Who gets to pick the title company that will issue the owner policy of title insurance?
It depends. If the seller pays for both the owner policy and the lender policy of title insurance, then the seller can pick the title company without violating the Real Estate Settlement Procedures Act (RESPA). However, if the buyer pays for the owner policy, the seller cannot condition the sale of the property on the buyer purchasing the owner policy from a particular title company. Rather, the buyer would get to pick the title company.
In situations where the seller pays for the owner policy and the buyer pays for the lender policy, RESPA application is less clear. At least one court has held that where the seller paid for the owner policy and the buyer paid for the lender policy, the seller did not violate RESPA by insisting on a particular title company for the owner policy. The court explained that the seller did not require as a condition of sale that the buyer use that same title company to issue the lender policy. However, the Consumer Financial Protection Bureau, the government agency that enforces RESPA, has yet to take an official position on the law’s application in this scenario. Therefore, if a seller wants to avoid a possible violation of RESPA, the seller should not insist on a particular title company for the transaction unless the seller is paying for both the owner policy and the lender policy of title insurance.
This is going to come down to who does the policy protect. Caveat Emptor or let the buyer beware. The buyer, who is in effect, the consumer here, gets to chose who they will have goods or services from. Who pays for those services is an altogether separate issue that is typically outlined in a contract.
My Thought on this frequent issue: The buyer is the party to which my one day be liable for a Title issue, together with a lender who may also be involved. So WHY does a seller have any right to insist on the Title Co. anyway? Seller protection comes from their existing Title Insurance issued when they purchased. After the sale, seller received their $$, release from lender, and a myriad of potential issues, but buyer could be holding the proverbial “bag!” RIGHT OR WRONG??
Right.
thank you!
We have a situation where the buyer chose their title company. Title company affiliated with real estate company of buyer. Buyer was an agent of the company that was affiliated with both. Title company messed up and recorded an additional lot that did not convey with this sale Everyone including title company acknowledges it wasn’tsupposwd to convey. Seller goes to pull permit to finish building on the lot that didn’t convey they were told they didn’t own the lot. When title was made aware they told the rightful owner that has title policy to get an attorney
So why does our TREC contract form not have boxes to check for who is going to pay for Both policies, and who is going to select the title company?
And better yet, why is this discussion about the buyer’s and seller’s choices, when we all know it is an arm wrestling contest between the two Agents…??
I just wish we could get a court decision on this ruling once and for all….
I get lost in the mechanics of how this is an issue.
Is this disputable when the contract has an agreement of the choice of title company? I can see this becoming an issue if either party wishes to change title companies. How could one prove the seller insisted if there is no contract?
We recently closed on a house in TX and paid owner’s policy of $3,800 – not a small amount. Our relocation company refused to pay this amount as this charge is not TX state mandated. We are new to TX and did not know that we had the right to refuse to close with the title company and refuse to buy the title insurance. That is why this topic is relevant – the builder picked the title company and they charged us nearly $4K for a brand new house with no apparent title issues.
Unless you paid cash, the title policy was necessary — lenders require it. Even if you did pay cash, it’s not wise to forego title insurance. The builder did not take advantage of you.
JamesF that is not true the title-owner Policy is necessary but optional
In my opinion, Title companies are like McDonalds. You go to the closest one. Why fight over which McDonalds?
Underwriting, knowledge, communication, customer service, quick return on title work, mobile closings, legal expertise…to name a few. There is a HUGE difference between title companies. That’s why some fade away while others win Small Business of the Year. I’m sorry you haven’t worked with a title company that distinguished itself.
I do about 80 transactions a year, all with different title companies in different market areas. Rarely a bad one, all are very good. The glass is close to full not empty.
It’s not just about the title work but the insurance side. I don’t care who holds the earnest money. But who insures the Title makes a difference. Having a title properly insured and backed by a company that has as much money as a big city in its reserves to fund the mistake wins over an oops we are sorry who knew that guy was going to come out of nowhere and lay claim to your property, and you end up tied up in court with a claimant, then a Title company. You run a big risk if you venture… Read more »
So correct Matt
I live and work in a small town, and our local title company charges far less for their services/fees than companies 20 minutes away. Sometimes the difference is double.
Many companies are owned by the real estate brokerage. Would you think they would be neutral over any disputes that may arise?
