TitleSouth Closing Centers Weblog

Kudos to Capstone Realty

2011-09-17T20:56:00.002-06:00

I had an opportunity to visit with our associated company, Capstone Realty, in Huntsville, Alabama on Thursday and present "Issues in the Sale and Listing of Foreclosed Property" to the company's sales associates. This is a wonderful company - full of energy and sales talent. Don't tell these folks there is a real estate recession - they don't want to hear it.

Thanks you, Capstone Realty, for the invitation and the opportunity to visit with you. I hope to have another chance to see y'all again very soon.

ISSUES IN LISTING AND MARKETING FORECLOSED PROPERTY

2008-02-03T16:19:00.000-06:00

As the United States’ economy in general and the real estate market in particular have “slowed,” ”corrected,” ” softened,” or otherwise “cooled” from the comparatively “giddy” extremes of recent years, media reports abound about the increasing rate at which mortgage lenders are foreclosing on delinquent mortgage loans.

An increase in foreclosures results in an increasing number of real estate properties being owned by entities that do not want to own them.

Once a lender forecloses on a property, its very first thought is to protect the value of the collateral by securing the property and correcting any defects that would result in a deterioration of the property’s condition. The next thought is to sell the property.

The listing and marketing of lenders’ “REO” properties (“Real Estate Owned” as the properties are classified on the company’s balance sheets and regulatory reports) creates opportunities for real estate agents, as well as for investors and other buyers. Those opportunities, however, carry with them certain pitfalls for both agents and purchasers.

This discussion is designed to provide agents with an introduction to the pitfalls facing those persons dealing with foreclosed properties.

This entry is designed to acquaint real estate agents and others on the foreclosure and resale process in the State of Alabama. It is not intended as legal advice, nor is it intended for persons located outside of the State of Alabama. If you are interested in purchasing a foreclosed property, you are strongly urged to seek the services of a qualified and experienced real estate professional or an attorney skilled in real estate and title insurance matters.

The Foreclosure Process

The process of foreclosing a mortgage lien in the State of Alabama is a combination of statutory requirements (law) and the contractual agreement between the mortgagee and mortgagor (that is, the language of the mortgage and promissory note it secures).

The particulars of the foreclosure process are a topic for another discussion. For our purposes today, we will assume that when a property is being marketed by a lender, or a lender’s liquidation subsidiary, the lender and the lender’s attorney properly conducted the foreclosure sale.

So we begin our discussion after the foreclosure when the lender starts to market the property.

First, if you have found yourself watching a late night or early morning advertorial program touting some expert’s method for making hundreds of thousands of dollars dealing in foreclosed property, forget it. Those programs are designed to make only one person rich from foreclosed property – and it’s not you!

When lenders begin to market foreclosed property, they have likely been dealing with the property for six months or more. After the loan went into default and the lender determined that it was not likely that the owner would be able to cure the default, the lender began a series of events leading up to the foreclosure of the mortgage on the property. One of those events was to obtain either an appraisal of the property or a broker’s value opinion from a real estate agent. The lender, when it begins marketing a property, generally knows what the property is worth. There are few instances where a buyer can purchase a foreclosed property at a huge discount from its fair market value. In addition, as we will see later, the bigger the discount from the “fair market value” of the property, the greater the risk that the purchaser will be faced with legal hurdles to keeping the property.

What is the Statutory Right of Redemption?

The biggest factor in dealing with foreclosed property, either as a listing agent or a selling agent, is the statutory right of redemption.

The Statutory Right of Redemption is a creature of the legislature that is intended to mitigate the harshness of forfeiture arising form the foreclosure of a mortgage. The Statutory Right of Redemption is the right of the mortgagor (the property owner against whom the foreclosure was conducted) to:

(1) pay the indebtedness; plus
(2) the interest; plus
(3) other permitted costs and charges incurred by the mortgagee during the foreclosure period; and if necessary,
(4) to compel the reconveyance of the property to the mortgagee whose interest in it was lost at the foreclosure.

The mortgagor cannot, prior to foreclosure, waive his right to redeem the property.

