“Cause the good ole days weren’t always good…and tomorrow ain’t as bad as it seems.” Billy Joel Keeping the Faith
Believe it or not…this is a post about Title Companies and Escrow Services and…my ever favorite topic: Homebuyer’s Rights. It’s a plea, really. A humble request for help from someone, or many someone’s, in authority.
In “The Good Old Days”, an agent ordered “Preliminary Title” AND “pre-opened” escrow, when they listed a property for sale. To encourage this practice, Title Companies offered the seller a discount for pre-ordering escrow so that the Title Company was guaranteed not only the Title Insurance business and money, but the right to be the Escrow Closing agent and earn that money in addition to the Title Insurance premium. A good business practice, I guess, and reasonably appropriate back when every agent represented sellers of homes and never buyers of homes.
You know…”the Good Old Days…(that) weren’t always so good”, when buyers were represented by no one, had no rights, and the Rule of the Day was Caveat Emptor.
In the present day in the here and now, meaning “The Seattle Area”, our basic Real Estate Contract has a provision for choosing Title Insurance Company that does not refer to anyone’s choice. Just a blank place for the writer of the contract (usually the agent for the Buyer – since buyers write and make the offer on this contract) to enter the name of the “Title Insurance Company”.
Then there is another line after it that says “a qualified closing agent of buyer’s choice:”
There are still some real estate agents, with the encouragements of added benefits to do so from Title Companies, who are PRE-ORDERING ESCROW before the buyer of the home is a known entity. Who CHOOSE the “qualified closing agent of buyer’s choice” in advance of the buyer being a known entity. Please stop that. And Title Companies…please, please stop offering seller’s agents and sellers “bribes” to encourage this practice of “pre-ordering” escrow in advance of the buyer being a known entity.
I agree that the owner/seller should choose Title Insurance Company, because the seller has to procure and pay for an Owner’s Title Insurance Policy and give it to the buyer in this area, as part of the means of conveying clear title to the buyer of their home/property.
And…it’s quite OK to “suggest” that escrow be X in the Agent remarks section. But to OUTRIGHT DEMAND THAT ESCROW MUST BE SELLER’S CHOICE instead of the obvious contract intent of “buyer’s choice of escrow”…well, frankly, it’s an antiquated and totally inappropriate activity in this day and age.
I know that Rome wasn’t built in a day and change takes time…but I urge you to at least move in the right direction so that tomorrow can, and will, be a better time.
Until then…I’m gonna Keep the Faith.
When things get heated about title and escrow…that can only mean one thing.
the real estate agent is the beotch of the title rep because the rep or title company is rewarding the agent in some non-RESPA-compliant way, to send that title and escrow business to that title and escrow company.
Real estate companies that own their own title/escrow companies tend to have private conversations with their agents about expectations that the agents will use the firm’s affiliated businesses for a certain percentage of their business.
Go ahead and deny it all you want on the blog real estate agents, but a different story is told around the water cooler.
This tells me that we’re going to see a drop in sales if agents are getting testy about sending their favorite title/escrow company business.
Ardell, in my good old days the mortgage loan processor chose the title company on a purchase transaction and escrow was across the aisle at the same mortgage company.
Today title and escrow reps are scrambling to earn their commissions, too. Pre-opening escrow solidifies that commission on that deal will go to title rep X.
Oh, I forgot to add this: RESPA says title insurance is the buyer’s choice. Here you go:
http://www.hud.gov/offices/hsg/ramh/res/sc2sectf.cfm
While you’re here, Jillayne, the WORST offenders of these gestapo tactics are the bank-owned transactions. There oughtta be a LAW against THAT! Someone tell Obama for me, please?
Thanks 🙂
Jillayne…that RESPA rule makes more sense in non-escrow states where Title is automatically the closer. Not that it can’t apply here too…but I think given where RESPA “comes from” they mean “escrow” when they say “title” since they are not two separate entities in many if not most states like they are here and in Cali.
But sometimes it’s just about parking.
????
Hey, folks. Hello. 😉
RESPA definitely intends that the buyer have the choice of title insurer unless the seller is paying for the insurance. The mortgage lender can control the closer if they choose. All this unless it’s ABA then no one can require use. And…..needless to say…state laws may be more stringent and there are some transactions that do not fall under RESPA.
I know…preaching to the choir.
See ya.
dc
Hi Diane,
Thanks for stopping by. I have resolved the issue more than once by doing a split escrow. But recently ran into a case where the Title Company chosen by the agent for the seller refused to do a split escrow. Buyer’s choice of escrow (actually my choice due to this particular client’s needs) was used, but it was pretty messy there for awhile. Reason, agent had pre-ordered escrow when the home was listed, really surprised me. I hadn’t heard that in years.
