This will be the third version of this post since I started writing The Mortgage Porter in late 2009. Things have overall changed for the better for consumers when it comes to the closing procedure. Last month, two new disclosures, the Loan Estimate and Closing Disclosure, were introduced replacing the Good Faith Estimate and HUD-1 Settlement Statement effective for loan applications dated October 3, 2015 and after. This post applies to loans originated after October 3, 2015. If your loan application is dated prior to October 3, 2015, you should refer to this post instead.
I’m often asked by my clients if they can select their title or escrow provider and the answer is a big YES! Some feel that title and escrow fees are all within a close range and this simply isn’t the case. I have seen fees for these services vary by hundreds of dollars.
Here are some pointers you may find helpful if you are interested in shopping for your title or escrow provider:
Know how your rates are priced. With escrow on a purchase transaction, you will need to provide the sales price and let the escrow company know if there’s going to be a second mortgage or if a courtesy signing may be required or if it’s a short sale. It’s important to ask the escrow company for ALL of their fees. I’ve received quotes from an independent escrow company in Ballard where they try to pad their quotes with a $200 “miscellaneous fee” just in case something “pops up” during the transaction. Ask the escrow company if the fee is the “full” fee or your “half”. Typically, in Washington the buyer and seller split the escrow fee.
NOTE: If your escrow provider is a title company, most offer a significant discount on their title fees when title and escrow are at the same company with a purchase. This discount often applies to both buyer and seller. Using two different title companies for title and escrow services seems like money flying out the window to me.
If your transaction is a refinance, typically the escrow company just needs the loan amount. As with a purchase, ask for “all” their fees. Do they charge a reconveyance processing fee, wire fee or courier fees (also possible with purchase transactions).
Have the escrow company provide your quotes in writing – they should be able to easily email this to you.
With title insurance, the company will need to know your sales price and loan amount. For a refinance, they just need your proposed loan amount. They will also need to know which county the property is located. In Washington, the seller typically pays for the owners policy and the buyer pays for the lenders policy. With a refinance, the buyer pays for the lenders policy.
Ask for possible discounts. Some title companies will provide an additional discount if you title is placed electronically via their website.
Start early. You’ll want to obtain your quotes before your purchase and sales agreement is drafted. If you’re involved with a purchase transaction, real estate agents will try to direct where the title and escrow services are placed. Sometimes this is a legitimate concern where the agent has received excellent service from their escrow and title team and/or it could be that one of the real estate brokerages have an ownership interest in the title or escrow company (see below). Regardless, the consumer does have the right to select these service providers. Some title or escrow companies may insist on needing a signed purchase and sales agreement before providing a quote which is not needed if you provide the above information (sales price, loan amount and county the property is located in).
If your transaction is a refinance, let your mortgage originator know that you would like to shop for these services at your loan application.
NOTE: Mortgage companies may have ownership interest in an escrow company as well. You are not required to use them – it is your choice!
Ask for recommendations. Talk to your real estate agent and mortgage originators about who they like to work with and why. Does their company have an ownership interest in these providers? Will the escrow company do amazing back flips to make sure your transaction closes smoothly and on time? Ask your family or friends who have recently closed a transaction, who they used for title or escrow providers.
Know the relationships. A few of the big real estate brokerages have interest in title and escrow companies. In the greater Seattle area, we have the following large real estate brokerages who continue to maintain an interest in title or escrow companies:
- Coldwell Banker Bain: Rainier Title; and Escrow Professionals of Washington (EPOW)
- Windermere: CW Title (formerly known as Commonwealth of the Pacific)
According to Northwest Title Company’s website, one or more principals at Routh, Crabtree, Olsen, PS, a firm located in Bellevue which does significant REO (foreclosure) escrow business, have interest in Northwest Title Company.
Higher fees does not always equate to better service. I’ve seen some escrow companies that charge significantly more than what I would consider to be a fair market price. They may try to justify this because they have attorneys on staff or because the property is a short sale or foreclosure – ask why. I have no problem with anyone being compensated for work performed as long as it is a fair market price.
Some companies make it easier for you to shop than others with rate sheets or calculators posted on their websites. I still recommend giving the title or escrow company a friendly phone call followed up with an email to obtain your personal quote in writing. I’m amazed at the lack of service I sometimes find when I call a title or escrow company to obtain a quote for my Good Faith Estimates.
I used to have my preferred title and escrow providers listed on this blog, however DFI felt that this was a potential violation of respa since they viewed it as free advertising even though I had a link to all title and escrow companies and encouraged consumers to shop.
Bottom line: consumers are paying for these services and are free to exercise their right to shop for and select their title and escrow providers.
EDITORS NOTE: With the introduction of CFPB’s Loan Estimate and Closing Estimate, some of the information below may not apply if your loan application was originated October 3, 2015 or later as the 2010 Good Faith Estimate and HUD-1 Settlement Statement have been retired. Watch for an updated post soon!
When I originally wrote this post back in January 2007, we didn’t have the Good Faith Estimate that HUD created and implemented in 2010. Although this GFE has caused greater confusion and has overall been a failure (a new version is should be available in 2012), the one positive feature about the 2010 GFE is that lenders are bound by what they quoted on their last Good Faith and page three of the HUD-1 Settlement Statement clearly compares what was quoted by the Mortgage Originator and what the final fee at signing is. In addition, there are certain tolerances that limit how much more a fee at closing can be for some of the lender fees.
If you’re a long time reader of The Mortgage Porter, you know that my pre-mortgage career was in the title and escrow industry. One of my early jobs was preparing documents to be recorded at King County. Later in my career, as a sales rep, I would sometimes have the opportunity to “be a hero” by driving “rush recordings” directly to the court house in Seattle and either meeting the title company’s recorder or actually having to “walk on” the documents myself. Recordings are the deeds and deeds of trust that will be recorded at the county to become public record to give the world notice that you now own the land or have debt attached to the property. (It also gives scammers notice to hound you with loan and other offers).
On a recent transaction, I learned that all title companies are not the same when it comes to how the manage their recordings. When a title company receives documents from the escrow company, they are typically “on hold” meaning–do not record yet; or they’re a “walk on” which means, record as soon as possible. It’s my understanding that most title companies keep holds at King County UNLESS they have verified with the escrow company that the documents are not scheduled to close for some time.
This transaction involved a title company who apparently keeps recordings for King County at their Lynnwood office until they know they are released for recording and then they are sent with their recording courier. Problems can arise when recordings are released later by escrow or if the courier faces high volumes of traffic with her commute to Seattle (what are the odds of that?). I have been informed by their Senior Title Officer that they are changing their policy on keeping holds at their office.
It could be worth asking your preferred King County title provider:
Where do they keep recordings that are on hold?
Where do they keep recordings that are on hold?
Hopefully the recordings are kept at King County (or the appropriate county) so that in the event of a later release, the documents are prepared and ready to go to avoid delays with closings.
I am often asked this question during a refinance from homeowners. Your mortgage payment is paid in arrears. For example, your February payment is paying January’s interest. Remember when you bought or refinanced your home and the loan originator stated “you’re going to skip one month’s payment” or “you won’t have another payment due until the following month after closing”? Well this is where that payment essentially catches up with you. (Technically, it’s not “that” payment, you’re just always paying the previous month’s interest).
One of the first-time home buyers I’m currently working with just called me with a few excellent questions. She and her boyfriend have recently made an offer on their next home, with their agent which was accepted. They now have handsome stack of papers from the escrow company (as if the paperwork from the lender wasn’t enough) that caused some questions.