When one holding a Statutory Right of Redemption exercises that right, the effect is to divest the legal title of a purchaser or his or her successors at a foreclosure sale.

Since 1969, the statutory redemption period has been one (1) year. The one-year period begins to run on the date of the foreclosure sale or, in the event of a judicial sale (foreclosures can be either non-judicial or judicial), then from the date of any judgment confirming the judicial sale.

There are a few circumstances in which the one-year period is “tolled” or extended. The one that is most applicable today is the provisions in the Servicemember’s Civil Relief Act, formerly known as the Soldier’s and Sailor’s Civil Relief Act, that provides that the period of military service is not to be included in the computation of a period for the real property. Courts have held this part of the act to be an absolute suspension, and the serviceman is not required to show that the period of service prejudiced his or her ability to redeem. In addition, under certain circumstances, the filing of bankruptcy by the former owner/mortgagor can “toll” the one year

PRACTICE NOTE: We have been asked by agents how to determine the date the redemption period expires. The rule is that the redemption period expires one year from the date of the foreclosure sale. You can determine the date of the foreclosure sale from the date of the foreclosure deed (the date the deed is signed, not the date it is recorded). HOWEVER, do NOT advertise that “Redemption rights expire on …….” and give the date one year following the foreclosure sale. INSTEAD state “Foreclosure Deed dated …..”

Who Can Redeem a Property from Foreclosure?

(1) Any debtor on the obligation secured by the mortgage;
(2) The debtor’s guarantors and sureties;
(3) Any mortgagor (that is, anybody who executed the mortgage), whether or not obligated to repay the indebtedness (example, a spouse who is not a borrower under the promissory note but who executed the mortgage to subject his or her constitutional homestead to the lien of the mortgage);
(4) Any junior mortgagee (second mortgage holder or equity line lender) or any transferee or assignee of the original junior mortgage holder;
(5) Any judgment creditor or his or her transferee;
(6) Any transferee of the interest of the debtor or the mortgagor;
(7) The spouses of all debtors, mortgagees or transferees; and
(8) In some cases, the United States Government.

From Whom Can These People Redeem?

A person or company entitled to redeem a property from foreclosure is entitled to redeem the property from the purchaser at the foreclosure sale, or the purchaser’s transferee. This means that someone purchasing a foreclosed property during the statutory redemption period might end up losing the house.

What Happens if Somebody Redeems from a Buyer?

The way the right of redemption is exercised is statutory. The person holding the right gives the current owner a Demand for Lawful Charges. It is up to the owner to prepare the statement of charges and to deliver the statement of charges to the person seeking to redeem. The person who owns the property has ten (10) days from the date of the redemptioner’s demand to provide the redemptioner with a statement of charges.

How Much Does it Cost to Redeem the Property from Foreclosure?

The redemption price is as follows:

(1) The purchase price paid at the foreclosure sale (not the price somebody paid to purchase the property from whomever bought the property at the foreclosure sale); plus
(2) Interest at 12%; plus
(3) “All other lawful charges” which are the following:
a. “Necessary Permanent improvements”;
b. Taxes Paid or Assessed;
c. All insurance premiums paid or owed by the purchaser;
d. Any lien or mortgage on the property having a higher priority than the one under which the property is being redeemed

What are “Necessary Improvements?”

Necessary improvements are those improvements that are made to preserve the property by properly keeping it in repair for its proper and reasonable use, having due regard for the kind and character of the property. Necessary permanent improvements include not only ordinary repairs necessary to restore the property after injury, decay, storm, fire, flood, and the like but also valuable and useful additions and improvements to the property suited to its reasonable necessities, character, and use.

Note that it is not the COST of the improvements that are recoverable, but the VALUE of the improvements.

This is the area of the redemption process that has resulted in the most litigation – purchasers claim items as “necessary improvements” that the person seeking to redeem the property thinks are cosmetic in nature, and do not preserve the property by keeping it in repair for its proper and reasonable use.

For this reason, I have always encouraged foreclosure property purchasers to avoid undertaking major renovation or any construction projects until the expiration of the redemption period.

