Many real estate agents may not be fully aware of how hold open title policies can be a game-changer in certain transactions. This lesser-known title insurance feature can save your clients money, speed up future transactions, and provide strategic advantages for agents working with repeat sellers or flippers. Here’s everything you need to know about this valuable tool and how it can benefit you and your clients.
What is a Hold Open Policy?
A hold open policy is a type of title insurance that remains "open" for a set period (typically 6-24 months) after the initial transaction closes. It’s designed for properties that will be resold in the near future, such as fix-and-flips or new developments. By leaving the policy open, sellers avoid paying for a completely new title policy when they sell the property again within the set timeframe.
For example:
Traditional Approach: A flipper purchases a home and pays for a title policy at closing. When they sell the home a few months later, the new buyer pays for a separate title policy, increasing costs.
Hold Open Policy: The original title policy stays open for the flipper, and when they sell, the policy is simply updated—reducing fees and saving time.
Benefits of Hold Open Policies for Agents and Clients
1. Cost Savings for Sellers Clients who flip homes or sell shortly after purchasing can save hundreds to thousands of dollars by using a hold open policy instead of buying a brand-new title policy for the resale. This cost savings can be a great selling point for agents pitching their services to investor clients.
2. Streamlined Transactions With a hold open policy, the title insurer already has the title history on file, reducing the need for additional searches and speeding up the resale process. This is particularly valuable in competitive markets where time is of the essence.
3. A Competitive Edge for Agents Being knowledgeable about hold open policies sets you apart from other agents. When you can present this option to investors or developers, it demonstrates your expertise and ability to save them money—a key factor in building long-term client relationships.
4. Improved Planning for Fix-and-Flip Projects For agents working with investors, recommending a hold open policy can help them better estimate project costs and timelines, ensuring a smoother process from purchase to resale.
Potential Challenges to Consider
While hold open policies are a great tool, they may not be the right fit for every transaction. Here are a few things to keep in mind:
Timing Restrictions: The policy typically needs to be used within a specific timeframe (often 6-12 months). If the resale takes longer, the savings may no longer apply.
Initial Costs: Some title insurers may charge a slightly higher premium upfront for a hold open policy compared to a standard title policy.
Limited Awareness: Not all escrow officers or title companies automatically offer this option, so agents need to specifically request it during the initial transaction.
One of our agent partners recently worked with an investor who purchased and renovated a distressed property. By requesting a hold open policy during the initial escrow, the investor saved nearly $1,000 in title insurance fees when reselling the property just six months later. The agent not only delivered cost savings to their client but also reinforced their value as a trusted advisor.
At United One Escrow, we pride ourselves on being proactive and providing creative solutions for our clients and their agents. Our experienced team works closely with title companies to identify opportunities like hold open policies that can save your clients money and simplify their transactions.