by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Admit it. You’ve wondered if there was a lot of fat in title policies, didn’t you? I mean, how many claims does a title company REALLY get in this “nobody trusts anyone” market? We order a title commitment and the title company:
- performs a detailed search of the property’s chain-of-title
- mitigates most any risk
- insures the title and earns an insurance premium.
One would think that this highly-regulated, extremely commoditized business would file premiums within cents of each other, right?
I received a direct mail piece from EnTitle Direct today. They are a national title insurance company (the old Guardian Title):
ENTITLE DIRECT is the only title insurance company that markets and sells directly to consumers at 35% savings. We combine 30 years of experience and stability with a consumer-friendly approach and provide you with significant savings on title insurance, the ability to control your own closing, and transparency throughout the closing process.
I was curious so I got a quote for a $400,000 refinance transaction:
- $500.00 escrow fee (about $100 more than the local folks)
- $357.50 for a title policy (endorsements not included)
I ran the CLTA Title Wizard to comparison shop. Local escrow fees are about $400.00 so the locals are winning, at this point. Let’s see what the locals offer for title policy premiums:
- Commonwealth $1, 045
- Ticor $1,045
- Placer $675
- Orange Coast $625
- Stewart $675
- Provident $800
- Old Republic $800
- Chicago $1045
- FATCO at $605
What am I missing here, gang?
I think someone may have just figured this game out. Any comments or experiences with EnTitle Direct are appreciated.
PS: EnTitle Direct claims to be a member of the California Land Title Association (CLTA) but its quotes don’t show in the CLTA Title Wizard. Either the CLTA charges extra to be quoted on Title Wizard, EnTitle Is being less than forthcoming about its professional memberships, or I need to get my tin-foil hat out.
Lenn Harley says:
It doesn’t matter.
If the consumer is free to shop title insurance policies and require the title attorney/title company that conducts the closing, survey, abstract, etc. to use this or that title insurance company, the fees for managing and conducting the settlement services will skyrocket.
Conducting the settlement services has been a “loss leader” for the title companies because their money was in the commission for the title insurance. Take that away in the interest of “transparancy” and the home buyer and seller will just pay in another way.
Letting the public shop for title insurance is like letting the public shop for mortgage lenders. They don’t know what they’re doing.
Lenn
June 7, 2009 — 2:38 am
Charles Stallions says:
Hi Brian, Most agents choose the title company or the mortgage company so the consumer probably doesn’t realize what they are paying which may be unfortunate. But it comes down to the lowest cost I would think.
June 7, 2009 — 6:35 am
William J Archambault Jr says:
Brian,
I’ve never experience this much variation in title rates, but it doesn’t surprise me. Title insurance is finite so you get the same coverage no matter what the premium, so lower is best! Well sorta’, there are times when only one company will do regardless of the cost. IE: New construction, or when a title flaw has previously been insured over, and there are lenders who will only accept ceratin companies.
Escrow services are an entirely different matter! Escrow agents like REALTORS and Loan Originators vary from person to person and should be selected accordingly! When you select an escrow agent with a title company you must use their insurance. When you select an independent escrow service you can select the title company separately.
As lenders we rarely have any influence on escrow and title company for purchase money mortgages. The buyer and seller have to agree on the selection, but it’s rare that anyone but the two REALTORS have any influence. Refinance is a different story the LO or his processor generally select the escrow agent with the clients permission.
Even with the variation in cost in the end like REALTORS and LO’s Escrow Agents should be selected by who is most likely to get the job done!
Bill
June 7, 2009 — 7:53 am
Diane Cipa says:
Hi, Brian: I think you need to run a transaction through them to thresh out all costs. In PA, we have filed rates, ENTITLE only offers an enhanced policy and when you add on the fees quoted in their system, consumers buying policies under $200,000 might do better elsewhere. That is, if the consumer shops. In PA, lots and lots of title policies are written under $200,000.
I am happy, though to see a large company put some money and effort into reaching consumers directly. It’s this momentum that will hopefully push competition that benefits consumers. We’ve had for too long reverse competition that serves the referral net.
June 7, 2009 — 10:00 am
Brian Brady says:
I’m so happy you showed up Diane because I think this question was ultimately meant for you (because you’re in PA and know the biz). You’re correct when you say that ultimately, I have to get baptized by fire with Entitle Direct.