Can an owner who is foreclosed on redeem the property and get it back for less than he owed on the property?

NO. Under Alabama law, if a former owner redeems the property, then all outstanding liens mortgages and encumbrances against the owner that encumbered the property are reinstated upon redemption by the former owner.

Can a buyer who purchases a foreclosed property from the bank that foreclosed lose money?

YES. Remember that very, very few properties are redeemed from foreclosure. However, if the redemption price is less than what the purchaser paid for the property, the purchase could end up losing money. Remember that the redemption price is determined by the foreclosure price, not the price for which the property resells following the foreclosure.

As a Real Estate Agent, how can I protect my buyer who purchases a foreclosed property??

There a limited number of ways to protect the buyer from the economic results of redemption.

One way is to advise the buyer not to pay in excess of the foreclosure price. The foreclosure price is stated in the foreclosure deed, which your title company can provide for you, or which may be available on line at the Judge of Probate’s web site.

In any event, advise your client of the fact that the property is a foreclosure, and that for one year following the foreclosure sale, there is a possibility, no matter how slight, that someone who had an interest in the property prior to the foreclosure might redeem the property, and that in that case, the client would be forced to give up the property and could lose some or all of the money the client invested in the property.

If a client purchases a foreclosed property, the client should not engage in extensive renovation projects or any construction projects during the redemption period.

Ask the selling lender for an indemnity protecting the buyer from loss in the event of redemption (most lenders will not give an indemnity to the purchaser, but it doesn’t hurt to ask, and some lenders, particularly local banks, are more open to this suggestion).

Depending on when the foreclosure sale was held, delay closing until after the expiration of the one year redemption period.

DO NOT ask the title company to “waive” or “insure over” the redemptive rights – no title company is in a position to insure against this risk on its owners policy.

What about a "redemption bond?"

Redemption bonds are insurance policies issued by a bonding company in favor of the title insurance company insuring the title company against loss from any claim on its lender’s policy in the event of The Redemption Bond does NOT protect the purchaser.the exercise of the right of redemption. In addition, the purchaser may be required to sign as a surety for the bonding company, which would mean that in the event the bonding company has to pay a claim, it could seek to recover its losses from the buyer.

The real purpose of a redemption bond is to allow the mortgage company to issue its mortgage secured by a property that is still subject to rights of redemption.

Redemption bonds cost approximately $13.50 per thousand dollars of the new mortgage amount. The price of redemption bonds has gone up in recent years. If you are representing a buyer of a foreclosed property and the buyer is obtaining a mortgage to purchase the property read your title commitment carefully to see if a redemption bond is required!

Is there any other way to protect the lender so that the lender will issue a mortgage?

The lender is looking for a mortgagee’s policy of title insurance that is issued to the lender without an exception from coverage for the exercise of redemptive rights. One way a title company will remove this exception from the lender’s policy is to receive a redemption bond from a reputable surety company. Another way to induce the title company to issue its lender’s policy without exception for the redemptive rights is to secure a letter of indemnity from the foreclosing lender to the title company in which the foreclosing lender agrees to indemnify the title company from loss on its mortgagee’s policy resulting from the exercise of the right of redemption.

A caveat here – not all foreclosing lenders are willing to provide a letter of indemnity and title insurance companies may not accept indemnity letters from all lenders.

A Word on Contracts to Buy Redeemed Property.

When you represent a prospective buyer of redeemed property, you will undoubtedly start out with one of RealtySouth’s standard contracts. Expect, and let your clients know to expect, that when the contract is submitted to the foreclosing lender, you most likely get back an “addendum” to the standard contract that effectively changes each and every term of the original contract. While we have found certain terms in the “addendum” are somewhat negotiable, sellers of foreclosed property want the contracts for each property to be as uniform as possible. The “addendum” generally will disclaim any warranties of condition, and contain stronger “as-is” language than our standard contract. The inspection time may be shorter, and your purchaser will be receiving a statutory warranty deed instead of a general warranty deed. If title insurance is being purchased by or for the buyer, then this distinction in deed forms is not critical.

