Hey, everybody, welcome to “Avoiding Real Estate Turbulence” podcast, season two, episode two. This is your pilot, Jon Lafferty, with Century 21 Town & Country.
And copilot Tony Abate, with Ross Mortgage, and we are your real estate pilots. Our job is to be your real estate advocate and also make sure you’re educated about the buying and selling process. We’ll keep you informed throughout until we get you safely closed.
Today’s episode is sponsored by Title One. When you’re a seller or buyer, and you’re feeling weary or small, with tears in your eyes, Title One will dry them all. They are on your side. If times get rough and friends can’t be found, Title One can be your bridge over troubled title issues. You can reach Title One at 734-427-8000, or e-mail them at email@example.com. Again, firstname.lastname@example.org
There you go. All right, and a I love the commercial, man. You could go into business and write those taglines, I think. In a real estate transaction there are many reasons why you can encounter turbulence. Today we are going to talk all things title with Ken Taylor from Title One. Welcome back to the jump seat, Ken.
Welcome back, yeah.
Glad you’re able to join us for episode two.
Happy to be here.
In our last episode, we sorta talked a little bit about how you got into title, why you’re in title, and some things about it, what a commitment for title insurance is, owner’s policy, lender’s policy, so I thought maybe what we’d do is, in this episode, maybe just talk a little bit about some general questions that maybe people have of differences between different ways to hold title, and red flags when you’re purchasing a property to keep your eyes out for.
Well, first, let’s talk about why, in Michigan, we have split title, what’s called split title, and is it a benefit? Is it a detriment? If it’s a benefit, who does it benefit? And what does split title mean? Split title means that in a real estate transaction, obviously, you have a seller and a buyer taking out a loan. You’re gonna be purchasing two policies at a closing. A seller will provide an owner’s title policy to the purchaser. The buyer provides a lender’s title insurance policy to the lender and mortgage company. What they call RESPA, Real Estate Servicing Protection Act, made a rule that the consumer has the right to choose whoever they want for the service that they pay for, so the seller pays for an owner’s policy, so they can choose a title company, whoever they want. The buyer is also paying for a title policy. They can choose whoever they want. Therefore, kinda created this split closing process where each consumer had the right to choose the company that they were gonna buy the insurance policy from, or title insurance. In my opinion, this started probably about 12 years ago was about the real start of the split closing process. I was always of the belief it was a benefit. I’m of the opinion that it does not hurt to have more eyes to look at a scenario. It’s two title companies. You do it getting research on the property twice, so you are having two sets of eyes making sure that the history of that property and the transfer of that property is gonna go through clean without any liens or encumbrances, so my opinion on it is that it’s a benefit, and also, the professionals that you work with, your real estate agent, your mortgage company, typically have a strong and good relationship with the title company already, and I think that gives some confidence to your clients that you’ve worked with the partners, the title insurance company for a long time, and you trust that they’re gonna do the best job for your customer, so I believe having a split closing is a benefit to, really, everyone in the situation. It gives confidence in the client, gives confidence in the agent or the mortgage company that they know who they’re working with and that they’re gonna get the best service and the best policy possible because they know who they’re working with.
Give an example of a title company when you’ve been on the pick a side. You’ve been on the buyer’s/lend side, and you’ve been on the owner’s policy side of working with a title company on the other side that, number one, they were difficult to work with ’cause you could never get a hold of them, and what they were providing on the other end, you just, there just wasn’t a benefit to that other side, you know, working with a fly-by-night title company, or some of these other title companies that we’re starting to come across that don’t attend closings, and therefore funds get sent overnight, and so, and I’ve experienced this, where you have these fly-by-night title companies, let’s just, you know, Jimmy Bob’s Title Company and Services, and Jimmy Bob says, “Well, we’re gonna save every dollar we can, “so the buyer’s gonna come to our office, “and we’re gonna have them sign all their loan docs here, “and we’re gonna have our funds wired here. “Hey, seller and seller title company, we’re gonna, “once we receive the signed docs back from the seller, “and your title company sends us over the documents, “or we send them to your title company, “once the originals are consolidated and reconciled, “then we’ll release the funds to the seller,” which, if you’re closing on a Friday, that means the seller’s not getting their check till Tuesday or Wednesday. Meanwhile, do we have a legitimate closing? If keys were gonna be handed at closing, yeah, but guess what? The seller’s not getting his check until Monday or Tuesday of the next week, and if I’m a seller, I’m pretty PO’d about something like that.
