Closing Process and Fees

One of the biggest reasons for this blog is to help consumers understand the closing process so they know what to expect when they close and help them avoid being taken advantage of. Most consumers are fairly familiar with realtors and mortgage lenders but have little knowledge of the closing process. Part of the reason is they simply leave it up to the real estate professionals to take care of everything. This works well for traditional title and closing companies but not so well for consumers.

It's time for consumers to learn more about the closing process and begin to take control of their closing costs. myClosingSPACE is attempting to change the title industry by putting control in the hands of consumers. Not only are they offering consumer oriented pricing and service but they are attempting to educate consumers about the processes and fees associated with real estate transactions. One way they are doing this is with their myClosingUniversity.

This new section provides detailed information on the various processes and fees in a typical real estate transaction. There are two different sections, one for refinance and one section is for the purchase process. Each section has links to different pages that lay out the associated fees and what they cover for every aspect of the real estate transaction. This covers realtor, attorney, lender, title company, and what is needed when it is time to close.

Consumers, this is a good place to start your education on the closing process. There may be a need to get further clarification and you may have some more specific questions but you will get a decent top level understanding of the closing process there. If you are going to make a big investment like a house you should know everything that will go into it and closing is a big part of the real estate process. Start educating yourself at myClosingSPACE as well as the many other great resources online and you can be on your way to taking control of the real estate transaction.

Shopping for Title Insurance

One of the main points of the GAO Report on title insurance was the emphasis that consumers need to be able to shop for title insurance. According to the current laws consumers have a right to to shop for their own title insurance. The problem is that most consumer have no idea that they can do this (let's face it, most consumers do not even know what title insurance is until they have already bought it). On top of that most title insurance companies do not put their services in front of consumers.

It is up to all real estate professionals to help consumers make the proper choice when it comes to title insurance. There needs to be a concerted effort to move away from the ABA's that benefit the real estate professionals in these partnerships and leave the consumer out in the cold. Our goal should be to assist the client in making decisions that are best for them. This will lead to long term benefits for the real estate professionals in the form of referrals and repeat business. If your client trusts you they will be willing to tell their friends about you.

Consumers need to learn all they can about every aspect of the real estate transaction. If you don't understand something take the time to educate yourself. You do have a choice so if your mortgage broker, attorney, or realtor pushes you to use their title company or tells you that you have to use who they recommend you need to take a long hard look at that person. They may not have your best interest at heart. I have seen my share of issues arise when we tell a consumer that they have a right to shop around for title insurance. More than once we have had consumers tell us that their real estate representative has told them that they can't shop for it themselves. We even had one attorney who said that they would not work with their client if he did not use the title company he recommended. Why do you think they would do that? I am willing to bet it has a lot more to do with the title company (illegally) paying that attorney for business referrals than it does in actually protecting the client. As consumers you are paying for a service and if that service is not working for YOU it is probably time to find someone else who will work for you.

As real estate professionals it is time to go back to working for the client and get away from working for ABA partners. We owe to our clients and they deserve the best service we can provide FOR THEM.

Steve Adkins Letter on Radical Title Talk

Diane Cipa has posted a letter from Steve Adkins on her Radical Title Talk blog. Mr. Adkins originally wrote the letter to the Washington Post's Close the Home page in response to an article on Barney Frank's ascension to the chairmanship of the House financial services committee. I agree with what he is saying and applaud Diane for posting the letter. There is a need for our representatives to look at the issues in the title insurance industry and work to clean them up. I am posting this to help get the letter more recognition and I hope that eventually media outlets like the Washington Post will take a look at these issues. The more exposure we bring on the bad players in the industry the easier it will be to get the public involved and actually create real reform.

What Magazines do I read? - I have been tagged by the Incrediblehelp (AKA Jaan Kanellis)

I just got tagged by Jaan with a new blog meme. This one asks what magazines I read. Like Jaan, I spend a good portion of my time online I rarely read print magazines but there are a few that I still peruse.

Here is a list of the few that I read regularly.

Sports Illustrated
Wired
Website Magazine
The Title Report

So, let's keep this going. I am pinging the following people. Let's hear which magazines you read.

Diane Cipa - Radical Title Talk
Ed Rybczynski - Title-Opoly
Dave Wirsching - Clearing Title Blog
Pat Kitano - Transparent Real Estate
Robert Franco - Source of Title Blog

Will Title Companies Embrace or Ignore the GAO Report

OK. I have discussed the GAO Report on Title Insurance here and there have been discussions on most of the prominent title industry blogs including Radical Title Talk. The GAO report outlines the problems with the way title insurance works and offers some insight into how it should be cleaned up. There are a few industry insiders spreading the word and trying to force a change but the question that still remains is whether the majority of title companies are willing to completely change their business models to comply with the recommendations in the report?

