The Jason Theory
Jason Stratton of KlopasStratton Team, a top 20 team in the nation with over 1.2 billion sold , sits down with weekly guests to talk about becoming successful, the real estate market, and crazy stories/people we run into. Visit www.klopasstratton.com to see more!
The Jason Theory
S3 E6 - Protecting Property Purchases from Hidden Hazards and Fraud
Unravel the complexities of title insurance with us as Dru Wischhover <dru@inspired-title.com> from Inspired Title sheds light on this vital yet obscure facet of real estate. Steer clear of unseen historical debts and legal troubles that could threaten your property ownership with insights from our latest episode. Drew walks us through the unique backward-looking nature of title insurance and how it contrasts with other types of insurance. Discover the meticulous risk assessments title companies perform to secure your real estate transactions and understand the significant role of underwriters in this process.
Explore the behind-the-scenes action of real estate transactions where title companies and attorneys work diligently to avoid pitfalls and ensure rightful ownership. We discuss the nuances of title searches and the significance of addressing unforeseen issues such as foreclosures, tax liens, and municipal liens. The conversation also highlights the emerging trend of realtors becoming agents for title companies, the potential conflicts therein, and the importance of transparency and consumer education.
Our discussion takes a sobering turn as we confront the increasing threat of real estate fraud, including wire fraud targeting title companies. We share a personal story of a bounced $380,000 cashier's check and its ramifications. The episode concludes by debunking myths associated with price fixing in real estate, advocating for informed decisions by both buyers and sellers. Tune in for a comprehensive guide to navigating the title insurance landscape, armed with the knowledge to protect your investment.
I cannot stress enough how important relationship building is in an industry where this is not only your house, your home, your American dream. This is life, this is out there and this is happening. Wire fraud is a real thing and they are targeting title companies because it's the most money transacted over a wire than any other industry right now.
Speaker 2:What's the five Ps? Do you remember it? Proper preparation prevents poor performance. There you go. It doesn't matter how much money we get, if we don't close it's no money, right. So no, close is no money. I'm everything that I am because of my dad's death, and I wouldn't be as successful without his death, and I wouldn't be as successful without his death. Hello and welcome to the Jason Theory. We're going to have an interesting conversation about stuff that a lot of you don't know, but you pay for it every time you close. So if you're paying thousands of dollars for something, you should know what it is, and that is title insurance. I'm here with Drew from Inspired Title. Drew, just tell us a little bit about yourself and let's get right into what people don't know that they should know.
Speaker 1:That's a very interesting introduction and I appreciate that. I'm the guy who you pay for things that you don't know why. We are a full-service title company. We service Indiana, illinois, licensed to do business in both those states. What is title insurance and why do people? People have it and why do people need it? We're obviously going to dive deep into that and I'm pretty excited about that, so go ahead and give me your. Why.
Speaker 2:Give me your why. So I always when we had a great discussion about a ton of things before we got on the mics, and whenever someone gets their closing disclosure, the first thing they say to me is what is title insurance right? And I always say that is, I said you're paying for that one in a million thing that could take you out, yeah, and I and I always tell, being doing it like obviously we're talking about you're in construction and this, and that one of the biggest things about title insurance is obviously, when you're buying new construction, these builders have contractors that they owe money to, right, and you want to make sure that that title company says, hey, no one. As a lawyer back in the day, tom Moore is like a zoning board this that Tom Moore is like a world zoning board this that the first time he said to me he goes, he goes.
Speaker 2:He explained to a person you just don't want somebody knocking on your door and saying hey, you owe me $2,000 for this fridge, right? Or you owe me a hundred dollars for this or that, and title insurance, make sure that what you're buying is yours. That was his simple explanation. Yeah, but why don't you dive a little bit more into it?
Speaker 1:For sure, and again, thanks for taking some time and having me out here today. I think that the simplest way that we can talk about this and put this is it's an insurance that is unlike any other insurance. The easiest way, best way to describe it is if you think about insurance, you're buying it to protect you from things that are going to happen going forward. Okay, car insurance if you get into an accident down the road. Homeowner's insurance If there's some damage to your house. Title insurance is insuring the ownership of that property from the day that you own it the day that you close on it before. So it goes backwards. Yeah, I've never heard of that that way. That's great.
Speaker 1:Yeah, it's backwards insurance Everything Exactly so. It's also different in the sense that you're not paying it monthly. You pay it one time. So the fee and the cost of it, when you look at it in perspective of all the other insurances you're paying for monthly and you're going to pay for it with the assumption that something might happen. Title insurance you're paying for it to say something didn't happen. Up to this point, everything's been free and clear. There is no liens or encumbrances on my property. So title insurance is that product that says you now, jason, are the rightful owner of that property that you just bought.
Speaker 2:So when you guys do what's called the title search Correct, the title search basically says's called the title search Correct. So the title search basically says here is the past history of the property. That's literally what. This is, yes. How does then something get through that title and that title search where, like, oh my God, I need to file a claim. I have a great example, but I want to hear like examples that happened to you or how does that? Just let's rewind how does that happen?
Speaker 1:Sure, so what we've done is, I kind of simplified to say, we report the news, we do what is called that title search and we've let the parties know buyer, seller attorneys everything that happened on that property to the point where, before we get to closing, there's some things that we need to deal with. There's some items on here that have to be taken care of. You know, obviously we know you're going to pay off the prior mortgage from their previous owner. Yeah, if there's a, if there's a tax lien on there that's got to be dealt with, if there's an irs uh lien, if there's a judgment, if there are mechanics liens which you were speaking about earlier and mechanics liens are just liens that are put on by contractors because they didn't get paid.
Speaker 1:These things pop up at different times throughout the process of time and they can really impede the ability to sell that property. So our process of going through and lining this all out to say here are all the things that have happened on your property since the beginning of time and if it's clean, if there's no big issues, you're good to go. But how does a mechanics lien pop up? How does a tax lien pop up? How do you know delinquent taxes. Well, easily, don't pay your taxes, don't pay the IRS and, you know, don't pay your builder. They have a right to go ahead and file a claim against the or file a lien against your property, to do exactly what we're talking about here. Stop and make somebody look at it so it can get dealt with, so they can get paid.
