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Study
reveals closing cost differences | | |
| In reality, there are no purely
all-inclusive jurisdictions, Maher says, and in risk-only states, "there
always seems to be other services that, one way or another, creep into the rate."
These differences result from state and local regulations and evolving customs. Bottom line: Lenders don't control
the cost of title insurance. Nor do lenders set the prices of other services provided
by third parties: appraisal, attorney or settlement fees, credit reports, inspections
and title searches. Evaluating
third-party fees
Some third-party fees, such as those for appraisals
and credit reports, don't vary much from state to state. But you can find big
state-to-state differences in attorney, closing and settlement fees. These cover
the costs of the closing the transaction, whether the signature-filled ritual
is overseen by a real estate agent, title agent, escrow officer or a gaggle of
lawyers. Closings are handled differently from state to state and sometimes within
states. For example, in Southern California, the process
of drawing up the title and deed transfer documents starts as soon as both sides
sign the purchase contract. In Northern California, that process doesn't start
until the lender approves the loan, says Carolyn Marcial, chairwoman of national
affairs for the California Escrow Association.
She adds that, generally speaking, the custom in
Southern California is for the seller to pay for the owner's title
insurance policy. But for Northern California, she has to consult
a chart. In some counties the seller pays, and in some counties
the buyer pays.
Parts of the Golden State also tend to handle escrow
differently, with independent escrow companies more common in Southern
California, and escrow departments of title companies more prevalent
in the north, although you find both kinds in all parts of the state.
And real estate brokerages can handle escrow closings on their own
property transactions. Each of these three ways of handling escrow
is governed by different regulatory agencies. No wonder the fees
vary.
Escrow closings vs. attorney
closings
Where California and low-cost Wyoming have escrow closings,
high-cost New York has attorney closings. The signing procedure is attended by
so many lawyers they could step outside and play a tennis doubles match. Attorneys
for the buyer's mortgage lender, the title company, the buyer and the seller are
present. Sometimes an attorney for the seller's mortgage lender is there, too.
"You can have a lot of people sitting at that closing table," says Neil
Garfinkel, a partner with Abrams Garfinkel Margolis Bergson law firm in New York
City.
Indeed, a lot of well-paid people sit around that
table in New York. "There's no question about it being a more-expensive
system," Garfinkel says. "It's very labor intensive to
send someone out to a closing table. I could make the argument that
it's silly -- you don't need so many attorneys. ... On the other
hand, I can't tell you how many questions are asked by our clients
at the closing table."
In an attorney-closing state, all the interested
parties meet at the closing. They sign documents and hand over a
check.
With escrow closings, the purchase money is deposited
into an account controlled by a third party, and when all the documents are signed,
the money is transferred to the seller. The buyer, seller and lender don't necessarily
have to gather in one room at the same time. The system tends to be less costly,
but that's not always the case.
As for the origination charges that lenders control
-- fees for administration, application, document preparation, processing,
tax service and underwriting, for example -- a savvy loan shopper
can find big differences among lenders in one state. But if you
pick one national lender and compare
its fees from state to state, you find that they don't differ
much.
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