Yeah, you know, there are occurrences where we run into newer title companies, ones that have not been seasoned, and you tend to find that you are almost helping them out, in a way, or helping them along. You are double-checking some of the work, and sometimes you are finding items that should be taken care of at closing that they didn’t, which, going back to the more eyes looking on a situation, so you, it’s almost like you’re double-checking that life of the property. Also, our job is to facilitate the sale for you and your customer, and we want to do so in the most easy and painless way, but also the proper way, so that a seller gets their funds the second that they hand over keys, so that the buyer doesn’t have to nothing’s closed in escrow, so they purchase the house, but then they’re waiting to close in escrow for three days before they get the keys, so there are times where we try to go or we do go above and beyond to ensure that your customers are getting what they are supposed to on the day that they’re supposed to do, and that’s, you know, you do run into that. You hope that you don’t, but as you said, lot of title companies aren’t as seasoned as we are, or they haven’t been out there as long, so it’s our job. We’re representing you and your customer to make sure that everything is done correct and on time, as it should be.
Question for you. Let me know if this is if you’ve ever come across this or heard about this. Buyer, seller sign documents, and funds have been wired to buyer’s title company, so they have the mortgage funds. They have the buyer funds, and before those proceeds are passed over to the seller, either lender says, “Whoa, whoa, whoa, whoa, whoa, wait a second. “Hey, we’re recalling those funds “because we just discovered an issue,” or B, buyer calls title company. He says, “I want you freezing those funds. “I don’t want you to release those to the seller. “We just walked into the house, and the basement’s flooded,” or have you ever had anything like that happen?
Yes, not too often, luckily. Usually, by the time you are at the closing table, most of those problems or issues have been worked out. There’s been a walk-through, usually before you go to the table, so that water in the basement takes, but yes, there has been times where there have been occurrences where either a lender will say, “Well, whoa, whoa, we just came across something.” Maybe that buyer didn’t listen to Tony and bought a boat on the way to closing, or there is that water in the basement, and there has been times where we have to either postpone the closing, have to maybe reclearance their underwriting, or maybe an escrow has to be held to move the closing forward, but there has been times where you have that moment. You get to the table and we have to say, “We have to figure something out.”
I guess what I’m I understand that, but what I’m saying is everything is signed. Mortgage docs are signed. Everything’s complete. The only thing that hasn’t happened is the seller hasn’t been given their proceeds yet. Has it ever happened where–
Yes. Yep, yeah.
So, okay, so, in other words, what you’re saying is the lesson today is if you’re a seller, and the buyer and the buyer’s title company hasn’t sent your funds over to the seller’s title company to be disbursed to the seller, or the seller isn’t getting a check that day that he’s handing over keys, then you probably don’t wanna hand over keys until you’re getting your check because there’s a chance, a slight chance, probably, but a chance that the seller may not get their funds. Either A, that mortgage gets recalled, or B, the buyer says, “Freeze everything. “I don’t want that seller getting anything because of this,” so this is a–
Yeah, does happen. The old kinda rule of thumb is, if you wanna think of it as the seller’s holding a warranty deed, or the buyer’s holding the warranty deed. The seller, or the seller, I’m sorry, the seller’s holding the warranty deed and the keys. The buyer has cash. The whole purpose is the seller’s gonna hand the key and the deed to the buyer. The buyer’s gonna give the seller cash. I wouldn’t wanna be that seller where I hand the keys and the warranty to the buyer who’s keeping the money. That’s supposed to be a, at-the-same-time transaction, so it is very rare in that occurrence, where it’s made it to that point, but yes, we have–
But it’s happened.
It’s happened before where you get through everything, and then, right as you’re at that just-about-to-the-finish line, there’s a red flag that pops up, and then everyone’s gotta pause and figure out the solution before–
And not even, I’m not even thinking about… I guess my head is all in the lines of what if the buyer, after they sign their documents, and the husband and wife, on the way to the property, get in a huge fight and decide, “Well, that’s it. “Marriage over. “I don’t wanna live in that house. “You’re not gonna live in that house. “Hey, title company, we’re not buying this house. “Freeze the proceeds. “We are not gonna buy this.” Now, could, at some point, they be forced to move forward with that? Sure, but, I mean, I don’t know, I’m just, I’m thinking like doomsday scenarios here, but–
Yeah, you know, I think part of, I mean, you are all about satisfying the customer, and you guys do a great job with that, but the core of what you do is ensure that the terms of the contract are met, and if they’re met, and everybody has agreed to it, you disburse.
