A recent REO transaction included a standard contract of sale and the asset management company's counter offer addendum. For the most part the counter offer addendum was pretty straight forward except that there was an additional page to the counter offer addendum titled "REO Escrow/Closing Disclosure for Buyer's Choice" which reads as follows:
Seller hereby agrees and acknoweldges Buyer has the right to select the Settlement/Closing Company and Title Insurance Company. In this regard the Buyer has selected its own Settlement/Closing and Title Insurance Company other than Seller's designated closing service providers therefore Buyer agrees as follows:
Buyer will pay ALL title insurance and settlement/closing fees, including those customarily paid by the Seller.
OK, makes sense, buyer elects to use our services, buyer pays for all of OUR services to them. And then I receive the seller's title agent's closing instructions to me. Again, very ordinary, EXCEPT that in the closing instructions to me there is this little blurb...
The buyer elected to use your company, please see REO/Escrow closing disclosure for Buyer's Choice. You must collect a seller settlement closing fee of $700 payable to [Seller's Title Agent]. This fee is paid by BUYER.
SAY WHAT!! Now remember that this requested collection of funds from the buyer to pay the seller's title agent is NOT part of the contract, It's part of the instructions to me for preparation of the final HUD for review and approval by seller.
The way I intrepret the REO/Escrow Closing Disclosure is that if WE customarily charged a seller settlement fee then the buyer would pay that fee. In no way did I, nor could I have, intrepreted this to mean that any fees to be paid by seller to others became the responsibility of the buyer.
So, in my preparation of the final HUD I omitted the requested $700 fee. And guess what?? No one balked at that. The seller's title agent sent me a fee sheet with fees to be paid by SELLER unto seller's title agent from the proceeds of sale.
The question then is this. What if I had not omitted the fee but had instead gone ahead and arbitrarily charged that fee to the buyer? You can be sure that the seller's title agent would not have asked that I remove that fee. Thus, the seller's title agent would have gotten paid twice for "services rendered" to seller.
I represent sellers in REO every day. I have NEVER asked that a buyer pay a fee to me that should have or will be paid to me by the seller. And, as a point in fact, I don't think I can ask that a buyer pay a fee to me simply because they elected to use the services of their own title agent, as is their RIGHT in Maryland.
I am sure that this title agent has been paid in the past by unsuspecting buyers; or those who's title agents were not familier with the workings of REO transactions. I am equally sure that this request for payment is a violation of some rule, law, mandate, but I am not certain which rule, law, mandate has been violated. I am also sure that this behavior has to be reported to a regulatory agency within this state, for the protection of future buyers, but I am not sure to whom I would send a complaint.
And too, I am not sure that it would do a lick of good to file a complaint. Who would it help? Me, NO, My buyer? NO, my buyer was not harmed, other buyers? Probably but who are they? How many are there? How do I find them?
And, too, with business being what it is and given that I operate in a very small arena (REO) for the most part, would I end up actually causing myself harm by filing a complaint? There are a handful of firms who operate in the REO arena in my area and we all know one another, and for the most part we all work well together. Do I want to take a chance of losing business because I took the high road?
Sometimes doing the right thing is the wrong thing to do. This may be one of those cases. Nevertheless, I will be ever mindful of this new attempt by this seller's representative to "double dip" and will keep doing all I can to save at least some people from having to pay this extortionist fee.