Who picks the title company?

Who gets to pick the title company that will issue the owner policy of title insurance?

It depends. If the seller pays for both the owner policy and the lender policy of title insurance, then the seller can pick the title company without violating the Real Estate Settlement Procedures Act (RESPA). However, if the buyer pays for the owner policy, the seller cannot condition the sale of the property on the buyer purchasing the owner policy from a particular title company. Rather, the buyer would get to pick the title company.

In situations where the seller pays for the owner policy and the buyer pays for the lender policy, RESPA application is less clear. At least one court has held that where the seller paid for the owner policy and the buyer paid for the lender policy, the seller did not violate RESPA by insisting on a particular title company for the owner policy. The court explained that the seller did not require as a condition of sale that the buyer use that same title company to issue the lender policy. However, the Consumer Financial Protection Bureau, the government agency that enforces RESPA, has yet to take an official position on the law’s application in this scenario. Therefore, if a seller wants to avoid a possible violation of RESPA, the seller should not insist on a particular title company for the transaction unless the seller is paying for both the owner policy and the lender policy of title insurance.

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28 Responses to Who picks the title company?

  1. David J Davis says:

    This is going to come down to who does the policy protect. Caveat Emptor or let the buyer beware. The buyer, who is in effect, the consumer here, gets to chose who they will have goods or services from. Who pays for those services is an altogether separate issue that is typically outlined in a contract.

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  2. My Thought on this frequent issue: The buyer is the party to which my one day be liable for a Title issue, together with a lender who may also be involved. So WHY does a seller have any right to insist on the Title Co. anyway? Seller protection comes from their existing Title Insurance issued when they purchased. After the sale, seller received their $$, release from lender, and a myriad of potential issues, but buyer could be holding the proverbial “bag!” RIGHT OR WRONG??

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  3. Rick DeVoss says:

    So why does our TREC contract form not have boxes to check for who is going to pay for Both policies, and who is going to select the title company?
    And better yet, why is this discussion about the buyer’s and seller’s choices, when we all know it is an arm wrestling contest between the two Agents…??
    I just wish we could get a court decision on this ruling once and for all….

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  4. I get lost in the mechanics of how this is an issue.

    Is this disputable when the contract has an agreement of the choice of title company? I can see this becoming an issue if either party wishes to change title companies. How could one prove the seller insisted if there is no contract?

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  5. In my opinion, Title companies are like McDonalds. You go to the closest one. Why fight over which McDonalds?

    Liked by 1 person

    • Matt Tilley says:

      Underwriting, knowledge, communication, customer service, quick return on title work, mobile closings, legal expertise…to name a few. There is a HUGE difference between title companies. That’s why some fade away while others win Small Business of the Year. I’m sorry you haven’t worked with a title company that distinguished itself.

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      • I do about 80 transactions a year, all with different title companies in different market areas. Rarely a bad one, all are very good. The glass is close to full not empty.

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    • Dee says:

      I live and work in a small town, and our local title company charges far less for their services/fees than companies 20 minutes away. Sometimes the difference is double.

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  6. Luke Moses says:

    Todd G Franklin you must have been fortunate enough thus far not to deal with a bad title co. They are not like McDonald’s because McDonald’s is a franchise that strives to replicate service and product worldwide. There are a plethora of title companies out there all providing different levels of service and speed. Furthermore, it’s nice to be known and on a first name basis when dealing with title issues. If you close 10 deals a month at 1 title Co they will listen when you call. Results will likely be different if you shop title companis for every new closing…

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    • I do about 80 transactions a year, all with different title companies in different market areas. Rarely a bad one, all are very good. The glass is close to full not empty.

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      • Let us not forget, it is really the choice of the buyer or seller, not the agent. We just make recommendations and should make more than one.

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      • Dee says:

        You’re very fortunate to have worked with all great title companies. I’ve found myself taking the heat from sellers and buyers because of “their choice” of title companies. We’ve had to deal with rudeness, numerous errors on closing docs, poor communication with the lender, falsely blaming other parties, delays because someone “forgot” or was on vacation, and just plain incompetency.

