Who hires a title company? The buyer or the seller?

20 Replies

Hi again BP. Another newbee post here about a typical home buying process.

Who hires a title company for closing? The buyer or the seller? is it safe to use the seller's title company to close if I'm buying a house

How do I go about the building code inspection? Should I hire a building code inspector for code violations on top of a house inspector?

Thank you

Contractually, title is supposed to be picked by the seller.  It doesn't always work that way.

I think a good home inspector would be able to find code violations.

Mark

Originally posted by @Andri Artayudianto :

Hi again BP. Another newbee post here about a typical home buying process.

Who hires a title company for closing? The buyer or the seller? is it safe to use the seller's title company to close if I'm buying a house

How do I go about the building code inspection? Should I hire a building code inspector for code violations on top of a house inspector?

Thank you

Title I think depends on your area. Where I live the seller chooses the title company. On a city north of me about 2 hours away, they are buyer friendly and the buyer chooses the title company. 

@Mark Creason

Another erroneous assumption based on local practices.

The correct answer: it depends!

Title companies provide both title insurance and closing agent services in most locales. 

I've purchased many properties without paying for it and without receiving the benefit of either services. I do not suggest this for the new investor.

Title insurance benefits both buyer and buyer's lender against specific losses. Closing agent services may be provided by a title insurance company, attorneys who regularly provides this service, independent 3rd party escrow companies and even some licensed real estate brokerages, at least in my state, CA.

Even within a state, like California, tradition is different between Northern and Southern counties. 

Historically, by custom but not by statute, buyers and sellers split the cost of escrow evenly. But this may be negotiate to put the burden elsewhere. Or, I could offer seller a net price and pay all closing costs. Or, seller could inflate the price a few bucks and offer to pay both sides. 

Unless specifically made by statute (or policy, as would a VA no down or some FHA loans) you'd negotiated your best deal and pay pursuant to your written agreement.

Originally posted by @Rick H. :

@Mark Creason

Another erroneous assumption based on local practices.

I was referring to a title policy.  I believe in California, the law states that buyer has the right to choose the title company for the title policy.  I understand that in California, you may have a title company handle escrow, but you could also have an escrow company who does not do title work handle escrow.  I also understand that closing is negotiated on all sales, but is typically 50/50 split.

I did a loan for a client in northern California, in which the escrow company did not do the title work.

Mark

Personally, I like the expenses paid which are related to each party - - I pay mine and you pay yours.

With that thought, each party seeks it's own title insurance, to be sure they are independent AND there's proper recourse if there's problems.

In Texas, it's customary for the seller to select the title company if he is paying for the title insurance. If not, then the buyer can pick whatever title company he wants.

As you have read this can be a negotiation. I am happy to use the sellers title company if it is an experienced seller, I might learn of a new investor friendly title company. Otherwise I choose the title company whether selling or buying. 

It seems like every time I let a buyer choose the title company it gets screwed up. Most title companies just aren't prepared to handle investor properties.

@Ned Carey interesting - - I find the exact opposite, buyers have no idea and are usually naive about investments, especially MFUs such as mine.  I don't accept an offer or show until I get a Load Pre-Approval and a Proof of Funds due to the look-loos which really tank any Turnkey Sale.

Originally posted by NA Beard:

@Ned Carey interesting - - I find the exact opposite, buyers have no idea and are usually naive about investments,

 I think we are saying the same thing. Buyers don't know who the good title companies are or even how important a good one is. 

Originally posted by NA Beard:

@Ned Carey interesting - - I find the exact opposite, buyers have no idea and are usually naive about investments, especially MFUs such as mine.  I don't accept an offer or show until I get a Load Pre-Approval and a Proof of Funds due to the look-loos which really tank any Turnkey Sale.

 You know this could not be more true.  I hate when I am selling a house to someone who picks an awful title company, or if I am working with a buyer who insists on using a title company I know is going to screw things up. And I am not working on complex transactions...very very basic stuff, so if they are screwing up a normal retail sale, they are bad.  This also goes to their choice of lenders too. Everyone who has never bought a property thinks they know better than the people who have been involved in 100 transactions.

In NJ I much prefer using my own hand picked Investor friendly Title Insurance company. They have prevented me from making mistakes in purchasing properties that did not have clear title... In one case an acquaintance purchased a property I was just a tad leary about and  BAMMMM a person whom had interest from three transaction prior surfaced and made claim to the property and they are still in litigation 3 years later and tens of thousands of dollars later... Another involved Tidelands issues along with crazy "utility and right of way easements".   

@Ned Carey   This Is such a regional thing... 

And one must understand how escrow and title works in different parts of the country to understand what poor performance is as opposed to good performance.

West coast is Totally opposite of what you folks have to deal with out there.. when you have buyers that have their own attorney and sellers have their own attorney and then the attorneys are just agents for the title underwriter.. Along with getting title commitments or preliminary title reports as we call them .. up front .

