Virginia Buyers-Don’t Be Bullied By the Listing Agent
By Cindy Jones on November 3rd, 2009Recently it seems that agents have forgotten the basics of Virginia Real Estate Contract Law. It couldn’t be more clearly spelled out in Paragraph 10 of the Virginia Jurisdictional Addendum: “Notice to the Purchaser Regarding the Consumer Real Estate Settlement Protection Act. Choice of Settlement Agent. You have the right to select a Settlement agent to handle the closing of this transaction.”
Yet time after time listings agent will cross out your choice of settlement agent and insert theirs or state in the MLS you must use their settlement agent. Don’t be bullied by the listing agent. You are not required to use their settlement agent and if it means that you need to do a “split” settlement you can make that decision.
Why does a listing agent try and force you to use their settlement agent? The reasons vary. With short sales they may be working with the settlement agent as a negotiator and have promised to bring the settlement to their office. They could be working with a brokerage that has affiliated business relationships and it helps the brokerages bottom line. Or they could be a shareholder in the settlement company and receive an incentive to use the recommended settlement company.
So why should you care? In our current market making sure that the title work has been done, checked and double checked is critical. Assuring that liens have been released and foreclosures were filed properly are just part of the issues we see before we get to settlement. You might be surprised the number of time second liens or lines of credit with balances are discovered that the listing agent didn’t disclose. Working with a company that you know or your agent knows is reputable is key. You want to know that should there be a problem before the deed is recorded that they are going to work to resolve the issue for you is also important.
If you are buying a home in Northern Virginia and the listing agent tries to bully you into using their settlement agent, remind them of the wording in the Virginia Jurisdictional Addendum. Unless it makes sense for you then don’t feel as if you have to agree to their choice of settlement agent. It’s the law!
Yes, “it’s the law,” but unfortunately there’s no law against the seller discriminating against prospective buyers based on their choice of settlement agent.
If you want the property, unless you are willing to outbid everyone by a substantial sum AND forego an appraisal contingency, you might want to think carefully about standing up so forcefully for your settlement rights.
I haven’t been on the seller end of any short sales, but the good agents I know who handle a lot of them swear by settlement agents who know what they’re doing in those special cases. Look at the fees and talk to the listing agent before you decide against it.
I call it a “split-settlement” when the feeling is right. Unless there is a financial incentive, stick to your guns because you want your title company pulling the title report to assure you there isn’t a future legal problem.
Kim,
Most sellers don’t have a clue about settlement companies, they are doing what the listing agent tells them to do. Certainly if it is a settlement agent that I have confidence in then I have no problem telling my buyers to use them. But frankly many of them I see I’ve never heard of and then we have an issue.
Doug,
Split settlements can work just fine. I recently had an agent tell me “I would use her settlement company or else.” I asked what is “or else”, an ethics complaint against you with the association?
No more questions after that.
Cindy,
You’re right, the seller is not in the picture. I should have said, “listing agent discriminating against prospective buyers based on their choice of settlement agent.”
Kim,
Gottcha!
Cindy