That’s really, so I’d be hard-pressed to say that in that window where everything has been signed but not disbursed, I don’t think a buyer could legally tell you guys to hold off. I think the buyer’s leverage is not signing–
at that point.
That’s why it’s been, I mean, it’s very rare that it has happened at that. Usually it’s everything’s signed, and maybe you got a call from the mortgage company that something else happened, but, yeah, as you said, once you’ve completed signing, typically at that point you’ve so you’ve fulfilled your agreement or your terms of purchase agreement and your under your obligation to the note of the mortgage, but hate to say, I’ve never, I don’t think I’ve ever said, “I’ve never seen that before,” ’cause then it always pops up, but yes, there has been times where you’re getting just to that finish line, and something has popped up.
But, yeah, there are nuances, though, because what is that purchaser holding? That cashier’s check.
And when does the title company take the cashier’s check? At the end, so I can see a scenario where everything has been signed, and purchaser says, “My wife and I just stepped out of the room. “We’re in disagreement on something. “This check isn’t leaving my hands.” I don’t know, I think that’s a call-the-attorney moment at that point.
Yeah, usually, that’s kind of what it is, it’s–
‘Cause if they don’t pass the money, you couldn’t disburse,
but they have signed everything, to your point, Jon. Scary.
Well, and that’s why these separate closings, where these other title companies where we’re not gonna send a closing person to the seller’s closing. You guys are gonna have to get your seller’s signed docs, drop ’em off at us. Then we’ll cut a check, and we’ll overnight it, which, a lot of times, isn’t till the next day. By the way, can a title company collect interest on funds that they have sitting in their account, maybe over a weekend, that you haven’t disbursed?
No, all funds that a title company holds are in a non-interest-bearing account. That’s a underwriter guideline that they all have to be in a non-interest-bearing account.
Even if it’s disclosed in your paperwork that you can collect interest on that?
Look, man, I’m just–
I think it’s a legal thing, isn’t it?
Yeah, that’s, yeah. It can’t be held, I mean, we can’t make money off of other people’s funds sitting in an account, so…
You’re educating me on something here. Have you had title companies, basically, wanna do it remote?
I will not say title companies. I will say that in another state there is a company, a service. Title does not do closings in this other state that I’m speaking of. I won’t mention what state it is. They have a specific service that’s called something, and they specifically do closings. They have the buyers sign. They have the sellers sign, and so they handle all that. The lenders wire the money to this service provider. Title just does title in this state. They issue title insurance for owner’s policy. They issue lender’s policy. That’s it. They don’t get involved in closings, so in this particular area there is specific language in their paperwork that says that they are allowed to collect interest on funds that they hold and manage, so what you have happening is, in this particular state, there are deadlines associated with closings, so in other words, “Hey, Ross Mortgage “just is gonna be funding this loan, “and we’re just waiting for funds to hit. “We’re just waiting for funds to hit. “Our cutoff for closing is “11:30 this morning, “and if we don’t receive funds by 11:30, “we’re not gonna be able to close today,” and so what’ll happen is if, on a Friday, sometimes you’re encouraged, or not encouraged to have a closing, “Oh, it showed up at 11, you know, uh, “we’re gonna have to sit on these funds “Friday, Saturday, Sunday. “We’ll close on Monday,” and so what are they doing? They’re collecting interest on those funds. Well, can you imagine $200,000 here, $300,000, $500,000 sitting in an account, an interest-bearing account, over three, four days, over a period of time, and if you have a collective of over a million dollars in disbursements that you need to get out, and you’re able to sit on those through the weekend, maybe because people aren’t available to do it, you can see how, over several months and year, you can collect a pretty good amount of change on that, so this is not legal in Michigan.
Let’s make that clear. This is not something that is done in Michigan. Title companies do not collect interest on funds that they hold.
It’s like what the guys in “Office Space” did, isn’t it? Kinda like that, where they just took the rounded-off or the rolled-over interest that in the movie where they made a lot of money because of this money that just kinda sat on the–
I believe so. They rounded up.
They rounded up, right, right. Take a penny from the jar, right?
That’s exactly right.
Interesting. All right.
‘Kay, so talked about split title, why we have it. One of the things on our last episode was we talked about title policies with and without standard exemptions. Can you talk about an eagle policy. What’s the difference between an eagle policy and a standard policy?