Speaker 1:Now we take a risk through the process that by us saying, hey, I'm selling you my property, I'm giving this to you free and clear. So if somebody comes knocking at the door and saying, yeah, so my dad died and my brother and sister sold the house, but I'm also an heir, so they didn't include me, so I own one third of this house now too, and now you've got to deal with that. And so we're reporting all the news so that the attorneys, and even the seller, for that matter, can recollect things that have maybe happened in their lives as to what has gone on with that property. And that example of death is one of the bigger things. Or divorce In a divorce situation, husband and wife get divorced.
Speaker 2:Everyone throws everyone. It's a. I'm in one of those right now. It's a mess.
Speaker 1:It is a disaster, it's a mess, and you know they're not going to play nice in the sandbox. No, so it's. You know, getting them to sign off or deed the property to the other, or maybe the divorce decree says that you have to. You know you have to sell the property and half the proceeds go to your spouse, your ex spouse. So if that's not done correctly or if those items are not done through the measures that the court indicated I mean we are really involved in the whole process of you know what people don't know about and what people don't. They just know it's part of this. So we're, at the end of the day, when you leave, you just bought a $500,000 house. The last thing you want to think about is having somebody knock at your door and ask the question of saying you know, I don't, there's reason to believe that you don't really own it because and they give reasons Then they would file a claim and then it becomes a. You know that's what the title insurance policy would pay out on. Is that claim?
Speaker 2:Yeah, like that's what I think people need to understand. That too. It's like when you buy that property and there could be a lien or, as people say, clouded title. So whenever the cloud just think about title and cloud, you can't see title. So whenever the cloud just think about title and cloud, you can't see Correct. So whenever there's clouded title, the title insurance company will take a look at that and say, and they'll do an evaluation hey, we think there's a case here or we don't, or this or that. And then you guys, I see it, you guys put your initials on the title and you you insure over that, right. So when that buyer goes home, if there is an issue in the future from something they know about, they know that they're covered by you, we've insured it, we're telling you that, don't worry, you sleep well, we're going to handle that. If anything ever comes up. I normally get those on boundary disputes and fences and like oh, they tied up something yeah we'll insured over it.
Speaker 2:Right, we're insured over this, we're insured over this. I got something right now where this is interesting they were not married. Okay, she basically paid for the house, mm-hmm. They broke up, mm-hmm, she sold the house and he's suing her for ownership in the house because he lived there for a couple years. Homestead rights, yeah, but they were never married and all the money came from her, right, so anyone could sue anyone.
Speaker 1:Oh yeah, For sure.
Speaker 2:Now has anything happened about it? But you can sue anybody, right? So the title company was like like, well, there's a lawsuit pending on the ownership of this house, right, we have the sale going here and there. So the the title company is like, yeah, we will insure over this issue. Um, however, we're gonna want to hold x amount of proceeds from the sale and we'll release the proceeds upon that. Now, the downside to a title company far exceeds the proceeds that were kept.
Speaker 2:For sure, but they are evaluating the risk and still wanting to get the deal done for the seller and the buyer.
Speaker 1:And that's exactly what this is. It's risk analysis. To say, all right, you know, hey, there's a mortgage that is 20 years old on there but it's not been formally released. Okay, but several things have happened since that time. The likelihood of that still being in play is, you know, minimal. However, it's still there.
Speaker 1:Now, you know, some companies will you know? They're going to go right by the book and go, well, it's out there, I want it released and we're not going to close this deal until that mortgage of 20 years is released. I'm the guy that's going to look at that and go there's 10 years left, it's a $100,000 mortgage. My risk is really only X. It's a number right. So, okay, we hold back a couple bucks or we can actually formally release it as a title company because we feel confident enough and we've done our due diligence to say the legitimacy of that or that our mortgage is no longer, yeah, I'm not worried about so, being a smaller company, we can take some of those risks and assess that. But what happens is the underwriter now is going to be aware of that.
Speaker 2:To say, all right, drew took that and the underwriter now is going to be aware of that to say, all right, Drew took that risk and the underwriter just expects people to pay out the claim.
Speaker 1:Typically you'll hear First American Fidelity, chicago, title, stewart. These are the big guys in the area. We're underwritten by them, so we're an agent of them, so when they issue the policy they're the ultimate company that is the insurer of if there's any claims in loss. You know we carry, you know insurance for these reasons as well, that if we make a mistake through the process, you know is errors and omissions.
Speaker 2:Yeah, yeah, absolutely. I know that's good, I was going to get it.
Speaker 1:No, that's good, I was going to get over there. So we then look at that and say, all right, there's a potential loss here, our deductible on the insurance is $10,000. All right, well, just pay it out because it's under $10,000. We're not going to exercise that option.
Speaker 1:So there's a lot of factors that come into assessing of the risk and determining whether or not these titled properties are insurable and, realistically, the processes that it takes to get to that point. It's pretty standard and organized. I mean, every title insurance company does it the same way. Way it's the risk assessment is maybe done a little different. Or the willingness to, you know, think outside the box and be creative, as opposed to giving the stock answer of saying, well, you know, no, I need this to be cleared.
Speaker 1:But where the risk becomes, going back to your encroachments and things, you know, if there's a fence that's on the other guy's property by you know, a couple feet, it's a removable object. Like you know, there's not a lot of loss there, right? So that's why it's easy to say, well, we'll insure over that If your neighbor's going to make a big stink out of it. Now, if your house is four feet on that guy's property, okay, that's not an easily easily removed, item Right. So, um, or if it's encroaching on you know how many people do you know that they use the easement of the backyard to be oh, that's part of my yard, you know, they fence it all the way to wherever it is and then ComEd comes blowing through there and blasts out your fence and your pool and all these things and they go. Oh my God, you file a claim to the title insurance company. They're just saying, hey, guess what? No, I mean you. You encroached on the easement, the utility and combat needed to get in there. Guess what you lose?
Speaker 2:and that I mean that damage and all that stuff is is a, you know, a covered expense if it's talked about ahead of time so if they let's just say like, for instance, let's say they're, you get the survey and that you know that that person's encroaching on common space correct, they've fenced it and they, and the survey shows it, and it says there are there times where just the title company just forgets to look at the survey or doesn't see it and then just like signs the survey and say everything's good here. That would be that, that.
Speaker 2:And then all of a sudden comment comes through right that would be a something that the underwriter would be like okay, we need to cover this right.