Also expect the closing cost division to be different than the “usual” split. In some cases, the foreclosing lender insists that the buyer pay all closing costs, while in others cases, the foreclosing lender will agree to pay substantial costs for the buyer. The foreclosing lenders we work with generally required the buyer to pay all closing fees and attorney document preparation fees, but will pay the full cost of the owner’s policy of title insurance.

These changes to our standard contract form will likely necessitate you revising your good faith estimate / net sheet once the addendum is received.

Also, Realtors working with a buyer of foreclosed property should expect to lose a substantial portion of the control they are used to exercising over the particulars of the transaction. Sellers often direct the title insurance and closing agent. Sellers often dictate the time and date of closing since the lender’s asset management companies require from 24 – 48 hours of advance notice to review the settlement statement. Working with the asset management companies that handle disposition of lender owned property takes many Realtors out of their “comfort zone” and while this can be frustrating to some, it is a reality of dealing with foreclosed property.

BOTTOM LINE

Buying a foreclosed property during the redemption period is a risk vs. benefit proposition. A buyer may get a benefit in the form of a “good deal” on the property, but the good deal comes with additional risks. The better the deal - the bigger the risk.

Be aware of the pitfalls of buying foreclosed properties and advise your clients accordingly. You are not called upon to be attorneys or judges in the interpretation of the laws pertaining to redemption, nor are you called upon to be accountants and calculate redemption prices. You serve your clients if you are able to advise them of the basic risks of purchasing a foreclosed property subject to redemption, and advising them that if they have more questions about the risks involved, they should consult their personal legal advisor.

Do not be afraid to show or market foreclosed properties, but be mindful of the additional risks arising out of the foreclosure and that the transactions are not likely to proceed in the manner to which you are accustomed.

We are Coming - To Your City (Mortgage Fraud, that is)

2007-03-11T20:05:00.000-06:00

I like the country duo "Big and Rich." They have a song called "We are Coming to Your City."

Well, there are other people who are coming to our city - if fact, they are already here - and they want to get "Big and Rich" by commiting mortgage fraud. And they want you to be a part of the show.

Mortgage Fraud is, according to the FBI's web site, one of the fasting growing financial crimes in the country. I have spoken to several groups of real estate agents, brokers and loan officers over the past few months. At each speech, there is always somebody who asks "Well, if we don't know about it, how can we get in trouble?" That's just it, real estate agents, brokers and loan officers should know loan fraud when they see it, and they should make sure that neither they, nor anybody associated with them, is in any way involved in a fraudulent transaction.

Another theme that may not be spoken, but is apparent in the looks in some people's eyes is "that could never happent to me."

Well it can happen to you.

I will post two or three artices on mortgage fraud over the next few weeks as time permits. In the mean time, I encourage anyone in the real estate industry who reads this post to click over to http://www.mnrealtor.com/publications/pdfs/TipsRuinYourLife.pdf and read this article. It is a painful and poignant reminder that it can happen to you.

How Much is Your Closing Fee? And Does that Include Shipping and Handling?

2007-02-18T18:30:00.000-06:00

“Hi, my name is Pat, and I am an Ebay addict.”

If there were a 12-step recovery program for Ebay addiction, I would be there. I started shopping on Ebay several years ago – back when it really was a virtual garage sale. I have gotten a lot of good deals on merchandise over the years. I learned very quickly, however, that the price of the merchandise was only part of the cost. You see, many people who sell on Ebay have figured out that they can boost their profit by charging “shipping and handling” charges that are more than their actual out-of-pocket cost of getting the merchandise from their garage to mine. I realize that it takes some effort to package an item for shipment and to take the package to the shipper. I also realize that packaging supplies cost money and I don’t fault sellers for wanting to recoup their cost. And yet, these additional charges for shipping and handling end up making the widget, or whatever I just purchased, cost more than the stated price

I’ve noticed that sometimes, pricing for real estate closings can look a lot like an Ebay auction: the stated price looks really good, but by the time you add in all the “extra” charges – copy fees, package printing fees, overnight delivery fees, courier fees, email delivery fees, incoming wire fees, outgoing wire fees, and a host of others – the total cost to the buyer and seller is up to $100.00 more than the stated cost for the closing.

