Aren’t title insurance costs regulated by the government?
Each state approves their own rate manual for title insurance premiums, charges, and fees. However, there is very little monitoring or enforcement of these fees, and title agencies have been known to add junk fees or inflate fees to increase their profit margins without repercussion.
It is no secret that the closing costs associated with buying a home are substantial. There are lender fees, recording fees, taxes, legal representation costs, to name a few. Nestled within the bevy of financial obligations also includes the cost of title insurance and settlement, which may be the least understood and most obsecure of all closing costs.
To be fair, calculating the price of title insurance is far from simple. The total cost for title insurance includes an owner’s insurance premium, a lender’s insurance premium, pass-through costs (i.e. judgment searches, tax searches, etc), and service fees (i.e. settlement fee, examination fee). While there is state regulation of title fees in most states, including New Jersey, monitoring and enforcement is minimal, so many title agencies are undeterred from adding junk fees to bloat their profit margins.
many title agencies are undeterred from adding junk fees to bloat their profit margins
Five Tips When Comparing Title Estimates
1. Shop around!
The old adage, “you get what you pay for” is not as true in the title industry as other products or services. At the end of the day, most owner’s and lender’s title policies should essentially offer identical coverage, so gathering multiple quotes from multiple title agencies is a good idea. If the estimates vary widely, ask the title agency why their fees are so much higher than others.
2. Look at the settlement fee.
We have found that the settlement fee is where see the greatest variance in fees across title agencies. The base fee for settlement in New Jersey is $300, with various add-ons for travel, extra time spent, disbursements, and after-hoursclosings, but we have found that some title agencies take advantage of these allowances to substantially inflate their settlement fee. This is the first place we’d look to see if we are overpaying.
3. Compare apples to apples.
The biggest factor impacting the calculation of title fees for a purchase is the price of the home. Making sure that you are getting a quote based on accurate information will help ensure you are comparing apples to apples.
If you are refinancing, a borrower will get a discount based on the original amount of the mortgage being refinanced. Though an estimate can be given without the original borrowed amount, providing this will give you the most accurate quote.
4. Are recording fees included?
Oftentimes, title agencies will include recording fees in their estimates. While recording fees are a closing expense, these are collected by the settlement agent and paid to the county clerk, not kept by the title agency. When reviewing estimatesfrom title agencies, take note if recording fees are included. If unsure, ask the title agency to clarify.
5. Be wary of quotes that are too low!
This may be counterintuitive, but some title agencies have been known to underquote in an effort to win business. Once you commit to working with them, they will tack on additional fees later in the process when it’s too late to switch. If a quote seems significantly lower than the others, or if there seems to be missing fees compared to other quotes, ask the title agency to provide assurances that no fees will be tacked on later.
Isn’t the cost for title insurance the same for all companies?
Yes and no. The title insurance premiums, which are calculated using the purchase price and loan amount of your home, will be uniform across title agencies. However, the premiums are only 30-50% of the cost of title insurance. The other fees that title agencies charge is where there can be a great deal of variance from company to company.