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A Title Company is like our children - always questioning authority.

Questioning authority No, we're not trying to be the boss of you, but at least 25 percent of our real estate closings involve a question of authority. That is, does each of the parties sitting in my closing room have the authority to complete their part of the transaction?

If a party at a closing is an individual with a valid I.D. and isn't acting crazy, stoned or otherwise impaired, we assume that they can properly complete their end of the transaction. But often, a party to a closing is not an individual. It may be a corporation, a trust, or someone acting in a fiduciary capacity. What then? Well, our suspicious and untrusting title instincts kick in; we look them in the eye and slowly ask "show me your authority . . . please."

Individual stockholders own corporations. Individuals grant power to trustees and attorneys in fact. Executors represent the interests of individual heirs and devisees. Individuals are at the root of all these entities. A title company must establish that those individuals have properly granted their authority to whoever is going to complete the transaction.

We might require a resolution from a corporation's board of directors. We might want to examine the powers of the trustee clause of the trust agreement. In the case of an estate, we may need a court order. All of this establishes the authority of every individual participating in the transaction.

Whatever

And once we've established who is the boss of you, we can ensure (and insure) that all of the closing documents are properly executed and enforceable.

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Posted by John Bethell on 12/01/2008 08:37 PM

Comments (29)

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Originally posted at: Opening Titles and Closing Remarks: A Title Company is like our children - always questioning authority.

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29 Comments on A Title Company is like our children - always questioning authority.

DEC

2008

That's because there are so many idiots in Real Estate

This is so true, with all the foreclosures, I have seen the lenders asking for "authority and proof" of those signing on the contract for the listing side. This is to insure the purchaser is actually buying the house and not just signing papers.

Signs of the times I think. As a closing has to be done by parties that are legally able to transfer the property. I see where this can be a pain.

John,

This is excellent.

So many people think this is nit-picking, but if it weren't for the nit-pickers nothing would close! It's the same in lending,! It's not personal! We're not picking on anyone! We all have to follow the "Golden Rule of Real Estate, He with the gold rules!"

Bill

Richard: Sounds like a Monday response. Stop back tomorrow. :)

Valerie: I've not encountered that myself, possibly happens before I get involved, but it makes sense. Particularly with all the mortgage fraud occuring in some markets.

Laura: Not normally a pain although sometimes explaining it is difficult. People are sometimes offended that we don't trust them.

William: I agree. Its not nit-picking. We're just trying to protect everyone's interest.

Thanks all for your comments!

Regards, John

Thanks for post very informative

Sounds like a good idea to me... I have no problem with it. Just as when someone needs to list a home, if it is not an individual I require the same thing in my file...

John,

This is an excellent post. I commend you very much for posting it. I wish you could do a blast email to 300 million+ people.

Great explanation of an important issue. Most agents don't have any comprehension of what's required behind the scenes for a settlement.

Whenever dealing with a contract that has any principals who are not an individual, I've asked many of the Title Companies I've worked with to provide me with a list of what they'll require as soon as they've reviewed the contract, and to do so in writing. I can think of a couple scenarios where that saved a major hassle at the closing table.

Thanks for sharing your perspective!

John, Quickly after opening our own Brokerage we established a relationship with a Title Company that "respects" our deals and our word. They are on our side. We take them all of the closings we possibly can and they know that. We give them more business and volume than any other Brokerage in the county so they work extremely hard to make it easier on us. If every Title Company worked as hard as they do for us ... no matter what the volume...they could be the best Darned Title Company in Texas. I love ours. Look for a new one. Build a relationship with one and build on it! Just some unsolicited advice.

Oh, and the Title Company should be able to establish the "person or business with authority" if they are working for you.

Become the boss. It really helps. Thanks and I mean for you to continue to be "good at what you do" ... and they will follow.

Later in the rain~Deb

If they're stoned, they can't close? WHAT!?! What's up with that? LOL. j/k This is so simple. But necessary. It always amazes me how little, most people know about the closing process.

John.. Great post here.. It is very important to ensure the correct people sign to prevent a cloud on the title.

DEC

2008

Bryan: You're welcome! Stop back again.

Valerie: In any sales situation, we need to identify the actual decision maker, don't we?

Tony: It's OK to do that but . . . use your email address, not mine. Thanks. :)

Margaret: I've actually had one or two deals where the person with the real authority didn't know what their "trusted" friend was trying to do.

