topic Re: Seller requires buyer to use a specific title company? in Mortgage Loans

VA Loan - First time home buyer

Anonymous — Sun, 15 May 2016 13:46:18 GMT

I was just reading through a seller's disclosure document on a short sale property and it contains this line on the first page:

"Purchaser must use Michaels Title which provides short-sale negotiation services."

My reading of RESPA seems to indicate that seller cannot require a buyer to use a specific title company.

However, the seller can require a specific title company if the seller is paying for title related costs. But there's nothing in the disclosures that the seller is offering to pay for title costs.

The other scenario I can see is that the seller is allowed to require the above title company to work as closing agent. However, this would have to be clearly spelled out in the contract.

Am I reading this RESPA section right?

Re: Seller requires buyer to use a specific title company?

Anonymous — Sat, 02 Apr 2016 11:45:23 GMT

It depends on what state you are in. Some states the seller gets to pick the title company if they want to.

Re: Seller requires buyer to use a specific title company?

StartingOver10 — Sat, 02 Apr 2016 11:54:31 GMT

When you are buying a short sale - iit is entirely different. The title co or closing attorney negotiates with the seller's lender for the short sale approval. That attorney or title company wants to get paid for their work so they have two conditions:

1) Pay the fee for the attorney - this is either paid by the seller or the buyer

2) Close the sale at the title co for the associated title fees go to the attorney or title co that negotiated the sale with the lender.

The selection of the title co and/or closing attorney are specified in the Purchase and Sale agreement between the buyer and the seller.

However there is an addendum that is added to the contract referencing the fact that it is a short sale offering and subject to the seller's current lende/servicer approval. Make sure to have your Realtor give you a short sale addendum so you can see the changes to the standard contract.

Note that the lender is under no obligation to accept a short sale offer.

The sellers' lender frequently has normal and customary seller fees they refuse to pay on behalf of the seller so you will end up with higher closing costs when purchasing a short sale verses a property that is not short.

A short sale is not always a deal. Look at the recent closed short sales of similar properties in the neighborhood to see if it is worth the time and effort.

SHORT SALES ARE LENDER SPECIFIC. By that I mean that certain lenders are totally uncooperative and others are cooperative. You should find out first how many liens are on the property (all liens have to go through the neogtiation process) and who are the lenders involved in the short sale approval process. I makes a huge difference. There are lenders that prefer to foreclose but not until it is offered for a short sale and gone through the process (but not approved at the end).

Re: Seller requires buyer to use a specific title company?

StartingOver10 — Sat, 02 Apr 2016 12:01:22 GMT

@Anonymous wrote:
It depends on what state you are in. Some states the seller gets to pick the title company if they want to.

For standard sales (not short sales) it depends on the contract. In our state it varies from county to county as to what is customary, but the contract allows the buyer and seller to choose who gets to pick the title co. In my county, Palm Beach, it is customary for the seller to choose the closing attorney or title co. However the county to the north (Martin) and the county to the south (Borward) customarily have the buyer pay. Still, each contract has the selection so the buyer and seller can determine who selects and pays in their specific transaction.

Re: Seller requires buyer to use a specific title company?

Anonymous — Sat, 02 Apr 2016 13:29:01 GMT

I made my first mistake already by falling in love with the house and the neighborhood

So the house is listed for $340K which is fairly consistent with Redfin's estimate (FWIW) but a similar property one street over sold for $380K (though the original listing was $420K)

My first instinct tells me that I should not even try to offer anything below $340K and that the seller may or may not be flexible with closing costs

The property qualifies as military short sale due to PCS, so I'm guessing the bank can recover the short sale deficiency amount from DoD?

This property had two previous offers since it went on the market on May 2015, apparently both offers fell through after the inspection contingency period, so my realtor thinks the bank probably countered with an amount or terms much higher than the listing price but couldn't say for sure.

One of the neighbors told me she personally knew the property owners and had been inside the house many times, she assured me that they took really good care of the house, so I don't believe there was any significant findings during the previous inspections but then again it was built in 1928

I will ask for the short sale addendum from my realtor this afternoon to get more details

Re: Seller requires buyer to use a specific title company?

StartingOver10 — Sat, 02 Apr 2016 17:28:30 GMT

The seller isn't the decision maker in a short sale. They walk out with zero dollars.

The sellers lender is the one that accepts, rejects or counters the offer (after the seller has accepted it). Have your agent explain the process throughly. Also please note, the seller's lender virtually ignores all dates but you can't miss any of the contracted dates! It is very one sided.

Re: Seller requires buyer to use a specific title company?

