Agents should prepare themselves to handle these routine scenarios.
Real estate closings require a delicate balancing act. Not only is speed of the essence, but closings also require accuracy and professionalism. Often there is no time to correct errors, and customers need to feel confident that their transactions are being carried out correctly.
Many issues can arise during the closing process. The following is the first of a three-part series that will explore some of the most common scenarios agents need to keep in mind.
Fiduciary Responsibilities
As escrow officers, title agents have fiduciary responsibilities and must act as neutral third parties, impartial arbitrators of contractual arrangements with conditions agreed to by both the buyer and seller. Escrow officers do not make decisions regarding a transaction and do not advocate for any one party. Instead, they ensure that written instructions are carried out properly.
Authority Issues
Within this purview, there are a variety of common issues that may arise during closings. Issues can and do vary state-to-state. In Texas, for example, one such issue is determining who has authority to act for an entity, with a pertinent example being an LLC. When dealing with this type of entity, agents will need to review operating agreements. In the absence of an agreement, a certificate of authority can be examined. These certificates are helpful when dealing with sole manager and member LLCs.
For corporations, agents should examine bylaws and subsequent amendments, and shareholders may be required to sign an affidavit. Nonprofits and churches conduct business differently. But in each context, the agent only needs to be concerned about authority when money is being borrowed or the entity is the seller.
Another authority question is power of attorney (POA). This is also mandated by state law. In Texas, agents must accept, reject or request a certification when presented with one. In reviewing a statutory durable power of attorney (DPOA), agents need to analyze if the powers have been limited, if it is durable and review the revocation clause. It is advisable to rely on a DPOA until there is a notice of revocation. As a best practice, certification for statutory DPOA should be required. The agent should also call the principal to verify if they are alive, that the POA has not been revoked and that a POA is being used to sell property. With trusts, it is prudent to maintain a full copy, and in its absence, obtain the certification of the trustee.
Information Security
Given the sheer volume of paperwork in real estate closings, data security is important. When possible, personal customer information should be heavily redacted. And all company policies should also be adhered to when processing this information.
Spouses and Marital Status
First, each state has its own spousal and/or marital law that dictates how agents must address issues. Be sure to familiarize yourself with the laws of your state.
In Texas – again, as one example – agents must be prepared to address transactions where only one spouse is listed in the title. Anyone with an interest in the property should be checked for involuntary liens and sign the deed. The marital status of the parties should be questioned if only one party is given as the seller, buyer or borrower.
With a married couple, both spouses must sign a deed of trust. If an agent is insuring a purchase money lien and one spouse is taking the title, an agent may accept a deed of trust signed only by the purchaser. The warranty deed is also required to include the vendor’s lien language. If the property belongs to one spouse while the other spouse lives in another property, one signature can be accepted and a Homestead Designation and Disclaimer will be executed.
In a sales transaction, agents should investigate the possible homestead character of the property, inquiring if there is an exemption and if the property address is the mailing address of the individual(s). The residency of the individuals should also be established. Sometimes a deed will be accepted signed solely by the spouse in the title, especially if permission is received by underwriting beforehand. It is necessary, though, to discern that the property to be insured is the separate property of one spouse and not the other spouse’s home, and a Homestead Designation and Disclaimer will need to be executed.
When dealing with spouses, it is always important to compare the sellers and buyers on the contract with the grantors and grantees on the deed – and to resolve differences. Some examples are:
The contract shows the buyer to be Joe Smith, but the grantees on the deed are Joe and Mary Smith.
The title is vested in and signed by Fred Farmer. The deed of trust is signed by “Fred Farmer and Susan Farmer pro forma to perfect the lien as to her homestead interest only.”
The title is vested in Harry Jones, but the note and deed of trust are signed by “Harry Jones and Cindy Jones.”
In the first example, the contract should be amended to add Mary Smith if she plans to take title. The case of Fred and Susan Farmer would be acceptable if there is evidence on file that the property is Fred’s separate property – either acquired before his marriage to Susan or inherited. Lastly, there is not much to worry about regarding Harry and Cindy, as this is a preferable way to handle the situation.
Conclusion
Numerous issues can pop up during closings, from entity authority to navigating transactions involving spouses. Agents can do a lot to circumvent any thorny problems. It starts with understanding the most common scenarios that arise during the closing process and then being prepared to take prompt and deliberate action. The next part of this series will continue to explore various challenges agents may face during closings, covering items such as funding and family transactions.
Alliant National Academy takes company’s educational offerings to the next level
Longmont, Colo. – (February 16, 2021) – Alliant National Title Insurance Company, a unique title insurance underwriter that partners with independent agents to improve their competitive position, announces the launch of Alliant National Academy, an online portal that pairs the company’s in-depth content and expert instructors with industry-leading education technology to provide an all-new learning experience.
Alliant National Academy is a convenient way for Alliant National agents to access the company’s catalog of live-st ream and on-demand webinars, many of which are approved for continuing education (CE) credit. CE courses are currently available to Alliant National agents in Texas, Florida and Alabama, with additional states coming soon.