The eagle policy does cost a little more, but what the eagle policy is is it gives further protection than a normal, what they call standard policy. Now, a standard policy, which is still done 90%, 85% of the time, is gonna insure both buyer and seller in the transaction, and will still cover all the necessary issues that could arise: post-closing liens, anything like that. An eagle policy just has slightly more coverage, more coverage when it comes to post-closing forgeries. The eagle policy is transferable, which is probably the number-one reason to that people get it. A standard policy, if you wanted to transfer between a family member, you couldn’t. You’d have to get a entirely new policy. An eagle policy you can transfer between family members, which is a little added bonus, but the main difference is it gives you slightly better coverage post-closing, and there’s a very long list of what it does, but they have, and it does cost slightly more, but more and more mortgage or real estate companies I see are going through that. On a whole, probably averages $110 more, so it’s not an extreme increase in cost, but it does give the seller and the buyer slightly more protection after the closing, which is where some of the problems come in. Little more coverage in that regard, and the fact that it’s transferable, really kinda like people, so in case they wanna add their kids onto their house, or wanna give it to their kids–
So in other words, where you might wanna actually use something like this is Mom and Dad are elderly. They get a loan on the house. They buy it. It’s in Bob and Ellen Smith’s name, and then Bob and Ellen Smith wanna put it into the trust, Bob and Ellen Smith trust. They transfer it into the trust, and then Mom passes away and they wanna add daughter to the title, or maybe they just wanna deed it to daughter so she’s sole person on title, that’s where eagle policy comes in handy. You don’t have to worry about–
Correct, you still have that coverage still connected with you ’cause it’s transferable between families, which is nice to have.
Well, this is an interesting point because I think we often see kinda the reverse without an eagle policy. We’ll have somebody purchase a property, and maybe for whatever reason, the spouse isn’t in the transaction at the time, or it’s a scenario like yours, where they want to add a family member at a later date. Correct me if I’m wrong, but if somebody has a standard owner’s policy, and then they do that type of conveyance, adding a spouse or adding a child, does that original owner’s policy become invalid at that point?
Yeah, at any normal wanted, so it’s so it matters, so going, you know, it matters how you take title or how you purchase a home because that transfer on a normal policy does void it once you transfer, so it does matter, when you do purchase a home, how you purchase it, or what type of policy that you do acquire when you do purchase a home.
Yeah, and I think a lot of people view that as kind of an innocuous transfer. It’s a non-issue.
Same people are living in the house. Nobody has gotten any money or anything. It’s just paperwork, but holy cow, that’s a big event.
On Monday you have coverage under an owner’s policy, and on Tuesday you don’t.
That’s a really good point.
We see it. We see it, don’t we?
Oh yeah, see it a lot where it’s not even a thought about the title.
I’ll just quitclaim it.
Yeah, we’ll just quitclaim. Just had somebody, Mom is elderly, and the family decided they were just gonna put the daughter on title with Mom. I’m sorry, the granddaughter, put the granddaughter on title with Mom just to have somebody on there. Well, the uproar from the siblings was, “Whoa, whoa, whoa, whoa, whoa. “You’re putting her on title? “But what about me? “And what about brother number two and brother number three? “This isn’t fair. “Why you putting? “We should all be on there “or none of us should be on there,” so they showed up at our office to do a quitclaim, to quitclaim granddaughter off so it was just Mom on title again, so no coverage.
Interesting, yeah, yeah.
You know, you were talking quitclaims before this episode, and it’s probably a segue because I think this is also something that folks interpret incorrectly, and I think, inside and outside the industry, folks kinda put a deed conveyance all in the same tier as far as validity and everything, but I think you brought up a very good point. You have the killer warranty deed, and then you have quitclaim deeds, and there’s others as well, but the warranties and the quitclaims are what we see the most. They’re not the same, right?
Yeah, talk about that–
They are not.
a little bit?
Yeah, a quitclaim deed is just conveying interest in a property. It just, if I own a house, and I wanna put my daughter on it, so I would quitclaim it, just the interest of it transfers.
If any, yeah, that’s true. A warranty deed warrants the condition and the marketable title of the property, and that’s what, really, title insurance stands on. We are taking from that seller a warranty deeds, you know, it’s their warrant that they have all the conditions met of the property, or they don’t have any liens on the property, and that’s what is enforced, usually in court, in that way. A quitclaim deed doesn’t have anything to stand on. If a seller’s not willing to give a warranty deed, I would be leery ’cause that usually means there’s something, you know, maybe something’s not quite right. Title insurances, across the board, do not rely on quitclaim deeds because there is no assurance from the seller. If the seller is not willing to give that warranty deed warrantying the condition and the marketable title of the home, then why would a title insurance be willing to give a title policy? So that’s, you know, quitclaim deeds are, I mean, they’re useful in scenarios, but they don’t stand up to any kinda scenario where you would have to fight in court over a claim or anything like that.
