By Kay Wilson-Bolton
October 16, 2009
Every “market” has its own unique influences that make a mark in history.
When the market we know today became driven by banks and asset managers, they formed alliances with various service providers for title and escrow. The goal was to increase efficiency and reduce costs. I’m not sure either of those goals was met but those alliances created major hardships on our local title and escrow providers, because they were excluded from all this new business.
Millions of dollars have been spent in other cities and counties on services that have been traditionally provided by local companies.
A new law was signed by the governor on Sunday, October 11, 2009 that enacts the Buyer’s Choice Act. This new law, “prohibits a mortgagee or beneficiary under a deed of trust who acquired title to residential real property improved by 1-4 dwelling units at a foreclosure sale (or trustee’s sale) from, requiring, directly or indirectly, as a condition of selling the property, that the buyer purchase title insurance or escrow services in connection with the sale from a particular title insurer or escrow agent.”
The law does not prohibit a buyer from agreeing to accept a title insurer or an escrow company recommended by the seller if written notice of the right to make an independent selection is first provided by the seller to the buyer.
It is interesting to note this law applies only to REO transactions. Furthermore, the real estate agent of the REO seller is included under this definition.
A “seller” who violates these provisions will be liable to the buyer for an amount equal to three times all charges made for the title insurance or escrow services. In addition, any person in violation will be deemed to have violated his or her licensing law and will be subject to discipline by the Department of Real Estate.
However, a transaction is not invalidated solely because of the failure of any person to comply with any provision of this law.
A validating principal is the existing Section 9 of federal law Real Estate Settlement and Procedures Act which prohibits a seller in all transactions from requiring the home buyer to use a particular title insurance company as a condition of sale.
In fact, buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance. However it is not a violation of Section 9 to require a buyer to use a particular title insurance company so long as the seller pays for it. This new California law does not clarify this distinction as to whether to law applies or doesn’t apply depending on who pays for the title insurance or escrow services.
So, if you have a favorite title or escrow company and want to use it in your next transaction, ask your agent to submit a copy of the new law along with your offer. Your choice of title and escrow will likely be ignored and REO agents will not advocate your request, but at least this is a set towards fair and equitable competition.
Corporate sellers will get the message after a while and agree to let money for these services be spent in Ventura County instead of places far from home.
Kay Wilson-Bolton served the real estate industry since 1976. She is the broker for CENTURY 21 Buena Vista with offices in Santa Paula and Ventura. She brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.readysetkay.com