Category Archives: Closing Costs

Know Before You Owe Disclosure Forms

Sandy Gadow

(Most states require sellers to fill out a disclosure form or disclose material facts about the property. To find your state’s law, speak to your real estate agent or state regulatory agency. You can find the disclosure requirements in your state at www.arello.org look under “resources-Regulatory Agencies”).

New Forms Improve Consumer Understanding, Aid Comparison Shopping, and Help Prevent Surprises

Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) is issuing a rule today requiring easier-to-use mortgage disclosure forms that clearly lay out the terms of a mortgage for a homebuyer. The new “Know Before You Owe” mortgage forms will replace the existing federal disclosures and help consumers understand their options, choose the deal that’s best for them, and avoid costly surprises at the closing table.

“Taking out a mortgage is one of the biggest financial decisions a consumer will ever make. Our new ‘Know Before You Owe’ mortgage forms improve consumer understanding, aid comparison shopping, and help prevent closing table surprises for consumers,” said CFPB Director Richard Cordray. “Today’s rule is an important step toward the consumer having greater control over the mortgage loan process.”

For more than 30 years, federal law has generally required that within three business days after receiving a mortgage application, mortgage lenders must deliver two different, overlapping disclosures to consumers. At the closing stage, federal law again generally requires two forms. All of these forms contain duplicative and sometimes confusing information. The Dodd-Frank Wall Street Reform and Consumer Protection Act recognized the need to simplify and streamline this information for consumers and transferred responsibility for the forms to the CFPB.

Today’s final rule requires that lenders use the CFPB’s new disclosures, puts in place rules about when the new forms are given to the consumer, and limits how the final deal can change from the original loan estimate. The forms are available in English and Spanish.

  • The Loan Estimate: This form will be provided to consumers within three business days after they submit a loan application. It replaces the early Truth in Lending statement and the Good Faith Estimate, and provides a summary of the key loan terms and estimated loan and closing costs. Consumers can use this new form to compare the costs and features of different loans.
  • The Closing Disclosure: Consumers will receive this form three business days before closing on a loan. It replaces the final Truth in Lending statement and the HUD-1 settlement statement, and provides a detailed accounting of the transaction.

The CFPB conducted more than two years of extensive research, testing, and review to find out how to create mortgage disclosures that do what the law intended them to do: disclose information in a way that consumers can understand. A good disclosure helps consumers know if they want to commit to the loan being offered, and it enables them to make meaningful comparisons between loan products for better shopping. The Bureau received feedback from consumer testing, through the Bureau’s website, from a small business review panel, through public comments on the proposed rule, and from other supplemental outreach.

Improved consumer understanding

An extensive study confirmed the benefits of the new CFPB forms. Consumers of all different experience levels, with different loan types – whether focused on buying a home or refinancing – were able to understand CFPB’s new forms better than the current forms. Testing showed that participants who used the CFPB’s new forms were better able to answer questions about a sample loan – a statistically significant improvement of 29 percent. Importantly, they were better able to decide whether they can afford the loan, including the cost of the loan over time. And, specifically, the forms help consumers better understand key information:

  • Risk factors: Because information on the CFPB forms is disclosed in an easy-to-read format, consumers can more easily identify risky loan features. In addition, lenders will have to tell homebuyers about prepayment penalties, larger-than usual periodic payments, and complicated loan structures.
  • Short-term and long-term costs: By putting the important information in a clearer format than the current forms and in plain language, both the Loan Estimate and Closing Disclosure more easily explain the total costs of the loan. This includes an important breakdown of the loan amount, the principal and interest payment, and how it could change, and closing costs.
  • Monthly payments: The CFPB forms state in bold font what a consumer’s monthly principal and interest payments will be. If it is an adjustable-rate loan, the forms say the projected minimum and maximum payments over the life of the loan.

Better comparison shopping

When consumers understand their loan offers, they can better compare competing offers. In testing, the CFPB’s new forms performed better than the current forms when it comes to comparing competing offers by as much as 42 percent. This leads to better consumer choice. The forms enable better:

  • Comparisons of competing loan offers: The new forms use formatting that clearly breaks down the costs of the loan, such as the interest rate, mortgage insurance costs, and closing costs. As a result, would-be-homebuyers and those refinancing their existing mortgage are better able to distinguish between two different loan offers.
  • Shopping for closing costs: Closing costs are the costs of completing a mortgage transaction, including origination fees, appraisal fees, title insurance, taxes, settlement services, inspections, and homeowner’s insurance. Consumers can save money if they shop around for their own service providers for some of these costs. The CFPB forms plainly outline what closing services a consumer will need and which ones they can shop around for.

Avoiding costly surprises at the closing table

With the current forms, consumers can have a hard time comparing their original loan terms to their final loan offer. Consumers need to be reasonably sure that the mortgage they signed up for is the one they are getting. The CFPB’s rules curtail “bait and switch” tactics, where the terms change at closing, by implementing several new consumer protections:

  • Easier comparisons of the estimated and final terms of the loan: By making the Loan Estimate and Closing Disclosure very similar in format, consumers are better able to compare their estimate with the final terms of the loan. In testing, the CFPB’s new forms performed better than the current forms when it comes to comparing estimated and final numbers by as much as 28 percent.
  • More time to consider choices: By providing the Closing Disclosure three days before closing, consumers can review their final loan terms and costs in an unpressured environment rather than at the closing table. This allows consumers time to confirm whether they are getting what they expected. It also gives consumers time to ask questions and negotiate over changes that have occurred. This is especially true for consumers who are refinancing and can more easily delay the closing of the loan.
  • Limits on closing cost increases: Today’s rule restricts circumstances in which consumers can be required to pay more for settlement services than the amount stated on their Loan Estimate. Lenders cannot impose new or higher fees on the final loan unless there is a legitimate reason.

Today’s rule is effective Aug. 1, 2015 and the CFPB is already working with industry and consumers toward effective implementation. As the CFPB continues with “Know Before You Owe,” it will work collaboratively with all, including other government stakeholders, to take a close look at all documents provided at closing.

Today’s rule is a continuation of the CFPB’s efforts to reform the mortgage markets. In January 2013, the CFPB released new rules on mortgage servicing, mortgage loan origination compensation, and the mortgage origination process. Today’s rule and new forms are just one part of the CFPB’s efforts to make the mortgage market work better for consumers, the industry, and the economy as a whole.

A factsheet about the “Know Before You Owe” mortgage disclosures is available at:http://files.consumerfinance.gov/f/201311_cfpb_factsheet_kbyo_mortgage-disclosures.pdf

A factsheet about the testing process the CFPB used to arrive at today’s rule is available at: http://files.consumerfinance.gov/f/201311_cfpb_factsheet_kbyo_testing.pdf

The “Know Before You Owe” mortgage disclosure rule will be available 12 p.m. Wednesday at: http://files.consumerfinance.gov/f/201311_cfpb_final-rule_integrated-mortgage-disclosures.pdf

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov

Can I Ever Get Someone Else to Pay My Closing Costs for Me?

