25 Mar Pros and Pitfalls of the Buyer's Choice Act
The Buyer’s Choice Act (AB 957) was established to protect the buyer’s right in an REO transaction in having a choice as to which Escrow Company and Title Company is used. This sounds great, although in many cases it can be a benefit to the buyer to choose the companies that the REO Bank use on a regular basis for the following reasons:
- The REO Banks require the settlement companies to use their online systems (only the companies selected by the REO Banks are given authorization to log onto the online systems) in order to obtain necessary documentation for your transaction. Without access to the online systems there may be delays in the closing process.
- The REO Banks have special internal requirements that must be completed before they can move forward to closing. The Escrow Companies and Title Companies used by the REO Banks know the requirements and are able to provide the seller with the necessary items in advance therefore getting the job done quicker and more efficiently.
- The Title Companies that work with the REO Banks have documentation already in place that is necessary to clear the title on the properties. Using Title Companies that work with the REO Banks creates a much smoother transaction process for you.
- The REO Banks must approve an estimated HUD settlement statement prior to authorizing the close of escrow. In order to accomplish this each REO Bank has special requirements for certain items they need prior to approving said settlement statement. All these items again must be sent to the seller via their online systems. Using the companies that know the REO Bank’s requirements helps to get your transaction completed much quicker and smoother.
- Each REO Bank is different and has different requirements. Using an Escrow Company and Title Company that has experience with that particular Bank’s requirements will inevitably make your transaction smoother.
For further information on the Buyer’s Choice Act you can read the following article: AB 957 “The Buyers Choice Act” Passes
When making your choice or accepting the seller’s choice of escrow or title companies, consider asking the following questions to the prospective companies:
- Do they retain an Errors & Omissions Insurance Policy and a Fidelity Bond each with a minimum of $2,000,000 which protects your transaction to the fullest value?
- Do they conduct background checks on all new hires through the Department of Justice including stockholders, officers, directors and managers?
- Are Potential employees barred if they have drug convictions, moral turpitude or theft of any type on their record?
- Do they have set minimum financial requirements by their licensing entity?
- Are their trust funds and processing of files audited by their licensing entity, or in-house auditors and CPA?
- Are their trust funds balanced every day?
- Is their computer systems capable of handling the paperless file required for processing an REO transaction?
- Are they proficient in a variety of REO software platforms?
- Do they have an extensive back up computer systems, which includes a disaster preparedness plan?
- Can they handle all transactions in a professional, honest and diligent manner?
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