Speaker 1:So what happens in an instance of that? If we don't raise it on title as an exception of what they're being covered for, then it's assumed that it's been covered. So in that instance, if they don't see that there's anything, assumed that it's been covered. So in that instance, if they don't see that there's anything noting that there's a fence that's encroaching on by so many feet and ComEd does this, they have a rightful claim to say, hey, they cost me X amount of dollars. Then the underwriter, the title insurance company, is ultimately going to make the decision on paying that claim out and more than likely, because it's not a big dollar amount, they would. But it goes as a blemish to us because we missed it.
Speaker 2:And that your relationship with the underwriter.
Speaker 1:I mean understand that misses in our business are not little. Yeah, they're big. If you miss a mortgage and say, well, that mortgage from a couple years ago you didn't raise it on title as an exception to have it dealt with by being released or whatnot, now you're on the hook to releasing that mortgage for the number that it is. If it's a hundred thousand dollar mortgage, you as the title company now are responsible for that.
Speaker 2:So would that be E&O on you, or is that because doesn't? Wouldn't the underwriter also need to check what you're doing? Do they have a? Is there a checks and balance within with them?
Speaker 1:Sure, so anytime a claim would be filed. The underwriter would then notify us and then they you know, they ask for our file and we kind of go through the file and they let us know as to what the claim is about. What the claim is about, and if they see that we didn't raise the mortgage at all, or if we raised it and then we waived it but we didn't have any supporting documentation as to why like there's a release or it's being paid through closing they're going to then come at us and say that's your responsibility, the underwriter's not going to pay for it. So now it is on RENO.
Speaker 1:Where it becomes that really nastiness is when the underwriter's out of pocket and they're gonna go ahead and pay this claim. That's where it really jeopardizes your relationship with them and they don't allow you a lot of those opportunities Meaning, you know, because it's costing them money. Insurance companies aren't in the business to pay, as we well know, but when a title insurance company pays, it's not usually on little dollars, it's on big dollars, because these things are big.
Speaker 2:Have you seen title insurance fees, like I know, home insurance and this and that is doubled Stuff. That's happened in California and it's happened in Florida has killed the insurance market. A lot of insurers have gone actually under. They're stopping insuring certain things. It's a whole to-do. Have you seen that happen in title? Title's not really affected by fires and stuff like that. Has it been consistent or are you seeing those price jumps just like everything else?
Speaker 1:Not to the degree and to the level and I'm glad you said you know brought the home piece in there. We definitely have to clarify that this is not homeowner's insurance and you know, if your house burns you're not going to call the public.
Speaker 2:Yeah, that's what I'm saying.
Speaker 1:So it's not affected by all this. No, I'm ensuring that jason owns that property because we've done the search to see that all the transfers and every conveyance has been done correctly. So the title insurance companies will, you know, make increases, maybe every 18 months or so, but they're they're so nominal and, as I said earlier, it's such a small percentage of what the you know. Know, if it's a $500,000 house, if you're paying $5,000 for the closing costs, and they're divided between buyer and seller and we can kind of, you know, touch on a few of those items. But the policy is the biggest expense, which is the actual insurance policy. The other stuff is kind of, you know, just the fees that go along with closing and documentation and things.
Speaker 1:Illinois is not a regulated state. Indiana is Illinois' insurance rates are a third of what. So a $200,000 policy in Illinois is, call it, around $1,900. That same one in Indiana is less than five. So it doubles. Yeah, I mean, it's less than $500. Oh, less than $500. Yeah, $500. Yeah, yeah, yeah.
Speaker 1:So I understand a lot of people go okay, well, Indiana's cheaper for everything taxes et cetera, it's true. But because it's a regulated state, whether you come to Inspired Title or you go to Chicago Title or you go to John Q Public Title. The rate is the rate is the rate. What's the difference is maybe their closing fee, the things that they can actually, you know, make a change on, but the title fees are regulated. Everything that pertains to a title fee underwritten or determined by you. They say this is what it is, the regulated state. Illinois is an attorney state and that's a whole topic for another day. We can go down that path. So, understanding that the rates that you're paying for title insurance, they're not as impacted by the economy like normal insurance rates are. We're affected by the economy as a whole in a different aspect.
Speaker 2:So in terms of the attorneys, we'll just touch on that. Sure, so attorneys have relationships, they're agents. So you're an agent to be whatever Fidelity or Chicago, whatever it is whatever people you're working with underwriting, then the attorneys are agents to the title company. That is correct. So part of that title fee will also go to the attorney, or is that Great question?
Speaker 1:Great question. So Illinois has been an attorney state since the beginning of time, been an attorney state since beginning of time. What this ultimately means is in illinois the seller's attorney dictates and picks the title company. Yes, so the seller's attorney says to their client I have a relationship with inspired title and that's where we're going to do this closing. Very, very infrequently is that argued to become different. So, because most people don't get it or care or understand, yeah, whatever, right. So what that means now is they have a relationship with us that says okay, we, inspired Title, are going to be the servicer now to you, mr Attorney, for this transaction. So they're going to take a percentage usually 85% of that policy fee. So the other 15 ultimately goes to the underwriter. So in a $2,000 example, $300 is going to the underwriter and $1,700 is going to the attorney on top of his attorney fees and anything else that he's doing. So they also get the where's your piece exactly.
Speaker 1:It's gotten now, so he just cut into what would be ours, right, yeah, so we get like the closing fee because we're the, you know, we're the servicing so the table fee so right.
Speaker 1:So whatever that closing fee is is ours, plus maybe a few of the other little wire fees and things like that, but we still have to pay those. So that's where the title companies have been really squeezed over the time. And there's been so many discussions about getting rid of the attorney-agent program because title companies aren't going to be able to survive, and we see that I mean, the smaller guys get kind of sucked up by some of the bigger guys over the period of time, but ultimately that's just not going to change. But now there's a shift. Now they're starting to have realtors be agents of title companies, so there can only be one agent on the transaction. Okay, so now what does this do? This creates the war between the attorney and the realtor.
Speaker 2:Why would the realtor want to be the agent to the title company? Just for the fee?
Speaker 1:Yeah, yeah, extra money.
Speaker 2:But that's not what they do. That seems like a disaster for the buyers Trust me as the title guy sitting here across from you going think about the liability now, the liability with the realtor. Open yourself up for a thousand bucks no way the.
