Clearly, abstractors have the highest potential for losses in relation to fees charged. But, that whole system is skewed when you look at it that way. Realtors probably have the least amount of liability and they have the highest fees of the bunch. The only fee of those mentioned that bears any relationship to claims is the title insurance premium. That is because it is the only fee that is specifically for insurance. All of the other fees are for services performed.
Sellers find it worth the fees to have a Realtor find a qualified buyer and to get them the highest possible price. Whether they are all worth the 6% commission is certainly debatable. But, the sellers get to choose that for themselves.
Surveyors are hired by the lenders, just as abstractors are hired by the title companies. The fees that surveyors and abstractors charge are not based on the liability they incur. For the most part, the fees are based on the time it takes to prepare an appraisal or title search, plus operating overhead. I'm not sure about appraisers, but abstractors are traditionally short sighted when it comes to figuring their overhead. They assume that if it takes them 2 hours to do a full search and they charge $100, they are making the equivalent of $50/hr. Obviously, that is oversimplified and extremely inaccurate. However, the point is that abstractors price their services too low and the availability of cheaper services makes it much more difficult for some who would like to charge more to do so.
Abstractor's fees are based on market forces like supply and demand, not liability. They are caught in a rut because there is too much competition among abstractors. They do not have a strong lobbying group like the NAR to establish customary fees. Nobody wants to be the first to declare their fees will be based on the purchase price, or mortgage amount. The clients would find it much more simple to go to another abstractor who charges a fixed, lower fee and there would be many options available to them.
In short... the low fees are the fault of the abstractors as a group. For the most part there is no regulatory body (except in a few states that regulate abstractors) that have anything to with establishing the fees. Nor is there an organization capable of uniting the abstractors into a national fee arrangement.
Best,
Robert A. Franco
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