When you buy a home in Texas, you expect to write a check at closing.
But that check will be the second highest in the nation.
So, what is the biggest culprit in closing costs?
Well, if you don’t count your down payment or any so-called points you buy, it’s title insurance.
And if you think all the cartels are down in Mexico, you can look a lot closer.
Here’s the scenario.
You’ve bought the home of your dreams.
You’ve secured the financing, and now it’s time to close the deal.
That last act in Texas will cost you more than in 48 other states. We are second only to New York in closing costs.
“It’s because the title insurance is so high,” says Carolyn Bain, a Tyler realtor. “For instance, on this closing that we have coming up tomorrow on a $120,000 house, the title insurance will be $950.”
Although a thorough title search will be conducted, and with so much online, the insurance is to guard against a claim against the title.
The odds are overwhelmingly against that.
Realtor Aaron Layman in Houston says, it’s a racket.
“Price gouging is the term I use, and that’s exactly what it is,” he told KETK. “They are colluding and a small group of players control most of the market to set pricing high.”
And it’s a business that has very little downside.
In auto insurance, your premium could be, say, $800.
The insurer can expect to pay out $440 a year in claims or about 55%
Your title policy on a $140,000 home would be about $1,050.
They can expect to pay out $52 bucks over the life of that loan. That’s about 5%.
There is almost no risk of a title being challenged.
And it turns out, realtors can be partners in title companies. It’s like the doctor who owns the MRI machine.
Some other states don’t even allow private title insurance to be sold.
And the chances of those prices going down?
Between slim and none according to Layman. “The powers that be and the lobbyists, and the insurance companies of course, have control over everything, and they have a vested interest to keep pricing high.”
Texas closing costs average $4800 on a home.
The national average is $3700.
The national regulations are the same, the interest rates are the same.
The big difference is title insurance.