Most purchase agreements in the Illinois portion of this area obligate the seller to provide either an abstract or a policy of title insurance to the buyer. If your purchase agreement does not, negotiate for title insurance. If your agreement leaves the option up to the seller, negotiate to get the title insurance. If the seller refuses, buy it yourself. The price depends on the purchase price of the real estate. But unlike most insurance policies, this one is good as long as you own the property. It does not matter if you live there for one year or fifty years. Once the premium is paid, you are covered until you sell the property.
DO NOT let anyone tell you you don't need it. You might hear that it costs too much, the bank is doing a title search, the bank's lender's policy will protect you, or any number of other excuses. All are wrong, wrong, wrong.
Here's a recent horror story, from the Columbus Dispatch:
Family in Ohio buys a house from a Doctor in 2001. The Doctor had a couple of mortgages on the property. The County Recorder entered the Doctor's name wrong in the computerized index on one of the mortgages, so when the title company went to search the records, they did not find this mortgage (don't know why they didn't search the property index--maybe they don't have one in Ohio?). The Doctor didn't see fit to mention this oversight at closing, and it was not paid out of the settlement funds. It appears that the mortgage was for a line of credit, so the Doctor actually paid on it for a few years. Apparently the Doctor ran into a bit of a financial difficulty, and stopped paying in 2007. Now that lender is going to foreclose. All the buyers got was a title search, which is not insurance, and now the buyers stand to lose their home.
Wednesday, June 25, 2008
Tuesday, June 17, 2008
Peoria! Whatsamatta with you?
We are currently representing sellers who own property in the Peoria area. Our clients advised the real estate agent numerous times that we were representing them, to provide copies of all documentation and correspondence to us. The real estate agent has continually "forgotten" to do this. We had to request one particular document four times. Big surprise here--that document was written confirmation that the commission was to be reduced. We also informed the real estate agent that we would be taking care of obtaining title insurance, deed preparation, obtaining mortgage payoffs. You know, the usual attorney things.
We found out that the real estate agent had, against our clients' specific demand, ordered title insurance from its in-house title company. We were told that this in-house title company would be "hiring" one of the attorneys who owns the title company to "represent" our client. Talk about conflict upon conflict of interest. How can any sentient individual argue that this "attorney" would exercise independent judgment in the exclusive interest of the seller? The title company is beholden to the real estate company. The attorney is beholden to the title company. Is there room in that bed for all of them?
I told them they were engaged in the unauthorized practice of law by ordering title insurance. This attorney the title company "hired" was not involved in this transaction at all. My guess is, this was going to be a "Deed and Green." I must have struck a nerve, since this was what I found in my email the next day. (Thay gots gud grammer an' spellin' two!)
"I have attached written conformation for the commission reduction for 1234 Main. Again, I request for title insurance threw a title company, they send it to the Lawyers that own their company. I do this for every closing, there is nothing illegal about the way we get these ordered. If you think so, maybe you should do some research." [sic, sic, sic, sic, and I changed the address]
Oh, young lady, but I have done the research. And this is from a real estate agent's assistant no less.
In Chicago Bar Association v. Quinlan & Tyson, Inc., the Illinois Supreme Court tended to disagree with their assessment:
". . . [W]hen the broker has secured the signatures on the usual form of preliminary contract or offer to purchase, completed by the insertion of necessary factual data, he has fully performed his obligation as broker."
Obviously, these folks know better than the Illinois Supreme Court. To summarize, after the purchase agreement is signed, the real estate broker's job is complete; as in finished, done, rifinito, acabado.
So, if I may be so bold: Sellers and buyers, do your own research, and find an attorney knowledgable in real estate law who is willing to represent only you. Someone who works for the title company that works for the real estate company might not be your best choice.
And please, somebody tell me it is just this particular real estate agent or company that does this, and that it is not common practice in the Peoria area.
We found out that the real estate agent had, against our clients' specific demand, ordered title insurance from its in-house title company. We were told that this in-house title company would be "hiring" one of the attorneys who owns the title company to "represent" our client. Talk about conflict upon conflict of interest. How can any sentient individual argue that this "attorney" would exercise independent judgment in the exclusive interest of the seller? The title company is beholden to the real estate company. The attorney is beholden to the title company. Is there room in that bed for all of them?
