Then when you sell the property to a buyer, you only pay the difference in price on the new premium vs. The fee for a “hold open” is generally anywhere from 10%-25% of the original title insurance premium. In this instance, the investor would be responsible for paying their own closing costs when they purchase the property, and their eventual buyer would pay for their own closing costs––eliminating the discount mechanism of a binder. There wouldn’t be any significant benefit to purchasing a binder in a state where the buyer pays for their own title insurance costs, such as Pennsylvania or Maryland.
Instead of accepting that title policy, the investor can pay for a title binder to “hold open” that policy for 1-2 years, and then eventually pass that policy through to their end buyer. For example, when an investor purchases a property, the seller pays for their owner’s title insurance policy. Hold opens or “interim binders” are generally only used in states where it is customary for the seller to pay for the buyer’s title insurance policy.
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