For Sale by Owner News and Articles
Convincing Title and Escrow Companies to Come Clean
By Broderick Perkins
California has accounted for $13.6 million since it filed a suit earlier this year claiming title and escrow companies wrongfully withheld as much as a half billion dollars from consumers.
State Controller Kathleen Connell's office, which filed the May 21, 1999 suit, says it has identified or recovered the money owed to home buyers and sellers following audits of some of the 200 title and escrow companies named in the suit.
"It is my intention to recover every cent illegally withheld," Connell said.
Estimating California's title and escrow industry wrongfully withheld as much as $500 million from the state's housing consumers, Connell filed the class-action suit on behalf of Californians who purchased homes since 1970.
The suit says, after escrows closed, title and escrow companies retained possession of unclaimed escrow funds, a violation of California's Unclaimed Property Law. The companies should have turned over any unclaimed funds to the state so it can attempt to locate those owed the money. If the consumers don't claim the money it becomes state property.
The suit also says the companies charged housing consumers fees for services never rendered as well as fees supposedly for other charges, but kept the payments as company income.
Audits of 26 title companies and one escrow firm have identified more than $7.1 million. Of the 27, 13 have repaid more than $2 million to the state. Other title and escrow companies voluntarily remitted another $6.5 million.
If you've been in escrow at any time since 1970 you should check the state controller's Web site to determine if you are entitled to recovered funds. The controller's office released a database of people currently owed funds.
Other suits against the industry are pending both in California and in federal court so all consumers must be diligent about scrutinizing escrow.
-- Before you open escrow, shop around. Compare all the costs of several title and escrow companies before agreeing to use one. The Escrow Institute of California at (800) 337-2769 can help.
-- When you complete your loan application get the settlement costs and good faith estimates information. Federal law requires the lender or mortgage broker to deliver these documents to you within three days of receiving the application. The figures are estimates and some amounts may be unknown but all the cost items must be listed.
-- You'll get a final settlement statement from your title or escrow company on closing day, and perhaps a settlement update or two sometime during escrow. To avoid surprises, let the lender and escrow agent know that you will want to see the final settlement statement at least one day before closing. Plan on spending that day scouring the statement.
-- Compare the original, good faith estimates with the final sheet. Contact the lender as well as the escrow or title company and demand that they explain any differences in costs. Ask the lender, title or escrow companies to waive any fees that were not at least listed in the good-faith estimate.
-- Some hard-line consumer advocates suggest demanding a receipt for each and every item on the settlement statement, but if you do, be prepared for delays. Escrow experts say the settlement sheet is effectively the receipt for all the charges, but with the state court suit in mind, many companies may be more inclined to render the service. Consumer advocates insist on at least getting a receipt for unexplained charges. You can then approach the entity that levied the charge and ask questions.
-- On closing day, come prepared with plenty of time, pencil, paper, a calculator, and an inquisitive, demanding mind. Tell the escrow agent you will not be rushed. Do not hesitate to question any amount that you do not understand and sign nothing until you understand each charge. If you are intimidated by the event, consider bringing an accountant or other number crunching professional to assist you.
Broderick Perkins, has been a consumer journalist for 20 years. Experienced in print, electronic, and consulting journalism, he is chief executive editor of San Jose, CA-based, DeadlineNews.Com, an editorial content and consulting firm.
© Copyright 1999 by Broderick Perkins. All Rights Reserved.