Access to the system is also free of charge for Alliant National agents.
“Every agent’s education needs are different, and Alliant National has built a reputation for delivering customized solutions to meet those needs,” says Alliant National President and CEO David Sinclair. “Alliant National Academy is a new standard for online learning in our industry, and we’re excited to make this powerful tool available to our agents and their teams.”
Alliant National Academy enhances the educational experience before, during and after the course. Specific features of Alliant National Academy include:
One-click course registration after completing initial registration.
Improved course player that allows for pausing and completion of on-demand courses at the agent’s convenience.
Streamlined, all-in-one course completion system that easily provides the necessary verifications to obtain credit. No need to download, unlock and email required forms.
The ability to track course progress from a customizable personal dashboard.
Downloadable certificates of course completion that can be viewed and printed at any time.
Alliant National distinguishes itself from competitors by combining strong underwriting capability with independent agents’ in-depth knowledge of local markets. The result is a nationwide network with deep roots in local communities, and a wealth of expertise that is flexible, nuanced, and continuously growing.
Cathie Beck Capital City Public Relation e : cathie@capitalcitypr.com p : 303-241-0805
ABOUT ALLIANT NATIONAL TITLE INSURANCE COMPANY
The Independent Underwriter for The Independent AgentSM – Alliant National believes in empowering people to thrive.
The company protects the dreams of property owners with secure title insurance and partners with 500+ trusted independent title agents as a licensed underwriter in 27 states and the District of Columbia, with annual revenues exceeding $126 million.
The adoption and implementation of remote online notarization (RON) received a tremendous boost during the COVID-19 pandemic. Buyers, sellers and title agents are looking to close transactions in the safest way possible. According to the American Land Title Association (ALTA), “Forty-eight states and the District of Columbia have either passed a RON law or issued an executive order pertaining to remotely notarizing documents. Some have done both.”
In December of 2020, ALTA reported that RON use had increased 547 percent during the year compared to 2019. If you are a “Star Trek” fan, the lightning-fast adoption of RON – as well as alternative remote closing methods such as Remote Ink-Signed Notarization (RIN) – has felt like the title industry has gone from cruising to warp speed in a nanosecond. It can even feel tempting to utter one of the show’s classic lines like “Beam me up, Scotty!” when thinking about such transformative change.
But let us back up a bit. As the automobile was invented and became a commonplace form of transportation, society built an accompanying infrastructure – including roads, highways, bridges and tunnels. The same is needed for RON. However, it takes time to develop secure and accessible technology that everyone can use. It requires effort to garner the acceptance of the county recorders who must be ready, willing and able to record native electronic instruments. Creating uniform laws to ensure interstate legal recognition and consumer confidence is also no easy matter.
Properly building out RON infrastructure necessitates the continuous collaboration of numerous parties, including individuals, industries and organizations. For example, MISMO, the Mortgage Industry Standards Maintenance Organization, has been working on standards concerning credential analysis, borrower identification, audio-visual requirements (including the recording of the electronic notarization process) and audit trails. PRIA, the Property Record Industry Association, has been developing national standards and best practices for the land records industry. ALTA and the Mortgage Bankers Association (MBA) have also joined forces to establish model RON legislation. Finally, there are numerous other stakeholders not identified here who have, and are, tirelessly working to enable the requisite RON infrastructure.
Currently, the federal Senate bill (SB) 3533, the Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (otherwise known as the SECURE Notarization Act), is pending. If passed in 2021, the SECURE Notarization Act will permit RON across the nation and provide for minimum standards and interstate recognition. To track the progress of the SECURE Notarization Act, click on the link provided for SB 3533.
During this time of rapid transition, it is important to keep abreast of the latest RON developments, to “boldly go” forth and not end up like another classic science fiction show: “Lost in Space.”
Are you unethical? Have you witnessed unethical behavior in a real estate transaction – either from the lender, realtor, seller or buyer? Almost nobody answers “yes” to the former, while nearly everyone agrees to the later. In reality, everyone in the title business can be more ethical. However, first you must define ethics in general, understand different types of ethics and learn what tools are available to help you work through ethical problems that arise.
Ethics describe the rules, laws and principles that govern human behavior. There are three different types of ethics: personal, business and legal. These are hierarchal. Legal ethics, for instance, are lowest. The law is universal and immutable; you have no choice but to obey it. Business ethics takes it higher. You have some agency over adhering to a business’s policies or codes of conduct. Personal ethics is the highest form, as they are based solely on the rules that individuals create for themselves.
Title agents must think through these ethical systems and navigate potential conflicts. Perhaps there is a discrepancy on the price of a property where it is listed for a higher price than it was in a recent appraisal. As an agent, would you inform the buyer of this additional information? Many professionals would say that, from a business ethics perspective, a title officer should say nothing. The title officer is a neutral third party, and a price discrepancy should be resolved between the buyer and seller. The listing price differing from the appraisal price is also something that occasionally happens. But what if the buyer is a good friend?
