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Why GRADUATED closing fees are a MUST for any title company going forward

We’ve seen this trend more and more with the title companies that are currently using the TitleCapture branded app. These companies are switching to graduated closing fees - the closing fee gets higher as the value of the property gets higher. 

Many title companies are still reluctant to do this, but our data shows that the ones that give up having “flat” closing fees, tend to outperform their competition. Lucky for them, the TitleCapture system allows them to easily set up these graduations. 

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And that’s on top of the fact that our ultra-customizable system allows them to set up however many fee schedules they would like, where quotes may vary depending on the settlement location, property county, city, state, the title rep or even based on who the real estate agent or lender is. 

Getting back to the closing fees. Let’s first look at the reason why some title companies are reluctant to switch to graduated. 

The first excuse we heard was that it’s harder to disclose their fees if they’re not flat.

When a client asks them how much will closing cost, they would love to just tell them a number and that’s that. And we get that, but that’s a choice the title company makes. I wouldn’t call it lazy. I would simply call it taking the easy route, but leaving money on the table. 

The truth is your title company shouldn’t give out quotes verbally, on the phone. When you or your client use a calculator, not only are the disclosures complete with other fees such as Search Fees or Doc Handling, but if your quotes are branded (such as with the TitleCapture branded app), you get the extra benefit of putting your title company’s brand out there. And our tool makes it sooo simple to not only generate the quote but also send it out with one click.

And when you’re relying on a quoting tool, why not make it graduated? The system will calculate it accurately every time. Chances are most clients won’t even notice the change in closing fee from one property to the other. 

The other excuse we're hearing was that it’s hard to justify the gradual increase in price.

When the service (or the “work”) is the same, regardless of the property costing $250,000 or $900,000. It’s still the same search process, same documents, the same closing table. Right? Wrong.

In our minds, that’s a mistake. You should never price your services according to the work you do. You should ALWAYS price your services according to the VALUE they bring. The protection you help provide to the new homeowner is definitely going to be higher for a $9,000,000 house vs the $450,000 condo. Sure, you’re not an underwriter, but if you do a bad job, the damages are higher when the property price is higher.

The third excuse we heard was that graduated fees will make you seem more expensive than your competition.

This is the most brutal excuse ever because it comes out of fear and not having a good strategy. 

If your strategy for growth is being the cheapest, you’re going to be squeezed one day between your ever-decreasing income vs the ever-increasing costs, so good luck with that. You should compete on quality of service, innovation, client experience. Two of these is something our branded title company app can help you with. 

But if you insist on being cheap, remember that 90% of the title companies (and they’re not many) who choose to cancel their subscription with TitleCapture, when asked why they need to cancel, tell us they’re essentially scaling back or going out of business. And guess what, out those, the majority had no growth strategy beyond outpricing their competition.

I will leave you with one more thought. I wrote about this in another post, related to how declining homeownership is going to affect title companies. 

People are going to rent more and more. This means that the volume of purchases will go down over time. This is the actual number of purchases. The cumulative value of these purchases will go up, like it always does. Purchases will end up being more and more between investors, institutions, etc. Not right now, but in 30 years from now, that’s the game. 

So you can’t keep playing the “volume” game, where you just take a low flat fee for a large number of deals. You need to switch to taking a higher fee, for a smaller number of deals, because that’s where things seem to be going. 

If low prices were the best thing ever, people wouldn’t be buying overpriced phones. They wouldn’t be driving a Mercedes or a Porsche. Yet… they still do and they will keep doing it. Premium is premium and you shouldn’t be afraid to put a premium on your services.

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