Choosing a Title Company
YOU have the RIGHT to choose your own Title Company!
Federal law guarantees you the right to choose the title company that will handle your real estate transaction-whether it is a cash sale, purchase/sale with a new mortgage or a refinance. As this will probably be one of the most important financial transactions of your life, you should carefully research who you will be entrusting with your money and the ownership of your home. Depending on the price of your home and/or the size of your loan, you will probably be paying $500.00 to $2,500.00 for title and closing services; would you make any other purchase that size without shopping around?
By all means listen to your real estate agent or lender, but call around, ask questions and get comfortable with the people who are going to handle what is probably the biggest financial transaction of your life! The more information you have, the more control you’ll have over the outcome. It’s your choice!
Closing a real estate transaction and solving title problems often requires fairly sophisticated interpersonal and legal skills. You need a title company that is experienced, competent and familiar with local custom and practice. An established local agency – with attorneys and underwriting staff available in their office – probably is your best bet to insure a smooth closing.
The following is information you may want to know as you go about selecting a title company and how title and closing services are Sold/Performed.
Title insurance is sold in Michigan in four ways
“Direct operations” are branch offices of national insurance companies. Often referred to as the ”underwriters”, these companies are Stewart Title Guaranty, First American Title, Fidelity National Title and Old Republic Title, and their subsidiaries Chicago Title, Commonwealth Title, Lawyer’s Title, and United General Title.
The “direct” operations usually rely on centralized title search and closing departments that are often located out of state or even overseas in the Philippines, India or the Dominican Republic. The local office, in the residential market, usually functions primarily as a marketing operation, with closers who obtain the signatures of clients on documents produced elsewhere. Title underwriting decisions are handled at the state or national level, rather than in the local office. Direct operations also only sell one brand of insurance-if your transaction does not fall within their guidelines, you are just out of luck.
The other methods of selling title insurance and closing services is through the use of a title agency. Title agents perform all of the tasks an underwriter “direct” office performs, except guarantee the policies. Title agents contract through the underwriters and pay them a portion of the title premium as a “commission” to issue policies backed by their company. Depending on how much of the search and examination work an agency performs, and the claims experience the agency has, the commission retained by the agent can be a substantial amount of the premium.
A second method for the sale of title insurance by agencies in Michigan is through an “Affiliated Business Relationship” (AfBa) title agency-an agency where the Real Estate Broker, the Lender or the Foreclosure law firm has a piece of the action on title and closing fees. Federal and State Law require that real estate agents, brokers and lenders disclose whether they will receive a financial benefit from a title company that they recommend, but unfortunately these disclosures are often misleading or buried in the fine print.
“AfBa’s” vary tremendously in size and competence. A small number of these firms represent multiple underwriters, do their own title examinations locally, have their work reviewed by attorneys on staff and have experienced local closing/processing departments. Most AfBa’s in Michigan, however, are little more than shell companies, with one or two employees who rely on their one underwriter for all title research, most title underwriting and for “back up” help when times get busy at the end of the month. If your Realtor or Lender recommends an AfBa, make sure you understand what capabilities the Company has and what benefit your Realtor or Lender will receive for the referral.
The most common way that title insurance is sold in Michigan is through the use of an independent, local title agency. The independent title agency usually represents more than one underwriter; performs its’ title examination by using local public records, supplemented by privately owned databases known as “title plants”; processes closing documents locally and has closers on staff who are trained to answer consumer questions about their closing documents. An independent agency also may have lawyers on staff that can assist the parties in the drafting of legal documents that are needed to complete the transaction such as Deeds, Land Contracts, Certificates of Trust and Powers of Attorney.
Pricing and Closing Costs
In Michigan, both underwriters and agents are obligated to charge title insurance rates that have been filed and approved by the Michigan Insurance Bureau. This is the entity that regulates the Michigan industry. In the past, these rates were almost identical; however, some underwriters have chosen to modify their rates, so there can be some savings, particularly if you purchased a home in the last 10 years.
