The series of articles by Michael Weisskopf may be sounding familiar. They should. The players and the details have changed over the past 10 years, but the plot remains: ways in which buyers of real estate are fleeced.
Despite legislative and other efforts to curtail some of the abuses of the real estate settlement business since the last time these practices were exposed, some of those engaged in that business continue to rip off consumers. But a community does not have to tolerate the kind of arrangements outlined in these artices. There are other ways in which real estate settlements can be concluded that would be cheaper and just as effective. The current system exists because those engaged most deeply in it find it convenient and lucrative.
The place to begin to change this is with the effective regulation of title insurance companies. It is wrong, in Virginia, to have lawyers creating their own companies to evade the ban on accepting kickbacks. It is wrong, in Maryland, to have title insurance companies competing for business by paying agents more instead of selling their product for less. And it is wrong, everywhere, for a company to charge in 1979 the same amount for reinsuring a title that it charged in 1977 for insuring that title the first time. Governments in the two states and the District could do something about all this if they wanted to.
Another place to start could be with the link between lawyers and lending institutions. It is not right for a bank to insist, as some do in Maryland, that the buyer of real estate pay a second legal fee for a "review" of the work done by any lawyer other than the one it recommends. Surely there is more than one competent law firm in that state. This situation, and the non-competitive pricing it creates, could be attacked by the Maryland Bar Association or the legislature if either had the courage to take on the settlement lobby.
Other things could be done too. The whole business of searching and guaranteeing real estate titles can be modernized and made much cheaper. The requirements of settlement procedures -- like the one that mandates a new "survey" every time a piece of property changes hands -- can be revamped with an eye to reducing costs instead of maximizing someone's profits. The sneaky way in which lending institutions increase the real interest rate on loans -- by charging "points" -- can be eliminated.
There are tougher measures yet. Any lawyer, banker or other person handling real estate settlements could be barred from receiving fees or dividends from title insurance companies. Any lawyer could be barred from serving two masters, like a bank as well as a buyer. A state office could be created to handle all the details of all real estate settlements. These severe measures have their drawbacks. We raise them only to suggest to those engaged in the settlement process -- lawyers, real estate brokers and financial officers -- that public patience with their reluctance to clean up the business is wearing very thin.