The 3 Year Interim Binder

The 3 Year Interim Binder

As more and more people buy property for investment or speculation, the Interim Binder becomes a more important tool. The Interim Binder is not, in itself, a policy of title insurance. When issued however, it binds the insurer to issue a policy of title insurance within three years. By utilizing the Interim Binder, principals to a transaction can realize a substantial savings in the cost of title insurance.

Here's How It Works:

Cost = 110% of HOP Rate

Time Parameters = Must resell within a 3 year period or buy a one year extension for an additional 10% of the HOP rate.

Seller's Pay = Normal Fee

Buyer's/Investors Pay = 10% of HOP Rate

Example:

Original price or liability $1,000,000 - HOP Rate

CLTA/ALTA HOP - Paid by Seller $2,339

Buyer/Investor pays an additional 10% + 234

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Total fees for Interim Binder $2,573

Resale price within 3 years $1,200,000 - HOP Rate

CLTA/ALTA HOP $2,559

Less the original rate on $1,000,000 - 2,339

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Binder resale rate $ 220

The total cost to the Buyer/Investor is $454 derived by adding $234 (representing the original additional 10% of the HOP rate), to the $220 (representing the premium for the increased liability at the date of resale). By contrast, the rate the buyer/investor would normally pay without utilizing the Interim Binder is $2,581.

Total Savings: $2,127 ($2,581 less $454)

Note: Equity Title Company automatically issues the HOP Policy for Single Family 1 to 4 unit properties. The HOP -"Homeowners Policy" is the most current and comprehensive policy available by CLTA/ALTA for residential properties.

*Material discussed is meant for general illustration and/or informational purposes only and is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary, therefore, please consult a professional for specific advice.

**S2-09-2 (05/05, 07/08, 02/09)