Buyer Beware – Junk Escrow Fees In Home Purchase

EscrowMy husband and I just sold our house and bought a new one. And boy did I learn a lot. Last time I was involved in a property purchase, I didn’t pay all that much attention to the documents. Yes, I read my loan documents and understood them and read the title, but I didn’t really pay much attention to the escrow stuff. Now being older with more experience, I did. And boy – one of our escrow companies really tried to rip us off with junk fees! So lesson learned – make sure you carefully review your escrow’s estimate of closing costs.

For some background, our sale and purchase were separate transactions – that is, we sold our house in one transaction and one escrow and purchased the other in a separate transaction with a separate escrow. Generally in California residential transactions, it seems that the seller picks the escrow company. But it doesn’t have to be that way. Your escrow company matters in terms of the fee being charged. With the house that we sold, the buyer wanted a specific escrow company, which was fine but we agreed on the maximum rate per $1,000 of purchase price that the escrow company could charge. And you can do this whether you are seller or buyer. It makes a big difference. On the house we sold, the escrow company charged us (and also the buyer) $1.00 per $1,000. However, on the house we bought, the seller picked the escrow (big mistake – we should have been more careful in our offer), and the escrow company was going to charge a $195.00 base plus $2.50 per thousand. We got that down some, but wow – Tradewinds Escrow really charged us significantly more than others for the basic escrow fee.

That basic escrow fee should cover what escrow does. But no, Tradewinds also tried to charge us a loan tie-in fee of $200. Now, a loan tie in fee is supposed to be for services rendered tying in two or more loans. But we had only one loan, so why a loan tie-fee? Because it is a junk fee that simply nets more profit to the escrow company for no real service when you only have one loan. We objected and initially were told that Tradewinds always charges the fee and there was nothing we could do. Well, we kept objecting and got the fee removed.

We also had a junk fee for “e-docs” of $200. Now an “e docs” fee is nothing more than a charge for printing out electronic documents or sending documents electronically. Most companies consider the cost of email to be part of standard overhead costs. And the escrow company is charging you a fee that should encompass its services. We objected and got this fee removed after some back and forth. You should too – it is a total junk fee.

We also had an audit fee of $110 although the escrow agreement only allowed $60 to be charged.

Lesson learned – carefully review the escrow closing statement for junk fees and object as soon as you can – don’t wait until closing day. Better yet, get recommendations for escrow companies before listing your home or making an offer. That way, you can investigate the company’s fees and select a good company. Also, you can write the escrow company into your contract specifying the amount to be charged for escrow.

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  1. Sounds like something your real estate agent should have been on top of.

  2. DanInCali says:

    I stumbled onto your article too late. Just opened escrow and I find myself in the exact same place you were, with Tradewinds, and a lot of the same junk fees. Is there anything I can do at this point? Can I just ask to have those fees removed/reduced?

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