Unless an agent orders a preliminary title report on every listed house, how will they know how many leins there might be on said property? Properties today are over leveraged and have many problems that a review of a preliminary title will show.
If I”m making an offer on any property, I want to see the prelim title as part of my offer, or ahead of making an offer if at all possible. If an agent hasn’t even bothered to order title, I often move on. No point in waiting for surprises.
Your advice is backwards.
buyer,
As I said in my post “I agree that the owner/seller should choose Title Insurance Company…”
Title and Escrow are not one in the same, and my plea is to let buyers choose escrow. I fully agree, and did in my post, that seller should order Preliminary Title.
They should not “pre-order” escrow services, as escrow closing agent should be chosen by the buyer of the home.
Do you mean pre ordered Title?
David,
no…I meant what I said, pre-ordered escrow. I haven’t run into it in years…but just did on a recent transaction. Agent for the seller set up escrow when he put the house on market.
Hi Buyer,
Years ago the real estate agent would order information like the last conveying deed and a copy of any liens (such as a deed of trust) from their title insurance company for free.
It became fashionable to order preliminary title at the time the home is listed right around the early 1990s. There were a couple of things pushing this change (at least in the greater Seattle area.)
1) real estate brokers wanted to make sure the person who was signing the listing agreement was actually in title to sell the home.
2) real estate brokers wanted to have the title company provide the legal description to the property being listed, and have that legal attached to the listing agreement.
3) there was a big title insurance commissioner audit of all the title companies early in 1990 and all the title companies had to start keeping track of the amount of money spent per customer and this included formerly “free” stuff coming out of the customer service department (we are living through that again this decade.)
4) title sales reps transitioned from being paid on salary to being paid on commission. When the preliminary title report is opened at the time of the listing, that title rep received the commission on that sale.
That concludes today’s trip back through the hot tub time machine.
re: #4) in 1991 I left my salaried title rep job at Chicago Title to be paid commission at Transamerica Title. 🙂 There were part of a “movement” where we did target listing agents to explain why they needed the title prelims… I can’t remember if we did pre-escrow yet or not.
I would personally review each title commitment on a listing and make notes on the report for the agent.
As a title rep, we would do what we could to influence who had control of directing. In the late 80s, when I began my title career at CTI, escrow companies directed a majority of the titles.
Now with the big brokerages having an interest in title companies, they’re doing all they can to manipulate their agents to fight for marketshare–I understand the jv companies have had tremendous growth from supporting and fighting for their broker’s title/escrow companies.
…thanks for the hot tub time machine trip, Jillayne. 🙂
A provocative title/issue that I’ve been thinking about all day. Today’s new days are what we have to deal with- while remembering the old. As has been said: comparisons are odious.
RESPA: any transaction that involves a Federally backed loan (ie, most) the seller cannot dictate who the settlement services company is. P E R I O D. If a seller or buyer mutually agree to keep the escrow portion of the transaction with the same title company, no foul committed.
Tim,
Some days RESPA looks like the Easter Bunny. I just did a search of bank-owned property and here is the exact wording of 3 out of the first 6. A full 50%.
…and I quote:
“Seller will direct title/escrow”
“Seller to direct Title and Escrow”
“X-Title/X-escrow per seller”
…and they have no idea at the time of listing if the buyer will be using “a federally backed loan”. I took the names of the companies out on that last one and replaced the name with an X.
I’m not saying that what you say is not true…but why then would that language even be allowed?
There does not appear to be a “rule” among the very many rules of listing property, prohibiting that language as a directive to agents writing offers.
Tim…kinda like mutual agreement via “making an offer you can’t refuse” 🙂
And then there area the big real local estate companies (Windermere, JLScott, Coldwell Banker Bain) with the joint venture/aba arrangements with various title companies (Rainier & Commonwealth come to mind)… how could that not impact how title and escrow are ordered/directed?
“The Good Ol Days” is when I was a title rep. I’m glad I’m not one now.
The consumer pays for it and should have more control, in my opinion. The seller pays a majority of the title insurance fee with the owners policy yet it’s the buyer who’s receiving the protection of the policy the seller is paying for. The buyer pays for the lenders policy if there is one.
In my experience, Rhonda, closing agents are always best if you have a strong working relationship with them. When the client needs an extra push or favor, the agent-closer relationship is important to the best service for the client. So I am not in any way suggesting that the choice trickle down to the consumer any more than I would say that about choosing a home inspector.
But if the agent for the seller chooses escrow, they often push the buyers through like cattle who are there for only one reason…so the seller can get what they want…out of that buyer…no more and no less.
