Thursday, August 6, 2009

Part II: Title, escrow services under fire again

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Part II of III: Title, escrow services necessary
Title and escrow services come into play during the "closing" period of real estate transactions. Lenders require title insurance to protect them against losses. Escrow services provide a neutral third party to manage the transaction.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - The $10 billion-a-year title insurance and escrow industry is under fire again -- if they were ever not under fire -- and one big cannon could unload on them from the Obama administration's proposed Consumer Financial Protection Agency.

The agency would oversee many consumer financial products, including title insurance, which is now largely state regulated.

Title and escrow services come into play during the "closing" period of real estate transactions when the two parties come together to seal the deal.

All the expenses associated with title and escrow costs from tiny recording fees to title insurance premiums can add up to thousands of dollars, and those fees can vary widely from one company to another.

Local custom dictates who -- the buyer or the seller -- pays for what, or the costs can be negotiable between the buyer and seller.

Title companies are hired, in part, to issue title insurance protection for home buyers and lenders. Lenders require the service to protect them against loss resulting from claims by others against your new home.

The title company investigates the title to make sure it is clear of any encumbrances, such as liens or judgments, forgeries or fraud and any other title anomalies and then issues a policy to protect you from any claims that turn up later. Because title searches are conducted each time the home changes hands or, perhaps, during a refinancing, the searches rarely turn up title claims, but you have to pay for the search.

Escrow services provide a neutral third party, through which is funneled the paperwork, money, transaction instructions and other details of a home purchase or mortgage refinance. The companies hold onto, and then exchange, disburse and transfer deeds, other documents and monies related to the transaction.

In some areas escrow attorney's provide the escrow service. In other areas, combined title and escrow companies do the work. In most cases title and escrow services are purchased as a package.

What many real estate consumers overlook is that they can also negotiate with the title and escrow companies and shop around for the best deal.

DeadlineNews.Com Special: Title, escrow services under fire again
Part I: What is it this time?
Part II: Title, escrow services necessary
Part III: Shop around for title, escrow services

• See the historical archive, DeadlineNews.Com's Finance/Title Insurance Section
• See the investigative report, DeadlineNews.Com'sTitle Insurance Industry Under Investigation

• Click on the keywords below for more stories on this subject.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Perkins is also the first Examiner to cover three beats for the news service:
National Offbeat News Examiner
National Consumer News Examiner
National Real Estate Examiner

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