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Candy, Home Buyer in El Dorado Hills, CA

ALTA Loan policy and buyer agency fee in California

Asked by Candy, El Dorado Hills, CA Sun Feb 12, 2012

I found a short sale home and contacted the sellers agent to be my agent as well. I have in past put offers on short sale hoems and none of teh agents asked for ALTA loan policy or buyers agency fee. But this real estate agent has asked in the home contract in the 4D section of offer in other costs that buyer pay these two
1. for ALTA loan policy
2. Buyer to pay 495$ to selling broker as buyer agency fee.
For ALTA loan policy I never heard buyer shoudl be paying anything. Is this something that benefits a buyer? There is no amount listed in the contcat that says how much is the policy worth. Is the policy ther eto help a buyer or is it for lender protection?
Also, I contacted the selling agent so I could negotiate beter since one agent is getting all the commision. Why should a buyer pay any kind of fee to the agent?
Seller is already apying for the agent why shoudl the agent charge the buyer? Any advice on this is appreciated. The home I am buying is in Sacramento, CA

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Aileen La Bouff’s answer
Hi Candy,
The ALTA title policy will protect you and your lender. It insures the purchaser (and their mortgagor) free and clear title to the property. In some counties in it customary (but not compulsory) that title and escrow fees are paid by the seller, and in some county those fees are paid by the seller. Regardless of who pays the title and escrow fees, the difference between a CLTA policy and an ALTA policy is 'always' paid by the purchaser if they're borrowing money to make the purchase.
The $495 buyer agency fee is probably not a commission to the seller's agent, but is paid to a short-sale facilitator. There is some question whether these fees are legal, but they range from $495 up to $1500.
If you had your own agent representing you they may be able to negotiate these fees for you, they may not. They may also be able to assist with re-wording the terms of the contract so that they are clearer and more beneficial to all parties. As it is, you have chosen to deal with the seller's representative, so you don't have someone working on your behalf.
Just for your own benefit, the legal definition of 'agency' is that the agent must put their clients' needs first. Ahead of their own, ahead of their company, ahead of any buyer who may make an offer on the property. If the agent is representing both sides of the transaction it can be difficult to provide full agency services to both seller and buyer. I, personally, do not represent both seller and buyer unless under the most extreme circumstances - because of this very fact.
Good luck.
2 votes Thank Flag Link Sun Feb 12, 2012
Dual agency is no way to buy a home.
If you feel ripped off now think how you will feel a year from now.
If you are indeed buying the home negotiate with the agent about the fee.
If you can buy another house do so and for your own sake get your own agent.
You would not hire the attorney of a person suing you would you?
Having a buyers agent doesn't cost you anything.
They work on your behalf. not their own.
When you sue the sellers agent the sellers agent will best represent the seller.
Just look up "Dual agency."

Harold Sharpe - Broker
So Cal Homes Realty
(951) 821-8211
California Department of Real Estate Broker License # 01312992
1 vote Thank Flag Link Sun Feb 12, 2012

"How is the ALTA loan policy different from title insurance policy insuring Buyers lender or the escrow and title that is usually split 50/50 between buyer and seller."

Let me take the last part of your question first:

El Dorado Hills is in El Dorado County. Each County in CA has their customary escrow and title fee splits (by the way, this is not cast in stone - all escrow and title fees can be negotiated, just expect the seller to push back on the ALTA fee). Customary Escrow/Title/County Transfer Tax splits can be reviewed at http://docs.steven-anthony.com/ClosingCostsGuide.pdf customary fees

Now, re: "ALTA loan policy different from title insurance policy insuring Buyers lender "
From http://en.wikipedia.org/wiki/Title_insurance#Owner.27s_policy

Owner's policy

The owner's policy assures a purchaser that the title to the property is vested in that purchaser and that it is free from all defects, liens and encumbrances except those listed as exceptions in the policy or are excluded from the scope of the policy's coverage. It also covers losses and damages suffered if the title is unmarketable. The policy also provides coverage for loss if there is no right of access to the land. Although these are the basic coverages, expanded forms of residential owner's policies exist that cover additional items of loss.

The liability limit of the owner's policy is typically the purchase price paid for the property. As with other types of insurance, coverages can also be added or deleted with an endorsement. There are many forms of standard endorsements to cover a variety of common issues. The premium for the policy may be paid by the seller or buyer as the parties agree. Usually a custom in a particular state or county on this matter reflects in most local real estate contracts. One should inquire about the cost of title insurance before signing a real estate contract that provides that he pay for title charges. A real estate attorney, broker, escrow officer (in the western states), or loan officer can provide detailed information as to the price of title search and insurance before the real estate contract is signed. Title insurance coverage lasts as long as the insured retains an interest in the land insured and typically no additional premium is paid after the policy is issued.

Lender's policy

This is sometimes called a loan policy and it is issued only to mortgage lenders. Generally speaking, it follows the assignment of the mortgage loan, meaning that the policy benefits the purchaser of the loan if the loan is sold. For this reason, these policies greatly facilitate the sale of mortgages into the secondary market. That market is made up of high volume purchasers such as Fannie Mae and the Federal Home Loan Mortgage Corporation as well as private institutions.

