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Derek Eyring, Real Estate Pro in Lake Tapps, WA

HUD, Bank Owned (REO's) force buyers to use their selected escrow...

Asked by Derek Eyring, Lake Tapps, WA Thu Sep 9, 2010

How has your experience been with HUD deals? Same question for Bank-Owned (REO's)? Also, what do you have to say about the escrow companies (please don't name names-don't want anyone to get in trouble)? I think our buyers are being forced to use them-do you agree or disagree? Just curious what the consensus is.

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Derek,

Yes depending on the bank they do force the buyers to use their escrow companies. To be honest with you I am not a fan of this because i dont like the YOU HAVE TO. But in the long run it always works out better because that person does so many reo that they know how to make sure title is clean, how to deal with the banks on the paperwork. Some even use a system that some escrow companies do not have access to.

So as someone who who lists and sells alot of reo it always ends up being less of a hassle if you use their escrow and title.

I hope this helps
Web Reference: http://www.tk2homes.com
0 votes Thank Flag Link Thu Sep 9, 2010
Now that we have the added complication of clouds on title on a lot of bank owned property...this topic is more important than ever. Split the escrow!
1 vote Thank Flag Link Sat Oct 30, 2010
In CA, a buyer cannot be forced to use a particular Escrow or Title Company UNLESS the Seller pays BOTH sides. Now, in reality, HUD and REO tell you if you want to use a buyer chosen escrow and title, go ahead and the buyer will have to pay both sides PLUS the seller will only close with their own escrow and title - so it's a catch-22. Best give-in and use teh HUD / REO chosen escrow but put into the contract that they have to be located within "x" miles of the subject property.

Many REOs are using escrow and title in States 1500 - 3000 miles away - which typically delays closing / recording.

Best,

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. There is NO benefit to the Seller or Buyer and only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful abotu using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble.
888-391-5245 Direct Cell
THOM@THOMCOLBY.COM
DRE# 01398570
1 vote Thank Flag Link Sat Sep 11, 2010
Buyer should pick escrow...PERIOD! I do a lot of split escrows now. I'm dealing with an after sale bank owned problem where escrow conveniently missed something in the bank-owner-seller's favor!

Seller picks Title...Buyer picks Escrow. That's the way it should be here, and I fight for it most every time. Doing another bank owned right now...split escrow. Seller can use theirs...buyer is using their own to make sure nothing slips through the cracks.

I couldn't do that on the last one because there were multiple offers. Not worth the risk of losing the house. So now I'm doing after-sale cleanup. :( Either way my client doesn't lose, make sure of that..but don't for one second think escrow is "neutral". That may be legally true, but we all know it's not the case in real life.
1 vote Thank Flag Link Thu Sep 9, 2010
It doesn't work that way here, Scott. We have 3rd party neutral escrow companies who usually hold the Earnest Money, and we don't have a "transfer tax". We have a State Excise Tax that is paid 100% by the seller. Rarely will a bank let either brokerage hold the Earnest Money Deposit. It is held by the "Closing Agent" and required to be so in most Bank Addendums, regardless of how you write the offer.
0 votes Thank Flag Link Wed Dec 8, 2010
You can not be forced to use any escrow company, the key is when writing the offer you have to specify buyer has choice of closing/title company and earnest money deposit be held in the listing agents escrow account. if you do not request these things, it defaults to the seller chooses everything. Same thing with closing costs. Th ebuyer should specify sellers pays 50% of transfer tax and buyer pays 50% of transfer tax, if not buyer may pay the whole thing.

Please see my blog with tips and advice on buying bank owned homes. Please let me know your opinion.
0 votes Thank Flag Link Wed Dec 8, 2010
I have not had a bad experience, but I have to say it sets a bad tone when the bank starts making demands as to having to be prequalified through them or needing to use a specific escrow company. The fact that the house is a foreclosure is not the buyers fault. The bank shouldn't make the transaction more difficult or adversarial out of the shoot. It doesn't benefit them and it doesn't benefit the buyer.
0 votes Thank Flag Link Wed Dec 8, 2010
I truly wish there were choices with escrow on these...just based on the HUD closings that went through our office this year. It just seems like escrow companies should be allowed to go through steps to be HUD approved just like Brokers do so that there are choices. Competition always seems to improve efficiency, right?
Web Reference: http://www.cooperjacobs.com
0 votes Thank Flag Link Fri Dec 3, 2010
Hello Derek, in reference to the escrow companies I think we ultimately have our favorites, I've had one issue on REO assigned escrow, buyer indicated lack of communication and not so friendly service. Also they did not purchase a home warranty even though it was in the settlement statement. ( fixed after a phone call) Another issue for example N King based escrow on a Pierce county transaction. Not very convenient for the buyer. Good topic thanks for posting.
Web Reference: http://www.homes77.com
0 votes Thank Flag Link Sat Oct 30, 2010
My experience with bank owned, (REO's and HUD), has been much less difficult than with short sales. On bank owned transactions, the bank's agent does assign the escrow company, and we as agents don't really have a choice. But, there is a positive in this--these escrow companies do so many of these bank transactions, that they actually know what they are doing, know what the bank expects, and rarely is there an issue.
0 votes Thank Flag Link Wed Oct 6, 2010
Jean,

That's what I was thinking, and was willing to pay for the split if that were the case. That's how important an issue I deem this to be. BUT when her answer was "MY SELLER likes..." I bust up laughing...she blew her "neutral" story right there.
0 votes Thank Flag Link Sat Sep 11, 2010
Or did she care because her fee was split?????

