Opening Titles and Closing Remarks

We just finished compiling our monthly statistical package for September. A recent network upgrade put us behind the curve for a week or so, but we're caught up now.

Our property records data base shows that through September, the sale market in Monroe County continues steady and is off about 20% from a year ago. 

Total deed recordings in September were 165, compared to 210 in September 2007. For the year to date period, there were 1821 deed recordings compared to 2293 in 2007. Only deeds judged to represent a residential, commercial or vacant land sale transaction are included. Quit-Claim Deeds, deeds between related parties and Sheriff's Deeds, for example, are not counted.

Judging from media reports, we're faring much better than some other parts of the country. Actually, has anyone ever fared worse than media reports about anything? I don't think so.

Here's a chart that shows the last four years of so. If you like to receive our complimentary monthly statistical package, send an email to Tammy Walker , our Vice President of Sales.

There's a right way and a wrong way to buy on Land Contract, a popular form of seller financing in the Midwest. Here are four mistakes that I see all too frequently in Land Contract sales.

Mistake No. 1: Not recording the Land Contract or a Memorandum of Land Contract in the public records. Recording gives notice to the world of the Buyer's legal rights to the property. Although being in physical possession of the property may provide the same notice, possession is a question of fact that must be decided by a court if the priority of the Buyer's interest is challenged. By recording the contract, this question of fact is removed. The Buyer's interest is there for all to see. A Buyer certainly would record their deed, wouldn't they? Record the Land Contract.

Mistake No. 2: Not having the Land Contract drafted by an experienced Real Estate Attorney. The money saved by using a generic store bought form of agreement is chicken feed if a dispute arises during the term of the contract. There are important legal considerations for both the Seller and the Buyer in an installment sale. The time to negotiate these is before any payments are made and received.  Don't expect a $10.00 contract downloaded off the Internet to address all the possible legal issues that can arise in a Land Contract sale.

Mistake No. 3: Waiting until the Land Contract is paid before getting a title commitment. The time to review the title is when the Land Contract is entered into, not when it's paid off. A Buyer should know who else has rights in the property.  Are these rights potentially adverse to the Buyer's interest, like a mortgage or other lien for example? How is the property restricted? Are there any easements that might affect the Buyer's intended use of the property? The time to answer these questions is before the Buyer starts making payments, not after they're finished.

Mistake No. 4: Not requesting an Owner's Title Policy at the time the Land Contract is signed. Often times we are asked to "hold the title commitment open" until the Land Contract is completed and a deed is recorded. This is a misinformed request usually related to someone (including even a few title companies) not understanding that a Land Contract transfers equitable title of the property to the Buyer. It's no big deal for the title company to adapt an Owner's Policy to insure the Buyer's Land Contract interest. If the policy is not issued, the title commitment expires, the title underwriter is not paid, and there is no title coverage protecting the Buyer's interest.

Entering into or accepting seller financing is a serious decision. Many factors must be weighed. In the end though, the Buyer is buying the property. Just as if the Buyer got a mortgage and the seller gave a deed. Avoid these mistakes. The expectations of your title company in a Land Contract sale are no different than in any other sale.

For additional information about Land Contracts, closings or title insurance send me an email or leave a comment.

For a city our size, Bloom® is a magazine of remarkable quality. Bloom® is the passion of editor and publisher Malcolm Abrams. Malcolm, a quintessential New Yorker with years of publishing experience, visited Bloomington a few years ago, fell in love with our city, relocated and decided to publish a city magazine.

For the most recent issue of Bloom®, Malcolm asked his readers several months ago to "take pictures of whatever caught their fancy on one day, Saturday, August 23."If you're from Bloomington or have visited here, you'll find the collection captures the quality of life that we would all miss if we left. If you've not been to Bloomington, you'll get a glimpse of what makes our city such a special place.

There's a link to Bloom® down the right side of this page. Take a few minutes to check it out. You will not be disappointed.

My favorite picture is the one Malcolm chose for the magazine cover; the Chocolate Moose by Domingo "Ding" Prud'homme. The Chocolate Moose is just down the street from my office and has achieved legendary status in the eyes of our employees; especially when one of them has a birthday. The picture captures the timelessness of the "Moose." It would be the same even if taken 30 years ago.

This issue of Bloom® also marked my debut as the author of a short column about the local housing market. If you have the opportunity to pick up a copy of the magazine (the column is not available in the online magazine) please check it out and let me know what you think.