Most of our title transactions are over $300,000 so this might work for us. I’m curious if anyone else has used them.
June 7, 2009 — 11:19 am
Diane Cipa says:
We’ve just had a public hearing in PA on title insurance and it’s just possible we may see deregulation of the agent’s portion of the premium. That ought to shake things up. 😉
Let me know if you do try ENTITLE. They testified at our hearing and were very careful NOT to anger their agency side of the business. They also operate as Guardian Title in a traditional underwriter/agency model.
The ENTITLE program is meant to serve consumers who are net savvy and want that form of communication.
June 7, 2009 — 12:51 pm
Ki says:
That would be interesting to get online title insurance. I like the idea of lower fees but the title company (at least in Texas) is a somewhat important part of the transaction. We dont have lawyers at closing just title companies. If we took them out of the equation I think things would get a little messy sometimes.
June 8, 2009 — 8:42 am
Claire Fennessey says:
Hi Ki,
Unfortunately, we’re not doing business in Texas just yet. However, for the 32 states in which we are licensed, we offer far more than a web experience. We’re very involved in the process through our fantastic group of experienced Specialists at our Specialist Center in Pittsburgh, PA. Via phone and email, we work with consumers, mortgage brokers, direct lenders and real estate agents/brokers across the country to ensure a smooth closing process. Of course, you can always get a quote online from us – or go to Closing.com and check our pricing against the competition (remember to sort by price!). And based on the information you provide when you get your quote on our site, our prices are just what we tell you — there are no additional junk fees or service fees (other than lender required endorsements). Also,take a look at our Control Panel, where consumers can watch/manage the process and see/share their documents on line with others involved in their closing process – takes the stress out of seeing a stack of closing paperwork at the closing tabel for the first time!
June 8, 2009 — 2:04 pm
Brian Brady says:
Hi Claire,
Thanks for the call today; you cleared up my nagging question which was, “Why aren’t you on Title Wizard?”
EntitleDirect is excluded from TitleWizard because they don’t have a CA office…yet. They are a CLTA member (http://www.clta.org/member-directory.php)
June 8, 2009 — 9:27 pm
Diane Cipa says:
Glad Claire is here. I have a question, but first, I got a quote for comparison. I see the quote for PA has been changed since I last visited. Your quote system now compares a basic policy to a basic policy and enhanced is an option. I asked for a quote based upon a $150,000 purchase in Pittsburgh, PA.
Major Competitors – that means most other underwriters since most are in the rating bureau – TIRBOP, $1108.75
ENTITLE $722.50 plus
doc prep $130.00
tax search $35.00
courier $10.00
recording service $50.00
ENTITLE total $947.50
The TIRBOP rate is an all-inclusive rate and so it includes the extra services you are itemizing.
A fair comparison, then, would be $1108.75 vs. $947.50 – still a savings of $161.25 but not the savings you proudly display on the quote page to the consumer – $386.25.
Both the TIRBOP quote and the ENTITLE quote do not include lender endorsements, closing services letter, notary or settlement/closing fee.
TIRBOP’s all inclusive rate includes the closing/settlement service so long as the consumer goes to the title company/agent office during normal business hours. The title company/agent must disclose this option to the consumer so that they knowingly select their closing location and time.
My question, Claire, in PA, what are your closing/settlement services and how are they priced?
June 9, 2009 — 4:07 am
Lisa R. says:
If you are in a state where rates must be filed with the state, you will not see the variance in price. All title companies in Michigan are within a couple of dollars of one another as we are in a filed rates state.
The important question becomes what your closing fees are. Flat fee or not?
Lisa R.
June 10, 2009 — 7:47 am
Diane Cipa says:
Every area is different. In PA we have filed rates, ENTITLE has filed rates that are very different from most underwriters.
June 10, 2009 — 10:48 am
Briian Brady says:
“In PA we have filed rates, ENTITLE has filed rates that are very different from most underwriters”
Can you explain that, Diane without the title lingo and acronynms?
In CA, we use independent escrow companies to close (some title companies choose to perform those services as well). Are Pennsylvania consumers denied that freedom of choice?
