Outrageous Title Co. Fees? (long)
My friend just received a "Buyer's Estimated Settlement Statement" from the Title Co. She has a few questions about some of the charges, but her agent and escrow officer have taken off for the weekend. Can anyone shed some light on a couple of issues? The purchase in question is a duplex rental property.
1. In additon to title insurance fees of $1,100, there's an additional charge of $475 for an "Alta Extended Loan Policy." It was explained that this charge is a title policy for the lender. Is this standard?
2. Escrow fee of $800. High?
3. $35 charge for "Email of documents." Explanation: There was some email communication with the lender. Reasonable?
4. Special Messenger fee of $45. Explanation: After the lender sent over documents, these documents had to be signed then returned to the lender. Reasonable?
5. Wire fee of $25. Explanation: This fee applies even if you bring in a cashier's check to pay the "Cash Due from Borrower" amount.
6. Record DT and assignment of rents- $75. Record Grant Deed- $50.
What's bothering my friend the most is that when she first went to talk with an escrow officer at this company and asked about the fees, the officer made a list of what she could expect to pay. This list, she was told, might vary a little, but not substantially- in other words, there should be no big surprises.
Of course, it turns out that EVERY item on the initial list of charges was understated. The escrow fee was listed at $650, the recording fees at $50, and there was no mention of email fees, messenger fees, or wire fees. Furthermore, there was no mention of a "title policy to the lender," let alone a fee of $475 for it.
Anyway... if anyone has any comments on anything I've mentioned, my friend and I would really appreciate it.
Thank you for reading through this entire post.
Tracy
The insurance policies are based upon the sales price and regulated by the government. Email docs, the lender emailed your docs to them and they printed them out. Messenger fee is them sending the docs back to the lender via fedex, transbox, etc. Wire fee, lender wired the money to title and they handled it. Recording is typical at $75.
I would say that the extended policy was probably not necessary, it is an upgraded title policy. However, the other fees seem reasonable. Title companies will "pad" themselves so check for that. It seems like a little bait and switch but these fees are fairly typical. Escrow officer should have been more upfront with all the possible fees. People in this business tend to over-promise and under-deliver.
Tracy,
My thoughts numbered to correspond to your numbered items.
1. It is standard for charges for extended coverage endorsements required by the lender. In PA, title charges are regulated or standardized by the state Insurance Commissioner. Since I don't know the situation in your state, I can't address the amount question. Also don't know what specific endorsements are involved.
2. The amount of the real estate tax escrow varies from lender to lender--how many months of school taxes and how many months of county/township taxes they will escrow. Here the school tax year is fiscal and county/twp tax year is calendar. It also depends on the date of closing. The title company should break the escrow out (so many months of X tax at Y$ per month, etc.)
3. Have no idea. You friend should question how this was computed.
4-6. These should be "pass-through" charges -- charges that the title co has to pay so they pass them on to your friend. I would, however, find out if #5 is required by the lender and that 4 & 6 are pass through's. The county has set fees for recording different types of documents. The county website may have their schedule posted (Recorder's office).
For whatever it's worth, in PA RE agents are required to give a buyer a good-faith estimate of closing costs at the time the purchase contract is signed. Did your friend's agent provide any estimate?
Nancy
Tracy,
In California your mortgage broker/lender should have provided you with a good faith estimate and I believe this is provided to them by the title company. The ALTA fee is as you said insurance for the title company is in the last closing I did, charged to the buyer. The $35 fee for email is because no one want to have to print your documents, therefore they charge for that. They would rather get all of the documents paper based. I a friend of mine is a notary and I know she charges about $35 more if she has to print the documents, so this though it may be outrageous if it's a one page document, is completely fair given how many documents are usually involved in a closing. Rather than charge by the page, they are charging a flat rate.
HTH,
Robert
Tracy,
The fees are reasonable in my opinion
Lori
[addsig]
Thanks very much to everyone who replied. My friend just left after reading through the comments, and she was very grateful for the input.
Additional thoughts:
1. The smaller fees for office stuff (email, etc.) are understandable.
2. Still not sure about the ALTA policy, but it sounds like this is mandated by the state. Does this apply to all loans/lenders? If so, it would have been nice to have been informed of this charge beforehand. If not, what is the criteria for requiring this policy? And what exactly is being insured?
3. The lender did prepare a Good Faith Estimate, but there seemed to be little communication between the title co. and lender. None of the title/escrow charges were close to the actual figures, and several were not included. Is there really no way to get a better, more realistic estimate early on in the process?
It just seems like a strange way to do business- not actually finding out the total charges until right at the end when the title co. shows you the Net Closing statement. Kind of like ordering off a menu that doesn't list prices, but instead has the waiter tell you that the wine you've chosen goes for "about" $50, and then the bill arrives and you're stuck $125, plus an additional $20 because the wine was delivered to the restaurant. by a guy in a big truck.
Living and learning. I really appreciate the feedback from everyone.
Tracy
The alta policy is required by the lender.