I told them they were engaged in the unauthorized practice of law by ordering title insurance. This attorney the title company "hired" was not involved in this transaction at all. My guess is, this was going to be a "Deed and Green." I must have struck a nerve, since this was what I found in my email the next day. (Thay gots gud grammer an' spellin' two!)
"I have attached written conformation for the commission reduction for 1234 Main. Again, I request for title insurance threw a title company, they send it to the Lawyers that own their company. I do this for every closing, there is nothing illegal about the way we get these ordered. If you think so, maybe you should do some research." [sic, sic, sic, sic, and I changed the address]
Oh, young lady, but I have done the research. And this is from a real estate agent's assistant no less.
In Chicago Bar Association v. Quinlan & Tyson, Inc., the Illinois Supreme Court tended to disagree with their assessment:
". . . [W]hen the broker has secured the signatures on the usual form of preliminary contract or offer to purchase, completed by the insertion of necessary factual data, he has fully performed his obligation as broker."
Obviously, these folks know better than the Illinois Supreme Court. To summarize, after the purchase agreement is signed, the real estate broker's job is complete; as in finished, done, rifinito, acabado.
So, if I may be so bold: Sellers and buyers, do your own research, and find an attorney knowledgable in real estate law who is willing to represent only you. Someone who works for the title company that works for the real estate company might not be your best choice.
And please, somebody tell me it is just this particular real estate agent or company that does this, and that it is not common practice in the Peoria area.
Wednesday, April 23, 2008
Not funny, but it kind of is...
Have you heard about the latest spam scam? Those pesky scammers are targeting attorneys, and hitting us where we live (some attorneys anyway). Right in the ego.
Starts out with the usual professionally polite nearly sychophantic introduction, commenting on how the attorney was referred to the scammer by some lofty individual or organization. My recommendation came via the U.S. Chamber of Commerce, so they said. The story goes that Mr. Scammer is owed significant sums of money by some nefarious deadbeat located in the attorney's jurisdiction. But of course, since Mr. Scammer is located in some foreign locale, it is very difficult for him to try to collect. Because of the attorney's stellar reputation, Mr. Scammer is just certain the attorney could obtain that money.
For those simple individuals that took the bait, here's what happens. The attorney sends a demand letter to Deadbeat, Inc. (or Mr. Deadbeat, as the case may be). Deadbeat, Inc., due in no small part to the attorney's aggressive tactics, stellar reputation, and impressive legal acumen, immediately forwards a certified check to the attorney via overnight courier. Mr. Scammer is so grateful, and requests the attorney to please wire the funds and of course keep a healthy, nay, HUGE fee for the valiant efforts in bringing Deadbeat, Inc. to justice so quickly. Without breaking a sweat. Before tee time!
Here's where it gets comical/sad. The check was a forgery and Mr. Scammer and Deadbeat, Inc. are in cahoots (if not the same individual). The attorney gets to pony up the shortfall in his trust account.
Seriously, if it sounds too good to be true.........
Starts out with the usual professionally polite nearly sychophantic introduction, commenting on how the attorney was referred to the scammer by some lofty individual or organization. My recommendation came via the U.S. Chamber of Commerce, so they said. The story goes that Mr. Scammer is owed significant sums of money by some nefarious deadbeat located in the attorney's jurisdiction. But of course, since Mr. Scammer is located in some foreign locale, it is very difficult for him to try to collect. Because of the attorney's stellar reputation, Mr. Scammer is just certain the attorney could obtain that money.
For those simple individuals that took the bait, here's what happens. The attorney sends a demand letter to Deadbeat, Inc. (or Mr. Deadbeat, as the case may be). Deadbeat, Inc., due in no small part to the attorney's aggressive tactics, stellar reputation, and impressive legal acumen, immediately forwards a certified check to the attorney via overnight courier. Mr. Scammer is so grateful, and requests the attorney to please wire the funds and of course keep a healthy, nay, HUGE fee for the valiant efforts in bringing Deadbeat, Inc. to justice so quickly. Without breaking a sweat. Before tee time!
Here's where it gets comical/sad. The check was a forgery and Mr. Scammer and Deadbeat, Inc. are in cahoots (if not the same individual). The attorney gets to pony up the shortfall in his trust account.