Speaker 1:The realtor's liability to me is substantially higher than the attorney who's got the degree and has something. Not that realtors don't have anything to lose, but he's got his law license. That is you know, listen.
Speaker 2:You want to eliminate who can sue you amen amen if you live in illinois, it's like how can I like I want to take? If there's 10 people that consume, how do I get it to one?
Speaker 1:but. But reality is, is the greed factor of what's going on? That's crazy in there. So they're. They're three to five percent or six, whatever that, whatever they're charging, that's not enough. So okay, I just made $8,000 or $10,000 on my commission. Now I'm going to get another $3,000 for the title fees as well.
Speaker 2:So are they? We've got to sit on this for a little bit. So are these people? Are these realtors, then, doing like? Are they reviewing the CDs? Are they doing the tax prorations? What are they doing, are you asking me? I'm just wondering what they're doing to earn this fee.
Speaker 1:Okay, so the answer to this question is that we've been instructed by the underwriter, by our title, by the title companies, to say whether it be an attorney, whether it be a realtor. Whether it be an attorney, whether it be a realtor, whoever is collecting the fee and examining title is the responsible party. So, yes, they're supposed to be examining the title, they're supposed to be determining insurability. I'll tell you factually when this goes sideways. It's a lawsuit for everybody. So, even though we're not, we didn't do it but but can't you deny?
Speaker 2:can't you say, can't you deny like? Can't you just like like I stay away from rentals so somebody may ask me to do a rental, yeah right, but but all my lawsuits are rentals, correct? It's like every like 95 of all the lawsuits in real estate come from rentals. Because of how this?
Speaker 1:state is fucking done yeah.
Speaker 2:So can't you just say listen, I don't want to open myself up for this lawsuit. I you as a realtor cannot be an agent for this. So that's what I would say. I didn't say that Inspire Title is supporting this.
Speaker 1:We, I. For that reason, I have chosen right now to not go down that path. Two reasons One, I have good relationships with the attorney. The minute I start bringing in some of the realtors to do it, even though it's not maybe on their deals, it sends them a message that's saying I'm going to allow this and they don't support it. So I don't want to offend them.
Speaker 1:However, the market is just so tough, it's so competitive, it's out there, it's happening and come on, we know that there's no kickbacks is a big thing. You can't do these things. I mean, I'm hearing stories, Jason, that I mean thanks for sending my family to Hawaii. They're never going to get caught until there's a disgruntled person on the other end of that. That's a conversation I can come back and we can just literally dive into the intricacies of the agent program, because the liability is huge. But I think there's going to be a civil war between the attorneys and realtors as this thing continues to progress, because you can only have one. So now the attorney is going to go all right. Well, I'm not going to get the title fee anymore, so now he's going to charge $2,000 for his attorney fee. So who's actually getting impacted by this?
Speaker 2:The buyers and sellers, the buyers, yeah Right.
Speaker 1:So, as much as we're trying to help the consumer and that's always the talk and I know that'll segue nicely into the other stuff we want to talk about but that has always been the focus and concentration is the consumer. The minute you start to really put two of the professionals at odds, you're just opening up a whole myriad of things, man, I would never want to open myself up for that.
Speaker 2:There's enough lawsuits flying around as is. Yeah.
Speaker 1:You have to carry your own insurance because of the same reason, because now you're insuring that transaction. I mean you're signing the commitment, you're signing the title, we're there to do some of the work, but we're still now just the coordinator through this thing. We're still going to get the closing fee because we're still doing that part of it, but the actual agent and liability lies on whomever is the signer of that policy and the underwriters are okay with it because they're allowing it and they're aware of it because, again, we can't do it without them knowing.
Speaker 2:So the underwriter is safe, right, if this person looks at the title policy. This agent looks at the title policy and signs it and it says, hey, I agree with this title. Doesn't that kind of Where's? The claim going to start the underwriter. I know, but they're. Why would it go there when this person messed up?
Speaker 1:So the claim starts with the underwriter.
Speaker 2:Oh, they'll look at it and say, no, it's you.
Speaker 1:Yeah, and they'll come back and say, hey, we got a claim on this and here's what happened. Now you know they're going to.
Speaker 2:The underwriter has a deeper pocket, so they're going to get brought into it anyway. Yeah, so they're going to have to defend it. They're going to sue everybody, right. I'm going to sue one person. Take them all. Take them all, right. Whoever's got the deepest pockets is going to lose and. I work for Berkshire.
Speaker 1:Right, right, yeah, it's a reality. Yeah, so no, that's a. Some of the lawsuits are like well, sometimes I get like when someone says something to me into something.
Speaker 2:Yeah, like I got sued because the governor had the moratorium on evictions. Oh yeah, right on, and they're like. They're like, well, you brought us the renter and then, when the moratorium, when they said you don't have to pay your your rent, our person stopped paying and I'm like I go, I didn't make that law correct, so I still have to defend myself. That's five grand for my you know deductible. I went there, we had a great attorney, attorney and we're on video, and the judge just looks at us and says I don't know why you're here, you can leave. And I was like, all right, that was five grand, though.
Speaker 1:Right, yeah, no right.
Speaker 2:You can't get out from underneath that I can't get out and anyone could sue anyone for anything.
Speaker 1:Anytime, absolutely so. My whole existence is based on that exact statement. Statement is taking risks. I'm fine with taking some chances and evaluating the risk, but the bigger piece is I want to stay out of court. I'm not going to do a transaction, that eventually this thing has too many ideas, that this can go sideways and I'm going to just get crushed.
Speaker 1:So, I don't want to bring in agents to have them as uh, because they're, they're flying around anyway, they're moving so fast. They're going to say, hey, go ahead, and you guys do it, and you know, now the onus is going to be back to us like, no, they want, they want us to do all the work and then get paid for it, but then when the responsibility comes back, they're they're going to point a finger. So I'd rather deal with the attorney who's got the schooling and the financial backing of their law license and things, to be a little more cautious, and I think another thing that you hit on that I always know is that whenever I talk to my attorneys, I'll be like, why do you use this title company?
Speaker 2:or why do you use this title company? And you hit on it a lot. And the main thing is is the relationship that the title company has with the attorney. They can talk over these items and say, hey, listen, I know this is here. The attorney is like but let's talk about this, this, this, and get the title company to insure over it, because I have a relationship which then benefits the buyer because now he has insurance over something that he is now not liable for.
