- The Washington Times - Thursday, April 7, 2011

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.

“You can get another recommendation from your lender and call each company to see which one you prefer,” Mr. Savitz says.

Mr. Ewing says a good Realtor will explain a business affiliation upfront with their buyers.

“A Realtor needs to explain if the broker profits from that relationship, because even if the Realtor is not directly compensated, there is indirect compensation through the brokerage,” Mr. Ewing says. “Buyers should look at the websites of the recommended title company and an independent company before making a choice.”

Mr. Ewing says Federal Title, an independent title company, gives a credit to the borrowers for the amount of money the company would have given to an affiliated real estate company.

Mr. Savitz says buyers should work with a local title company that does settlements full time, rather than a national company that may not be as aware of local rules.

“Buyers should call the title company and ask if the documents are prepared by an attorney or if the company uses a traveling title clerk who is not an attorney,” Mr. Savitz says.

Settlement fees used to be listed on the HUD-1 form and the good faith estimate as several fees, but now they are bundled and listed simply as a flat settlement fee, with the lender’s title insurance premium and the owner’s title insurance premium listed separately.

“Buyers should consider the fees when shopping for services because they don’t want to overpay, but they should be careful to pick a reputable company so they don’t pay less and then get poor service,” Mr. Savitz says. “It’s great to start online to compare fees, but I also recommend calling the company to ask questions, too.”

Ms. Krause suggests negotiating settlement costs.

“You can always ask a company if they are willing to match a lower rate that you have seen online from a different company,” she says. “Sometimes they will be willing to lower their price, especially if they have a relationship with your Realtor or want to get more of that Realtor’s business.”

One way borrowers can save money on their title costs is to request a reissue rate. Homeowners who are refinancing should check to be sure they are given a reissue rate from their title insurance company.

“Buyers can ask the sellers if they have lived in the home for less than 10 years and, if so, if they will provide a copy of the title insurance policy,” Mr. Ewing says. “The buyers may be able to pay the reissue rate and save a few hundred dollars this way.”

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