Buying a Forelcosure: What to do when the REO company refuses to pay a closing cost

In the past year, I've closed on three foreclosures and all sellers were willing to contribute some or all closing costs.  I've learned over the years to be very particular in how you word that additional term in your purchase and sales agreement.

I usually write for a condo:
1) Seller to pay up to $5,000 of buyer's closing costs, prepaids, reserves, prorations of HOA dues, HOA reserves, and prorations of taxes.

I ususally write for a home without dues:
1) Seller to pay up to $5,000 of buyer's closing costs, prepaids, reserves, and prorations of taxes.

Just this week I had an REO company, REO World, refuse to pay the prorations of taxes which left my buyers paying hundreds of more dollars than they expected.  When the HUD came in, I immediately saw that REO World was not paying the full amount of closing costs they agreed to and when I questioned the title company about this error, they said REO World will not pay for any tax prorations so I responded by email and wrote,

That is unacceptable.  They signed the purchase and sales agreement stating "and prorations of taxes" and I do not have any documents stating they will not pay that. 

The title company responded:

The seller will not pay pro-ration of taxes there is no way around that, they pay buyers closing costs, prepaid and reserves that is it, I am sorry but there is nothing else we can do.  Attached is the breakdown of closing costs.  I need to have this out to the seller soon if we are to sign buyers on Thursday and record Friday.

What I didn't like about this situation is that we had a written contract and REO World was not honoring it, title company was not acting like a neutral 3rd party and filling out the HUD according to a legal written contract instead they were just going off of what a seller was telling them which is no okay in my book, and if my buyers didn't agree to it either they didn't get to buy the house or possibly the closing would be delayed (it had already been delayed a month) while we figured this out.  I do NOT like when my clients are backed into a corner by the other party. 

Finally the title company decided to send the HUD to REO World for approval with the seller paying the full closing costs they agreed to in the contract but wrote to me in an email that  "there is a good chance the seller will reject the HUD."  Talking to other lenders that see lots of HUD statements on foreclosure closings, they said it is common for REO companies to not pay items at the last minute and then the buyers are forced to pay for it.  I really think that is outrageous!

This morning we got word that in fact REO World agreed to pay the full closing costs by paying prorations of taxes!!  And of course they should, they agreed in writing to it.  I wanted to write this because I think more Realtors need to go to bat for their clients when something is so cut and dry like that.  I refused to make a call to my buyers to tell them to just bring more money to closing and in the end, it paid off.