This is an article about one of the least understood aspects of every real estate transaction. http://seattletimes.nwsource.com/html/realestate/2002975217_harney07.html
Ken Harney does a good job reporting real estate issues. However, the Seattle Times seems to do little to verify the applicability of his articles to our local market prior to publishing Harney's syndicated column. The "hanky-panky" aspect of this article is not known to us in the local real estate market. Years ago title companies would offer to supplement real estate agents' advertising efforts by actually paying some of their advertising costs. The State Insurance Commissioner now requires that in order to support an agent in such a manner, a title company must "co-brand" with said agent i.e., also have the title insurance company name/logo appear in the ad.
In 21 years we have never heard of any kickback arrangement between title companies or escrow companies and real estate professionals. That doesn't mean they haven't occurred. We and the agents that we've known over the years have never heard of such a practice.
To go further, we refrain from using Windermere sponsored in-house services for the very reason that it may call into question our fidiciary duty to our clients.
WHAT ABOUT THE COST? We agree with the thrust of Harney's article as it pertains to the cost of title insurance. It is way too expensive. Here is a brief review of how title insurance has changed over the last 20 years:
Originally, a representative acutally searched county documents at the courthouse in physical files for information related to real property. A report and title policy were issued based on this research. In 1986 a title policy for a $300,000 home was around $400.
With the advent of computers and increased storage capacities, all county documents now exist in digital format, easily accessed by title companies.
Here is the kicker: as we understand it, most title companies, if the subject property has been financed or refinanced by a front line reputable lender within the last 5 years, rarely review the title report. They print it and issue the policy for it. The premium for a $300,000 purchase today is over $1,000. The reasoning is that rather than spend the money on researching and reviewing a property's title condition, the company takes its chances on the title being good based on past reviews by former lenders and title companies. The consumer is protected by the policy, but is paying a lot of money for what essentially amounts to printing and mailing costs for the title company.
There will be the occassional erroe or claim against which the title company is required to protect the consumer. But the actuaries have determined that the related costs of potential claims are so small relative to the policy premiums that it doesn't make sense to pay for title research.
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