Homeowners title insurance fees on a closing of a property, got scammed?
May 27, 2016 7:44 AM Subscribe
Gave power of attorney for a closing we we're physically present for, got the sale receipt and found that the attorney charged a 3385.00 title insurance fee to his own name. Did we get scammed?
First of all, thanks in advance for taking the time to read this and for any replies, as my only other outlet would be to go on a legal forum and pay for advise which I may still end up doing.
Long story short, I helped my parents find an attorney to handle their closing, they have moved to Irvine Ca, from Chicago, IL. They were already here in CA so we had to had to find one that would handle everything without us present since they didn't want to fly back for the closing. They and I assumed it was a relatively simple process since the buyer bought in cash (value of the property sale 1million) and although most closing fees for an attorney are between 500 standard to 1500 at the high end I found one off craigslist that posted that he did closings for 169 for legal representation of a sale. So the closing went smoothly and he emailed us the final copy of the closing contract/fees. We were startled to find that there was a 3,385.00 Owners title insurance fee paid out to the Attorney in his name. We are aware that in sale, the seller of the property must purchase title insurance for the new homeowner but it's confusing because each state is different and the cost of this is tied to the value of the sale. Also confusing is the fact that often times attorneys get commissions and incentives to utilize certain title companies etc. Is there a way to check this? The sale price of the property was 1,000,075.00 When we called him about this fee and asked him to explain this he said that he gets a 2000 commission of this 3385.00 fee and that otherwise, expecting him to close for 225 dollars (up from the 175) he quoted us was not realistic. Also he said that either way we'd have to pay the 3385.00 property title insurance fee so whether he takes a commission or not it doesn't affect what we pay which doesn't make sense.
What we're upset about is that he didn't bother to go over this before the closing when we talked to him so is this a case of something he decided to have put in his name to rip us off or is he correct? I can't find the state title insurance fees for the state of IL so if I had that I could at least calculate how much that would be for this property by value of the sale. Next I need to figure out if that's normal and standard to have this fee for sellers owner insurance to be written to the attorney, not the title insurance company. And finally, if we got ripped off, I need to find out if there's any recourse (reporting him to the legal board) warning others on craigslist about him since he still posts ads there, or even taking legal action (Which would be tough since we signed over power of attorney). If any one out there can give their opinion from selling a property or any legal advise I'd really appreciate it. This is probably a lesson learned, which is don't find a lawyer on craigslist and don't simply price shop for any services!
First of all, thanks in advance for taking the time to read this and for any replies, as my only other outlet would be to go on a legal forum and pay for advise which I may still end up doing.
Long story short, I helped my parents find an attorney to handle their closing, they have moved to Irvine Ca, from Chicago, IL. They were already here in CA so we had to had to find one that would handle everything without us present since they didn't want to fly back for the closing. They and I assumed it was a relatively simple process since the buyer bought in cash (value of the property sale 1million) and although most closing fees for an attorney are between 500 standard to 1500 at the high end I found one off craigslist that posted that he did closings for 169 for legal representation of a sale. So the closing went smoothly and he emailed us the final copy of the closing contract/fees. We were startled to find that there was a 3,385.00 Owners title insurance fee paid out to the Attorney in his name. We are aware that in sale, the seller of the property must purchase title insurance for the new homeowner but it's confusing because each state is different and the cost of this is tied to the value of the sale. Also confusing is the fact that often times attorneys get commissions and incentives to utilize certain title companies etc. Is there a way to check this? The sale price of the property was 1,000,075.00 When we called him about this fee and asked him to explain this he said that he gets a 2000 commission of this 3385.00 fee and that otherwise, expecting him to close for 225 dollars (up from the 175) he quoted us was not realistic. Also he said that either way we'd have to pay the 3385.00 property title insurance fee so whether he takes a commission or not it doesn't affect what we pay which doesn't make sense.
