Why is it so important to you, the consumer, to have a local title insurance professional conduct your real estate closing?

The old adage that all real estate is local is absolutely correct, no doubt about it. And that adage is no truer than in Pennsylvania. Each county and township has its own criteria to transfer real estate and record transactions.

It’s your choice

When refinancing or purchasing be sure to shop for your title insurance provider and by all means choose a local, independent, licensed provider. Choose someone in or around the county in which you live. Don’t settle on the real estate agent’s “in-house” title agency and don’t let your television, internet, or national lender choose for you (let’s call them “out-of-state” lenders). If you do, most likely, you will have a “mobile” notary or notary signing agent conducting your closing.

By hiring an independent, licensed title insurance agent who is located in your community, you are:

• adding a level of security in the protection of your financial information
• hiring an independent eye who is not affiliated with your lender or real estate agent
• saving money
• supporting business owners who pay taxes and give back to your community
• protecting the sanctity of the public record
• adding a wealth of knowledge and expertise to your transaction

See why out-of-state title agents cost you money and why you pay more for less!

In Why Shop for Title Insurance, we explained how consumers can protect themselves from inappropriate charges simply by comparing charges from various providers.  Now we’d like to provide you information on how to shop for title insurance.

First, check the rates and fees

We’ve developed a Title Insurance Shopping Guide for use in Pennsylvania. This will allow you to compare quotes side-by-side. A detailed comparison will quickly highlight any glaring discrepancies such as incorrect application of the rates or inappropriate or “junk” fees.

Once you have compared the quotes from several title insurance providers, your next step is to identify the best title insurance agent for your transaction.

Interviewing a Title Agent

What’s important when selecting a title insurance provider? After performing literally thousands of settlements, we think we know what works. Here’s a quick list of important areas to consider to ensure a smooth settlement without surprises or post-closing issues.

Independence - An independent agent doesn’t risk being mired in conflicts of interest. We agree with The Office of the Attorney General of the Commonwealth of Pennsylvania on Affiliated Business Arrangements (where a lender, real estate agent or builder owns part of a title agency):

“ABAs…also create an inherent conflict of interest…”

Experience – Real estate transactions, even “simple” refinances, require the attention of an experienced title agent. Experience can make the difference between a smooth transaction or one mired in problems and omissions.

Local Knowledge – “All real estate is local” is a tried and true maxim. Real estate laws, rules, regulations and customs, are exceptionally local. Just because someone can pass a test sponsored by the state, doesn’t mean they have the knowledge of your local area. Many post-settlement headaches and mischarged fees are caused by out of area settlement agents trying to work outside their “boundaries” Make sure your title insurance provider has a local presence.

Focus on Quality – The true test of a title agent is satisfied clients. Do they have testimonials available? Do they use employees or contractors, like signing agents to conduct key parts of the transaction? If possible, try to talk to the person who will be handling your transaction. Be concerned if the title insurance provider can’t or won’t identify who’s handling your personal information.

Ask more questions – We’ve created a helpful guide Questions for Your Title Insurance Agent so that you can better equip yourself to shop for title insurance.

Need a City Real Estate Certification for Philadelphia?  No need to go to City Hall.

The Department of Licenses and Inspections Online Certification Site now provides an online application in just a few easy steps. The City charges $100 for the Certification plus an additional $3.00 service charge. Receipt of the Certification can happen in minutes. Payment is made by major credit card. Adobe Acrobat Reader is required to download the certification.

If you are fortunate enough to be able to refinance your mortgage loan into a lower interest rate, you should know how your escrow account with the new and current lender will be handled.  The mechanics of escrow accounts are complicated, and many borrowers want to know: What is escrow, and where does the money go?

Why Do Lenders Hold an Escrow?

Lenders want to make sure that its collateral (your property) is insured and that the taxes are paid on time.  Many lenders require that borrowers establish an escrow account to make sure that these bills are paid.  Lenders may require escrow only for taxes or insurance or for both taxes and insurance. The escrow account is established at the time of settlement, and the funds for establishing the account are shown on the HUD-1 Settlement Statement.   The funds shown on the settlement statement represent the starting balance for the account, and regular contributions to the account are made as part of your payment schedule.  Throughout the year, payments to your insurance carrier, school district and other local taxing authorities are made from the account.

In addition, most lenders require any tax and/or insurance bills due within 60 days of settlement be paid on the HUD1 Settlement Statement.  In most Pennsylvania suburbs, the local and county tax bills are mailed as early as the first week of February with the school tax bills mailed in July.  If you own property in the City of Philadelphia, you will receive one bill only and it is issued in December for the upcoming year.

What Happens to the Current Escrow Account When You Refinance?

As for your existing escrow account, once the mortgage payoff funds are posted, any monies currently being held in escrow with your current lender will be returned to you within 2-4 weeks directly from that lender. The existing escrow account cannot be transferred to the new mortgage lender UNLESS:

• Your current lender is the same as your new lender.  Your payoff will be reduced by your current escrow balance.
• Your current lender is NOT the same as your new lender. But, luckily for you, your current lender does not want to be bothered with sending a check later so it reduces your mortgage payoff by the amount it currently holds in escrow.  Very few lenders will offer this option unless you refinance directly with them.

How much Money Should I Expect to Place In Escrow at Settlement?

In either scenario above, you can expect to place an additional 1-2 months of taxes and insurance into the new escrow account over and above your current escrow balance.  Your situation may look like this: You owe $100,000, your current escrow balance is $1,500, and your current monthly escrow payment is $200.  At settlement, your payoff will be $98,500.  Your new lender will require you to place $1,800 into the new escrow account.  Remember that only $300 of that is new money, the other $1,500 represents the balance in your existing escrow account.

What if you are not refinancing with your current lender and the current lender does not offer an escrow credit on the payoff statement?  In this case, you will have to fund the new escrow account at the time of settlement and then wait to receive a check back from your existing lender.  Keep in mind that it is possible that the monies placed in escrow at settlement will be more than your escrow refund. Two reasons for this are that you are skipping a payment (more about this in my next post) and quite possibly, your current escrow account is not fully funded due to increases in taxes and/or insurance billings, creating an escrow deficit.

Keep in mind that all lenders don’t behave the same but most do, so, you may have a lender that does not fall into the above descriptions.