Sandy Gadow
One of the most effective ways of avoiding one or more of your closing costs is to ask the Seller or Lender to pay for the expense on your behalf. For example, many times you can ask the Seller to pay for part or all of the title insurance premium, escrow fee, inspection fee, or termite repair work. When negotiating loan terms with your lender, you can ask to have to have the “points” reduced or eliminated, you can request to waive a requirement to fund a reserve account, you can ask that notary, doc prep, processing fees, or courier fees be waived. Some lenders offer a fixed price closing cost package, whereby you agree to pay a set price for all lender closing costs. Title insurance and escrow companies have flexibility in most of the fees they charge, and many times will match a lower fee you find at a competitor. Real estate agents may reduce their sales commission, if asked. Sellers should negotiate the real estate fee at the time of their initial consultation and put that agreement in writing.

Copyright © 2004 Sandy Gadow. This column may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

Closing Checklists

Sandy Gadow

Buyer’s Home Closing Checklist

  • Have you made a final walk-thru inspection of the property?
  • Is the condition of the house or property as it should be? Are there any personal property items left behind by the Seller. Is everything in working order? Did you order a Home Warranty policy for future repairs? If so, did you review that policy?
  • Are you satisfied that the Seller provided you with all required disclosure documents or any known defects on the property?
  • Have you carefully reviewed your mortgage closing documents? Are the lender’s closing costs as they represented they would be? Are there any “junk fees” added on that you do not agree to? Are the names correct on the mortgage or Deed of Trust documents?
  • Is the loan amount, interest rate, term of the loan, and prepayment penalty correctly stated? When will your first mortgage payment be due? Where will the payment be made?
  • Do you agree with the title fees being paid to the title company, attorney, or escrow agency? Are they the same as previously quoted to you?
  • Do you understand the prorations, those items or costs of which you will pay a portion of or be given a credit for? Are the prorated dates and amounts correct?
  • It is clear on which day you will take possession of the property? Will the Seller hand over the keys on the day of closing or at a later date?
  • Is the purchase price correct on the closing documents?
  • Have you been credited for all deposits put into escrow either by you or on your behalf?
  • Is your name correct on the grant deed? Is it spelled correctly, and does it include your correct middle initial? Is the manner in which you will take title stated correctly? Is the legal description of the property correct? Does this description conform with the one given in the title report? Are all the easements and rights-of-way properly listed?
  • Were any questionable items on the title report removed or explained to your satisfaction?
  • If there is any personal property included, are you being given a Bill of Sale, and do you agree with the items included?
  • Are you paying for fire insurance yourself outside of escrow or through the closing agent? Is the premium correct and is the policy for a full year?
  • Are the property taxes being paid in full? Ask when the next property tax bill will become due.
  • Does your state allow a Homestead exemption? If so, and you want to choose this option, ask how you file for Homestead exemption status.
  • Check that the return address on the Deed is where you will want the recorded Deed to be sent. (you will want to keep this official document in a safe place).

Seller’s Home Closing Checklist

  • Have you removed all your personal property items?
  • Have you left the property in the condition you promised you would?
  • Is the Sale Price and payoff information correct on your closing documents?
  • Were you given credit for any items agreed upon to be credited to your account?
  • Is a satisfaction of mortgage or payoff document being prepared for your old loan?
  • If you will be signing a Bill of Sale for personal property items, are those correct?
  • Are the prorations correct? Check the dates on these debit and credit items.
  • Do you know what day you must vacate the property? Is it the day of closing?
  • Have you agreed to perform any repairs or other work before or after closing?
  • Are the title and closing costs as you understood them to be?
  • Is the attorney fee, closing agent, transfer tax, or title insurance fees correct?
  • Did you correctly make any disclosures as required by your state or federal law to the new buyer? Or, did you sell the property in “as is” condition?
  • If there was a Realtor involved in the sale, is that fee correct?
  • Is any money being held back in escrow on your behalf? If so, how and when will it be released?

This column may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

State by State Closing Guide

Sandy Gadow

This summary is merely a general reference guide. Local practices within your city or county may differ. Contact a local title company or real estate attorney for specific information.

This is not intended as a legal advice, but merely as a general reference guide.” For further explanation and an in-depth resource guide for your state refer to The Complete Guide to Your Real Estate Closing, available at www.amazon.com or sandygadow.com/order.html.

 

Please choose a state:
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ALABAMA

Attorneys and title companies handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosures are non-judicial. Foreclosure notices are published once a week for three weeks on a county-by-county basis. The foreclosure process takes a minimum of 21 days from the date of first publication. After the sale, there is a one-year redemption period. Alabamans use ALTA policies to insure titles. Buyers and sellers negotiate who is going to pay the closing costs and usually split them equally. Property taxes are due and payable annually on October 1st.

ALASKA

Title companies, lenders, and private escrow companies all handle real estate escrows. Conveyance is by warranty deed. Deeds of trust with private power of sale are the customary security instruments. Foreclosures take 90-120 days. Alaskans use ALTA owner’s and lender’s policies with standard endorsements. There are no documentary or transfer taxes. Buyer and seller usually split the closing costs. Property tax payment dates vary throughout the state.

ARIZONA

Title companies and title agents both handle closings. Conveyance is by warranty deed. Whereas deeds of trust are the security instruments most often used, mortgages and “agreements for sale” are used approximately 20% of the time. Foreclosure depends upon the security instrument. For deeds of trust, the foreclosure process takes about 91 days. Arizonans use ALTA owner’s and lender’s policies, standard or extended, with standard endorsements. The seller customarily pays for the owner’s policy, and the buyer pays for the lender’s policy. They split escrow costs otherwise. There are no documentary, transfer, or mortgage taxes. The first property tax installment is due October 1st and delinquent November 1st; the second half is due March 1st and delinquent May 1st. Arizona is a community-property state.

ARKANSAS

Title agents handle escrows, and attorneys conduct closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosure requires judicial proceedings, but there are no minimum time limits for completion. Arkansans use ALTA policies and endorsements and receive a 40% discount for reissuance of prior policies. Buyers and sellers pay their own escrow costs. The buyer pays for the lender’s policy; the seller pays for the owner’s. The buyer and seller split the state documentary tax. Property taxes come due three times a year as follows: the third Monday in April, the third Monday in July, and the tenth day of October.

CALIFORNIA
Not only do escrow procedures differ between Northern and Southern California, they also vary somewhat from county to county. Title companies handle closings through escrow in Northern California, whereas escrow companies and lenders handle them in Southern California. Conveyance is by grant deed. Deeds of trust with private power of sale are the security instruments used throughout the state. Foreclosure requires a three-month waiting period after the recording of the notice of default. After the waiting period, the notice of sale is published each week for three consecutive weeks. The borrower may reinstate the loan at any time prior to five business days before the foreclosure sale. All in all, the procedure takes about four months. Californians have both ALTA and CLTA policies available. In Southern California, sellers pay the title insurance premium and the transfer tax. Buyer and seller split the escrow costs. In the Northern California counties of Amador, Merced, Plumas, San Joaquin, and Siskiyou, buyers and sellers share title insurance and escrow costs equally. In Butte County, sellers pay 75%; buyers pay 25%. In Alameda, Calaveras, Colusa, Contra Costa, Lake, Marin, Mendocino, San Francisco, San Mateo, Solano, and Sonoma counties, buyers pay for the title insurance policy, whereas sellers pay in the other Northern California counties. Each California county has its own transfer tax; some cities have additional charges. Property taxes may be paid annually on or before December 10th, or semiannually by December 10th and April 10th. Annual taxes are set at no more than 1 percent of the property’s base value or purchase price. Each year following this, a two percent increase is permissible. (Proposition 13). A property transfer between husband and wife will not result in a new tax assessment of one percent of the fair market value.