Speaker 2:And I think that's the one thing that it's not like a kickback, like you said, but everyone's trusting everyone because everyone has a relationship and knows, hey, I know that this attorney, who I've known for 20 years and do all his deals, I know he's never going to screw me over. So if he tells me that this is the story, that's the story and I'm going to insure over it Cause I know that and he wouldn't screw me over because I've done this for him, he knows I'll do it for him and I know what he does for me. Like we talked outside about the relationship aspect of things and big piece, yeah, things and big piece, yeah, it's a big piece. So like when people are working, when you're working with an attorney and you're like, okay, you know this guy's 900 and this guy's 500 and I say to my client, yeah, but this person has relationships I don't get into the title and this and that, but there's, you're paying for something other than just a paper.
Speaker 1:Paper for sure right, we can sit down and have a conversation truly to say all, all, right, here's where you're exposed, here's what I think you guys make the decision, so we can have an educated conversation. You know, kind of off the record, before any decisions are made, because we've developed a rapport and we both know that we're going to lead each other down that path of trouble, right so, and we can be creative and say look, let's, we can't do this, but how about these things? Some people say nope, we can't, it stops.
Speaker 2:And if there's a mistake on the title, sometimes the attorney and the title agent can say hey, listen, this is what it is, this is how it needs to be presented, this is your best case for your insurance claim, or yada, yada, yada. So there's a lot of behind the scenes stuff that people just really don't know about. But that insurance, when you're paying that insurance, just know that you never need insurance until you need insurance.
Speaker 1:Totally. That's literally. One of the best things that somebody said to me is you don't need a title company until you need a title company.
Speaker 2:Yeah, yeah, yeah, yeah. And then all of a sudden someone's knocking on your door and you're like, oh my god, and the horror stories are out there.
Speaker 1:Yeah they're, just they're especially if you're buying new oh, new construction opens up a lot of opportunities if you're buying stuff that is being like foreclosed on or short sales, even tax sales. The tax sales laws have changed pretty drastically. That indicates that just because there was a tax deed issued to an individual and then that individual goes ahead and sells it to a bona fide purchaser, if that tax sale was not done correctly and all the parties have been notified and everybody has been made aware that this thing went to tax sale, this thing can get unraveled. And now it's. You know, the guy who just ended up with the property may not really own it because, oh, you forgot to notify you know this person and they have a right still rightful ownership to that property. So now you got to unravel all of that.
Speaker 1:And you know, these are out there. These are not just you know, just a conversation for the podcast. This is a reality. That happens If you look at a balance sheet from the underwriters. They are paying out, certainly, they're making lots of money, but they do have loss.
Speaker 2:So when you're saying for someone that's looking for flips or foreclosures, what is the pitfall that you you that you find that title needs to like the underwriter sometimes needs to pay off yeah, in a lot of cases with the, the flips and foreclosures are, you know, looking back at that history to find out a like, what got it there first?
Speaker 1:you know, we we've since 2008 in the big you know six, seven, eight market, when you would say you're being foreclosed on, people would frown and look at you and go, oh, my god, what did you do? You know, now it's not as as a bad thing, it's like, oh, you lost your job, and you know they can, they can equate it to why right, whereas before it's like you were a deadbeat and you know how the hell did you not pay your mortgage, idiot?
Speaker 1:but at that during that time, or now looking at this, there's reasons why these properties went into this distressed state. So, researching that through the title exams and finding out all the paper trail of, okay, this has been done correctly. So to get it to a point to say now, in this current flip process, because if you think about that market, it's an investor market.
Speaker 2:Yeah.
Speaker 1:It's, you know, it's wholesalers, it's guys who are, you know they're trying to make that quick buck. Well, immediately you know we got to close this thing fast. Okay, we're not, because there's obviously a reason why you have to close this fast, because there's other things coming down the pipeline. So we're going to kind of slow play this and look through it. But some of those things are the ownership process, because you'll see a bunch of quick claim deeds all over the place. A quick claim deed for just quick reference is the least protected deed of transfer that's out there.
Speaker 1:I can quick claim deed you the Sears Tower right now and you can walk around and go. I have a deed that says I own the Sears Tower. Well, drew, never owned it. So I didn't give you anything. I legitimately gave you nothing. But the common person. They don't understand it to the degree that we do, because we're in the business. So if you are quit claimed the interest of that property, well, if that person who did it never really owned it right or the process behind their ownership wasn't done correctly, then you don't own anything. So we're unraveling that stuff and we've done many situations where now you've got to go to a quiet title suit, which is literally a eight, nine month process to go in front of the judge to prove the fact that your ownership and is correct based on these factors. So it takes time, costs a lot of money.
Speaker 2:And it's just which judge has the time to do that?
Speaker 1:I mean literally, you were presenting.
Speaker 1:Yes, and it's a, it's an expense, but if you want it done, right, that's what. That's what it's going to take to get it done. To say no, I, I believe I'm the rightful owner because of all of these items and we provide all those items. Um, but there's, you know, the liens that these villages and cities put on. Things are also seen in those distressed properties. You know, you've got demolition liens, you've got, uh, weed cutting liens and you've got weed cutting liens and all of these ridiculousness. Stairs are bad, windows are broke, because they can. I mean, I've seen $10,000, you know weed cutting liens and you're going. It's a 25 by 150 lot.
Speaker 2:So what happens in that situation? When the city has a lien? I mean, can you just insure over and say F you Like? How do you handle that?
Speaker 1:No. So what has to be dealt with in? In a lot of instances you negotiate, you can't. In a lot of instances the attorney is going to go ahead and try to negotiate that and say, hey, we're trying to get this thing back into a, a state of you know, get it back on the tax rolls, bring this, bring this thing back, so you know you'll get that revenue, get money. It could be paid through closing. We'll do a hold back and say, while the attorney's negotiating it, the title company is going to hold that money and hopefully it's less than the $10,000.
Speaker 2:And that's how the lawsuits are holding money, right, yeah.
Speaker 1:And that's been a very common practice.
Speaker 2:They're suing for a ridiculous amount of money. And enough lawyers told the title company, hey, at the most it's going to be this Right. And then they held three X of what intelligent people said could possibly happen.
Speaker 1:You don't know the time, you don't know the interest, because now, all of a sudden, you're ready to settle this.
