LAS VEGAS—“Too many” vendors have their hands in the real estate cookie jar, a long-time title industry executive claimed here last week.
Patrick Stone, president of the Williston Financial Group, told the annual Real Estate Services Providers Council meeting that five to 18 different vendors are involved in the typical real estate transaction, “making for a complex and disappointing experience” for consumers. And costly, too. Whereas the fee to purchase $250,000 worth of securities is $1,250 and the commission to buy a $250,000 Ferrari is $7,500, Stone pointed out, homebuyers generally pay a whopping 8%—a total of $20,000—in fees to purchase a $250,000 house.
Stone, who had a lengthy career at Fidelity National Financial, including eight years as president, said firms that operate affiliated business arrangements can and should “drive some of that cost out” of the transaction. “If you control the point of sale,” he ventured, “you should be able to cut the cost almost in half.”
During his talk, Stone, whose firm acquired the Millennium Title Group in 2009 and TransUnion National Title Insurance last year, also took exception to purveyors of national housing statistics. And he suggested that the housing finance sector can get along just fine without Fannie Mae/Freddie Mac. He said oft-quoted indices such as Case-Shiller do more harm than good because they distort the fact that housing is local. By reporting a national decline in house prices, he explained, the indices suggest that all localities are suffering when in fact many are doing well. The same goes for reports about foreclosures and borrowers who owe more than their homes are worth, he added. “Underwater borrowers are not a universal problem,” he said, adding that while every state has its share, the problem is heavily concentrated in just six states.
Regarding Fannie/Freddie, which the Obama administration has targeted for extinction, Stone said that if borrowers are willing to give up the ability to refinance at the drop of a hat—or a rate—without incurring a prepayment penalty, investors won’t need Fannie/Freddie as a backstop. But if investors aren’t given some kind of call protection, he said, they will shy away from MBS because they will not be able to compute their yields.
