By DiAnna Jackman, Senior Escrow Officer/Branch Manager, Chicago Title Insurance Company

As Investors, we all know that the name of the game is keeping our P&L in check. Keeping costs low is important in any business but most of all when that business is your own. You have to answer only to yourself and maybe a partner or two so be sure you are getting the biggest bang for your buck. There are many ways for you to help keep costs low and one of those is utilizing products and services that help reduce that bottom line because, as the saying goes, “every penny counts”. 

  Just one of these tools is a binder title policy or more commonly referred to through out our industry as a “Hold Open Policy”.  The hold open policy works for those of you who will be buying a property and re-selling that same property with in two years. At the time of acquisition typically the seller pays for the buyer’s owner’s policy. You (buyer) would pay a small fee, usually 25% of the title policy amount and in return receive what is called a “binder”.  The binder that is issued holds all of the same coverage while you own the property as the full policy would. When you sell the property, you would only pay the difference between the policy premium and the sale policy premium.

  An example of this would be for a sales price of $150,000.00 on acquisition you, as the buyer, would pay $218.75 for the binder.  Once you find your buyer and sell to them at a price of $200,000.00 you, as the seller, would pay $145.00 for the buyer’s owner’s policy. This has just saved your P&L $801.25. Imagine the savings 30 deals a year would make to your profit, which would $24,037.50! I would not want to pass that up would you?!

  There are times when a hold open or binder policy would not be an option.  If you plan to keep the property for two or more years this would not be an option for you. When you are paying all closing costs on acquisition you would need to be sure to have your Escrow Officer run the numbers for you to be sure this option will still be saving you money.  

 Please be sure to take into consideration that when you have an investor or real estate agent that wants you to use their “preferred” Title Company that the said company offers a binder or hold open policy. Most Title Companies have the product but because of the savings not all Escrow Officers like to offer it up as an option.  Another “no no” in the Hold Open policy world is “no”, you can not hold a policy open at John Doe Title Company and then try to sell it with that binder at Jane Smith Title Company.  The binder can not be honored/transferred to a different Title Company other than the issuer of the original binder.

 All these rules aside, the binder or hold open policy is usually a true friend to the investor. As I am sure you are discovering, there are a lot of “do’s and don’ts” in Title Insurance! Make sure you discuss with your Title and Escrow partner how this wonderful tool can help to save you money on your next deal!  And of course, we would love to be that Title partner and close your next transaction at Chicago Title!