Speaker 2:But the relationship with that attorney and that title company is literally how it got done.
Speaker 1:That's exactly why it happens. Yeah, if there was no relationship that deal's dead, that deal's dead Right and it's the creativity of the relationship coming together. And we do this all the time and I'm often the one suggesting those ideas because, again, I want to see the deal done, I want people to, you know, be the happy homeowner. There's ways to do it, there's workarounds that are within the law, that are going to protect all the parties involved, and it's just kind of thinking, you know, outside the box a little bit.
Speaker 2:Yeah.
Speaker 1:And you know so there is a level of creativity that comes in it as well. It's insane.
Speaker 2:What else do you want to tell us about title that I can't think of right now?
Speaker 1:Since I'm not involved in the weed.
Speaker 2:Something that would strike a chord.
Speaker 1:I think, knowing the risk factor that's out there as to you know, there's conversation or people might read a perfect example. You get these advertisements for protect your title, closing lock and all those things. It's virtually I'm not going to say it's totally it's virtually impossible for me to steal your title, for me to steal ownership in your title. So these companies that are out there with you know, protect your, you know.
Speaker 2:Safe life lock, safe lock.
Speaker 1:Yeah, closing lock and title lock, all these different. How could someone steal title, exactly right? Well, we know this because we're in the business, right?
Speaker 2:We understand it a little bit, but is there a possibility? I mean Virtually impossible.
Speaker 1:That's what I said. They would have to fraudulently have deeds and conveyances signed. That are you know.
Speaker 2:Like in the past. Right Because the time.
Speaker 1:Well, it could be current too.
Speaker 2:But you would follow, like before you transfer title, you'd be following, you'd be like well, hold up. What happened to Jason and Nikki? They own this house, right? I don't see a sale. Right, I don't see a sale. Right, I don't see a quick, I don't see anything. So how are you now the owner?
Speaker 1:So it's because they, you know, draft up a document that is from Jason and Nikki to you know, drew, and all of a sudden Drew's walking around going I own your house, and you knock on somebody's door that is, you know, easily influenced and say this was signed over to me. Like, why are you in my house? And now what does that start? It starts to, you know, the wheels moving and conversations happening and, but realistically, you're going to dig and take a deep dive into that to find out that where was the fraud. But that's going to cost time and money and and you know why are people doing it and why. You know it's, it's the, it's the crime-ridden people. Why do people intercept emails? And you, you know, fraud the world.
Speaker 1:Right, I'll tell you this to a point of what is an interesting story. We, as title companies, are the most preyed upon wire fraud. I would say wire fraud, yeah Right, because we're holding and transacting the most amount of money and you know you take, you know take $500,000 wire that's coming in. I can tell you a story of my past that we had a cashier's check back in 2006, before they changed the laws to anything over $50,000 had to be a wire right. In the end it's everything over $10,000. In the end, it's everything over $10,000. So the lady brought in a cashier's check for $380,000, and she was basically a straw buyer.
Speaker 1:When it all comes out in the end, realistically, that $380,000 cashier's check bounced. I found that out three days after because it takes the bank a couple days to process it. Right, this check looked remarkable. Deposited it into the bank, we paid off the lender, we paid off all these other liens. We I mean we exhausted the 380 000. My bank called me and said true, we got a problem, that cashier's check bounce. I'm like, shut up the cashierier checks, don't bounce, he goes. Well, this one did cut to. You know, oh, my god, what do we do? You know you call the lender that you just paid off and say, hey, hold on, we, oh no, we already processed that sorry, called you know all the other, nope, sorry. You know what?
Speaker 1:happens so we obviously file a claim with our you. You know we called the FBI to. You know they came out and you know looked at everything. They brought the lady in and they, you know held her for a bit.
Speaker 2:Oh, they found her.
Speaker 1:Yeah, well, we knew who I mean. She was there, she was at the closing right. Oh sure she didn't know it was a fraudulent. Oh, she didn't know. No, they gave it to her as the. You know the process of this. You know part of this whole scam.
Speaker 2:So they couldn't keep her hope. The bank gave it to her. How did she get the client? Oh, that she was buying for?
Speaker 1:yep, oh, that's right, she was a straw buyer, so she comes in and buys this thing and buying for someone else.
Speaker 1:Yes, as a straw buyer so, ultimately, the fbi is like you know, there's it's 380 000. It's like there's not a lot we can do. I said what's the dollar amount that you need to kind of engage to actually, you know, be proactive? And they said well, it's not so much, it's trying to find the crime around it. I said so if I shoot her, you're going to come after me, right? So there's 100% fact that you're going to do that. But she def us $380,000, and we're lost. I said, and that's okay, there's no action to this, had to get attorneys involved. We recouped about 250 of it, we lost 130 of it. But, more importantly, what we can't measure is the relationships that we lost with the banks because that was a client of ours and the other parties involved, and even the attorneys who are like you know, we, like we dropped the ball no no, it's.
Speaker 2:It's a fraud, like it happened you can't, you can't measure this, yeah, and you can't hold yourself accountable to a criminal no yeah, like the one case, that that one, the one, the one case with the person that was in the apartment and stopped paying. We found out she was right, fraudulent, this and that, and it's like everything.
Speaker 1:Like these people are good, yeah, oh no, no doubt, and I'll tell you more good the benefit, and this is this is one thing that I I say I've spoken on this in in many instances. So then they changed it to everything over 50 000. But the benefit of being a smaller family-owned title company is we, we, we know, our, our people, like we're, we're not doing a volume of business, that we're just going, you know, go, go, go yeah we were able to kind of we don't work with centrust or sun trust bank sounds like centrust.
Speaker 1:We don't work with sun trust bank. That's a out-of-state bank like we're able to see and know. We know our relationships, we know our clients Is.
Speaker 2:SunTrust still around. They were a big second home lender.
Speaker 1:No, but they were part of one of the. That was what a lot of the wire fraud guys were using was SunTrust.
Speaker 2:Yeah, they did all the seconds. Yeah, totally Between like 05 and 08.
Speaker 1:And that's what crushed the market yeah, they were the.
