Escrows And Title Insurance By Donzel Stoney

The RatItE Blue Book of Co,Lifornia

62

The RedLtABLueBook of Cauforni,a

Escrowsin Connectionwith Title Insurance 89, DoNzELSToNEY Eltokftian ol Es,nd,tlingLo,rul,Tittres-Legal, Escrou q,nd Age W-Aathoization to S?U lhe Staftina point-Debus Eli ittit?(L Procpdure-For-ms-Withd rauhg-Sltstp , inerpenafue -Rel,ie"ring the Tran$Lctiolr ol BurtJens. f N the early history of land ritlesin this sjate title e\idenceconI sisted of an absiract of- title preparedby an Abstraclor and contatnrng a more or less brieJ sl,atempDlo[ the substanceoI all matte$_ obtainable fr.om the public records afiecting the propety involved. This sas submitted to an attorney to determine wh;the; the title was_good;ifso, the necessarydocuments\verepreparedand the transaclion closedin rhe atlomey s office. or at a bank, and in someinatancesat t}Ie recordels offfceThe evolution of the businessled to the consolidation of all these functions in one. The Title Insurance Company maale its owll abstract, report€d on the titlg and if merchantable, received the deeds and other documents and the money, attended to the recoidina- and t}Ie distribution of t}Ie money,and then insuredthe purchaser. I,EGAL ESCROW AND AGENCY

There are now in operation two distinct methods of handlins thesetransactionsby title companies,one through the medium of i legalescrow. Such escrowconsistsin an agr€emententeredinto and execuledby all the psflies direclly and indjrectlyintcresled,settins forth all the termsof saleand pur.hase,and providingfor all possibli contingenci€s that may adse between the date of the agreement and the recording of the doclrments. The other is the use of the Tifle Insurance Companyas an agencyof the respectiveparti€s, to hold their money or documentsuntil recording,and at thal time to make the deliveriesand disrribuiplhe money. Theseare senerallvdesisnatecL as escrov/s,bul are nol striclly legalescrows. Underthis lattdr system any of the parties can, upon surrender of his receiDt. receive the documcrlsor moneylherain mentionFdat any time 6eforethe transactionis finally closed. AU'IHORIZATION TO SEITI]THD STARTINQ POINT

Under the system developed through real estate boards, a real estate agent receives written authority from an owner to sell his

Tke Rdrl,tu BLueBook of Cdifot"tuilr

63

for a certain price, and the owner agreesto pay a cornmbrle is madewithin a definite time. Thp agent 6nds a pur_ lo in lq'ritinE asreps to pay the sum dcmanded. The agent The standard the owner t-o approve tJre sale in writing.

the real €statebotrds are becomingmore and more in general rhen signed and apprcved, constitute a legal binding-a€reeon both padies. Provisionis madefor delectsin lobiigati"on pio-raling taxes,agenl'scornmissionand other coniingenIor t}er party caincompeithe pelformanceof the agre-ement.if is m;rch;ntabto.and if it ia not, and cannot be madeso. the ld aot be efiected anyhow, but the buver srould have his iD t}Iat event, and the ag€nt would l€gally be entitled to his woulal not. therefore. seem to be a necessity for a new If there are mortgages or other liens, they can be paid out pulchasemoney. DELAYS DI,IMINATED

of i,imeand labor in connectionwith expenaliture rv unnecessarv to ;state transactionadds the already heavy burden it has to Any ulnecessary delay in closing a transaction makes real estate tmehtsless attractive. If an owner can complete a loan and get in one or two days, or a seller can leceive the purchase within a few days after a sale, conditions would be greatly sd.and the intrinsic value of real estate would be increased, Our iunction is merely i,o lake up a matjer after i,Ie buyer and lave elready entered into an agreement as to the pnce and of pa]'ment, analsee that the seller gets the money to which he ;ntitled and $al the buyer gets a mprchanlabletiile. in ordinary transaction it is not necessary that the sarne ltative of the Title Insurance Company should handle all parts the €sclow. One of our employeesmay take in the deed, another leaseof mortgage and still a third the money. This all works Jor improvemenfof the service to the public and saves a great deal time to the man on the outside of the counter. ' The trme required to tal<e in a deed or othe} document and give rcceipt for it is very tittle. Where the parties come in together it usual and natural t}.at a $eaI deal of conversation ensuesand a .gearnountof timq is consum€d. Ordinarily an employe will handle times the amount of business where the parties comeseparat€. or don i .ome at all (bul lei tlp agent do it), than he wouid if the rties came together. Many a deal has been ieopardized under the

tter circlmatances. PBOCEDllRE

lte systemin vogue around San FranciscoBay is the result of aim to conform to these businesspnnciples. When a sale has been throush a real eslatebroker, the lai,ter,or the buyer, or both, b tldTirle InsuranceCompanyfor a Policy of Title Insurance. die preparation of deedsand mortgages is the matter of a few minutes,and it is more satisfactory not to sttempt to prepare them until th€ r€port is issueal,and the r€cord na.mesof the owners vedfied as well

