I submitted a SFR contract that got accepted as-is over the weekend except with an addendum (counter) that we use the seller's title company that was specified on the private section of the MLS listing. We'd prefer to use our own that we normally use instead of their title company that we haven't heard of that has pretty bad Yelp reviews. We tried negotiating the seller to cover our title costs to use their place but they are unwilling to either cover our title costs or let us use our title company.
It seems according to the RESPA rules we should be able to choose our own title company: "Section 9 of RESPA prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale."
The deal is probably not worth walking away from over this but is there any other avenue we can pursue?
Everything is negotiable, including the title company...so in effect, the seller is doing nothing illegal if he/she negotiates for ALL the terms he/she desires. That RESPA rule is terribly hollow and always has been. Builders, REO's, FNMA, etc. do all they can to force the use of their preferred title company, as do I...it's all part of the negotiations.
@Guy Gimenez Thanks for the input. So while it does appear they are in violation of the RESPA rule, it seems its basically like speeding - everyone does it.
@Brandon K. I wouldnt even liken to something as serious as speeding. Yes buyers get to decide on the title company....but sellers get to choose who they sell to. RESPA can not force a seller to sell to you if they do not like the terms. If you are that intent on the title company, I would suggest offering them more money. I would absolutely take more money for a property to switch title companies. Also 95% of title companies are the same. There will be 1 or 2 that stand out above the rest, and 1 or 2 that are atrocious, but you would likely be unable to tell the difference honestly. The only people who will know the difference are agents who are doing a lot of volume.
Actually, I don't believe it's even a violation. A seller can't be forced to forego negotiation on any specific contractual provision.
This is the kind of stuff that REALLY makes me mad!! Are you guys serious? Have you ever even HEARD of RESPA??? This is LITERALLY a textbook violation. Makes me wonder how many other times you are breaking the law. Please pay attention!
RESPA Rules on Agents
Section 9 of the Real Estate Settlement Procedures Act prohibits sellers from conditioning the home sale on the use of a specific title insurance company, and in fact violators can be subject to penalties, with the most typical being a fine of up to three times the amount of the title insurance fee.
Section 1024.2 of RESPA says a “required use” exists when a person must use a particular provider of settlement services to have access to a distinct service or property, if the person will pay for (or pay a charge attributable in whole or in part to) the settlement service.
It’s not considered a “required use” if the seller offers to pay the buyer’s title charges. So, if the seller agrees to pay for both the owner’s and lender’s title insurance policies, RESPA doesn’t consider the seller to be requiring the use of a particular title company. But if the seller insists, as a condition of sale, that the buyer pay for both the owner’s and the lender’s title insurance policies from a title company of the seller’s choice, then the seller would be in violation of Section 9.
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The real issue is Why does the seller want a certain title co.? If it's typical for the buyer to pick and pay for the title co./insurance (here the seller does), your agent's first question to the other agent, before the offer was even written up, since He had notice of it in the MLS, was why. Could be a friend, could be some shenanigans, right now you don't know.
Seller accepted your offer as is....except for the title company requirement in the counter.
That to me gives you the upper hand in that he accepted your price.
I would play hardball and withdraw the offer and see how much he really wants to force the issue when he knows there is a paycheck coming and you basically swipe it from his hand.
Do RESPA rules apply to commercial transactions or only homeowner occupied transactions?
in our area seller customarily Chooses the title company
- Property is a REO. Listing agent specializes in REO and distressed sales, which is a flag for "higher probability of shadiness" in itself.
- Seller (actually the listing agent, in all probability) insisted that we use one particular title company.
- In talking to the buyer's agent, something made my BS alarm go off halfway through the transaction, I don't recall what.
- So the agent and I called a few local title companies.
- Turns out several local title companies had, in fact, already done prelims for this property, and discovered a serious cloud on title - to the effect that it wasn't clear at all if the bank even foreclosed on the right people, and/or followed proper foreclosure procedures in general, and/or had any right at all to even be selling this house!
- Putting two and two together, the listing agent probably 'shopped prelims' until she found a title company that didn't catch the cloud, and that's the title company she insisted on using for the transaction.
The 'norm' of the seller picking title company is the #1 thing I would change if I were Dictator of Bay Area Real Estate for a day. The notion that "we have pre-escrow open, it'll go faster" is simply a lie. I challenge anyone to find reference to the very concept of "pre-escrow" anywhere in any statute or regulation. You won't find it. It doesn't exist. It's not a thing, except in the realm of "tradition."
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