What Is a Market Value Rider in NYC Real Estate?

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.

A market value rider increases the amount of your home's title insurance protection up to the fair market value of the property. It can be purchased at closing.

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.

Estimate your buyer closing costs in NYC with Hauseit’s Interactive NYC Buyer Closing Cost Calculator, and consider requesting a Hauseit Buyer Closing Credit to reduce your closing costs.

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.

Example: You are buying a Lower East Side condo for $1,350.000. The title insurance premium for the owner’s policy is $5,499. The title Insurance premium for the lender’s policy is $958. The total cost of title insurance is $6,457.

The optional Market Value Rider is just $550, which amounts to just 8.5% of the total cost you’re paying for title insurance. This additional premium also represents just a fraction of your total buyer closing costs, which can exceed $50,000 in this particular example assuming you’re financing.

Assuming you plan on holding onto the property for more than a few years, the Market Value Rider seems like a no brainer. It could literally double or triple the amount of insurance coverage available to you a decade or two down the line.

Here is an example of a Market Value Policy Rider:

Title No. XX-XXX-XXXXX
Date of Issue 4/29/2022
Name(s) of Insured Homeowner(s): John Smith

Owner’s Statement of Coverage:

In consideration of the payment of the additional premium for the issuance of this Rider to the Policy as hereinafter defined, the Company insures the named homeowner against loss or damage not exceeding the market value of the premises at the time of loss, in accordance with the Conditions of the Policy not inconsistent with the provisions of this Rider, and subject to the matters excepted from coverage in Schedule B.

DEFINITIONS:

(a) The Policy is the policy issued to the named insured herein in the amount of the original purchase price paid for the insured premises.

(b) Time of loss shall be such date as the homeowner shall have actual knowledge of facts giving rise to a claim under the Policy.

(c) A homeowner is a natural person, fee owner and resident of real property used predominately for residential purposes and containing no more than 4 dwelling units, a residential condominium unit, or a residential co-operative leasehold interest. The benefits of this Rider shall be available only to the named insured provided the named insured is a homeowner as defined herein at the date of the issuance of this Rider and at the date any claim under this Rider is made.

(d) Market value at time of loss shall be such value of the insured premises as is determined by three arbitrators or any two of them, one of whom should be chosen by the insured and one by the Company, and the two so chosen selecting the third arbitrator. Such value shall exclude the market value of any improvements made to the premises subsequent to the date of the Policy. The above valuation procedure shall also apply in the event the insured premises is a residential cooperative leasehold interest.

CONDITIONS:

(a) Notwithstanding anything herein to the contrary, in the event of a loss, partial or total, the insured shall have the option to elect to value such loss under the terms of this Rider or under the terms and amount of the Policy.

(b) All other provisions of the Policy, not inconsistent with the provisions of this Rider, shall remain in full force and effect.

(c) This Rider and the Policy is the entire contract between the named insured and the Company.

Dated: 4/29/2022 

Can a market value rider be purchased after closing?

No. A market value rider is typically only available for purchase at the time of closing. It cannot be purchased at a later date, post-closing.

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.

Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided.

Leave a Comment

Your email address will not be published.

Scroll to Top