Savvy homebuyers shop carefully for the right real estate agent and a trustworthy lender, but many then think the only shopping left to do is for the home itself.
However, a study by Veris Consulting and commissioned by the District’s Federal Title shows that shopping for title services can save homebuyers several hundred dollars and sometimes more than $1,000 for a transaction. Homeowners who are refinancing also can shop around for title services and save because a refinance is a new loan that will require closing costs.
“The purpose of the survey is to show that it makes sense to shop around for title services rather than simply to accept the recommendation of a Realtor or a lender for the settlement company,” says Todd Ewing, president of Federal Title & Escrow Co. in the District.
“In addition, I want to encourage consumers to go with a company that is transparent and puts their rates for title services on their website,” he says. “People should not have to call to get a quote.”
Mr. Ewing suggests that consumers Google a phrase, such as “‘title companies in Northern Virginia or D.C. or Maryland,” to compare the websites of various companies before choosing a title company. Another option is Closing.com, a website that allows consumers to compare title costs from various companies online.
“Look for a company that allows you to communicate through their website and can deliver documents through their portal so that you know what’s going on,” Mr. Ewing says. “The more information you can get from the website, the more likely you are to feel comfortable working with a company.”
The title services survey included only title companies that published their settlement fees and charges on their websites, along with title insurance premiums for lender’s title insurance and owner’s title insurance. Lender’s title insurance is required by lenders and protects the lender in the event of a title dispute. Owner’s insurance is optional, although most financial professionals highly recommend purchasing title insurance, which protects the owner’s investment in the property if a title issue arises.
The study used identical criteria for real estate purchases in the District, Maryland and Virginia, including a purchase price of $500,000, a loan amount of $400,000 and the same type of title insurance coverage. In the District, the difference between the most expensive and the least expensive title services was $1,180; in Maryland, the difference was $935; and in Virginia, the difference was $934.
Some closing expenses, such as transfer taxes, listed on the good faith estimate are not variable, but Mr. Ewing says about 70 percent of variable closing costs are related to title costs.
In the typical home purchase transaction, the title company is chosen by the homebuyers, often on the recommendation of their real estate agent.
“To some extent, it can be a good thing that most people choose their title company based on the Realtor’s recommendation because the title company will bend over backward not to embarrass the Realtor,” says Jim Savitz, a lawyer with Village Settlements in Gaithersburg.
“However, sometimes the title company may be owned by a friend or by someone not qualified to handle a settlement. Buyers should do some research on their Realtor’s recommendation to find out if it is a reputable company and whether title services are a regular source of the business for the company,” he says.
Helen Krause, marketing director for New World Title & Escrow in Fairfax, says buyers should pick good people from the beginning, including their Realtor, so that they can rely on the professionals’ guidance for the whole process.
“Even if you trust the judgment of your Realtor, you should ask why they are recommending that particular company and what they like about it,” Ms. Krause says. “You should ask whether the title company is an affiliated business and whether the Realtor or the broker is being compensated in some way for using that particular company. It is not necessarily bad to use an affiliated title company as long as you get a good level of service.”
Mr. Savitz says buyers should ask their Realtor if they are recommending the title company because it is the most qualified company with the best rates and the best services, or if there is another reason.