Transation control! What transaction control?

In real estate, the mantra once was: My goal is to sell it for the highest price in the shortest amount of time, and control every phase of the transaction.

Most Realtors knew the first of this statement was a goal (to sell it), but the second was where they could really exercise their real estate chops by keeping things on track for a closing.

With various changes coming up in 2010, transaction control will be allocated to the lenders and buyers for a time until the real estate community adjusts to the new federal regulations and figures out how to regain control.

But it's going to be a icy, slippery 1st quarter as we skid around the highway to closing, bouncing off the guardrails of the new regulations.

Loreena Yeo outlined in an excellent post about buyers now choosing the closing company. She was writing while I was doing my research.

To recap: RESPA rules have stipulated that it is the buyer who should choose the closing company because of the title insurance that goes with the purchase of the house. While this has not been followed, it will now be enforced because of the new standardized instructions on the good faith estimates.

In my market in Baldwin County, Alabama, the seller -- or often the listing agent -- has chosen the closing company with the argument being that the seller paid the lion's share of closing costs because of the brokerage commission. Also, this enabled the seller to get re-issue credit if they were a repeat customer of the title company.

Choosing a title company with superior service ...

• Allows me to exercise some transaction control, know that the closing agent will alert me if any aspect of the closing is not on track. (Still don't have the bill for the home warranty, for example).
• I don't have to relearn a company's policy or way of doing business each time a house closes. (This covers mailouts to principals, wiring money, timeframes needed to complete work, whether the earnest money is brought to the closing or not, etc.)

Now, local lenders tell me they will be itemizing the fees for three closing companies on the new good fairth and asking the buyer to choose. What will happen now?

• The buyer will ask their agent or lender which title company to use, particularly if the buyer is moving from out of state.
• The Realtors will eventually figure out if a lender is listing title companies that are dilligent and professional in getting houses closed. Lenders who do not choose these companies wisely may lose business from Realtors.

The other area that will effect closing timelines in the near term is Rule 3/7/3 in the Mortgage Disclosure Improvement Act of 2009. Here the borrower has 7 days to review the Good Faith Estimate. If the annual percentage rate fluctutes by more than .125% (say, because of a interest rate increase), the lender must re-issue the good faith and the buyer has another 3 days to review. Then lenders can only collect fees once the Truth-In-Lending is in the hands of the borrower for 3 days.

• The days of quick closing are over. Expect lenders to follow these timelines to the letter, particularly because they may have to eat the cost of fees (appraisal being the biggest one) since they can no longer collect it upfront.
• Expect buyers' agents to quickly size up the lenders who are up-to-speed on guiding a buyer through the process. Those lenders who are behind the curve may be out at the curb.
• Expect listing agents to add more stipulations to purchase agreements in order to monitor the progress of the buyer and lender.
• Expect to see more use of the purgatory "under contract" status in the MLS system, as sellers and agents become reluctant to take a house off the market while in a protacted waiting period.

Eventually, everyone will become comfortable with the new regulations ... well, maybe not comfortable, but familiar. But for the first part of 2010, there will be a learning curve to be negotiated.