How Important is the Title Company in the Home Buying Process?

One key component of the home buying process that is often overlooked is the title company selection. The title company, also called a closing agent or settlement agent, is responsible for the actual execution of the mortgage documents on the day of closing and ensuring that you as a buyer are able to properly take ownership of the home. Traditionally here in Florida, the seller selects the settlement agent. But a smart consumer, you know that protecting your best interest is much more important than any tradition. Believe it or not, every home buyer has the right to break this tradition and take control of the title agent selection process.

Before we get into how and why a buyer has the power to choose, let's take a look at why as a buyer you should want to take control of this very important decision. The ability to shop around and save money are key. Settlement agents charge fees to both buyers and sellers, but only one party is able to select which title company is used. This leads to a situation where home buyers are overcharged, because the title company considers the home seller to be their client and not the buyer. And in this case, they charge the buyer excessive fees. I've seen these fees amount to over $1,500 above industry standards for some home buyers.

The way to protect yourself is to shop around for the best title company. But in order to do so, you have to negotiate upfront with the home seller that you want to be the one to choose the settlement agent. This will allow you to avoid last minute delays and headaches as well. I've had a number of buyers call into my radio show and share horror stories of lost paperwork, last-minute closing delays, and rude, unprofessional experiences with some title companies. Your mortgage company can have everything ready to go for closing, but if the title company is unwilling to cooperate, the closing just won't happen.

If you want to read some horror stories about title companies here in Florida, just go into Google and search for the phrase "worst title company Florida," and you can read some amazing stories. After reading these stories, you'll understand just how bad your home buying experience could be when working with the wrong title company. In fact, one Florida law firm has paid $2 million to settle a slew of foreclosure fraud charges that related to the title and closings of loans. This also included things like robo-signing and all kinds of other horror stories. In one other case, a lender cut ties with what used to be the largest foreclosure closing agent in the state because of allegations of flawed paperwork which left thousands of transactions in limbo. That's thousands of home buyers who can't close on their new home because of misdeeds by the title company.

So you can see the by choosing your own title company, you can protect yourself from thousands of dollars in excessive fees and from last-minute closing nightmares. But how do you break this tradition of the seller choosing the title agent for you? Well, it's simple. All you have to do is speak up.

You see, legally as a home buyer, if you let the seller know prior to signing your purchase contract that you will be selecting the tile agent, there's nothing they can do to stop you. It's the law. Section 9 of the federal Real Estate Settlement Procedures Act states, "No seller of a property that will purchased with the assistance of a federally-related mortgage loan shall require, directly or indirectly, as a condition of selling the property, that the title insurance covering the property be purchased by the buyer from any particular title company."

I guess from lack of education, most buyers , and, unfortunately, many real estate agents, do not know this. And they allow the seller to pick the title company. I would say that on 98 out of 100 residential real estate transactions in Florida, the seller selects the title company, leading to problems and excessive costs for the home buyer.

Even Fannie Mae, the largest seller of foreclosed homes in the country, will allow the buyer to choose the title company. But it's hidden in the fine print on their website. All you have to do is ask. The Q&A on Fannie Mae's website states that a home buyer may designate the title company, as long as they negotiate it prior to the contract.

So remember-- when you're purchasing a home, insist upfront, before you sign the contract, that you are given the option to select the title agent. This will give you the opportunity to shop around and make sure your home purchase will be a smooth one on the day of closing. On top of getting better customer service, you'll also save thousands in fees.

To learn more about how to choose your own title company, visit savingthousands.com, and enter keywords "title company." And remember, you can always join the conversation on the Saving Thousands! forums at savingthousands.com, where you can ask questions anytime, day or night.