Anonymous — Mon, 04 Apr 2016 02:12:40 GMT

Decided not to move forward with the short sale. They already had 3 other offers on the table so it apeared that a bidding war was coming, and we are not willing to bid much more than the listing price.

We'll keep looking

Re: Seller requires buyer to use a specific title company?

StartingOver10 — Mon, 04 Apr 2016 11:48:19 GMT

From your post, it sounds like a good decision.

Re: Seller requires buyer to use a specific title company?

ezdriver — Mon, 04 Apr 2016 18:38:13 GMT

I believe that you have made a wise decision. When there are multiple factors causing a buyer mental hesitation, it is often wise to heed the signal and move on. The short-sale segment of the market is not for the faint-of-heart buyer. All the best with your next one.

Re: Seller requires buyer to use a specific title company?

Anonymous — Fri, 08 Apr 2016 12:04:17 GMT

So we put in another offer but my VA was beat by a Conventional loan offer though I can certainly understand the seller's choice here, net seller's profit is higher with conventional loan offer

I'm also about ready to dismiss my current buyer agent, I don't believe she's very experienced with VA loans and may not be able to present our offer to the seller's agent in the best light. I understand it's not 100% her fault I got beat in previous offers though.

DW and I have done most of the research, looking for a house, talking to neighbors, business owners and even attending the local farmers market to learn about the community where we're looking to buy.

We found another house we like, we spoke to the seller's agent ourselves, he was very up-front as to what the seller's situation is and what the seller will do as part of the sale, price, closing costs, closing date, etc. That house had a previous offer last month, VA loan offer fell through but he seemed willing to work with my VA loan though.

Now I'm wondering about the wisom of using the seller's agent as my buyer agent? good idea or bad?

Re: Seller requires buyer to use a specific title company?

StartingOver10 — Fri, 08 Apr 2016 12:20:07 GMT

Normally you want your own agent rather than using the seller's agent. The seller's agent may have a fiduciary duty to the seller depending upon the agency representation the seller has signed with their agent. What agency representation did the sellers agent represent to you for your side?

Here are the available ways an agent can represent you in Virginia: http://www.mojo.biz/content/Virginia/articles/agent-representation.htm

Not all agents are the same. Find one you have confidence in or the purchase will be difficult.

Note that Sellers have their own ideas of what is acceptable or not. You can't assume that the seller listens entirely to just the agent's presentation of the offer. When the agent presents an offer to the seller they also (usually) present a 'sellers net sheet' so the seller can see where they are financially with the sale. But that is not the entire analysis. The strength and reputation of the lender are a factor too as well as other terms in the offer having nothing to do with the dollar amounts (closing dates, inspection days, etc).

Re: Seller requires buyer to use a specific title company?

Anonymous — Fri, 08 Apr 2016 13:31:11 GMT

yes, I can certainly see where there would be a conflict of interest in a dual agency transaction.

The seller's agent never represented that it would save me any money by using dual agent or that the seller himself was agreeable to dual agency in the first place.

I'm not looking to save money this way though.

One thing that I'm wary of, is to offer more than the list price or what the comps justify. My VA loan is pretty much dependent on the VA appraisal process, which seesm to be notoriously stringent in this area (near DC). I'm not in a position to pay $$ if the VA appraisal is lower than the list price. I would have to negotiate a lower price with the seller in that scenario

My buyer agent has suggested to offer more than the list price but I'm not comfortable doing that in future offers then have the deal fall through during the VA appraisal.

Re: Seller requires buyer to use a specific title company?

StartingOver10 — Fri, 08 Apr 2016 13:41:00 GMT

@Anonymous wrote:
yes, I can certainly see where there would be a conflict of interest in a dual agency transaction.

The seller's agent never represented that it would save me any money by using dual agent or that the seller himself was agreeable to dual agency in the first place.
I'm not looking to save money this way though.

One thing that I'm wary of, is to offer more than the list price or what the comps justify. My VA loan is pretty much dependent on the VA appraisal process, which seesm to be notoriously stringent in this area (near DC). I'm not in a position to pay $$ if the VA appraisal is lower than the list price. I would have to negotiate a lower price with the seller in that scenario

My buyer agent has suggested to offer more than the list price but I'm not comfortable doing that in future offers then have the deal fall through during the VA appraisal.

It doesn't always fall through if the appraisal comes in below sales contract price - sometimes the seller just has to see that the appraisal came in at $X before they will reduce the price to the appraised value. There is a strategy where you offer more than list to get the house contract accepted and then when the appraisal comes in lower, your agent has the seller reduce the contract price to the appraised value. It is a two step process - but the seller needs to understand up front that you aren't going to bring in extra cash over appraised value. Discuss this strategy with your agent. (It is frequently done in your area)

I know that the pricing in Virgina near DC is crazy. Your area never did experience the downturn that the rest of the country went through in the great recession. So you are working in a difficult market.

