We represent many buyers in residential and commercial real estate closings. In doing so, we see settlement statements from title companies and closing attorneys across Florida. We’re amazed at the variations in the closing costs for settlement and title insurance. The settlement fees range from lows of $250.00 and highs over $1,700.00. Title insurance premiums, while promulgated by state law, vary too as the closing agents add to the statutory rates with abandon. Also, although Florida laws changed in October, 2008, to forbid the practice, many closing agents still charge separate junk fees for items such as courier, electronic storage, notary, copy, 1099 processing, and other fees that are required to be included as part of the “Settlement” or “Closing” fee.
We are also surprised at how often the buyer simply lets the seller, especially REO sellers such as Fannie Mae and foreclosing lenders, dictate where the closing is conducted. The general rule is that the party who is paying for the owner’s title insurance policy is the one who chooses who issues that title insurance policy. The FNMA addendum to contract, since early 2010, has permitted the purchaser to choose the closing agent. However, for whatever reason, many buyers continue to simply let the REO seller choose the closing and title agent.
Another confusing issue is that most buyers don’t push for their choice of closing agent when they are purchasing a short sale. Sure, they may have to pay the owner’s title insurance premium, but – with a little shopping for price and quality – the buyer can have their chosen title company handling the closing. The buyer has a lot invested in ensuring the short sale closing is completed in a timely manner. If the seller’s lender makes more money at the closing because the buyer is paying the title insurance, that may be the little “grease” that helps the closing clear the short sale lender’s objections.
Few title companies, such as PCS Title (our sister title company), understand that every little bit can help in getting the REO or short sale closing completed. To that end, PCS now gives a “Butler Rebate” of 40 percent of the owner’s title policy premium on every closing. This portion is deducted from the agent’s portion of the overall title insurance premium and is in addition to the discounts available for reissue credit or substitution rates. The higher the value of the policy, the greater the rebate. We have found that, when such rebates are offered, buyers find it more appealing to choose their own title company to handle the closing, and the lenders find it more appealing to approve the sale, knowing that they’ll be pocketing more money to cover their losses.
So, if you’re buying a short sale or an REO, don’t hesitate to designate the title company. If doing so means that you must pay the owner’s title insurance premium, then be sure to use a title company that rebates a portion of the title premium to the one who is paying for it.