Jean Bradford
John L. Scott RE
Silverdale WA
Web Reference: http://www.johnlscott.com
0 votes Thank Flag Link Sat Sep 11, 2010
Usually the only people saying it doesn't matter, are agents who want buyers to use their choice of escrow when they represent the seller vs the buyer. As Cascade mentioned, I've been doing "split" escrows. Had to tell you this "funny".

Escrow Officer for the seller called the day I opened escrow and asked why it was split. She said escrow is neutral and it doesn't matter. I asked why do you care then? She said: "Because MY SELLER likes to...." LOL! So much for "neutral".

As I said before...Buyer chooses Escrow - seller chooses Title (only talking about Seattle Area or other escrow states) Those answering from places where Title IS the closing agent with no "escrow" may have a different answer.

Here we have two separate services Title - usually chosen by the seller before the property is listed & Escrow - chosen by the buyer in the offer.
0 votes Thank Flag Link Sat Sep 11, 2010
Don't forget, the Escrow Company has no fiduciary duties to one party or the other. The law is very
explicit on how it must, or must not, operate. It receives "escrow instructions" from both sides of the transaction that specify the limits of it's authority. It has no power to negotiate. It must follow the escrow instructions; and can also be held liable for any violatioons. Anyone with a complaint about how the Escrow Co. handled the transaction should seek legal advice.

Jean Bradford, ABR,GRI,CRS,CRB
Managing Broker Associate
John L. Scott RE
Silverdale, WA
0 votes Thank Flag Link Sat Sep 11, 2010
By law, the buyer has the right to choose their escrow company. You just have to be foreceful. I even had one situation where we used 2 different escrows. My buyer closed at the escrow of their choice and the Bank closed at their escrow. If you have a strong preference, you can make it happen.
0 votes Thank Flag Link Sat Sep 11, 2010
I represent REO's and they are generally no different than a normal transaction; in fact it is usually easier as the bank representative has more experience and we don't have to cover the process. I don't personally care much which escrow company is used, as a listing agent I am in a transaction where the buyer may have chosen a company I choose not to use so what's the difference?

Conversely, I will not make short sales a part of my business. Too much time, risk and hassle. Bless you, those of you with the patience and stamina to ride that process to completion.

Sean
0 votes Thank Flag Link Fri Sep 10, 2010
Hud and REO's are going A LOT smoother then short sales. I don't really blink when I see REO and HUD houses for my clients. I get an enormous knot in my stomach when I see short sales. By far I think the worst addition to our industry is the third party negotiators for short sales. These people make the process more complicated and expensive. They have created a cottage industry, that adds no value for anyone.
0 votes Thank Flag Link Fri Sep 10, 2010
In the past six months, I have 'caved' twice and allowed the seller to pick the escrow company. In each case, the escrow company made mistakes and were overall far less communicative than the escrow company I typically use. I agree with Ardell - the seller picks title and buyers pick escrow.

There seems to be a few exceptions, however, that are very difficult to negotiate - REO's and new construction with builders. I've also sold new construction in the Bothell area this past year, and the builders require you use their escrow company. In these cases, I've had good experiences with escrow. They are dealing with large volumes with the same seller, so I can see how it can streamline the process. As for REO's, I'm working on one right now and haven't been overly impressed with their communication, but otherwise, haven't had any major issues.

Bottomline: fight for your buyers as much as you can to have control over escrow, but don't lose their dream house over it. If you can't control escrow, you must be incredibly diligent to ensure all "t's" are crossed and "i's" are dotted!
0 votes Thank Flag Link Fri Sep 10, 2010
In hundreds of transactions over the past few years, I have yet to have a bad experience with an escrow company, whether by client has chosen it or our use of the Listing Broker's preferred escrow.

On HUD deals, I find the hardest part is just getting the paperwork correctly submitted. I personally find that HUD has a difficult purchase process. If I can get past that point and win the bid, I have had no trouble with their required escrow agent in our area.

There is no doubt that some escrow companies are more communicative than others by providing weekly status/checklist emails and even post-close anniversary notifications. I feel that the escrows are properly regulated.

On REO's, I can see where the banks have a preferred escrow as they have a national account and get some discounts.
0 votes Thank Flag Link Fri Sep 10, 2010
when I represent the buyers, I hate to use escrows that the seller picks. I do not care what the reason is, most of the time the service is terrible, and bottom line is things get messed up & I have to do more work.
0 votes Thank Flag Link Thu Sep 9, 2010
Banks, investors, so on that purchase/sell lots of real estate just want it streamlined
0 votes Thank Flag Link Thu Sep 9, 2010
Here in Georgia, if the buyer wants their title insurance paid for and seller concessions, they have to use the seller title atty. If it's a cash sale and they want to pay their owner title insurance, etc., they're free to use the title atty of their choice.
Web Reference: http://www.DesariJabbar.com
0 votes Thank Flag Link Thu Sep 9, 2010
Hi, Derek,

I don't think there's anything nefarious about it, or that it hurts the consumers in any way. If a bank puts all it's REO's (for instance) with the same escrow company, it may get a slight discount and it will have the conformity of the same forms, escrow officers, phone numbers, etc. in doing their processing.

Jean Bradford, ABR,GRI,CRS,CRB
Managing Broker Associate
John L. Scott
Silverdale, WA 98383
360-620-4774
0 votes Thank Flag Link Thu Sep 9, 2010
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