“I thought the seller paid the title fees?”

In January 2010, RESPA (Real Estate Settlement Procedures Act) mandated changes to the Good Faith Estimate (GFE) and the HUD-1 Settlement Statement (HUD-1) so consumers could better understand and compare fees for Title Services. Title services are now placed in a “bucket” in block 4 of the GFE and quoted to the buyer early in the lending process.
The Minnesota Association of Realtor’s (MNAR) previous purchase agreement (pre-September 2010) had language which required the seller to pay some of the costs included in block 4 of the GFE (specifically, title evidence); the remainder of the title exam and title insurance fees had typically been funded by the buyer.
Since the buyer is the party who shops for title services and is able to make a value judgment as to the services being quoted by different vendors offering the services contained in block 4 of the GFE, the MNAR’s Forms Committee felt it would be easier and more market oriented if we modified the form so buyers would be responsible for paying the fees being quoted to them.
This change also corrects a market inefficiency whereby some title service providers would decrease one fee and increase another in order to secure business. The RESPA change was focused on making sure consumers understood what they were being charged in relation to the services being provided by identifying the total title service cost in one “lump sum” bucket. By making the buyer responsible for the fees they are being quoted in block 4 of the GFE, the buyer can make educated decisions as to the cost and value of the various service providers. Keeping those fees placed in the buyer’s “bucket” on the HUD-1 as charges that are ultimately paid by buyer (unless negotiated or agreed to be paid by seller) increases the transparency in the transaction and helps preserve the objective the change in the HUD-1 was designed to achieve.
In the end, a buyer can choose to have the seller contribute to their closing costs, choose to lower the property price or do any combination of things to best satisfy their needs in the real estate negotiations. The change in title language within our purchase agreement is a point from which parties can negotiate, but also provides a default position if they choose not to further negotiate. It is not a requirement, nor are our forms required to be used in residential real estate transactions. The title fees, thanks to RESPA changes, are no longer vague, misconstrued or unknown by the consuming public. Buyers will receive a firm price in their GFE that cannot vary by more than a specific amount. Armed with that knowledge, the buyer can structure the purchase agreement in a way that best satisfies their situation and open the negotiations so all parties know within a very small window what the final closing costs will be.