Opening Titles and Closing Remarks

The mortgage mess is difficult to explain. There are lots of axes to grind. Many seeking to place blame. Many looking to absolve themselves of blame. No wonder it's hard to really understand what actually happened. The embed video here is the work of Jonathan Jarvis. Jonathan is a graduate student, not in finance, but in Media Design. He attends the Art Center College of Design in Pasadena, California.

It's most interesting to me that this video, the best explanation of market cause and effect that I've seen, is not the product of one of the many talking heads on CNN or CNBC or the Wall Street Journal or any well known financial media publication. It's the product of someone studying how to use new media to explain complex concepts. Jonathan, how Marshall McLuhan of you.

Jonathan gave me permission to pass this on in this post. He also asked that I mention the fine work done by John Levoff with the narration and Brandon Au who did the music. Thanks also to my friend Dave Wirshing who brought this to my attention over the weekend with a post on Twitter.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo. 

While looking at the video a second time, I remembered Alan Greenspan's famous "irrational exuberance" comment that preceded the dot com bust. The dot com bust pales in light of the current situation. So Alan maybe had it right after all - just wrong about the timing!

Jonathan took down the original web site to which he'd posted this video. It appears that it received so much traffic that Jonathon incurred several thousand dollars of expenses. Not easily assimilated into a graduate student's budget. You can show support for this excellent material by buying a t-shirt here.

I will certainly be showing this video to many questioning clients. Maybe you will to.

Last Wednesday at 9:00 a.m. sharp at John Bethell Title Company a nice couple walked into our Downtown office for their refinance closing. The same closing that was on our calendar for 9:00 a.m. - at our East office-- for next Monday.

Yikes!

Then began the questions. The phone calls. A few more questions. I sat in my office behind the front desk and continued working. All the while keeping an ear out listening to how our team handled this unexpected early morning surprise. I couldn't be more proud of them!

Jeanette, one of our Real Estate Closers, after a series of phone calls determined that although we'd been misinformed about the date, the loan package was ready to download and close. Jeanette and Kara, our downtown Closing Officer, apologized for the mix-up but did not point any fingers or assign blame. They offered solutions.

We could reschedule for another day. We could accommodate them later in the same day. Or, they could wait for 30 minutes or so while we tried to get their current mortgage payoff letter, complete their package and close the transaction. The couple chose to wait.

Jeanette printed the package, took the couple into a closing room and started going over the standard documents that did not need any preparation. At the same time Kara obtained the payoff of their existing loan (local lender fortunately) and worked up the closing statement. After a couple of back and forths with the lender's closing representative he approved the closing statement and the couple signed it. They left with smiles about an hour and a half after they'd arrived. Pretty good I thought under the circumstances.

The ability to successfully deal with the unexpected is an important consideration in selecting a title company. Lately many of our closings are last minute or after. It's just the way it is in the current financing environment.

We have seven licensed closers, four closing rooms in two locations. And while these Yikes! moments don't happen often, our folks know how to deal with them effectively. Don't assign blame. Offer solutions. Be flexible.

Meet Claire Voyant, who just joined John Bethell Title Company, Inc. Claire, is now assisting our closing team in predicting the property tax amounts for our real estate closing tax payment escrows.

Every year at this time lenders begin requiring that we insure them that the spring tax payment is paid. May 10^th is the statutory date in Indiana when the first installment of property taxes is due but that amount isn't usually known until the end of April. To comply with the lender's instructions, we escrow enough money (hopefully) at the closing to pay the taxes after the bills come out. Deciding the amount of the escrow is tricky.

This year, rather than attempt these predictions myself, I decided that we needed the services of a professionally trained prognosticator. Claire comes to us after seven years with a local funeral home successfully predicting death. Claire is looking to expand her professional experience by predicting taxes. She turned down competing offers from the IRS and the Congressional Budget Office.

Claire will gaze into her crystal balls (which I got a great deal on at Sam's Club® but I had to buy a case of them) and advise our closers as to what the future property tax amounts will be.

This is a feat of prophesy worthy of Zoltar, himself, with whom Claire apprenticed early in her career. For you see (actually, Claire sees) there are many changes with Indiana Property Taxes this year.

First, as most Hoosiers know, this year for the first time statutory caps will limit that amount of property taxes that can be assessed. For owner occupied residential property the cap is one and one-half percent. Residential rental, the cap is two and one-half percent. For all other improved property the cap is three and one half percent. Depending upon where you live and what you use your property for, your taxes will go up or down as a result of the caps.

Second, the State of Indiana is eliminating the state replacement and homestead credits (not the homestead exemption-that's different) which in the past reduced local property tax levies. So eliminating these will cause property taxes to increase.

Third, the State of Indiana is assuming responsibility for much of the school funding that used to make up the largest portion of the property tax levy. This will reduce taxes.

Fourth, last year's $640 million state subsidy to local governments that reduced property taxes for homestead properties is only $140 million this year. This will cause taxes to increase.

And fifth, no one knows for sure what if anything the State Legislature is going to do the next few months to change any of this. There are dozens of bills introduced in the current session that would affect property taxes.

You can see that Claire's work is cut out for her. And according to a state official I heard Tuesday only about a dozen counties are expected to mail tax bills on time, so we'll be doing a lot of tax escrows.  The escrows need to be sufficient to pay the taxes when they become known.

