Opening Titles and Closing Remarks

Steve Dalton commented on my last post that sometimes "title companies get in the way" of closing legitimate real estate purchases and refinances.

Title companies are at the bottom of the hill that is a real estate transaction.

And guess what? It all rolls down hill. Delays, misunderstandings, mistakes, and last minute stipulations get compressed as the closing date looms. And since the title company is the last one that generally has to do anything prior to closing, I'm not surprised, and even expect, that clients may feel that we get in the way from time to time.

What may seem as needless meddling in the consummation of the sale or refinance is usually the title company trying to resolve conflicting instructions received from one or more of the parties to the transaction.

Common conflicts between the Purchase Agreement and the Lender's Closing Instructions revolve around the Buyer's net cash back or net cash to close being outside the Lender's permitted tolerance, handling inspection and repair credits, and how the Seller's contribution towards closing cost is defined and set out on the HUD-1. In Indiana, the Purchase Agreement often requires prorating taxes in a way that is simply not possible given the inherent one to two year lag time of tax assessments.

We resolve all the conflicting instructions by requiring written clarifications and Amendments to the Purchase Agreement, Closing Instructions or Title Commitment.  If this process seems to you to be getting in the way of a closing, it's probably our fault for not explaining this correctly.

Just like you, we don't get paid unless the deal closes. Why would we want to make things needlessly difficult? We don't. All we're trying to do is resolve the conflicts so that we can close the transaction without compromising our fiduciary responsibilities to all the parties.

There's always a reason behind what a title company may require. If we don't explain it sufficiently keep asking until you understand. Sometimes, you can clear up a misunderstanding that will make things easier or even eliminate the requirement. As always, good communication is the key to a successful closing experience for you and your clients.

Good communication helps us dodge that rock at the bottom of the hill, too. For which we are eternally grateful.

Photo courtesy of Free Digital Photos. Net

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.

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.

You're going to hear this from me a number of times between now and year-end. If you purchased or are purchasing a new primary residence in Indiana this year, you need to go to the County Auditor's office (after closing) and file for or confirm your Homestead Tax exemption. You may also be eligible for other tax credits as well. You have until December 31^st to do this. Don't wait!

We get a few calls every year when (if?) tax bills come out, about tax bills that do not contain the Homestead credit. The difference in tax bills with and without is startling. Given Indiana's politicizing of the whole real estate tax process and the shoot from the hip approach to reform, next year the difference only stands to be greater.

You may have closed after July 1, 2008 and applied for the credit on the new sales disclosure form. This is only an application and does not guaranty that you will receive the credit. Follow up with the County Auditor and make certain that the credit is reflected in the Auditor's records. Only you can do this. Not the title company, not your Realtor®, and not your lender.

The County Auditor has no authority to retroactively apply a credit unless you can prove you applied and are entitled. Do it now, and save your receipt. You may need it. The burden of proof is on you in these situations.

Now back to our regularly scheduled programming.

The Office of Federal Housing Enterprise Oversight recently released 2nd Quarter 2008 survey supports my own suspicions that the Indiana housing market is doing much better than other parts of the nation. Here are the changes in year over year housing prices for the separate Indiana Metropolitan Statistical Areas and their rank nationally among the 292 MSA's in the report.

           MSA                                +/- Year to Year       Rank

• Columbus                            +4.50%                 20^th
• Bloomington                         +3.81%                 32^nd
• Anderson                             +3.21%                 44^th
• Louisville-Jefferson               +3.19%                 45^th
• South Bend                          +1.77%                 92^nd
• Terra Haute                         +1.76%                 93^rd
• Indy-Carmel                        +1.72%                 97^th
• Gary                                   +1.59%                 101^st
• Lafayette                            +1.33%                 109^th
• Evansville                            +0.35%                 145^th
• Fort Wayne                          -0.67%                  178^th

The data for this survey is from sales and refinances involving conforming mortgage loans purchased or securitized by Fannie Mae and Freddie Mac. The Muncie MSA is not included because of too few transactions in the survey. The complete survey is here under the House Price Index tab:  http://www.ofheo.gov/

I have not seen or heard any reference to the OFHEO survey in the Indiana media. Our local newspaper here in Bloomington and also the Indy Star, I think, both ran the stories about the recently released Case-Shiller survey showing housing values declining over 15% nationally. The Case-Shiller survey is widely reported and highly regarded but contains zero data from Indiana.

