I believe we have a new issue to negotiate on behalf of our clients:
CANCELLATION FEES
A couple of weeks ago we had a buyer cancel a transaction within the timeframes agreed upon by the buyer and seller. Notice of cancellation was sent out shortly after the physical inspection on the $400,000 downtown San Diego condo.
It should have been a simple matter, but that was not to be the case.
The Prudential listing agent had stipulated that Prudential California-owned Pickford Escrow handle the transaction. All proceeded smoothly until the point of cancellation, when Pickford assessed a $1115 cancellation fee against the buyer, and refused to back down from that claim, despite our requests to do so.
Never in our real estate experience had we encountered an escrow cancellation fee of this enormity, and I cannot recall any escrow cancellation fee that had been assessed against any of our transactions in the last few years.
In the rare cases when we have had an escrow that cancelled, the escrow and title companies bore their losses along with the agents involved in the transaction. Even though œreasonable cancellation fees are generally allowed for in the escrow instructions, it is something that is rarely levied against the real estate client.
Curious as to whether this is to become a revenue-generating trend of some sort in a sagging real estate economy, I called the Pickford Escrow manager involved in this transaction and asked if cancellation fees were part of a new policy. He said it wasnt a policy, but was something that was allowed for in the escrow instructions and could be charged on a discretionary basis.
Hmmm..
I called Steve Torneo, San Diego attorney for First American Title and Escrow, and asked what First Americans stance would be regarding escrow cancellation fees. He, too, said it was a discretionary call, but that they would not levy that fee against a cancelling client who felt it was unfair in any way or who felt that First American had failed to earn what was charged.
He also agreed that $1115 seemed excessive.
A call to Alonzo Castro, a Carlsbad service rep with First American Title, further confirmed the rarity of cancellation fees and he could not recall First American assessing them against any clients.
To round out this informal survey, I asked senior escrow officer Deanna Lynch with Southland Title Escrow in Carlsbad, CA what their policy was regarding escrow cancellation fees. She said, œWe just dont charge cancellation fees.
A final call to Gena Riede, a seasoned Sacramento real estate broker, confirmed that she had not seen any fees assessed against any of her cancelled escrows either. I mentioned that an authorization for this fee appears in the small print of escrow instructions, and that in the future we will be inserting language in our offers that prohibits the assessment of escrow cancellation fees against any of our clients.
Gena will be doing the same.
It is the least we can do to help protect our clients.
Roberta,
Can’t believe that Prudential had the nerve to do that. You know what they say…bad news travels faster than good news. I plan on letting the folks up here in Sacramento know about this. I would hate for another Home Buyer to be caught in this web.
Gena:
The best thing you/we can do is to protect our clients from these outrageous real estate fees. And I believe the place to do it is in the offer itself.
Oh that’s just ridiculous! I just called a Title company we use often and asked them what was involved in cancelling an escrow from their perspective. The answer? “It takes a couple of keystrokes and printing a page for the file.” I asked if they ever charged a cancellation fee. The answer? “Uhm, it takes a couple of keystrokes and printing a page for the file. Why would we charge for that?”
Great work digging up the details Roberta!
Jay:
My fingers have been itching to write about this incident, but I had to tame my anger. You see, I was also threatened by the escrow manager that if I wrote about this incident, I would be going up against all of Prudential and their resources.
I am going to give Prudential the benefit of doubt and assume this “manager” does not speak for management.
Yeah, dont you just hate that small print!!!!!
If you would ban together against Pru and let them know that we all want that extra cash in these tough times but its not the right thing to do, then they will relent.
They are just counting on grumbling but no real action
Phil:
I still want to believe that this incident was “abuse of discretion” on the part of that Pickford Escrow manager. Escrow cancellation fees of this enormity just haven’t been showing up elsewhere.
But, who knows? It is something we will certainly be shielding our real estate clients from in the future!
Thanks for stopping by.
Hi Roberta,
A sensational post and a one that needs to brought out more in the individual offices. Nothing surprises me in todays market but best we all be prepared and addres some of the potential issues that crop up.
The fees charged are onerous and may need to be court challenged. I hope your client is going to persue that remedy.
I was threatened by a Remax2000 agent, Crete, Illinois at the end of last year to release the listing on my little,cheap $112,000 property by paying them $500 to release the listing. This goes on unchecked with the greed society now vengenful in this crashed housing market-especially back in(live in AZ now) in BTW where they get away with it often. I let the listing expire in Feb of this year, then placing it on the market By Owner after two non-performing Realtors(including the one mentioned) so I wouldn’t have to repeat the same litany of excuses both used, not REASONS but rather EXCUSES,saying “someone on the Multiple will sell it.”
Hi Anita:
I am sorry you had such an unfortunate experience with your real estate agents in Illinois. We have never charged a cancellation fee to any of our clients–for any reason. Moreover, we offer an easy-exit on all of our San Diego listings.
Hope you were able to sell your home!