I believe that there are some title companies that will do so but I fear that there are still too many who will ignore the report and continue fleecing the consumer in their quest for the almighty dollar. For these companies change will on occur when consumers force it either through lawsuits or political action. It seems like every other month there is a new class action suit against a title company that is involved in illegal kickbacks or shady ABA's. These companies know the risks yet they continue to engage in these activities because they know that in most cases they will get away with it. The regulatory agencies policing them are not proactive and will usually only step in when enough consumers make complaints. If the government agencies are not willing or able to take control of this situation themselves it is up to the legitimate title companies and consumers to force them to.

It is important that the good title agents and title companies take the lead in getting the information out to consumers. Let them know they have a choice in title insurance and that they can take on an important role in changing the industry to benefit themselves. Talk to people you know who are not in the industry and point them to the report, educate them on how title insurance works, and help them understand that they can make a difference. Title insurance companies have flown under the radar for far too long and with the GAO report it is time to bring the industry into the public eye. Change can come from within and there are many who are doing just that but the bad actors will not change so it is up to the good title agents and consumers to step up force change.

Leading the Charge for Title Insurance Changes: Steve Poizner

Steve Poizner is the California Insurance Commissioner and has been one of the toughest critics of the title insurance industry. He has taken a very visible role in the fight to force title insurers to change and become more responsive to consumer needs. His latest salvo in the fight is his response to the recent GAO Report on Title Insurance.
Mr. Poizner agrees with their findings and he is using his power to push title insurers to respond in a way that will benefit consumers. Click here to see Mr. Poizner's response to the report.
I agree with Mr. Poizner and I hope to see leaders in other states take the same position and began forcing a change in the title industry. Consumers pay for title insurance and they should understand what they are paying for and have a real choice in the process.

Can Someone Explain This to me?

I can't figure this out. Please take a look at this listing in Nutley, NJ. The house is listed at $825,000. I have been looking at houses in the area for the past year or so and most houses of the same size and features and in the same neighborhood have been priced in the $500,000-$600,000 range. So right off the bat it is way out of sync with what the market will bear. What further adds to the strangeness is this house was for sale a little over a year ago for $590,000 and it did not appear to sell since it is on the market with a different realtor now. In the pictures you can see that it appears to have updated floors, kitchen, and living room but what they do not show is the recent water damage. When we looked at it a year ago we were impressed with the updates but we went back a few months ago and noticed that water was pouring into the rooms from the ceiling. We called the listing agent and told them about it. When we went back after seeing this listing we checked the room from the outside and noticed that there was extensive water damage to the floor and ceiling.
So to wrap this up this house was not able to be sold with brand new updates at $590,000. Now the updates are ruined by water damage (along with other parts of the house), the average price for homes in the area is going down, and the house is now priced $825,000.

Am I missing something? Does this make sense to anyone else.

GAO Report on Title Insurance

Title Insurance: Actions Needed to Improve Oversight of the Title Industry and Better Protect Consumers.

The U.S. Government Accountability Office has released their new report on the title insurance industry. As in previous reports the GAO concludes that title insurance is largely controlled by the 5 major insurers. They also report that lack of competition and inappropriate marketing and sales tactics by ABA's result in consumers paying too much for title insurance. The report highlights that title companies need to provide more information for consumers and make it easier for consumers to shop around for title insurance.

To view the findings visit the following links.

GAO Report Highlights (PDF)
GAO Report Abstract
GAO Full Report (PDF)

Finding the Right Title Company

Finding the right title company is an issue for consumers and real estate professionals. Real estate professionals want to find a company that represents their clients' interests as well as their own, which are generally going to be the same. There may be a few specifics that a real estate professional is looking for but in most cases they simply want a title company that will work FOR their clients. Since they have a good understanding of the real estate transaction process they know what questions to ask and what to look for in a title company.
Consumers on the other hand are generally not as familiar with real estate transactions and that puts them at a disadvantage when shopping for title insurance. They actually have to learn more about title insurance and the services title companies will be providing. This can lead to a lot of confusion and leaves them open to shady title companies. There are ways to alleviate these problems.
Just like anything else you should be comfortable with the company you are choosing. Shop around and ask questions. Don't just focus on price but consider price along with service. Find a title company that responds to your queries quickly and takes the time to answer your questions. Remember they are working for you. Find a company that makes you feel comfortable and will actually work for you. Avoid companies that refuse to answer questions or sidestep your queries. Real estate is generally the largest purchase most people will make and title insurance is a big part of the closing costs. You should feel like the company selling it to you has your best interests at heart and will do what it takes to make you happy.