Title does need to be ordered when you list a property and don’t know who the buyer is. Current common practice is mostly Seller chooses Title; Buyer chooses escrow. That seems to be a fair balance unless there are specific needs as to the Title Insurance Policy…which does happen from time to time, but not often.
Ardell, what does “strong working relationship” mean?
I had a transaction that closed last year in spite of the escrow officer who is someone that has a “strong working relationship” with the real estate agent. She was a nightmare to work with from a lending standpoint, allowed the borrower to sign with 14 different signatures not to mention had a pile of escrow “junk fees” that wound up costing the buyer far more than I would have ever dreamed.
The real estate agent feels comfortable because of her long time “relationship” with the escrow company–but did it serve the the consumer? By the way, this escrow company is very popular w/local re agents….I have no idea why…it must be the “strong working relationships” they have with RE agents. They don’t give a rats patuty about the lenders and I doubt the consumer.
Rhonda,
Well that goes back to did the consumer choose the right agent in the first place…LOL!!!
As to cost, I absolutely think the clients can and should get best cost, and I’m more than willing to pay the difference if the escrow or title I deem to be “best’ costs more. So far the ones I choose have been both great and lower cost…so I have not had to do that.
We have had closings together, Rhonda, and I think you will agree that I use best ancillary services well and am not “stuck on” only ONE best for all clients. Sometimes X is best for client #4 but not client #5, for various reasons.
Speaking of my “being willing to pay the difference”…I ran into TWO situations in the last 48 hours where the lender disallowed ANY agent credits. Are you seeing more pressure in that regard? One was ridiculous. Buyer had over 30% down conventional loan and the credit was $200 for a sewer scope differential, and the buyer was paying their own closing costs, so there was no “excessive” credit issue. They disallowed that $200 agent credit. Pretty goofy…but…whatever.
Are you seeing lenders tighten allowances for credits?
That does seem goofy:
“Buyer had over 30% down conventional loan and the credit was $200 for a sewer scope differential, and the buyer was paying their own closing costs, so there was no “excessive
It was late…but I didn’t think anyone would blink at $200 under those circumstances. They blinked 🙂 Not a huge deal…but a last minute surprise.
I think everyone is just stressed out with these end of May closings resulting from the higher volume caused by the end of the tax credit.
Ardell, any changes must be reviewed and addressed as soon as possible… a change as small as the $200 credit could cause a “buy back” for lenders…and no lender wants to buy back a mortgage in this climate where foreclosures are up and jobs are down. Different types of lenders may be able to respond quicker depending on where their underwriting is (in house or not) and if they’re funding the loan.
Ardell, I’ve been meaning to revisit my comment because I forgot to address your preferred escrow company–Tim and Lynlee do a great job. I understand that it’s a relief for industry professionals to be able to work with those we are comfortable and have confidence in.
As long as the seller’s choice of escrow is not seller biased vs “a neutral party” …but all too often that is not the case.
Where do I start with all these belt high fast balls!
Banks with REO’s generally want to work with big box companies that have coverage in every corner of the US. Much like a builder, using one escrow provider gives them a familiarity that can’t be achieved by dealing with randomly chosen providers. I can’t add much else because we only do business in the Puget Sound area and as a result, do very little REO.
The new GFE is creating a purely price driven market for title & escrow (third party service providers). Buyers will end up choosing by who’s a buck less and will guarantee their pricing. Ironic that an email from Closing.com just popped onto my screen wanting us to list our title and escrow rates with them so that consumers can compare.
RESPA clearly states that the choice for title is the buyers (I get why it makes sense to order at listing). Yet, the standard mls form contains: “If Seller previously received a preliminary commitment from a Title Insurance Company that Buyer declines to use, Buyer shall pay any cancellation fees owing to the original Title Insurance Company.” If you ask me, this kind of knocks out any savings a buyer could gain by shopping. Cancellation fee’s will return as in the good old days. The OIC wants us to charge for any work performed. Furthermore, OIC audits will make sure we collect as well.
The lines on the P&S for Title Insurance was added partly because of agents sticking on little stickers the title companies gave them and the other side agent ripping them off and adding their own choice. A little bit of missing trivia from the earlier comments 🙂
I’m going to have to foul off the Pre-escrow subject for the time being but will be back on it after I help get us through this busy month-end.
A closing I have tomorrow has Seller will use X Title Company for the Owner’s Title Insurance because seller pays for that BUT does say that the buyer could use a different Company for Lender’s Title. Another way of complying with RESPA.
I believe the choice for both policies is with the buyer. I don’t think RESPA cares who actually ends up paying for it:
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. Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance.
