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Every real estate market has its own local nuances, including how title and closing services are priced and charged to buyers and sellers. For companies managing real estate transactions nationwide, the pricing of a distributed local title network all too often reflects local cost structures and competitive dynamics more than the value of services provided.
For example: escrow fees charged on the west coast can be 2x to 5x what you’ll see elsewhere, while the variety and prevalence of creative “ancillary” charges seems to increase as you move eastward. These can be confusing and frustrating for national operations, where transparency, consistency, and predictability in costs are critical.
In this article, we’ll take a closer look at how title and closing services are priced and charged nationwide. In order to maintain focus, we’ll set aside government charges (transfer taxes and recording fees set by the applicable jurisdiction) and title insurance costs (premiums, endorsements and other charges controlled by the underwriter) to hone in on those charges within the discretion of the title and/or escrow company.
National real estate operations are often faced with reconciling closing statements with fees all over the map (pardon the pun):
Sidebar - After 15 years of managing national real estate closings at two underwriters, what a Cover Record fee covers is still to me, obscure, and that’s the problem. These are actual charges to our customers by title companies other than Spruce.
Every line item above is entirely within the discretion of the title and/or escrow company. The pricing may be based on their labor (title examination), cost-plus services (title searches, notaries) or directive to monetize infrastructure investments (technology and archival fees), but they are each ultimately a business decision on how to maximize profitability within the acceptable competitive limits of the local market.
It’s important to emphasize the local market context and behavior because companies managing real estate transactions nationwide receive no additional value from these local dynamics. Why does a loan being involved add $350 to the cost in California (or $200 in Colorado), but nothing in Ohio, New Jersey or most other states? It doesn’t and it shouldn’t. Irrespective of which market we are in, we’re still effectively performing the same core services. It’s not a difficult exercise to price accordingly.
Issuing a title insurance policy and closing a real estate transaction is a valuable service and should be compensated as such. However, national customers deserve consistent and predictable pricing that makes sense across geographies. Generally, title companies serving national customers should set pricing in two categories, subject only to those deviations mandated by state law:
This usually removes:
At Spruce, we take it one step further and charge an all-inclusive flat rate for everything, nationwide. This includes all title and closing services above, including notaries for both buyer and seller. Averaging 20% cost savings nationwide, our customers can realize savings of 40-60% in certain markets like California and Illinois. Sure, there are areas where a national flat rate is in line with local market rates, but there is also tremendous value in the simplicity, consistency and predictability this pricing model offers our customers across markets. More importantly, if we can help move the industry towards national standardization and away from local nuance, we see it as progress.
What are you seeing with your title providers? Let’s start a conversation.
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