Why do Title Companies Overcharge?
And how to save on title fees and closing costs with Empora
Real estate investors with a high volume of transactions are always looking to reduce costs. Savvy investors try to save money on expenses including taxes, appraisals, repairs, and capital expenditures. But did you know that investors have the potential to save thousands of dollars in title fees and closing costs?
The outdated title and closing system is rife with hidden and unnecessary fees. It’s easy for title companies to overcharge because everyone else does. Just because it’s always been this way doesn’t make it right.
Why do title companies charge what they charge? Which fees are legitimate, which are common, and which fees are being charged simply because everyone else is charging them? We’ll review them in this article, and shine a light on how Empora is challenging the status quo, reducing fees, and saving investors thousands of dollars.
Junk fees are common
Most homeowners only purchase three houses in their lifetime, so exorbitant title and closing costs have a limited impact on them. The equation is very different for real estate investors, many of whom purchase 3+ properties per month. Real estate investors – especially those doing a high volume of property transactions – stand to benefit the most from fair and transparent pricing on title fees and closing costs.
There are many avoidable fees that traditional title companies try to charge that you may be unaware of, including:
- Endorsement not requested by the lender
- Notary fees
- Wire fees
- Postage fees
- Courier fees
- Travel fees
Fees tend to vary on a state-by-state basis. Investors entering a new state should compare the prices of multiple title companies. Fees that aren’t common in other states where you’re doing business might be the norm in the new state. Also, the way fees are split between buyer and seller can vary from state to state. For example, while the buyer typically pays the settlement fee in Ohio, Kentucky, and Indiana, the buyer AND the seller both pay a hefty settlement fee in Florida.
At Empora we provide our estimated fees upfront so you know exactly how much each deal will cost. Check out our Closing Costs Calculator to estimate your closing costs.
Which title fees are standard, and which are avoidable?
While some fees are fairly standard from title company to title company, many fees are unnecessary and some are potentially avoidable. Here are some of the more common fees you can expect to see, and how much you’re likely to pay for each.
- Settlement fees. The settlement fee represents the core fee for services provided by the title company, and it is generally the single largest fee charged by the title company. It can also vary greatly between providers and by state. In general, settlement fees start around $400, and they are typically paid by the buyer. That said, settlement fees can be significantly higher in some states, like Florida where it’s common for title companies to charge a $450 settlement fee to the buyer and the seller on each deal. Empora often saves buyers $100+ each closing on settlement fees alone.
- Search and exam fee. The search and exam fee covers the cost of searching title records by the title company. It’s not uncommon for typical title companies to charge $250 for this process, but that fee is at their discretion. In most states, Empora saves buyers up to $100 per closing.
- Wire fee. Although the title company typically incurs little to no cost for wiring funds, it’s very common for them to charge upwards of $100 in wire fees on each property transaction. Empora does not currently charge any wire fees, which results in an instant savings of about $100 per transaction.
- Notary Fee. Notary fees can add significant cost to each deal. It’s common for traditional title companies to charge $150 or more in notary fees on every deal. This is one area where Empora’s digital-first title and closing solution brings efficiency. With Empora you won’t pay for a notary unless your deal requires more than one notary instance on each side of the deal (buyer and seller). This is an example of fair and transparent pricing, and only charging customers for the services they use.
- Commitment fee. Commitment fees compensate the lender for their commitment to lend to the borrower. This is a common fee that is charged by most title companies. Typically this fee will be around $50.
- Deed preparation fee. Deed preparation is done to draft the deed when the seller conveys the property to the buyer. Many title companies charge the buyer and the seller a deed prep fee, because they can. Empora only charges a deed preparation fee on the buyer side. In general, if your title company charges more than $85-$100 for deed or document preparation – you are probably overpaying.
It varies from state to state, but home buyers typically save $500+ when closing with Empora, while sellers save over $200 on each transaction. For investors doing multiple transactions per year these savings can add up quickly. Some investors have saved over $25,000 in closing costs per year by leveraging Empora’s digital-first title solution.
5 ways to save on home closing costs
The best way to save on closing costs and hidden fees is to take a step-by-step approach to determine which costs are required and which are “nice to have.”
- Review your closing statements for hidden fees for endorsements not requested by the borrower or the lender. If you are not sure why you’re being charged a fee, ask for clarity.
- Validate these charges with your lender and know that a lender may require some fees while others are unnecessary.
- Send back the corrections. Most title fees are automatically assigned and are never questioned by the buyer or seller. You can then request to remove the fees you don’t need.
- Shop around! Fees and closing costs can vary significantly from one provider to another. Many title companies have closing cost calculators that can show you how much you’d pay before submitting a deal.
- Choose a title company that doesn’t overcharge for title and closing fees!
Revolutionizing title for real estate investors
Empora is changing the game for real estate investors. Our tech-forward approach to title saves investors up to 30 percent on real estate closing costs and fees – while streamlining and adding transparency to the overall process.
Empora is currently active in Florida, Ohio, Indiana, and Kentucky and we continue to expand to support investors across the country.
Is Empora right title partner for your business? Learn more about how Empora was built to support the specific needs of real estate investors. Try our Closing Cost Calculator to find out how much Empora could save you on your next deal. Or, submit a deal to experience how Empora’s digital title platform will elevate your title and closing process.