Something is wrong. Terribly wrong.
Last Spring, we represented a Buyer client on a transaction that qualified as possibly the worst title experience EVER....
A few days prior to the contracted closing date, our agent received a blank digital closing package with instructions that consisted of "sign and return" only. She called me with concerns, as our Buyer had never received title commitment from the escrow officer prior to receiving this closing package.
Upon investigation, we also found multiple errors on the preliminary HUD-1 and with the closing documents:
1. No title commitment received from escrow officer prior to receipt of the closing package
2. Emailed closing package with only "sign & return" instructions
3. HUD missing Earnest Money deposit & title policy
4. Buyer's check showed cleared, but no escrow account open and no EM receipt
5. Closing package charged ~$600 lender's title policy on cash transaction
6. No survey, but required buyer's initials for acceptance of survey
7. T47 included with no survey
8. Required buyer's acknowledgement of "no survey"
9. Required acceptance of lender's title policy; offered owner's TP for $0
10. Required buyer's signature to waive delivery of owner's title policy
11. Stated buyer would assign owner's title policy to some future transaction
12. Escrow officer verbalized clear title but would not deliver commitment
13. Corporate investigated and found un-cleared liens (clouded title)
Our hope was that the title company's corporate office would simply inject the necessary accountability to make the attorney fee office (that the listing agent had so adamantly insisted upon using at the start of the transaction) act right. When they didn't, we reached back out to the listing agent to request file transfer. The listing agent (citing "seller's preference") declined.
Our next step was to reach out to the listing agent's broker for assistance. As an established and tenured broker for a larger franchise brokerage brand, we expected matched concern about the title company's competency and performance. What we received was pretense, at best.
What Was Said: The listing agent's broker promised to look into the matter, but cautioned that his influence might be limited by the fact that the listing agent had just transferred out of his office. And, even though the listing was still the broker's, he had zero familiarity with the file or Seller, and intended to continue to work with the listing agent to help arrive at resolution.
What Wasn't Said: While it was true that the listing agent had transferred out of the listing broker's office, what the broker didn't disclose is that the agent transferred to another office under the same brokerage brand, for which the listing broker was ALSO the designated broker.
What Was Shared: The listing agent took it upon himself to provide the listing broker with 'proof' and 'evidence' that title commitment had been shared with Buyer parties, and that acknowledgement of Buyer's checks had been shared by the title company.
What Was Discovered: When we reviewed the documentation provided to us by the listing broker, we found evidence of forgery in those documents. This pointed directly back to both the listing agent and the escrow officer, who appeared to be working together to cover their tracks.
What Ensued: We addressed the forgery with the title company's corporate office, the listing broker, and the attorney who owned the attorney fee office. The "Seller" still refused to agree to change title offices or title companies.
Our Buyer still wanted to complete the transaction (in lieu of default), and we insisted upon dealing directly with the attorney for the attorney fee's office. We received notification of clear title and the commitment we had been waiting for. Closing arrangements were made.
What readers should know at this point is that this was for a simple cash purchase for a modest price point (under $100k). We were floored when we received the settlement statement and saw that errors continued to riddle the transaction. The Buyer's checks were still not credited correctly, and not only were both parties were charged for the title policy, Seller was charged twice on separate lines. And, there were additional unexplained fees charged on the HUD.
The battle to get the settlement statement corrected was merciless, and lasted the better part of a day. We fought for corrections on both sides (Buyer and Seller), as neither the listing broker or listing agent ever bothered to respond, although copied on every single email. (Later, the listing broker explained that he didn't bother because he felt that we were 'handling' it.) We would ask for 3 corrections, and only get 2 back in return. We would ask for the 3rd, and receive the 3rd corrected, only to have the first 2 errors reappear, or a new error introduced in the mix. We asked the title company provide the Buyer with a discount on their fees for the horrible experience. They begrudgingly complied to a token concession, and parties finally arrived at HUD approval and proceeded to close.
The Rest of The Story
After closing, we felt compelled to report the incident to the Texas Department of Insurance. Our report was fully substantiated with documentation and evidence of what had transpired. It should have been a slam-dunk, right? An obvious case of malpractice?
Findings: TDI investigated, and closed the case, reporting no violations had occurred since all of the title company's errors were corrected prior to closing.
We were beyond disappointed with the findings. TDI's determination suggests an equivalent scenario of having a store owner stop a robbery, and then get told by law enforcement that since the robbery was stopped, no crime occurred.
And, is it really ok to postulate that it is the job of a broker/agent or buyer/seller to ensure title does their job correctly? Although certainly in a stronger position to do so than the average consumer, that is a massive and inappropriate amount of pressure on the average broker/agent, who is neither licensed for, nor practices in, title services.
And what is to be said for a consumer who is less strongly represented -- or unrepresented -- on a transaction? Shouldn't the complaint have warranted a deeper look into the general practices of the named escrow officer and fee office? For the degree of incompetence (and possible attempts at outright deception & fraud) displayed in our transaction, it doesn't stretch the imagination to consider that other consumers have fallen victim to malpractice.
If a restaurant exhibits insects, rodents, and unsafe food practices, is it ok for governing bodies to claim that they have no obligation to do anything unless a patron dies? And what would it say about the ethics of a witnessing party to allow such a death to occur in order to be able to hold said restaurant accountable for 'violations committed'?
This is exactly the double bind that is created by TDI's message… in order to hold the title company accountable on this transaction, we would have been put into a position of knowingly allowing our Buyer client to suffer the damage -- which would be in direct violation of NAR's Code of Ethics and our fiduciary duties to our client.
We call BS. The system needs more accountability, for the benefit of consumer protection. How do we get there?