Yeah, ’cause correct me if I’m wrong, right now I could legally sign a quitclaim conveying my interest in Jon’s house to you.
Because basically I’m saying is any interest that I have in Jon’s house, anywhere from zero to 100%, whatever I have is conveyed to you. Well, I have no interest in Jon’s house, so you have a valid deed, but you haven’t gained any ownership.
So it’s definitely of a different level than the warranty deed.
Yeah, it does, and–
I would never do that, by the way.
Well, you bring up a valid point because it wasn’t too long ago where we’d see houses for sale in some hard-hit communities. $5,000 gets you this 3,000-square-foot house, and we’d get calls all the time: “This house is $5,000. “Can you show it to me?” And I’d quickly read through and say, “Oh, this being quitclaim deed, there’s no warranty deed.” “Well, I don’t know what that means.” Is it basically what it means is they’re gonna quitclaim you the house whether they have ownership in it or not. You’re gonna pay them five grand. They’re gonna disappear, and any liens, encumbrances that are attached to that property are now your responsibility.
Yeah, and they could have zero–
in the house.
And have zero ownership interest.
Yeah, yeah, yeah, it could have they could have somehow acquired it, even not correctly throughout the chain of or the chain of title, or the history of the property, and they’re just gonna give you whatever they want and, like you said, run away, and yeah, everything that’s left in that house, liens, anything like that, is your responsibility now, so the warranty deed is what, you know, and that’s, again, Act Two, it’s standard in every purchase agreement that the seller’s gonna provide that warranty deed. I would be leery if a seller said, “I’m only gonna do it on a quitclaim deed,” ’cause that usually means something’s maybe not right through that history of the property, or something needs to be taken care of, and they’re not willing to do it.
So really, they’re are they not more accurately or appropriately used for corrective actions?
Corrective actions, you know, typically you see it in more estate-planning occurrences where you are going to, you know, we’ve set up a trust for our family. We need to put the property in a trust. More situations like that. I would say more call it estate planning scenarios to get the house into wishes of the family trust, things like that.
Interesting, so let’s talk about how you hold title is how you’re gonna get paid in a real estate transaction, so I don’t think most people realize that if Bill and Sally Smith are on title, and they’re divorced, and they sell the house, are they gonna receive proceeds? Or the house is in an LLC, or an S corp, or a trust. Can you talk about that and things that people need to be aware of? We run into problems with this all the time is the house will be held in a certain language, and they will have an account that doesn’t match this language. I just went through this with an owner where they were holding house in a trust, and the way they were holding the house in the trust is how the title company had to make the check out, and how they were gonna make the check out didn’t match how they were how they, what the account, the bank account was set up in, and if it’s not set up exactly, the bank won’t cash that check from the title company, so you’re holding a check that you can’t do anything with. Talk about that and the importance of getting that correct in the process.
Yeah, and trust seem to be the number-one occurrence of that, and I think it’s a lot of people not understanding. Maybe their attorney didn’t explain it fully, or they just didn’t kinda think about it after that.
Better call Saul.
Yeah, but once you transfer your property into a trust, and this is something that sellers always take to heart or find hard to hear, but once you transfer property into a trust, you, as an individual, do not own that home. You, the entity, the trust itself, owns that home, and you are now just the instrument acting on behalf of the trust, which is why, as a title company, we review people’s certificate of trust, and all we’re looking for is making sure that you, as an individual, can act on behalf of the trust, but because of that, once that property is in that trust, the trust gets the money. They own the home, so at the closing table, the Taylor family trust owns it. That’s how the check’s gonna be made out, and a smart rule of thumb that I’ve always been told from estate attorneys that have talked to me is the second you open up a trust or create a trust, you need to fund the trust is what they call it. You need to go and open a bank account that matches the name of your trust so that you can take any proceeds, take anything you get from the trust and put it in there. Same thing goes for if you own the house as an LLC. Again, once you transfer that property out of your name as an individual into a corporation, a limited partnership, that entity owns the property, and that’s who gets the funds, and that tends to be, sometimes a point of contention because you go through the whole process of selling your house, and you think, “I’m gonna get that money,” and then you get to the table and you realize you’re name’s not on there. The trust name, the LLC name’s on there, and that does, and we’ve had that happen, too, where a seller has gone to a bank, and then called us from the bank, and say, “Well, they won’t cash my check,” and you have to say, “You have to open up an account “in the name of your trust in order to cash it,” and sometimes it gets a little because they just didn’t and I think it’s as lot just didn’t know, and you know it, and luckily we work with enough real estate professionals that once they see that, and we tell them early property’s in the name of the trust, usually at that point they’ll tell them, “Hey, this is how you’re gonna get your check “at the end of it all.”