Joel: That's a really good approach. Sometimes the logistics of getting the proper documents at the last minute can really mess up an otherwise good closing.

Deb: Check my profile. I am "the Best Darned Title Company" in Indiana. Great advice for all the Realtors and Lenders here.

Lisa: Stoned is not good. You'll just have to find another way to get your clients to sign. I'm sorry. lol

Roland: It also good to ask a few qualifying questions before you start working with a seller or buyer. Then you'll know that you're dealing with the correct people.

Great Post. It's amazing sometimes what people do. I have had clients sign a listing contract and they didn't even own the property. We worked it out but I can see how you have be on lookout at all the time.

Thanks John...I am still wondering how a number of years ago we sold a house to a couple to learn months later of his identity fraud.....but then again the wife at the table didn't know about the other wife in California...soooo...guess we weren't the only ones fooled.

I, like Valerie above, have seen lenders require proof that the person signing on behalf of the trustees in an REO transaction are authorized to do so. No different than going to court for probate or to force a lis pendens.

I have great respect for title companies as they do a bunch of background work that they don't get credit for. Heck, usually at least one side of the transaction doesn't "choose" you but we must work with and trust you.

Yesterday I did have a weird one, they contacted my Buyer's agent for him to figure out how they were going to vest title. I said "that's their job, not ours!"

We all have jobs to do and when we work closely together it can be a pleasant experience!

John,

Nice post! Good to see another title guy around the rain!!! :) Thanks, Fran

John - It's interesting to hear your perspective on this. Clearly, one of your tasks as a title company is to establish that everyone involved has the authority that they claim to have. Nicely done.

Hi John,

Bottom line, you aren't running a popularity contest. You are being paid to do a job for those at the table. If they are thinned skeined, oh well. You have been charged with a responsibility and those involved should accept you are doing all that is needed to protect each paarties interest.

Mark: Usually we don't find that there's anything but a misunderstanding. Once in a while though we find out that someone who should know what's going on, doesn't know. That's a big problem.

Sally & David: The all time classic title claim! We learn about that one the first day on the job.

Renee: You're right. Usually only one of the parties actually selected us and the remainder are along for the ride. I've never quite thought about it in that context. All the more reason for us to treat everyone as decision maker in our next deal.

Fran:Thanks for stopping by. I'm sure we could share some war stories. lol

Jason:Thank you! I'm just trying to de-mystify the title business one concept at a time.

Harold: No. No. I'm not trying to cop and attitude. I'm just trying to find some fun ways to explain a business that I find exciting, but most others find dull. I do take my responsibility as a neutral third party quite seriously though.

Thanks to all for your thoughtful comments!

Regards, John

John...

Thanks for the great post. As one 'Titlest' to another who's been through a few real estate cycles... I too have witnessed a few great 'war stories' at my company... Never ceases to amaze me that there are actually people out there who will try what they will in a real estate transaction. Guess that's why we're here!

Thanks again...

Rene'

DEC

2008

Rene': I agree. If we weren't fulfilling our role, real property ownership would be a much bigger gamble.

From eSettle, LLC, a Title Company doing business in MD, DC, PA, VA and NJ, this issue arises most often in both the REO and commercial transactions. I agree with Mr. Bethell that this is an extremely important aspect of a title closing. Establishing rights of transfer should be a simple matter for a Title Company and should put no burden on anyone else. I have found with a lot of business arriving from the REO sectors lately that the law firms conducting the sellers end of the REO are more than happy to provide the necessary information such as recorded Documents, advertising reports on the foreclosures, etc. So a title company that has difficulty in establishing transfer authority should maybe look a little closer at their understanding of this procedure. In this business, each of us rely on the other to made the transaction go smoothly. Title Companies worth their salt should work DAMN hard for every customer/friend. And if you can not establish a friendship relationship with your customers you need to go into the paint ball business (not to denegrate the paint ball business at all).

Kevin Stroud, eSettle, llc

DEC

Some thought provoking words from a different perspective. I have never, ever felt like the title rep was trying to boss me around. Quite the opposite, they are worth their weight in gold in getting to a successful close. Maybe that's because I'm not one of the idiots Richard was refering to. Harsh!

I'm numb now to the constant questions as to why I need this piece of ID or that article of incorporation... My response every time is "well now Mr and Mrs Seller, we don't want somebody else selling your house, so I'm just watching out for you".

Great post, John!

DEC

Thanks for the info. I deal with a lot of investors who use LLC's and this information was very useful.

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