Bankrate, in a shameless quest to drive traffic to their site, released a study showing that San Francisco has the 4th highest closing costs in the nation. Upon hearing this, you might gasp and think to yourself “those bastards, how dare they screw me!”
But before you work yourself up into a state of mad frothy indignation, you should realize that the costs surveyed by bankrate (I refuse to link to them just because I think this survey is so bone-headed and misleading to consumers) are usually based upon the purchase price of the home. And guess what? San Francisco has expensive homes!
Title insurance is one of the primary drivers of closing costs in the survey, and most buyers purchase two title policies – one to insure themselves, the other to insure their lender. The cost of the owner’s policy is based on the overall purchase price of the home. The lender’s insurance policy is based on the value of the lender’s loan. So if you are going to buy a home that is, for example 3 to 5 times as costly as the median home price in America, it doesn’t seem to be too shocking that your title policies will be – you guessed it – 3 to 5 times more expensive!
So unless you’ve been under a rock for the past 25 years, it will come as no surprise that homes in San Francisco are expensive. Which means that any product that is priced based on the value of your home will be more expensive than elsewhere. Why bankrate needed toÂ commissionÂ a study to mislead consumers into thinking they are getting the proverbial shaft on closing costs is beyond me. Unless, of course, I was being cynical and thinking that it was just a shameless way to drive consumer business to their website where they offer mortgages.
Disclaimer – according to the study, the costs are all based on the purchase of a $250,000 home. I have a hard time lining up their estimated closing costs with the actual costs I see my buyers pay. I still say it is a junk study.