Wow, super-critical, and there’s back-to-back transactions. I’m the seller, or more accurately my trust is the seller, but I’m selling 123 Elm Street on Monday, and I’m buying 456 Oak Street on Tuesday. I need those proceeds from the Monday closing. If they can’t bank it because they didn’t have the account, then the dominoes can’t fall, and that second transaction can’t close.
Yeah, and I think a lot of consumers probably don’t think of I like the phrase you use, fund the trust, and when folks get that financial advice, “Hey, we’re doing estate planning. “Let’s deed this home into the trust. “It’ll help you at tax time,” that’s not considered a bankable event, and so it is probably an afterthought to open a bank account in the name of that trust until you sell the property. Now you gotta put that money somewhere, and Jon, you brought up an interesting point about divorce scenarios, too, similar situation, you know, if Bob and Sally own the home, that’s what’s on title, that proceeds check–
Payable to both, right?
Yep, now that you sold it, you know, how you hold title, if you’re still husband and wife, even if the divorce is final, it says that you are split up, but you’re still both on title, so that check usually goes to both, and typically either an attorney or the husband, ex-husband, ex-wife are directing us on how to do the funds, but if you’re both still on title, you’re both still gonna get the money, and that’s what people and it kinda goes in the reverse, too, as well, where maybe the husband bought the home just by himself. The wife wasn’t on title, and they keep wanting to say, “Well, I need the check in both of our names.” Well, if you’re not in title, you don’t have any access, especially with no more dollar rates in Michigan, and you do not have any right to those funds.
It’s the only person who has the right to the funds is who is the registered owner of the property, whoever that is, entity, individual. That’s who gets the money.
I know that title tries to be perfect when it comes to printing up documents and making sure all the T’s are crossed and the I’s are dotted, and you try to print all these packages up error-free all the time, but let’s be honest, when you’re doing 30, 50 closings a week, clerical errors and things happen. It’s just the way of doing business. What does Title One do if an error isn’t caught prior to closing, and you’re sitting at the closing table, and an error is caught by buyer or seller? “This isn’t right. “This needs to be corrected,” and if it’s caught then, do you just correct it at the closing table, and everybody initials the change? And if it’s missed and is caught afterward, is there some sort of document that title has people, has buyer and seller sign so that those errors can be corrected and correct in the proper way that they need to be?
Yeah, yeah, I mean, obviously, you said goal is everything comes out perfect. Everybody, no mistakes are ever made, but nobody is perfect. No one’s gone through the life undefeated, as they say.
Do humans work for Title One? No, we only hire robots.
So humans are not perfect, right? So everybody makes mistakes, and the mistakes happen, but–
Yep, it does, and we hope we have layers of security in place for us. The file gets looked at by a good amount of people before it goes to the closing table, but you get to the closing table, and even after real estate agents reviewed it, even if the homeowners reviewed it, it’s a quick glance at their closing package. You get to the table and, “Oh, all my name’s spelled incorrectly.” Probably the best thing, with the advent of technology as it is, it’s a quick, “I’m gonna call the office. “They’re gonna make quick change.” E-mail right over. Usually it’s a two-second fix and you’re good there. Perhaps it would be something after the fact, you know, no one realized this, and maybe we even went to go record the deed, and there was a typo in the legal description. It got bounced back from the county. Well, we need to get something signed by the seller again. Every company, I think every company now, no matter what industry you’re in, but has some form of errors and omissions, or a clerical error form that says, “Hey, we’re not perfect. “If, through the course of this transaction, “we find something “that needs to be re-executed due to an error, “you gotta work with us to do so,” and really, 99.9% of the time everyone is willing to do so, and happy to do so because it’s something small because we have had so many people look at it that it’s really nothing major, but it does happen. Again, we’re not perfect, but we like to think that there’s enough layers in between where other people are catching things before it get to the table, and even if it does get to the table, with technology now, I mean, it’s so simple to change. It’s not like in the old days where if something was hand-typed, or there wasn’t e-mail, we’d have to all we’d have to cross it off and initial it, or, “You know what? “We’ll get you to sign it tomorrow “because I have to run back to the office “’cause that’s where the printer’s at “’cause I can’t e-mail it here.” It’s pretty quick nowadays, and pretty seamless, and with technology I think I have my office computer I can log in on my phone, which is my wife hates that sometimes, but it comes in handy when I need to correct something, so it’s pretty easy to make those little minor changes if needed.