Generally speaking any Title and Escrow company in the Northwest is the underwriter and title insurer all in one.. IE you go into a Fidelity office or a Fatco office or a Ticor office or a Chicago office ... WFG etc etc. its all done in house and very proficiently.. can there be mistakes yes.. but in my experience of closing on East coast and west coast and in the mid section of the country.. our title and escrow in the northwest is pretty bullet proof and I agree with you out your way its anything BUT that ... I have experienced extreme displeasure with some of these Attorney closing agents and the lack of efficiency on their part.

When closing in States that are attorney driven and the buyer has their own attorney and the seller has their own.. these are basically clusters in my mind.. way to many people in the pot and very inefficient.. but its the customs.. so know you have for one transaction a listing broker a selling broker an attorney repping the buyer an attorney repping the seller , the buyer and the seller... 6 people to deal with... ugh... I told one closing attorney this is like doing divorce work... when negotiations have to go through all these parties.

Now in our state of Orygun it is not legal to steer business to one title company or the other but it is customary to do so.. its right on the MLS listing .. title preference with the name of the escrow officer and this is chosen by the Seller and in a Sellers market no one argues but its not mandatory to use them.. The seller may not sell to you though.. Just like with my new construction I have a master file at WFG I will not let anyone use another title or escrow company they use my gal at WFG she handles seller buyer and lenders all at ONE desk.

@Account Closed   this is the main difference in how you transact and how we do.. We get a title commitment or prelim within 72 hours of opening an order.. the Onus is on us to review the title and if we have questions we start asking title to explain remove or in some manner clean it up... Were as in many cases out east your just sitting there waiting for the closing attorney to let you know if title is clear and they just tell you clear or not clear. They do that work for you so for sure your wanting your closer or attorney or whatever to be very sharp .. Because they may tell you its fine only find out they made a bad boo boo.

AS for who pays for what in the SFR realm which the OP is just talking about buying a SFR I think to live in .. this is almost always according to local customs that the Real Estate community has been doing for decades and Realtors guide their buyers and sellers.

@Jay Hinrichs

I agree with your assessment that is a regional thing. That said we often do not close with an attorney and we also work directly with the Title/escrow company. Many of the Title companies we work with are independents. I am not sure why but they get better rates and discounts than going to the underwriter directly. Again we have found no rhyme or reason. We have found we also can negotiate so many of the fees in getting a Title it just works for us.  

Continued Success

Thank you for all the educating replies. So the answers are:

- Some times the buyer, sometimes the seller who picks the title company

- And it is OK / safe to use the seller's tittle company (I'm a buyer)

- Code violations can be detected by home inspectors. 

Correct me if I'm wrong. And Happy New Year everyone!

Typically the Seller will engage the real estate agent to initiate the marketing of the property. The Seller's agent will then use a Title company to check ownership and liens. Title Companies provide this service for free in order to get the Insurance contracts (Seller and Buyer) at the close of sale. Since this usually happens way before a Buyer enters the situation, the Seller's Title company is used by default for insuring both the Seller and Buyer at time of sale. 

However it can also go another way in California. If the Buyer demands his own Title Insurance Company then that can be done through the Buyers real estate agent or specific instructions to Escrow. In this kind of deal the Seller uses a different company for Title Insurance than the Buyer. Escrow companies are familiar with this even though it doesn't happen as often.

@John M.   title companies will run prelims as you allude to for free for their bigger RE brokers and or investors.. however a one off person general is charged.. now they may not pay the bill as your billed after its done.

Out east these Attorney shops in many states Have to hire a Title abstractor to physically go to the courthouse and manually pull title.. ( I know in MS and SC were I do quite a bit of business its this way) So to that end the attorney many times does not Pull title to the last week of the closing.. As they don't want to get stiffed for the abstract fee... The attorney must pay the abstractor then get reimbursed by the buyer or seller depending on who is paying for what according to the contract.. This leads to all sorts of problems in my mind.. I have had more than one deal fall apart within a week of closing simply because title was not pulled until late in the game and there were issues.

Were as your correct our title companies have their own plant and its all digitized and they can do a full title search same day if you have enough juice with them.. 3 days max.

Plus you can get a TRIO in 5 minutes from most customer service departments at the title company.. this is a copy of the last recorded deed, the tax records and maps.. we can call customer service as stated and have that e mailed to us while we are talking to the rep on the phone... You simply can't do that out east in Attorney states..

So basically in my mind for those in the distressed asset business its far easier to operate here than it is in those states.

Especially when I was doing foreclosure rescue before the laws changed and those that wanted to be compliant with the law quit working those ( like me )

In terms of the building code violations this is something yo should confirm with the city.  

An inspector can usualluy tell you what is not up to current code, but that doesnt mean it is a violation.

Many citys have a pre closing inspection and there can be violations that need to be corrected before the property can transfer.  Most of the time a buyer can sign an affidavit that they were made aware of the violations and still close 

If you are worried about the condition of the building your home inspector is who you should defer to, but if it is a matter of city code violations you want to verify with the city directly.

Originally posted by @Andri Artayudianto :

Who hires a title company for closing? The buyer or the seller? is it safe to use the seller's title company to close if I'm buying a house

How do I go about the building code inspection? Should I hire a building code inspector for code violations on top of a house inspector?

