Homebuying Blues!

Discussion in 'Credit Talk' started by roni, Aug 13, 2001.

  1. G. Fisher

    G. Fisher Banned

    The lender has the ultimate authority to choose the title insurance provider.

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    "Disclosures at the time of loan application. When a potential homebuyer applies for a mortgage loan, the lender must give the buyer (1) a Special Information Booklet, which contains consumer information on various real estate settlement services; (2) a Good Faith Estimate of settlement costs, which lists the charges the buyer is likely to pay at settlement and states whether the lender requires the buyer to use a particular settlement service... "

    http://www.hud.gov/progdesc/respa216.cfm

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    What is the buyer's recourse if a seller requires, as a condition of the purchase contract, that title insurance be purchased from a particular provider?

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    You said:

    "Not."

    "Surely you do have the 'one day before' right. And if that is what you'd like, the title agency will simply push your closing back one after whatever day everyone else finally gets their information in. That keeps things legal and to the letter of the law."

    I could have sworn that the closing agent was only required to provide the information they had at that time to be within the legal requirments-- making the delay of the closing you mentioned uneccessary. Have you ever heard that?
     
  2. Hope

    Hope Well-Known Member

    Ah, therein lies the rub. The statement posted on HUD's site is not legal and inaccurate. I can only tell you that, in the industry, the inaccuracy of HUD's stance is now and has been for several years under attack from many sides and it is one of the items on Tommy Thompson's desk, (poor guy; he inherited a wasp's nest).

    The selection of the title -- HUD's poorly phrased comment not withstanding -- is ultimately a decision to be negotiated between the buyer and seller.

    The confusion may lie in instances you may have seen or heard such as the following:

    1. Listing Agent states, "please close at XYZ Title Company".

    2. For Sale By Owner states, "must close at XYZ Title Company"

    3. HUD property comments state: "must close at" or "please use XYZ Title Company".

    Ultimately, the Seller cannot compel the buyer to close at a specific title company. But sometimes the situation is much like our friends at the CCC's when they state, "you do not have to pay this adjusted interest rate, however, if you don't agree to, your account is closed."

    Put another way, there's usually some practical reason for the request by the Seller (in the case of HUD, it's shear rudeness in how they phrase it. They truly have no right to compel the closing to be a specific title company.) Rather they have a vested interest in such, which likely benefits the buyer as well. Most often it is that the preliminary title work has already been done by such-n-such title company, thus saving time and money at the closing.

    Those of you who have had corporate relocations will be very familiar with this.

    As a Realtor, I've had un-schooled agents insist that my client HAD to close at XYZ. Not so. There are always alternatives. I have had sellers offer to pay my clients to close at a specific title company because they were getting a discount and were willing to pass along some of that to my clients. All things being equal I advise them to save themselves some time and money and accept.

    Builders and Relocation companies are notorious for misphrasing the "request" to close at a certain title company. But in my neck of the woods, the request has in recent years become more just that -- a request.

    Instead of seeing "must close at", we more often now see, "please close at".

    Hope that sheds a little light.
     
  3. Hope

    Hope Well-Known Member

    I want to make sure I address these 2 things specifically, if it wasn't clear as mud above:

    1) The buyer and seller are negotiating and the choice of the title company is merely a part of the negotiations. The buyer's choice if s/he and the seller cannot agree upon the title company (again, it cannot legally be "required"), is to renegotiate any and all other terms of the contract, or ultimately to walk away. Seller has the same right, don't forget.

    However, I want to put a very fine point on this: in my humble experience, it is 99.9999% misunderstanding that would cause the choice of the title company to be a deal-breaker. So it behooves the parties involved (Agents included) to discuss why the choice is such an adamant one and go through the pros and cons together.

    2) No, the title company is not obligated to go with whatever figures and info they have. In fact, the title company's obligation is soley to provide title insurance. EVERYTHING else is a courtesy, from the coordinating of the invoices, appraisers, surveys, getting the payoff balance, reviewing the documents, all the way down to figuring the HUD-1 Settlement Statement and providing a conference room for the parties -- and let's not forget that cup of coffee or glass of iced tea.

    Yes, they're paid for the courtesy and it is more convenient for all involved for them to handle it, but that IS NOT what you're hiring them for.

    So now you probably see that for the title company to issue the buyer (or seller) a premature closing cost bottom line would be foolhardy for them as there's a liability involved for that courtesy for which they are otherwise poorly renumerated.

    Ouch!
     
  4. G. Fisher

    G. Fisher Banned

    Ouch!

    I just found it, Hope-- and you are not going to believe it!

    This is the law:

    Upon the request of the borrower to inspect the form prescribed under this section during the business day immediately preceding the day of settlement, the person who will conduct the settlement shall permit the borrower to inspect those items which are known to such person during such preceding day.

    12USC2603
     
  5. Hope

    Hope Well-Known Member

    Re: Ouch!

    Cool Greg!

    And I'll bet money the escrow officer will wisely either make the statement to the buyer/seller in front of witnesses, or have them sign off on an acknowledgement something to the effect "subject to change and verification".

    They're no fools!

    Thanks Greg
     
  6. G. Fisher

    G. Fisher Banned

    Hoo, boy! "Not!" "Ouch," etc.

    I'm glad I cleared that up for you, Hope, REALTOR!

    Now, on that issue of recourse, here's the correct answer:

    (a) 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.
    (b) 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.


    12USC2608

    But, back to this, for a moment:

    Whether verbal or written, it is a condition. If the contract exists in any form, the seller is liable for 3x the premium. Sorry, Hope, REALTOR-- you can't wink and nod around the federal law. It's triple trouble.
     
  7. Hope

    Hope Well-Known Member

    Re: Hoo, boy! "Not!" "Ouch," etc.

    Au contrare Greg,

    Looks to me as though you simply reiterated what I so profusely said earlier.

    I stand by my statements, and it lokes like you stand by mine, too.

    Thanks anyway.
     
  8. G. Fisher

    G. Fisher Banned

    This isn't France

    Deny, deny, denying won't help you when your words are in black and white.

    Look up the laws before spouting, next time, Hope, REALTOR. Your words don't reflect positively on your trade association.
     
  9. Hope

    Hope Well-Known Member

    Re: This isn't France

    Oh, now I see the problem. Sorry, Greg I looked back on your previous posts.

    It speaks volumes.

    You have my deepest sympathies.
     
  10. G. Fisher

    G. Fisher Banned

    gaffe

    But, the big question is: Are you still going to advise your clients and roni with false information?
     
  11. Hope

    Hope Well-Known Member

    Re: gaffe

    Sorry, Greg,

    My info was not only correct, but accurate and timely as well. Your own only reiterated that.
     

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