Well, just as an example, I had a seller, and they signed one of these error and omission forms that if anything was missed, they agreed to make it right, come back, and correct it. Well, when title pulled the taxes, they pulled the current taxes, and when they received the bill, what wasn’t on there was that the previous year’s taxes hadn’t been paid, so at the closing table, when the seller saw the taxes that were taken from their proceeds, they thought, “Great, perfect.” Got their proceeds check, left, called me a week later and said, “What do I do? “The title company’s calling me. “They’re saying that I have to pay the back taxes. “Do I have to, or can I just blow ’em off?” I said, “There’s a little form you signed “that you agreed “to make any corrections, “or fix any errors, “or anything that was missed. “You need to pay it,” and so he went over, and he made it whole, but stuff like that happens, but that’s why forms like that are in there to catch errors because sometimes it’s the municipality that screws up and doesn’t, you know, it’s one of the things that we see a lot of is, not so much anymore, but one of the things that we saw a lot of back in ’14, ’13, ’12, ’11, ’10, ’15, ’16, we saw homes that were vacant, and in the summer the grass would be this long, right? And what if it was, let’s say it’s owned by somebody who, maybe, bought it at a foreclosure sale, and they’re just turning it around to sell it, and all of a sudden the grass is cut, and then, two weeks later, the grass is cut again. “Wow, somebody’s cutting the grass,” and then you go to close on the property, and maybe the title companies back then didn’t realize that all these municipalities said, “Yeah, we’re not gonna have these houses “with long grass like this. “We’re gonna tag the house, “and if they don’t cut the grass, “we’re gonna cut it for them, “and we’re gonna put a $150 lien on the property,” but it sometimes takes two weeks or a month, so by the time the title company calls the city and asks for water bill, and taxes, and anything else that appears on, and by the way, that usually gets attached to the water bill, doesn’t it?
Lawn cuttings, so it sometimes doesn’t show up, so two weeks after closing the homeowner sees that on his bill he’s got his water bill of 30 bucks plus 150 or 300 for grass cutting, or landscaping, or whatever, and so that was happening a lot, and it wasn’t getting caught because there was a delay for the recording, so a lot of that stuff you guy had to go back after the sellers to make the buyers whole.
Well, and like you said, too, ’cause not everyone’s perfect, so sometimes municipalities, like you said, they, maybe they didn’t code in the right amount for taxes, or the water bill wasn’t correct at the same time, and so it was slightly more, even after escrow was held to pay for a water bill, so there are occurrences and times where corrections need to get made because of outside information that might not be correct, and you know, so ’cause you know we are relying on we’re relying on public information to help us form the facts for the closing, and sometimes that’s not always correct, so it leads to either corrections at the table or maybe a phone call afterwards, that say, “Hey, we gotta make this right,” and move on from there.
Before we go, I wanted to talk about one other thing that’s been happening in our industry a lot. It affects your end. It affects my end, and it affects your end, and that’s wire fraud, and it’s unfortunately become a reality, and these people that commit wire fraud are so sophisticated now that they spoof title companies and send fake wiring instructions, so talk a little bit about that and some of the things that title companies are doing to help combat that, along with the stuff that we do, which is what we tell our clients with regards to wire fraud.