When we were working up the business plan for the TitleSouth Closing Center, we took a different approach to pricing closing services. Instead of stating a certain price – say $500.00 for a typical real estate closing with one mortgage – and then adding on for overnight packages, incoming and outgoing wire transfer charges and other expenses that are ordinary and necessary costs of doing business, we decided that our stated price would include all of these incidental costs.

It is a simple and straightforward business model – one price, no hidden charges. The price we chose is reasonable and competitive based on what closing attorneys and other title insurance companies in the Birmingham area charge for similar services. TitleSouth Closing Center’s fees are not the lowest in the Birmingham area, but they are far from the highest. We believe in being upfront about our fees, charging a fair price and delivering quality service and a good value for the fees we charge. Not only are the Closing Center’s fees competitive for closing services, we also offer agents, buyers and sellers an interactive closing experience through SureClose, our on-line transaction management platform (www.sureclose.com). We also offer to provide buyers and sellers copies of their closing documents on a CD, and work with buyers and sellers whose work schedules or travel arrangements make it difficult for them to close between 8:00 a.m. and 5:00 p.m., Monday through Friday.

In short, we pay the shipping and handling – it’s a lot better deal than you’ll get on Ebay.

Don't Tempt RESPA Fate (Part 2)

2007-02-11T10:09:00.000-06:00

When I started this weblog, I hoped to post a couple of times a week, and I kept to that schedule for a while. The past few weeks, however, I have not posted as often as I planned. My absence was the result of a much busier than expected January at the TitleSouth Closing Center, and the demands of preparing to fully open the second TitleSouth Closing Center location on Acton Road. Please forgive my absence. I will try to be a more faithful to my original posting schedule.

My last post discussed RESPA and a series of actions by settlement service providers that are permissible under RESPA. It was “the Good” in terms of RESPA Compliance.

This post contains the second and final installment of my “The Good, the Bad and the Ugly” RESPA compliance post. The following actions are NOT permissible under RESPA. Do any of these actions sound familiar? Remember, under RESPA, it is just as much a violation to receive a thing of value in exchange for a referral as it is to give a thing of value in exchange for a referral.

The Bad
(Not Legal)

1. Can a lender, title company or other settlement service provider sponsor a RE salesperson in its advertising where the RE salesperson does not have to pay for the ad or gets a discount?

No. The sponsorship defers an expense that the RE salesperson would otherwise have to pay and is a thing of value under RESPA.

2. Can a lender, title company or other settlement service provider sponsor a contest in a real estate office that awards points for each mortgage application, title order, etc. that the other settlement service provider receives?

No. The contest prize and even the opportunity to win a prize in exchange for referrals is a thing of value under RESPA. HUD has recently taken action against a drawing held at an awards program administered by the Coldwell Banker Real Estate Corporation.

3. Can a lender, title company or other settlement service provider buy lunch for the office subject to receiving a specified amount of business?

No. Buying lunch in exchange for receiving referrals violates RESPA.

4. Can a loan officer give my buyer a closing gift that is from both of us at no cost to me?

No. By giving your buyer a gift in your name without any cost to you, the loan officer is deferring a business expense that you would otherwise incur.

5. Can a lender, title company or other settlement service provider send me on a trip or pay for a weekend at a hotel?
No. Trips, weekend stays, fine dining and other expensive gifts are not considered to be in the range of normal marketing expenses under RESPA.

6. Can my broker provide incentives to me for recommending my company’s mortgage or title company?

No. Your broker would be providing you a thing of value in exchange for a referral. RESPA does not require that the thing of value be given by the same person or company that receives the referral of business. HUD recently took action where title companies provided the RE agents with virtual tours at no cost.

7. Can a lender, title company or other settlement service provider sponsor lunch at my open houses without advertising it?
No. By making it appear that you provided the lunch, the lender, title company or other settlement service provider is deferring a business expense you would otherwise incur.

8. Can I be paid for helping my buyer complete a mortgage application?

No. Filling out a mortgage application or providing other nominal services is not compensable under RESPA. HUD recently took action against Re/Max agents in Georgia who received $400 in compensation for merely filling out a mortgage application.