The homeowner’s exemption allows an owner to be exempt of the first $7,000 of the property’s full cash value. This exemption is allowed only for primary residences. Homeowner must obtain a form from the county tax assessor, and submit it by February 15 of the current tax year to be eligible for the exemption.  Californians over the age of 55 also have the option of moving primary residences and taking their prior “old” tax base with them to the new property. This exception may be used only once in a lifetime. Referred to as the” Senior Citizen’s Replacement Dwelling Benefit”, Proposition 60 was a constitutional amendment approved by the voters in 1986. It is codified in Section 69.5 of the Revenue & Taxation Code, and allows the transfer of an existing Proposition 13 base year value from a former residence to a replacement residence, if certain conditions are met.   California is a community-property state.
COLORADO

Title companies, brokers, and attorneys all may handle closings. Conveyance is by warranty deed. Deeds of trust are the customary security instruments. Public trustees must sell foreclosure properties within 45-60 days after the filing of a notice of election and demand for sale, but they will grant extensions up to six months following the date of the originally scheduled sale. Subdivided properties may be redeemed within 75 days after sale; agricultural properties may be redeemed within 6 months after sale. The first junior lien holder has 10 additional days to redeem, and the second and other junior lienholders have an additional 5 days each. The public trustee is normally the trustee shown on the deed of trust, a practice unique to Colorado. Foreclosures may be handled judicially. Coloradans have these title insurance policy options: ALTA owner’s, lender’s, leasehold, and construction loan; endorsements are used, too. Although they are negotiable, closing costs are generally split between buyer and seller, and seller normally pays for title insurance. Sellers pay the title insurance premium and the documentary transfer tax. Property taxes may be paid annually at the end of April or semiannually at the ends of February and July.

CONNECTICUT

Attorneys normally conduct closings. Most often conveyance is by warranty deed, but quitclaim deeds do appear. Mortgages are the security instruments. Judicial foreclosures are the rule, either by a suit in equity for strict foreclosure or by a court decree of sale. Court decreed sales preclude redemption, but strict foreclosures allow redemption for 3-6 months, depending upon the discretion of the court. There are lender’s and owner’s title insurance policies available with various endorsements. Buyers customarily pay for examination and title insurance, while sellers pay the documentary and conveyance taxes. Property tax payment dates vary by town.

DELAWARE

Attorneys handle closings. Although quitclaim and general warranty deeds are sometimes used, most conveyances are by special warranty deeds. Mortgages are the security instruments. Foreclosures are judicial and require 90-120 days to complete. ALTA policies and endorsements are prevalent. Buyers pay closing costs and the owner’s title insurance premiums. Buyers and sellers share the state transfer tax. Property taxes are on an annual basis and vary by county.

DISTRICT OF COLUMBIA

Attorneys, title insurance companies, or their agents may conduct closings. Conveyances are by bargain-and-sale deeds. Though mortgages are available, the deed of trust, containing private power of sale, is the security instrument of choice. Foreclosures require at least six weeks and start with a 30-day notice of sale sent by certified mail. ALTA policies and endorsements insure title. Buyers generally pay closing costs, title insurance premiums, and recording taxes. Sellers pay the transfer tax. Property taxes fall due annually or if they’re less than $100,000, semiannually, on September 15th and March 31st.

FLORIDA

Title companies and attorneys handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosures are judicial and take about 3 months. They involve service by the sheriff, a judgment of foreclosure and sale, advertising, public sale, and finally issuance of a certificate of sale and certificate of title. ALTA policies are commonplace. Buyers pay the escrow and closing costs, while county custom determines who pays for the title insurance. Sellers pay the documentary tax. Property taxes are payable annually, but the due and delinquent dates are months apart, November 1st and April 1st. Under Florida law, a widow or widower has the right to live in their deceased spouse’s house for the remainder of his or her life, even if the home is willed to someone else.   A Homestead Exemption exists for an owner’s residence in Florida. Florida’s exemption is unique because it lacks any monetary cap on the homestead protection, while other states which offer a homestead exemption usually place a limit on the valuation which can be protected.

GEORGIA

Attorneys generally take care of closings. Conveyance is by warranty deed. Security deeds are the security instruments. Foreclosures are non-judicial and take little more than a month because there’s a power of attorney right in the security deed. Foreclosure advertising must appear for 4 consecutive weeks prior to the first Tuesday of the month; that’s when foreclosure sales take place. Georgians use ALTA title insurance policies, including owner’s and lender’s, and they use binders and endorsements. Buyers pay title insurance premiums and also closing costs usually. Sellers pay transfer taxes. Property tax payment dates vary across the state.

HAWAII

By law, only attorneys may prepare property transfer documents, but there are title and escrow companies available to handle escrows and escrow instructions. Conveyance of fee-simple property is by warranty deed; conveyance of leasehold property, which is common throughout the state, is by assignment of lease. Condominiums are everywhere in Hawaii and may be fee simple or leasehold. Sales of some properties, whether fee simple or leasehold, are by agreement of sale. Mortgages are the security instruments. Hawaiians use judicial foreclosures rather than powers of sale for both mortgages and agreements of sale. These foreclosures take 6-12 months and sometimes more, depending upon court schedules. Title companies issue ALTA owner’s and lender’s policies and make numerous endorsements available. Buyers and sellers split escrow fees. Sellers pay the title search costs and the conveyance tax. Buyers pay title insurance premiums for the owner’s and lender’s policies. Property taxes come due twice a year, on February 20th and again on August 20th.

IDAHO

Closings are handled through escrow. Conveyance is by warranty deed or corporate deed, though often there are contracts of sale involved. Either mortgages or deeds of trust may be the security instruments. Deeds of trust which include power of sale provisions are restricted to properties in incorporated areas and properties elsewhere which don’t exceed 20 acres. After the notice of default has been recorded, deed-of-trust foreclosures take at least 120 days, and there’s no redemption period. Judicial foreclosures for mortgages take about a year, depending upon court availability, and there’s a 6-12 month redemption period after that, depending on the type of property involved. Idahoans use ALTA policies and various endorsements. Buyers and sellers split escrow costs in general and negotiate who’s going to pay the title insurance premiums. There are no documentary taxes, mortgage taxes, or transfer taxes, but there are property taxes, and they’re due annually in November and delinquent on December 20th or semiannually on December 20th and June 20th. Idaho is a community-property state.

ILLINOIS

Title companies, lenders, and attorneys may conduct closings, but only attorneys may prepare documents. Lenders generally hire attorneys and have them prepare all the paperwork. Conveyance is by warranty deed. Recorded deeds must include a declaration of the sales price. Mortgages are the customary security instruments. Judicial foreclosure is mandatory and takes at least a year from the filing of the default notice to the expiration of the redemption period. Illinoisans use ALTA policies. Buyers usually pay the closing costs and the lender’s title insurance premiums; sellers pay the owner’s title insurance premiums and the state and county transfer taxes. Property tax payment dates vary. Larger counties typically schedule them for March 1st and September 1st, and smaller counties schedule them for June 1st and September 1st.