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  7. Michelle says:

    As a Buyers Agent, I cross this dilemma all the time. Many Brokers are “In Bed” with a certain Title Company and Strongly URGE you to use the Sellers “Pick” for Title Company, which we ALL know is not the Sellers PICK for the Title Company, It IS the Listing Agents pick., but in multiple offer situations, we would not win the offer if we pencil in the Buyers choice of Title Companies, I have had many closings in which the Seller prefers “A not so good Title Company” and they tell me, If you want your buyer to pay for the Owners Title Policy then you can certainly pick our own. So wrong on many levels. There is too much power going on here and it needs to be mandated immediately., To me, If it is the OWNERS title policy, then the NEW OWNER should be able to choose where they want their papers drawn and closed. Too many Listing agents use their FRIENDS to close and do not care if the Title Company is 30 miles away from the area that the buyer is purchasing…… Just wrong, needs to be fixed. Every MLS states ” Seller chooses “X” Title Company…….Isnt that against RESPA ?

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    • Tod Franklin says:

      In my opinion, listing agents are overzealous about title companies. Unlikely there is any actual compensation unless laws are violated. I guess they are looking for status in the eyes of the title company.

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      • Michelle says:

        Oh yes, they get wined and dined on every level…… I dont because I dont get to pick, so I am invisible to Title Company reps…..

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      • Let us not forget, it is really the choice of the buyer or seller, not the agent. We just make recommendations and should make more than one.

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  8. Matt Tilley says:

    This business is all about relationships. I know that we (yes, I work for a title company) bend over backwards for our clients (and those on the other side of the transaction). We make it our mission to be the best at what we do and when our clients have to close elsewhere, they see the difference. That’s why Realtors want to use a certain title company…they know they, and their clients, are going to be taken care of.

    And yes, the friendship aspect is certainly a part of that. Like I said, it’s all about relationships. After working together for so long, you can’t help but form a bond…and who doesn’t want to work with people they like?

    Liked by 1 person

  9. It’s not just about the title policy, it’s about the escrow services. I’ve dealt with great escrow officers who really help the transaction proceeded smoothly and a terrible escrow officer who neglected her duties and made things much more difficult than they needed to be. As a seller’s agent, I want a title company and an escrow agent who will help ensure a smooth and successful transaction for both the seller and the buyer. The one transaction I had with a terrible escrow officer was one that was selected by the other party. I would advise any party, buyer or seller, not to use that title company or escrow officer in the future. But I won’t have to worry about that since there are no longer in business.

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    • Binh Nguyen says:

      I agree with Sharon 100%. I am a Seller’s agent representing investors who have previously dealt with Title Company and they know good Title Companies and prefer to use them. Whereas, many Buyers are novices who can’t make a distinction between a good and a bad Title Company. I would like to bring to Michelle’s attention that the Title policy is the same, regardless of the chosen company and the premium amount is also the same. As pointed out by Sharon Demarque, The difference between a good and a bad Title Co. is the level of services provided by the escrow officer. In my last transaction, the Seller suggested a Title Company but the Selling agent insisted on using one near the Buyer’s residence with a the reason being that the Buyer doesn’t drive and he prefers to use the one near his apartment so that he would be able to walk to closing. And, unfortunately, the Seller agreed to allow the Buyer to use the Title Co. of his choice. The deal almost went bad because the escrow officer didn’t respond to emails, phone calls, refused to order the HOA closing package and provided the wrong instructions for the Seller to order the closing package himself…

      The Title company suggested by the Seller works days, nights, weekends, holidays and the Manager (a lawyer) would respond to your email even at midnight. And, we could arrange for closing before or after normal working hours. It also advance the company’s fund to pay the fee for the ordering of the HOA closing documents.

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    • sharondemarque says:

      edit: “since *they are* no longer in business.”

