Title Companies – Who Picks and Why Is It Important?

“Who gets to pick the title company?”.  If you guessed the Buyer, you are correct.  The HUD RESPA (Real Estate Settlement Procedures Act)  guidelines are very specific.

Choice of title company

Who gets to pick the title company that will issue the owner policy of title insurance? (updated July 27, 2010) Logical arguments can be made that support either a seller or buyer picking the title company. A seller may feel he should be the one to pick the title company where the applicable provision of the TREC contract shows the cost of the owner policy to be a seller’s expense. A buyer may feel that he should pick the title company because he will actually be the insured party in the owner policy.

The only law governing this issue is under the Real Estate Settlement and Procedures Act (RESPA). The HUD Web site states, “Section 9 of RESPA prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.

Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance.”

How do yo choose a title company?

• Price – Price is Important, Value is more Important! You should search for a closing agent or title company that offers you a savings on title insurance, closing costs, title search & exam, and courier fees, etc. You may be entitled to a discounted rate on your title insurance policy. If you are refinancing and have a previously written Owners or current Lender’s Title Policy, ask if you qualify for a “reissue rate” or “substitution rate”. Title companies may not offer the discounted rate unless you ask for it. The savings could be 30 percent or more of the original title policy.
• Service – Title Companies and Closing agents are not all alike. Title insurance rates and closing fees vary from company to company, but you may not be aware of the differences in service you will receive from one company to the next. Many borrowers also are not aware that they have the right to choose title insurance agents. Under the Federal Real Estate Settlement Procedures Act (“RESPA”), the seller cannot require you to buy title insurance from a particular title company. The lender may request that you use a title company it finds acceptable, and it likely will recommend some companies, but in most cases you have the choice. In the end, the lender usually agrees with your pick. This power of choice is a tool you can use to be sure your closing goes as smoothly and quickly as possible. Closing is about preparation, service and anticipating your needs before and long after the closing. Making the right choice on service is a major component of Value and can save you thousands of dollars in the long run.
• Reputation – When choosing a Title Company, Closing Agent or Escrow Officer an important component is their reputation in the community. Ask the number of years the company has been in business. Ask your friends and acquaintances who have had recent experience with real estate transactions to recommend a company or an individual they have been pleased with, one who met all their expectations. Inquire among friends as to the reputation of the individual officer or Title Company in your local community. Ask your friends if the escrow agent they recommend returns phone calls promptly, explains details in everyday understandable language, inspires confidence, is knowledgeable and acts in a professional, courteous manner.
• Technology – Does the Title Company use a “transaction-management system” or other means of receiving/delivering documents? Can Realtors, Lenders, home buyers and sellers log into this system to monitor the status of the closing? Are they set up to receive lenders “digitally delivered documents” from Lenders quickly and efficiently. It’s critical to be able to receive last-minute changes, corrections and additions to your loan documents. How good is their bank’s wire room? Do they get instantaneous notifications of arrival of funds? Things sometimes move fast at closings. Access to funds and documentation can mean the difference between closing and not closing. It can cost your money! Again, it’s all about Value!
• Experience – The Title Company should able to comply with the terms and conditions of your contract, strive to be as confidential as possible, answer your questions, and clear up any title problems which may arise. Management experience and Professionalism, as well as knowledge, friendliness and efficiency are critical. Ask lots of questions about their previous experience. Do they have a good working relationship with lenders and understand loan documents? Do they have experience in handling possible title problems? Choosing the company to handle your sale can mean the difference between a smooth rapid closing or a complicated, delayed closing, fraught with anguish and extra cost. Again, this is part of Value.
• Underwriters – A great indication of the quality of your Title Company is the identity of their Underwriters. The five major national title insurance companies are LandAmerica Financial Group (Commonwealth Land Title & Lawyers Title), Old Republic Title Company, Fidelity National Financial Inc., First American Corporation, and Stewart Title Guaranty Company. These underwriters comprise the vast majority of all transactions in the United States. The top Title Companies and Agents have the top underwriters, simple as that.
• The Final Decision – Your choice of escrow or closing agent may be one of the most important decisions you make to arrive at your final goal of a timely real estate sale or purchase. Although price is a major factor in choosing a title company, good service, reputation, access to technology and the ability to pay claims should also be considered. You will want to try to select the most reputable and professional escrow or closing agent you can find, combined with the one who also charges the most reasonable fees. In the end, It’s about Value.