64

Tke Realta Bhte Baok ol Cq,l,ifornia

as the correct descdption of the property, and it is known that the transactioncan be consurnmated.The repod is jssuedwithin a very few, da,ysand delivelcd to l,heagent. Tl ihe rille is good the ageni s€nds_foJthe seller. preparesand has the deed exec-uted, whic-his depositedwjth lhe TiUe Insurance Company with instructions to collecta definitesum of money,and what to do with it. viz: Dav lor v/ar slamps on lhe deed,pay off incumbrances,pay lirr pro raia of taxes and for recording releases.if any, and pay the batanceto the seller, or in many caseslo the Realtor. If a bank modgage is in\aDlved the seller has the bank send us a statementnecesi{, for its release,which is paid when the transactioD is closed and the release tlere€fter procured and recorded. In casesof private loans the ;;lI;; has the moltgagee deposit with us a release with his statement as to the amount to be-paid therefor. The buyer then brings in the purchaso.mlney and expenses,the titl€ is run down an.-dthe pai:erg recoroeo. FOBMS

I

In nearly every insl.anceihe only evidenceol [he instructions is contalneorn.srmpte-receiptsgrven by the Title lnsurance Company. rnere are Duttwo ol thesereceiptsin use,onefor the monevreceived. and one for the documenis. There are slight variations i; the form and langlage.of these receipts as betweei the different companies, ouE-meunderiytng prrncipte is the same. With the aid of carbons, cluplrcate_recerpts are madeout, one deliveredto the clienl,,the other retainedby the companyand altachedto the applicalion and report.

Following are forms showing the instructions and directions in craesol-a simple salc and showinghow lhe blanks are fillad out:

Tke RedltlJ BIue Book of C'ttlifornia

65:

PAPERS Sdn Frsncisco,

1s

@to deliye. o. @.ord only o! recdptby us or t (-*,)

Dolla6 !s!

iB tc be di$bu6ed by us .s lolows i

Irll,ll

INAUTiANOE Ai{D OUARANTY COMPANT. By

MONEY No.

No_

san Imncs@,

19_

($_)

Dollars

Ded 5-Mr'se D{d ol Trusra l---R€1. t d Agm,. t -RecoD. 3ias, B.Dk Fee

or Stref Asssmetrt TA-

Total i TITT]D INAUR.{NOI!

By

AI{D CUAIiANTY

CDI|IPANf.

TkeRq,l,tuBtrueBookal Cavforniat

66

Sdr Frscioco.

No. 1682203 Reived Imm Jd6 G. Blak D€€d io H@ry L Reel

3/7,

which re @ to deliver on record olly on.€ceip[ by u ol127500 DolbE sq

Abo!€ 6um iB to be djsbNed

" SuDboldt

Bdk.

by u E follos:

a Der stafement

" Re@rdins R€l*e

of }{orfgase

IIII,E

IN€IIR,ANOE

AND OU'FANfY

@IITP4.I{Y.

By WEIE!'

O-ILLINE

FOR

O

MONEY Appli@tio! No. 1682203 3-8 Resiv€d frcD Heuy I. Reel

Rec'd De€d tr.10 Mt'ee S-

XBc'dAsrbt. .Conveydailg,

($2?617.10)

oi Trsl

PuchasEllo'tsaceDped

_l_llll'"

D@d ol Tr$t 3-

X€I. | --Rson

Saak Fe

TueB or Si. tusessetrt

TffTi]

1984

INATTNANOD ANI'

Bv

GUAIIANTY

COIIPANT.

The Rea],tuBkte Book of CdiforlLia

67

WITHDBAWINC

heretoforestated, either of the parties can surrenalerhis and receive back his papers and money. It is the p&ctice of Lpanyin caseauch request is made to first rotifv the other inparty. as lhereby trouble to both pa ies is often obviated. one of the part-iesFit}draw his money or papers.no legal are aff€cted, as there is already a binding agreement in efict settles those rights. We have no recollection in our twentvyea$ of expedence of enyone €ver attempting to make suih iaral, excepting where the other palty was believed to be in Dudng that time we have had but two instances where we written.notice from one of the parties not to retlrm papers 'case,depositedby the other party, and a lawsuit result6d.' In as'wehad the moneyand all the papers,we coulalsufer no 9a.we ilr €ach case merely deposited them in court and vrere SYSTEM INEXPENSIVE

