I just received an email from ReaLegal®, brought to me by the California Association of REALTORS® that an announcement of a form revision.
This post really did start off as a simple review of the form and changes that are now in effect. Read the whole blog and find out that it is much more than that...
The REO Advisory (CAR form REO) has been updated to include the notice that Buyers of REO properties in the State of California (which include the Hemet - San Jacinto Valley, CA by default) that they are not required to purchase escrow services or title insurance from any particular company...let alone the company that the seller has previously mandated.
The new law is called the "Buyer's Choice Act" that became effective on October 11th, 2009 - the day Governor Arnold Schwarzenegger signed it into law. This new California law is for the convenience of buyers of residential property - up to four units. Personally, I do not think it offers the buyers any type of protection and if anything will actually cause more harm.
From an economic point of view, if the seller is contracting with escrow and title companies for services and insurance - they are doing so on a wholesale level, which in turn reduces the closing costs for the buyers.
The real concern I have is if consumers start insisting on a any they may be dealing with one that has not developed an expertise in this very narrow niche. I say this, because 2 years ago most of the escrow companies that helped me close my REO listings were relatively inexperienced when it came to working with REO's. Today, without exception every REO Escrow we open is like a well oiled machine - it works like clock-work. So "why fix what ain't broken?" My Grandma used to ask me and it's a darn good question right now!
AGENTS EXCLUDED TOO
The other provision the buyers are informed of is that their AGENTS cannot require that a buyer use a particular escrow or title company...even if they have one in-house, as many do.
By using an in-house escrow or title company you can be assured that the needs of the broker are met first and foremost and that this additional service is a huge profit center for them. Hey, there is nothing wrong with profit. In my opinion though, if a Broker is making money on the transaction and then possibly the loan, the escrow and maybe even an ownership interest in the title company than they need to cut some of their fees for the use of the full all-inclusive list of broker services.
CLOSING THOUGHT
I'm not saying this is right and I'm not saying it's wrong and I'm certainly not saying it has been done or that it will be done...but think about this...
A new bank-owned reo listing for a home for sale in San Jacinto is just listed in the MLS and it generates lots of excitement and multiple offers.
The bank considers all of the offers on all aspects of the offers, including price, length of escrow, down-payment, seller contributions, seller concessions and all of the other proposed terms...and narrows it down to two offers that stack up very evenly when looked at side by side...
EXCEPT one wants to use a local escrow affiliated with the buyer's broker that the seller has never done business with in the past and has no idea what their level of REO experience or their efficiency at processing and closing escrows on time and the other asks the seller to pick a company of their choice.
Remember now, the banks and asset managers, who are real people that put their pants on the same way you and I do, have formed relationships...even friendships with escrow officers and title reps that have gone above and beyond through the thick and thin of the last several years and now they get to decide on which offer to accept (remember all is equal). Does it not make sense that the PERSON who makes this decision to ACCEPT YOUR OFFER may lean towards a PERSONAL BIAS and allow them to use the vendors of their choice?
So, for me and my team...when we represent a buyer in an REO transaction for a Hemet - San Jacinto Valley home for sale we will always defer to the sellers choice and be glad when we get our offers accepted.
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