Re: Seller requires buyer to use a specific title company?

Anonymous — Sun, 10 Apr 2016 12:41:59 GMT

@StartingOver10 wrote:

It doesn't always fall through if the appraisal comes in below sales contract price - sometimes the seller just has to see that the appraisal came in at $X before they will reduce the price to the appraised value. There is a strategy where you offer more than list to get the house contract accepted and then when the appraisal comes in lower, your agent has the seller reduce the contract price to the appraised value. It is a two step process - but the seller needs to understand up front that you aren't going to bring in extra cash over appraised value. Discuss this strategy with your agent. (It is frequently done in your area)

I know that the pricing in Virgina near DC is crazy. Your area never did experience the downturn that the rest of the country went through in the great recession. So you are working in a difficult market.

I wish my previous agent had explained it to me that way, it would have been more flexible on my offers.

Out of curiousity, I called a local lising agent and asked if she would be open to dual agency ona property? Initially she said yes, but later came back and said it would make the transaction appear "too cozy" so she would have to refer me to another agent in her office to fill the role of buyer's agent

Her second reponse sounded very sincere, though she would've been able to pocket the full commission, she did what was right for the transaction. Her client is a house-flipper so the seller's agent is looking to get him the most money for his investment

Re: Seller requires buyer to use a specific title company?

Anonymous — Wed, 13 Apr 2016 00:17:37 GMT

So this crazy thing happened: last week my VA loan offer was beat by a conventional offer, it turns out that the guy who made the conventional offer walked out on the deal at the last minute, in fact the seller's agent told us that guy had done it before so now he's gonna get blacklisted by local agents.

The property has gone back on the market and the seller's agent is meeting with the seller to see how they want to move forward. My previous offer is still on the table but it appears that neither the seller nor the seller's agent even read my offer letter since "all eyes" were on the other offer that had promised them 45% down payment.

Kinda irked that I was beat by a bogus offer, but will soldier on

Re: Seller requires buyer to use a specific title company?

Anonymous — Fri, 15 Apr 2016 15:49:37 GMT

The seller is now considering my offer. I requested that the seller pays 100% of the closing costs and my agent has a verbal counter offer from the seller agreeing to 50% of the closing costs. This is a bit challenging but not impossible. However, I'm going to respond to the counter offer and see if the seller will agree to pay 75% of the closing costs.

Worst scenario at this point, is that I end up paying 50% of the closing costs, so I'm in a good spot right now

Re: Seller requires buyer to use a specific title company?

Anonymous — Fri, 15 Apr 2016 16:06:04 GMT

@Anonymous wrote:
The seller is now considering my offer. I requested that the seller pays 100% of the closing costs and my agent has a verbal counter offer from the seller agreeing to 50% of the closing costs. This is a bit challenging but not impossible. However, I'm going to respond to the counter offer and see if the seller will agree to pay 75% of the closing costs.

Worst scenario at this point, is that I end up paying 50% of the closing costs, so I'm in a good spot right now

Will keep fingers crossed for you. Keep us posted.

Re: Seller requires buyer to use a specific title company?

Anonymous — Fri, 15 Apr 2016 16:21:41 GMT

thanks! will do.

Re: Seller requires buyer to use a specific title company?

_NERD — Fri, 15 Apr 2016 21:30:55 GMT

To StartingOver10 & AhmedInMD:

My agent suggested we come in strong 5k over list price and mentioned more than once that the house needs to appraise for the amount of the offer anyway. If it appraises lower, then a reduced sale price may be possible. Or the seller could turn away our offer and try again with another buyer, which would be silly since it didn't appraise. Oh and my 5k over list offer includes seller paying 5k towards closing. I'm good with that.

I do, however, live in a seller's market and houses are going into Pending within days of listing. YMMV.

Re: Seller requires buyer to use a specific title company?

StartingOver10 — Sat, 16 Apr 2016 01:15:00 GMT

@_NERD wrote:
To StartingOver10 & AhmedInMD:

My agent suggested we come in strong 5k over list price and mentioned more than once that the house needs to appraise for the amount of the offer anyway. If it appraises lower, then a reduced sale price may be possible. Or the seller could turn away our offer and try again with another buyer, which would be silly since it didn't appraise. Oh and my 5k over list offer includes seller paying 5k towards closing. I'm good with that.

I do, however, live in a seller's market and houses are going into Pending within days of listing. YMMV.

^^^Yes, this is the strategy I see often in a seller's market. Good luck with your offer!