The Ugly
Business Opportunities

There are many lenders and title companies offering business opportunities to RE agents in the form of an ownership interest in a mortgage or title company. These are permissible so long as the business is operated within strict parameters. They are The Ugly because promoters of these businesses often produce letters from reputable law firms which have reviewed the business plan of the company and confirmed its legality in order to induce RE agents to participate. However, a significant number of these businesses are subsequently operated in a manner that is not consistent with the business plan presented to the law firm and become RESPA violations or “sham” companies. This is a trap for the unwary RE agent who can find himself or herself on the wrong end of a HUD investigation not knowing how they got there.

HUD does not limit its investigation to the business plan or other paperwork of a suspected sham company, but pulls back the curtain on the business operation by exercising its subpoena power to find out what is really going on in the business. For example, companies that require a minimal investment from you, but offer generous returns with little or no risk of loss violate RESPA. HUD has recently taken action against several sham companies in North Carolina, South Carolina, Georgia, Tennessee, Ohio and other states.

AUTHOR'S NOTE: The above recitation of “the Bad and the Ugly” come from a memorandum distributed by HomeServices of America’s General Counsel, Dana Strandmo, in 2005. In light of HUD’s increase in enforcement actions and the expansion of its somewhat limited investigative staff by the use of private auditors, I thought that the topics discussed in Dana’s original memorandum were particularly relevant today.

Dana’s discussion of “the Ugly” – business opportunities that may result in RESPA violations even though they were designed to be compliant, is an area where I have some personal experience. Before I came to TitleSouth as General Counsel, I structured two joint venture title companies for clients. I was very careful to make sure that the formation and operation documents were drafted in a way that was RESPA compliant. I went a bit further, however, and required that the companies conduct “self-audits” every quarter to determine that they where being operated in accordance with their governing documents, and that an outside law firm conduct a “compliance audit” once a year to make sure that, in operation, the companies did not inadvertently violate RESPA even though their organizational documents were designed to ensure compliance.

This is an area where, until Congress address the reform of RESPA, we will continue to have to tread lightly and weigh each business opportunity and interaction with fellow settlement service providers on the scales of RESPA compliance. Until RESPA is reformed- if Congress ever gets around to RESPA reform – the best bet is to utilize the “smell” and “newspaper” tests: “Does this Smell Right” (if it doesn’t it probably isn’t), and “How Would this Look on the Front Page of the Paper” (unless you want to read about it there, it probably doesn’t past muster).

Don't Tempt RESPA Fate

2007-01-10T20:41:00.000-06:00

Many years ago - when I was first starting out in the real estate closing business - I was approached by someone who offered to send me a lot of closing business, but it came with a catch: the person who could bring me the business wanted a "piece" of the fees. They assured me that "People do it all the time."

Desipte not having a lot of business and needing all the business I could get, I had the good sense to turn this person away.

At that time, I hadn't spent a lot of time studying the Real Estate Settlement Procedures Act ("RESPA"), but I knew that this proposition didn't pass the smell test.

As the years passed, and I was asked from time to time to render an opinion on whether or not a particular arrangement was permissible under RESPA, I spent more and more time reading RESPA, case law interpreting RESPA and HUD's Formal and Informal Opinions about RESPA. I don't claim to be a RESPA expert - far from it. I know a couple of folks are are bona fide RESPA experts, and they have helped me tremendously.

One of the people I know who is well-versed in RESPA is Dana Strandmo. Dana is HomeServices of America's General Counsel, and is one of my bosses. About a year and a half ago, Dana sent out a memorandum to all HomeServices of America's agents (HomeServices owns approxmately 18 real estate brokerage companies across the country, including RealtySouth, and through these companies has in excess of 11,000 agents) giving them some guidance on what is and isn't permissible under RESPA. Dana's memorandum was titled "The Good, The Bad and The Ugly."