Speaker 1:They were the piggyback loan by closer, called me up and he's like drew, we got a, we got a problem, he goes, you know, sun trust, uh, like our wire instructions were intercepted and and changed in sun trust, because we use centrust, which is a bank up in northbrook, was changed and like that money is scheduled to go there. Thankfully we caught it beforehand because again, we recognize that we see it, we're like you know, we're able to kind of you know. So again back to the relationship piece. I can't, I cannot stress enough how important relationship building is in an industry where this is not only you know, your house, your home, your american dream, this, this is life like this is out there and this is happening.
Speaker 1:Wire fraud is a real thing and they are targeting title companies because it's the most money transacted over a wire than any other industry out right now. Yeah, and like you said, they're so good at it, they're good if these guys would put any effort into just I don't know doing something. They're so good at it. They're good If these guys would put any effort into just I don't know doing something positive.
Speaker 2:they're brilliant. Yeah, right, you get those phishing emails, right. Yeah, it's insane.
Speaker 1:You're like oh, Just one click and you see it yeah.
Speaker 1:So wire fraud is a real big thing in our industry and we are protected All the title companies are protected from that. But doesn't mean it's not going to happen. I mean there are. There are buyers and sellers sitting at closing tables going money's not coming to our bank. Where is it? Well, we wired it, okay, but it's not here. So now you know you just lost your life savings and you can't check. Lost your life savings. You also can't buy the house. Check. Oh man, I mean, so, mean, so it's horrible. Yeah, it's one of the most gut-wrenching feelings.
Speaker 2:Those apps kind of help now where you know you're putting that money into. And with Berkshire we can't send wire instructions right. So we send the email Yep, the email then gets sent to the home office. Yep, the home office. Home office then sends an encrypted email. Totally, it's literally the buyer and the back office, that's it.
Speaker 1:It never was like this. We can go back enough time where we can say that I've done so many handshake deals where you just go, you're going to do that, I'm going to do this cool, boom done, and we execute, we do it, it now, unless you're totally, you know, signed, sealed and delivered in writing. Everything is you know. It's just, it's just evolved to. This is what we have to do, to, you know, do business now. Yeah, just really protect yourself the computers.
Speaker 2:Yeah, I mean it's, it has. I still get the, I still get the. You, I still get the. You know the Somalia like, oh yes, and I'm like, and I always say, I always say if, if, if I'm getting this email once a week, it's working, yep, yep, deficient, yeah, because, because there's no reason anyone would send it if it didn't work. Right. But new one I get now is that we've tapped your computer and we have your history for the last four months. We're gonna broadcast it, delete. Yeah, all right, I'm like.
Speaker 1:But I usually email back and I'm like, have fun with it exactly, yeah, but what you know, you can flip that and go hey, if it's working, this is a marketing thing like this, this is the consistency that we have to send for a tour because it they're doing it too, so they're marketing in a negative way. If you can see that and it's capturing your attention, realize what that is and make it your own and create that same type of marketing strategy.
Speaker 2:Do you ever see the movie Cash If you Can? Oh yeah, when you said Cash If you Can, the first thing I thought about was that movie. I read the book first and I watched the movie Okay, okay. And I'm just like man.
Speaker 1:You've seen the Big Short, I'm sure.
Speaker 2:Yes.
Speaker 1:Yeah, I mean, that is literally what we both lived through in that process and we're just kind of sitting back going, okay, what's next? There's something up, it's going to happen. It's just finding out what is that next little program, scam, whatever you want to call it, that they're going to direct and go. But the reason and need for title insurance is it's invaluable for the cost. It really is based on some of these things we talked about today.
Speaker 2:All right, we've spent a lot of time on title. I don't know where we are on time. I just want to dip into for just five minutes really quick. We can have another one and dip into it more.
Speaker 2:But we had a good discussion about the NARS settlement, or actually proposed settlement, and people have talked about it ad nauseum. Yeah, and I think the only thing that we talked about is that, when it's all said and done, it's the consumer that's really going to get hurt on this, and we both think and I've communicated this to people that have always asked me we both think eventually we're just going to come back to where we are now. I mean, the buyer's agent was, was conceptualized, it was brought to protect the buyer Right Because it was the Wild West and it was like one of the main reasons I've never gotten to commercials like I don never gotten to commercials, like I don't want to swim with that Sure. I don't even want to be part of that Sure. I think we'll get to that point and I think it.
Speaker 2:I think it does revert back where people can be protected and I think what's going to come about of it is what we talked about. There's just going to be a lot more um, hey, this is what I do, this is what the lawyers that fought this, they just wanted the money, right. But I think the byproduct of that is you're going to have a lot more transparency, yeah, and I think we like, how mean you take, how we take for granted what we know about title Right, and I think I think we, as real estate agents, title you know, we look and say, well, how did that person not know this? And I think it's really tough sometimes to separate yourself and say, listen, when that person got that called up, hit that number on Zillow, and that Zillow person said, hey, you don't have to pay for us, right.
Speaker 2:I think then saying hey, listen, you do pay for us because here's how it's paid through the commission, you know there's no. The whole, the whole thing of price fixing is so insane to me because I'm not going to get into that. Like price fixing and monopoly, just everyone, everyone knows to have price fixing and have monopoly, you have to control the product Right. Agents do not control the product. We're hired. The person that controls the product is the owner of the home and they make the decisions on what they want to pay and what they want to do. So there's no price fixing and there's no monopoly because by the definition of that, you don't own the product. Mlb, when they get hit in basketball and football, when there's 25 or 30 owners that get together and say we own the product and Barry Bonds cannot go in the hall or this guy can't coach, that is a monopoly. There's not. Two million homeowners came together and saying let's keep commissions at this so we can keep our prices up. All of that is BS. What is true is the transparency.
Speaker 1:And I think to that point too.
Speaker 1:Really, this summarizes it all the way down to the consumer doesn't necessarily need somebody else to speak on their behalf.
Speaker 1:As much as we need to spend time educating them somebody else to speak on their behalf, as much as we need to spend time educating them and really doing a better job at helping them understand that transparency.
Speaker 1:They don't know what they don't know. So instead of just really making this big, radical change or so they think maybe putting some time and effort into educating and breaking it down, simplifying it a little bit so that there isn't this ignorance of misunderstanding, because with with that example, the product is the homeowner. Right, they own the house, but they don't know the rightful ways and the options they even have, because they've developed it through our conversation today is all relationship-based, right? They've known somebody or know somebody who knows somebody that brought them the realtor that starts the process into. Well, the realtor now has a relationship with an attorney. The attorney has a relationship with a title company, mortgage all the way down. So it's all's all relationship based, but the homeowner still has no idea what any of those other parties are doing, unless they've done it before or they're in the business now, yeah, I can't.