Yeah, that has that has been a major, major increase in worry for us, as an industry, has been wire fraud, and like you said, Jon, the level of sophistication that they are now doing in spoofing e-mails, making it look like if I’m e-mailing somebody, they can copy me exactly to my signature line, my e-mail address, and even real estate agents mortgage. I’ve heard tales from everyone, where mortgage companies, they’re getting spoofed, and as an industry, especially us, as a title company, things we’re doing to combat it, you know, secure e-mail. I know it’s not something that, as an industry, that everyone likes to do because it’s another step. I gotta remember another password, but it’s an added layer of protection. We try not to, anymore, actually e-mail out our wiring instructions as much as we can. We encourage, always, consumers, call in, verify ’cause things you will never hear a title company say: “Hey, we have these new wiring instructions.” That’s a big one, and I mean, and Title One’s been around for almost 30 years now, and we’ve changed banks once. Title companies do not change banks, so right off the bat, if you get an e-mail, “Hey, we just changed our bank,” be cautious. Be suspicious, or you’re on your way to your closing, and you get an e-mail, or you’re on your way to the bank ’cause you got your final number, and you just heard, “Hey, the number just changed.” You know what? Nowadays, and Tony knows, too, I mean, it’s rare that your number just changes. Usually you know it for long enough, so we try, with secure e-mail. We encourage you to call and verify. Get to the bank. Make sure that you’re calling in ’cause you know our number. Verify our wiring instructions, but it is pretty rampant. I’d say that I get, and myself, I get minimum 10 to 15 e-mails a day from people trying to spoof our account, to hack us, to get us to open up so they can get into our system to do that, and I get it from real estate agents, that they spoofed their account, and mortgage companies, too, so it’s the rule of thumb is be cautious. There is, I would take 4,000 phone calls a day of someone saying, “I need to verify your wiring instructions,” versus that call saying, “Well, I sent it two days ago. “Why don’t you have my money yet?” ‘Cause the second it goes to a fraudster, it’s gone, and it’s something to really, really be cautious about, and it is scary, but there’s, you know, you should still have confidence that your money’s gonna get there, but caution is always the key.
Yeah, well, the interesting thing, too, is that it’s also at a time when a consumer is in a carefully timed transaction, where there’s a lot of instructions going on, and I think that consumer is hard-wired to think, “It’s very important “that I follow all the instructions I get, “or I may not close,” so they get that spoofed e-mail, and it looks like it comes from me, or it looks like it comes from Jon, says, “Make sure, whatever you do, “use these wiring instructions,” they’re gonna be inclined to do that unless they’ve received 10 warnings from each of us to not do that ’cause they wanna make sure things happen, and boy, the bad guys are hitting consumers at a really vulnerable time in the transaction, and it’s been an interesting progression, right? Now we were cashier’s checks,
Right, we were cashier’s checks for a long time. Then a bunch of fraud happened. Then it was, yeah, if it’s over this amount, we want the rest wired back to, .
We don’t want wires anymore.
We don’t want wires anymore well, we’ll take the full cashier’s check pop, and we’re just gonna verify the funds are good.
And at lightning speed, you know, as an industry, title companies went to wire pretty much universally, and then it seemed like within days and hours the instances of wire fraud just left the launch pad big time, and it’s interesting. They talk about the average retail theft or bank theft is in the hundreds or thousands of dollars. Average wire fraud is five, six figures all the time.
All the time.
All the time.
It’s huge money.
And then the amount that it affects. If a buyer wires, you know, gets hit with a fraud, not only is that buyer out money, but that seller is out those funds, too–
and then and the agent more. I mean, it’s just, it’s a trickle-down effect, and it is scary, but it’s you preach caution as much as possible. Always it sounds weird to pick up a phone in 2020, and no one wants to make a phone call, but pick up a phone, call. Say, “Hey, I’m gonna be wiring funds. “Can you confirm what your instructions are? “I wanna make sure that I have them right “before I send them.”
Talk about avoiding real estate turbulence. That might be the ultimate turbulence that could happen in a deal, the fraud at the tail end.
Can you imagine, yeah, what a sinking, horrific feeling if you’re a buyer and you wire $250,000, and it’s everything you have, and it’s gone.
Yeah, and gone-gone, ’cause it’s–
Once we’ve had security advisors. We’ve even heard of people from the FBI who do this for a living talk about the second it gets to a fraudster account, it’s in six different ones, and then it’s out like that, and with wires, it’s hard to pull them back. It’s hard to do, so caution, caution’s all right–
Split from six different banks: Bank of the Caimans, Kangaroo, yeah. If you receive the account number to wire to, and it’s OU812, don’t do it.
Think twice, yes.
Well, hey, Ken, thanks for coming in again–
I appreciate it.
for episode two.
Thank you, not a problem. It was great having you here. Gosh, I figured the second episode we’d be talking with the questions maybe 10, 15 minutes, but no, this is great information. Thanks again.
Any time. I appreciate you guys having me out here, and–
Thanks for sponsoring episode one and episode two. Title One, thanks for sponsoring–
Yeah, yeah, yeah. Oh, reaching Title One. How can they contact you and the company if the need arises?
Yep, phone number: 734-427-8000, or e-mail, email@example.com, but we’re here for any title questions that you have, big, small. Any way we can help, we’re glad to help.
You guys do a great job.
Yeah, absolutely. All right.
Thank you, appreciate it.
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