I considered making this a "members only" post but decided instead to throw it out there to stimulate discussion. All real estate agents are or should be familiar with RESPA. It's been around since 1974. But new sections are added all the time.
Section 9 says: "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."
It's obvious that Section 9 was created because many buyers pay for title insurance and buyers need protection. California tends to lead the nation regarding buyer protections and caveat emptor revisions in contracts. However, a northern California lawyer says that if the buyer doesn't pay for the title insurance, then the seller is free to negotiate the selection of a title company. Because it's the sellers' money and sellers are free to negotiate.
In California, custom seems to dictate who pays for title insurance. In Sacramento County, for example, it's customary for the seller to pay for title. In El Dorado County, sellers and buyers often split that cost. I believe it's customary in Placer County for buyers to pay for title insurance, but my experience in Placer and El Dorado County is mostly limited to short sales, which doesn't make me an expert in either of those counties.
I've seen a ton of REO contracts and addendums that specifically designate a title company. But those addendums also say the buyer is free to choose if the buyer wants to pick up all the cost. Therefore, it would seem to me the questions on the table are who pays for the title insurance and whether that right to pay for it is a negotiable item.
Agents, what do you think? Do you believe sellers are in compliance with RESPA when paying for and negotiating the title company?
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Certified HAFA Specialist
My Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
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