I have written before about the "slim shady" shadiness of ABAs or "affiliated business arrangements." See blog: Beware: "Affiliated Business" or Illegal Kickbacks?
The latest and most profitable ABA is when real estate companies funnel deals to title companies and share the profits. The first major case trying to stop this is against Coldwell Banker (Post Article).
But now I'd like to take what might initially seem like the flip side to that blog.
PARNTERSHIPS CAN BE GREAT, AND GOOD FOR THE CLIENT.
Just recently a client got a loan through a credit union. They had a "partnership" with a closing company and they worked hard to steer the client back to their closing company that I had never heard of. Somehow they had some "package" that drastically reduced the closing costs. I was skeptical, but the savings was so large that the client went with them.
As with anything, saving money is great. But as with everything, "saving" now can hurt you later (not saying it WILL, but it CAN).
I don't mind a great company that also might discount (like Costco). But a discount company that makes their money on volume and sacrifices service, is a SCARY proposition when dealing with your home.
I love Monarch Title, specifically in Old Town Alexandria. Why? Well let me tell you about today's closing at the above listed credit union:
- The preliminary HUD1 is usually sent a day or two before so that it can be reviewed for errors and hidden fees.
This did not occur. Closing was set for 1pm and at 9:30am, we had nothing. An email was sent. At noon I called and went through a mesmerizing phone tree maze. Finally on my 3rd call I was told that the voicemail for the main contact was FULL!! WHAT? First she didn't reply to the 9:30am request for a HUD1 (that should have been done the day before) and then her VOICEMAIL WAS FULL! I then asked to speak with her boss. That went to another voicemail saying that he would get back to me within 24 hours. Even though the closing was within the hour.
- I finally got the Preliminary HUD1. Initially they wanted to fax it. As if email is too difficult (no big deal but come on)
- The Prelim HUD1 had one of the closing company tricks that I despise. They bundled the Lender's and Owner's coverage into one line. And they put in as a default the "premium" policy (other terms for premium include: Eagle, Alta, extended, steroids, better, not standard, "higher") which is more profitable to the closing company. (I'm not saying they are bad, I just don't like them snuck in). Don't miss my blog on Owner's Title Insurance.95% Buy It, 10% Know Why! And this was even after he requested NOT to have the premium policy.
Ok, these things aren't tragic issues, but it has to make you wonder. If they mess up on something this obvious and easy, imagine the level of sloppiness in searching for your clear title, and proper recording of your property. Don't think those things can't be messed up. I know of one closing company that messed up and the property was recorded in the wrong county!
I came to Monarch after working exclusively with another closing company. The first company was great. But then they decided to push profits and offer discounts and drive a larger volume with the same staff. Employees were disgruntled and quiting and the service tanked. You might not have a problem today (like we did), but in 10 years when you go and sell your place, don't be surprised when you hear: "Houston, we have a problem," especially if your name isn't Houston!
Sidenote: Recently another closing company didn't have the means to wire some funds and . Again a simple task like this makes me wonder what is going on behind the scenes.
This blog isn't just for Title Companies. We have combed through different service providers and seen the bad and dumped them. Also our "partners" know that if they mess up, they will be replaced. Your fly-by-night company (or even a big company that might stink) doesn't give a rat's ass if they don't do future business with our firm.
So this goes for every company that I would consider a "partner" in the home buying process. From a home inspector, to a painter, to a lender to a moving company.
- LOANS: Don't complain when you went with an internet company that quoted a .125% better rate than one of our recommended lenders, just to find out that some hidden fees cropped up, or you can't get through their phone tree a day or two before closing, or worse yet, they have a snag and the closing is delayed. Or more commonly the company without any loyalty to the Realtor uses funny math to convince the client that they are a better deal (when they really aren't when you compare apples to apples.)
- HOME INSPECTION: So you found somebody that would do it for $50 less! Great. Don't complain when they missed the cracked pipe going into the kitchen. Our guy might also miss that, but after a few misses, we will find a better inspector.
- PAINTERS: Great, you called somebody with a number on the side of a truck and you saved $100. Before you do this, please let me give you a number of a client that hired somebody from a cheap quote and then had to fire them and re-hire our recommended painter to get the job done. She wasted money trying to save a few bucks and said "I wish I would have just used your recommended painters." To which I replied, "no problem, as long as you let me give out your number to future clients looking to save a buck with somebody else." She replied "Gladly!"
Just like all Realtors aren't the same and some are cheaper than others (see blog:discount Realtors) the focus should be on the best end result, while balancing price.
Just make sure not to sign the ABA form that many agencies try to sneak in front of you that says that they are making a profit from the partners they are referring you to.
Happy closings and please let me know of any typos, and I love your comments, both pro and con!
Frank Borges LL0SA- The Real Estate Gadfly - Virginia Broker/ Owner FranklyRealty.com
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