Seriously, if it sounds too good to be true.........
Tuesday, April 22, 2008
Certified Checks at Closing
I just got yelled at, and likely lost a client, because [competitor's names deleted] don't require certified funds at closing.
We were acting as closing agent for a large Midwestern Bank located in the US (get it?). The buyer was getting ready to give me a $35,000 personal check at closing. Attorneys in Illinois and Iowa are required to obtain certified funds or wire transfers if they are planning to disburse before check clearance. Makes sense, don't you think? I wonder why the same isn't required of title companies. And even more curious, why would a title company even want to accept personal checks. [The good funds act now requires this.]
Sure, most people's checks will clear. Ignore for the moment those that don't. Banks now put a three to ten day hold on personal checks before the funds are available. That means, if a closing agent disburses at closing or shortly thereafter, they are disbursing money that belongs to someone else. The money for that transaction won't be available for a week or more, but here they are ponying up money that belongs to someone else. At some point, that little house of cards is doomed to collapse, whether it's because there is not enough float, or funds don't arrive on time, or business slows down to the point they don't have enough money to cover YOUR closing.
The excitement which would ensue for a check which did not clear really does not require discussion.
I asked the buyer on which bank the check was drawn, hoping it was nearby so she could just zip over there to get a certified check. She told me it was Bank A, and passed a check over to me drawn on Bank B. I pointed this out, and she rifled through her purse and announced that she did not have the checks with her for Bank A--the bank where money was located! So, yes, her check would have bounced. I try to follow the rules, and I get yelled at and lose a client.
So, I put it to you: Would you want to have your closing for your purchase or your sale at a closing agent's office who accepts personal checks and is using money that belongs to someone else to fund your closing? Or would you prefer to close at a title agent who diligently obtains good funds from all parties so there are no, um, "complications" which can occur when it is time to divvy up the money?
www.thomasmoens.com
We were acting as closing agent for a large Midwestern Bank located in the US (get it?). The buyer was getting ready to give me a $35,000 personal check at closing. Attorneys in Illinois and Iowa are required to obtain certified funds or wire transfers if they are planning to disburse before check clearance. Makes sense, don't you think? I wonder why the same isn't required of title companies. And even more curious, why would a title company even want to accept personal checks. [The good funds act now requires this.]
Sure, most people's checks will clear. Ignore for the moment those that don't. Banks now put a three to ten day hold on personal checks before the funds are available. That means, if a closing agent disburses at closing or shortly thereafter, they are disbursing money that belongs to someone else. The money for that transaction won't be available for a week or more, but here they are ponying up money that belongs to someone else. At some point, that little house of cards is doomed to collapse, whether it's because there is not enough float, or funds don't arrive on time, or business slows down to the point they don't have enough money to cover YOUR closing.
The excitement which would ensue for a check which did not clear really does not require discussion.
I asked the buyer on which bank the check was drawn, hoping it was nearby so she could just zip over there to get a certified check. She told me it was Bank A, and passed a check over to me drawn on Bank B. I pointed this out, and she rifled through her purse and announced that she did not have the checks with her for Bank A--the bank where money was located! So, yes, her check would have bounced. I try to follow the rules, and I get yelled at and lose a client.
So, I put it to you: Would you want to have your closing for your purchase or your sale at a closing agent's office who accepts personal checks and is using money that belongs to someone else to fund your closing? Or would you prefer to close at a title agent who diligently obtains good funds from all parties so there are no, um, "complications" which can occur when it is time to divvy up the money?
www.thomasmoens.com
Tuesday, April 1, 2008
Iowa Delay of Sale in Foreclosures
Iowa's foreclosure laws have some unusual quirks. One is the ability to request a delay of sale. Make no mistake--requesting a delay of sale does nothing except delay the date of the sheriff's sale. Here is a brief overview of how delay of sale works:
A foreclosure petition is filed.
The borrower/mortgagor/defendant (will call this person the borrower from here on out) files a demand for delay of sale.
If the property is not the residence of the borrower, the sheriff's sale will be delayed two months from the date the foreclosure decree is entered.