The reputations of many ethical, hard working Mortgage Brokers, Realtors®, Appraisers, Title Companies and others have been tarnished as a result of the actions of an unscrupulous few over the last 5 years. It's guilt by association. Are we about to experience deja vu all over again?

The other night I was working late at the office and one of our secondary phone lines rang. Odd, but I picked up the phone anyway and started to answer. A recording kicked in and I am surprised not surprised at what I heard.

The voice, in an official government sort of tone, informed me that the Emergency Economic Stabilization Act mandated, yes mandated, that every homeowner had the right to negotiate with their lender to lower their monthly mortgage payments. Huh??? I guess I missed that part. 

The message continued for about a minute urging me to act now because time's running out. It did not tell me who took such a personal interest in my situation. At the end I was offered a choice to press 1 for more information or press 2 to be removed from the call list.

How about press 3 to whack you upside the head a few dozen times?!?! Show some professionalism and tell me who you are and what you really do? And while you're at it, find a new business model that doesn't rely on deception, misinformation and unfulfilled promises!

Why bait me and not tell me who you are? Why fish for leads through an automatic telemarketing scheme. I'd be surprised if this isn't a foreclosure counseling scam. Brought to you by the same people who contributed in part to the mess we're in now. Ironic.

There are legitimate financial counseling firmsto help people in need. They're in the phone book. You're minister probably knows one or two; so does your lawyer and accountant. Talk with a realtor®. Check with a local loan officer. Check on line here: http://activerain.com/. Honest and trustworthy help is available.

During the last 18 months, many engaged in the predatory lending gig left the business. Are they finding their way back? The number of desperate prospects is at an all time high.

JB note: re-posted this w/changes 10/18.

This post deals with Insured Closings from the seller's side. Earlier this month I posted about Insured Closings from a buyer's perspective; what is and is not actually insured.

To quickly recap, an Insured Closing is when the title insurance underwriter (not the local agent, but the actual insurance company) issues a Closing Protection Letter (CPL) to the Buyer's Lender. Lenders require a CPL before they will send the closing agent any documents or funds.

The CPL provides no protection directly to the Seller. The Seller has no direct right of action against the title insurance underwriter as the Buyer and Lender do. Where the Seller's interests are aligned with the Lender, the Seller will enjoy a measure of indirect protection.

In our market, the Seller pays for the owner's title policy. This sometimes leads to a misunderstanding about the occasional post closing matter that requires the seller's cooperation. Most often it will be a payoff that is short or a payment that needs to be made that we were unaware of. A Seller might say to me "It's not my problem. It was an Insured Closing, wasn't it?" My answer is that "Yes, it was an insured closing. We insured the Buyer that you owned the property when you sold it to them. We didn't insure you that your lender gave us the correct payoff information."

As a Seller, how can you protect yourself? First, carefully review the closing statement. Particular attention should be paid to payoff amounts, credits to the Buyer, prorations, and other payments that you agreed to in the Purchase Agreement. Once you sign the closing statement, you are accepting it as correct.

Secondly, do not "dry " close (sign everything, leave it and hope the Buyer's Lender sends funds) unless there is a written agreement including you,  the Buyer, and the Closing Agent providing a mechanism for you to get your deed back if the transaction is not funded within a specified period of time. In the current environment of dynamic loan approvals, this couldn't be more important.

Finally, consider the reputation and local expertise of the title company that you select for the transaction. When you select John Bethell Title Company, Inc., your sale will be handled by knowledgeable people that care about you and your community. We will do everything we can to ensure that your transaction happens on time and with minimum anxiety. When we run into you at the Kroger, we won't be embarrassed. We won't duck behind the bread rack. We will look you in the eye and smile.

If you have any questions about closings or title insurance, please leave me a comment or email me directly.

We just completed a major upgrade to our network server.

Completed as in your loan approval is completed except for these 43 stips; upgrade; as in 3 years this will work much better than what you're using now; network, as in that virtual binary ether of bits, bytes and bps that revolutionized the way we communicate with each other, if only we talked with each other; server, as in the human's role when interacting with technology platforms.

We upgraded to Small Business Server 2003.  I figure whoever owns the company after I die can give serious thought as to whether the 2007 version is stable enough yet. I am not Ahead of the Curve when it comes to operating systems.

