Escrow fees are one of the many costs involved when buying or selling a home. The escrow company handles the transfer of money and documents between the buyer, seller, and lender during the transaction. But can you negotiate escrow fees like other aspects of the home buying and selling process?
Can You Negotiate Escrow Fees?
Negotiating lower escrow fees is possible in some situations but not guaranteed. The best approach is understanding what services the fees cover, researching multiple options, and discussing any discounts available. For many transactions, moderate savings in the $50-$150 range are typical through negotiations. Your attorney should be able to guide you on what fees may be negotiable.
With both buyers and sellers aiming to maximize savings, putting in the effort to negotiate escrow can provide extra funds that add up.
What Do Escrow Fees Cover?
Escrow fees pay for the services provided by the escrow company during the real estate transaction. The escrow holder securely holds funds, documents, and instructions during the home buying and selling process. They work as a neutral third party to facilitate the exchange according to the purchase agreement terms.
Typical escrow services include:
- Preparing the escrow based on the purchase contract terms.
- Holding the buyer’s earnest money deposit in a trust account.
- Completing the title search to uncover any issues with ownership rights.
- Obtaining title insurance to protect the buyer and lender from claims against the property.
- Facilitating the proration of property taxes, HOA fees, utilities, and other closing costs between the buyer and seller.
- Coordinating with the lender on the loan process and documentation.
- Handling transfer documents like the deed and affidavits.
- Recording the deed to transfer legal ownership.
- Disbursing funds to the appropriate parties when the process is complete.
What Impacts Escrow Fees?
Escrow fees are typically based on the home’s sale price, and rates can range from a several hundred dollars to a few thousand, depending on location and purchase price. The precise rate may also vary by title company.
Key factors influencing escrow rates
Some of the key factors that influence escrow rates include:
- Home Sale Price: Fees are often tied to the sale price, with higher prices leading to higher total fees.
- Location: Rates may vary by state and region. Some states regulate the fees.
- Property Type: Unusual or complex properties like new construction may have higher fees.
- Escrow Company: Large corporate title companies may be more expensive than local providers.
Tips for Negotiating Escrow Fees
In some cases, you may be able to negotiate the escrow fees. Here are some tips:
- Shop Around: Get quotes from several escrow companies to leverage for the best rate. Local companies may offer discounts.
- Reduce Special Services: Opt to handle tasks like surveys and municipal transfer stamps separately to lower the escrow workload.
- Offer to Pay Cash: All-cash offers avoid lender-related fees, allowing for lower overall costs. In the Chicagoland area, the escrow fee is typically paid for by the buyer on a financed purchase, but split between buyer and seller on a cash deal.
- Bundle Services: Use the same provider for title and escrow to avoid duplicate charges.
- Get Help from Your Agent: Experienced real estate agents may know providers willing to discount.
- Be Reasonable: Small savings of $50-$100 are more realistic than major rate cuts.
The Bottom Line
Escrow fees are a standard part of the real estate transaction process. They pay for important services managing the exchange of funds and documents between parties.
While escrow rates are largely based on factors like sale price, some negotiation is possible in certain situations. Shopping around, asking for discounts, minimizing services required, and bundling providers are just a few helpful strategies to try for lower fees. Being reasonable in requests and understanding typical costs for your area are also key.
With preparation and research, buyers and sellers may be able to achieve a bit of savings through the escrow negotiation process.