Or consider a theoretical agent who is two closings short of winning an award. Their manager says they will give them two phantom closings and then later delete them from the system. How would you respond? Would you report the maleficence? Take the closings and benefit professionally? Refuse the help on principle?
Both situations require an agent to navigate and balance the different ethical systems that define their life. There are strategies to help with this. In the former, you could receive counsel from an objective third party. An impartial person can help separate personal allegiance to a friend from a professional code of conduct. In the later, the agent can employ critical thinking to determine that, while it is likely unnecessary to report their manager, particularly if this is a rare ethical lapse on their part, they cannot, in good conscience, accept the phantom closings.
Agents can also filter ethical problems through different “tests” to help them decide on a correct course of action. In keeping with the hierarchy of ethics, the most critical test to apply is the “harm test.” Ask yourself if your actions will harm anyone else and violate your personal ethics. The harm test is always applicable and should follow other tests. For example, an agent should put relevant ethical dilemmas through the “law test” followed by a “business ethics test.”
The harm test is the final step. Just because something is technically legal, and just because it does not violate any business ethics, does not mean an agent should do it. If it fails the harm test and violates your personal ethics, you must change course. Agents can gain even greater ethical clarity by using the “newspaper test,” which asks whether you would want to read about yourself taking a specific action in a newspaper, and the “child test,” which ponders whether you would advise your child to take the action you’re considering.
Complex ethical problems occur in real estate transactions. In these moments, it’s important to remember that short-term benefits rarely outweigh long-term costs. It takes a substantial amount of time to establish a trustworthy or honorable reputation, but you can quickly lose it through one unethical decision. As somebody in the title business, you must always be seen as an ethical paragon, as your reputation is critical to being able to perform your job effectively. To meet this high bar, you can apply appropriate scrutiny to ethical questions, utilize critical thinking, and rely on impartial support systems for guidance. By doing so, you will experience long-term professional success and, perhaps most importantly, a blissfully clean conscience.
Best practices to help keep your remote environment secure
While working remotely at home provides flexibility and social distancing in this time of COVID-19, it may also open the door to unexpected and unwanted security issues and breaches. By taking a few simple and important steps, you can securely work and have peace of mind that your business is continuing to operate without introducing added risks.
Risks that present themselves range from nuisances and disruption, such as with “Zoombombing” [a disruptive intrusion by hackers into a video conference call], to device and network compromise with viruses, spyware or ransomware.
Here are some best practices to keep your remote environment secured:
Teleconferences
When using Zoom or other remote meeting sites that provide audio and video connectivity, be sure that the security settings are activated to only allow screen sharing by the host, or designated others who have a need. Also be sure to use access passwords or codes available only to the invited participants that are provided in the invite prior to the meeting.
Equipment, Software and Hardware
Often the organization does not provide all equipment or supplies necessary to ensure remote access. The proper protection of information to which the user has access involves connection to the Internet, local office security, and the protection of physical information assets. Below are some of the additional items that may be required:
Broadband connection;
Paper shredder;
Secured office space or work area; and
A lockable file cabinet to secure documents when unattended.
Remote users using personal equipment are often responsible for:
access to the internet;
the purchase, setup, maintenance or support of any equipment or devices not owned by the company; and
ensuring current and active antivirus, firewall and malware protection is installed, functioning and updated regularly.
Security and Privacy
Organizations often have policies regarding user logical security responsibilities. Here are a few such responsibilities, which should translate to the work-from-home environment:
Log off and disconnect from the company’s network when access is no longer required, at least daily;
Enable automatic screen lock (if available) after a reasonable period of inactivity;
Do not provide (share) their user name or password, configure their remote access device to “remember me,” or automatically enter their username and password;
Enable a firewall at all times;
Ensure virus protection is active and current; and
Perform regular backups of critical information using a secure storage solution.
Additionally, companies often implement additional logical security procedures for remote users. These may include:
Disconnect remote user sessions after 60 minutes of inactivity;
Access to company owned technology applications to use commercially available encryption technologies, such as multi-factor authentication, or use of a Virtual Private Network (VPN);
Update the virus pattern on a regular and frequent basis;
Provide a reasonable backup solution; and
Perform regular audits of the company supplied equipment to ensure license and configuration compliance.
Company policies regarding physical security should also carry over into the remote-office. Here are some steps to consider:
Maintain reasonable physical security of your remote office environment. This includes access to both company and personal technology equipment and documents;
Limit the use or printing of paper documents that contain sensitive, confidential or non-public private information (NPI), and restrict requests for and handling of NPI to only what is essential to perform your job; and
Ensure documents containing sensitive, confidential or NPI are shredded and rendered unreadable and unable to be reconstructed.
It is entirely possible to work remotely. A home office can be made secure by adhering to the steps above. Bear in mind that working at a hotel or a cabin or anywhere internet service allows for access presents security issues that may compromise privacy.
For further information, reach out to Tom Weyant, Director, Risk Management & Continuous Improvement, CQA, CFE, directly at tweyant@alliantnational.com or visit www.alliantnational.com/newsroom for additional information and articles related to cyber security and internet privacy.