In Pennsylvania we have a nice sales agreement used by members of the Pennsylvania Association of Realtors. It covers title insurance commitment cancellation fees very nicely in TWO places.
The seller agrees to convey marketable title and the buyer agree to pay for the search, including cancellation fees, if any.
The mortgage contingency clause contains similar language. If the buyer can’t get a mortgage, the buyer agrees to pay for the title commitment/search, etc.
I have a dead deal - a purchase - that died due to a low appraisal. It cost me $135 to have a full title search completed and I paid $10 to the tax authority for certifications. My staff spent a lot of time on the deal but we didn’t invoice for our time, we invoiced for out of pocket costs.
I look at it this way. Going in the hole is just plain stupid. I really should’ve charged for our time but I didn’t. We are not a non-profit enterprise. This isn’t a charity.
The consumer called me to say how very unfair it was that we were charging her for work when she did not get the property. I suggested that she wouldn’t think twice about not paying if we were a home inspection company and she agreed, saying that at least we would have provided a service.
I reminded her that we did provide a service and that she had in hand a copy of the title insurance commitment which is the end product of a professional full title search and examination.
Funny that the real estate agent called me to ask for an update and said she supports our position completely, she pointed out the clauses in the contract and told the consumer she owes for services rendered.
What’s killing me is the loan originator caving and not understanding that the consumer is responsible or the invoice.
A mortgage loan applicant gives permission to the loan originator to order certain services on their behalf such as the appraisal and perhaps the title work. The consumer had already signed a contract agreeing to pay for the service.
I just hate to see someone bullied and I guess that’s why I’m posting this here on Lenderama. Perhaps the post will help a loan originator faced with a similar circumstance to stand firm and not just eat fees because someone is whining.
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4 responses so far ↓
1 Chris // May 15, 2008 at 2:04 pm
I’m not gonna argue. Just say that the L.O. and the agent need to be sure that not only did the consumer sign the contract, but that those clauses were pointed out and understood.
It’s a pet peeve of mine that people say “it’s in the contract” but then they never explain, paragraph by paragraph, to the consumer what they are signing. It’s part of our jobs.
Now, if all that was done I say bill’em!
2 Refinance Mortgage Guy // May 16, 2008 at 3:07 am
As a Realtor I too have experienced this situation, but on the contrary, the closing or title company we use has always waived the fees associated with title search and fees as a bad debt. I assume they write off the loss on their business expense in hopes that once a deal is successful, the buyer will not hesitate to use or recommend the title compnay for future business? Makes better business sense to me, sorry.
3 Diane Cipa // May 19, 2008 at 2:57 pm
Would you expect a lender to eat the cost of the appraisal? The appraiser to eat their fee after having fully completed what they were asked to do? What about the painter who painted the house and the deal fell thru? You can’t undo work.
Asking these service providers to eat fees presumes that they are overcharging consumers and have layers of fat to cover extra costs.
Set aside the kickback question when the request comes from the real estate agent or the lender, because it IS a RESPA and state statute violation, and just consider how you would feel if you had completely earned a fee that wasn’t a contingency fee.
People who earn contingency fees, such as real estate commissions earn a large sum per deal to make up for those that don’t close.
Everybody else works on a thinner margin because they expect payment for services rendered or in our case a cancellation fee to cover - not our work - but the municipal fees and abstract costs we had to pay out of our own pocket.
Would you risk $300 to make $600? Would you pay out $300 then eat it and then pay out $300 again to make $600? That’s just nuts.
I know without asking that the provider you use is dependent upon your business and is terrified of losing it. It’s not business sense. It’s a RESPA violation - no different than a $100 bill at the bottom of a donut bag.
4 Diane Cipa // May 21, 2008 at 12:49 pm
As a follow up, we received a check from the consumer today. The real estate agent helped the loan originator understand the terms of the contract and all is well with the world.
I just noticed two new orders in the bin from our loan originator and that makes me happy.
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