INDIANA

Title companies, lenders, real estate agents, and attorneys handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Judicial foreclosures are required; execution of judgments varies from 3 months after filing of the complaint in cases involving mortgages drawn up since July 1, 1975, to 6 months for those drawn up between January 1, 1958, and July 1, 1975, to 12 months for those drawn up before that. Immediately following the execution sale, the highest bidder receives a sheriff’s deed. Hoosiers use ALTA policies and certain endorsements. Buyers usually pay closing costs and the lender’s title insurance costs, while sellers pay for the owner’s policy. There are no documentary, mortgage, or transfer taxes. Property taxes fall due on May 10th and November 10th.

IOWA

Attorneys may conduct closings, and so may real estate agents. Conveyance is usually by warranty deed. Mortgages and deeds of trust are both authorized security instruments, but lenders prefer mortgages because deeds of trust do not circumvent judicial foreclosure proceedings anyway. Those proceedings take at least 4 -6 months. Since Iowa is the only state which does not authorize private title title insurance, Iowans who want it must go through a state administered title company or fund.  Buyers and sellers share the closing costs; sellers pay the documentary taxes. Property taxes are due July 1st based upon the previous January’s assessment.

KANSAS

Title companies, lenders, real estate agents, attorneys, and independent escrow firms all conduct closings. Anyone who conducts a title search must be a licensed abstracter, a designation one receives after passing strict tests and meeting various requirements. Because many land titles stem from Indian origins, deeds involving Indians as parties to a transaction go before the Indian Commission for approval. Conveyance is by warranty deed. Mortgages are the customary security instruments. Judicial foreclosures, the only ones allowed, take about 6 months from filing to sale. Redemption periods vary, the longest being 12 months. Kansans use ALTA policies and endorsements. Buyers and sellers divide closing costs. Buyers pay the lender’s policy costs and the state mortgage taxes; sellers pay for the owner’s policy. Property taxes come due November 1st, but they needn’t be paid in a lump sum until December 31st. They may also be paid in two installments, the first on December 20th and the second on June 20th.

KENTUCKY

Attorneys conduct closings. Conveyance is by grant deed or by bargain-and-sale deed. Deeds must show the name of the preparer, the amount of the total transaction, and the recording reference by which the grantor obtained title. Mortgages are the principal security instruments because deeds of trust offer no power-of-sale advantages. Enforcement of any security instrument requires a decree in equity, a judicial foreclosure proceeding. Kentuckians use ALTA policies and endorsements. Sellers pay closing costs; buyers pay recording fees. Responsibility for payment of title insurance premiums varies according to locale. Property taxes are payable on an annual basis; due dates vary from county to county.

LOUISIANA

Either attorneys or corporate title agents may conduct closings, but a notary must authenticate the documentation. Conveyance is by warranty deed or by act of sale. Mortgages are the security instruments generally used in commercial transactions, while vendor’s liens and seller’s privileges are used in other purchase money situations. Foreclosures are swift (60 days) and sure (no right of redemption). Successful foreclosure sale bidders receive an adjudication from the sheriff. Louisianians use ALTA owner’s and lender’s policies and endorsements. Buyers generally pay the title insurance and closing costs. There are no mortgage or transfer taxes. Property tax payment dates vary from parish to parish (parishes are like counties). Louisiana is a community-property state.


MAINE

Attorneys conduct closings. Conveyance is by warranty or quitclaim deed. Mortgages are the security instruments. Foreclosures may be initiated by any of the following: an act of law for possession; entering into possession and holding the premises by written consent of the mortgagor; entering peaceably, openly, and unopposed in the presence of two witnesses and taking possession; giving public notice in a newspaper for three successive weeks and recording copies of the notice in the Registry of Deeds, and then recording the mortgage within 30 days of the last publication; or by a bill in equity (special cases). In every case, the creditor must record a notice of foreclosure within 30 days. Judicial foreclosure proceedings are also available. Redemption periods vary from 90-365 days depending on the method of foreclosure. Mainers use ALTA owner’s and lender’s policies and endorsements. Buyers pay closing costs and title insurance fees; buyers and sellers share the documentary transfer taxes. Property taxes are due annually on April 1st.

MARYLAND

Attorneys conduct closings, and there has to be a local attorney involved. Conveyance is by grant deed, and the deed must state the consideration involved. Although mortgages are common in some areas, deeds of trust are more prevalent as security instruments. Security instruments may include a private power of sale, so it naturally is the foreclosure method of choice. Marylanders use ALTA policies and endorsements. Buyers pay closing costs, title insurance premiums, and transfer taxes. Property taxes are due annually on July 1st. Police officers in Prince George’s County who are first-time home buyers get a break on their transfer taxes at closing under a law that took effect July 1, 2006.  Officers pay 1 percent of the purchase price rather than 14%, the regular rate.  County school teachers were made eligible for the same tax break in an earlier law without the first-time buyer limitation.  Teachers must commit to living in the house for at least three years and maintain their teaching position with the county during that time.

MASSACHUSETTS

Attorneys handle closings. Conveyance is by warranty deed in the western part of the state and by quitclaim deed in the eastern part. Mortgages with private power of sale are the customary security instruments. Creditors forced to foreclose generally take advantage of the private power of sale, but they may foreclose through peaceable entry (entering unopposed in the presence of two witnesses and taking possession for 3 years) or through the rarely used judicial writ of entry. Frequently, cautious creditors will foreclose through both power of sale and peaceable entry. People in Massachusetts use ALTA owner’s and lender’s title insurance policies and endorsements. Buyers pay closing costs and title insurance fees, except in Worcester, where sellers pay. Sellers pay the documentary taxes. Property taxes are payable in two installments, November 1st and May 1st.

MICHIGAN

Title companies, lenders, real estate agents, and attorneys may conduct closings. Conveyance is by warranty deed which must give the full consideration involved or be accompanied by an affidavit which does. Many transactions involve land contracts. Mortgages are the security instruments. Private foreclosure is permitted; it requires advertising for 4 consecutive weeks and a sale at least 28 days following the date of first publication. The redemption period ranges from 1 to 12 months. Michiganders use ALTA policies and endorsements. Buyers generally pay closing costs and the lender’s title insurance premium, and sellers pay the state transfer tax and the owner’s title insurance premium. Those property taxes which pay for city and school expenses fall due July 1st; others (county taxes, township taxes, and some school taxes) fall due on the first of December. In many tax jurisdictions, taxpayers may opt to pay their taxes in two equal installments without penalty.

MINNESOTA

Title companies, lenders, real estate agents, and attorneys may conduct closings. Conveyance is by warranty deed. Although deeds of trust are authorized, mortgages are the customary security instruments. The redemption period following a foreclosure is 6 months in most cases; it is 12 months if the property is larger than 10 acres or the amount claimed to be due is less than 2/3 of the original debt. This is a strong abstract state. Typically a buyer will accept an abstract and an attorney’s opinion as evidence of title, even though the lender may require title insurance. People in the Minneapolis-St. Paul area use the Torrens system. Minnesotans use ALTA policies. Buyers pay the lender’s and owner’s title insurance premiums and the mortgage tax. Sellers usually pay the closing fees and the transfer taxes. Property taxes are due on May 15th and October 15th.

