Why Agents Haggle over Title companies


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Over the 26 years or so I’ve been selling commercial and residential real estate, I’ve had more disputes with buyer agents in regard to which title company to use than any other issue.  We might have the entire contract negotiated, but the last point will be which title company to use.  The title insurance rates are set by the state of Texas, so it isn’t a matter of one title company providing a better price than another.  And it’s illegal for title companies to kick money back to an agent for bringing a contract to them.  So what’s going on?  

A Little History – The Old Days

 In the “old days” it was permissible for title companies to provide benefits other than money to agents for bringing their contracts to them.  The title companies would shower the agents with free tickets, wine and dine them, take them out to play golf, and give them gifts to circumvent the rules about cash payments.  The Texas Department of Insurance (which is the regulator of title insurance in the state) put a stop to that.  So the title companies went at it from another angle.  They started offering to help agents with their marketing costs.   They teamed up with them on the costs of floor plans, flyers, and even virtual tours.  They would pay for their portion of the marketing exposure on the postcard or other media.  That didn’t last long either.  It was obvious the title companies were only doing that to develop a relationship with the agents.  Finally, after many years of abuse and testing the system, the ruling came down that title companies had to discontinue all the agent “freebies”.  That’s really how it should have always been, but the competition for business between the title companies has always been fierce and the margins small.  There wasn’t enough business to go around so they had to get creative.   

How Do Title Companies Differ? 

Like my business, title companies distinguish themselves with the level of services they provide.  There are lots of very good title companies, but I have had occasions to work with title companies I felt were sloppy and unorganized.  They didn’t stay on top of the contract deadlines, they didn’t notify me immediately if there was a problem, and they didn’t take care of my clients.  One title company I used never even collected the earnest money, which almost led to a lawsuit.  A good, reliable title company will have the resources and people who know what they’re doing and will stay on top of every detail.  They’ll have the legal expertise to handle issues as they come up.  If they see a potential problem coming down the road, they don’t sit back and hope it doesn’t happen.  They’ll be proactive and address them right away.  They’ll also communicate with the agents on both sides and keep them in the loop.  In my case, I don’t need or want constant updates from a title company, but I want to know right away if there’s something looming on the horizon that could impact the sale.  

Can a Seller and Their Agent Force a Buyer to Use a Certain Title Company?

Absolutely not!  Whoever pays for the title policy has the right to decide which title company to use.  If my seller is paying for the title policy, I’m going to pick a title company I can rely on.  If the buyer or their agent want to use another title company, they are welcome to do so, however we will move the cost of the title policy over to their side on the contract.  It’s as simple as that.    

Why Do I Fight To Use My Title Company of Choice? 

• There are certain performances with timelines required of the seller during the life of the contract.  For instance, the seller has a certain number of days to provide the homeowner association restrictions and resale certificate to the buyer.  Many sellers don’t even know who the head of their HOA is nor what a resale certificate is.  But if they don’t provide those documents to the buyer within the contract timeline, they might be considered in default of the contract.  They’ll not only find out who the head of the HOA is, they’ll get those documents to the buyer in the timeframe allowed, and keep my sellers in compliance on the contract.  This is only one of the many things I rely on our title company to take care of. 
• Although I’d like to say all transactions go smoothly, the reality is many of them don’t.  When they start to break down, more often than not, it happens near the closing rather than early in the transaction.  As a Realtor, you’d better have a competent title company that’s willing to go the extra mile to help you close the deal.  We Realtors are not allowed to give legal advice, so we have to rely on the legal expertise of a title company attorney.  Although the title company does not represent the buyer, seller, or agents, they can provide a certain amount of legal expertise.  And what they can’t, they’ll suggest the parties retain the services of their own attorney.  But I can tell you first hand, what they do is an invaluable service. 
• A good title company will do what it takes to close a sale no matter how inconvenient for them.  I’ve had title companies close late in the day on New Year’s eve when everyone else has left the building.  I’ve had them close at 8 PM on a Friday night because that’s the only time the buyer or seller had.  I’ve had them close in other remote offices that are more convenient for one party or the other.  I’ve even heard of them closing at a Starbucks.  A good title company is like a good Realtor.  They’ll do whatever it takes.  I only work with title companies that have that same commitment to their business as I do to mine.
• Nothing’s more disconcerting to me as a Realtor than to call a title company I’m not familiar with checking on the status of a contract and have them ask me to repeat my name or ask me who I’m working with on the sale.  I’m sure other Realtors feel the same way.  It’s not an ego thing.  We just want to know the title company is giving our clients and the agents the attention they deserve. 

Are There Other Reasons Agents Fight For Their Title Company?

Yes there are and sometimes for the wrong reasons.  The majority of the time, offers will come to me with the name of a different title company than the one I normally use.  Even though the MLS even has a field where the listing agent can insert their preferred title company, most buyer agents ignore it.  They just hope the listing agent will take the path of least resistance and concede on the title company just to get the deal done.  And many will. 

When that happens, I’ll always change the title company to mine.  I always discuss this with my sellers right up front, so they know where I stand.  When a buyer agent sees the change they’ll either not make an issue of it, or tell me they want to use their own title company.  I tell them that’s perfectly OK.  The buyer is welcome to use their title company if they pay for it and the seller will pay for it if they use ours.  Not only is that fair, it’s the law.  99% of the time the buyer decides they’d rather not make an issue of it.  Especially since it will cost them another $5,000 or so to buy the home if they use theirs.  But sometimes its not as easy as that. 

Every so often, the buyer agent tries to bulldog me.  They’ll dig in their heels and demand we use their title company … and they still want my sellers to pay for it.  When I tell them that’s not going to happen, they’ll say something to the effect of “So your seller is ready to lose this deal over a title company?”.  I’ve heard it so many times, it doesn’t even phase me any more.  They think by putting that kind of pressure on me I’ll relent.  But when I hear that, it only strengthens my resolve.  I know there’s something going on.  No buyer who really likes a home is going to walk away from it because they didn’t get to pick their own title company.  Nor would any good buyer agent allow it to happen … unless the agent had ulterior motives.    In my experiences, the chances are extremely high it’s the buyer agent, not the buyer, who has a special working relationship with someone at another title company.  I understand that, but when they try to lay it off on the buyer, it’s just plain dishonest.  Chances are, their buyer doesn’t even know their agent is making an issue over the title company.