If a buyer was to choose a different title company than the seller and only pay for the lenders portion of the title insurance, it would cost them the same amount as an ALTA Extended Owner’s Policy. This would cost them several hundred more dollars by not getting the discounted simultaneous issue rate. It gets complicated why but ultimately is because of claim scenarios.
Rob,
I’ll show you the wording in the addendum when we have our meeting in mid-June.
Rob how could I forget those annoying little stickers. Some of them were neon ugly.
I thought you’d get a kick out of that Jillayne! I think I still have a pack of those left over from Transamerica Title days. These were the latest 2.0 transparent stickers that wouldn’t cover up any initials or language on the purchase and sale.
I remember plain as day why we convinced listing agents to order prelims on their newly listed properties. It was an immediate and direct sale. We were tired of asking agents to kindly remember to fight for us when they wrote up a contract. Another reason for the switch to agent direction was that the independent escrow companies hated Transamerica Title for having escrow branches throughout the county in the early 80’s. It was a California model that did not fit the Northwest. As young and hungry Account Managers, we had to change the market place to survive. It’s all my fault and that… is the rest of the story.
When I left Chicago in 91, we didn’t have escrow branches. We did have customer service offices
When I went to Transamerica, my clients were shocked…one actually fell out of her chair when I told her (no joke). 🙂
I remember working on a re-design of the earnest money stickers…they used to just be a single strip…with carbon copies the agent would say “oh we put a sticker on the page”…and we’d still sometimes would lose a deal because of the carbon copy lacking the ugly little sticker. We created a new sticker that had a big strip along the top thanking the agent for their business and then four strips along the bottom (like a tear off) where agents could remember to get those stickers on every copy of the purchase and sales agreement.
Further back down memory lane, at Safeco Title when I was in customer service (’86) we had earnest money stickers with the Pink Panther… very cool 🙂
Just got this in my email:
“When you use our bundled services together, your clients can save BIG! On sale of $400,000 with our bundled title and escrow savings the seller can save over $200.00. See details below.”
Drives me absolutely CRAZY when company’s do not acknowledge the buyer’s rights in a real estate transaction. What is this? 1980!?!?!?!?
I just wrote about that (kind of) on my blog… I think consumers must get more active in who THEIR team of professionals will be in assisting them with their real estate transaction.
Rhonda,
People just don’t “get” who works for whom.
Had two calls yesterday.
1) Agent: I am the agent for the seller and the buyer is unrepresented.
Then that buyer called me:
2) I am the buyer and the listing agent represents me. She’s a Dual Agent.
The buyer was an agent in the past, so better than average knowledge about these things. Still…two totally different answers on who is representing whom.
I think people “trust” that their interest are being looked out for. They don’t ask enough questions on such a large transaction.
Still Rhonda. “trusting” the agent for the seller to “look out for your interests” when you are the buyer is:
1) Not at all realistic
and
2) Almost impossible to be true
And yet a very, very, very common error made on the part of home buyers. Even one as noted above who should know better, given he was a licensed agent for some period of time.
If an agent can’t “get” this…how could we possibly expect the Average Joe Homebuyer to “get” it?
OK Ardell, Here’s an “Off-Topic Post”. (Thanks for the invitation).
I’m interested to see Rain City Guide’s new Bellevue Page. because it’s about Bellevue where I had my residential architect’s office for some 30 years.Jerry
(Click) http://raincityguide.com/home-search/bellevue-real-estate/
I see it, and I’m pretty sure you can “see” it. Did you mean “talk on it”? Pages are for display…not commentary, best I can tell. A “blog” is for talking. A “page” is something only the administrator or site authors can interact with and is a static “page” display piece.
If you wanted to “talk” about that page, you would link to it from most anywhere. Your Knoll, or facebook, as example, and then talk about the page in your place while linking to “it”.
Ardell- As to your above “Pages are for display…not commentary, best I can tell”. as you well know by now, I’m often moved to comment on most anything I see on Rain City Guide- or anywhere else. This probably has to do with my many years of residential architecture practice in a continually changing/evolving Pacific NorthWest homebuilding scene. Jerry-
LOL, Jerry! That’s like wanting to go in everyone’s house, whether it is for sale or not, because you like to look at houses. 🙂
Some places are not open for public commentary…like some people’s websites. Not every place on the internet is a “talking” place. 🙂
LOL to you, Ardell! As for me personally, I like comments on what I post- or present to a custom client. The toughest people I ever design houses for are those who say- “tell me what I want, you’re the architect”.
Ardell- I’m glad to see Rain City Guide’s new Bellevue Page adding the EastSide to its purview– as I did quite a while ago in one of my many Google Knols. As you know, I had my residential architecture office there for some 30 very good years. Here’s a link to same:
http://bit.ly/bBY3Ej