Two separate title insurance policies are typically issued at every California real estate close. Most sellers do not realize there are two, do not know what each one covers, and do not understand why custom puts one of them on their side of the closing statement. The line items are small enough to slide past notice but big enough — $1,500 to $3,500 on a typical SCV resale — to matter. The policies themselves are also one of the most useful and most misunderstood products in real estate.
The two policies, structurally
Owner's title insurance policy
Issued in the buyer's name. Protects the buyer's ownership interest against title defects that existed before the policy date but were not discovered during the title search. Coverage extends for as long as the buyer (and their heirs) own the property. The buyer pays a single premium at close; no ongoing payments. Coverage amount is typically the purchase price.
Lender's title insurance policy
Issued in the lender's name. Protects the lender's lien position against the same kinds of title defects. Coverage amount is typically the loan amount and decreases as the loan is paid down. Coverage extends for as long as the loan is in place; refinancing requires a new lender's policy.
Both policies are issued by the same title insurance company on the same property at the same close, with the premiums calculated on different bases.
What title insurance actually covers
Title insurance is unusual among insurance products. Most insurance covers future events — a fire next year, a car accident next month. Title insurance covers past events — a defect in the property's recorded history that existed before the buyer purchased the property but was not discovered by the title search. The premium is paid once because the insurer is essentially guaranteeing the title search was complete.
Common covered defects:
- Undisclosed heirs. Prior owner's death where heirs were not properly identified.
- Forged documents. Prior recorded deed, release, or mortgage that was forged.
- Errors in public records. Incorrect indexing, typographical errors, missing recordings.
- Undisclosed liens. Tax liens, judgment liens, mechanic's liens that were not surfaced.
- Encroachments. Structures or improvements crossing property lines.
- Easement disputes. Unrecorded easements or boundary disputes with neighbors.
- Claims by parties not in possession. Prior owners or third parties asserting interests.
- Defective deed in chain of title. Missing notary, improper signing, mistakes in legal description.
- Mistakes in survey or property description.
Two coverage levels exist in California: standard owner's policy (CLTA) and extended owner's policy (ALTA Homeowner's). The ALTA Homeowner's policy is the more comprehensive option commonly issued today; it covers additional risks like post-policy encroachments, post-policy adverse possession, and certain other items beyond CLTA.
The cost — who pays what in SCV custom
For a typical SCV resale at $1,000,000:
- Owner's policy (ALTA Homeowner's): $1,800-$2,800 typically. Seller pays per CAR form default in this region.
- Lender's policy (ALTA Loan): $400-$900 typically, depending on loan amount. Buyer pays per CAR form default.
Title insurance rates in California are filed with the California Department of Insurance. Quotes between major title companies are similar but not identical; rate variation exists.
The allocation is custom, not law. A counter offer can reallocate the owner's policy to the buyer; some local customs and contract structures do exactly this. The CAR form in the Greater LA region defaults to seller-pays-owner's-policy, which is the most common SCV outcome.
Why is owner's policy the seller's obligation by custom?
The historical reasoning: the seller is conveying title and warranting that title is clean. The seller has owned the property and has the records and the relationships with prior parties. The seller paying for the owner's policy expresses the warranty — "I'm conveying clean title and I'm paying the insurer to back that up."
In practice today, this is mostly tradition. The buyer benefits from the policy; the buyer's protection extends decades; but the seller pays the premium. Sellers occasionally negotiate this in counter offers, with mixed success depending on market dynamics.
The preliminary title report (the "prelim")
After escrow opens, the title company produces a preliminary title report — a snapshot of the current condition of title. Standard contents:
- Vesting: who currently holds title and how (sole, joint tenants, tenants in common, trust, LLC, etc.).
- Schedule A: the proposed insured (buyer), the policy amount, the property's legal description.
- Schedule B: exceptions to coverage and conditions to be satisfied before policy issuance.
- Recorded matters: existing mortgages, HOA recording, easements, CC&Rs, tax liens, judgments, mechanic's liens, anything recorded against the property.
- Property tax status: current and past assessments, any delinquencies.
- General exceptions: standard policy carve-outs.
