Summer is here! Memorial Day just ushered it in. Did you see? Did you feel? The sun, the jubilation of being vaccinated, the sudden realization that there are people to visit, places to see and trips to take. If the last year and a half was the Winter of our Discontent, the next months will be the Summer of our Release.
There is not much to report in the real estate industry news. Refinance closings have slowed down considerably. We are still struggling with supply meeting demand in the residential sale market. We are still gasping for breath as we hear what trials and tribulations Buyers have to go through to get their property of choice (see my Funny at the end!). All in all, the frenzy that struck us earlier this year has calmed down and it is much more handleable. There is room to breathe! There is time to sleep!
I know readers enjoy the crazy escrow stories so this month I’d like to share some of what we encounter in our day-to-day work. If it interests you, we have other stories that have been made into videos on my Think Escrow! YouTube channel under Escrow Stories in the Trenches. Here are two stories:
NOTARIZING WHEN OUT OF THE COUNTRY?
I received a call from a consumer who looked us up through our website. She and her partner are purchasing a house in California. She is here but her partner is in Calgary, Canada and he needed to sign a Power of Attorney (POA). Now, a POA to be used in a California transaction needs to be signed in the presence of a U.S. notary public, but he is in another country! (Yes, surprise! Canada is a foreign country!). She read about notarizing using Remote Online Notarizations (RON) but the Title Company would not allow the use of such notarization.
A simplified explanation of RON is that it calls for the use of a special platform in which the signer and the notary public are in different locations (even different parts of the world) and notarizations done through webcam online. California does not have a RON law in place, so its use requires the approval of the Escrow Holder, the Title Company and the County Recorder. If Title would not allow a RON, then he had two choices: (1) go to the American Consulate in Canada, which was apparently not open for notary business, or (2) cross the border to find a notary in the U.S. and sign face-to-face. Unfortunately, the gentleman just took on this new job and could not get time off to do either choice. Hence the random desperate call made to our office.
The caller said both of them needed to be on the loan to qualify, so the only other choice that I could see was to change the Title Company in the transaction. It is a management decision by Escrow and Title Company whether they are willing to accept a Remote Online Notarized document and present it to the particular County Recorder to accept also. As it is, this Title Company may not accept it but there are a few other ones that will, as I found out in a couple of my transactions. The caller’s best bet was to get some help from her Escrow Officer to find out which other Title Company would work with her and then ask her real estate agent to change the contract so that the transaction could close with a new Title Company.
This story illustrates one of the issues that we encounter when our clients go out of the country. We hope that anyone leaving in the middle of a transaction will have the presence of mind to get their paperwork squared away so that the transaction can be handled smoothly without them here. Taking a few minutes to sign a POA in the U.S. with a U.S. notary sure beats scrambling around in another country trying to find a way to do this. As to my caller, I sure hope she found a solution quickly as she was desperate to continue with the purchase.
As a bonus here is a link to my other RON story on Escrow Stories in the Trenches – Remote On Line Notarizations? Oh, those Trials and Tribulations! – YouTube
IS PROPER CORPORATE VESTING NEEDED ON PUBLIC DOCUMENTS?
My Borrower was doing a commercial property refinance. The property was listed under his corporate entity name, which I will call “ABC, LLC”. About two years ago on the recommendation of his CPA he transferred his property from his Trust to his California LLC. Due to that transfer, his property taxes were reassessed, much to his anger and dismay. He had been fighting the re-assessment since.
In our transaction, our new Lender requested that the corporate name on the ownership document be corrected to show as “ABC LLC, a California Limited Liability Company”. To document the change we would need to do a new ownership deed. A new deed! Upon hearing that the Borrower became extremely upset thinking that another deed would lead to another reassessment despite our assurances that such a deed would be exempt. He refused to sign.
What threw us for a loop was that besides his fear of reassessment his contention was that the corporate name he filed with the Secretary of State was “ABC LLC”. Pure and simple. His registered name was not “ABC LLC, a California Limited Liability Company”, he said, and why would he change it to an entity that was not his?
As I explained, this was a Lender underwriting requirement. The reasoning behind this was to make it known publicly that the property was owned by a California entity. After all, there could be an “ABC LLC” filed in every state of the Union and how would creditors be able to distinguish between his corporate entity and others? Did he want to be confused with other same name entities and have their debts added to his? From the face of the ownership document there was no indication that his entity was registered in California.
My repeated efforts to explain were met with anger and obstinacy. In the end the Lender agreed to drop this underwriting condition so that the loan could go through. At closing, however, I told the Borrower that he should check with his corporate legal counsel (not his CPA who probably could not advise correctly) if there would be a need to properly show his corporate entity vesting on a public document.
What made this transaction “memorable” was not only the level of verbal abuse that we were subjected to, but also the intransigence of the Borrower in refusing to even give it consideration. It was the proverbial “either my way or no way”.
So let this be a small tip to all: When you are putting your property under a corporate entity, be sure that you put the complete corporate vesting on it. Is it simply ABC, Inc.? Or is it ABC, Inc., a California Corporation? Or perhaps it is ABC, Inc., a Nevada Corporation? Little things like this help to determine who you are and which State laws your corporate entity will fall under.
Let me end this newsblog with the following funny from Instagram regarding the hoops we jump through to get an offer accepted:
~ Thought of the month ~
“110 years ago everyone owned a horse and only the rich had cars. Today everyone has cars and only the rich own horses.
~ (Author unknown) ~
My YouTube offering for the month:
Escrow In The Trenches: INTENTIONAL Document Fraud!
You Have Questions? We Have Answers!
Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP
“Escrow is my FOREMOST language!”
The opinions expressed in this blog are solely the author’s.
Your comments and viewpoints are always welcome.
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