MISSISSIPPI

Attorneys conduct real estate closings. Conveyance is by warranty deed. Deeds of trust are the customary security instruments. Foreclosure involves a non-judicial process which takes 21-45 days. Mississippians use ALTA policies and endorsements. Buyers and sellers negotiate the payment of title insurance premiums and closing costs. There are no documentary, mortgage, or transfer taxes. Property taxes are payable on an annual basis and become delinquent February 1st.

MISSOURI

Title companies, lenders, real estate agents, and attorneys may conduct closings. In the St. Louis area, title company closings predominate. In the Kansas City area, an escrow company or a title company generally conducts the closing. Conveyance is by warranty deed. Deeds of trust are the customary security instruments and allow private power of sale. The trustee must be named in the deed of trust and must be a Missouri resident. Foreclosure involves publication of a sale notice for 21 days, during which time the debtor may redeem the property or file a notice of redemption. The foreclosure sale buyer receives a trustee’s deed. Missourians use ALTA policies and endorsements. Buyers and sellers generally split the closing costs. Sellers in western Missouri usually pay for the title insurance polices, while elsewhere the buyers pay. There are no documentary, mortgage, or transfer taxes. Property taxes are payable annually and become delinquent January 1st for the previous year.

MONTANA

Real estate closings are handled through escrow. Conveyance is by warranty deed, corporate deed, or grant deed. Mortgages, deeds of trust, and unrecorded contracts of sale are the security instruments. Mortgages require judicial foreclosure, and there’s a 6-12-month redemption period following sale. Foreclosure on deeds of trust involves filing a notice of default and then holding a trustee sale 120 days later. Montanans use ALTA policies and endorsements. Buyers and sellers split the escrow and closing costs; sellers usually pay for the title insurance policies. There are no documentary, mortgage, or transfer taxes. Montanans may pay their property taxes annually by November 30th or semi-annually by November 30th and May 31st.

NEBRASKA

Title companies, lenders, real estate agents, and attorneys all conduct closings. Conveyance is by warranty deed. Mortgages and deeds of trust are the security instruments. Mortgage foreclosures require judicial proceedings and take about 6 months from the date of the first notice when they’re uncontested. Deeds of trust do not require judicial proceedings and take about 90 days. Nebraskans use ALTA policies and endorsements. Buyers and sellers split escrow and closing costs; sellers pay the state’s documentary taxes. Property taxes fall due April 1st and August 1st.

NEVADA

Escrow similar to California’s is used for closings. Conveyance is by grant deed, bargain-and-sale deed, or quitclaim deed. Deeds of trust are the customary security instruments. Foreclosure involves recording a notice of default and mailing a copy within 10 days. Following the mailing there is a 35-day reinstatement period. After that, the beneficiary may accept partial payment or payment in full for a 3-month period. Then come advertising the property for sale for 3 consecutive weeks and finally the sale itself. All of this takes about 4 1/2 months. Nevadans use both ALTA and CLTA policies and endorsements. Buyers and sellers share escrow costs. Buyers pay the lender’s title insurance premiums; sellers pay the owner’s and the state’s transfer tax. Property taxes are payable in one, two, or four payments, the first one being due July 1st. Nevada is a community-property state.

NEW HAMPSHIRE

Attorneys conduct real estate closings. Conveyance is by warranty or quitclaim deed. Mortgages are the customary security instruments. Lenders may foreclosure through judicial action or through whatever power of sale was written into the mortgage originally. Entry, either by legal action or by taking possession peaceably in the presence of two witnesses, is possible under certain legally stated conditions. There is a one-year right-of-redemption period. The people of New Hampshire use ALTA owner’s and lender’s policies. Buyers pay all closing costs and title fees except for the documentary tax; that’s shared with the sellers. Property tax payment dates vary across the state.

NEW JERSEY

Attorneys handle closings in northern New Jersey, and title agents customarily handle them elsewhere. Conveyance is by bargain-and-sale deed with covenants against grantors’ acts (equivalent to a special warranty deed). Mortgages are the most common security instruments though deeds of trust are authorized. Foreclosures require judicial action which take 6-9 months if they’re uncontested. New Jerseyites use ALTA owner’s and lender’s policies. Both buyer and seller pay the escrow and closing costs. The buyer pays the title insurance fees, and the seller pays the transfer tax. Property taxes are payable quarterly on the first of April, July, October, and January.

NEW MEXICO

Real estate closings are conducted through escrows. Conveyance is by warranty or quitclaim deed. Deeds of trust and mortgages are the security instruments. Foreclosures require judicial proceedings, and there’s a 9-month redemption period after judgment. New Mexicans use ALTA owner’s policies, lender’s policies, and construction and leasehold policies; they also use endorsements. Buyers and sellers share escrow costs equally; sellers pay the title insurance premiums. There are no documentary, mortgage, or transfer taxes. Property taxes are payable November 5th and April 5th. New Mexico is a community-property state.

NEW YORK

All parties to a transaction appear with their attorneys for closing. Conveyance is by bargain-and-sale deed. Mortgages are the security instruments in this lien-theory state. Foreclosures require judicial action and take several months if uncontested or longer if contested. New Yorkers use policies of the New York Board of Title Underwriters almost exclusively, though some use the New York State 1946 ALTA Loan Policy. Buyers generally pay most closing costs, including all title insurance fees and mortgage taxes. Sellers pay the state and city transfer taxes. Property tax payment dates vary across the state.

NORTH CAROLINA

Attorneys or lenders may handle closings, and corporate agents issue title insurance. Conveyance is by warranty deed. Deeds of trust with private power of sale are the customary security instruments. Foreclosures are non-judicial, with a 10-day redemption period following the sale. The entire process takes between 45 and 60 days. North Carolinians use ALTA policies, but these require an attorneys opinion before they’re issued. Buyers and sellers negotiate the closing costs, except that buyers pay the recording costs, and sellers pay the document preparation and transfer tax costs. Property taxes fall due annually on the last day of the year.

NORTH DAKOTA

Lenders, together with attorneys, conduct closings. Conveyance is by warranty deed. Mortgages are the security instruments. Foreclosures require about 6 months, including the redemption period. North Dakotans base their title insurance on abstracts and attorneys’ opinions. Buyers usually pay for the closing, the attorney’s opinion, and the title insurance; sellers pay for the abstract. There are no documentary or transfer taxes. Property taxes are due March 15th and October 15th.

OHIO

Title companies and lenders handle closings. Conveyance is by warranty deed. Dower rights require that all documents involving a married person must be executed by both spouses. Mortgages are the security instruments. Judicial foreclosures, the only kind allowed, require about 6-12 months. People in Ohio use ALTA policies; they get a commitment at closing and a policy following the recording of documents. Buyers and sellers negotiate who’s going to pay closing costs and title insurance premiums, but sellers pay the transfer taxes. Property tax payment dates vary throughout the state.

