I felt compelled to write a post about title and escrow costs, and hope this may help educate some borrowers, if not other real estate professionals.
In an industry that is intensely competitive, there is a constant need to examine your business model with the purpose of driving down your costs.
When it comes to being a mortgage broker, one of the costs of a loan is closing costs, specifically the non-recurring closing costs.
One of the main categories, and in fact the single biggest category after a loan origination fee (points), are all the title and escrow costs. (This applies to Northern California where we typically use just one company. Other states and Southern California are different)
Whenever I am asked to provide a Good Faith Estimate, I always must include the title and escrow costs.
Borrowers compare these costs, and often will choose the loan that has the lower costs, all things equal.
There are times when a borrower will tell me they decided to go with someone else, perhaps not because of a lower interest rate, but because the loan costs were lower.
Naturally, no one likes to lose business because your cost structure is too high, so it behooves the mortgage broker to find a title and escrow company that is very competitive in their cost structure.
A few months ago, in the search of a more competitive solution to get those title and escrow costs as low as possible, I experimented with a couple of companies, one of which was a large discount company advertising significant savings with Title Insurance.
Well, to make a long story short, the results were totally unsatisfactory, proving the old adage that "you get what you pay for." The delays and extra work created for my processor were deal-killers.
In today's lending environment, when all paperwork must be perfect, and the process has become longer due to government intervention, and especially because of more severe penalties if you don't meet the rate lock expiration dates, having a title and escrow company who knows what they are doing is of paramount importance.
I have learned a valuable lesson and that is in today's strict lending environment, you must choose Competency over Cost.
My advice to borrowers is not to get hung up on $200 or $300 of extra closing costs. Find out who the Title and Escrow company is. Ask how long they have been in business. How many loan transactions do they close? Are they a well-oiled machine, so to speak?
When I have a loan to close, and we are getting down to the wire, and when every day could mean either meeting a close of escrow date, or a lock expiration date, the decision to choose Competency over Cost becomes an easy one. It makes no sense to save $300 when you are risking the entire purchase transaction, or when you are facing thousands of extra dollars because you missed a funding deadline by one day.
I choose Competency. Hands down.