Why won't a bank let you use your own title company?

Asked by D.decor, Houghton Lake, MI Wed Jul 6, 2011

I would be able to see if there is a clear title at a cost of 100,00 but the bank won't recognise it at closing,as they will only use their own. Anyway around this? Time is a huge factor here.

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Are Andresen’s answer
Are Andresen, Agent, Vienna, VA
Wed Jul 6, 2011
With a foreclosure I would suggest you retain your own title company. They should have an attorney on staff or retainer that would be able to advice you on what is typical and acceptable. By having someone looking out for you (in addition to your buyer agent) you can make sure the survey and title search is acceptable and that title insurance properly protects you.

The foreclosing banks title company regularly issues indemnity letters and title policy exceptions. The title company may try to convince you that those are "normal" or "industry practice" and threaten you with default if you don't proceed to closing (some exceptions may actually be "normal".) It usually doesn't help that the issues aren't discovered until last minute.

In Virginia you should be able to use your own title company for your part of the closing. In my opinion it is worth loosing the closing incentives in return for gaining a better understanding of what you are purchasing.

Using the sellers closing company for a foreclosure is sort of like the seller providing a home inspection and saying all is good and normal. Wouldn't you want to rather do your own inspection?

Are Andresen
Web Reference:  http://soldsense.com
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David Burnham, , Washington, DC
Wed Jul 6, 2011
You should be able to use your title company and the bank can use their own. It is called a split settlement and it happens all the time.

It is possible that the bank will refuse to enter into a contract with anyone other than their title company and this could be for a couple of reasons. First, many foreclosures have been undone lately and the bank may want to use a company that they are sure will get the process correct. They don't want to deal with an issue later.

Second, the title in a foreclosure is often messy and it is possible that their title company has cleaned the title and has all the paperwork to show it. If you pick another title company, that work will need to be repeated and it is possible they have trouble fixing all the issues and you don't make it to settlement. The bank does not want to get 99% of the way through the process not to settle.

I would look into a split settlement and if that does not work, I would look into their company if that is what it will take. It may not be the best alternative, but sometimes that is what it takes to get the house. In the end, you will still have a title insurance policy.
0 votes
Vicky Chrisn…, Agent, Purcellvile, VA
Wed Jul 6, 2011
I think your agent should guide you in this.

But I have a different opinion from the last poster. The sellers prefer you to use their preferred company for many reasons, but in VA they can not require you to settle with their company. Buyers have the right to choose in VA. They can "entice" you with paid closing costs and such, but that is it.

While there are many pure motives and a massive convenience factor for sellers to use one title company on their side, it is entirely possible that the company they chose will insure a defective title. That's not a good thing. I'd much rather have the title scrutinized and have to back out of sale than to get into one where down the road we find out the property was wrongly foreclosed upon and you are forced to give up your home to the person who the bank stole it from. Sure, the insurance kicks in and covers some of your damages, but not all. Can you imagine dealing with this? When I buy a property I want to know I own it fully.

Vicky Chrisner
Serving Northern Virginia
Web Reference:  http://www.vickychrisner.com
0 votes
Cynthia Cont…, , San Jose, CA
Wed Jul 6, 2011
In California you have the choice to use your own title company and banks are not suppose to influence the buyer but it still happens. In my experience every bank/asset management company has their own process in dealing with a title/escrow company. So the banks prefer to use the same title companies so that they are not continually having to teach someone new about their process and required paperwork.
0 votes
Erik Weissko…, Agent, fairfax, VA
Wed Jul 6, 2011
David gives some excellent points..however the biggest point that is missed..is $$$. yes, the old fashioned dollar. The title insurance is the biggest money maker for the title company.

Go for the split settlement if you can and be sure you are getting proper coverage in your title policy.

Good luck to you.

Kind Regards,

Erik J. Weisskopf,ABR,CDPE,CRS,GRI
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