Beyond The Sale: Title and Escrow

Michelle Linton, President of Northern Arizona Association of Realtors, discusses fraudulent transactions and escrow challenges with Merilee Arend, a title escrow officer. Fraud often occurs in outlying areas with elderly sellers, with red flags including quick closings and large upfront payments. To prevent fraud, agents should verify identities and use anti-fraud letters. Compensation confusion arises from evolving payment structures, emphasizing the need for clear instructions and documentation. Best practices include detailed emails with all transaction information and complete documentation. Incomplete files can lead to payment issues and last-minute surprises. Clear communication and thorough documentation are crucial for smooth transactions.

Transcript

Michelle Linton: 0:00

Hello everyone and welcome. I'm Michelle Linton, your president of Northern Arizona association of realtors. Today I'm excited to sit down with Merilee Aaron. She is a title escrow officer with Premier Title Agency. Merilee is on the front lines of our industry, working every day to help ensure smooth and successful closings. Today, we'll be diving into two timely topics that impact all of us as real estate professionals. The first is the rise of fraudulent transactions and what people are attempting to get away with. The second are escrow challenges surrounding compensation, specifically the confusion that continues to linger and how realtors can help by providing clear and accurate instructions. Merilee, thank you so much for joining us today, for having me All right, let's get this podcast started. Merilee, what kinds of fraudulent activity are you seeing most often in northern Arizona real estate right now?

Merilee Arend: 1:08

So it tends to still be our outlying areas, Williams parks, all of those areas that are vacant land that people haven't been to in a really long time. You've got your sellers who maybe you've owned the property for 3040, years, and they don't really do anything with it anymore. The people that are trying to get the fraud happening are the ones that are coming in, and they see that maybe that person's elderly now, they come in and pretend to be a seller, and then next thing you know, you have a contract coming in. One of the good things is, is that all of us as Title and Escrow have things in place that we go and check to see if it is really our legitimate seller. What kind of red flags do agents need to be on the lookout for? So they definitely need to be looking for people that want to close quickly, people that want to put down all of their money right now. Instead of just sending in their earnest money, they're like, Oh, let me just send in my full sale price. It doesn't matter if it's vacant land or if it's a $2 billion property, if you have somebody who's pushing on you, or you have somebody who's going to come in and spend the money for your buyer. So it's not the buyer itself putting the money down. It's somebody else that should raise some red flags and make you reach out to your escrow officer and say, Hey, what do you think? What?

Michelle Linton: 2:26

Well, who are the other somebodies? Are there people pretending to be lawyers or guardians or

Merilee Arend: 2:32

that's a great question. So we've got some people that are coming in. They're like the benefactor for the buyer, or maybe they're the buyer's boss, and they're buying a piece of property that they're going to use for a business, but whenever somebody's pushing on you really hard, and they're because I don't want your money before we're ready to close, because I don't have your final figures. If you've got any customer who's like, Oh no, I want to send it all now. I'm going to be traveling, or I'm going to be out of the country, or if it's an international wire, those are all things that I'm going to be on the phone with you. Your escrow officer is going to be on the phone with you, and they're going to be like, Wait, let's talk about this a

Michelle Linton: 3:12

little bit. Oh, good to know. So if anybody wants to give you your money right now, red flag. So what can Realtors do on the front lines to help protect

Merilee Arend: 3:23

Well, all of you have your things in place, like your forewarn. You have all the things that you can investigate to see if your buyer your seller are who they really say they are. So we're going to send out an anti fraud letter. We're going to send that to the address of record on the county tax parcel records. That way, if it's the seller who maybe has owned the property forever in a day, just only pays their taxes once a year, all of a sudden, they're getting a letter from an escrow officer that they've never heard of before, saying, Are you selling your property? And we ask them to call us, we ask them to verify, we ask them to give us a special code that's on that letter. Most all of your title and escrow companies are going to do that for you. But as a realtor, just if that gut feeling is there and you feel like I'm not sure if this person's even on the up and up, call us before you even write a contract, call us and we'll be happy to run all of the extra things just to help you so that we're maybe going in the right direction.

Michelle Linton: 4:19

That is a great new extra layer of protection that the title companies are doing. Next up, let's move into compensation with this big, bad lawsuit with NAR. Seems like there's still confusion on how agents should submit how they get paid to the title company.

