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We Don't Have To Sign That Addendum! Just ask RESPA

By Mike Mitchell

Real Estate Agent with Kee Realty

March 28, 2012 10:20 PM

RESPA - Real Estate Settlement Procedures Act

The past 3 deals I've done as a buyers agent in the last 30 days all 3 of the listing agents have tried to get my buyer to sign an addendum stating that the buyer will agree to use the title company of the listing agents choice for their mortgage title insurance.

3 deals in a row I've received this!

The 1st one, I just ignored and didn't send it over with my otherwise complete offer package. We closed without any problems.

The 2nd deal, we did send back the "Title Addendum" but we countered it. We crossed off the part that says: and mortgage title insurance policies and we wrote in - Buyer chooses to use XXX Title Company for mortgage title insurance. Nothing was said or countered back on, and we are waiting to close this deal.

Now this 3rd deal, the same thing! Along with the sellers disclosures, was a "Title Addendum".

I'm not sure why some agent's make such a big deal over split closings or why they are so against them that they try and get buyers to sign their "title addendum" but I do know this, the Real Estate Settlement Procedures Act counters it!

What is a split closing?

Many closings that take place in Michigan involve "split closings" where one title company closes and insures the seller’s side (issues the owner’s policy) and another title company closes and insures the buyers side (issues the loan policy).

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RESPA

Section 9: Seller required title insurance

Section 9 of 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.

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Comments(14)

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Erv Fleishman

Realty Associates - Boca Raton, FL

Luxury Prop Specialist Realty Associates

Anything is negotitable, but why increase costs by reinventing the wheels on one car?

Mar 28, 2012 10:44 PM

Mike Mitchell

Kee Realty - Saint Clair Shores, MI

REALTOR (R)

Hi Erv, thanks for commenting. Where are there increased costs? Not trying to reinvent the wheel. The buyer has the right to choose and the advantage is the agent has more control over the transaction with their title company doing the closing.

Mar 28, 2012 10:50 PM

Mike Mitchell

Kee Realty - Saint Clair Shores, MI

REALTOR (R)

Hi Doug, thanks! I agree with you! If the seller wants to choose who does the mortgage insurance policy then let them pay.

Mar 28, 2012 10:53 PM

Mike Mitchell

Kee Realty - Saint Clair Shores, MI

REALTOR (R)

Hi Doug, thanks! I agree with you! If the seller wants to choose who does the mortgage insurance policy then let them pay.

Mar 28, 2012 10:54 PM

Doug Rogers

RE/MAX Coastal Properties - Destin, FL

Your Real Estate Resource!

If the seller is willing to PAY all closing fees, then let them pick. Otherwise my buyer will decide. Nice post.

Mar 28, 2012 10:54 PM

Dan Hopper

Dan Hopper - Gold Way RE - Westminster, CO

Colorado Broker / Referral Services

Thank goodness we do not have split closings in Colorado. We are a good fund state, and both parties sign documents based on that day of closing, and the Title company disperses funds that same day... escrow is a dirty word, here. Both the seller and buyer sign a closing instructions document during the contract phase, and at the time if the buyer chooses their title company, that is who the seller and buyer goes with... conversely, if the seller (listing broker) uses their title company, and the buyer is satisfied, we close with that title company.

Who pays? You can still negotiate that in the process. 90% of the time, the Seller pays for the title policy.

Mar 29, 2012 12:51 AM

Nancy Conner

Olympia, WA

Olympia/Thurston County WA

Maybe someone should mention this to banks for their REO properties.....though most seem to feel like laws and rules don't really apply to them.

Mar 29, 2012 01:43 AM

Mike Mitchell

Kee Realty - Saint Clair Shores, MI

REALTOR (R)

Dan - both parties do sign based on the day of closing and typically funds do disperse the same day also.

Thanks for your comments.

Mar 29, 2012 02:10 AM

Mike Mitchell

Kee Realty - Saint Clair Shores, MI

REALTOR (R)

Nancy - Thank You! I completely agree. At first it was banks and their REO properties doing this, then listing agents doing short sales and now I'm seeing it in private sales as well!

Mar 29, 2012 02:12 AM

Erv Fleishman

Realty Associates - Boca Raton, FL

Luxury Prop Specialist Realty Associates

If I understand you, they are each issuing a policy. If that is so, then there is duplicative work. Why not have the policy issued for both sides by the same source. Our contracts indicate who is obtaining what. Invariably, the mortgage company/ bank will want the policy piggy backed on whomever is required to buy the title insurance. That responsibility varies county by county but is negotiable as all things are.

Mar 29, 2012 03:11 AM

Maureen McCabe

HER Realtors - Columbus, OH

Columbus Ohio Real Estate

Interesting, I worked in a market many years ago where the buyer typically chose the title company (or their mortgage company or the agent was the one choosing.) The buyer was paying for title insurance. In my market now (an hour and half east of the 1st market) the seller typically pays for a buyers title insurance policy so the seller usually chooses the title company. There has been pressure to put a clause in the contract to get the get the title insurance business back over to buyer's agent's choice. I have only experienced a split closing a few times. Interesting how it is handled in different markets. I have always been aware of the RESPA rule but since the buyer is not paying in our market.

Apr 10, 2012 01:31 AM

Mike Mitchell

Kee Realty - Saint Clair Shores, MI

REALTOR (R)

Thanks for commenting Maureen. It is interesting how different markets vary. Yes I would agree, if buyer is not paying for it, than it wouldn't be an issue in my opinion.

Apr 17, 2012 10:03 PM

Maureen McCabe

HER Realtors - Columbus, OH

Columbus Ohio Real Estate

I had a bad experience with an out of town attorney once, he waited until the last minute to fire the seller's choice of title insurance company so he could use his choice. Earn the commission? He was making money hand over fist from the buyer because he was trying to renegotiate custom in our area and tell us our pre-printed contract said something that it did not say. I don't know how many hours he billed his client for, for needless quibbling. He added a lot of unnecessary work and worry for his client and for the seller. He threw the "who are you working for?" thing in my face at some point, probably over this. He assured his client it was not a problem and that brand x title insurance was what she needed. So w

Who is paying for TI insurance is probably does not make it not something that buyer has choice on, but most buyers here just use the title company that the seller has chosen. Who is paying commission does not determine who is represented. If the attorney had acted on a more timely basis it would not have upset everyone here as much. I forget sometimes about customs in other areas not being identical to ours, even though I know real estate is local. Sorry to be so windy. I should write a post. I won't though.

Apr 18, 2012 01:48 AM

Mike Mitchell

Kee Realty - Saint Clair Shores, MI

REALTOR (R)

That does sound like a bad experience and a lot of unnecessary problems.

Here, the sellers pay for the owners policy and the buyer pays for the mortgage policy. The seller does choose the title company for the owners policy and the location of the closing. Traditionally the sellers title company would issue both policy's but many have started doing split closings now.

The reason I believe in split closings, is because when I'm working as a buyers agent, and we use my preferred title company, we have more control. Also I am familiar with the title company and the staff and if there is any type of problem I feel more confident it will get resolved quickly. All of this is in the best interest of my client. A lot of agents are trying to stop this, which was the reason for this post and the rules of RESPA.

Thanks again for you comments Maureen :)

Apr 18, 2012 10:40 PM