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Buyer Select Closing Agent Program

On January 22, 2013, the US Department of Housing and Urban Development (HUD) launched a “Buyer Select” closing agent pilot program for HUD owned properties. Under the Buyer Select program, the buyer selects his or her own closing entity and is not required to close with HUD contracted closing agents.  The program was created with the goal of streamlining the closing process for the benefit of both HUD and the buyer. As of Monday, October 28th, 2013, this program is being implemented in the State of Colorado.


What are HUD Owned Properties?
A HUD home is a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.


HUD is represented by 3 Asset Managers (AM’s) - PEMCO, Matt Martin and Hometelos.  They direct all aspects of the closing.  Their closers are the title company contacts who will approve and sign off on the HUD and the Special Warranty Deed.


What Items Does the Buyer Select Program include?

  1. Buyers get to choose their own closing agent.
  2. Buyer is responsible for Title and Closing fees.
  3. HUD will pay only a portion of the closing fees, if the buyer includes closing costs on line 5 of the sales contract at the time of bid submission and there are sufficient funds remaining to allow for this fee to be paid. If there are no closing costs included in the bid, the buyer will be required to pay all settlement and closing fees.
  4. At the time of bid submission, the selling agent is required to complete the Buyer Select addendum providing the AM’s with the name and contact of the selected escrow company.
  5. The earnest money payee and delivery will vary based on geographic area.  Refer to the earnest money guidelines for complete instructions.

What are the Standards for Acceptable Buyer Select Closing Companies?
According to AM’s Closing Instructions, the following standards must be met:

  1. A Buyer Select Closing Company (BSCC) must be an attorney, title company, or escrow company. They must meet all requirements of state and local laws for the applicable entity type.
    a. Use of attorneys: An attorney or law firm may act as a BSCC, provided that they are duly licensed to practice law in a state where the property is located and state law allows an attorney to facilitate Real Estate closings.
    b. Use of title companies: A title company may act as a BSCC, provided that they are duly licensed to do business in the state where the property is located, and are regulated by the State Insurance Commission, or similar regulatory agency recognized by the State.
    c. Use of Escrow Company: An escrow company may act as a BSCC, provided that they are duly licensed to do business in the State where the property is located and meet all state legal and regulatory requirements as a recognized and registered escrow company.
  2. Insurance and Closing Protection Letter requirement: A Buyer Selected Closing Company must be covered by Errors and Omissions Insurance of at least $1,000,000. Title companies shall provide a Closing Protection Letter (CPL) when required to insure against any improper handling of HUD’s proceeds or deed. 
  3. Conflict of Interest: BSCC’s that have a financial interest in the property cannot be  involved in the closing process. This rule extends to immediate family members and business associates of the BSCC.  Financial interest includes having an equity, creditor, lender, or debtor interest in any corporation, trust or partnership with a financial interest in a property.
  4. Debarment or suspension: Any party currently debarred, suspended or otherwise excluded from participating in any HUD transactions or federal programs, may not participate in any aspect of the closing or title clearance process. 
  5. Non-Discrimination: BSCC’s, their employees, and any person or entity authorized to act on the behalf of a BSCC shall 1) refrain from discrimination on the basis of race, color, creed, religion, sex, sexual orientation, gender identity, marital status, national origin, age or handicap. 2) instruct their staffs in the policies of nondiscrimination and all applicable local, State, and Federal fair housing and non-discrimination laws.  
  6. Failure to Abide by HUD’s Closing Instruction: Failure to adhere to HUD requirements or guidance may result in sanctions including civil money penalties or administrative action against any person, part, company, form or business. For further questions on the Buyer Select Program, contact the FHA Resource Center at 1-800-CALL-FHA (1-800-225-5342) or email answers@hud.gov.

For additional information on selecting the right title company for your real estate transaction, reference Land Title Guarantee Company’s You Choose questions at www.ltgc.com/consumers/choose.

Disclaimer: This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal or accounting advice or other expert assistance is required, the services of a competent professional should be sought.
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