Last week I mentioned excessive closing costs sometimes charged
by the settlement agent that closes your purchase transaction. In every market
competitive forces usually keeps these forces pretty well identical. But identical at what rate?
charge a flat fee of $400 plus $2.50 per $1,000. If a home sold for $400,000, the escrow fee
would be $1,400 divided equally between the parties. Now, due to inflation, all
these years later this home now sells for $1,000,000, so the escrow charge
would be $2,900. But the fee structure
has now gone up too. They now charge $400 plus $1.75 per $1,000, a total of
$3,900, a 178% increase. Note that there are some title companies who will only
charge a lower flat fee if they are also doing the title insurance.
It gets worse. The
escrow fee used to handle just about everything, but we have seen the
introduction of new extraneous charges, not unlike the myriad of "garbage fees"
charged by lenders. Notary charges used
to be included but now there is an extra fee, perhaps $75. Almost invariably
the buyer wants a loan, so he now gets charged a "loan tie-in fee." That fee started out at $100 or so, maybe
$200, but in the two cases I referred to, the Loan Tie-In Fee was $600. Frankly,
that is outrageous and when we found out about it, I was able to get it
reduced.
schedule of fees that you will be charged. Keep it so you can compare it with
the final bill, and be firm about stonewalling increases.
Randy Johnson Randy is a Credit.com contributor and seasoned mortgage expert. He writes about home buying, mortgage laws and real estate finance issues. He has financed over $1 billion in properties, is the author of How to Save Thousands of Dollars on your Home Mortgage and he is a feature columnist for Savvy Borrower.
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Should that $1.75 up there be $3.50?
As far as closing cost rip-offs go, everyone wants their piece of the action. In PA, the lender, realtor and title companies are usually the good guys at closing. It’s the state, township and school district that make it expensive for closing. Real Estate Transfer taxes (1% of sales price for buyer AND seller), PA caps seller contributions at 3% for some reason or another, real estate taxes are paid by the year instead of quarter so a lot of that has to be paid up front AND escrowed for your mortgage company at closing. Closing on a home here is outrageously expensive.
With so many people out to get you, it really makes me want to never, ever move.