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Don’t Give Up Your Buyer Right to Choose the Title Company

A recent, concerning trend during the real estate offer and acceptance phase is for the seller to push a particular title company on the buyer.  This is a troubling new trend for many reasons.  The buyer, wanting to appeal to the seller and wanting to make their offer as enticing as possible, often agrees to the seller’s request, but at what cost?  Don’t give up your buyer right to choose the title company.

Neutrality

At the very core of a title and escrow company’s function is its ability to remain neutral in the transaction.  Our recent blog, The Title Company “Represents the Contract”, goes into detail about what this means and how this is important.  As a homebuyer, when the seller side recommends a title company, you should always ask, “why?”  Are they recommending that title company simply because they prefer them or is it because the seller’s real estate listing agent is an owner of that title company?  If it is the latter, keep in mind that the title company cannot be considered a neutral party.  You are trusting that title company with your money, wouldn’t you prefer they be neutral instead of being an entity owned by the opposing real estate agent?  And what happens when a dispute arises?  Can you be certain that title company will make an impartial decision and not be influenced by the opposing agent who is an owner in that company?

Cost

Before agreeing to use the seller’s preferred title company, please research how much agreeing to use that company will cost you.  It often could cost anywhere from $500 to $2,000 more.  As the homebuyer, you are paying the bulk of the title company expenses.  You should find out how much these services are costing you before agreeing to them.  Independent title companies charge less than title companies with affiliations with agents and brokers.

The Buyer Right to Choose

Finally, it is the buyer’s right to choose, and it is unlawful for the seller to require the buyer to use their title company.  Section 9 of RESPA [12 U.S.C. § 2608] states:

  • No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company.
  • Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance.

There is no exception to this for a “seller’s market”.  The seller cannot reject your offer because you do not agree to use their title company.

So, the next time you are about to make an offer on a property and the seller “recommends” a title company, ask questions.  Why do you recommend them?  Is the listing agent an owner of the title company?  How much does the title company charge?  And then make your own decision knowing that the law backs you up.

agents, Buying 'n' Selling, Closing Attorney, closing costs, homebuyers, homebuying, neutral, settlement, Settlement Fees, title company