The OFHEO survey once again confirms that real estate is local and that there's no substitute for local knowledge.

If you're in one of these markets, how does this survey compare to your own opinion about the market? Let us know.

I am continually perplexed by the increasing number of Buyers and Sellers who find it "inconvenient" to make time to attend their real estate closing. Yes, you can appoint an Attorney-in-Fact or do a mail out but it's not the same as being there.  I just don't get it.

A sale or purchase of a home is an important event in our lives. Most of us are only going to do this a few times. Why would you not allow yourself the opportunity to clearly understand all of the details and commitments that take place?  In the current financing environment, deals are always changing at the last minute to satisfy the Buyer's loan underwriter, the "response to inspections", or increasingly the Seller's short sale lender. When trying to understand a change, there's no substitute for looking someone in the eye and both of you knowing that accurate communication is occurring.

Your full attention is required. Today! Now!  Not a year from now when you're doing your taxes only to realize that something on the closing statement is different from the way that you remembered it. Not next spring when you get your real estate tax bill and its gone up 50% because you didn't file your homestead exemption as we remind everyone to do several times at closing; after which your Attorney-in-Fact signed a couple of documents acknowledging that advice. Not when your water heater breaks and you realize that you never got that Home Warranty contract you'd talked about. Avoid these unpleasant aftershocks by being an active participant in your closing!

Certainly there can be personal circumstances that prevent your being at the closing. If that's you, brief your representative about your understanding of the transaction and the details of your financing. Try to be available by phone at the time the closing is scheduled to take place. Then as soon as possible after the closing, review all the documents that your representative signed on your behalf. Delegate, don't abdicate your authority.

Do any Realtors® or lenders feel the same way or differently? Please leave a comment.

We are often provided a copy of a Seller's existing title insurance policy and a disturbing trend for Buyers is appearing. As a cost cutting move, some title companies have stopped searching for all of the recorded rights that may affect the property being purchased.

If the title commitment and policy are based upon a complete search, Schedule B exceptions from coverage will only list specific matters that have been recorded in the public records and in some jurisdictions non-specific exceptions for unrecorded matters (i.e. survey issues). More and more we're seeing policies with exceptions taken for "any and all recorded covenants, conditions, restrictions (CC&R) and easements." This means that the title company did not search for these property rights. Lenders routinely receive special title coverage over these matters whether searched for on not. Buyers do not receive such coverage.

Most purchase agreements afford the Buyer the opportunity to review the CC&Rs and easements prior to closing and in some cases cancel the deal if they don't like them. If the title company is not providing that information, who is?

Secondly, if it turns out after closing that there are CC&Rs or Easements that restrict or prohibit the Buyer's intended use of the property who is the Buyer going to look to since the title company isn't insuring these matters? When the Buyers can't put their swimming pool in over an undisclosed easement, keep their horses, or put a manufactured home on the property, someone's going to get an unpleasant phone call and maybe more.

I find this a blatantly deceptive practice with serious implications for Buyers and their Realtors®. If a property right or restriction is recorded, the general expectation of our clients is that title policy will reflect that. Title agents engaging in title insurance "lite" do not disclose this practice. They are taking advantage of Buyers who often feel challenged to understand title insurance anyway. Realtors® and their clients do not need to accept this and are clearly within their rights to demand that the title coverage only except recorded property interests.

Select John Bethell Title Insurance Company, Inc., and you get the whole deal. We show all relevant recorded property rights. We do not provide "lite" title insurance.

Title Insurance "Lite" is prevalent throughout the Midwest. I am interested in hearing from Buyers, Realtors®, and title agents with an opinion about this.