Now, at the beginning of the new year, seems a good and appropriate time to review "The Good, The Bad and The Ugly" and take a look at what is, and perhaps more importantly, what is not permissible under RESPA. Today's post looks at "The Good" - that is, permissible actions under the provisions of RESPA. These questions and answers are directed at real estate agents and their relationships to title insurance companies, loan officers, and others to whom they have the opportunity to refer busienss. Remember, however, that in the context of payments in exchange for the referral of business, RESPA makes it a crime to either give or to receive any thing of value in exchange for the referral of a settlement service. Accordingly, these quesions and answers apply equally to anyone in a position to make or receive referrals of settlement services.

The Good (Legal)

1. Can a real estate (RE) salesperson advertise with a lender, title company or other settlement service provider if each party pays their fair share?

Yes, if the RE salesperson and the other party are sharing the cost of the ad on a pro rata basis (e.g., if you have 10% of the ad space, you pay 10% of the ad cost).

2. Can my office manager sponsor a contest that awards points for listings, open houses, showings, etc.?

Yes, so long as points are awarded only for real estate brokerage activities.

3. Can a lender, title company or other settlement service provider buy lunch for the office?

Yes, so long as everyone in the office can benefit equally and the cost of the lunch is not overly expensive. That is, the cost is considered in the range of a normal marketing expenses for that market area.

4. Can a loan officer give my buyer a closing gift that is from both of us?

Yes, so long as you and the loan officer each pay your pro rata share of the gift expense.

5. Can a lender, title company or other settlement service provider send me a gift on the holidays?
Yes, you can receive gifts that are not overly expensive, that is, they are in the normal range of marketing expenses for the market area.

6. Can I give my seller or buyer a gift in appreciation for their business?

RESPA does not prohibit gifts or other benefits given to your client in the transaction. However, many state laws prohibit it. Check with your manager or company management before making gifts to your clients.

7. Can a lender, title company or other settlement service provider sponsor lunch at my open houses?

Yes, so long as it is clearly advertised that the lunch is sponsored by the lender, title company or other settlement service provider and is not overly expensive, it is considered a normal marketing expense.

8. Can a lender, title company or other settlement service provider help sponsor a party, softball tournament or some other real estate company event.

Yes, so long as the sponsorship is not overly expensive, that is, it is in the normal range of marketing expenses for that market area.

Clearly, this list of permissible activities is not exhaustive and whether or not a particular activity is or is not permissible under RESPA is fact dependent. Throughout the questions and answers set out above, there is one recurring theme - everybody pays their fair share. If somebody pays more than their fair share, the it could be that the payment is considered a "thing of value" in exchange for the referral of business. That is where you can get in trouble under RESPA, and that will be the topic of my next post.

Until next time,

Pat Smith

The Way Tech Support Should Be

2006-12-30T10:25:00.000-06:00

Some of you know that TitleSouth and TitleSouth's Closing Centers are "Stewart Title shops." Stewart Title Guaranty Company is TitleSouth's title underwriter, and we use Stewart Technologies' "AIM" and "SureClose" software in our title and closing operations.

This week, the folks in Houston, where Stewart Title and Stewart Technologies are located, had some gremlins invade SureClose and we couldn't scan documents to our online files. It is a minor annoyance, and there are work-arounds that keep us going. However, we were having trouble working the way we like to.

As soon as we realized we were having problems, I shot off an email to Sheryl Cave, Dona Sutton and Kim Sekenski at Stewart Technologies Regional Office in Tampa. Sheryl, Dona and Kim provide product support for SureClose for about 4 states. Within minutes, I started getting replies from the team letting me know that they knew about the problem and that they were working with engineers in Houston to get the problem identified and solved. The Houston folks worked on the problem throughout the day, and by day's end had everything back in order. I received about a half dozen emails from Sheryl, who was monitoring the progress, to let me know what was going on, and then another email to sound the "all clear."

To me, this is the kind of responsiveness tech support should give to customers. Sheryl, Dona and Kim (as well as our AIM support and training team of Laz Conn and Laura Roberts) "get it" when it comes to meeting and exceeding our customers needs.

When it comes to supporting our customers, Sheryl, Dona, Kim, Laz and Laura give all of us something to shoot for.

