Dec 23, 2015

Who chooses the title company in Texas?

Residential real estate continues to change after the new Consumer Financial Protection Bureau (CFPB) went into effect in 2015. One regulation highlights that the buyer has the right to choose the title company for their purchase.

In Texas, it is typical for the seller to pay the title policy and, in years past, the seller felt that they should get to choose the title company. But that is not the case. Why?

Because once the sale is completed, the seller is gone and has no future stake in the property.The title insurance policy belongs to the new owner. As a buyer, would you want the seller to choose your homeowners insurance company, home warranty company or home inspector? The buyer should get to choose these. The CFPB does not care who pays for the title insurance policy. But they care that the buyer has been informed of their right to choose the title insurance company.

This rule has actually been around for a while, but now being regulated and enforced. With the new CFPB, if a seller (or their agent) requires a buyer to use their preferred title company (either directly or indirectly), they are violating RESPA (Real Estate Settlement Procedures Act) and could face fines or a law suit.

Check out RESPA Section 9 : Seller required title insurance
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ramh/res/respamor#HE2

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