CLUES TO CHOOSING ESCROW AND TITLE COMPANIES, AND REALTY AGENT

Savvy real estate consumers know that buying or selling a home doesn't stop with finding the right buyer or the right house. Many more decisions need to be made for consumers to have a successful real estate transaction - decisions that should be made with knowledge - decisions that often are left to others but shouldn't be. DID YOU KNOW THAT YOU COULD SELECT YOUR OWN ESCROW AGENT AND TITLE COMPANY? That's right, smart consumers can help in the selection of both the escrow service and title company by investigating those companies themselves rather than leaving this important decision to their realty agent or lending institution.

Real estate professionals recommend that consumers pay attention to the following checklist when making decisions concerning the individuals and companies you select:

• First, carefully choose the real estate agent that will steer you through the home-buying process. Ask the agent(s) you are considering for three professional references.
• Ask your realty agent to make three recommendations for both escrow service and title insurance, and ask why the agent likes these companies.
• Decide which type of company you prefer, one that specializes or one that performs several services.
• Decide if you prefer a big or small company.
• For escrow, determine whether a company is truly acting as a neutral party, or is under the control of a realty agent or mortgage broker.
• Compare the state regulations involved in the different types of companies.
• Compare the financial backing of the companies and the financial ratings where available. This is especially important in considering title insurance.
• Consider reviewing a financial statement of the firm you've selected.
• Remember that price is not the only consideration, attention to your specific needs and good service can and in most cases should be more important.
• Contact the state agency that regulates a company to determine if there are any pending complaints or disciplinary actions.
  Other important questions to ask:
  • How long have you been in business?
  • How large is your company?
  • Who will handle our file and work directly with us?
  • How does the State of California regulate you and which Department regulates your company?
• Is your company audited by the state, how frequently, and are your trust funds included in the audit?
• What happens to escrow funds if they are mismanaged or embezzled? Do you have or are you covered by fidelity bond insurance?
• Do you underwrite your own title insurance? If not, who does?
• What happens if a company is unable to pay off a title insurance claim?

In summary, it is important that consumers exercise due diligence and proper care when entering into one of the most complicated and important transactions they will ever undertake. If you are unclear or uncertain about any of the steps taken during the escrow process, forms to be completed, fees to be paid, do not hesitate to ask your escrow or title professionals.

WHY YOU SHOULD RETAIN AN INDEPENDENT ESCROW COMPANY AS YOUR PROVIDER FOR REAL ESTATE CLOSING SERVICES.

Most real estate transactions in the State of California utilizes the services of an escrow company. Ironically, escrow remains one of the least understood elements of the real estate process.

Because of this, buyers and sellers often place their faith in the real estate broker or lender to recommend an escrow company. What many consumers don't realize, however, is that they are entrusting this escrow company to safeguard their funds being held in trust. In addition, it is the primary responsibility of the escrow holder to ensure that all of the necessary instructions in the real estate agreement are executed.

The responsibility to protect the consumers' interests should not be taken lightly. The escrow holder must remain impartial during the escrow period to ensure fair representation of all parties. It is crucial, then, that the broker, lender or consumer makes a knowledgeable and informed decision in choosing an escrow company.

"Licensed" vs. "Controlled"

All escrow companies in California can be classified into two basic categories: Licensed or Controlled. "Licensed" escrow companies are independent businesses licensed by the California Department of Corporations. This license regulates the procedures and practices of the companies and subjects them to stringent requirements designed to protect consumers.

"Controlled" escrow companies are non-licensed businesses that can be owned by a variety of entities, including real estate brokers, mortgage brokers, banks, savings and loans, and title insurance companies. Such companies fall under the jurisdiction of a variety of supervising agencies, with regulations and requirements that vary widely. One fact remains constant, however. None of the agencies have regulations as strict as those imposed on the escrow companies licensed by the Department of Corporations.

Better Protection

Although the majority of escrow companies are honest and above board, the large sums of money handled by escrow companies can entice unscrupulous individuals to abscond with the funds they are holding in trust. And unless the escrow company is bonded, there is often no safeguard assuring the return of the money to consumers.

Licensed escrow companies are consumers' best bet for safeguarding their funds. All licensed escrow companies are required to be members of the Escrow Agents' Fidelity Corporation, which provides fidelity coverage for member trust accounts in the amount of $5 million. This fidelity bond guarantees that, in the event of theft of trust accounts, the consumers' funds are protected.

Higher Standards

The stringent requirements by the Department of Corporations assure that every licensed escrow company has met the highest standards in the industry. Consumer protection regulations unique to licensed escrow companies include:

• A Certification Program for all escrow officers in the company's employ, including fingerprinting and background checks by the Department of Justice;
• A requirement that an escrow officer with at least five years experience be on-site;
• Financial stability requirement, including at a minimum one CPA audit a year; and, frequent surprise examinations conducted by the Department of Corporations;
• Prohibiting employment of convicted felons or anyone who has been disbarred from the real estate industry;
• Membership with the Escrow Agents' Fidelity Corporation which provides a $5 million fidelity bond;
• Company's sole business is doing escrow, which requires a higher level of state regulatory requirements and oversight.

The bottom line is that a licensed escrow company is the best possible neutral third party to complete your real estate transaction. Whether searching for an escrow holder yourself, or looking to recommend one to a client, a licensed escrow company gives you peace of mind.