Let's Go Out of Town For Escrow, It's Cheaper

One of my investor clients recently asked if we could use an out-of-state title and escrow company for his new transaction. Seems he has been surfing the Internet and found some companies that were charging less than what he is paying in town. Here is how I responded to him:

First of all, I understand that this is a business decision for you, not an emotional one. I run a small business myself, and I am only too aware of the need to manage costs. Even the little ones can build up and sink you if they are incurred on a regular basis. Furthermore, as the consumer of settlement services and because of the fact that you will be using a loan to purchase, it would be a violation of RESPA for you to be forced into purchasing title insurance from any specific provider.

Having said that, and since you are asking my opinion, let me give you a few reasons I think that may not be in your best interests.

• My experience with several of those companies is that they are extremely unresponsive. They do not answer the phone, and rarely respond to email. I suspect (though don't know for sure) that they keep their rates lower by keeping the volume high and their agents overworked. Now I admit, you probably see this as mostly my problem, but it will become yours if we don't close and you lose the deal of the century or start paying per diems that quickly eliminate your discount.
• Companies in other states are likely not to be familiar with Nevada State law and our settlement procedures. I have had out-of-state escrow agents set up closing in Las Vegas, which as you know is 500 miles away. In other cases, documents required by law have been overlooked.
• I know that you have been through many closings and feel comfortable with the proceedings. But it is not impossible that some unusual document may be presented for you to sign. Have a question? Too bad! Despite the fact that you are paying close to retail for escrow services, you will be provided with a mobile notary, whose job it is to plop documents in front of you and witness your signature on them. Sorry, I am specifically prohibited by the scope of my licensure from commenting or advising you in most of these areas. Imagine if you were a first-time buyer!!!
• This is a bit hypothetical, but... There is a great deal of discussion both in the news and in the legal community about the legality of foreclosures in some cases. It is speculated that some of these foreclosures may be challenged or even unwound. Although that seems unlikely to me, the only thing protecting you on your purchase of the bank-owned foreclosures that you favor is your title insurance.  You want a quality company providing it, that doesn't have a million exclusions, and by the way, must be licensed and bonded in the State of Nevada. Don't be penny-wise and pound foolish.

So think it over. This is ultimately your decision. But I have to open escrow somewhere. By Monday. :-)