You have all the power in the world to choose your real estate professional and negotiate the commission for the sale of your palace.
Choose a mortgage professional your heart desires for your purchase or refinancing financing needs. Be sure to negotiate the loan program, interest rate, points and fees.
What about the same jurisdiction for property insurance?
Forget it. Someone else chooses. And you can pay the bill.
Your broker or mortgage professional will almost always choose the title insurance company for your sale or refinancing.
Title insurance is designed to allow for a clear transfer of title from the seller to the buyer. It is believed to protect the buyer from financial loss and legal costs of things such as unknown defects in the public record, forgeries, missing heirs, unknown liens and the like.
This is also known as CLTA policy. Usually, the seller pays for this policy in Southern California.
There is also an ALTA policy that pays the buyer or refinancer and offers similar protections to the lender. In a cash sale, there is no ALTA policy because there is no lender.
According to the California Department of Insurance, just 13 California title insurance groups wrote more than $1.8 billion in cases in 2019. Less than 6% of that was paid for legal fees and claims.
Can you say money cow?
What about price competition? Not so much.
Title insurers set their prices. They must report their prices to the insurance department before offering them to the public. Haggling over the prices of property insurance is not an option. California law protects insurers from one-time price discounts. The insurance department cites price discrimination as the underlying reason.
Fidelity National Title and First American Title control approximately 80% of the current California market, according to the insurance division.
Assuming a sale price of $750,000, First American would charge a Southern California home seller $2,070 for a seller’s CLTA policy, website calculators show. Fidelity would charge $2,067.
Quite a difference of $3 from the biggest gorillas in the room.
What about big discounts? I only found one.
WFG National Title offers the same $750,000 seller policy for $1,980. But WFG has a coupon on its website for 40% off ($792 cheaper), bringing your seller policy to $1,188. WFG offers a separate 25% discount for the first buyer.
Fidelity, First American, WFG National Title and the California Land Title Association declined to comment.
The primary avenue or opportunity to reduce costs is open competition, given the file-and-use status of property insurance, the insurance division said.
Okay then. Let’s start with Ricardo Lara, commissioner of the California Department of Insurance.
Create a simple, transparent online consumer pricing system for any California home seller, buyer, or refinancer to shop and compare, including any volume discounts booked, such as a five-year refinancing policy.
Here we are in 2021, besides title insurance, can you think of another industry that doesn’t have a simple procurement process for comparable prices? The insurance department has all the data.
Second, stop the price controls. Reform the law. Look no further than Amazon or Costco. Let consumers and consumer groups negotiate the price. The title insurer can simply say no if they don’t want to agree to a particular price.
For additional credit, Governor Gavin Newsom and Commissioner Lara Lindsey should call Guerrero, director of Iowa Title Guaranty, or ITM — which has been operating successfully since 1985. Iowa is the only state union agency to offer home insurance. ITM is self-sufficient, not funded by the taxpayer. Excess profits are invested in local Iowa housing programs.
According to Guerrero, $60 million has been returned so far.
For the same example of a $750,000 retail price, Iowa Guarantee would only charge $175.
The Mortgage Bankers Association reported an 8.1% increase in mortgage application volume from the previous week.
Briefly: Assuming a borrower gets the average 30-year fixed rate on a conforming loan of $548,250, last year’s payment was $215 more than this week’s payment of $2,232.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at a cost of 1 point: a 30-year FHA at 2.125%, a 15-year conventional at 1.875%, a 30-year conventional at 2.375%, a 15-year year conventional high balance ($548,251 to $822,375) at 2%, a 30-year conventional high balance at 2.5% and a jumbo 30-year fixed at 3.125%.
Eye catcher loan of the week: Free of charge 30 years fixed at 2.875%.