Power to the people! Yeah, right.
Effective October 11, 2009 and in the latest in our government’s efforts to better serve us, we have been gifted the new Buyer’s Choice Act in California.
In short, the Buyer’s Choice Act “prohibits an REO lender selling residential property up to four units from directly or indirectly requiring the buyer to purchase escrow services or title insurance from any particular company. A buyer, however, who has received written notice of the right to make an independent selection, may agree to the REO lender’s escrow or title recommendations. An REO lender that violates this law can be held liable for three times the charges the buyer incurred, whereas a violation by the seller’s agent may be subject to license disciplinary action.”
Sounds good so far. Here’s the problem. Our legislators, most of whom I suspect have never had the pleasure of submitting an offer on a bank-owned home, one where their client is competing with 437 other buyers, many of whom are tossing impressive wads of cash in the general direction of the bank, failed to recognize that their time would have been better spent napping or watching Jerry Springer.
They failed to recognize the first rule of multiple offers: The seller holds all the cards.
Let’s first look at a traditional sale. The seller may receive an offer from a buyer asking for the refrigerator, the washer and dryer, and the complete set of Fiesta Ware (little “R”). There is currently no law preventing the buyer from asking the seller to leave all of his stuff behind, so the seller might exclude these items in a counter offer.
Now let’s assume that the state passes a new law saying that the buyer can have whatever he wants. So now the offer specifies that the garden gnomes, the lawnmower, and the toaster oven shall all convey. While the seller is no longer able to specifically exclude these items from the sale, he is under no obligation to accept this offer. If it is the only offer he has on the table, and price and all other terms are attractive, he might – but he doesn’t have to.
But what if the seller has many, many offers to choose from? He can’t demand that the buyer not ask for his life’s possessions, but he can certainly cherry pick from the best, cleanest offers. So goes the selection of service providers.
Our contract already says “Buyer and Seller may select ANY service providers of their own choosing.” In other words, it is negotiable, and the guy negotiating from the position of strength always wins.
And that is how things will continue to work for bank-owned properties. The buyer can certainly choose who he would like to use for title and escrow services, but only if he chooses to have his offer tossed faster than my last casserole.
Every agent out there knows that when you are representing a buyer in a multiple offer situation, you have to write the squeakiest-clean offer you are able. Take out all of the “noise,” concede all of the things that cost you nothing (or very little), and do things like write “Seller’s Choice” in the lines identifying who title and escrow will be. Buyer’s Choice Act or not, the choice is not the buyer’s in practice and never will be as long as the process is highly competitive.
It was a good try, but it won’t work. Maybe Senate Bill 237 will do the trick. According to the California Association of Realtors (another little “R”):
The Office of Real Estate Appraisers (OREA) will have regulatory oversight of appraisal management companies, which gained prominence after Fannie Mae and Freddie Mac adopted the Home Valuation Code of Conduct (HVCC). Starting January 1, 2010, the OREA must implement a registration system for appraisal management companies, including fingerprinting and background checks for persons with operational authority as defined. On a separate note, this law clarifies what conduct constitutes improperly influencing the appraisal process by anyone with an interest in a real estate transaction. Such prohibited conduct includes withholding or threatening to withhold an appraisal fee, withholding or threatening to withhold future appraisal business, and promising future business, promotions, or compensation.
An OREA to oversee the AMCs – Now who is going to oversee OREA? I guess we will have to wait until 2011 to find out.