Criticisms
However, critics say that kickbacks still occur. For example, lenders often provide captive insurance to the title insurance companies they work with, which critics say is essentially a kickback mechanism. Others counter that economically the transaction is a zero sum game, where if the kickback were forbidden, a lender would simply charge higher prices. One of the core elements of the debate is the fact that customers overwhelmingly go with the default service providers associated with a lender or a real estate agent, even though they sign documents explicitly stating that they can choose to use any service provider. Some say that if the profits of the service providers were truly excessive or if the price of the services were excessively inflated because of illegal or quasi-legal kickbacks, then at some point non-affiliated service providers would attempt to target consumers directly with lower prices to entice them to choose the unaffiliated provider.
There have been various proposals to modify the Real Estate Settlement Procedures Act. One proposal is to change the "open architecture" system currently in place, where a customer can choose to use any service provider for each service, to one where the services are bundled, but where the real estate agent or lender must pay directly for all other costs. Under this system, lenders, who have more buying power, would more aggressively seek the lowest price for real estate settlement services.
While both the HUD-1 and HUD-1A serve to disclose all fees, costs and charges to both the buyer and seller involved in a real estate transaction, it is not uncommon to find mistakes on the HUD. Both buyer and seller should know how to properly read a HUD before closing a transaction and at settlement is not the ideal time to discover unnecessary charges and/or exorbitant fees as the transaction is about to be closed. Buyers or sellers can hire an experienced professional such as an attorney to protect their interests at closing.
Read more about this topic: Real Estate Settlement Procedures Act
Famous quotes containing the word criticisms:
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—William James (1842–1910)
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—Sigmund Freud (1856–1939)