The owner's policy is recommended but not required.
Not taking the owner's policy would be penney wise and dollar short!!!!!!
Lori
[addsig]
Hi Lori,
I definitely agree with you on the necessity of title insurance. I'm just wondering why, if this fee is standard, it's not discussed upfront.
When I think about business practices that annoy me, one factor I consider is this: In what other field would this practice be acceptable?
Let's say you go to the dentist. You discuss fees beforehand, and certain figures are mentioned, with the caveat that other issues may arise that require extra fees. Understandable. But if a dentist knows that x-rays are required, as a title co. knows that title insurance for the lender is required, isn't it reasonable to expect this to be part of the estimate?
I hope I don' t sound angry here; I'm actually just sort of amused that practices like this are tolerated, because I've heard enough stories from others regarding extra, previously unmentioned charges that magically appear on documents at the closing to know that's it's not uncommon.
Tracy
Tracy,
I agree that fees should be disclosed up front and good-faith estimates should be good-faith. Sometimes things happen that couldn't be foreseen, resulting in unanticipated charges. But buyers are entitled to the best info that's available at the time.
The only way I know of coming up with a fine-tuned estimate in advance of closing is getting the lender to estimate their charges, including requirements of tax escrow. Then get the title co to estimate everything else, using a specific closing date. Some title co. are better than others -- just like any other type of business.
Hi Nancy,
As always, you make some very good points. To be fair, it should be noted that the lender's fees were right on the money from the start- the estimate exactly matched the final, except for an adjustment on the pre-paid interest.
Because my friend talked at length with the escrow officer before opening title, then again on several occasions as the good faith estimates arrived from the lender, and specifically asked for updated title/escrow fee estimates, I think the escrow officer could have handled things better on the foreseen charges. But you're right- some companies are better than others, and this company certainly lost whatever future business I might throw their way if I ever get my own transaction rolling.
Okay, I'm going to stop whining now- have a great weekend!
Tracy
Quote:
On 2004-05-15 11:41, TracyH wrote:
To be fair, it should be noted that the lender's fees were right on the money from the start- the estimate exactly matched the final, except for an adjustment on the pre-paid interest.
This will vary based upon the final interst rate and on what day you close. If the estimate was for 15 days and you close on the last day of the month then you will have to put more in escrow. If you will close on the first day then you will put in less.
The alta policy is determined once the underwriter decides what kind of customer you are and what program you qualify for.
It takes years of doing anything to be good. I am usually have a $90.00 + or - on most of my GFE's, that only came with doing about 5000 transactions. Unfortunately people are put into positions that they know alot about very few aspects of the job.
When I do deals in states I am unsure of the fees I disclose and redisclose sometimes 2 or 3 times a week. I usually will tell them the things I have control over or know the answer to. When I don't know the answer Itell the customer ehat I don't know and tell them how and when I will know. But that is how I do it, everyone does it dfferently.
Lori
[addsig]
lacashman,
It makes sense that the pre-paid interest would vary due to the factors you mentioned. No problem on that.
Lori,
Of course you're right about the variance in experience and professionalism among people in any field. Generally speaking, this points to the leadership under which people are working as well- what is acceptable, and what is not, no matter how long someone's been on the job.
I'm sure your clients appreciate your honesty and diligence in keeping them informed of any changes or updates. Now, if only you were working out here in California... :o)
Thanks to you both,
Tracy
Well I can understand why you are upset having to pay all these closing expenses, especially when reporting all this on a Creative Real Estate Investing site.
My normal closing costs when I buy a property is $14.00 recording fees plus whatever transfer tax, $150.00 Loan Servicing set-up fee, my document printing costs, plus time and effort in doing my own due diligence; and then when I resell the property these closing cost are even less.
If it costs megabucks to close a conventional deal and you don’t want to pay that (and why would want to), then maybe you should start thinking creatively…which is what this is all about.
John (LV)
Hi John,
I'm right with you on this, and am all for thinking creatively. This was posted on the Beginner's Forum, though, because it sometimes helps to know how the game is played before thinking about alternative methods :o)
So, are you saying you avoid escrow altogether, and research the title yourself? This isn't an issue with the lender? Sounds promising, and I'd love to hear more about how this is done.
Thanks for the reply,
Tracy
When buying a property Subject to (the existing loan), you avoid all the new lender stuff and just deal with the seller of the house.
If you don’t have to deal with “all the third parties”, you can concentrate on helping out your seller with his problem of getting rid of the property, for whatever reason, that is holding him back from going on with the rest of his life.
By dealing directly with the seller, you can help your seller by purchasing their property and have a win-win situation, where you get the property and the seller gets rid of his problem.
And a bonus is you don’t have to pay all those conventional closing costs to purchase the property.
John (LV)
Hi John,
Thanks for the information on subject-to purchases. I went over to that forum and wow- a lot of lively debate going on. It looks like an interesting way to complete a transaction, and I'll be reading through the posts to learn more about it.
Much appreciated,
Tracy