Thanks to all of you for being so helpful to us - you are our champions and we appreciate your efforts.

If you would like more informaiton on SureClose - which I believe is the greatest thing to happen to the real estate industry since the fax machine - contact me at the TitleSouth Closing Center at 205-445-1414 and I'll give you a testimonial and put you in contact with the Stewart Technologies marketing team - they, too, are a top notch bunch of folks.

Until next time,

Pat Smith

Paper-Less Closings Really are Coming - and Soon I Hope!

2006-12-28T17:06:00.000-06:00

About a year ago, I got a preview of a product offered to closing agents by Stewart Technologies, a Stewart Title Company. The product, eClosing Room, allows closings to be completed in an almost paperless environment through the use of pen-based "tablet" computers. Think about it, we already complete many transactions in a paperless manner - debit card and some credit card transactions, internet-based transactions, on-line stock trades, and others. How often in the past month have you completed a purchase by signing your name on a digital pad at a retail store? Paperless, or at least "paper-less" (that is, not truly paper free, but at least involving less paper) are here, and are coming to the real estate closing table.

The Title South Closing Centers have signed up as an eClosing Room customer. We have the software, we have the hardware, and we have the trainer coming next month to get us up to speed on how to put it all together. We are working with mortgage lenders to allow us to submit digitally signed documents to them instead of pen and ink signed paper documents. We have asked the Jefferson County Probate Court to be part of the efiling pilot program for the recording of deeds and mortgages.

I don't know when we will be able to do the first "paper-less" transaction at the TitleSouth Closing Centers, but I truly believe that it will be within the next 90 days. I'll let you know when we're ready to go.

In the meantime, here is a link to an artcile on eClosing Room:

http://realtytimes.com/rtapages/20061226_eclosing.htm

Until next time,

Pat Smith
General Counsel, TitleSouth and
Director, TitleSouth Closing Centers

TitleSouth Closings Blog

2006-12-27T19:58:00.000-06:00

We opened the TitleSouth Real Estate Closing Center in the Mountain Brook Center (2700 Hwy 280 E) on January 3rd, 2006. Since that opening day, we have closed hundreds of real estate transactions at the Mountain Brook location and have built out and equipped a second location at 2409 Acton Road (the Dolly Creek Shopping Center). We hope to have this location open for business during the first two weeks of January 2007. Shortly thereafter, we will open a third location on the third floor of the RealtySouth Shelby County office on Highway 31 in Pelham. With these three locations, we are within 15 minutes of almost the entire Birmingham metropolitan area.

One of the challenges that we have faced during the past year was to communicate effectively and efficiently with agents, brokers, lenders and others. To communicate with others about specific closing transactions, we implemented the use of SureClose. SureClose is an on-line transaction management solution that allows us to open our closing file to the agents, lender, buyers and others involved in that transaction. By logging into SureClose, parties can see, download and print the documents in our closing files and check on the status of their closing. In addition, when documents are filed or tasks leading to the closing are completed, the parties receive an email or fax notifying them of the progress on the file. In addition, SureClose serves as our closing file from which anyone at the Closing Center can answer your questions about your closing at any time.

Despite the success of SureClose, there are a lot of things that we at the Closing Center would like to communicate to the agents that close with us, and we also would like to give our customers the opportunity to pass along ideas, suggestions and comments to us on how we can do a better job of meeting their needs.

Fred Smith (the founder of FedEx, not the successful Realtor from the RealtySouth Crestline office) once said that if you wanted to start a successful business, go to a party and listen to what people complained about and then start a business that would solve their problems - or something to that effect. To me, the key component of this suggestion is to listen.

This "blog" is designed to let us talk to you, but more importantly, to allow you to talk to us. So please, give us your comments, suggestions and criticisms. Tell us what we can do to make the closing process better for you and your clients. If you don't like what we're doing - tell us. If you like what we're doing - tell us (and a friend).

We promise that we will listen to your suggestions and do whatever we can to implement your suggestions so we can do a better job of serving you.

Sincerely,

Pat Smith
General Counsel, TitleSouth and
Director, TitleSouth Real Estate Closing Centers