Chris, Home Buyer in Macomb, MI

In Michigan, whos right is it to decide what title company is used in a real estate transaction?

Asked by Chris, Macomb, MI Thu Nov 8, 2007

Can a buyer's agent dictate what title company is to be used? Please be specific, note laws if applicable.

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14
Geoffrey D.…, , 48381
Thu Nov 8, 2007
The buyer can use the title company of their liking, make sure it is not pre-written in the purchase agreement. The seller can use the title company of their liking. The buyer and seller can have different title companies.
1 vote
Chuck Benedon, , Wisconsin
Thu Nov 8, 2007
Nicole..
Are you saying that real estate sellers (brokers, agents, etc) have a contract that demands that a specific Title Co be used in a transaction? Is that in the actual document or is that written in by the agent> Also, doesn't the lender provide the title insurance policy??

In any event, that is absolutely against the RESPA act. Here is the language from RESPA:

""Choice of Title Insurer. Under RESPA, the seller may not require you, as a condition of the sale, to purchase title insurance from any particular title company. Generally, your lender will require title insurance from a company that is acceptable to it. In most cases you can shop for and choose a company that meets the lender’s standards.""

Have you seen the legislation HR3915?

http://www.govtrack.us/congress/billtext.xpd?bill=h110-3915
1 vote
Christine Ki…, Agent, Clinton Twp, MI
Wed Nov 10, 2010
In Michigan, we can do a split title...both buyer and seller can choose their own title company. Now with many bank owned and HUD properties, the bank/government has taken this choice away and are demanding the buyer must use their title company.
0 votes
Carlo Gobba, Agent, Bloomfield Hills, MI
Thu Dec 20, 2007
You have alot of great answers already and specific RESPA info. The seller pays a title fee to insure the buyer. They should not be swayed by any buyers agent to use a different company. If a buyer wants to use their own title company to close the deal and they want to take out the mortgage policy through their own title company, they can. They cannot be forced by the seller to use the same title company the seller chose.

In the end, (IF there were any problems that came up later) you want to be sure that you know who to call, and having a relationship with a certain title company is certainly good. You will know exactly who deals with what question later. That is the major bennefit to dealing with a certain title company over and over.
Web Reference:  http://www.CarloGobba.com
0 votes
, , Louisiana and Mississippi
Wed Nov 14, 2007
There seems to be a bit of misinformation on this subject being passed along. It is a RESPA violation on a federally related mortgage for the seller to require a particular title company to be used UNLESS the Seller is paying the closing costs. Refer to the HUD web site on RESPA for more detailed and accurate information. You can find the applicable full RESPA guidelines on the link provided. It has been a common (illegal ) practice for builders or sellers to force buyers to use a certain title company in a purchase agreement. HUD considers that there must be a referral fee or kick back in such instances. Agents should report such violations. HUD is aggressively pursuing action against Title Companies and Agents. Check out their web site.
0 votes
Alicia Beyer, , Grand Rapids, MI
Tue Nov 13, 2007
Why lose the deal arguing over where you close. There are tons of great title companies out there. Realtors should go with the flow and just do what is best for your buyer or seller. CLOSE THE DEAL!!
Web Reference:  HTTP://WWW.2905BONNELL.COM
0 votes
Rp, , Midwest, WY
Thu Nov 8, 2007
Every state government independently regulates the title industry, so practices, prices and rules vary widely. Get to know what goes on where you live to make an informed decision. You said be specific, so here goes:

The CUSTOM in MI is for sellers to pay for the Owner's Title Policy, though custom is not always followed. Buyer pays for the Loan Title Policy for their Lender if there is a loan and also pays for any extra coverages on either policy, called Endorsements. In MI, Buyer customarily pays the closing Escrow Fee and the seller pays the State Transfer Tax (ouch in MI). Regardless of custom, if you pay for the Owner's Title Policy, you choose the title co. and so you should be able to ask questions from your real estate (R.E.) pros (pros being realtor, real estate attorney, loan officer) to get info to make your own decision on which title co. to use. You can call title co's on your own, but in the last few days of any month they are busy and will have less time to talk. I'd ask a R.E. lawyer if you have one.

The title industry is complicated and even most R.E. pros don't truly understand it, though they know more than property owners who have rare real estate experiences.

It is not acceptable for a lender, realtor or attorney to insist the title company is their decision to make. It IS true, however, that these pros may know which agents or direct title company offices give the best service.

The title industry in MI is dominated by Title Agents, meaning locally owned independent companies who issue policies which are underwritten by the assets of large, national title insurers (a few not so large). The agents are held to certain standards regarding underwriting decisions by the national co's, but the service levels they provide can be very good, very bad or anywhere in-between. The large title insurers also operate their own company-staffed offices in many parts of the country and those are Direct operations, not Agents.

