There was a recent article in the National Mortgage News about the fees associated with home loans. According to Patrick Stone, President of the Williston Financial Group, told the annual Real Estate Services Providers Council meeting that five to 18 different vendors are involved in the typical real estate transaction, “making for a complex and disappointing experience” for consumers. And costly, too. Whereas the fee to purchase $250,000 worth of securities is $1,250 and the commission to buy a $250,000 Ferrari is $7,500, Stone pointed out, home buyers generally pay a whopping 8%—a total of $20,000—in fees to purchase a $250,000 house.
Stone, who had a lengthy career at Fidelity National Financial, including eight years as president, said firms that operate affiliated business arrangements can and should “drive some of that cost out” of the transaction. “If you control the point of sale,” he ventured, “you should be able to cut the cost almost in half.”
During his talk, Stone, whose firm acquired the Millennium Title Group in 2009 and TransUnion National Title Insurance last year, also took exception to purveyors of national housing statistics. And he suggested that the housing finance sector can get along just fine without Fannie Mae/Freddie Mac. He said oft-quoted indices such as Case-Shiller do more harm than good because they distort the fact that housing is local. By reporting a national decline in house prices, he explained, the indices suggest that all localities are suffering when in fact many are doing well. The same goes for reports about foreclosures and borrowers who owe more than their homes are worth, he added. “Underwater borrowers are not a universal problem,” he said, adding that while every state has its share, the problem is heavily concentrated in just six states.
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While what is being said is very true, all stakeholders need to figure out the specific areas where costs can be taken out of the equation. An interesting benchmark was identified in the article and all efforts need to be made to figure out how costs can be reduced. Can the existing title (from a certain title company) be used to reduce the costs? Also, in the Ferrari example, are the insurance costs taken into effect?
Here are some fees associated with a vehicle purchase
Non negotiable fees
- Destination Charge
- Sales Tax
- Title, Registration & License
- Documentation Fee
- Market Adjustments
- Transportation Fee
- Dealer Prep
- Dealer Additions
- Finance Fees
- Processing & Miscellaneous Fees