OKLAHOMA

Title companies, lenders, real estate agents, and attorneys may conduct closings. Conveyance is by warranty deed. Mortgages are the usual security instruments. Foreclosures may be by judicial action or by power of sale if properly allowed for in the security instrument. Oklahomans use ALTA policies and endorsements. Buyers and sellers share the closing costs, except that the buyer pays the lender’s policy premium, the seller pays the documentary transfer tax, and the lender pays the mortgage tax. Property taxes may be paid annually on or before the last day of the year or semi-annually by December 31st and March 31st.

OREGON

Closings are handled through escrow. Conveyance is by warranty or bargain-and-sale deed, but land sales contracts are common. Mortgage deeds and deeds of trust are the security instruments. Oregon attorneys usually act as trustees in non-judicial trust-deed foreclosures. Such foreclosures take 5 months from the date of the sale notice; defaults may be cured as late as 5 days prior to sale. Judicial foreclosures on either mortgages or trust deeds allow for a one-year redemption period following sale. Oregonians use ALTA and Oregon Land Title Association policies. Buyers and sellers split escrow costs and transfer taxes; the buyer pays for the lender’s title insurance policy, and the seller pays for the owner’s policy. Property taxes are payable the 15th of November, February, and May; if paid in full by November 15th, owners receive a 3% reduction.

PENNSYLVANIA

Title companies, real estate agents, and approved attorneys may handle closings. Conveyance is by special or general warranty deed. Mortgages are the security instruments. Foreclosures take 1-6 months from filing through judgment plus another 2 months or more from judgment through sale. State law restricts aliens in owning real property with respect to acreage and income and includes special restrictions affecting farmland. Pennsylvanians use ALTA owner’s, lender’s, and leasehold policies. Buyers pay closing costs and title insurance fees; buyers and sellers split the transfer taxes. Property tax payment dates differ across the state.

RHODE ISLAND

Attorneys usually conduct closings, but banks and title companies may also conduct them. Conveyance is by warranty or quitclaim deed. Mortgages are the usual security instruments. Foreclosures follow the power-of-sale provisions contained in mortgage agreements and take about 45 days. Power-of-sale foreclosures offer no redemption provisions, whereas any other foreclosure method carries a 3-year right of redemption. Rhode Islanders use ALTA policies and endorsements. Buyers pay title insurance premiums and closing costs; sellers pay documentary taxes. Property taxes are payable annually, semi-annually, or quarterly with the first payment due in July.

SOUTH CAROLINA

Attorneys customarily handle closings. Conveyance is by warranty deed. Mortgages are most often the security instruments. Foreclosures are judicial and take 3-5 months depending on court schedules. Foreclosure sales take place on the first Monday of every month following publication of notice once a week for 3 consecutive weeks. South Carolinians use owner’s and lender’s ALTA policies and endorsements. Buyers pay closing costs, title insurance premiums, and state mortgage taxes; sellers pay the transfer taxes. Property tax payment dates vary across the state from September 15 to December 31.

SOUTH DAKOTA

Title companies, lenders, real estate agents, and attorneys may handle closings. Conveyance is by warranty deed. Mortgages are the usual security instruments. Foreclosures may occur through judicial proceedings or through the power-of-sale provisions contained in certain mortgage agreements. Sheriff’s sales follow publication of notice by 30 days. The redemption period allowed after sale of parcels smaller than 40 acres and encumbered by mortgages containing power of sale is 180 days; in all other cases, it’s a year. There’s a unique statute which stipulates that all land must be platted in lots or described by sectional references rather than by metes and bounds unless it involves property described in documents recorded prior to 1945. There’s another unique statute called the Affidavit of Possession Statute. Certain exceptions aside, it provides that any person having an unbroken chain of title for 22 years thereafter has a marketable title free of any defects occurring prior to that 22-year period. South Dakotans use ALTA policies and endorsements. Sellers pay the transfer taxes and split the other closing costs, fees, and premiums with the buyers. Property taxes come due May 1st and November 1st.

TENNESSEE

A title company attorney, a party to the contract, a lender’s representative, or an outside attorney may conduct a closing. Conveyance is by warranty or quitclaim deed. Deeds of trust are the customary security instruments. Foreclosures, which are handled according to trustee sale provisions, are swift, that is, 22 days from the first publication of the notice until the public sale, and there is normally no right of redemption after that. Tennesseans use ALTA policies and endorsements. The payment of title insurance premiums, closing costs, mortgage taxes, and transfer taxes varies according to local practice. Property taxes are payable annually on the first Monday in October.

TEXAS

Title companies normally handle closings. Conveyance is by warranty deed. Deeds of trust are the most common security instruments. Following the posting of foreclosure sales at the local courthouse for at least 21 days, the sales themselves take place at the courthouse on the first Tuesday of the month. Texans use only Texas standard policy forms of title insurance. Buyers and sellers negotiate closing costs. There aren’t any documentary, transfer, or mortgage taxes. Property taxes notices are send around October 1st, but are not due until the end of the year. Texas is a community-property state.

UTAH

Lenders handle about 60% of the escrows and title companies handle the rest. Conveyance is by warranty deed. Mortgages and deeds of trust with private power of sale are the security instruments. Mortgage foreclosures require judicial proceedings which take about a year; deed-of-trust foreclosures take advantage of private power-of-sale provisions and take about 4 months. Utahans use ALTA owner’s and lender’s policies and endorsements. Buyers and sellers split escrow fees, and sellers pay the title insurance premiums. There are no documentary, transfer, or mortgage taxes. Property taxes are payable November 30th.

VERMONT

Attorneys take care of closings. Conveyance is by warranty or quitclaim deed. Mortgages are the customary security instruments, but large commercial transactions often employ deeds of trust . Mortgage foreclosures require judicial proceedings for „strict foreclosure‰; after sale, there is a redemption period of one year for mortgages dated prior to April 1, 1968, and 6 months for all others. Vermonters use ALTA owner’s and lender’s policies and endorsements. Buyers pay recording fees, title insurance premiums, and transfer taxes. Property tax payment dates vary across the state.

VIRGINIA

Attorneys and title companies conduct real estate closings. Conveyance is by bargain-and-sale deed. Deeds of trust are the customary security instruments. Foreclosure takes about 2 months. Virginians use ALTA policies and endorsements. Buyers pay the title insurance premiums and the various taxes. Property tax payment dates vary.

WASHINGTON

Title companies, independent escrow companies, lenders, and attorneys may handle escrows. An attorney must prepare real estate documents, but there is a limited practice rule which lets licensed non-attorneys prepare most of the commonly used real estate documents. Conveyance is by warranty deed. Both deeds of trust with private power of sale and mortgages are used as security instruments. Mortgages require judicial foreclosure. Deeds of trust require that a notice of default be sent first and 30 days later, a notice of sale. The notice of sale must be recorded, posted, and mailed at least 90 days before the sale, and the sale cannot take place any earlier than 190 days after the actual default. Sellers generally pay the title insurance premiums and the revenue tax; buyers and sellers split everything else. Property taxes are payable April 30th and October 31st. Washington is a community-property state.

