The Title Company Problem.

Real estate transactions involve a title company. The title company ensures the seller actually owns the property, clears any liens, issues title insurance, and handles the flow of money at closing. It is a critical function.

Most buyers don't know what a title company does, let alone how to choose one. They are focused on the house, the inspection, and the mortgage rate. When the time comes, the agent recommends a title company. The buyer says yes. The fees show up at closing.

What most buyers don't know

Many real estate brokerages have ownership stakes or affiliated business arrangements with the title companies they recommend. This is legal, provided it is disclosed properly.

It is also a structural conflict of interest.

When an agent directs you to their brokerage's in-house title company, the brokerage captures another stream of revenue from your transaction. The fees are higher. The buyer's interests are not paramount. The agent gets a cut. It is a profit center disguised as a convenience.

What the actual numbers look like

Look at a typical title company fee structure from an affiliated business. You will see the standard state-regulated title insurance premiums, which are the same everywhere. But below that, you will see the "junk fees" — settlement fees, document preparation fees, wire fees, courier fees, and administrative fees.

These are the markup. In an affiliated arrangement, these fees are routinely inflated to pad the margin. An independent title company might charge a flat settlement fee of $400. An affiliated title company might charge $800, plus $150 for doc prep, plus $75 for a wire fee.

A buyer can easily overpay by $500 to $1,000 simply by accepting the default recommendation. And they do, because they don't know they have a choice.

What I do differently

I recommend independent title companies. I tell clients exactly why. I have no financial interest in the title company you choose. My only interest is that the job is done perfectly and you are not overcharged.

When the closing disclosure arrives, I read it with my clients, line by line. I explain every fee. If a fee is unusual, we ask why. If it shouldn't be there, we get it removed. That is what a consultant does.

What you should do

• Ask your agent if the recommended title company is an affiliated business.
• Read your closing disclosure three days before closing.
• Ask about each fee under the "Services You Can Shop For" section.
• If your agent can't explain a fee, or gets defensive when you ask, that's a problem.

If you're buying a home and your agent hasn't told you any of this, you have answered the question of whether you have the right agent.