Speaker 2:I mean, I just want to just hit another point on that too, because you know, we think we, we are talking about this and then I, you know about it's good, about six, seven years ago I was talking to somebody and they hired a big broker who has a huge team and things didn't work out. Them, yeah, the person made its way to me through whatever and and I'm talking to them I said, well, didn't you know? When you were talking to this guy, I go did you ask him if he was gonna show your house, right? And the person looks at me and just says I just assumed it was them. Yeah, and I was like, and then I sat back and I'm like people just don't know, they don't Like I, we, sophia and I have this, this branded thing, and it's the three questions you have to ask that people don't ask and like that brought it to me and I was like who's showing my house?
Speaker 2:Do you know the area? And how are you going to market my space individually to my space and not just throw it on the MLS and have your company? So I didn't forget it and no one asks those things and to me I would be like. Those are the first three things I would ask, because we know Right, know right. So, like, when you look at this lawsuit, it's like you know, no one ever says hey when I pick up that lead, and that buyer picks up the lead and says how do you get paid?
Speaker 2:Right now, a lot of these people, as we talked about because I was on those zillow coaching, a lot of those people were coached hey, you just say you're not paying for my services. And that's where it all started. We talked about the lead generation software and what's happened over the 10 years. This is the product of that, of all these big teams saying hey, you're not paying for it anyways. And here's your uber driver enjoy, right, right. Well, I am.
Speaker 2:You know, I thought I was hiring you with this, this, this, with this pedigree you have. No, you're not, you're talking to me, but you're going to get a minion. And I think that's how we got down this path. Is people not being provided the service that they should get? And, if not being provided that service, tell them they're not going to get that service. That's it. Like I said to you, you don't have to take a Lamborghini to the grocery store. You can walk, you can drive, you can skateboard. How do you want to get to where you want to get, as long as you know how you're getting there and what you're paying for?
Speaker 1:That's so true.
Speaker 2:It's, it's, it's but they don't know. The call me up. If you get an answer you don't like, I'll be back in an hour.
Speaker 1:But you might be doing something that's different than a lot of the other population in your business Because, realistically, I think it's just that I know I need this. So therefore, I'm going to let the professionals do their thing and they become oblivious to it, and it's only a problem when it's a problem, yeah you only need title when you need title.
Speaker 2:Right, Exactly.
Speaker 1:So it's just it circles all the way back is to you know how much is too much, what you know, what do we, you know, arm them with to give them some some, you know, some understanding and better feeling of the process? If I'm spending three quarters of a million dollars on a house, damn it. I want to know all the players of the game and what each role is, and if it's not you and somebody else shows up, somebody better have an explanation as to why.
Speaker 2:But that's the thing. People just were like okay. Right, that's insane to me.
Speaker 1:I think that's it, it's expected, or they don't know. It should be different. We do, because we're so in it, we're so ingrained in it, we're too close to it, and that's, I think, what's hard to really establish.
Speaker 2:And it's really interesting. It's like all my clients that are over 40, that let's say are over 45, that were before the computers took over yeah, they all like they understand it.
Speaker 2:Oh, this is my agent, he does this, he does this, she does this, she does this. It's when we got to that computer age where no one wants to see anyone, no one wants to talk to anyone. That's where people are like oh, I don't have to tell this person, yep, that I'm actually being paid by the selling broker. I can just say, like, when everyone asks me how you get paid, I'm like well, the selling broker has a deal with the seller. The seller pays the brokerage house. The brokerage house then turns around and pays me. That's how I get paid. But people don't have that conversation because it didn't go along with lead gen, that's my two cents on it.
Speaker 1:I don't think it's wrong, and I think it'll be interesting to see how this shakes out, how long it's going to last. There's obviously many more conversations that are going to be had around this topic. I'm sure there's going to be different deals and arrangements and things all set up, but, as we talked earlier, maybe the best interest right now is to just represent sellers, just kind of let the dust settle, man, and gonna go see where this is at, but I think it's gonna impact the market. If, though, the market for sure with just the consumer, I mean, forget about us in the industry. I'm interested to see what it does to the consumer, because, here again, they don't know everything you just spoke about.
Speaker 2:So I think all those people that were not over disclosing those people are out and I think you're left with really good people.
Speaker 1:Yeah, I mean, I hope, that's my hope, yeah, that's our, that's the hope, for sure. But what you know, reality, no, we'll see. Stay tuned, it'll be interesting.
Speaker 2:Yeah Well, this is an awesome conversation. I really appreciate it. I appreciate it. Let Well, this is an awesome conversation. I really appreciate it. I appreciate it. Can you just do? You want to give?
Speaker 1:people. Your podcast Do you have?
Speaker 2:whatever you want to throw out. Now to the audience.
Speaker 1:Absolutely. Thank you again for taking some time to have me here today. Inspired Title we are. You can find us on the web at inspired-titlecom. You can certainly contact me Drew D-R-U at inspired-titlecom. You can certainly contact me Drew D R U at inspired hyphen titlecom. You can call us at 708-598-5084.
Speaker 2:We're on all the social channels LinkedIn and what's your, your socials? It's just inspired. Yeah, it's it is.
Speaker 1:It's inspired hyphen titlecom. We we're Instagram and LinkedIn, as well as Facebook and the podcast, and the podcast is called the Closing Table. We do it every other Thursday. It's about a 45-minute. We have guests on there that are industry professionals. We talk a little bit about title kind of giving you guys some common words and verbs and conversation around that and then we talk about our philanthropy piece, which we're very big into giving to the community as well. We're doing a lot of philanthropic stuff as well, so it's pretty fun.
Speaker 2:It is other than your down payment. It's the most expensive thing you're paying for, no doubt, so you should really, no doubt. I'm glad people, I think, now have an idea what it is. Yeah and um, and hopefully you never have to make a claim no, no doubt, no doubt, and, like I said, we can.
Speaker 1:You know, we can dive into some other stuff on another day with all the stuff, because there's there's many different topics in this circle that I think people need to know and hear more about.
Speaker 2:For sure awesome, all right, thanks much, guys, enjoy and we'll see you. We'll see you after this next pod. Thanks, thank you.