Rethinking Closing Cost Quotes
January 10, 2019
By Jim Paolino
Providing accurate up front costs is an often-overlooked part of the closing process. Many title agents view this as an unimportant part of the transaction and still send quotes manually. However, the need for accurate up front costs has never been higher from both a compliance and a business perspective. There is a tremendous opportunity for business growth for title agents who can leverage technology to get their fees into the hands of lenders, real estate agents and consumers as early as possible.
Many title agents have no formal process in place to accurately quote fees such as title insurance premiums, transfer taxes and municipal recording fees. This leads to tolerance cures costing title agents and lenders thousands of dollars. Other agents choose to overestimate title fees, leading to potentially losing out on business by making their clients less competitive.
The days of posting a PDF of title fees on your website and finalizing closing costs at the table are over. As the speed of transactions increases, the need to quickly deliver accurate closing costs has never been higher. Title agents need to understand and leverage all the new technology platforms used by lenders, real estate agents and consumers to make sure they can ensure their involvement in the transaction.
Lender
Since the advent of the Good Faith Estimate (GFE) document over 10 years ago, title agents have become accustomed to manually sending or even faxing quotes to their lender clients.
Many title agents now have tools on their websites to provide fee quotes. While this is an important first step and an effective way to add some automation, agents are still missing out on opportunities to save their lender clients time and money by further automating the process of quoting fees. In this competitive market, lenders are always looking for a greater degree of automation and accuracy. Providing them with more efficiency is a win-win.
Every lender uses a loan origination system (LOS), which allows them to track and process all their files. Ideally, lenders want to be able to pull in closing costs from a title agent without ever leaving their system to go to the title agent’s website and manually re-enter fees.
“It is absolutely vital for title agents to know which LOS is utilized by their clients,” said David Spektor, chief technology officer at LodeStar Software Solutions. “We are seeing many lenders that will not enter into a business relationship with a title agent unless they can pull their title quotes within their LOS.
This type of integration is now ‘table stakes’ for any national lender relationship.”
LOS integrations benefit the title agent via added exposure to loan officers earlier in the process. Lenders are mandated to provide at least one title quote from a licensed title agent for each transaction. They can also see serious time and financial savings by leveraging the automation. Jack McAleese, senior vice president of production at Maryland-based Monarch Mortgage, said his company has reduced curing expenses by 85 percent over the past six months since mandating its loan officers to use LodeStar’s fee quoting system prior to loan disclosure. While lenders face the greatest regulatory pressure to quote accurate fees, other parties of the transaction team can also benefit from accurate up front cost estimates.
Realtor
While lenders are required to quote fees under TRID, real estate agents have a lot of incentive to be transparent about the fee-quoting process when engaging with a client.
There are two types of estimates that can benefits realtors. The first is a “Buyers Estimate” showing the up front cost to the buyer of a new home. The other is a “Seller’s Net Sheet,” which a listing agent can show to a seller to calculate their net proceeds after transfer taxes, settlement fees and their existing mortgage payoff.
“Our Realtor clients are always running quotes in order to provide their buyers and sellers with the highest possible level of service,” said Regina Braga, chief operations officer at Res/Title, a national title agent based in Rhode Island. “The more transparency they can provide up front, the more likely a customer is to return to them or refer a friend.”
While software system integrations are an important tool for lenders’ clients, real estate agents are much more reliant on mobile solutions in order to deliver fees to their clients.
“Solutions like a mobile calculator app enable title agents the ability to extend their service touch around the clock and visually show their investment in helping customers succeed,” said Dean Collura, CEO of TitleTap. “Realtors and lenders are increasingly leveraging mobile solutions when conducting business and hours tend to extend into nights and weekends. To produce an estimate on demand in seconds not only saves time, but also helps them respond quickly to buyers and sellers on the move, not to mention keeping the title agent top of mind.”
Communication with lenders and Realtors is vital to the success of a title agent, but it is even more important to keep the end consumer in mind.
Consumer
The purpose of the Know Before You Owe regulations, which created the Loan Estimate and Closing Disclosure documents, was to provide a greater level of clarity into the opaque closing process. By comparing estimates from multiple vendors in an easy-to-understand “apples-to-apples” format, the customer can shop for the best available quote.
“We are seeing consumers coming into the homebuying process much more educated about closing costs and the overall process, even first-time homebuyers,” said David Nadzam, chief operating officer at Priority Title & Escrow, a national title agent based in Virginia Beach, Va. “Prospective clients are running quotes on our website and researching title insurance online—all before ever placing an order with us.”
Realtors, title agents and lenders are all trying to be the first to the consumer in order to be the resource who guides them through the process. Technology platforms like Zillow and Trulia are adding more details about service providers and their associated costs.
Lenders are leveraging point of sale systems (e.g. Rocket Mortgage) to take applications and provide quotes to their customers. Title agents must get creative about how to interact with these systems as well as create tools of their own to get in front of prospective clients as early as possible.
Conclusion
As title agents enter 2019, it is more important than ever to carefully examine all aspects of their business to see where technology can be leveraged for greater sales opportunities. Even seemingly tedious parts of the process—like delivering fee quotes—can be leveraged into opportunities for business growth.
Jim Paolino is CEO and founder of LodeStar Software Solutions, a provider of closing cost integrations for lenders and title agents. He can be reached at jpaolino@lssoftwaresolutions.com.
Contact ALTA at 202-296-3671 or communications@alta.org.