Frequently Asked Questions

Legal Hotline FAQ

a blog of the most frequently asked questions to the MAR legal hotline.


Cindy Sellers
Cindy Sellers
Cindy Sellers's Blog

Is it legal for an REO seller to require the buyer to use a specific title company?

Section 9 of the Real Estate Settlement Procedures Act (RESPA) prohibits a seller from requiring a home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance.  However, a seller can offer certain incentives for the use of a particular title company but the seller cannot require that a particular title insurance company be used by the buyer as a condition of sale unless the seller pays 100% of all title insurance and related title costs. The CFPB has issued guidance stating that if the seller requires the buyer to use a title company (without offering an incentive), unless the seller pays 100% of the title related costs then the seller has violated RESPA. Even if the seller offers to purchase the owner's title insurance policy for the buyer, there can still be a violation of RESPA if the buyer must purchase the lender's title insurance policy.
Furthermore, pursuant to Sections 17-524 and 17-607 of the Maryland Real Estate Brokers Act (the Broker Act), a buyer has a right to employ her own title insurance company, settlement company, escrow company, mortgage lender, and title lawyer.  Nothing in the law prohibits a seller from offering an incentive to a buyer who uses a particular title insurance company, settlement company, escrow company, or mortgage lender.  The buyer then has the option of accepting or rejecting the incentive.  
As a practical matter, often the buyer does not want to use the title company suggested by the REO Seller, but likes the idea of having the seller pay for the owner’s title insurance policy.  In this case, you may want to reach out to your favorite title company and ask them to provide your buyer client with an estimated settlement statement. The difference in cost may not be as significant as the buyer might think.  The buyer, of course, must make the final decision.
Persons who believe a settlement service provider has violated RESPA in an area in which the CFPB has enforcement authority, may wish to file a complaint. The complaint should outline the violation and identify the violator(s) by name, address and phone number. Complainants should also provide their own name and contact information for follow up questions and status reports from the CFPB.  Complaints may be submitted online at: https://www.consumerfinance.gov/complaint/#mortgage
 


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