What we're upset about is that he didn't bother to go over this before the closing when we talked to him so is this a case of something he decided to have put in his name to rip us off or is he correct? I can't find the state title insurance fees for the state of IL so if I had that I could at least calculate how much that would be for this property by value of the sale. Next I need to figure out if that's normal and standard to have this fee for sellers owner insurance to be written to the attorney, not the title insurance company. And finally, if we got ripped off, I need to find out if there's any recourse (reporting him to the legal board) warning others on craigslist about him since he still posts ads there, or even taking legal action (Which would be tough since we signed over power of attorney). If any one out there can give their opinion from selling a property or any legal advise I'd really appreciate it. This is probably a lesson learned, which is don't find a lawyer on craigslist and don't simply price shop for any services!
I am by no means an expert in real estate transactions, but as a datapoint, I just looked at the closing documents of the three houses I've sold in two different states, and though my house sale in SC had a lower percentage cost and did not name the attorney/escrow agent as the recipient, both of my sales in Oregon are about on par with what you describe: title insurance was about .3% of the sale price, and the escrow agent was the named recipient on that line of the settlement statement. So not necessarily a scam. Hopefully someone familiar with IL real estate transactions will come along.
posted by rabbitrabbit at 7:59 AM on May 27, 2016
posted by rabbitrabbit at 7:59 AM on May 27, 2016
The first step I'd take is to figure out whether $3,385 is a reasonable cost for seller's title insurance. You can probably do that by calling around to a couple of title companies.
Next, I'd get in touch with the actual title insurance company and make sure that they got paid what they expected to be paid.
If the title insurance company is happy, and the price to you seems reasonable, then it seems like no-harm, no-foul.
If the price was jacked up by $2k to pay a commission to the lawyer, then that's the kind of thing that seems like maybe it might implicate some of the Rules of Professional Responsibility that the Illinois State Bar might be interested in. Basically, there are rules that have to do with "fee-sharing" and what kind of disclosures are required etc. etc.... I'm not saying that what happened violated any rules, but I would definitely want to be brushing up on those rules if I were a lawyer wanting to do business in that way.
You might want to try looking around the Illinois State Bar's website for resources for clients having a problem with their lawyer. State Bars get a bad reputation for "protecting their own," but a lot of that comes from the fact that often layfolks assume that a lawyer did something shady when it was just the law not being on their side and make unjustified claims.
posted by sparklemotion at 8:12 AM on May 27, 2016
Next, I'd get in touch with the actual title insurance company and make sure that they got paid what they expected to be paid.
If the title insurance company is happy, and the price to you seems reasonable, then it seems like no-harm, no-foul.
If the price was jacked up by $2k to pay a commission to the lawyer, then that's the kind of thing that seems like maybe it might implicate some of the Rules of Professional Responsibility that the Illinois State Bar might be interested in. Basically, there are rules that have to do with "fee-sharing" and what kind of disclosures are required etc. etc.... I'm not saying that what happened violated any rules, but I would definitely want to be brushing up on those rules if I were a lawyer wanting to do business in that way.
You might want to try looking around the Illinois State Bar's website for resources for clients having a problem with their lawyer. State Bars get a bad reputation for "protecting their own," but a lot of that comes from the fact that often layfolks assume that a lawyer did something shady when it was just the law not being on their side and make unjustified claims.
posted by sparklemotion at 8:12 AM on May 27, 2016
The post by sparklemotion is where I'd start. If the attorney said he'd do the job for the $175, and didn't disclose that he was getting a commission (especially if it's almost two-thirds of the title insurance fee) then I'd definitely inquire with the State Bar. Review all paperwork signed with the attorney prior to the closing to be sure there's not something in there.
posted by azpenguin at 10:23 AM on May 27, 2016 [1 favorite]
posted by azpenguin at 10:23 AM on May 27, 2016 [1 favorite]
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posted by soren_lorensen at 7:56 AM on May 27, 2016