Escrow Fees Explained And What To Look For
So, you’ve finally decided to sell your home and you’ve got a great real estate agent to represent you. What else needs to be done on your end? You’ve got to navigate through escrow and closing costs. But what are escrow costs and what kinds of fees can you expect from the escrow portion of your transaction?
This blog post is going to try and uncover some of the mystery behind how an escrow fee is calculated and some of the key ingredients to look for when shopping escrow services.
Calculating Escrow Fees
Let’s first start with a generalization of how a typical escrow fee is calculated. By most accounts, an Escrow Officer will generate a buyer and seller base escrow fee and calculate it based on the purchase price. I made a few calls to local companies in San Diego and my basic research shows the following as a range:
$1.00 – $2.25 per $1,000 in price plus $250 – $500 Base fee.
Example Calculation: Purchase Price $450,000
Base Escrow for this example will be $375 (average)
Plus per thousand fee of $1.50 = 450 x $1.50 = $675
For a purchase price of $450,000 an average escrow fee for the seller would be $1,050
The buyer side of the escrow would also be charged a similar fee. There are some key things to keep in mind when shopping services. There are additional fees that get added on to the above. Typical add on can include wire fees, courier, overnight, and miscellaneous storage fees.
What Exactly Are You Paying For?
There are a few things to keep in mind when shopping for services. What are you getting for what you are paying? As a shopper of services myself, I default to the lowest cost when I cannot see the difference between vendors.
When I called around to local companies, I noticed 2 out of the 5 actually dropped their fee in the initial conversation without me even asking. And interestingly enough, there was not 1 company that actually had anything unique to sell. I was given 5 very similar pitches about how their service was the best.
As a shopper, I am either looking for value or I will default to the lowest cost. The fees above were provided and actually turned out to be very similar.
As the owner of New Venture Escrow, it has been a lifelong passion to make sure that the product and service we provide is superior to any other company. The difference in what we offer versus what our competitors above offer, is a better and unique product and experience. We offer 3 products that I was not able to get anywhere else in my research.
Our 3 products would easily justify a higher escrow price, however, we were right in line with the average on the example above. Our 3 products include a mobile app, all documents being available to be completed with a digital signature, and an errors and omissions product given to the seller that protects them for 6 months after the close of escrow. We have a better, faster and more secure escrow experience for the same cost. That is value.
Your Escrow Service Makes A Difference
I am always amused at how few people actually shop for escrow services. Typically, the seller in a transaction will be the party to pick service providers. However, it is so rare for the seller to actually do the research and make the decision based on what the cost and value are to them. What other purchase do you spend $1,050 and do little to no research? We see most sellers will simply ask their agent for a referral on the escrow company and will side with whoever is recommended. I beg of you sellers to do a simple google search for local escrow providers and make a few calls. It will save you money and add value and ease to your transaction.
Here are some things to consider when calling an escrow company:
- What technology do they offer to make your transaction easier?
- What are the total costs based on your purchase price?
- Where are they located and how close is that to your home or work?
- Do they offer any insurance products that protect you as a seller once the transaction is closed?
- How much experience does the escrow officer have with your type of transaction? It would be ideal to actually talk to the Escrow Officer to get a feel for fit.
- What are the company reviews online? Yelp? Google +?
- Are they friendly and helpful when you call?
These are just a few of the things I would call around about as you pick a service provider. Figure out what is important to you in your transaction, negotiate a little with the company you like, and be diligent in making sure you get what you pay for.