5000$ Title search fee (New York, Smithtown, York: insurance, mortgage, refinance)

[Vivian08]

[SIZE=3]My husband and I moved from the midwest to Long Island about two years ago, and we are in the process of buying our first home now. We signed the contract for a house we like at the beginning of June, and our attorney’s office ordered the title search without ask our permission in advance. Since it has been ordered, we told the bank (Bank of American, BOA) and the bank said OK. The mortgage we applied for is the No Fee Mortgage Plus, it claims that they will pay for the title search fee and the attorney fee (our attorney knows that). After we got the title report, we wanted to know the price of the title search and called them directly, and they then called our attorney’s office and then called us back told us the title search fee is 4950$. We are first time house buyers, what should we do with the unreasonable charge? Our attorney is not very helpful. He always seems so busy and sometimes sounds a little nasty. When we were looking around for attorney back in April, he was so patient and caring during the interview. Now he is totally different. [/SIZE]
[SIZE=3]Please help us. We don’t know BOA will pay for the title search fee, even though it is ridiculous. BTY, the title report is not very complicated, there were only one family lived in this house since it was built.[/SIZE]
[SIZE=3]What else can we do about the title search fee? We don’t really want to take them to court, if will cost more money.[/SIZE]

[TomMoser]

Is this the title search or the title insurance? In NYS, title insurance fees are regulated by law. Here is a link to a calculator:

New York State Title Insurance Rate Calculator

You may also want to contact the NYS Insurance Department which regulates title insurers.

[totallyfrazzled]

Tom, I have a question on that site you linked to: Where you need to select a type, what's the difference between "Mortgage" and "Fee/owner"? Should the user select "Mortgage" if there is a mortgage involved in the purchase, but "Fee/owner" if the purchaser is paying all cash? Wouldn't the title policy cost be the same whether or not there is a lienholder on the house? The title company is still doing a search, producing results, and issuing a clear-title policy no matter what. And also a second question, I'm assuming these fees are for them to search for clouds-on-title only, and not to search for any C of O issues. Asking only because we looked at a FSBO recently where the house turned out not to have a CO for either the deck or for a 600-square-foot addition (I only found out because I checked with the town assessor's office myself). The current sellers did buy the house that way, 15 years ago, and even refinanced it once since. The sellers were (truly) shocked that there were no COs on file and kept saying 'How come the title company never picked this up?' Our response was that it's not a title company's job to do that, they're only concerned with liens, not COs. But I've since been told that if a buyer requests a CO search as well as a title search, the title company will do that as well ... but at an added cost. What has your experience been with that? Maybe the OP's title policy bill included a CO search and insurance as well as for liens, and that's why it's more expensive than the expected? Thanks for any input.

[TomMoser]

There are, indeed, different prices for an owner's policy and a mortgagee policy. Usually, you will get both unless you are paying all cash. The mortgage policy should be a little cheaper, because it covers only the amount of the mortgage, not the full purchase price. Don't ever forgo the owner policy however, because there is always that one in a million chance that you have a future title issue.

As for the CO for the deck, the title company will usually pick it up when they see the survey, because they compare it against what was previously insured on the house. Inside things are more often picked up by the bank (for example, the addition of a bathroom) when they do the appraisal.

The most commone items that home owners don't realize that they need COs for are decks, sheds, and above ground swimming pools.

[totallyfrazzled]

Tom, that's really interesting, I never knew that buyers should get TWO policies! In our case we'll probably end up buying a house in the 575K range but will only be getting a 75K mortgage. So does that mean our bank will require a title policy for only 75K? and will that policy only insure THEM (the bank), or both the bank and us? If the 75K policy insures both the bank AND us (which sounds logical), then you're saying that we should also purchase a 500K title policy that will just be in our name, not the bank's? Or should "our" policy be for the full 575K? If so, why not just get one 575K policy that names both us and the bank as insureds, and then when we pay off the mortgage the bank's name will be removed from the title policy?

[totallyfrazzled]

Doesn't the need for a CO for an above-ground pool vary by township? Because we were told that although the town of Smithtown requires a PERMIT for an above-ground pool, they don't require an actual CO because it's not a permanent structure (can be removed at any time). We do know that an inground pool needs first a permit and then a CO, no matter what town the house is in, because the inground pool is considered a permanent addition.

[TomMoser]

Originally Posted by totallyfrazzled

Tom, that's really interesting, I never knew that buyers should get TWO policies! In our case we'll probably end up buying a house in the 575K range but will only be getting a 75K mortgage. So does that mean our bank will require a title policy for only 75K? and will that policy only insure THEM (the bank), or both the bank and us? If the 75K policy insures both the bank AND us (which sounds logical), then you're saying that we should also purchase a 500K title policy that will just be in our name, not the bank's? Or should "our" policy be for the full 575K? If so, why not just get one 575K policy that names both us and the bank as insureds, and then when we pay off the mortgage the bank's name will be removed from the title policy?

That's right. There will be two policies. One for the bank for 75K (actually it may be somewhat higher because they pad it a bit) and one for you for 575K. Make sure that you get a "market value rider". This will cover you for the market value in the future if there is a title issue. For example, say 20 years from now, your house is worth 1.5 million and you lose it due to a title issue, the policy with the rider would pay you the 1.5 million. Without the rider you would only get 575K. There are no joint policies that cover both you and the bank. You should discuss all this with your attorney. They are all very well versed in it.

[totallyfrazzled]

Thanks Tom, the subject hasn't come up with our lawyer because we haven't yet found a house we want to make an offer on. We recently sold the house we had in another state, and we did have a title insurance policy on that, but since we bought that for cash, we just had a title policy issued in our name. This is the first time we'll have a mortgage (we hate them but our accoutant says that for the next few years it'll be better for us taxwise to have a mortgage interest deduction; it'll be a 15-yr mortgage but we intend to pay it off in less than 10 years) so we weren't aware of the requirement for TWO title policies. What a ripoff!! It was bad enough that when we bought that house we were required to give the title company representative a $75 "tip" at closing. I suppose they also do that sort of thing in NY .... what's going rate nowadays? $100? $125? By the way we intended to shop around and choose our own title company, rather than just leave it up to someone else like we did the first time. But you're saying that in NY State, ALL companies MUST charge the same title policy premium? If so, what's the reason for shopping around, if the policy and the premium must be exactly the same from one title company to the next?

[acip]

I will also shed alittle light on Title companies, which many realtors did not know
The buyer has the right to choose and not just accept the one their lawyer uses
I always recommend an independent I have done this on several transactions and even though the lawyer not to happy they honored the request Cost was alot less and full service for my buyer's Also, the service alot faster if there are no major complications
Good luck

[totallyfrazzled]

Aha, so the state-mandated amounts are the MAXIMUM any company can charge in NY, but they can charge LESS? In that case, shopping around is a definite must. But how would we know in advance which title companies give better service (could you define 'better service'? does it mean just how fast they do the searches, or are there other things?)? I always suspected that whenever an attorney or realtor does the title-insurance placement, the referrer gets some kind of 'referral fee' from the title company; is that the way it works?