Tip 32-2014: REO Purchases, Free Title Insurance & Closing Cost Credit

Previous Tucker's Tips have informed that when an REO seller like Fannie Mae or Freddie Mac offers Free Title Insurance to the buyer, the title insurance is not the best deal for the buyer. The buyer may incur additional title expenses (title search fee, binder fee, copy charges, and a lender's title insurance policy). Additionally, the buyer will be required to use the REO seller's non-local settlement agency who may not have the buyer's best interest as their primary goal.

Tucker's Tip recommends that REO Purchasers select their own settlement agency or real estate attorney and elect to purchase their own title insurance. Tucker's Tip also recommends that the contract state that closing cost credit will include among regular closing costs and prepaids the cost of the title insurance. REO sellers who offer "free" title insurance will often not allow the closing cost credit to go towards the cost of title insurance if the buyer chooses his own settlement agent. Accordingly, the contract should explicitly state that if the buyer selects his own title insurance, the cost will still be included in the closing cost credit.

Contact me at 434-951-0858 or Tucker@TGBLaw.com if you have questions.

William D. Tucker, III

Tucker Griffin Barnes P.C.

Charlottesville & Lake Monticello

434-973-7474

www.TGBLaw.com