June 10, 2009 — 11:36 am
Diane Cipa says:
Sure. Pennsylvania is not an “escrow” state. We table-fund which means that money moves at the conveyance table, often with all parties present.
Licensed title companies (underwriters) or title agencies (like me) handle title insurance and what you would refer to as escrow or settlement services.
There is also an approved attorney program but to keep things simple, I’ll stick to the system most often used.
Title agents follow the filed rates and fees that their underwriters work out with the PA Dept. of Ins.
Underwriters are the big guys like First American, Stewart, and Fidelity.
As a licensed title agent, I am authorized to issue title policies for an underwriter. At present I write for two underwriters.
Most PA underwriters are members of a rating bureau, called TIRBOP. Members of TIRBOP have the same filed rates.
ENTITLE is not a member of TIRBOP. They filed rates on their own.
The PA Dept. of Ins. regulates the title premium and sets limitations on the type of other fees a licensee can charge.
In PA, mortgage lenders and real estate agents quote TIRBOP rates and guesstimate the extra fees a title agent might charge.
Consumers or their lender or real estate agent select a title agency. The title agency then selects the underwriter.
Sorry for making this a novel. TIRBOP filed rates include the premium to the underwriter AND the title agent.
June 10, 2009 — 1:34 pm
Briian Brady says:
“Sorry for making this a novel.”
Not at all. Thank you. I find the parallels to my industry fascinating.
“The title agency then selects the underwriter. ”
So title agents are like mortgage brokers; compensated by consumer and provider?
June 10, 2009 — 1:37 pm
Diane Cipa says:
One more thing. Most underwriters have “direct” operations which means a consumer can go to them directly and get title insurance and settlement services. The underwriter still follows the same filed pricing guidelines as title agents.
You can Google all PA licensees and ask for a basic title insurance quote for $300,000 and most will tell you it’s $1858.75. That’s the TIRBOP “all-inclusive” premium. The trick is to get the “ancillary” fees – the extras – because that’s where the consumer may pay nothing more or they may pay hundreds more and all for the same services.
June 10, 2009 — 1:40 pm
Diane Cipa says:
Very much like a mortgage broker but all compensation comes from the consumer. Title agents pay a portion of the title premium to the underwriter – usually 15%.
June 10, 2009 — 1:43 pm
Briian Brady says:
“Title agents pay a portion of the title premium to the underwriter – usually 15%”
If the title agent is the principal, does that mean that a consumer would negotiate the policy fee with the title agent or is the title agent “commissioned (at 85%)” from the issuer?
June 10, 2009 — 1:47 pm
Steve Trang says:
What makes this whole story worse is all these REO transactions where the seller demands buyers to use the seller’s title company. We get to title, and their fees are ridiculously high. There’s often little recourse once we get that far. One of these days, somebody’s going to sue and win big. Unfortunately my clients are the little guys in the big picture.
June 11, 2009 — 12:05 am
Diane Cipa says:
Since we have filed rates, there is no negotiation on the policy fee. Consumers can negotiate ancillary fees but the law will not permit us to go above or below the filed rate for a policy.
There is one option, though, for getting a lower policy in PA and few use it. It’s under the approved attorney program. Under that program attorneys were exempted from the filed rates, except in the portion going to the title company. The larger portion of the pie is completely controlled by the attorney, though few offer a lower rate than title agents would.
June 11, 2009 — 5:42 am
Brian Brady says:
“Consumers can negotiate ancillary fees but the law will not permit us to go above or below the filed rate for a policy.”
WHAT??? The state mandate a minimum fee? That doesn’t sound very consumer-friendly
“The larger portion of the pie is completely controlled by the attorney, though few offer a lower rate than title agents would.”
This sounds like an opportunity for an entrepreneurial, Pennslylvania attorney
June 11, 2009 — 10:38 am
Diane Cipa says:
What’s really interesting is that the Insurance Commissioner and the Attorney General want to deregulate the rates – all except the underwriter portion to control solvency. I favor deregulation, however, it freaks out the folks in the biz.
I think we can put in place a few standards that help guard solvency then let the market do its job. Everybody wins. 😉
June 11, 2009 — 10:44 am
Diane Cipa says:
Well, I guess not everybody. Consumers and those players who seize the opportunity win.
June 11, 2009 — 10:46 am