WEST VIRGINIA

Attorneys conduct escrow closings, although lenders and real estate agents do them occasionally. Conveyance is by warranty deed, bargain-and-sale deed, or grant deed. Deeds of trust are the customary security instruments. Foreclosures are great for lenders; when uncontested, they take only a month. West Virginians use ALTA policies and endorsements. Buyers pay the title insurance premiums and sellers pay the documentary taxes; they divide the other closing costs. Property taxes may be paid in a lump sum after July 6th or in two installments on September 1st and March 1st.

WISCONSIN

Lenders and title companies conduct what are called “table closings” throughout the state, except in the Milwaukee area, where attorneys conduct the closings. Conveyance is by warranty deed, but installment land contracts are used extensively, too. Mortgages are the customary security instruments. Within limits, the actual mortgage wording determines foreclosure requirements; redemption varies from 2 months for abandoned property to a full year in some cases. Lenders generally waive their right to a deficiency judgment in order to reduce the redemption period to 6 months. Wisconsinites use ALTA policies and endorsements. Buyers generally pay closing costs and the lender’s policy fees; sellers pay the owner’s policy fees and the transfer taxes. In transactions involving homesteads, conveyances may be void if not joined into by the spouse. Property taxes may be paid in full on February 28th, or they may be paid half on January 31st and half on July 31st. Wisconsin is a quasi-community-property state.

WYOMING

Real estate agents generally conduct closings. Conveyance is by warranty deed. Mortgages are the usual security instruments. Foreclosures may follow judicial or power-of-sale proceedings. Residential foreclosures take around 120 days; agricultural foreclosures, around 13 months. Wyomingites use ALTA owner’s and lender’s policies and endorsements. Buyer and seller negotiate who’s going to pay the various closing costs and title insurance fees. There are no documentary, mortgage, or transfer taxes. Property taxes may be paid annually December 31st or semi-annually September 1st and March 1st.

All Rights Reserved. Distributed by Escrow Publishing Company. This article may not be resold, reprinted, resyndicated or redistributed without the written permission from the publisher.

How Closings Are Handled State by State

Sandy Gadow

Real estate closings may be handled by escrow companies, title companies, lawyers, or a combination of one or more of those. Some lenders may have their own closing department. A revised explanation of how a real estate closing will be handled in your state can be found in the new up-dated 2nd edition of The Complete Guide to Your Real Estate Closing, now available at www.amazon.com or www.sandygadow.com/order.html.  You will find a complete listing of how an escrow closing is handled in every state, which will include where to make a complaint, an estimate of the fees you will have to pay, and who will do what in the closing.

Here is a Sample: 

Alabama
Attorneys handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosures are non-judicial. Foreclosure notices are published once a week for three weeks, county by county. The foreclosure process takes a minimum of 21 days from the date of first publication. After the sale, there is a one-year redemption period. Alabamans use ALTA policies to insure titles. Buyers and sellers negotiate who’s going to pay the closing costs and usually split them equally. Property taxes are due and payable annually on October 1.

Consumer Complaints:

Banking Department

401 Adams Avenue, Suite 680 Montgomery, AL 36130-1201 334-242-3452
Fax: 334-242-3500
Web: www.bank.state.al.us
David Parsons, Acting Commissioner Alabama Department of Insurance 201 Monroe Street, Suite 1700
P.O. Box 303351 Montgomery, AL 36104 334-269-3550
Fax: 334-241-4192
E-mail: insdept@insurance.state.al.us Web: www.aldoi.org

Alabama Real Estate Commission 1201 Carmichael Way Montgomery, AL 36106-4350 334-242-5544, TTY: 334-396-0064 Fax: 334-270-9118
E-mail: arec@arec.state.al.us Web: www.arec.state.al.us

Rate filing statute: File and use Customary title fee splits: Owner’s policy: Negotiable Lender’s policy: Buyer
Title search: Negotiable Transfer taxes: Buyer
Transfer Tax based on appraised value not on sale price.
Closing fees: Negotiable Recording fees: Buyer
Real estate transfer disclosure required? No Agency relationship disclosure required: Required by time of purchase offer.

Copyright © 2014 Sandy Gadow. All Rights Reserved. This article may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

Should I Compare Escrow Fees On-Line?

Sandy Gadow

When you begin shopping for the best home price, mortgage rate, insurance premium, and lender closing costs, so to should you shop for the best escrow fees. Many buyers believe escrow fees are set by law and so they do not include escrow fees in their search for the most competitive closing costs. Escrow fees are not generally regulated by law or by state statue. Escrow fees may be set by each escrow company. In most states, independent escrow companies are regulated by the Department of Corporations, Escrow Division, and the department does not set limits on what an escrow company may charge. Title companies are regulated by the Department of Insurance.

A normal escrow fee may vary depending on your local area. Normally, escrow fees in larger areas are higher than an escrow fee in a smaller town. A usual escrow fee can run from $150 up to $500 or more, depending on the complexity of your transaction, the purchase price of the property, and the location of the property. Escrow fees can vary from state to state and even from county to county.

Shopping on-line is often an efficient and effective way to compare escrow fees in your area. While you could call several local escrow companies in your area to compare rates, you may find that you have to speak with several people before getting your answer, and then that person may tell you that the fee will vary depending on your individual circumstances. You may be asked several specific questions, such as if you have an open escrow, what services you will require, who the lender will be, or you may find that an escrow or closing agent is not available to quote you escrow rates. You could request that the escrow company send you a chart of their escrow fees, but that may take time. Shopping on-line for escrow rates can eliminate ambiguity and give you a speedy way to compare rates. You will be able to complete your search while on-line, with no waiting involved.

To begin your search on-line, you can start by finding the names of the local escrow companies in your area by using any one of several large search engines, typing in Escrow Companies as the keyword. You can access the local Chamber of Commerce, the on-line yellow page and phone directories, which will generally give you a good indication of the escrow companies which are on-line in your area. You may want to try two or three search engines, as each one indexes it’s listings by different criteria. If independent escrow companies are not typically used in your area, type in Title Companies as the keyword. In many areas of the country, title companies handle the closing and their escrow fees will be posted on their website. You can try searching the American Land Title Association site, www.alta.org, which will give you a list of the member title companies in your area, or the American Escrow Association at www.a-e-a.org. Your state may have an escrow association, such as California, which has the California Escrow Association, which can be visited at www.ceaescrow.org. Washington state has an escrow association which is located at www.e-a-w.org. These associations will list their members for each city on their site. Your realtor may be able to give you a list of escrow companies with websites in your area.

If the escrow or title company does not post their escrow fees on-line, you can try sending the company an e-mail request, indicating the purchase price of the property, the time limit for closing, whether 15, 30, or 60 days, and any special requirements which you may have. You should receive an answer within 24 hrs. of your request. Write three or four escrow companies with your request for fees. Keep in mind that some miscellaneous escrow fees may be negotiable, such as the notary fee, doc prep fee, and power of attorney fee. You may find that an escrow fee can vary as much as $100 or more from company to company. Be wary of an escrow company charging significantly less than other companies in your search. You may not be getting the same services which may be included in the other companies’ fees. Shop around for three good choices and then look for credibility and ask for references. You can post most all your questions on-line, via e-mail. In this way, you will have a record of the responses which you receive, and you can print out and compare the fees from company to company.