Tracy, a long time friend and gifted systems putter togetherer extraordinaire - what do they call guys like him, anyway? - drove all the way down from Detroit. Tracy is a rare computer guy who is comfortable with himself about what he doesn't know. It makes a difference in implementing technology, because he thoroughly researches everything he tries.

Joining the quest was Jack; our full time data base administrator and trusty level one technical support deity.  Jack was born with not one, but two patience chromosomes; an essential genetic characteristic when dealing with computers, waiting in queue for tech support, or interacting with local government officials. This chromosome is sadly missing from my own DNA.

Together, we engaged in a life or death struggle with the evil empire that is Microsoft's® full time technical writing nation.

Technical writers, as in squirrels that place tiny acorns of mission critical information in hidden directories on the ‘C' drive labeled "things we didn't tell you because we take perverted pleasure in imagining what you'll do while trying to figure this out."

Appropriate, I suppose, since October is "squirrel awareness month."  

btw - Word 2007®, presumably written by these folks, just alerted me that Microsoft® is not in the program dictionary . . . Hmmmm? In case you're wondering, I just checked, and Google® is in the dictionary. That's just too funny!

The quest started out rocky when UPS air dropped the server that we'd shipped to Tracy so he could start the configuration.  Tracy found some replacement parts for the fatally wounded machine on EBay®.

EBay®, as in where mostly you bid online for either 1:) things to give your girlfriend, hoping she'll believe that you paid retail or 2:) golf clubs.

Tracy and the server arrived Saturday afternoon and we (as in he) got started. The server booted up. The firewalls booted up. The auxiliary disc array booted up. We didn't break the Internet. We oozed confidence. We called it a night feeling satisfied.

Early Sunday morning, joined by Jack, we were back at it.  It didn't start well. The firewalls that worked last night, took Sunday off.

Firewalls, as in a part of a network security scheme that by default assumes you want absolutely no contact with the civilized universe.

Tracy spent about four hours Googling (not in the Word® 2007 dictionary, btw), configuring, testing and even guessing a little to figure out why.  Turns out Tracy just made the amateur mistake of following the Installation Sorcerer's instructions to the letter.

Installation Sorcerer, as in a program wizard that assumes that you'd already done a dozen other steps it never told you about when trying to cast the correct spell to activate the equipment. (see squirrels, above)

Eventually, he got the firewalls to at least let the email message through while keeping the attachments for their own evil purposes. Hmm . . . closings will be shorter.

Next we started migrating data over to the new server and configuring the workstations.

Configuration, as in following the Installation Sorcerer's instructions. Fail. Go back and do something else. Follow the Sorcerer's instructions. Fail again. Go back and do two others things it didn't tell you. Follow the Sorcerer's instructions. Fail again. Repeat process until thoroughly pissed.

Eventually we got the workstations configured. We check and not all the data migrated. Some of it is lollygagging around on the old server, laughing and giving us the raspberries. Trying not to let our feelings be hurt, we persevere. It is now about 10:00 p.m. I am falling asleep in my chair. Jack is drooping. Tracy, who is allergic to sunlight, is just cranking up. Eventually, good things start to happen. Server is working. Workstations are working. Printers are working. We think we got it licked. We go home. It's 1:00 a.m.

We spent most of Monday pushing string uphill, but by the time Tracy leaves at 5:00 p.m. everything is under control. Jack and I spend the better part of the week dealing with remaining little issues.

Little issues, as in things the computer is doing you've never seen happen before and have no clue why.

It's now Friday evening. I am exhausted. But for the most part everything is working and working well. Until the next time we upgrade our server and network. After I've retired.

Did I mention that October is Sarcasm Awareness Month?

When Realtors® and Lenders start asking me if I'm busy, I know what they really want to know. "Are you busy?" usually means "Am I the only one who is not busy? Please tell me so I know it's not just me."

Tammy Walker, our Sales V.P., is getting this question a lot lately. We talked about how we should respond. We want to be truthful. No blowing smoke. Be genuine, not phony. Most importantly in the current environment, we want to be as positive and upbeat as we can be. Here's how Tammy is answering this question.

Well, even though business is softening considerably over the last six weeks, we're busy. We're busy getting better prepared for when our customers get busy again.

Every winter we examine our entire work flow process; start to finish, looking for better ways to communicate with you and with each other; and, eliminate wasted activity.

We are planning our winter training activities so that next year our team will be even more prepared to deal with the unusual and unexpected.

