Don't get snookered on title and escrow fees
By JEFF LAZERSON / CONTRIBUTING COLUMNIST
Talk about a market on fire. I worked an open house two weeks ago, prequalifying potential homebuyers in the $600,000 price range. Perhaps 100 people stampeded through the open house in a three-hour window.
Fear of loss is a great motivator. Once a buyer gets battle-tested by losing out to competing bids a few times, that buyer is primed to do just about anything to be the winning bidder on the next go-round.
This creates perfect circumstances for some listing agents to discretely or even deceptively gain at the buyers’ (and maybe the sellers’) expense. The gain is something of value, either over the table or under.
The worst gouging we’ve seen is when the listing brokerage owns the escrow company. In one purchase loan we are processing right now, the borrower is being overcharged 25 percent ($500) compared to another standard priced local escrow company.
In another case, a buyer was unable to get a deep discount from a family member who is in the title business because the listing agent refused the offer unless the buyers used her choice of settlement services. That’s unconscionable, especially since the seller would have participated in the discounted pricing.
“We would certainly encourage consumers in that situation to submit complaints to the bureau,” said Samuel Gilford, Consumer Financial Protection Services spokesman.
Brett Smith, realty agent at Berkshire Hathaway, has a potential work around for this overcharge problem. Prior to submitting an offer, he calls the listing agent to learn whom he or she uses for settlement services. He contacts that escrow officer and asks if he or she will match fees of the escrow company he uses.
“I have pretty good success with that. They are quasi hoping you will use them in the future,” Smith said.
“Consumers have the right to shop around for certain services, and the CFPB does encourage consumers to shop around,” Gilford said. He pointed to CFPB research that suggests buyers can save as much as $500 on title services alone just by shopping.
Now, if your realty agent just rolls over and allows you to get ripped off for title and escrow services or the realty agent is double-ending (representing both the buyer and the seller), my suggestion is to just go with the services the agent plugs into the residential purchase agreement in hopes your offer will be accepted.
Then, do an apples-to-apples price comparison of three local escrow and title insurance companies. Bring that to the attention of the realty agents and settlement providers and ask that they match the average charge of the three bids you received. Now that’s fair.
And for good measure, bring a copy of this column for those gougers to read.
Jeff Lazerson - Mortgage Columnist since 2011