Todd G Franklin you must have been fortunate enough thus far not to deal with a bad title co. They are not like McDonald’s because McDonald’s is a franchise that strives to replicate service and product worldwide. There are a plethora of title companies out there all providing different levels of service and speed. Furthermore, it’s nice to be known and on a first name basis when dealing with title issues. If you close 10 deals a month at 1 title Co they will listen when you call. Results will likely be different if you shop title companis for every… Read more »
I do about 80 transactions a year, all with different title companies in different market areas. Rarely a bad one, all are very good. The glass is close to full not empty.
Let us not forget, it is really the choice of the buyer or seller, not the agent. We just make recommendations and should make more than one.
You’re very fortunate to have worked with all great title companies. I’ve found myself taking the heat from sellers and buyers because of “their choice” of title companies. We’ve had to deal with rudeness, numerous errors on closing docs, poor communication with the lender, falsely blaming other parties, delays because someone “forgot” or was on vacation, and just plain incompetency.
As a Buyers Agent, I cross this dilemma all the time. Many Brokers are “In Bed” with a certain Title Company and Strongly URGE you to use the Sellers “Pick” for Title Company, which we ALL know is not the Sellers PICK for the Title Company, It IS the Listing Agents pick., but in multiple offer situations, we would not win the offer if we pencil in the Buyers choice of Title Companies, I have had many closings in which the Seller prefers “A not so good Title Company” and they tell me, If you want your buyer to pay… Read more »
In my opinion, listing agents are overzealous about title companies. Unlikely there is any actual compensation unless laws are violated. I guess they are looking for status in the eyes of the title company.
Oh yes, they get wined and dined on every level…… I dont because I dont get to pick, so I am invisible to Title Company reps…..
Let us not forget, it is really the choice of the buyer or seller, not the agent. We just make recommendations and should make more than one.
There are a lot of listing agents who think they are God.
To a degree I think that the title company should be buyer selected. However, because the seller is also affected by the cost and competence of the title company…it is not so clear. So I guess it makes sense to allow the paying party to make the selection. I am not familiar with the MLS stating “Seller pays title company”. Where would that be stated in MLS and for what purpose? They are not parties to the contract.
This business is all about relationships. I know that we (yes, I work for a title company) bend over backwards for our clients (and those on the other side of the transaction). We make it our mission to be the best at what we do and when our clients have to close elsewhere, they see the difference. That’s why Realtors want to use a certain title company…they know they, and their clients, are going to be taken care of. And yes, the friendship aspect is certainly a part of that. Like I said, it’s all about relationships. After working together… Read more »
It’s not just about the title policy, it’s about the escrow services. I’ve dealt with great escrow officers who really help the transaction proceeded smoothly and a terrible escrow officer who neglected her duties and made things much more difficult than they needed to be. As a seller’s agent, I want a title company and an escrow agent who will help ensure a smooth and successful transaction for both the seller and the buyer. The one transaction I had with a terrible escrow officer was one that was selected by the other party. I would advise any party, buyer or… Read more »
I agree with Sharon 100%. I am a Seller’s agent representing investors who have previously dealt with Title Company and they know good Title Companies and prefer to use them. Whereas, many Buyers are novices who can’t make a distinction between a good and a bad Title Company. I would like to bring to Michelle’s attention that the Title policy is the same, regardless of the chosen company and the premium amount is also the same. As pointed out by Sharon Demarque, The difference between a good and a bad Title Co. is the level of services provided by the… Read more »
(My earlier attempt to leave a post failed at the computer level, so I’ll try again…) Title companies are not definitely Not like McDonalds! First of all, I wouldn’t eat there. But they Do follow a strict recipe which should produce the same results every time. ~That is Not true of title companies, as some are better than others. In 37 years, I have not seen very many sellers who knew anything about a title company, let alone how to select one. It is a case of arm wrestling between the agents. Why doesn’t our TREC contract form have a… Read more »
I agree totally! They should add check boxes to the contract so that the parties could choose. The lenders policy is built into buyers closing costs because the buyer is getting the loan, but if that choice effects the TC choice, then who pays should be a choice. Also, it would not be cost effective for the buyer and seller to choose two different title companies. In today’s climate of multiple offers, the buyer is at the mercy of the seller’s agent on this issue. On the other side of this argument, the property may have a file already open… Read more »
What if the.Seller is an Estate and a title company has opened title as a courtesy to the Executor and to the Attorney handling probating of the Will?
