Does Regulation Drive High Closing Costs?
The transaction costs of moving from one city to another have long inhibited the efficiency of labor markets. In times of high unemployment, these costs can slow recovery. To what extent are they attributable to government fees and regulation? Investment News reports that origination and title costs on a $200,000 mortgage average $4,070 nationwide and are $6,183 in New York. Other high cost jurisdictions are no surprise — Washington, D.C., Hawaii, and California — but others — e.g., Texas, Idaho and Utah — have a reputation as low-tax jurisdictions. The lowest-cost states are Arkansas, North Carolina and Indiana. Some claim these costs are increasing because of recent regulatory changes.
What are the components of closing costs? How could they be reduced? For example, what is the utility of a title search and why isn’t it as simple as checking an electronic database? Why do minorities pay higher closing costs, and college graduates pay $1,100 less than those with no college education?