Title Companies.. they are not all the same

In Maryland, the buyer has the right to choose the title company that will handle the closing of the transaction.  Very few buyers have a close relationship with any title company, so they seek the advice and/or counsel of their real estate agent.  Seems like a reasonable thing to do.  After all, real estate agents should have a good idea about title companies.

The first thing you should know is that the amount of money you can be charged for title insurance in Maryland is pretty much set by the State.  It will not or should not vary much from one title company to another.

Title companies can charge whatever they want for other fees associated with the transfer of property. Of course, the current HUD-1 in use in Maryland (a breakdown of how the money flows in the transaction) reveals the title companies charges on page two. I know that the settlement charges to the buyer and seller appear on page one, but that figure is a gross figure that includes all the charges.

The actual breakdown is on page two, where the buyer’s charges appear in one column and the seller’s charges appear in another. You just have to go down to the 1100 section Title Charges and see what is being charged each side. The biggest numbers involve title insurance. There is lender’s title insurance (required by the lender) and there is owner’s title insurance (optional). I will forever fall on the side of the equation that believes purchasing owner’s title insurance is absolutely necessary. It is a small price to pay for coverage of any lies, deceit or malfeasance that may have occurred prior to the buyer taking title.

Of course, it is always a good idea to ask your agent if there is a title insurance policy on the home you are buying that has a re-issue rate available.

Beyond those charges, there are minimal fees for closing the transaction. Note, the buyer usually catches a break here because they have chosen the title company. (If the title company wants to realize $250 per closing, they will just dump the cost on the seller’s side and leave the impression that they have done a wonderful thing for the buyer. “See the benefit of choosing our firm to handle the transaction?”)

There will be other costs. An abstract or Title Search fee will be there. Larger title companies have folks that do this in-house and smaller firms contract out for the service. You pay what the title company decides you should pay, regardless of the actual cost of having the search done.  I often wonder if there were a six or seven layers of contractors in title searches if the cost to the consumer would be so beefed up they would need a second trust to cover it? Sort of layer 7 charges layer 6 $X for doing the search and then layer 6 charges layer 5  $X+10%=Y, and layer 5 charges layer 4 $Y+10% and do on.  I am not sure there is no law preventing that from happening. Laws are written by lawyers and you know how that goes.

The final fee is Deed Preparation. This fee remains $100 +/- with most firms.  Even though, boiler plate deeds are available and computers have replaced typewriters and deeds can be whipped out in minutes, you are paying whatever the market will bear. Don’t fall for the old, “I am liable for any mistakes” statement. During closing, you will be asked to sign a form allowing the title company to make any corrections necessary to any of the documents.  Just understand, Deed Prep is priced according to the desires of the company.

Don’t get me wrong, The title company should be paid. It is real estate and everyone should get paid. Oh, and everyone does get paid.

So, what is the difference in title companies?  Some actually offer support. Some actually go overboard when making sure the transaction closes when and where it is required.  Some readily answer any and all questions. Some are available to “hold hands” or “resolve differences” or “work through challenging issues”.

I have had the good fortune to work with many of the title companies in the area. It is no secret that many brokers have a “close” relationship with some title companies. A little thing called RESPA (a federal law that frowns on “kickbacks for referrals, etc.”) caused a stirring of the pot in those broker/title company relationships. Some brokers still own a piece of a title company, and for the “convenience of the consumer” offer them office space in the broker’s building. Others just label the title company that shares a cozy relationship with them as “preferred providers”.  NOTE TO CONSUMERS: Preferred provider label indicates preferred by broker.

When my buyer clients ask me for the name of a title company, I always share Capitol Settlements. 240-599-2200.  Every time my clients either choose someone else or find themselves contractually forced to use another title company, my support of Capitol Settlements grows. I don’t have a dog in the fight. I have a client that deserves the absolute best in service. Capitol Settlements provides that service to both sides equally.  They answer phone calls. They handle closings off site. They work with folks locally and out of the area. They get the job done.  They are the go to title company for many banks in the area. The fees they charge both sides are usually equal to or less than what other firms quote.

So the money is the same. Why go with anyone else? I would not dare recommend anyone else.

Capitol Settlements  240-599-2200

Title insurance…CYA …. and now you know why!

Oh my goodness, no one saw this coming

The recent news regarding the possible halt to foreclosures has most people in the real estate industry scrambling. Blogs are being written, news articles are being published and talking heads are sharing what the think about the matter. The volume of home owners in danger of being foreclosed on seems to be rising everyday. The call for a halt to all foreclosures until the paperwork is reviewed and corrected has increased from a murmur to a dull roar.

