We asked two experts for advice: Todd Ewing, CEO of Federal Title & Escrow in Washington, D.C.; and Dan Wold, president of the American Land Title Association, a trade association for the land title insurance industry, and executive vice president of Old Republic National Title Insurance in Minneapolis. Both responded via email, and their answers were edited.
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Who typically chooses the title company for a closing — the buyer or seller?
Ewing: By custom, the buyer chooses the title company, and by federal law (Section 9 of the Real Estate Settlement Procedures Act or RESPA), a seller may not require the buyer work with a specific title company if the buyer is paying for title insurance.
Wold: Like purchasing title insurance, consumers have a choice when shopping for a closing services provider. While the buyer or the buyer’s real estate agent usually chooses the closing or escrow company, the seller can agree to the buyer’s selection or counter with another choice. Although the seller generally agrees with the buyer’s suggestion, the selection of the company is negotiable.
Is that the same throughout the country or this is a regional practice?
Ewing: In some parts of the country, the seller pays for the title insurance and so the seller chooses the title company. But in D.C., Maryland and Virginia, the buyer pays for the title insurance, so it is the buyer who chooses the title company.
Wold: There may be differences based on regional practices. For example, in states such as Michigan, Wisconsin and Minnesota, split closings commonly occur where the buyer and seller each select their own closing company. In most of the country, however, a title or settlement agent handles the closing. In other states, particularly states in the West, the person is called an escrow agent. In other states, particularly in the Northeast and South, an attorney may be required.
How does someone go about choosing their title company?
Wold: When selecting a company, in addition to cost, consumers should consider the company’s local expertise, service standards, market conduct and commitment to the local community. A great resource is the American Land Title Association’s consumer education website — homeclosing101.org — where home buyers can search for companies that handle closings in their area. Consumers can also consult with their title insurance professional, lender or real estate agent, as well as ask friends and family for references and suggestions on a company to work with.
Ewing: First, make sure your agent doesn’t just “choose” for you by inserting the name of his or her preferred title company in your contract. Asking your agent for three recommendations of title companies and requesting quotes from each one will serve you best. Perhaps the most effective and efficient way to choose a title company is by searching local title companies online, reading their online reviews, obtaining an online quote and even speaking with one of their attorneys. A reputable and established title company will have many online reviews and be transparent in offering you online guaranteed quotes for their services.
Is there any concern about going with the recommendation made by a real estate agent?
Ewing: A real estate agent should offer the home buyer more than one recommendation to choose from and should explain to them upfront if either they or their broker has a financial interest in any of the title companies recommended. If the real estate agent only offers one title company name and insists on using that title company, it’s likely that there are financial ties and, by law, this is required to be disclosed to the home buyer. More than ever, many agents and brokers are entering into joint ventures with title companies for financial gain. The fees paid to your agent’s preferred (joint venture) title company become a financial benefit to the agent and/or their broker. While the agent is required to provide you with a disclosure for this practice, that disclosure is oftentimes vague and buried among the abyss of paperwork you sign. Joint venture title companies often charge higher fees than independent title companies since they share their profits with the referral source agent and/or broker. Additionally, since a joint venture title company is not a neutral party like an independent title company, a joint venture title company may not always act in the best interest of the home buyer. Traditionally, a title company is selected to act as a neutral party, free of conflicts and fulfilling its duties in the interests of all parties to the transaction.
Wold: In most cases, real estate agents work with title professionals they trust will make the closing smooth, efficient and secure for the home buyer. There are situations where the real estate brokerage and title company have a business relationship, but consumers are not required to use a specific company if they are paying for the service. If there is a business relationship, a federally required disclosure must be provided to the consumer that acknowledges the affiliation, identifies the range of prices for the affiliated service in that area and informs them of the right to shop.
What questions do you recommend consumers ask before choosing a title company?
Wold: The closing, or settlement as it’s called in some states, is one of the most important parts of the process. This is when you legally commit to your mortgage loan. Before closing, consumers will want to ensure they review the Closing Disclosure, a federal form that contains the terms and costs of the transaction. By law, the lender must provide the Closing Disclosure to you three days before the closing.
Consumers can ask if the company offers digital closings. More and more title and settlement companies offer digital closings through remote online notarization. As of January, 39 states have passed legislation allowing for this type of closing, which allows consumers to sign documents safely and securely online.
Ewing: Consumers should ask:
⋅ Is your quote all-inclusive and guaranteed?
· Will you provide me with the opportunity to review and select the type of title insurance coverage?
· Can you act in my best interests as a neutral party in the transaction or do you have financial ties with any of the agents or brokers involved for which conflicts may arise?
Is there much of a price difference from one title company to another? Or is the choice mostly just about service?
Ewing: Yes. Title charges comprise about 70 percent of a home buyer’s variable closing costs so it’s very important that a home buyer shop for title services. Contrary to the popular refrain “all title companies charge the same” heard mostly from agents and brokers who seek to steer the home buyer to their preferred title company, the title charges can vary greatly. The title charges (such as the settlement fee, title search, document preparation, notary fees, etc.) can vary by as much as $1,500. Further, while the regulated title insurance premiums tend to only vary slightly, you could still be unnecessarily paying several hundred more dollars for title insurance because a title company doesn’t give you a clear choice of the type of coverage you desire.
Service is also extremely important. Is the title company established and experienced in the area? Read their online reviews and see what other home buyers are saying about them.
Wold: There isn’t much price differentiation when it comes to the cost of title insurance because they are regulated at the state level in most states, however consumers may find savings on closing fees by shopping around. Consumers should ask about the different services that are provided.