Carlsbad, CA–I’m not sure whether San Diego REO buyers should be rejoicing or rolling their eyes about Assembly Bill 957.
This new California law went into effect October 11, 2009 and prohibits an REO lender from requiring buyers to purchase escrow or title services from any particular company. And an REO lender who violates this law that applies only to residental property (up to four units) can be whacked for 3X the charges incurred by the buyer.
And if the seller’s real estate agent tries the same thing, he or she could be subject to license disciplinary action.
It sounds like a consumer-friendly action, and it’s about time that buyers of San Diego bank-owned or REO real estate get a break–especially when it comes to excessive fees that are slid their way at the closing table. Sellers and servicers have been in total control of the transaction, and almost always demand that escrow be handled by their escrow company of choice. That escrow company may be in another county, may have overloaded staff (dedicated to REO’s) who are unable to answer phone calls, and may very well be pushing excessive fees onto home buyers.
On the other hand, most of the San Diego REO’s we deal with are subject to multiple bids from other buyers, and just one of the ways we try to get our buyer’s offer accepted over others is to allow escrow and title to be of “seller’s choice.”
Why? Because if we stipulate our own responsible, reasonable and local escrow service provider in the offer–it could cost our buyer the home. The successful bid will be the one closest to what the lender wants.
And unless the REO is languishing and has no other offer, we will likely continue suggest to our buyers that they allow servicers and lenders to select escrow and title companies–and warn our clients about the possible overcharges that could amount to a few hundred dollars. What we may be trading is small change for savings in the thousands.