If the property is the residence of the borrower, and the lender is seeking a deficiency judgment, the sheriff's sale will be delayed twelve months from the date the foreclosure decree is entered. A deficiency judgment is best explained with an example: The borrower owes $100,000 on the mortgage. The lender only gets $80,000 when it sells the property after the foreclosure. The $20,000 difference is the deficiency. If the lender is going to try to get that difference from the borrower, the lender is seeking a deficiency judgment.
If the property is the residence of the borrower, and the lender is NOT seeking a deficiency judgment, the sheriff's sale will be delayed six months from the date the foreclosure decree is entered.
Remember, these delay periods only apply IF the borrower demands a delay of sale.
www.thomasmoens.com
A foreclosure petition is filed.
The borrower/mortgagor/defendant (will call this person the borrower from here on out) files a demand for delay of sale.
If the property is not the residence of the borrower, the sheriff's sale will be delayed two months from the date the foreclosure decree is entered.
If the property is the residence of the borrower, and the lender is seeking a deficiency judgment, the sheriff's sale will be delayed twelve months from the date the foreclosure decree is entered. A deficiency judgment is best explained with an example: The borrower owes $100,000 on the mortgage. The lender only gets $80,000 when it sells the property after the foreclosure. The $20,000 difference is the deficiency. If the lender is going to try to get that difference from the borrower, the lender is seeking a deficiency judgment.
If the property is the residence of the borrower, and the lender is NOT seeking a deficiency judgment, the sheriff's sale will be delayed six months from the date the foreclosure decree is entered.
Remember, these delay periods only apply IF the borrower demands a delay of sale.
www.thomasmoens.com
Friday, March 28, 2008
Dual Contracts....
....are bad. This one's not even very clever. The "bad guys" write up two contracts. One contract is the "real deal." The other contract goes to the end lender. Sometimes it is the real estate agent who comes up with this scheme, sometimes the buyer, sometimes the mortgage broker. Sometimes even the attorney. But the effect is the same. Maybe the buyer wants to put some cash in his pocket. Maybe the real estate agent or the mortgage broker want to pad their commission.
Say the seller wants $100,000 for the house. There will be a contract which specifies this price--the real deal. Then we have the second contract. This will either be a completely separate contract or just an extra page which will be conveniently removed before the appraiser and/or end lender get hold of it. This contract will say the purchase price is $140,000 and the buyer will "refund" the extra $40,000 to the seller, either under the table or via a "flexible" closing agent.
Again, not even clever. This is fraud, pure and simple. If the lender does not know the whole transaction, you are committing fraud. Hope you look good in orange....
www.thomasmoens.com
Say the seller wants $100,000 for the house. There will be a contract which specifies this price--the real deal. Then we have the second contract. This will either be a completely separate contract or just an extra page which will be conveniently removed before the appraiser and/or end lender get hold of it. This contract will say the purchase price is $140,000 and the buyer will "refund" the extra $40,000 to the seller, either under the table or via a "flexible" closing agent.
Again, not even clever. This is fraud, pure and simple. If the lender does not know the whole transaction, you are committing fraud. Hope you look good in orange....
www.thomasmoens.com
Wednesday, March 12, 2008
Bad closing agent! Sit! Stay!
Monday I attended a closing at one of our fine local lenders, with whom I do not have a business relationship. And now I know why.
We represented the seller. The purchase agreement said the termite inspection fee was to be paid by the buyer. The purchase agreement also said the buyer was getting a "conventional/VA" loan--whatever that is. We received a HUD-1 settlement statement from THE bank's closing agent which showed the buyer paying the termite inspection. When I got to closing, THE bank's closing agent had moved that fee from the buyer's to the seller's side of settlement statement without letting us know. That alone is merely annoying, rude, and unprofessional. I can live with that. What went beyond annoying, rude, and unprofessional was the explanation I received when I questioned this unauthorized revision. THE bank's closing agent said that since it was a VA loan, the lender would not allow the settlement statement to show the buyer paying the termite inspection fee, which is true. But then she said that the buyer would reimburse the seller directly outside of closing. Honestly, I was appalled at the ease with which this scheme was suggested. Usually, I would expect a whispered, "Psst, hey buddy, come here, I gotta talk to ya about something." She even offered to cut the checks that way from her trust account! I am pretty sure the VA does not look favorably on schemes to circumvent their rules.
