Step right up and save on closing costs
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ORLANDO, Fla. -- July 17, 2006 -- People will scramble to clip and use a $5 coupon at the supermarket or fill out and mail a long form for a $50 rebate on a new personal computer.
Yet most won't make a few calls that could save them hundreds of dollars on title insurance and other fees when they buy or refinance a house.
Too often, at the end of the home-buying process, people are "shopped out," experts say. They don't want to fret over what they perceive to be "nickels and dimes" when they're spending hundreds of thousands of dollars on the biggest purchase of their lives.
But with mortgage rates rising toward levels not seen in years, fewer home buyers are willing to sit back and use whatever title company is suggested by their real estate agent, lender or builder.
"We're getting a lot more calls like that, most of them from the for-sale-by-owner people," both sellers and home buyers, said Bill Primo, owner of Winter Park-based Aloma Title Co. "They tend to be more price sensitive and are better shoppers. They'll ask for specifics about what you charge. And they let you know they're shopping around."
Savvy consumers are looking for the best price not only for title insurance, which covers the cost of settling any disputes over a property's legal title, but also for other services often handled by title-insurance agents, such as the closing itself, escrow management, the title search, or document preparation.
Prices for these various services run the gamut, industry experts say. Settlement or closing fees average about $150, but some companies may charge twice that much. Document-prep fees may total as much as $150, though some companies will waive that charge. Attorney fees can range from $50 to $500.
The onus for procuring title insurance falls squarely on the home buyer, because it's required by the buyer's lender. But the lender requires only a policy covering its exposure should a problem with the property's title arise. Buyers -- and sellers -- may also want to consider buying an owner's policy, too, to cover their interests; such coverage can cost as little as $50.
Many people have become wary of title services in recent years because of problems that have cropped up within the industry, experts say.
Regulators from Florida to California have accused a number of major title insurers of using payoffs or kickbacks -- in the form of cash, gifts, paid vacations or other inducements -- to draw referrals from real estate agents.
This added "cost of doing business" has inflated the price of title services and led to consumers being gouged by fees totaling hundreds or even thousands of dollars, regulators say. In some cases, title agencies and real estate firms have shared the spoils, splitting the proceeds of inflated prices.
Critics say such alliances have undermined competition in the marketplace and consumer confidence.
"The basic problem is that title insurers don't market to consumers at all," said Birny Birnbaum, a consumer advocate and former chief economist for the Texas Department of Insurance. "They market to real estate brokers, lenders and others who can steer them business. And that drives up prices to consumers."
Investigations have resulted in multimillion-dollar settlements with title insurers across the U.S. -- even in Florida, where state regulations limit title-insurance premiums.
Last September, Jacksonville-based Fidelity National Title -- the nation's leading title insurer -- was fined $1 million and ordered to refund customers $2.2 million in premiums.
Fidelity agreed to the settlement without admitting any wrongdoing. But the state yanked the licenses of 60 Fidelity agents, including 35 in Central Florida, who were suspected of providing illegal kickbacks to real estate agents and lenders.
Industry officials argue that the problems involve only a small number of rogue agents. In Florida, for example, regulators investigated fewer than 120 of the state's 1,700 title agents last year, and almost one-third of those were exonerated, according to the Florida Land Title Association.
Still, some homeowners say all the turbulence has sent a clear message to consumers: Buyer beware.
"Most people who buy or sell a home don't know that much about the process, and they just go by what their real estate agent tells them," said Adrien Love of Oviedo, a real estate investor who says he has saved a bundle by price-shopping title services.
"People should definitely shop around. Look for a reputable title agent. Ask the right questions," he said. "Find out if someone's channeling you into some kind of referral-fee scheme. The difference you pay could be a couple of thousand dollars."
Love did his shopping the conventional way -- asking friends, bankers or other real estate investors for a list of good candidates. Then, after comparing their qualifications and what each charged for various services, he ended up going with Aloma Title and has stuck with the company.
Shoppers are also turning to the Internet for help. The Florida Department of Financial Services' Web site (www.fldfs.com) includes a link that lets people verify whether a title agent is licensed or has been the target of any complaints. The Better Business Bureau (orlando.bbb.org) also receives and tracks complaints.
A growing number of people are shopping for title services on the Web, according to Joan Rosenstock, a South Florida marketing executive who recently co-founded an online shopping service called titleinsurance.com.
The service lets users obtain price quotes from multiple title companies, much like LendingTree.com and others do with mortgages and consumer loans.
Since March, the title service has had 4,000 users across the country, Rosenstock said. More than 250 firms have signed on as providers.
"Shopping for title services is like buying a car -- you'd never just take it at the sticker price," she said. "When consumers have multiple prices, they can use those quotes to negotiate a better deal. If you think a charge is too high or bogus, use your leverage and get them to lower it."
Copyright © 2006, The Orlando Sentinel, Fla., Richard Burnett. Distributed by McClatchy-Tribune Business News.