The reason I detail this is b/c there are many title agents in MI which are owned by real estate brokerages. When a title agency is owned by a R.E. brokerage it can legally obtain business by telling their realtors to direct their listing clients to their own "captive" title agency. R.E. attorneys and lenders can also be title agents in some states. If a R.E. pro has an economic interest in a title agency that is used in a transaction they are involved in, that interest must be disclosed in writing to the seller and buyer (often this is not done until the closing!). RESPA is Federal law prohibiting kickbacks or referral fees to realtors, lenders, attorneys or anyone who directs real estate business, among other things. It is not a kickback for a title agency owned by a R.E. brokerage or lender to make money by providing title and/or escrow services to listing or borrowing clients, or for a R.E. attorney to generate revenue by functioning as a title agent. R. E. pros can fight over which title co or agent gets a deal without the consumer even knowing!

Sometimes when R.E. pros are also title agents in a deal they act in their own best interests rather than those of their clients, so it pays to know what is customary where your transaction is located. When a seller can negotiate away the responsibility of paying for the owner's title policy to the buyer but the seller's realtor or attorney has a title agency, they might not want to lose the title order and tell their own client they should pay for the title policy -- because if their client isn't the one to pay then they don't make the extra revenue by issuing the title policy.

Can you tell I prefer to use direct offices of title companies? I do not like the unavoidable conflict of interest when R.E. pros are title agents in my deals and I usually don't permit it - I want neutrality but without paying more than I should. I'M THE CUSTOMER, I DECIDE! Yet there are many very good title agents out there. Metropolitan Title and Seaver Title are big independent title agents which operate in MI and do a good job.

In MI, title policy premiums are filed officially with the state insurance authority, cannot be deviated from and the cost does not differ greatly between title co's. If you obtained a title policy from the acquisition of your home, depending on the age of that policy you can get a discount on the new policy, often called a Re-Issue rate. If your title policy is too old, it may not qualify for a discount. If a buyer is paying for title and the seller got a prior policy, the buyer may be able to get a discount using the seller's prior policy. Again, rules vary by state. Be aware that when a title agent is operated by a realtor or real estate attorney, they may discount some of their professional fees (bundle) if they provide title services, and a fee they quoted you for certain services may be under the assumption that they will gain supplementary title revenue.

Good Luck!
0 votes
Missy Caulk, Agent, Saline, MI
Thu Nov 8, 2007
I ask my sellers if they have a preference, if not I order it from a title company that gives great customer serve. When you are a buyer you can choose as well.
Web Reference:  http://MissyCaulk.com
0 votes
Chuck Benedon, , Wisconsin
Thu Nov 8, 2007
Geoffery has it exactly correct.

As far as having a credit union or bank dictate what title company one can use, I believe that violates RESPA, too. In this case, I would not argue with the CU on that, as they are probably requiring a title company that they know does a good job.

Each law/statute has a reason behind it, but you don't see that in the law, itself, unless it is challenged in court and then the judge makes the determination as to whether or not the law has been argued, properly, as to the INTENT of the legislature when the law was created. The reason for this particular respa rule (which is a law, btw) is to give the customer the choice to avoid any conflict of interest that could harm the consumer.

Chris, Your agent is lying ...whoops, I mean "mistaken"...no misinformed....

Call the credit union, directly and ask them that specific question. Also ask them about the respa guideline I posted.
0 votes
smith3gary, Agent, White Lake, MI
Thu Nov 8, 2007
Chris, Then I suggest getting something in writing from the CU that they will not fund unless you are using these Title Companies.
0 votes
Chris, Home Buyer, Macomb, MI
Thu Nov 8, 2007
Basically, here is the situation. My agent (buyer's) is telling me that it is their right to choose the title company. Being an average citizen with no training regarding real estate transactions, this seemed a little funny to me. When I specifically asked about that, they said that this is their right, not mine to decide.

The specific credit union that we are working with regarding financing is pretty particular about the title company. Therefore, I am worried that this will become a sticking point with regards to financing.
0 votes
smith3gary, Agent, White Lake, MI
Thu Nov 8, 2007
Chris, I have to admit, that's a very useful question. I'd like some clarification myself.
0 votes
Nicole Sleeva, , Novi, MI
Thu Nov 8, 2007
Chuck ~ No, I am not stating that. I am familiar with all of the RESPA guidelines. I am stating that a lot of contracts here in Michigan state that the Seller will provide to the Buyer, at Seller's expense, an owner's policy of title insurance. Sellers will look to their agent for a referral to a title company to complete that requirement. It is still the seller's decision as to which title company they will use. Generally, the mortgage company will accept the separate mortgage portion of the policy through the same company since it will be issued at a simultaneous discounted price (and combined closing fee); saving the buyer money. Purchase transactions require an Owner's Policy (provided by the seller) and a Mortgage Policy (required by the lender to cover their interest in the loan). It may vary from state to state but that is what is practiced here in Michigan.
Web Reference:  http://www.NicoleSleeva.com
0 votes
Nicole Sleeva, , Novi, MI
Thu Nov 8, 2007
Hi Chris ~ Generally it is pre-written in the contract that the Seller has the right to choose the title company. Most real estate brokers have pre-existing relationships with title companies so the listing agent will use that company. But EVERYTHING is negotiable. Work it into the offer/contract that you would like to use a particular company. As long as it is an insured title company and fees are comparable, it shouldn't be a problem. Just make sure you get it in writing. Good luck!

Nicole Sleeva
Web Reference:  http://www.NicoleSleeva.com
0 votes
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