I had to call shenanigans. I did. Really. I said, "Unacceptable! Mortgage fraud! RESPA fraud! Ain't gonna happen!" Except, without the exclamation points. And I don't think I used the word "ain't."
I suggested that the buyer pay the termite inspection fee directly, since he was contractually obligated to do so. THE bank's closing agent left the room, ostensibly to contemplate my refusal to engage in fraud, but more likely to disparage the jerk sitting in their closing room. THE bank's closing agent claimed that the "underwriter" said that "they" would verify with the termite inspection company that the buyer paid the fee directly. I really doubt that is true, but even assuming it was, why wouldn't "they" verify with the seller, the closing agent, the buyer, the seller's attorney, the listing agent, or the selling agent that the buyer paid the fee. I even read that portion of the settlement statement aloud to the class where it says:
I have carefully reviewed the HUD-1 Settlement Statement and to the best of my knowledge and belief, it is a true and accurate statement of all the receipts and disbursements made on my account or by me in this transaction.
This had the expected effect. "Do it our way, or we won't close." Well, I will not be coerced into committing mortgage and RESPA fraud, but apparently I can be coerced into paying a $50 to protect my clients.
Yes, I know, it was only $50. What's the big deal? The lender will never know, right? Doesn't matter. That kind of attitude is what has cause the current mortgage debacle. Fraud is not a matter of degree--an action is fraudulent or it is not. How can I allow a $50 fraud to occur, and then refuse to commit a $5,000 fraud, and a $50,000 fraud the next month, and then a $5,000,000, and pretty soon you are talking about real money there? It's a bright line, and we all know where it is. Stay on the right side of it.
www.thomasmoens.com
We represented the seller. The purchase agreement said the termite inspection fee was to be paid by the buyer. The purchase agreement also said the buyer was getting a "conventional/VA" loan--whatever that is. We received a HUD-1 settlement statement from THE bank's closing agent which showed the buyer paying the termite inspection. When I got to closing, THE bank's closing agent had moved that fee from the buyer's to the seller's side of settlement statement without letting us know. That alone is merely annoying, rude, and unprofessional. I can live with that. What went beyond annoying, rude, and unprofessional was the explanation I received when I questioned this unauthorized revision. THE bank's closing agent said that since it was a VA loan, the lender would not allow the settlement statement to show the buyer paying the termite inspection fee, which is true. But then she said that the buyer would reimburse the seller directly outside of closing. Honestly, I was appalled at the ease with which this scheme was suggested. Usually, I would expect a whispered, "Psst, hey buddy, come here, I gotta talk to ya about something." She even offered to cut the checks that way from her trust account! I am pretty sure the VA does not look favorably on schemes to circumvent their rules.
I had to call shenanigans. I did. Really. I said, "Unacceptable! Mortgage fraud! RESPA fraud! Ain't gonna happen!" Except, without the exclamation points. And I don't think I used the word "ain't."
I suggested that the buyer pay the termite inspection fee directly, since he was contractually obligated to do so. THE bank's closing agent left the room, ostensibly to contemplate my refusal to engage in fraud, but more likely to disparage the jerk sitting in their closing room. THE bank's closing agent claimed that the "underwriter" said that "they" would verify with the termite inspection company that the buyer paid the fee directly. I really doubt that is true, but even assuming it was, why wouldn't "they" verify with the seller, the closing agent, the buyer, the seller's attorney, the listing agent, or the selling agent that the buyer paid the fee. I even read that portion of the settlement statement aloud to the class where it says:
I have carefully reviewed the HUD-1 Settlement Statement and to the best of my knowledge and belief, it is a true and accurate statement of all the receipts and disbursements made on my account or by me in this transaction.
This had the expected effect. "Do it our way, or we won't close." Well, I will not be coerced into committing mortgage and RESPA fraud, but apparently I can be coerced into paying a $50 to protect my clients.
Yes, I know, it was only $50. What's the big deal? The lender will never know, right? Doesn't matter. That kind of attitude is what has cause the current mortgage debacle. Fraud is not a matter of degree--an action is fraudulent or it is not. How can I allow a $50 fraud to occur, and then refuse to commit a $5,000 fraud, and a $50,000 fraud the next month, and then a $5,000,000, and pretty soon you are talking about real money there? It's a bright line, and we all know where it is. Stay on the right side of it.
www.thomasmoens.com
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