Traditional title examination involves the judicial use of technology while not replacing human expertise. That said, it takes a bit of time and a bit of money and that’s where we’re caught in this crazy Catch 22. People want you to do all the work and pretty darn fast – almost never fast enough but if for some reason they change their mind, then they wonder WHY we processed it in the first place. HUH?
It only happens when the title order comes from a real estate agent or mortgage lender on behalf of a consumer. You see, consumers are pretty darn smart. They select our company for quality of service, expertise and fair price. Consumers understand when they place the order directly that the ordering of those services is a hiring decision. I explain Choose and Save and the value of placing a deposit up front versus being billed for cancellation should the transaction not close. Consumers make their choice – deposit up front or not – but either way they get it and if the deal falls thru, they understand they owe us for services rendered and always pay.
In the case of real estate agents and mortgage lenders, they don’t always get it – many do, but many don’t.
Here’s the case on my mind today. I received a call from a loan officer on August 20th – we had done business with him before but not for some time as he switched to working for a mortgage lender that is owned by a real estate company who also owns a title agency and he normally routes his business to the affiliated companies. In this case, he needed a speedy and efficient title agent, this client was a family friend, and so he chose our office. That’s very nice and we are happy to help. So…..
I ordered the abstract – a full 60 year search from a qualified expert abstractor with whom we have worked for years. [cost $130] I assigned the file to one of our closing coordinators, MC.
On 8/21, MC called the buyer and left a voice mail explaining who she was and giving him a courtesy heads up and a 48 hour window to opt into the Choose and Save Program. MC also created letters to the seller and buyer and to all municipal agencies. She created a file and faxed title confirmation sheets to the loan officer and real estate agents asking if they had preference for closing time, location or closer. MC cut checks payable to the various municipal agencies and sent them out with the lien letter requests. [cost for lien letters $165]
BTW – The “hello letter” MC created and mailed to the buyer on 8/21 contains – in bold – a heads up that we are processing a title order on their behalf and that if we are NOT to be doing so that they need to contact our office immediately as we have advanced money for abstract and lien letters and there will be a title cancellation fee for services rendered. There is an extremely small window in which we can cancel these things if there has been some kind of mistake.
After completing a full traditional title examination, we produced a title insurance commitment and mailed it to the buyer on 8/29 including copies of maps found at the courthouse and our plotting and a letter which reiterated that there would be a title cancellation fee should the transaction not close.
On 9/5 we received a call that the transaction was being cancelled due to property inspection issues. MC informed the buyer that we would be sending an invoice for $300 for title cancellation and he went crazy. Why had we done all of this work when he hadn’t decided fully to buy the property. I spoke with him suggested he should have that conversation with the professionals who handled his transaction as they ordered the title work on his behalf with full authority pursuant to the terms of the sales agreement he had signed. [PAR agreements include two clauses in which the buyer agrees to pay for title search, examination and cancellation. The clauses are in there to protect real estate agents from loss if the order the work and the deal goes south.]
The loan officer called and wanted to know why we were charging a fee, and I gave him all of the info I have just given to you. We had the pleasure of dolling out $295 to process the file, did a heck of a lot of work in the 7 to 10 day period following receipt of the order so that they would have their title commitment in time to meet their needs. We were only asking for $300.
The loan officer said he would be paying the invoice and I said that’s fine.
There are a few difficult issues here but the big one really is setting expectations. The buyer had conflicting expectations. On the one hand the buyer had a fast timeline expectation and that’s why the loan officer called upon us because he knew we could perform. On the other hand, the buyer had reservations about the structure and had a property inspection contingency. What the professionals in his transaction failed to do was to explain that in order to stay on target with his fast timeline expectation, it would be necessary to more forward and order services from a title agent while awaiting results of a home inspection. I feel certain that the buyer understood completely that he needed to pay the home inspector. He simply did not understand that he would also have to pay for title work – even though he had signed an agreement to do so.
If the consumer had placed the title order himself directly with our office, I would have had the chance to set the expectations in reality. I do it all the time and it works. We get loads of calls from consumers whose lender or real estate agent suggested they call us to place the order. That’s the smart way to do it. It recognizes the relationship between the buyer of services and the provider of services.
So, I’m tossing this post up here for the benefit of real estate agents and loan officers and consumers. Please understand that the ordering of title is the purchase of services. You wouldn’t go to a restaurant and order a meal, then cancel it after it was already prepared and placed on the table before you, would you?
My sympathies. All it takes is one bad title horror story to point out the value of a thorough title search. We bought our house from a nice guy who was downsizing into a new property. We ran into him at a party about four years later, and it turned out they had only just closed on that new house! Turns out the builder didn’t have clear title to the property, but sold the house to the guy anyway! It’s well worth $300 to avoid that kind of nightmare, and if your guy’s deal fell through for other reasons, that’s irrelevant to paying for a title search once it’s been done.
Thanks, Richard.
I don’t think I can blame the buyer, notwithstanding the restaurant example. Buyers are pretty much confused as it is, and have no idea what’s going on behind the scenes. There’s bound to be miscommunication. Taking money upfront for expenses while the buyer is interested would be a good idea, I think, rather than squabble about it after a person decides he wants to have nothing to do with you.
Taking money up front is a good idea. That’s the basis for our Choose and Save Program. If they make a deposit, we waive optional fees which give the buyer at least a $175 savings and free deed prep for the seller.
In addition to having a published policy on our web site, we called the buyer and left word about the C & S. We also sent a “hello” packet with clear terms followed by the title commitment with a letter stating terms.
The buyer likely ignored it because buyers tend to find a pro and trust their advice. The LO probably told him not to worry, he’d work it out. He is. He is paying for our services.
These words,”squabble about it after a person decides he wants to have nothing to do with you” clearly indicate a lack of awareness that a title order is an order for services. Let’s ignore the restaurant example. I doubt that most people would stiff an appraiser or a home inspector or a surveyor. If the lender decides to place an order and does so without a deposit, the lender still has to pay the appraiser.
Waiving fees for title cancellation is giving a thing of value and in most states and in transactions subject to RESPA rules, it’s a violation. It’s also crumby business practice and theft.
I agree Diane…
It’s the way it’s presented to the client they really don’t get it. The know that they have to pay for the appraisal whether the sale goes through or not because they are charged up front. But no one that I know does the same with title just because it not customary. I always wait until after the contingency period is over before ordering that way I “usually” avoid complications.
A very good title search is extremely important. I have also gone through title issues, but thankfully they cam up at the last minute before closing so that as the buyer I could make the proper decisions as to how to react. In my case, I was purchasing a home as an investment, you know fix it up, re-sell it. It turned out that the home owners ex husband who was still on title had his car repo’d and in order to close somebody had to pay Ford Motor Credit $5000.00 . I ended up paying some of it, and the seller put the rest of her proceeds to it as well. I fully understood the risk that I would be paying for a title search should the deal fall apart, and because we were closing 15 days after contract agreement I knew the title search had to be ordered right away. Still nice to have that come up before the fact.
I agree Diane…
It's the way it's presented to the client they really don't get it. The know that they have to pay for the appraisal whether the sale goes through or not because they are charged up front. But no one that I know does the same with title just because it not customary. I always wait until after the contingency period is over before ordering that way I “usually” avoid complications.