Title Insurance a Scam?
This GAO report sure makes it look that way. Another good indication that it's a scam? The Realtors are trying to get it reestablished in Iowa, the only state with the guts to shut it down.
Before I get to the bad, let me give a shout out to the good -- or someone who seemed very good to me in all the dealings I had with them. Entitledirect.com. This title insurance company (one of the evil "dicounters" and "out of state" providers that the local old boys clubs all warn against -- so they can keep their high prices protected) is stand up enough to publish links to articles about the abuses of the whole title insurance scheme.
So, who are you going to trust? The local guys who all magically charge the same price, all warn you against using lower priced providers, and who all vigorously fight to retain their arcane, unearned profits? Or the company that will charge you less, give you more info, and via an online system, keep you up to date in real time with the process?
As I wrote below, I didn't get to use entitledirect because I found out how much I was being ripped off too late to change providers. In the dealings I did have with them, they were courteous, prompt, professional, and straightforward. Contrast that with this, used-car salesman-type scare tactic I got from my local guy, and you'll probably get an understanding of why I trust the online guys more.
The bid from entitledirect came immediately, and was properly delivered, with all the relevant HUD information so that I could properly compare prices. The bid from the local guy didn't come with the relevant HUD line numbers (a tactic also engaged in by sleazy mortgage lenders, as it serves to make comparison shopping difficult). The local guy also didn't have the cuts or courtesy to total up the fee and quote the policy price. Instead, he just included a schedule of $$ per $1,000 in home price. This was obviously designed to catch me napping, make it look like the settlement costs would be $800 or so (when that's just the fees), and to get me to sign the papers, hooking me into a settlement cost 35% higher than necessary, without knowing it.
Great service from the upstanding local, eh? Best part was this obfuscation also contained language indicating that I could choose whichever title insurance provider I wanted at closing with this settlement agent, but when I tried to use another, they said I could not.
Then, get a load of what the "highly respected local businessman" (for that's what he told me he was when I questioned his prices and his tactics) told me when he decided he wouldn't compete on price (after previously having his assistant tell me they would.) The reason? because the competitor I was considering wasn't "local":
xxxx xxxx provided me with a competitor's quote for your upcoming closing. While we are generally willing to match the fees offered by competitors, we do require that they be a local competitor. I went online to reach Entitle (as I've not heard of them) and found only 4 branches, none of which are located in Virginia. While I hate to place an additional burden upon you, their prices are well below even the "discount" settlement service providers who are generally avoided in the area. Just like any commodity -- you get what you pay for, and this is definitely true in the title business.
If you could provide me with a local contact for Entitle, I'm certainly willing to conduct some further research on your behalf. If you are considering another provider, I would highly recommend that you speak with your agent about many of the hazards and pitfalls of using a discount provider.
Understand why I think the system is sleazy? "Oh, don't shop around, young man. We didn't really mean we'd compete on price. We meant we'd compete with our other local peers, who, magically, all charge the same thing. And if you are still thinking of using one of those "discounters," make sure you get the requisite scares stories from our friends."
But this nice man was "willing to conduct some further research" on my behalf. Great offer, eh? Research your competitor on my behalf instead of just considering the competing, printed bid, as you said you would?
I will never use a local title agency again, and I will do everything I can to make sure others are aware of how lousy this business is.
Here are some interesting tidbits from the GAO report.