Buying a home? Refinancing a mortgage?
Save thousands of dollars on Pennsylvania real estate closing costs - in any market - with these 5 tips
Shop around for your title insurance provider and save substantially on fees.
When purchasing or refinancing real estate, it’s the buyer/borrower that chooses the title company. The Consumer Financial Protection Bureau (CFPB) encourages consumers to shop around for title insurance and settlement services to make sure that they’re getting the best deal. And here’s why:
Think of title insurance as a product. Title insurance rates are filed with Pennsylvania’s department of insurance. Charging more for the product – or discounting the product – is prohibited. Now think of your final settlement as a service. But beware, the fees for that service are on uneven ground. Each title company is free to charge additional fees to cover the cost of those services such as administrative fees, closing and overnight mail fees, fees for bank wires, notarizing documents and even a fee to print the mortgage documents that you’ll be signing. And before you know it, an additional $500-$900 creeps into your closing costs. When you choose a title company, they are by definition your settlement service provider. So choose wisely.
Note: Many real estate agents, brokers and mortgage lenders enter into profit sharing arrangements with title insurance companies who refer business their way. They encourage the buyer to use the “in-house” provider for title insurance, but the buyer is under no obligation to use them. The in-house provider typically charges the buyer more in fees which in-turn generates larger profit distributions.
*Rather than pay a real estate brokerage, their title company or conveyancing company an additional fee to manage your transaction, which averages $395-795, let ALT manage your transaction at no additional charge.
Ask your lender if they’ll offer a credit towards your closing costs. A lender credit towards closing costs can offset thousands of dollars in fees.
Lender credits to the borrower towards allowable Closing Costs are common in today’s market. If you're purchasing a home, they will not have any negative effect on your agreement with the seller nor do they need to be disclosed to the seller. Depending upon the loan product that you choose, the lender credit can at times exceed one-percent of the loan amount.
We suggest discussing this option with lenders during the interview process. It’s always a good idea to interview several lenders during the preapproval process. The mortgage interest rate is always an important factor. However, your lender’s fees are also very important, as is their level of customer service to insure a smooth transaction.
Many real estate agents and brokers offer to pay a portion of their commission to the buyer at settlement, reducing the buyer’s out of pocket expenses.
Real estate commissions and service fees are negotiable. As the real estate industry transforms, we’re seeing more and more agents and brokers crediting a portion of their commission to their buyer at closing. At times these credits can be a much as 1% of the final sale price, reducing the buyer’s out of pocket expenses. Reports have shown that by offering a commission credit, agents and brokers are attracting more millennials and first-time home buyers which is adding a new dimension to their business.
In most cases, commission credits are handled right at the settlement table, provided your lender is aware of the credit. Your lender will likely require a letter from your real estate broker outlining the amount of the credit. Once again, the best time to speak with your agent about a commission credit is during the interview process. This will eliminate any confusion and make sure that all parties are on the same page.
Ancillary real estate services: Don’t forfeit your right to shop around and compare.
When you’re ready to place an offer on a house, your real estate broker may ask you to sign an ancillary services agreement/disclosure committing you to use their preferred service providers (title insurance, home owner's insurance, home inspection, home warranty company) before you’ve had a chance to look around. We suggest you decline if the disclosure prohibits you from shopping around for a better deal. Selecting these providers is not necessary to place an offer on a house and declining to sign it has no impact on your offer. After you’ve done your homework, if you come to the conclusion that you’d like to use the service providers recommended by your broker, go ahead and sign the disclosure.
Broker Admin/Conveyancing Fee: Avoid paying twice for the same service.
A conveyancing fee, also referred to as a broker’s services fee or flat-fee commission, is an administrative fee charged by many (not all) real estate brokers to process your transaction. The fee can range from $195 to $800 or more, and that’s over and above their commission which is typically paid by the seller. This fee is also negotiable, and can often be avoided if your title insurance/settlement services company is coordinating the transaction. Typically, your title company coordinates the entire transaction between the buyer, their lender, the seller and the real estate agents. This service is included in the one-time title insurance premium that’s part of the buyer’s closing costs.
Conclusion: The efficiencies of twenty-first century technology have empowered consumers and are transforming the real estate industry. As with any major project, having a plan is the key to success, especially when buying real estate. Select your mortgage provider, title agent and real estate agent before you start looking at homes and arm yourself with online tools and technology to help you through the process.
Best of luck finding the perfect home!