Please join me in welcoming Claire to our team. After the need for tax escrows passes, Claire will assume the additional responsibility of helping our employees decipher what I really meant to say when I said something totally different. Claire foresees a rewarding career with John Bethell Title Company, Inc. long after the need for tax escrows subsides.

After conducting thousands of closings I know that the title insurance commitment is the least understood and most ignored of all the residential real estate closing documents. Few buyers understand what a title commitment is for. They just know that they need it or that their lender requires it.

The title commitment (in some markets it's a prelim or a binder) is the operating manual for attaining legal ownership of the home that you're buying. It is a summary of the rights associated with the property. Here's how to use the title commitment to make sure that you get the property rights that you bargained for.

Prior to the closing, request the title insurance commitment and review it with your Realtor®, attorney or other representative.

Schedule A of the commitment lists the basics of the transaction. Verify that this information is correct and advise the title company of any concerns.  Are your names spelled correctly?  Does the insurance amount equal the purchase price? When there are multiple counter offers, sometimes the title company doesn't receive the last one.

Are the owners shown in the commitment the same people who signed the purchase agreement? Often when there are multiple owners, we find that not all of them signed the purchase agreement.

Does the property description in the commitment seem to match the one in the purchase agreement? Pay close attention to acreage amounts and question any inconsistencies. It may be that not all of the property or even the wrong property was searched.

Schedule B Section I of the commitment lists all of the documents and other requirements necessary for the title company to issue their policy to you. Besides the deed, new mortgage and affidavits, this is where you'll find a list of all of the seller's liens that must be paid off before you can receive clear title. Prior to the closing, make note of the face value of all the liens shown. If the total is close to or exceeds the purchase price it may be an indication that the seller is short.Consult with your Realtor®, attorney or other representative in these situations.

At the closing, examine the settlement statement to make sure that all the liens are being paid off. (In some locales, Privacy Practices prevent the buyers from seeing the seller's statement. Instead ask the title company to waive the seller's liens on your copy of the commitment or by a separate endorsement.)

Schedule B Section II of the commitment will show the details of the current real estate taxeswhich is usually the basis for any tax prorations on the closing statement. This section is also where any easements, restrictions and other property rights that will remain on the property after the closing are listed. Review these matters to ensure that you understand what you are purchasing. This is especially important if you are contemplating changing the use or altering improvements on the property. Restrictions may prohibit your plans or intended use.

Some title companies do not do a complete search of the public records for easements and restrictions. Instead they make their policies subject to "any and all recorded easements and restrictions." Follow this link to learn more about this consumer unfriendly practice that I dubbed "Title Insurance Lite."

In some markets the commitment may be organized differently than described here. All of the information will be there though. Keep looking until you find it.

Bring your title commitment to the closing. You can refer to it as needed to make certain that all the documents and tax prorations are correctly prepared. And if you don't understand something, ask for clarification. Most people only buy a few properties in their lifetime. Don't be embarrassed by what you don't understand. Mistakes are much easier to prevent before the closing than to correct after it.

Finally, compare your commitment to the final title policy when you receive it. The seller's liens should be gone. There should be nothing in Schedule B of the policy that you didn't agree to. Put your policy with your other valuable papers.

The commitment is the operating manual for obtaining your home's property rights. And as with anything complicated and unfamiliar, it pays to read and understand the manual.

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This is another in my ongoing series "Ask the Title Guy." If you're a realtor® or lender I hope these posts will prove helpful in explaining things to your clients. I will be tagging them as "Ask the Title Guy", so when you stop back, you'll know exactly where to look. And if you have a question you'd like me to address either leave a comment or email me directly.

pictures purchased www.123rf.com

I'm addicted. Some of you are there with me. Getting up early. Staying up late. Writing. Posting. Thinking about writing. Thinking about posting. Praying for comments!

And I've done it again. I've started another blog; this time with my friend Chris Dickens. It's called Branding Chaos.

Branding, as in what many of us participating in social media are trying to do. Create a personal Brand. Create power in our Brand. Drive business to us because of our Brand.

Chaos, as in the scientific sense of the word.  A system so large, interdependent and complex that predicting its behavior is impossible. That's how we see Social Media.

Branding Chaos is for Bloomington business. Chris and I hope to introduce Bloomington businesses to social media and discuss it in a friendly "Look what I just discovered!" manner. Chris, an IT professional, will also post about technical issues that sometimes complicate our social media experience. And when other Bloomington business owners take the plunge into social media, maybe Branding Chaos can be a forum for us to share what they're doing and for them to share what they're learning? We hope so.

Chris and I are not experts but we are certainly social media enthusiasts. We both feel that if we can help a few of our neighbors become active participants, it will enhance what we're trying to do in social media with our businesses. We're trying to help create our market. We're trying to get Bloomington past the "well, nobody else is doing this" stage. We're trying to accelerate the adoption of social media in our community.

I will continue posting to Opening Titles and Closing Remarks. This blog is an important part of my personal and company branding strategy. And I'm more excited than ever given the recent enhancements to the platform by Active Rain. I will repost here an occasional Branding Chaos offering appropriate to a real estate audience.

So if you get a chance, check out Branding Chaos. The link will always be over there on the right. I'd love to know what you think.