Escrow Fees in Closing (as a buyer) (CA) (documents, 2%, agent)

[krystle920]

We are looking to purchase a home in the Los Angeles (around Burbank) area in the next several months. We've heard from a few brokers that we would need to hire an escrow company for closing and it would be around 2% of purchase price. That seems really steep. Our question is - can we just use an attorney in lieu of an escrow company and their ridiculous 2% fee? We would be able to hire an attorney at a very reasonable (few hundred dollars) cost through Hyatt Legal Plans. Otherwise, are there also other ways we can save on closing costs?

[thelopez2]

Originally Posted by krystle920

We are looking to purchase a home in the Los Angeles (around Burbank) area in the next several months. We've heard from a few brokers that we would need to hire an escrow company for closing and it would be around 2% of purchase price. That seems really steep. Our question is - can we just use an attorney in lieu of an escrow company and their ridiculous 2% fee? We would be able to hire an attorney at a very reasonable (few hundred dollars) cost through Hyatt Legal Plans. Otherwise, are there also other ways we can save on closing costs?

You can OFFER whatever you want but the seller usually selects the services required for closing ( escrow company). Of that 2% I'd say most it is title insurance and county fees, taxes, transfer fees, the actual escrow company like your attorney makes a few hundred for their time and business cost, office rent, business insurance, staff. Nothing is free and you pay for it in one way or another. Escrow makes sure everyone gets paid. If you want to reduce your out of pocket you either 1) take a higher interest rate and ask your lender to cover some of your closing cost. 2) Ask the seller to pay for it.

I've worked with terrible escrow companies that would just hire assistants and the company was slow to respond, had poor quality of scanned documents, couldn't get their numbers correct, had problems printing documents, had tons of excuses, was slow to return phone calls, in accessible to meet with the seller. It is the cost of doing business.

If your lender hasn't explained this to you I'd suggest getting another lender you will encounter more problems with this lender and they'll throw it over the fence and make things your problem, just because they don't want to spend a lot of time on your file because you are shopping for the lowest quoted rate. No on wants to work for free. If you want the name of a local lender that I found to be very helpful let me know. If you want to use an hour of state internet lender, good luck with that.

[Joe Van Fossen]

Originally Posted by krystle920

We are looking to purchase a home in the Los Angeles (around Burbank) area in the next several months. We've heard from a few brokers that we would need to hire an escrow company for closing and it would be around 2% of purchase price. That seems really steep. Our question is - can we just use an attorney in lieu of an escrow company and their ridiculous 2% fee? We would be able to hire an attorney at a very reasonable (few hundred dollars) cost through Hyatt Legal Plans. Otherwise, are there also other ways we can save on closing costs?

The answer is no:

FINANCIAL CODE
SECTION 17200-17215

17200. It shall be unlawful for any person to engage in business as
an escrow agent within this state except by means of a corporation
duly organized for that purpose licensed by the commissioner as an
escrow agent.

As thelopez mentioned, I believe the 2% closing costs quoted to you is a conservative estimate based on things like title insurance, transfer taxes, warranty, lender closing costs, escrow, etc. I recently closed a $900K+ deal with my broker's escrow company and the fee was around $2000. There are ways to save on closing costs, but it sounds like you'll be entering the market at a time when sellers have more options/power than buyers do and you'll have to know what you can negotiate for in closing.

[BFett]

When I was in mortgage lending, California properties had to to go through Escrow.

Some other states do allow use of lawyers instead of escrow, but use of an escrow is still way more common.

And quite simply, outside of legal aspect, if you make an offer and stipulate you don't want to use an escrow company, unless it was an all cash offer, the seller would most likely not accept.

As to save on escrow and closing costs, the easiest way to ask the seller to split or cover some of the costs.