Did they really get a good deal on title insurance?

A Philadelphia real estate broker recently referred a couple to us for title insurance; she had listed their Center City home for sale.  The couple wanted to move closer to work, and planned to buy a home in Bucks County.  Since the couple was moving out of the city, they were working with a different real estate company for their purchase.

I contacted the couple to explain the process for ordering title insurance, the fees involved for a typical purchase transaction and the fees that we would waive.  They had just submitted an offer on a Doylestown property and were waiting to hear if the sellers were going to accept.  In case the offer led to a counter offer, I let them know that our real estate attorney would be available during the negotiating process in case they needed a consultation.

After about a week, I called to see how they were making out. The gentleman told me that their offer had been accepted and that they decided to use their realtor’s in-house title insurance provider.  Their real estate agent offered them "a deal that they couldn’t refuse."  Here’s how it went:

Apparently this real estate company, the one with the large yellow signs, was representing both the buyer and the seller.  As the listing agent, the realtor had to resolve a question as to whether or not a neighbor had rights to a common driveway.  So the real estate company had already run a title search to see if anything was listed on the public record before listing the property for sale.

When the seller and buyer agreed upon a price, the buyers signed the agreement of sale and the stack of disclosures that go along with it. The couple was asked to sign a contract authorizing their real estate agent to order title insurance with the in-house title company. They objected, informing their agent that they had been in contact with an independent title insurance company who would save them about $400 for the same service.

Their agent, who has been trained to use every tactic to keep the title business in-house, gives them the old line, “let me speak to my manager.” The agent comes back with “good news.”  Because they already performed a title search to resolve the driveway issue, the manager agrees to waive the fee for the title search if the buyers would use the in-house company.

Great deal, right? There’s just one problem…in Pennsylvania, the cost of the title search is included in the title insurance premium. There is never an additional charge for the title search. The only negotiable fees are for courier, notary, wire transfers, electronic document fee and closing fee.  So the in-house title agent waived the fictitious title search fee, yet charged this couple for everything else!

For many consumers, title insurance is the great unknown. The majority of homebuyers don’t fully understand what it is, how much it costs, or that they can choose their own title company.  They only know that they need it to satisfy a mortgage requirement. Unfortunately, that lack of knowledge makes buyers even more vulnerable to a smooth sales pitch from someone trained to convince you that all of these fees are reasonable and standard in the industry.

Bottom line:  get the facts about title insurance, compare a few quotes and question anything that sounds shady.