Site lets consumers price title insurance
The real estate title industry has taken a lot of flak lately for practices that state regulators and consumer advocates claim drive up the costs consumers pay for title insurance.
On Tuesday, the industry sought to counter some of the criticism by unveiling a website -- www.clta.titlewizard.com -- that, for the first time, allows consumers to see what the major title insurers charge for their policies.
By typing in a ZIP Code or city name, Californians in need of title insurance can comparison shop, without having to register or pay a fee.
State Insurance Commissioner Steve Poizner called the website “a first step” that could lead to lower title insurance rates in California, where such insurance is a $2.6-billion-a-year business.
Poizner has demanded rate cuts from the title companies, which have resisted. The two sides have been meeting in an attempt to reach a compromise.
“Too often, consumers have to rely on a middleman to select their title insurance. Now, consumers will be empowered to compare prices and services online,” he said in a statement.
Title insurance is something most people don’t need until they sell their house or refinance their mortgage. It’s a short-term policy required by lenders to ensure that there are no other ownership claims on a property they are financing.
In California, title insurance is one of the largest line items in closing costs paid by buyers and sellers in a real estate transaction.
Sellers typically must buy a policy before escrow can close, though in some California counties buyers are required to pay. Often, buyers and sellers split the cost, which is based on a percentage of the sale price.
Often, a real estate agent or mortgage broker involved in the transaction will recommend the title insurance company, and consumers may be unaware that they can shop around for a better price.
At the new website, users type in the location and sale price of a home and then receive quotes from title insurers. On Tuesday, setting the parameters for a $550,000 home sale in Downey, the site offered 19 quotes ranging in price from $1,386 to $1,653.
In California, title companies have paid more than $40 million in customer refunds and penalties since 2005 for allegedly participating in kickback schemes involving pricey gifts, sports tickets and cash payments.
Other states and the federal government have also targeted the industry, and currently there are more than 100 investigations looking into such arrangements.
The industry, for its part, maintains that competition exists, and that state rules are often vague as to what constitutes an illegal kickback versus a legitimate business-to-business relationship.
“Companies compete on more than just price, but also on different products and service,” said Mark Bogetich, a spokesman for the California Land Title Assn., a Sacramento-based trade group that is behind the new website. “It’s important that consumers go to the site before they get into a transaction. It’s about consumers arming themselves with knowledge, to really be in the driver’s seat so they know what their choices are.”
It’s yet to be seen whether the industry website will lead to lower title rates.
One of the chief complaints against the industry is that too much market share is concentrated in the hands of a small number of companies.
Studies by the U.S. Government Accountability Office and by Poizner’s predecessor, John Garamendi, found that the top title insurers account for the vast majority of all title business.
In California, the three top insurers -- First American Corp., Fidelity National Financial Inc. and LandAmerica Financial Group Inc. -- share 75% of the business. The companies also do business under a variety of names and subsidiaries, giving the appearance that there is more competition.
Norma Garcia, a senior attorney with Consumers Union in San Francisco who closely monitors the title industry, checked out the new website Tuesday and found it user-friendly. But she said it was not detailed enough to determine whether the policies were comparable.
“It’s easy to use. That’s a plus and I did see some variation in the local market for prices,” Garcia said. “But you have to look carefully at what’s being offered and it may vary by policy.”
“What the site does do is make it easy for title insurance companies to make themselves available to consumers,” she said. “It’s really good marketing for the companies.”