with the intent to sell the property within two years. You, knowing that this is going to be a short-term investment for the close of escrow. The original owner (seller) pays a title policy fee of $576, the normal charge.

Benefits of the Interim Binder

The buyer pays $58 or 10% of the basic rate for the INTERIM BINDER. One year and 11 months later, you find a buyer for this property, which is now worth $120,000. The property goes into Escrow. The buyer becomes the seller. Now the seller can recap the benefits of the INTERIM BINDER, which was purchased when the seller bought the property.

Using the Interim Binder Saves Money

The seller pays only the increase insurance amount necessary to cover the increased price of the property.

The money saving advantage of using the Interim Binder is evident. Title Fee on $120,000 liability is $622.00, less premium paid on $100,000 of $576.00. Seller’s cost for the new policy is $46.00.

Q. How Long is it Good For?

A. Two Years

Q. What Happens if I keep the Property Longer than 2 years?

A. In that case a policy of title insurance is automatically issued to you. However, the binder may be extended for another two years at an additional 10%.

It All Adds Up, For Less

The total cost for an owner’s policy of title insurance is $46 plus 10% or ($58 the seller paid up front) when the seller bought the property. The policy is a total of $104 compared to $622, the normal short-term rate fee for a home valued at $120,000. The seller saved $518.

 

Example above is based on the company’s rate filing as of 1/10/2010