Surpirse Closing Costs at the Closing Table

I was talking with my wife about buying a new house and she brought up some things she has heard from people she works with about their recent home purchases. Basically more than one of her co-workers has had bad experiences when sitting down to sign the closing documents. It seems that they had to come up with more money than they were originally told to bring. This is a big issue especially for those of us who are just able to scrape up enough money to cover what the closing costs that were quoted.

I tend to believe this is another result of Affiliated Business arrangements. The fact that the title company does not really care how they look to the consumer because the consumer is not their customer. This leaves a bad taste in my mouth and makes the whole industry look bad. People that have been taken advantage of by these title companies assume all title companies and their employees are the same and it reflects poorly on me and everyone else in the industry.

This needs to change and I believe that many in the industry are really pushing for changes. Consumers talk to each other and with the Internet they are able to reach a lot more people than they have in the past. In my mind this is a good thing because more and more of the shady companies are going to be outed and hopefully it will lead to less business for them and more business for the companies who put the consumer first. The consumer is the one paying for our services and it is up to us to provide our services to them with honesty and respect. I see the industry changing and I hope I am right.

Second Life Title Insurance

A recent news story about Coldwell Banker entering Second Life as a real estate broker in the virtual world got me thinking about other real estate services for Second Life. If you are not familiar with it, Second Life is a virtual world where users set up a second life for lack of a better term. Basically it is very similar to the real world where users can buy and sell property, products, and services and basically live life in a virtual world using real money. Plenty of companies are advertising in the virtual world but Coldwell Banker has taken it a step further by offering real estate services to Second Life members giving them the opportunity to buy and sell land.
Now the fact that there is room for real estate brokers leads me to question if there is a need for title insurance providers. After all title issues that occur in the real world could easily crop up in a virtual world. Obviously this seems like a silly concept, and in reality it probably is, but just for fun I thought it would be a good discussion. More and more people are spending a lot of time in Second Life and other virtual worlds so there is a possibility of conflict over title and who actually owns the rights to the virtual property.
It looks like it is time to start thinking ahead and developing the perfect title insurance service for virtual lifers. Or maybe not. Either way it looks like it could be a good advertising opportunity. I mean if someone buys property in Second Life using Coldwell Banker they may think of that company when it comes time to buy or sell property in the real world. The same could be said if title insurance services are available too. Many consumers do not know what title insurance is but if they have to buy it in their virtual world using your company they may come to you when the buy a new home.

Working with Title Insurance Companies

I have written quite a bit about Joint Ventures and collusion between title insurance companies and other real estate professionals. To be sure a problem does exist with these arrangements but there are ways for real estate professionals to work with title companies in a way that is legal and provides a benefit to consumers.

I have come out strongly against Joint Ventures, especially those that are designed to send business to title companies by providing gifts or inducements to the referring realtor or mortgage broker. I am against these arrangements because they invariably push extra costs on to the consumer. The nature of these relationships leads to anti-consumer practices.

There are ways that realtors and mortgage brokers can work with title companies that do not involve illegal payments and can save consumers a lot on title insurance and closing costs. First things first. These arrangements do not involve Joint Ventures. Instead, they involve totally independent businesses working together to offer consumers the best service and passing any cost savings to the consumer. There is nothing wrong with a realtor recommending a title company that they believe offers superb customer service and low prices. This is much different than recommending a title company because the agent or broker is being paid to do so. One important point is that this should be a recommendation and the consumer should be informed that they have a right to choose their own title insurance provider. Reputable realtors, mortgage brokers, and real estate attorneys should always put their customers' needs first and if they have a preferred title company that has the same customer first ideals they should have no problem recommending them. This type of partnership gives consumers a bit of direction in something they ma be unfamiliar with while still allowing them to make the final decision themselves.

Helping customers find a title company is good practice but it is important that the help is designed to benefit the customer. Forging relationships between title companies, realtor, and brokers can help build strong professional relationships and good will with consumers as long as they are done legally and for the consumer.

What’s the Problem with Joint Ventures

In theory joint ventures between title companies and other real estate professionals seems like a great way to make the real estate transaction process more efficient and cheaper for consumers. On the surface it would appear that using affiliated realtors, mortgage brokers, and title companies would benefit consumers but the reality can be much different. Joint ventures were developed to create one point for all aspects of the real estate transaction but problems arise in how these partnerships are run. As with many other aspects of the real estate industry the focus has moved away from helping consumers to increasing profit for the industry professionals. This article will look at how joint ventures have evolved to be more interested in benefiting the professionals while actually hurting consumers.

The idea behind joint ventures makes sense. By providing a one stop source for mortgage, title, and settlement services one would believe that consumers would benefit because the process would be more efficient. Consumers are saving time because they can get their mortgage, title insurance, and closing service from one place and don’t have the added stress of finding them each on their own. The problems arise when these joint ventures are using their relationships to steer business to specific companies with illegal kick backs and passing the extra cost off to the consumers. Recommending a title insurer is perfectly legal but once money or any other type of inducement is given for that referral it becomes illegal. These illegal practices hurt consumers because they end up paying for the referral whether they know it or not.

In recent years joint ventures have come under considerable scrutiny from state and federal authorities because of the illegal practice of kick backs and inducements. This has brought a negative image to the industry but it has not eradicated the proliferation of these arrangements. That is because the profit potential is much greater than the risk of getting caught and paying fines. The companies involved in joint ventures are also fighting any type of title insurance reform, like Senate Bill 2229 in New Jersey. They realize that reform bills like this will create real competition that favors consumers and destroy the current model that benefits the title companies using anti-consumer tactics. There is too much money being made by joint venture companies and they don’t want to lose it. On top of that if the joint ventures were eradicated title companies would be forced to improve their customer service towards consumers and that would create a huge need for change in their business structures. Right now joint ventures view their partners as their real customers and consumers are treated more as hindrances than customers.

Title Insurance and the Internet

A discussion on the Title-Opoly blog got me thinking about the role of the Internet (and technology) in the title industry. It seems to me that many title companies have tried to ignore emerging technology like the Internet for as long as possible. I see signs of that changing every so slightly but there are still many in the industry who do not take advantage of what the Internet has to offer.
I understand some reluctance to technological changes as change can be scary. Sometimes it requires totally overhauling processes and investing heavily in new systems. The way I look at it though is that eventually these changes will need to be made so doing it early puts one ahead of the competition. The Internet also offers the ability to present your message and even gain customers outside of normal business hours.
For the most part the real estate industry has incorporated Internet functionality into their businesses and they are better for it. The title industry us lagging behind and it needs to catch up. A few companies have taken proactive steps to move forward technologically and IMO they will see the benefits from this. Others are fighting it as much as possible and in the end they will either fail or have to start playing catch up with the early adopters. The Internet and associated technology is not going away and will continue to become more important. Title companies need to realize this and begin developing their business to compete in this new landscape.