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  10. Rick DeVoss says:

    (My earlier attempt to leave a post failed at the computer level, so I’ll try again…)

    Title companies are not definitely Not like McDonalds! First of all, I wouldn’t eat there. But they Do follow a strict recipe which should produce the same results every time. ~That is Not true of title companies, as some are better than others.
    In 37 years, I have not seen very many sellers who knew anything about a title company, let alone how to select one. It is a case of arm wrestling between the agents. Why doesn’t our TREC contract form have a box to check for who pays for both policies, and who selects the company to insure it? The buyers and sellers are paying for the policies, so why should the listing agent be the one to select it??
    In many cases these days, an agent from another county will list a property, and then demand that we all close at her favorite title company. If it is the buyer, the seller, and the buyer’s agent that have to go to closing, why should it be “closest” to the listing agent’s office or home…??
    I have seen many errors made at a title company. Recently I watched one in a small town, in another county, actually condone a violation of a VA regulation. When I objected, I was ignored. The veteran wanted the house so bad, he closed anyway, but it cost him several hundred dollars. (I’m hoping they file a lawsuit.) I know for a fact that it would not have happened that way had we closed at the title company that I normally like to go to. They are competent, they communicate with you, they are polite, and they have an in-house attorney who can answer legal questions, as well as teach MCE classes.
    ~You won’t find that at every McDonalds…

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  11. Emma Munoz says:

    What if the.Seller is an Estate and a title company has opened title as a courtesy to the Executor and to the Attorney handling probating of the Will?

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  12. Stuart Scholer says:

    Emma Munoz and Binh Nguyen both mention circumstances where it very well could be very important for the Seller to insist on a particular Title Company. When I represent a Seller that is not in such a circumstance I may recommend a certain Title Company. If I do, I usually put in the words “If the Buyer pleases” or “consider using such and such”. I always advise my Sellers to allow a Buyer to choose whatever Title Company they want because they will have to live with that Title Company and Title Policy as long as they live in the property. It is the same as repairs… best the Buyer chooses their own contractors… when the repair is not right then the Seller will not hear about it… Correct? Well.. if there is a claim on the Title Policy the Seller really does not want to hear about the performance of the Title Company he (the Seller) chose and insisted upon when the property was sold. Ooooh… What if it was really the Listing Agent that insisted on that Title Company??
    So you Buyer Agents… if you or your Buyer wants a particular Title Company… make sure that that Title Company will treat your Client like gold and just write it into the Offer. If it is not really an issue to the Seller then the Seller will not allow it to be a point of contention. They do not care. If there is a circumstance like Emma talks about (an Estate) then you really might want to leave it alone. That company probably has a head start on a potentially complicated problem. And you Listing Agents… don’t let the title Company issue sour the deal before you even get started… that would be a disservice to your Client, the Seller. They just want to sell their house! It is not ALWAYS about relationships BUT it IS always about representing your Client’s best interests!

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    • Michelle says:

      Yes, I agree, and know the Good from the bad Title Companies as I have been in this business for over 30 years. I have had really bad title companies that the sellers (um… Listing Agents ) prefer we use and had less than stellar closings. I would never recommend a bad title company, but hate that some are forced to use title companies Owned by Brokers….. just because….

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  13. Dale Moon says:

    The Texas Department of Insurance regulates Title Companies. They have very strict rules on this matter. The person insured has the choice of who to buy insurance from. Not the selling agent. Only the Federal Government can force you to buy insurance.

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  14. ABRAHAM KAITHAKOTTIL says:

    I agree with Sharon 100% , I had same problems too and was going to write like same experience Binh Nguyen explained. Both buyer and seller is under very stress, and how many first time Seller/Buyer knows about the tile companies and then who is leading/fighting to pick up the title company.?, then who is the one creating this on going big issue???. No one says anything about any cost difference between two companies, why ??. Why agents fighting to pick one for save money or better service ?. I believe all title companies have a good faith duty to both seller and buyer under Texas Law ?. Then what, any saving in closing cost in MONEY or help one just start up business without any experience, etc etc. I had problems the same buyer trying to seller the same property years later had problems too.

    i like to bring an issue about the Home warranty companies .

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  15. Wayne Kuhn says:

    Another example where nonsense prevails. We keep tripping over bureaucratic rules and regulations. Would like to see bureaucracies downsized 98% so folks in this business could
    spend their time productively working.

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  16. Linda Bartley says:

    Does this rule apply to builders? Some builders require you to use their title company with no incentives, in other words, the builder will NOT pay for any title policy NOR can the buyer choose ANY OTHER title company. What about this situation?

    Like

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