HAZARDS OF THE ESCROW DESK!
And this is one for that book that I will be writing after I retire….
John and Jane are my Sellers of property A and they are my Buyers of property B. Property A has to close first so that the money will flow into their purchase of property B. All is going well for the closing on property A, which was scheduled for Friday, 4/12 (yes, this just happened). The loan documents for property B arrives on Wednesday 4/10 and was scheduled to be signed on 4/11. We received a frantic call that day from John. Apparently, John and Jane went to Mexico early in the week for family business and Jane became ill. So ill that the doctor would not let her out of the hospital much less fly back to L.A. What to do?
We recommended that a Power of Attorney be given from Jane to John, so that John could fly back and sign the documents and close the escrow. But the Power of Attorney had to be notarized and the American Consulate in the nearest town was booked solid for two weeks. There was no appointment to be had and they did not work on Fridays. Now what?
We wrote an urgent appeal email listing the circumstances of the two concurrent escrow closings so that John could forward it to someone who knew someone in the Consulate and beg for help. The appeal said that since property A was closing, John and Jane were going to be homeless if they couldn’t come back to sign documents to close escrow on property B!
The appeal worked, the Consulate made a special accommodation. Jane was dragged from her hospital bed to go to the Consulate at 7:30 a.m. on 4/12. With a properly executed and notarized Power of Attorney in hand John flew back and signed documents on Monday, 4/15.
This was only chapter one, there were more chapters to this particular transaction as anything that could have happened did happen between 4/15 and the final closing on 4/19. Today we can look back and laugh, but that was one whole week of stress and sleepless nights.
There is a reason for this story and when I write my next book (in my spare time), this story will come under the chapter of “Top Ten Things You Should Never Do While Your Escrow Is Closing – #1 Leave the Country!”
NEW PRODUCTS, RE-BRANDING, NEW MARKETS
What does a company do to stay relevant? They look to offer new products, perhaps they re-invent themselves, or they look at expanding their markets. Probably it’s all of the above. Zillow, the company which is known to provide a site where real estate agents as well as consumers go to look up the specs on properties they are interested in, has been making the news these last few months and the real estate industry is none too happy. Zillow has entered into the market of direct sales with consumers – sellers and buyers – by purchasing properties directly from sellers, fixing them up and then selling to buyers. They are competing directly with the real estate brokerage houses and with their inherent name recognition, they are giving the brokers a run for their money.
Zillow also purchased a mortgage company Mortgage Lenders of America – and promptly rebranded it into “Zillow Home Loans” which became big news in the mortgage industry. They are even testing a mobile app which will allow interested parties to tour a house on their own without the necessity of showing appointments with an agent.
Why is this important? Zillow is such a big player that any move of theirs has a ripple effect. Other real estate brokerage houses are also considering their own market expansion. Keller Williams, for instance, is also starting a program in certain market areas to buy and sell their own homes. So competing for and signing up real estate professionals is no longer the only game in town. In this new market expansion, the brokerage houses will be in direct competition with their own agents, scooping up desirable real estate.
New products, re-branding, new markets. That’s the name of the game to stay in the game. One of my staff says we should get into “property management.” Ugh. Been there, done that in another lifetime and never again.
THE BANK OF MOM AND DAD
Do not discount the monetary force of Mom, Dad (and/or Grandpa and Grandma). For those who can find an affordable home, there is a 20% chance that part of their downpayment will come from relatives, most probably the 4 stated, and thus, welcome to the newest bank in our neighborhood – the “Bank of Mom and Dad.” Familial assistance has become a prevalent (and welcome) facto for the betterment of the real estate industry. We have seen seniors get a reverse mortgage on their own home so that they can provide assistance to their kids; we have seen Asian overseas parents foot almost the whole purchase price to provide a home for their study abroad kids; we have seen parents clean out their 401K to provide gift funds. Perhaps with today’s helicopter parents and Tiger Moms, providing food, shelter, love and support are not enough. The needs to provide the downpayment funds will also be part and parcel of what a parent must do. Have you heard of the College Admissions Scandal, hmm?
A FEW KERNELS OF HOPE TO HOMEOWNERSHIP WOES
My newsblog edition last month was all about the woes of housing unaffordability. This month there is a little good news from one of the largest national lenders. Bank of America, in their efforts to boost homeownership, is launching a program to put more consumers into their homes of choice, by giving out grants and funds to help those who have the need for some help. A brief write up can be seen at this link. Mind you, this is altruistic as BoA is certainly getting a lot of traction, recognition and market share from this move. But it’s a good one in low income areas of the nation.
There is also a California Legislative Bill – SB 50 (not to be confused with the Cannabis Bill SB 51 now!l) that is making the rounds in Sacramento. The passing of SB 50 will establish a state mandate to local cities and counties to allow for higher density volume residential developments wherein single family residential zoning may change to allow for multiple unit dwelling constructions. Is this good? Is this bad? There are many views and arguments pro and con. Here is an article with express views in the Los Angeles Times here. What are your arguments? Would this destroy the look of a particular community? Will developers find such projects attractive to build? Will these units be affordable?? Conversely, wouldn’t this exacerbate traffic congestion and noise? And shouldn’t we just leave this type of zoning control to the cities rather than enforce it statewide? I am sure there are already various lobbying groups for and against making their voices heard. I just came back from Sacramento after participating in a lobbying effort for another Bill and know first hand the power of speaking out. Do you have concerns? Let your voice be heard. Send an email to your State Senator or Assemblyperson!
Oh, and about SB 51? If passed, the State of CA “Cannabis Bill”, as we call it, will allow for state regulated banks and credit unions to take in money from the sale of anything related to cannabis aka weed, marijuana, etc. At this time, the sale of cannabis is all in cash and the sellers have no place to deposit their funds, except in their mattress, I guess. It is illegal for any financial institution that is federally insured (as under FDIC) to take in such money. This is why escrow companies and title companies do not handle any transaction that has any whiff of the sale of weed (pun intended) attached to it. Our banks will not take any deposit funds from such a transaction. In case SB 51 fails, Congress also has a House Bill – HR 1595 – which is seeking safe harbor for banks and financial institutions to deal with pot money. So, we’ll see.
Yes, our necessary perspective has broadened to encompass not only what is happening in California, but also nationally and what is happening in other states. Don’t let me get started on the different state bills regarding Remote Online Notarizations (RON)! Each time one state passes this bill I see our equivalent RON Bill (AB 199) being jerked in one direction and then another. 40 years ago when I first entered into this industry I would never have thought that my obscure escrow industry could be so intimately affected by what is happening nationally and in other states. The world has indeed gotten very much smaller and is now within touching distance at all times.
Paperless? We try! But some days going paperless just does not cut it!
You Have Questions? We Have Answers!
Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP
“Escrow is my FOREMOST language!”