Some of the biggest junk fee offenders are escrow companies, also called settlement agents. Some of them add several unnecessary fees to pad their profits.
These fees have good-sounding names in order to fly under the BS radar. Federal law says it is illegal to charge a fee for a service you don’t perform. OK, fine; but come on, do you really need to charge extra for the lettuce, ketchup, and pickle on the hamburger?
There are good escrow settlement agents that do not charge padded fees.
For example, here are some fees I don’t want to see on a Loan Estimate:
- Doc prep fee
- E-doc fee or email fee
- Archive fee or filing fee
- Messenger fee or courier fee
- Overnight fee
- Endorsement fee
- Tie-in fee
At this time, paying for a licensed notary to travel to you for signing is reasonable and common due to Covid-19. This is typically $200.
The time to look at fees and avoid them is BEFORE SIGNING the Purchase Agreement that stipulates which escrow settlement company will be used.
Once you have signed a contract agreeing to use Junk Fee Escrow Company, you are legally stuck with that company. You have put your signature on a legal document.
The time to choose your escrow settlement company is the same time you are shopping for and choose your mortgage lender (preferably a mortgage broker). That way, you tell your realtor which company to write into your offer. This is the time when you can still choose and negotiate.
If you failed to do your due diligence ahead of time, didn’t pay attention to which escrow settlement company was written on the contract, and only discovered all over-charges midway through your loan process, then it would take the seller agreeing to switching companies and making the change on the contract in order for you to change. That is highly unlikely to happen. The realtors will never allow it, because they will perceive it as creating a bump in the road to closing. In this case, chalk it up to a Life Lesson and write a review on Yelp and Google to warn others.
Prevention is better than cure. And with the federal lending laws enacted in 2010, sometimes prevention is the only cure.
As a First-Time Homebuyer…Hiwxwoukd the Consumer know these facts…
It would seem that the Realtor would be best positioned to counsel the Consumer on avoiding this type of treatment…
I agree, that this would be an excellent conversation to have with the realtor upfront. Thank you for pointing that out. Lately, I have received multiple emails from homebuyers asking me how to negotiate away the junk fees they are seeing on their Loan Estimates. The problem with that is these buyers are midway and even near the end of the loan process, so it really is too late for them to switch escrow companies. Escrow companies will not remove fees for some people and not others, so people can’t negotiate like they could prior to the Dodd-Frank Act of 2010.