Aimed at preventing banks from dictating the escrow and title services used in bank-owned (REO) property transactions, California’s Assembly Bill 957 was approved and immediately implemented last month.
However, some real estate agents and brokers question the effectiveness of the bill, dubbed the Buyer’s Choice Act.
"I don’t know if it’s going to make a difference," said Ralph Gorgoglione, a real estate agent with John Aaroe Group Inc. of Sherman Oaks.
Kris Berg, broker-owner of San Diego Castles Realty and an Inman News columnist, said the intention of the bill is good, but the reality is it will change nothing in terms of escrow and title provider selection when dealing with REO properties.
Under the bill, sellers of one- to four-family homes are barred from requiring a buyer to purchase a particular title insurer or escrow provider as a condition of selling the property, which is already prohibited under the federal Real Estate Settlement Procedures Act (RESPA).
According to the Escrow Institute of California, the bill was necessary because buyers who have not used a seller’s providers may have been unable to file purchase offers, or have seen their purchase offers denied because of this when reviewed by a lender.
Agents and brokers think such activity may continue despite the bill, citing property owners’ ability to be selective due to the large number of offers — sometimes 30 to 40 — they receive for REO properties.
"It’s OK to make it a policy that the buyer has a choice, but when it gets down to it the banks have their choice of offers to choose from," Gorgoglione said. "If someone (a buyer) writes in their own escrow and title, that’s going to be unattractive to the banks."
Because of this, a significant amount of buyers agree to use the "seller’s choice" when it comes to escrow and title services.
"There is no law that says the seller has to accept the highest price. Some sellers will take what’s not the best offer but what’s the most solid package," Berg said.
A buyer selecting a "seller’s choice" is something that will not change due to AB 957, as the bill allows a buyer to accept the servicers recommended by the seller if written notice of the right to make an independent selection is first provided. …CONTINUED