Emma Munoz and Binh Nguyen both mention circumstances where it very well could be very important for the Seller to insist on a particular Title Company. When I represent a Seller that is not in such a circumstance I may recommend a certain Title Company. If I do, I usually put in the words “If the Buyer pleases” or “consider using such and such”. I always advise my Sellers to allow a Buyer to choose whatever Title Company they want because they will have to live with that Title Company and Title Policy as long as they live in the… Read more »
Yes, I agree, and know the Good from the bad Title Companies as I have been in this business for over 30 years. I have had really bad title companies that the sellers (um… Listing Agents ) prefer we use and had less than stellar closings. I would never recommend a bad title company, but hate that some are forced to use title companies Owned by Brokers….. just because….
I agree there may be situations, like mentioned, where the seller may want to insist on using a particular title company. If they want to stay within the law then they will need to insist on paying the title policy as well.
Some listing agents won’t relent. I firmly believe that since both the Owner’s and Lenders policies benefit the buyer, and have nothing to do with the seller, that the buyer (and buyer’s agent) should be able to select the title company. As a predominately buyer’s agent, I also have as many horror stories about bad title company offices and listing agents. I believe if a buyer puts in a certain title company, and if you know they are good, or have not heard about them, then go with it. If you have had a really bad experience, bring it up… Read more »
The Texas Department of Insurance regulates Title Companies. They have very strict rules on this matter. The person insured has the choice of who to buy insurance from. Not the selling agent. Only the Federal Government can force you to buy insurance.
I agree with Sharon 100% , I had same problems too and was going to write like same experience Binh Nguyen explained. Both buyer and seller is under very stress, and how many first time Seller/Buyer knows about the tile companies and then who is leading/fighting to pick up the title company.?, then who is the one creating this on going big issue???. No one says anything about any cost difference between two companies, why ??. Why agents fighting to pick one for save money or better service ?. I believe all title companies have a good faith duty to… Read more »
Another example where nonsense prevails. We keep tripping over bureaucratic rules and regulations. Would like to see bureaucracies downsized 98% so folks in this business could
spend their time productively working.
Does this rule apply to builders? Some builders require you to use their title company with no incentives, in other words, the builder will NOT pay for any title policy NOR can the buyer choose ANY OTHER title company. What about this situation?
They cannot insist on using a specific title company if they are not paying for it. That’s why they always have incentives tied to them. I have yet to run across that situation when dealing with a new builder…especially larger builders.
Linda Read the builder contracts CAREFULLY as it usually states the title policy is ONLY tied to the lender and not to title. Sales people are the ones that push their title companies. Reason being, builders know they would be in violation of RESPA section 9 (which no one in this entire thread mentioned) which clearly states that the seller shall not directly or INDIRECTLY specify which title agent to close with. So let’s be clear. Buyers CAN choose whoever they want for title, period, UNLESS ALL FEES ARE PAID FOR for title BY SELLER (See HUD rules for FHA… Read more »
Thank you for helping me understand how a title company is picked. It’s good to know that the buyer could pick the title company if they pay for the owner policy. I’m kind of interested to learn if the owner policy is different depending on the property.
Yalls logic is very scary. Agent here, and usually a heavy listing agent. I NEVER list a property without a full set of prelims ordered, confirmation of who the owners are, liens cleared, judgements cleared, etc. That prep work takes a long time, and a buyer honestly doesn’t give two flying twigs. It’s the agents BS that makes me mad. If the title is already done, st least OFFER it to your buyer before saying “under respa, buyer chooses”. WHATEVER!! You should be so happy that this home you just showed, will close because the parties are properly documented. Not… Read more »
Vague! Since the Buyer is stuck with the Insurance Policy, he should have the Right to decide!
What about when the listing agent is a principal owner of the title company his firm recommended? Found that out at closing and the closing still didn’t go through because of mistake the listing agent made. Am I supposed to learn of this relationship before closing?
is the builder responsible for the title policy for the new home or can the builder negotiate the title policy.
The builder builds the house and than tells the potential buyer that he will not pay the title policy.
It’s interesting to know that if the buyer pays for the owner policy, the seller cannot condition the sale to another title company. My husband and I are planning to buy a commercial property, and we are looking to know about the property’s title. I will definitely pass this information to my husband so that we start looking for a real state title company.
Cant the seller just say “Im not selling the property to you unless the terms are what I want” then the buyer can decide if they want to purchase or not. Doesnt the seller have the right not to sell to anyone?
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What I find funny about this issue is that there is almost NO buyers or sellers who have any knowledge of title companies. They will ask their agent for advice so in 99% of the transactions the title companies are chosen by the agent- be it the listing agent or the buyers agent. No one expects the average buyer or seller to have any idea of who or what constitutes a good title company but we are debating whether the seller or buyer chooses? Don’t we mean listing agent or buyers agent chooses as their client is going to ask… Read more »