The other day I handled a split closing and things did not go smoothly. A split closing is where the buyer uses on title company and the seller uses another title company.
A closing already has many different parties involved: buyers, sellers, buyer’s agent, seller’s agent, loan officer. But two title companies?
For a closing in the DC metro area, it just doesn’t make sense to complicate the transaction further by adding a superfluous second company.
Superfluous? Yes, that’s right, because the "seller’s title company" is going to perform the exact same tasks that the "buyer’s title company" would have performed on behalf of the seller – and almost certainly at a higher cost.
Since the “buyer’s title company" is responsible for handling mortgage payoffs and consequently following up to make sure they are released, issuing a title insurance commitment to the buyer and lender on behalf of the seller, recording the deed, and administering the escrow functions, most of the seller requirements will be handled by the buyer’s title company anyway.
Really, all the seller’s title company will do is order a payoff (maybe), prepare the deed (maybe), and arrange for the seller to sign her documents, which is typically 10 pages or less.
Despite having such a small role, the seller’s title company charges higher fees. Here is a look at the closing fees from the last three closings in our office for which the seller chose to use another title company:
|Closing Date||Seller's Fees using Federal Title||Seller's Closing Fees w/ another title company||Additional Cost of "Split" Closing|
So if the seller is paying so much more, it must mean that the seller is being provided with better service, right? Wrong.
By adding a second title company you now have your classic "too many cooks in the kitchen" scenario. Only one of the three closings above went smoothly; the other two had issues. Think about it, when has hiring more lawyers made for a smoother transaction?
So if it costs more to split the closing, and the service is not better (and often worse), why do people do it?
Most often, it is the seller’s real estate agent who insists on a split closing without explaining to the seller that they are likely to pay more. In many cases, the real estate agent’s broker may own or have an affiliation with another title company so there is a profit motive for the agent to refer the seller to another title company for a split closing.
Another common reason why an agent will refer the seller to another title company for a split closing is simply because the location of the other title company is more convenient to the agent’s location.
Most of the time, sellers don’t realize how much more a split closing is costing them. That is why we strongly urge sellers to obtain quotes and make sure that it makes sense.
We've posted a seller's fee schedule on our website. Unfortunately, since most title companies do not publish their fee schedules, you will have to call or email them – and shouldn’t the lack of transparency make you think twice?