In addition to title insurance, title companies charge closing fees. Closing fees are the fees associated with creating the settlement statements, managing the loan documentation, paying off liens, commissions, and other “costs” incurred to get to settlement. They also include fees to make sure that deeds and mortgages are recorded timely and correctly. These fees are not regulated and vary from company to company, county to county and state to state. These fees are sometimes “all inclusive”, with one fee covering everything that the title company does-preparation of closing document, conducting the closing, as well as expenses such as overnight fees, wire fees, fees charged by municipalities etc. Other firms often charge for each item individually. Ask and get quotes and compare them, especially if your lender has provided you with a “Good Faith Estimate or “GFE”. Beware, however of lenders that do not charge “closing fees” or who have “zero cost” loans who try to steer you to title companies where they have a financial stake – the fees could be buried in a higher interest rate. The money is still collected and internally transferred to their title agency. You may want to compare the “no cost” loan to another company that offers a rate plus “fees” to be certain you are getting a good deal.
Who Pays and Who Chooses?
Title insurance and closing fees are one-time costs on the transaction. In Michigan, tradition is that the seller pays for the Owner’s Policy which insures the purchaser, and the purchaser pays for the Lender’s Policy that insures the lender for the mortgage. The seller has traditionally selected the title and closing agent because they need to show their ownership of the Property. The other reason the seller has traditionally chosen the title company is that at the end of the closing virtually all of the money that is on deposit with the closing agent belongs to the Seller, either in proceeds, payoffs of existing mortgages or payments such as Brokerage Commissions and Transfer Taxes that are obligations of the Seller. They want to be confident that the escrow agent holding their money is a company they can trust.
Here are some questions that you may ask…
How many employees work at the company? This company may not have a big understanding of title insurance or have the ability to problem solve difficult title and closing issues. Any company that has 3 or 4 employees does not have support in today’s complicated housing market to be fully informed of recent legislative changes. One or two “gals” in the back office is not a quality title agent in today’s world. You do not want to find out that you have a problem when you go to sell your home and that “gal” has disappeared.
How long has the company been in business? Many title agencies were created during the go-go real estate market. The largest concern for underwriters is “defalcation”, when an agent mishandles funds. A company that is a long established business has controls in place, and security measures to protect the handling of monies. A new company may not be up to speed with all of the protections.
Do they have the ability to give multiple quotes? Title agents that only have one underwriter may have been cancelled by other underwriters, or may not be big enough or have the quality controls necessary to attract other underwriters. Multiple underwriters mean multiple audits on the agency to protect you and your money.
Do you have more than one underwriter that can tailor a solution to any title problem? The “gal or guy” in the back room may only be able to make things work according to the wishes of the party or parties they represent. A multiple underwriter independent agency like Liberty Title can call on the expertise of all of the “big guns” to find solutions to title and closing issues.
Other important questions to ask…
- Who owns the title company?
- What benefit does the loan officer or real estate agent receive for referring their business?
- Do they get “credits” against their desk fees, advertising?
- Do they receive a financial reward, or their Broker, or their manager?
- Do they share in advertising costs or help the agent or their broker with costs of running the business?
- Does it seem like these title agents may not be working for you?
- Do they have an attorney on staff reviewing and underwriting their work?
- Is the work performed in the local area?
You have the right to choose a title company that will get you the best deal. And you have the right to pick an independent, local title agency that you can trust to handle what is probably the biggest financial transaction of your life.
At Liberty Title, we will “shop” your transaction among available underwriters to give you a fair price on Title Insurance, making sure you get all of the appropriate discounts. We will also give you a fair price on closing services-quoted up front, with no surprises at the closing table.
Liberty Title provides you the peace of mind that you should expect from a title company and closing agent. Our staff averages over 18 years of experience. We are honored and trusted by all of the major title insurance underwriters. We handle over $500,000,000 of client funds every year. Our reputation for honesty and integrity was built over 37 years of working in the real estate industry.