We're upgrading our computer network, improving the tools we use to service you; looking at how to incorporate powerful new features into our process.

We're looking at our existing production software. They say you only use 10% of your brain. Most of us only use 10% of the features in our software. We're going to be busy improving that ratio.

We're busy with our clients, too. What are you planning for your business? What things about how we work together would you like to improve? Please give us some constructive criticism.

We're into social media; talking to our clients about it. What are their thoughts about web 2.0? How will they incorporate social media into their marketing strategies?

Hopefully soon, after the election maybe, people will stop watching CNSBN (Cable News Sound Bite Network), things will settle out and start returning to normal. It's not a question of ‘if'; it's a question of ‘when.'

In the meantime, yes we are busy. There's so much to do and so little time to get it done before you're busy again.

A client asked me yesterday "How much FDIC Insurance does your escrow account get?" Wow! Is this a sign of the Apocalypse or what?

The quick answer to my client's question is that if the escrow account is set up and administered correctly, then the FDIC will treat each individual closing or escrow as a separate account. For example, if there are funds from 10 closings in my escrow account, each escrow receives the $100,000 maximum protection. It's like 10 accounts, not one.

To get the full benefit of FDIC insurance, the escrow account needs to be labeled as such in the account name. This is done when the title company establishes the account with the bank. Words to the effect of "Escrow Account" or "Trust Account" should be somewhere on the check from a title company, usually following the company name.

The title company must also be able to demonstrate through its own accounting procedures that it is managing multiple escrows through the single bank account. Separate ledgers showing deposits and disbursements for each closing and tracking of balances by closing file, not just aggregating the total, is required. We take the extra step on our bank deposit slip to put our file number next to each check we've received.

For many years now, title underwriters in their escrow audits, check for compliance with these procedures. So chances are that the vast majority of title companies are correctly administering their accounts.

With all that's going on now, at least I'm not worrying about this.  

In Indiana, we close and disburse at the closing table, not in Escrow. Most title companies in Indiana and many elsewhere advertise Insured Closings as well as title insurance and other services. But what is an insured closing? It is a broad term that is ripe for misunderstanding.

An insured closing occurs when the title insurance underwriter - that is the actual insurance company whose title policy is going to be issued - provides to the Buyer's new Lender a Closing Protection Letter (CPL for short). The CPL is provided before the Lender will send the Closing Agent documents or funds. The CPL assures the Lender against loss by reason of the Closing Agent's failure to follow the Lender's closing instructions and/or failure to properly handle the funds entrusted to the Closing Agent by the Lender. The American Land Title Association CPL (here http://www.alta.org/forms/ ) used by most title underwriters contains a clause extending this protection to the Lender's client, the Buyer.

The Buyer is tagging along on the Lender's instruction that the Closing Agent not disburse any funds until the Buyer owns the property and the Lender's mortgage is a first lien. This instruction requires the Closing Agent to obtain and record the deed(s) transferring title to the property to the Buyer and also make certain that any liens of the Seller are paid off at closing and released.  In the event these instructions are not followed and a problem ensues, the CPL gives the Lender and the Buyer a right of action directly against the title insurer, a large company with lots of assets, instead of the Closing Agent which may be a much smaller company with little or no assets. The CPL functions in similar fashion to a bond in that it transfers much of the Lender's and Buyer's closing risk to the title insurer.

While the CPL provides assurance to the Buyer that they will end up with title to the property and all of the Seller's obligations will be paid off, it does not provide any assurance that other parts of the closing statement are prepared in accordance with the Purchase Agreement or other instructions of the parties. Buyers should still carefully review the accuracy of the closing statement including the tax proration, repair credits and other matters and not just fees related to acquiring title, discharging liens or loan charges. By signing the closing statement, the Buyer is agreeing that it is correct. If an error is later discovered, the Buyer's only recourse will be against the Closing Agent and not the title insurance company. Reputable title and closing agents carry Errors & Omissions insurance to protect themselves against such problems.

The CPL provides no protection directly to the Seller. I will cover Seller's concerns in another post later this month.

As you can see, not everything about your closing is insured. You can minimize the risks by choosing a title company based upon its local expertise and reputation, not just its price. When you choose John Bethell Title Company, Inc., you'll work with experienced people that know you and your community. You won't have to navigate a call center matrix to get an answer. The people you need to talk with are not in a cube farm 1000 miles away. My office is just behind the front counter. I'm there to help - everyday.