Merilee Arend: 4:42

True. So traditionally, we've always had buyer's agent, seller's agent getting X number. Well now sometimes we have the buyer's agent may the buyer may be paying x, or the seller may be paying x and. It normally, in the past, the buyer has not ever paid anything. So if the when you send in those instructions to us, traditionally, we wouldn't be able to tell that. So when you open escrow, one of the things you could tell us is, hey, hey, as the buyer's agent, the buyers paying x, so that we know when that instruction comes in, if it doesn't look right, we know where to go. We know we don't just assume that it's all being paid by the seller.

Michelle Linton: 5:30

Got it, got that agent, let them know how you're going to get paid. Buyer broker agreements. How important is that that Realtors provide you with complete documentation, including buyer broker agreements when compensation is being split or shared. You guys don't really see the buyer broker agreements.

Merilee Arend: 5:50

Kratz, no, we typically don't see that agreement, and a lot of the brokers don't want to share that information, and that's fine. We don't have to have the buyer broker agreement, but we do have to have something in writing from the agent saying, buyers paying X or sellers paying all compensation, because we don't know, without some sort of instruction somewhere in that transaction, we won't know that, Oh gosh, the buyer's actually covering all the compensation, or the buyer's not covering any compensation. So they want to send to the buyer broker. We would love to have it, if they prefer not to, somewhere in that instruction that we send them, we

Michelle Linton: 6:33

would really like to see that. Let's talk about best practices. What's one or two best practices agents can do when they open escrow that we can maybe adopt to make sure compensation instructions are clear, accurate and enforceable at closing.

Merilee Arend: 6:50

So the best thing you can do always is send an email with your contract and say, here's all the things. We have, some seller concessions. We have the buyers paying part of the compensation. Buyer and Seller both live out of state. One lives out of the country. Once any information you can give us, you can never give us too much information and all the documents that are going to go with that transaction, send them all at the same time, we we will take everything we everything you give us makes our job all the easier, and we can do a better

Michelle Linton: 7:27

job for you. Great. And do you like one big PDF file, or do you like the different addendums and separate well, you think that's a personal preference? I mean, okay, just, just kick just Yeah.

Merilee Arend: 7:38

I mean, if you're if it's easier to send it as one, I'm going to take it if you would prefer to break them all out. That makes it all the easier for us to find them on the backside. But as I've always said, Never too much information. You can always tell us everything you think we need to know, even if it's something that you think is in significant down the road, it might matter.

Michelle Linton: 8:00

All right, merrily, let's talk about the real world impact. Now. Can you give any examples of when your file is incomplete because you're missing documents? Any fun stories you can share?

Merilee Arend: 8:13

Well, the biggest fun story that is probably you as agents, when we send you that estimated settlement statements. Take a look at and you forgot to tell us that the seller's paying x, but the buyer's also paying X, and all of a sudden you're not getting paid. What you thought that's nothing makes my phone ring faster than when that's not correct. So but some funny stories are too. Is that you get down to everybody signing, and the last thing you want is your buyer or seller to come in for signing, and they're like, What is this? That's not what I agreed to. That's not so, yes, that's why it's so important that you share all the information. All of our agents out there share all the information they can.

Michelle Linton: 8:59

That one would make me sweat if that was me. All right, so looking ahead as compensation structures evolve, what advice would you give realtors to stay proactive and keep transactions moving smoothly,

Merilee Arend: 9:14

like I said that initial email, even if you don't want the other agent to see or, you know, it's some information that's maybe private to the buyer, private to the seller. Send a separate email to your escrow officer saying, hey, you know, here's all the situation with my fire. Here's all my information from my seller. By the way, I'm also the buyer's paying part of my compensation. Just send it that way, that way we have it from the get go, and we open escrow, we can put all that information in when we first open the order. And that way there's not going to be that hiccup at the end. There's not going to be those surprises. Send us those invoices. Send us the, you know, if there's something in the bins or that, you know, says the buyer seller is taking care of something. Make. Sure you provide that so there's not any last minute buyer or seller going, what is happening?

Michelle Linton: 10:07

Merilee, thank you so much. I think it's so important that everybody doesn't end up at the closing table with any surprises, and you as the agent being the surprise. Merilee, thank you so much for sharing your insight with us today. Fraud Prevention and clear compensation practices are critical to protecting our clients and keeping transactions on track to all of our Realtors watching. Remember, the more detail and documentation you provide up front, the smoother the closing process will be for everyone involved. And when it comes to fraud, stay vigilant. Your awareness and communication are some of the best defenses we have on behalf of Northern Arizona association of realtors, thank you for tuning in and thank you, Marilee, for being such a valuable partner in helping us protect our clients and our industry. You bet my pleasure. You.