O.xrso{alled-es.row system is so simple and lhe expenseof lling is so relarively small thal our schedulefpe lor a policy of iruuranceincludescompensationfor the esoow servic;s. The

California Schedrrle$as loundedupon thc chargesmade b) for the examinationof abstr.a.rs,and jncludesill tle serv'of making up lhe abslra.t, examinationthereof and the chpckins recordingof all papem (nor the re.ordeCs fees, and the dislfibu--

money, For example, the actual expeDseto the company ! of _t-he handling the escrows conuected with the title insurance for thi of February, 1924, amounted to less than $2.00 per order

Il is o[ greatvaluein rhehandl;ngof real estatetransactions for reeltorand the bankslo be able to tell their clients lrom a Drinted supplied them by the Title Insurence Companies tha exact they will be. compelle4 tg._pay, without knowing an!,thing ut tle title or llouble connecladtheicwith. If the buv; is ;a;;; ,000for a pieceof real estatehe knows that his exDmsei; Si00: mor€ nor less. and the recordefs fee for recording. If he is ng money in connection with the deal, tfre onl| additional is for the war stamps on his note and the recoidinq of the RELIDVINC TIIE TRANSACTION OF BURDENS

Under t,lrelaw of this state if 1wo parties enter into an agreement purchaseand sale of a piece of real propelty at a certain-price, in absenceoI agreementto the contrary, th; seller can te;der hjs I and is entitled to his money on the day set for closing the transcn. He is not obliged to supply any evidenceof title, The buyer is oneg€tling the proteationand nalurally he shouldpay for the Ti e lmD_ce Policy, just as he pay6 for his fire insurancepolicy. For publicconvenience scheduleof rates is distributed l,o all fte perinlerestedin lhe real eslarebusiness. The ral,esin the Scheiule senta fair profit on the businessdonein wholesalelots. We can. the books of the company, estimate the actual average expens;

68

The RealtaBlue Book ol Ca,Alerni.a

per order, and the average char:geper order, and owing to the inexpensive methoclof handling escrowswe have consolidatedthis expense with Jhe e-xpenseof title insurance, and tle r$ult is reflected in the scheduleof rates. Ou! experiencehas taught us that everyoneis better ofi where the principals do not meet together to close a deal. When the purchase price has be€n agreed upon and agreement sigred at the agent s office there is seldom necessity for such meeting. The computation of proratings is a mathematical calculation, and where eachparty can call at his earliest convenienceand leave his documents or money without waiting for the other, more expeditious results are obtained. Many parties, having confidencein their realtor, leave their moDeyor papers \Fith him, and do not cometo the Title Company's office at all. We feel that business policy dictat€s that we should not seddle real estatetransactionswith an additional burden that would represent several hundred thousand dollars per year around the San Francisco Bay, and causedelay in the closing of land deals in order to possiblysavethe public or ourselvesa few slight ineonveniences and a few nominal losses. Dd. Note-ahe IoresoinS 4rticl$, treatiDg of the general sublect of escrow6, di6olose wlde dtEorence of oDinton and practtce as letween the tFo most ilensely 'polulrted areas oI Californla. Thts seems vorthy of edttortal codDert Dd thtg occasion ts taken to I)olni out tle state-vlde chareter ol the Realty BIU€ Book s6 ereoDlined in lbls In6tance. We itestre to sive tte reader the best obtahable lresentations, anrl vhen dilergent views obtaln uDon vhich are Dredicateil metbods of procedure, the reader shoulil accept that theory whtch seehs host 6oulit, siytag due eonslderatlon to the lact lhat locetlon wtll hrve much to ito *ith Dmcucal a!!llcouon. Mr- FarDer heats his dubleet broadly ard codprehenslvely, assuming thot all posible pmtectton Ghould be anorded by the !roce66 ol esdow, resariues6 ol the extstende or absence ot bindins contract6 as a condition precedent, dilfer€nttated anil decenta-llzeil from the title searchins functions of ths tltle comlantesMr. StoDey, o! the contnry, asstrDes the existen@ of bjniling conhacts a a natulal couEe ir Dort iutances, anit resards tle tttle @mpanies' functlon !.om thrt !ol!t as a cenhaltzed servlce to co4preft the tmns4tio!. As .lfge volme of Euccosslully coEilucteit brslneAs ls concluded ulaler llans pEG 3ponsoreil by fhe6e eDtnent autho ties, 1s it lot reasonatJle that a unlfom ttc€ may eYentually como .bout? Brok46 Eay nld in the6e dllcls , splerdrd rrgument h fryor ol the use ot standa.d forrd8, alil re4ltze tbe lmpo uce o! r dea! Frclerty made, and redu.ed to l€8al .ontnet, .lld€nctrg a Eeebtrg ol tbe minils of tle conlncltng latieB,