 Either the buyer or seller can hire the title company for closing.  Generally, given a Title Company's independence, it should be safe to use a seller's title company.

For building code inspections you should call the city building department, not a  house inspector.  

Originally posted by @Andri Artayudianto :

Thank you for all the educating replies. So the answers are:

- Some times the buyer, sometimes the seller who picks the title company

- And it is OK / safe to use the seller's tittle company (I'm a buyer)

- Code violations can be detected by home inspectors. 

Correct me if I'm wrong. And Happy New Year everyone!

Andri,

Like everyone above indicated, the answer is  "ït depends". Perhaps, you should to indicate the actual area of your property, some experienced investors in that area may be able to help further. 

From my engineering background (in Chicago), I would caution you against contacting a City Inspector or any code official, let the contractor do that once you own the place. If a Home Inspector detects deficiencies, they will tell you.  Then, you can get a contractor to give you an actual price to get it repaired at your own discretion. However, a city code violation may jeopardize the closing on your deal if the mortgagee requires this violation to be cleared before closing.  Even worse, you may have to repair it after the closing and this can drain your cash reserves.   If you are concerned with your safety or the safety of your tenants, you should address any and all code deficiencies, code is the minimum requirement. 

Get a good home inspector, ask for references.  It's worth the expense.  If you still have concerns reach out to a licensed contractor. Maybe you could schedule both at the same time. 

Most overcharges seem to occur with the title insurance, see if you can get your own. Here is suggestion and discuss it with your lender.

http://www.entitledirect.com/

Is this an FNMA property? if so, read the addendum, and read it a few times.  FNMA has a bullet proof addendum. If you "rat them out" with a code violation you could lose money.

"The Purchaser shall not directly or indirectly cause any inspections to be made by any government building or zoning inspectors or government employees without the prior written consent of the Seller, unless required by law, in which case, the Purchaser shall provide reasonable notice to the Seller prior to any such inspection."

Originally posted by @Jay Hinrichs :
Hi Jay, thanks for the reply.

@John M.  title companies will run prelims as you allude to for free for their bigger RE brokers and or investors.. however a one off person general is charged.. now they may not pay the bill as your billed after its done.

Yes, at times the individual investor may want to check a property using the Public Record at the County Recorder's Office. It's not as hard to do as most people expect. All liens and ownership are Public Record, anyone can check the Public Record, it is the law everywhere in the US to my knowledge. 

I remember one particular search I did for a client. I discovered he had a paternity lien against his property. The gentleman was 72 years old. He was quite surprised to learn this!! 

It turns out both he and his son had the same name, not uncommon. I told him the name of the woman filing the lien. It was the son's girlfriend! Perhaps now an ex-girlfriend (or wife). The son had no ownership in the property.

A word to the wise. Anyone can file a lien and many times the County Recorder (County Courthouse in the East) has no way to determine if the lien is legitimate. The CR leaves that up to the registered owner of the property. The CR will remove an illegitimate lien if the registered owner-property tax payer can prove it.

That lien had been on the property for years but my client never knew. I was able to remove it by working with the county recorder.

I didn't charge myself or the client for the service, the CR office was very helpful and took little time to accomplish.

Out east these Attorney shops in many states Have to hire a Title abstractor to physically go to the courthouse and manually pull title.. 

Yes, true but individuals can do that too. In the West, California, our statehood is "relatively" young so our property records only go back about 160 years. So we have much less searching to do than Eastern States.

Usually it is only necessary to search Title back to the previous issue of Title Insurance. For example if the last recorded sale of the property was 10 years ago then the Title Insurance from that sale insured the chain of title to that date (otherwise the deal wouldn't have completed). 

It isn't hard to examine liens over a 10 or 20 or 30 year period if the ownership hasn't changed. 

Of course I don't INSURE my Title searches, that's why God invented Title Insurance companies. I let them do that at closing time.

( I know in MS and SC were I do quite a bit of business its this way) So to that end the attorney many times does not Pull title to the last week of the closing.. As they don't want to get stiffed for the abstract fee... The attorney must pay the abstractor then get reimbursed by the buyer or seller depending on who is paying for what according to the contract.. This leads to all sorts of problems in my mind.. I have had more than one deal fall apart within a week of closing simply because title was not pulled until late in the game and there were issues.

Were as your correct our title companies have their own plant and its all digitized and they can do a full title search same day if you have enough juice with them.. 3 days max.

In California there can be a two week delay between the time the Title Plant updates it's records to the most recent additions filed in the County Recorder's office.

Plus you can get a TRIO in 5 minutes from most customer service departments at the title company.. this is a copy of the last recorded deed, the tax records and maps.. we can call customer service as stated and have that e mailed to us while we are talking to the rep on the phone... You simply can't do that out east in Attorney states..

So basically in my mind for those in the distressed asset business its far easier to operate here than it is in those states.

Especially when I was doing foreclosure rescue before the laws changed and those that wanted to be compliant with the law quit working those ( like me )

Very interesting Jay --- thanks,

John M.