What Are You Paying For?

When you are in the process of buying and selling a house there are so many papers and checks that fly around everyone’s hands.  There always seems to be a fee for this, a check needed for that, signing a contract here and another one there.  It seems the money leaves your hands before you even know it is gone.

Chances are one of those checks you write out is for title insurance.  Today’s LA Times Business Section gives a grim look at the title insurance business and what you don’t know, just might be costing you money!

According to the article, whether your are the buyer or seller, you will probably pay somewhere betwee $500 and $2,000 for the insurance.   The whole idea of title insurance is to protect the sellers and buyers in the case that there are any errors in the processing of the title of the home.  

The article paints a picture much like the pharmaceutical/doctor relationship – there are lots of incentives given to the Realtors for using certain title insurance companies.  This was/is not supposed to be the case though.  It was reported that the U.S. Government Accountability Office slapped over $100 million in fines over the previous four years to companies offering incentives (concert tickets, dinners/meals, boat charters) to real estate agents for using their insurance services.

The industry had the money to spend though!  According to the article, “The industry posted $16.6 billion in revenue in 2006, up from $5.1 billion in 1996.”  But now with foreclosures on the rise and the slump in sales profits aren’t expected to be as high. 

But what does this mean for you?  My husband’s a pretty wise fella and caught onto this while we were in the process of buying our home.  We had used a traditional Realtor from my husband’s company who was relocating us.  While he was oing through our paperwork and told us he’d call his “guy” for our title insurance.  That was when my husband told him we’d like to look into other options.   He was flabbergasted, this must have been a first for him.

Fully prepared for battle, my husband pulled out some quotes he received from several other title insurance agencies and explained we’d be happy to go with the suggested company, but we were only going to pay X dollars so they could take or leave our business.  Needless to say, we were told the title insurance was going to lose money on our deal (on what, dinners? they sure still got a good deal of money from us), but they took us on anyway. 

My advice – it pays to shop around.  There are several online title insurance companies that might even be able to save you some money (myclosingspace.com, titleinsurance.com, etc.).  If you’re uncomfortable using an online source, get a quote from an online website and use it to negotiate with the local companies.  Do not be afraid to open up the phone book and call a few companies to get quotes as well.  This is something you can negotiate and don’t be afraid to do it!

Happy negotiating and have fun spending your extra money!