The American Land Title Association ("ALTA") forms are almost universally used in the country though they have been modified in some states. In general, the basic elements of insurance they provide to the lender cover losses from the following matters:
1.The title to the property on which the mortgage is being made is either Not in the mortgage loan borrower, Subject to defects, liens or encumbrances, or Unmarketable.
2.There is no right of access to the land.
3.The lien created by the mortgage: is invalid or unenforceable, is not prior to any other lien existing on the property on the date the policy is written, or is subject to mechanic's liens under certain circumstances.

As with all of the ALTA forms, the policy also covers the cost of defending insured matters against attack.
Elements 1 and 2 are important to the lender because they cover its expectations of the title it will receive if it must foreclose its mortgage. Element 3 covers matters that will interfere with its foreclosure.

Of course, all of the policies except or exclude certain matters and are subject to various conditions.

There are also ALTA mortgage policies covering single or one-to-four family housing mortgages. These cover the elements of loss listed above plus others. Examples of the other coverages are loss from forged releases of the mortgage and loss resulting from encroachments of improvements on adjoining land onto the mortgaged property when the improvements are constructed after the loan is made.
[End quote]

Finally, and probably the MOST IMPORTANT POINT to consider before moving forward with a Dual Agency (using the listing agent to buy the home).

0 votes Thank Flag Link Sun Feb 12, 2012
The ALTA is the title insurance policy. There are 2 policies. One is for your lender and is less expensive. One is for you. Every county has a different custom as to who pays it. In Santa clara County the seller usually pays it. In San Mateo County the buyer pays title and escrow. I am not familiar with what generally happens in Sacramento. However, even when the seller pays, or when title and escrow are split, the buyer always pays their own title insurance or ALTA for their lender. Escrow fees are to pay the title company for handling the escrow. Again these fees can be paid by buyer, seller, or split, depending on the county.
In a short sale the bank decides which fees they are going to pay. Sometimes they will pay the title fees, but not the escrow fees, sometimes they pay all, and sometimes none of the fees. Who pays for what will be spelled out on the HUD1 which the bank needs to approve.
Marcy Moyer
DRE 01191194
Web Reference: http://www.marcymoyer.com
0 votes Thank Flag Link Sun Feb 12, 2012
Thank you Marcy for the responses. How is the ALTA loan policy different from title insurance policy insuring Buyers lender or the escrow and title that is usually split 50/50 between buyer and seller.
Sorry I am being paranoid because its a common agent and I am not sure if I can get ripped by signing something and later regret.
0 votes Thank Flag Link Sun Feb 12, 2012
Candy you pay the title insurance one time. The price will depend on the amount the property sells for. You can get the exact amount from the title company, but for example on a home worth $570,000 the title insurance for the buyer is about $1600 and the lender portion is $575.
Marcy Moyer
DRE 01191194
Web Reference: http://www.marcymoyer.com
0 votes Thank Flag Link Sun Feb 12, 2012
Hi - Thanks for all of the advice.
Is the ALTA loan policy something like life insurance that I have to keep on paying while I am paying off the loan?
Or is it one time deal? Can the real estate gurus on the site give a number on how much this policy may cost me?
thanks again for all the advice.
0 votes Thank Flag Link Sun Feb 12, 2012
No one wins when you use the seller's agent in a short sale. the bank will just cut the seller's agent's commission so they will do twice the work and not make the anywhere near twice the money. The bank will also make you sign something that says you are not getting any money back from an agent. their perspective is that if anyone gets any money back it should be them. You will not be getting someone whose sole responsibility is to look after your interest, not the seller's or the bank's interest. So in the case of a short sale it is really not worth it.
As far as the title policy goes you need one title policy to cover yourself and one to cover your lender. Sometimes the banks will agree to pay for the policy that covers you, but they never agree to cover the one that covers your lender. You can not buy a home without title insurance, so don't even try to go there.
Marcy Moyer
DRE 01191194
Web Reference: http://www.marcymoyer.com
0 votes Thank Flag Link Sun Feb 12, 2012
Aileen said it very well. The Buyer Agency Fee could also be their transaction coordinator fee. This is like their assistant.

I don't understand why a Buyer would want to use the Seller's agent. The commission is usually paid by the Seller to the Broker who list the home and that BROKER already has agreed to share the commission with the Buyer BROKER regardless of who writes the offer so you might as well have your own agent. Notice that I said BROKER and not agent. Broker being the company, such as Coldwell Banker, Intero, Keller Williams, etc... The agents can not change the commission unless the Broker agrees to it. There is a huge misunderstanding in the many buyers mind thinking they are going to get a deal working with the Selling agent. This is wrong. It is the job of the listing agent to get the highest price for the seller. How can they do that and still get you the best deal? It's not about the commission. If they get paid for both commissions it doesn't necessarily mean that the seller is reducing their price.

All the best to you.
Web Reference: http://www.terrivellios.com
0 votes Thank Flag Link Sun Feb 12, 2012
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