Why do some people require you to use their title company?

Question

Noob here.

I often see ads of a FSBO, usually a distressed type of house in bad shape usually always has "must use sellers title company"

Can anyone tell me why this is?

Rich Baer · Answer

@Bryon Stout

Usually one or more of these reasons:

1. They are giving the Seller a discount.

2. They will put through the deal despite a shaky title issue.

3. They have done the back work and payoffs for the Seller.

4. They have found an insurance underwriter who will insure the property even though most other insurers will not do so for some reason.

Jeff B. · Answer

Frankly, that's against the law; the buyer always has the choice of the closing /  title company

Steve Vaughan · Answer

I usually see agents that are title co loyal more than FSBOs. They build relationships with a certain one over time.

My guess is the seller will get a lower re-issue rate if they use the same co that issued title insurance when they bought.

Could also be since they are distressed that they have particular circumstances the one title co is familiar with.

Most are pretty much the same so it shouldn't affect you as a buyer much either way Account Closed

JD Martin · Answer

Yes I have, a number of them, and I always used my own title company. Would you like to call them and ask?

PS: You need to get familiar with RESPA Section 9.

Mindy Jensen · Answer

The way my Colorado contract reads, the seller chooses the title company. The buyer has the option of choosing the title company - but then they have to pay for it.

One way around this is to write an addendum, saying the Buyer chooses XYZ Title, but seller pays for it. This must be in the contract BEFORE both parties sign or your chances of it being accepted are slim.

Jay Hinrichs · Answer

@Steve Vaughan  my personal experience in PA is that the escrow title co is owned by the RE brokerage.. and the selling brokers steer the buyers to their title and escrow company.

Chris K. · Answer

Account Closed also makes a good point but might not apply here since this is a FSBO property. If there is no agent involved in this deal, I would say it's for some other reason.

One possible reason is that if the property is selling for such a low price, the title company doesn't want to get bothered with handling the deal for the amount of fee it would receive. I've seen that a number of times with the more established companies.

Whether it's a red flag depends on the reason. You can always ask the seller why he or she wants you to use the specific title company.

Account Closed · Answer

thanks everyone!

Account Closed · Answer

Thanks everyone.

So is this a red flag when looking at properties?

Why do some people require you to use their title company?

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