Connor reviews the prelim with the seller within 48 hours of receipt to identify:
- Items on title that need to be removed before close (paid liens not reconveyed, old mortgage releases missing, etc.)
- Items the seller was unaware of (occasional surprise: old judgment lien, old mechanic's lien)
- Vesting that needs correction
- Easements or CC&Rs the buyer should be aware of
- Any unusual items that need explanation
Title curative work — clearing the clouds
When the prelim surfaces items that need clearing, escrow and the title company work with the seller to address them:
- Old paid-off mortgage with no recorded reconveyance. Title obtains the reconveyance from the lender or the lender's successor.
- Old judgment lien against the seller. Seller pays it off through escrow (deducted from proceeds) or obtains a release.
- Old mechanic's lien from a contractor. Seller addresses with the contractor or files a bond.
- Vesting mistake. Corrective deed prepared and recorded before close.
- Probate or trust issues. Documentation gathered to confirm authority to sell.
- Death of a co-owner. Death certificate filed; surviving owner conveys.
Most curative work happens silently between escrow, title, and Connor's office. Sellers see the cleared prelim ("Pro Forma" or final prelim) before close and the issues are resolved.
The title issues that surprise sellers
The most common title surprises Connor sees on SCV listings:
- Old HELOCs or second mortgages that were paid off but not reconveyed. The lender failed to file the reconveyance after payoff; the lien still shows.
- Old IRS or state tax liens. Sometimes surface years after they should have been released.
- Boundary or fence-line easements. Recorded decades ago; sellers may not know they exist.
- Mello-Roos or special assessments. Visible in prelim; sometimes new to sellers who bought without paying attention.
- HOA-recorded items. Some HOAs record CC&R amendments or other documents that appear on title.
- Easements granted to neighbors decades ago. Particularly common on older SCV parcels.
- Recorded mineral rights or other historical interests. Rare but appear on some older parcels.
None of these are typically deal-killers. Most are addressed by title curative work before close.
The seller's mortgage payoff
If the seller has an existing mortgage on the property, escrow handles the payoff:
- Escrow requests a demand statement from the seller's lender showing the exact payoff amount as of a specific date.
- Demand statement specifies the per-diem (per-day interest) and any payoff fees.
- At close, escrow wires the payoff to the seller's lender directly.
- Lender records the reconveyance after receiving the payoff, releasing their lien.
- Net proceeds to the seller are after the payoff is satisfied.
If the seller has multiple liens (HELOC, second mortgage, judgment liens), each is handled the same way through escrow.
The owner's policy at the closing — what the seller actually gets
Strictly speaking, the seller doesn't keep anything from the owner's policy — it's issued to the buyer. But the seller's payment of the premium is part of conveying clean title and is reflected on the seller's closing statement as a line item.
What the seller does benefit from:
- Avoidance of post-close title claims (the seller has warranted clean title; an issue surfaced later could trigger seller liability if the buyer had not been insured)
- Clean exit from the property and the chain of title
- Confirmation that all liens are released and no surprises follow the seller into their next property
Negotiating title costs — what's possible
- Reallocate owner's policy to the buyer in counter. Possible but uncommon in strong seller markets; more achievable in buyer markets.
- Negotiate title company selection. Both parties can name preferred providers; rates vary slightly.
- Reduce escrow fees through provider choice. Less variation than title; can save $200-$500.
- Address title curative costs. If liens or judgments need clearing, the cost falls to the seller in most cases.
"Title insurance is one of the most useful insurance products in real estate and one of the least examined. The seller writes the check, the buyer keeps the coverage for decades, and a clean prelim is the quiet evidence that the listing agent did the homework. The buyer who has a problem on title in year ten still has the policy the seller paid for at close. That is what the line item buys." — Connor MacIvor
Review Your Prelim with Connor
Connor reviews every prelim with the seller within 48 hours of receipt and coordinates with title on any curative work needed for a clean close.
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Escrow, Title & Closing Costs Deep Dive — Pillar Guide How Escrow Actually Works in California: A Seller's Timeline County Transfer Taxes, Documentary Transfer Tax, and City Add-OnsFrequently Asked Questions
