Is it legally permissible for a seller to require the buyer to use a specific title insurance company if it increases the seller's net proceeds?

The correct answer is that it is illegal according to RESPA, which stands for the Real Estate Settlement Procedures Act. RESPA was enacted to protect consumers in the real estate transaction process, particularly concerning the closing of real estate transactions and settlement services. One of its key provisions is to prohibit practices that could lead to excessive costs for the consumer or conflicts of interest in the settlement process.

Under RESPA guidelines, a seller cannot require a buyer to use a specific title insurance company, as this can be seen as steering the buyer towards a service provider that may not offer the most competitive rates. This could ultimately increase the overall costs to the buyer, affecting their financial interests negatively. By ensuring that buyers have the right to choose their title insurance provider, RESPA promotes transparency and competition in the market, which benefits consumers by keeping costs down and choices open.

Other options relate to specific regulations or financial situations, but they do not align with the primary protection aim of RESPA. Regulation Z focuses more on truth in lending and disclosure practices related to credit transactions rather than the issue of required use of specific title insurance services, and the provisions about VA Loans or fees paid to the seller do not exempt sellers from RESPA's prohibitive rules in this context.