Despite the regulations
imposed by the Truth-in-Lending/RESPA Integrated Disclosure (TRID) rules and
disclosure forms in October 2015, some homebuyers still say their final closing
costs caught them by surprise. Some appear to have been unaware that closing
costs were even required.
ClosingCorp, a provider of
real estate closing cost data and technology, has released results of a new on-line
survey that explored whether TRID has helped consumers better understand the
closing costs associated with purchasing a home. The survey, commission by
ClosingCorp and conducted by Wilson Perkins Allen Opinion Research, was conducted
in early January, among 1,000 adults nationwide who had purchased a home during
the 12 months ended on January 1, 2017.
When asked what surprised
them about their closing costs, 31 percent of homebuyers were not surprised at
all about their closing costs because their loan estimates and closing fees
matched. However, 35 percent expressed
surprise that their costs/fees were higher than expected while 17 percent said
they hadn't expected they would be required at all. (sidenote: how does that even happen?!)
The top five closing costs
that most surprised homebuyers were:
insurance (24 percent)
fee/points (23 percent)
insurance (21 percent)
fees (20 percent) and fees paid by the buyer vs. seller (20 percent).
Fifty-eight percent of respondents
said their initial loan estimate had changed or been revised prior to closing.
Sixty-seven percent of those saying their estimates were changed were residents
of the Northeast and 63 percent of had home values between $500,000 and $1
Buyers said the fee estimates
most frequently changed were closing costs (12 percent), insurance costs (6
percent) and taxes (5 percent).
The most common reason
homebuyers cited for revisions to their closing costs was changes to the loan
based on what they qualified for (31 percent).
Other reasons given were inaccuracies in the estimate (27 percent) and a
change to the loan because of a homebuyer request (23 percent.)
The majority of respondents, 72
percent, said their loan estimates and closing disclosures were delivered
electronically. ClosingCorp pointed out
that was also the percentage of all respondents falling into the Millennial age
Half of all homebuyers said
they selected had picked the title company involved in their closing. Of those who did not, 35 percent said their
real estate agent had selected it for them. The report said this suggests that
agents, as the homebuyers "first touch point," have a lot of influence on their
Bob Jennings, chief executive
officer of ClosingCorp said, "As more and more
Millennials become first-time homebuyers, TRID or Know Before You Owe has made
it easier for them to understand the costs and fees they'll face at closing. Yet
there are still surprises during the closing process. Lenders and realtors need to keep educating
borrowers on the costs and fees associated with closing to alleviate surprises."
addition, our survey shows that 52 percent of lenders were 'off' on their
initial loan estimates, so there's significant room for improvement. Using automated
fee technology can help prevent lenders from under- or over-estimating closing
costs and mitigate the risk of costly variance issues post-closing."