What about all the foreclosed property that has been purchased?

Hypothetical … The Jones family stops paying their mortgage in 2008. In 2009, their lender finally gets around to foreclosing on the property. The lender goes through what might be questionable steps to take possession. The lender then hires ABC Realty to list and sell the house. ABC Realty is a top notch REO firm and they put up one picture in the MLS, put a cheesy combo lockbox on the door and wait.

Sign of the times

Along come the Jones. The Jones have been searching for a real bargain in this market. They have instructed their agent ( most likely their third or fourth agent) to find them a deal. They have probably written three of four low ball offers and been rejected. The come across what used to be the Smith’s home. At this point, they are able to see beyond the missing stove (they can buy a new one with a Home Path loan). They realize that the horribly stained carpet can be cleaned or replaced. The holes in the wall that the Smith’s left behind can be repaired. This is the best of the rest. They instruct the agent to write an offer, submit it to the bank and let them know when the bank replies.

You got the house

Or do you?

It is now a year later. You receive something in the mail that indicates the Jones family is challenging the foreclosure. Oh my, they have gone to court. They are saying that the proper procedures were not followed ( read, the law was not followed) in the foreclosure and they are asking the court to over turn the action. They want their house back and they want it now!

This really opens yet another can of worms

First reaction, they can’t do that… can they? Why yes they can. If their lender used one of the various fast track processing techniques that have been exposed, the foreclosure can be over turned. It is a legal matter. If the radar gun used to clock you at 90 mph was calibrated to clock everyone at 90 mph regardless of their actual speed, and that was made public, there would be a lot of speeding tickets overturned. I know, it seems that lenders are not required to actually follow the law and in most REO sales, lenders ignore state law, but this time they have crossed the line.

The Jones family can win and the Smiths will have to move out of the Jones house. It can happen.

  • But what about all the money the Smiths have paid for the house
  • and what about all the money everyone made on the sale of the house
  • and what about the money that the Jones have not paid
  • and ( insert your question here)?

Like I said, this opens a great big can of worms !

The Smiths can only hope that at settlement, when they asked their agent if they really needed the enhanced, owners version of title insurance, the agent said yes and explained why and they took it. You see, if they opted to just take the lenders policy (which is required by most lenders) they have no protection. They will have to go to court and sue the pants off the listing agent, the lender that had foreclosed, the selling agent and anyone else with a deep pocket.

If, they took the owners policy, at least they will be financially covered for their loss. Title insurance is a good thing. It insures that when you buy a home, the title is clear and the home is yours. There have been stories of over looked liens and long lost relatives coming forward after the sale and title companies have resolved these issues. No one saw this train barreling down the track. Not to worry, if the train shows up and you bought the total package, you are covered.

In light of this problem, Old Republic is no longer writing title insurance on purchases in some States. They are a pretty big company. Others will follow suit. If the problem blows up, title companies will be next in line for a Government handout to remain solvent. The amount of money at risk if cases start being won and foreclosures overturned is enormous.

And what of REO sales that are pending and REO properties that are currently for sale. Hmmm, you might want to reconsider a purchase until this mess is sorted out. Those home prices that seem to good to be true….they are too good to be true. The safest course for a buyer looking at REO properties today is to step back and put that thought on hold until there is some more clarity to the situation.

If you are in the position of looking for a new home, you may want to focus on homes that are not in financial trouble. You might find that what I have been sharing for quite some time is accurate. There are really a great deal fewer homes for sale than all the properties that appear to be on the market.

Yep, we will toot our own horn

We have been sharing information about buying and selling over the years. We have cautioned our clients about the potential dangers of some purchases. We have encouraged EVERY client to pay for the enhanced title policy. We believe our job as buyers agents includes a great deal more than sending listings and showing homes. It is our duty to protect the interests of our clients.

Lourdes Tudela and John MacArthur

We are Lourdes Tudela and John MacArthur. We are buyer’s agents working out of the ReMax Realty Centre in Olney, Maryland. We cover Maryland and the District of Columbia. If you are looking for a new home and want representation that will protect your interest, we would welcome the opportunity to represent you. Feel free to visit our website MyBuyersAgents. We can be reached at 301-509-5111. If you have questions about title insurance, you can call our friends at Capital Settlements. Their information is found on their website, Capital Settlements.