December 12, 2022

Title Companies Overcharge: Here’s How and Why

Unlocking Savings: Revealing Hidden Title Fees and Closing Costs for Real Estate Investors

Real estate investors with a high volume of transactions are always looking to reduce costs. Savvy investors try to save money on expenses including taxes, appraisals, repairs, and capital expenditures. But did you know that investors have the potential to save thousands of dollars in title fees and closing costs?

The outdated title and closing system is rife with hidden and unnecessary fees. It’s easy for title companies to overcharge because everyone else does. Just because it’s always been this way doesn’t make it right.

Why do title companies charge what they charge? Which fees are legitimate, which are common, and which fees are being charged simply because everyone else is charging them? We’ll review them in this article, and shine a light on how Empora is challenging the status quo, reducing fees, and saving investors thousands of dollars.

What are Real Estate Junk Fees?

Real estate title junk fees refer to unnecessary or excessive charges imposed by title companies during the process of a real estate transaction. These fees are often added to the closing costs without providing any meaningful service or value to the buyer or seller. While some fees are legitimate and necessary for the completion of the transaction, junk fees are considered unnecessary and can significantly increase the overall cost of the transaction. These fees can add hundreds or even thousands of dollars to the cost of buying or selling a home.

When engaging in a real estate transaction, it is crucial to be informed about real estate title junk fees. Request a comprehensive list of all the fees that will be charged at closing from your real estate agent or title company. By conducting thorough research and being prepared, you can potentially save hundreds or even thousands of dollars on your real estate transaction.

How to Avoid Common Junk Fees with Empora Title

Most homeowners only purchase three houses in their lifetime, so exorbitant title and closing costs have a limited impact on them. The equation is very different for real estate investors, many of whom purchase 3+ properties per month. Real estate investors – especially those doing a high volume of property transactions – stand to benefit the most from fair and transparent pricing on title fees and closing costs.

There are many avoidable fees that traditional title companies try to charge that you may be unaware of, including:

Endorsement not requested by the lender: This fee is charged for the title company to add a rider or endorsement to the title insurance policy. In many cases, this fee is unnecessary and can be negotiated with the title company.
Notary fees: This fee is charged for the title company to have a notary public witness the signing of documents. Consider using electronic signatures as a cost-saving alternative to avoid incurring this fee.
Wire fees: This fee is charged for the title company to wire funds to various parties involved in the transaction. Opting for electronic funds transfer can help bypass this fee.
Postage fees: This fee is charged for the title company to mail documents to and from various parties involved in the transaction. By utilizing electronic document delivery methods, you can eliminate the need for this fee.
Courier fees: This fee is charged for the title company to have a courier deliver documents to and from various parties involved in the transaction. Utilizing electronic document delivery methods can help you avoid this fee.
Travel fees: This fee is charged for the title company to have an employee travel to various locations to meet with parties involved in the transaction. Leveraging video conferencing options can eliminate the need for such fees.

It is important to be aware of these fees and to ask your title company to explain them if you are not sure why they are being charged. Fees tend to vary on a state-by-state basis. Investors entering a new state should compare the prices of multiple title companies. Fees that aren’t common in other states where you’re doing business might be the norm in the new state. Also, the way fees are split between buyer and seller can vary from state to state. For example, while the buyer typically pays the settlement fee in Ohio, Kentucky, and Indiana, the buyer AND the seller both pay a hefty settlement fee in Florida.

At Empora we provide our estimated fees upfront so you know exactly how much each deal will cost. Check out our Closing Costs Calculator to estimate your closing costs.

Navigating Title Fees: Differentiating Standard Charges from Avoidable Expenses

While some fees are fairly standard from title company to title company, many fees are unnecessary and some are potentially avoidable. Here are some of the more common fees you can expect to see, and how much you’re likely to pay for each.

Settlement fees. The settlement fee represents the core fee for services provided by the title company, and it is generally the single largest fee charged by the title company. It can also vary greatly between providers and by state. In general, settlement fees start around $400, and they are typically paid by the buyer. That said, settlement fees can be significantly higher in some states, like Florida where it’s common for title companies to charge a $450 settlement fee to the buyer and the seller on each deal. Empora often saves buyers $100+ each closing on settlement fees alone.
Search and exam fee. The search and exam fee covers the cost of searching title records by the title company. It’s not uncommon for typical title companies to charge $250 for this process, but that fee is at their discretion. In most states, Empora saves buyers up to $100 per closing.
Wire fee. Although the title company typically incurs little to no cost for wiring funds, it’s very common for them to charge upwards of $100 in wire fees on each property transaction. Empora does not currently charge any wire fees, which results in an instant savings of about $100 per transaction.
Notary Fee. Notary fees can add significant cost to each deal. It’s common for traditional title companies to charge $150 or more in notary fees on every deal. This is one area where Empora’s digital-first title and closing solution brings efficiency. With Empora you won’t pay for a notary unless your deal requires more than one notary instance on each side of the deal (buyer and seller). This is an example of fair and transparent pricing, and only charging customers for the services they use.
Commitment fee. Commitment fees compensate the lender for their commitment to lend to the borrower. This is a common fee that is charged by most title companies. Typically this fee will be around $50.
Deed preparation fee. Deed preparation is done to draft the deed when the seller conveys the property to the buyer. Many title companies charge the buyer and the seller a deed prep fee, because they can. Empora only charges a deed preparation fee on the buyer side. In general, if your title company charges more than $85-$100 for deed or document preparation – you are probably overpaying.

It varies from state to state, but home buyers typically save $500+ when closing with Empora, while sellers save over $200 on each transaction. For investors doing multiple transactions per year these savings can add up quickly. Some investors have saved over $25,000 in closing costs per year by leveraging Empora’s digital-first title solution.

5 Ways to Save Money on Home Closing Costs

The best way to save on closing costs and hidden fees is to take a step-by-step approach to determine which costs are required and which are “nice to have.”

Review your closing statements for hidden fees for endorsements not requested by the borrower or the lender. If you are not sure why you’re being charged a fee, ask for clarity.
Validate these charges with your lender and know that a lender may require some fees while others are unnecessary.
Send back the corrections. Most title fees are automatically assigned and are never questioned by the buyer or seller. You can then request to remove the fees you don’t need.
Shop around! Fees and closing costs can vary significantly from one provider to another. Many title companies have closing cost calculators that can show you how much you’d pay before submitting a deal.
Choose a title company that doesn’t overcharge for title and closing fees!

Revolutionizing Title for Real Estate Investors

Empora is changing the game for real estate investors. Our tech-forward approach to title saves investors up to 30 percent on real estate closing costs and fees – while streamlining and adding transparency to the overall process.

Empora is currently active in Florida, Ohio, Indiana, and Kentucky and we continue to expand to support investors across the country.

Is Empora right title partner for your business? Learn more about how Empora was built to support the specific needs of real estate investors. Try our Closing Cost Calculator to find out how much Empora could save you on your next deal. Or, submit a deal to experience how Empora’s digital title platform will elevate your title and closing process.