Why You Can’t Believe Everything You Read:

BankRate.com Study Claims Title and Appraisal Costs Up 47.2 Percent Year-Over-Year

Bankrate.com closing costs study claims title costs and appraisals are up 47.2 percent compared to the prior year.  If that was true, then why did Q1 2010 see a statutory premium increase nationwide of only 4.3 percent for all title underwriters in the nation?

This shows:

  • *  What an inept methodology the Bankrate.com study is based on (it’s the lender’s estimates of closing costs and not actual closing costs)
  • *  That lenders are padding costs in closing estimates (and remember that these are estimates and not actual closing costs) since there is a significant penalty for underestimating costs and none for over-estimating costs.
  • *  Why bundling of all closing costs would really never work and will end up costing the consumers more.  While lenders know their business extremely well, they often are pretty inaccurate on other costs not performed by them.  Nor should they be allowed to do so.  After all, who made all of the subprime and Alt A loans that funded the housing bubble—title companies?
  • *  Why that every time the government comes out to protect the consumer (this new HUD1, for example and the CARD act), the consumer ends up paying more and often losing services at the same time.

It’s a shame that this study has major headlines across the country but no scientific credibility what-so-ever. 

You must compare actual closing costs to really find out what consumers actually pay and which parties provide and charge for those services.  From the consumer perspective, it’s what they pay that counts.

Closing Costs on New Mortgages Up 36.6 Percent HousingWatch.com

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