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The Closing Protection Letter: What the What?

By Charita Cadenhead

Real Estate Agent with eXp Realty

October 01, 2013 12:59 AM

The Closing Protection Letter: What the What?

Questions Is anybody asking the same question: What the What? No matter how I try to process this in my head, the rationale escapes me as to why the buyer has to "buy" this protection against possible errors or fradulent activity of the closing agent, lender or title company.

It seems to be that closing agents, lenders and title companies should have their own insurance in place in case of a lawsuit claiming negligence, fraud, etc. I know as a real estate agent, I have professional liability insurance for the same purpose, but I don't ask my clients to contribute $25.00 to the cause.

If anybody can answer my questions: What the What? to a point where it makes sense, I'll be more than glad to liten and to ponder upon why the reasoning has escapted me up to this point.

I'm list-en-ing! (in my Frazier Crane voice).

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Dick Greenberg

New Paradigm Partners LLC - Fort Collins, CO

Northern Colorado Residential Real Estate

Hi Charita - I haven't seen that one yet, but it's obnoxious. If I ever see it, I'll be asking our legal counsel about whether my buyers can just refuse to sign it.

Oct 01, 2013 01:22 AM

John McCormack, CRS

Albuquerque Homes Realty - Albuquerque, NM

Honesty, Integrity, Results, Experienced. HIRE Me!

That's a new one for me Charita. Like Dick suggested can your buyers opt not to sign?

Oct 01, 2013 02:01 AM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

It is obnoxious Dick and it really makes me sick when I have to present it to my client to accept or decline. The cost to the client is minimal ($25), but they should not have to pay it to protect themselves because someone screwed up or got greedy.

John the absolutely don't have to sign. They can definitely opt out. Everytime I see one, Blackmail comes to mind.

Oct 01, 2013 02:54 AM

Brenda Mullen

RE/MAX Associates - San Antonio, TX

Your San Antonio TX Real Estate Agent!!

I haven't seen that over here...that makes no sense at all and I hope to never see one..geez

Oct 01, 2013 03:03 AM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

I did a Google search and the Closing Protection Letters are used in Texas too, but apparently not as widespread as here. Good for you.

Oct 01, 2013 04:48 AM

Jane Peters

Home Jane Realty - Los Angeles, CA

Los Angeles real estate concierge services

We don't have closing tables here, but I saw this in the paper yesterday http://www.latimes.com/business/realestate/la-fi-lew-20130929,0,1365908.story

Oct 01, 2013 05:58 AM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

That's a good reference article Jane and thanks for including the link. I see why such protection is needed, but I am still of the notion that title companies and closing agents should be covered by their own insurance and not stick the consumer with the cost of a Closing Protection Letter.

Oct 01, 2013 06:10 AM

Susan Haughton

Long and Foster REALTORS (703) 470-4545 - Alexandria, VA

Susan & Mindy Team...Honesty. Integrity. Results.

I admit I have never heard of this before reading this post and the article for which Jane provided the link. If you could see me right now, I'm just shaking my head.

Oct 01, 2013 07:10 AM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

Susan I just ho or it does not become widespread. The first time I saw it, red flags went up everywhere. I immediately became suspicious of the company that sent it for my buyers acceptance or rejection .

Oct 01, 2013 07:44 AM

Debbie Reynolds, C21 Platinum Properties

Platinum Properties- (931)771-9070 - Clarksville, TN

The Dedicated Clarksville TN Realtor-(931)320-6730

It isn't right Charita. In fact it sounds like government or Congress is involved and messed things up.

Oct 01, 2013 09:43 AM

Gladys Webb

Kreative Realty LLC - Tuscaloosa, AL

HI Charita, love the look! It's an Alabama thing! It's not right, the closing company should have insurance to cover such errors and omissions etc but they want the buyer to pay for it and some do some don't. In my personal opinion its just all about the money and maybe something somewhere came up we should research and see where it really did stem from. I'd like to know more to more knowledgeable to my clients except don't purchase it! Have a good one!

Oct 02, 2013 11:58 PM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

Debbie you are correct. It just is not right. I don't know about the government involvement though. That was not my first response.

Thanks Gladys. I did Google it and it seems their are some other states that us it as well, but it appears it's not used as routinely as it is in Alabama. Everytime I get that email with the letter attached, I just want to cringe.

Oct 03, 2013 12:42 AM

Roy Kelley

Retired - Gaithersburg, MD

All of us need to be alert for unneeded creative fees that pop up.

Oct 03, 2013 01:06 AM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

Roy a creative fee describes this to a tee.

Oct 03, 2013 01:51 AM

Tammy Lankford,

Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA

Broker GA Lake Sinclair/Eatonton/Milledgeville

I read this and called you, because I wanted to hear your Frazier crane voice. LOL I've never even heard of this and it's not being charged in Georgia (at least not in my area) Our closing attorney has E&O. Maybe they are hiding it in the attorney's fees, but it's never a separate fee.

Oct 03, 2013 05:03 AM

Wayne Johnson

Coldwell Banker D'Ann Harper REALTORS® - San Antonio, TX

San Antonio REALTOR, San Antonio Homes For Sale

Charita-Thanks for the alert. I looked over a few of my HUD-1s for the year and did not see a separate line item, nor has it been offered by any of the Escrow/Closing Officers handling my Buyers to far. I'll be on the look out now.

Oct 08, 2013 11:15 AM

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