A Market Value Rider (MVR) increases the amount of title insurance protection on your property in New York and NYC. Without the addition of a market value rider, a traditional title insurance policy will only provide coverage up to your original purchase price.
This is a problem if someone makes a claim years after you close, as the market value of your home will likely have appreciated significantly.
Let’s say you bought a Manhattan condo in 2010 for $690,000. The apartment is worth $1,500,000 today. If you did not purchase a market value rider, your standard title insurance policy will only cover up to $690,000 of losses at the time of the claim.
If, on the other hand, you purchased a market value rider at the time of closing, your title insurance policy will provide up to $1,500,000 of coverage.
The market value rider is only available to purchase at the time of closing. “The cost of the MVR is 10% of the owner’s policy premium and is paid for at closing,” according to Brenda Posner, Executive Director at Langdon Title.
In the event of a claim against your title, “the MVR would cover the fair market value of the property (minus the cost of any improvements made after the purchase) instead of the original purchase price. The MVR is only available for the purchaser of a 1-4 family residential property for which the purchaser is a natural person who will reside in the property and is most commonly purchased during foreclosures or estate sales,” she adds.
You should strongly consider purchasing a Market Value Rider given its low upfront cost relative to what you’re paying for title insurance as a whole. This is especially true if you intend on holding the property for more than a few years.
Remember that there are no yearly premiums or renewals when it comes to both title insurance and the optional market value rider.
Both the title insurance policy itself and the market value rider (if purchased) are paid for upfront at the time of closing and are good for the lifetime of ownership.
Here is an example of a Market Value Policy Rider:
How is fair market value determined in the event of a MVR claim?
In the event there’s a covered loss against the Market Value Rider policy, market value is typically determined by a handful of arbitrators. A typical Market Value Rider contract may stipulate two or three arbitrators, with the first being chosen by the homeowner, the second being chosen by the title insurance company, and the third being chosen by the two appointed arbitrators.
The arbitrators would determine the fair market value of the property at the time of the covered loss “minus any value renovations would have added,” according to Brenda Posner of Langdon Title.
What other types of supplemental title insurance are available?
If a buyer believes she or he is getting a sweetheart deal on a property, the purchaser may elect to increase the face value of the title insurance policy.
For example, “if purchasing a $500k property, instead of purchasing a title policy for $500k they can purchase one for $600k which may better reflect the value of the property,” according to Brenda Posner of Langdon Title.