You may feel that all escrow companies should be offering comparable services, so shopping around isn’t really that important. Most escrow and title companies do handle typical escrows efficiently, but there is always the chance of the unexpected circumstance, such as your needing a special “rush” order on your closing, or help with a dispute over items found in the title report, or help with hurrying your loan through the underwriting process. Selecting an experienced and reputable escrow company, one whose fees are clearly stated and understood, will be appreciated when it comes time to sign your closing documents and pay your closing fees.

When you are comparing different escrow companies and their rates, be sure to ask them what the circumstances would be which would make the rate change. For example, if you anticipate that you will require that your escrow be closed at another location other than at the escrow or title company, there may be an out-of-office fee of $25-$35, plus tolls and parking. Some escrow companies have been known to change their fee at the last moment, indicating that extra work was required. You may not be notified of these changes until you arrive to sign your closing documents. At that point, it may be too late to do anything about the revised escrow fees.

Comparing escrow fees could add up to a savings of $100 – $200 or more. These savings on escrow fees would cover the price of a home warranty policy or an inspection of one of the systems in the home which are in question. Closing costs are generally higher than anticipated by most buyers, so even a small savings can be significant. Many times, unexpected closing costs appear which the buyer has not provided for. Most buyers must calculate the amount needed to close escrow carefully. They must pull money from savings accounts, family and investments, to come up with the total closing costs.

If you are located in a state which does not use escrow or title companies to conduct the closing, you would begin your search by locating two or three attorneys who handle closings in your area. Many law firms have their own websites. You can then e-mail the attorney to request a list of closing fees. The escrow fee in an attorney-assisted closing may be called an attorney’s fee or a settlement fee, but the services performed will be the same as with an escrow fee. An attorney’s closing fee may include ordering the title, resolving any title issues, preparing deeds and other closing documents. There may be an extra charge for the title search if the attorney uses an outside title company to perform the search. That fee could run from $150 – $160 and would be listed separately. Other services performed by the attorney, such as reviewing your purchase agreement, may be an extra charge, s o be sure to ask the attorney what the hourly rate would be for special requests and help. If you are buying a condominium, for example, you may want the attorney to review the condominium documents for you. This may be an additional charge, and not included in the closing fee.

You may find that in some attorney-assisted states, the lender typically chooses the closing attorney. You could make a request for an attorney of your choice, and the lender would most probably agree to your request. Under RESPA law, a lender cannot require you to obtain title insurance from any particular company. You are allowed to choose which company will issue the title insurance. You may want to review RESPA law as it pertains to escrow and settlement fees and title insurance at http://www.hud.gov/ownahm.html. Go to “Topics,” “Own a Home.” Scroll down to “Settlement Costs and Helpful Information” and choose “RESPA Disclosures.”

When requesting a quote for escrow fees, be sure to indicate any special circumstances of your transaction. Will you need a “rush” escrow or have trust or probate issues to deal with? Will one or more of the parties be out of town at the time of closing? Would there be any divorce issues which must be dealt with at the closing? The more information you can give your escrow agent, the less likely the stated escrow fee would vary from the fee initially quoted to you. Ask if you will be notified in advance in any change from the stated fee. Filing a complaint against an escrow company can be time consuming and frustrating. It could be months before you resolve the dispute and receive a refund. Although you could file your complaint with the Department of Corporations or the state Insurance Commissioner, depending on who regulates escrow or closing companies in your state, this may a tedious and complicated matter. In addition, you may have to hire an attorney to assist you.

Escrow fees do vary from state to state, county to county, and company to company. Shop on-line and ask for all the fees which you might incur at closing. Ask which services will be included in the escrow or closing fee, and which services will be an extra charge. Keep in mind that your lender will have a separate list of closing fees which they will disclose to you on a Good Faith Estimate form. These closing costs will be costs directly associated with your loan.

This column may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

Escrow Impound Accounts: Do You Have a Choice?

Sandy Gadow

Escrow impound accounts are those accounts which lenders set up to collect “up-front” money from you when you take out a mortgage to cover future expenses such as property taxes and insurance. Lenders like to set up these impound accounts, as they are then certain that the property taxes and insurance will be paid on time, as they will be holding the money and paying these expenses for you. You can typically waive escrows on a conventional loan if your loan-to-value ratio is 80% or less. The key point is to convey to your lender or mortgage broker from the start that you choose to waive the escrow account option.

The lender may charge you an additional 1/4 point for this option to “waive escrows. “This is not an increase in the interest rate, but rather a one-time charge. If your loan is for $l00,000.00, for example, and you are paying no points, you would pay $250.00 for the privilege of waiving the escrow impound account. In the long run it may well be worth it. It is very difficult to get a lender to cancel the escrow impound account once it is in place, and difficult to get the lender to pay out any interest accrued on the money. Only about 14 states have passed legislation which requires the lender to pay interest on your escrow funds held in these accounts.In some states, lenders allow buyers to set up separate accounts into which they place a certain amount of money and then pay the insurance and property taxes themselves.These are called pledge accounts, and they must be set up before you close on the house.

If you change your mind before the close of escrow regarding your escrow account, you can ask the lender to redraw your loan documents, but they will charge you a fee for this and it would delay your closing. It is best to make a decision regarding the escrow account option before you start shopping for a loan.

If you do choose to allow the lender to collect for escrow accounts, keeping track of your escrow money may become difficult. Many loans are sold in the secondary money market and the original lender you contracted with may not be the lender you are dealing with today.You definitely loose control of that money once the lender has collected it from you.

In some cases you may find that the lender did not pay the hazard insurance or property taxes on time and you receive a cancellation notice or penalty assessments. In this case, you would need to contact your lender, sending along a copy of the bill. The lender should pay the penalty for not paying the taxes or insurance on time.

Escrow impound accounts do have their advantage to some borrowers, however, in the case where you do not want to be bothered to plan ahead and save to pay the property taxes and insurance. When the lender collects this money from you each month, you don’t have any worries when these expenses come due.

You may feel that your lender is requiring you to place more money than necessary into the escrow account. Typically, lenders collect a two-month cushion for taxes and insurance. There is a law which governs the lender’s ability to collect escrow money and if you have a specific complaint you can contact the Department of Housing and Urban Development or the State or Federal financial regulators.

Related Questions

Can I cancel my impound account anytime during the life of my loan?

Most lenders will not allow you to cancel the impound account on your existing loan. The only way to get out of your impound account requirement is to refinance your loan with your existing lender or write a new loan with a new lender.

Are lenders required to pay interest on escrow accounts?

Legislation was introduced in Congress in 1992 and 1993 which would have required lenders to pay interest on your escrow monies being held in an escrow account with your lender, but unfortunately this legislation did not pass. Some states do require interest be paid on escrow account funds, so you may want to check your state laws.

What rights do I have in my lender does not pay my property taxes on time from the money they hold in their escrow account on my behalf?

Your best remedy is to send a copy of the bill to your lender. They should be responsible for the penalty for failing to ay the taxes on time, as long as you were current in your mortgage payments. If you lender refuses to pay the penalty, you may have the option of filing a complaint under RESPA guidelines.

This column may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.