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Legalease
Legalease, Attorney
Category: Business Law
Satisfied Customers: 16363
Experience:  14 years experience corps, LLC's and partnerships; preparation, negotiation of complex contracts and business agreements
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Can a Colorado Builder/Seller require a Buyer to use their

Customer Question

Can a Colorado Builder/Seller require a Buyer to use their "Preferred Lender" in order to receive Seller Concessions?
Submitted: 1 year ago.
Category: Business Law
Expert:  Legalease replied 1 year ago.

Hello there --

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Can you give me an idea of how much the seller concessions are worth?

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MARY

Customer: replied 1 year ago.
The actual closing costs and pre-paids comes to approx $7,000 but the $ amount the seller agreed to pay is 4% of $399,990. But that's not my actual question. I want to know if it's legal for the Builder/Seller can require the Buyer use their "Preferred Lender" as a condition of paying the Closing Costs and Pre-paids as stated in the offer. I could send the Offer to you if that would help.
Customer: replied 1 year ago.
The section I'm questioning is on Pg 2, Item 9A(1)(b) which states that the Seller shall pay an amount not to exceed 4% of the Sales Price towards the following: Buyer's expenses which Buyer is prohibited from paying by FHA, VA or other Govt loan program, (borrower is doing a Conv loan so there are no fees they're prohibited from paying for) "Buyer's Pre-paid items" (that's typically the 1st year of Hazard Insurance + additional months of Hazard Ins and Property Taxes to start escrow account + pre-paid Interest) and "other Buyer's expenses" (Orig Fee, Appraisal, Title Fees, etc). No where in this section does it state that the Buyer must use the Builder/Seller's "Preferred Lender" as a condition of paying these Fees.In the section directly below that I 9A(2), it says the Buyer will only pay $1,000 towards the following expenses if using the Builder/Seller's "Preferred Lender" which seems to contradict 9A(1). Then on pg 18 of the attachment, the Financing Addendum doesn't state that the Buyer must use the "Preferred Lender" either so how can the require that now?The Seller is stating now that if the Buyer doesn't agree to using their "Preferred Lender", he'll back out of the Offer because in CO he can. However, when I look at Pg 5, Item 17 regarding dispute resolution, it sounds to me as though it would go before arbitration. If that were to happen, how could the Seller argue their case when they are the party who prepared the Offer which was signed by the Buyer and Seller's Agent?
Expert:  Legalease replied 1 year ago.

Hello again --

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Actually I was trying to get an idea of what the builder might be getting from this lender for the "referral". I apologize for the delay -- I wanted to look into this to get the latest pronouncements on this point.

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It is a violation of RESPA for a lender to do anything more than require that their own attorney and title company be used at closing and a seller cannot force you to use their own lender as this is a "kickback" under 24 CFR 3500.14 and 3500.15. However, any seller can refuse to sell to any buyer for any reason or no reason -- but in this situation that you describe I would think that the seller who is the builder will be hard pressed to come up with some other reason why they will not sell to you if you refuse to use their lender and you still insist upon receiving your concessions.

Here are links to the actual statute 24 CFR 3500.14 and 15 AND a federal reserve publication which explains the RESPA very well and offers more explanation into the statutes than just reading the statutes will give to you ---

https://www.law.cornell.edu/cfr/text/24/3500.14

https://www.law.cornell.edu/cfr/text/24/3500.15

http://www.federalreserve.gov/boarddocs/supmanual/cch/200601/respa.pdf

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My suggestion here is to contact and possibly file a complaint with the CO division of real estate -- the state agency that regulates such transactions (the builder is probably a broker or agent also). Here is a link to their website - https://www.colorado.gov/pacific/dora/division-real-estate

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I hope that helps. Please let me know if you have any further questions. If not, can you please press a positive rating above so I will be paid for my time assisting you tonight. THANK YOU VERY MUCH

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MARY

Customer: replied 1 year ago.
Since the Seller/Builder isn't a licensed Real Estate Agent, would he be exempt from these rules/regulations? The "Agent" who signed on behalf of the Seller also isn't a licensed Real Estate Agent but is a "Sales Associate" for the Builder.
Expert:  Legalease replied 1 year ago.

Hello again --

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RESPA applies to all parties involved in the transaction not just the licensed real estate agent and broker -- I only suggested filing a complaint with or calling the CO dept of real estate as a place to start (and I still think you should because someone involved in the transaction is supposed to have an agent or a broker's license). You can also make complaints to the Attorney General in Colorado as a consumer violation and to the US Office of the Comptroller of the Currency (OCC) if the lender involved is a regional or national bank.

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MARY

Expert:  Legalease replied 1 year ago.

Hello again --

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Is there anything further that I can help you with on this matter? Please let me know if you have further questions. If not, can you please press a positive rating above so I will be paid for my time. I am paid nothing unless you press a positive rating above. Doing so will not cost you any additional money -- it simply acts as the trigger to Just ANswer to pay me for my time helping you today. THANK YOU

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