News from Vero Beach, FL that may help others. . .How many ways are there to express on both a professional as well as human level that you're thoroughly disgusted by someone's "poor" business practices? For me, it includes everything from "totally unacceptable" to "outright despicable" and plenty of other equally descriptive terms in between; all of which only begin to express what I'm actually feeling about a local escrow company.
This company was used by many real estate companies in our immediate area, including several neighboring counties - specifically for the purpose of holding a customer's funds in "escrow" until a real estate transaction closed. Most of us would typically visualize that the very word "escrow" would mean "safe." Funds held in a safe place for a specific purpose and time. Even Webster's definition uses the term "in trust." Well, think again! Safe would definitely suggest that the funds would be there when needed or demanded.
At this time we don't really know "the details" of what has happened - but we do know that a local escrow company has closed their doors and ceased operations.
This escrow company was in business for over nine years and was one of three (3) companies owned/operated by a local real estate attorney, which included a Title company - and yes, a law practice. They had operated for years and successfully transferred funds for many thousands of transactions, without a hitch! The news came as a complete shock to us all.
The fax was dated Tuesday 9 /4 /07 - the first business day, following the long labor-day weekend.
This is just a snapshot of the instructions all professionals received from the escrow company:
•1. Escrow services ceasing all operations, effective immediately
•2. All "un-deposited" monies will be returned to the source [usually a real estate office].
•3. Don't deposit checks because bank "instructed not to honor any checks that have not already cleared."
•4. To return any such checks to them via mail.
•5. Advise all of our clients to stop any wiring of funds/automatic deposits
•6. They're unable to return any funds that have been deposited with them/cleared at this time.
•7. They're "working on a solution that will allow all funds to be returned "within a short period of time."
•8. We will be kept informed.
•9. The office is closed - do not fax anything.
Naturally, as professionals we've speculated the various possible reasons for this outcome but we don't really know at this time exactly what caused the problem. We do know that there are both local and state official investigations in process to establish the facts and we all hope to hear in the coming days/weeks exactly what happened. Even more importantly, we all want to know WHEN the funds will be forthcoming for our respective customers.
Our company's broker has already taken some action - and on behalf of a customer who has been directly affected, I have taken some additional action in hopes that it may make a difference.
In the meantime there may be buyers who have made an offer on a property that wasn't accepted and simply want their money returned, and/or buyers who are waiting to close on a transaction, perhaps unable to because they don't have sufficient funds. Of course this equally affects sellers who think they're closing and now may not be able to. This may affect their plans to relocate or perhaps close on another home. Then there are the transactions that have closed and the monies have been dispersed. Closing agents then receiving the bad news that the check from the escrow company hasn't cleared. The fall out continues because we don't have the answers and/or the time frame of any resolution. Naturally, we are all very impatiently waiting for the facts to surface.
So, why would you be interested in what is clearly just "our local news?" Well, hopefully this will serve as an eye opening opportunity for you to heed an important warning because unfortunately, it could just as easily happen in your own back yard.
This information is obviously not applicable for real estate companies who use their own escrow account; this is for the hundreds, perhaps even thousands that may be using an escrow company.
Inevitably this will likely create yet another disclosure for our industry; beyond the escrow addendum that is always provided for each customer's signature, prior to depositing their funds in escrow. It also wouldn't surprise me if we began seeing some contracts without binder deposits; certainly everything is negotiable.
There are many, very fine, quality real estate professionals who work very hard every day and who really do put their clients and customers best interests first, who are as shocked as the general public by this situation.
We know this is an industry that is rife with [potential] liability; therefore, it is my hope that this proves to be a very helpful and valuable warning to colleagues everywhere, one which I hope you'll heed!