Funds and Proceeds – Tips for a Successful Escrow Closing

Funds and Proceeds at Escrow Closing

When working with real estate buyers and sellers, our escrow operations face challenging situations relating to funds needed to close as well as proceed distributions. Having an awareness of bank requirements in advance of your signing appointment can make the difference between closing on time or working through costly delays. Below are a few tips that can help your transaction close more smoothly.Funds and Proceeds at Escrow Closing

Buyers – Your Funds to Close

Buyers – How to prepare for your signing appointment

Talk with your bank well in advance of your closing (approximately 3 weeks before your signing appointment). Ask your banker if there are wire limitations or account restrictions. You should also find out how many days notice are required by your bank for wire transfers made from your account.

Internet banking accounts such as eTrade or ING may require that you arrange well in advance and determine requirements. Sometimes restrictions prevent same day withdrawals or wire transfers. This is something you’ll be glad that you know well in advance of your closing day.

Some local banks in the Seattle area have daily wire limits (such as $25,000). This can be difficult and costly if a buyer assumes their funds beyond the daily limit are accessible.

Sellers – Proceeds From Your Sale

Sellers – How to prepare for your signing appointment

Remember to bring your account information and your photo identification to your signing appointment. If funds are to be deposited into an investment account, be sure to bring full account information and wire instructions. Deposit slips and checks do not have full account information needed for escrow to complete a wire transfer.

A Word About Trusts and Estates

If title is held by an Estate or Trust, funds must be deposited into a bank account with the same name. In other words, proceeds from an Estate or Trust can only be deposited into a bank account established for the Estate or Trust. Funds cannot be deposited into the heirs/individuals accounts. A bank account for the Trust or Estate must be established prior to closing.

“If title is held by an Estate or Trust, funds must be deposited into a bank account with the same name”

Remember to ask your Escrow Officer here at Ticor Title Company if you have any questions. We are glad to help you well in advance of your closing date.

An Assignment of Proceeds Fraught with Fraud

Our Company decided years ago to take a stand and stop accepting assignments of proceeds to third parties. Our decision was spurred by too many bad experiences. This story provides yet another reason why we do not accept assignment of proceeds instructions.

Absentee Borrower

assignment of proceeds fraudThe transaction was a loan for a borrower who owned their property free and clear. The property was located in the state of Washington, but the borrower lived in California. The transaction was being handled by an escrow officer in Washington, who arranged for an approved notary to meet with the borrowers in California to execute the loan documents.

Proceeds Wired

Along with the executed loan documents, the borrower submitted instructions to the escrow officer regarding where he wanted her to wire his loan proceeds. The loan amount was $248,000 and the borrower’s proceeds were for just over $209,000. The wire instructions from the borrower instructed the escrow officer to wire almost $90,000 to a small business and the balance of $120,000 to another individual. The escrow officer complied with his request and the loan closed.

The owner contacted the lender stating he did not have a mortgage with them or anyone…

Surprise! No Loan Payments Are Made

The first payment date came and the borrower failed to pay. The lender sent a notice of late payment, but instead of sending it to the borrower’s mailing address in California, they sent the notice to the property address in Washington. The owner contacted the lender stating he did not have a mortgage with them or anyone, as his property was free and clear, and that he did not sign any loan papers with them. When the lender asked if he lived in California he said no, that he lives at the property address and had for years.

A Forgery is Revealed

The lender looked into the file and discovered the borrower was an imposter. The lender has now filed a claim under the title policy for forgery. Upon notification of the claim, we attempted to recall the outgoing wires and freeze the recipient’s two separate bank accounts – both located at Chase Bank. Chase Bank responded both accounts were drawn to a zero balance and closed upon receipt of the wire transfers.

What If?

If the escrow officer had stuck to Company Policy and Procedure would she have closed this fraudulent deal? We’ll never know. None of the loan proceeds were made payable to the actual borrower. If she had insisted on paying the proceeds to the borrower what would he have done? Would we still have the money? To add insult to injury, the signing was set up with an approved notary and not BancServ. The approved notary only carries $100,000 in errors and omissions insurance which is the minimum amount required by Our Company to be included on the approved notary list. If it is proven the notary did not properly identify the signer, the maximum amount which can be recouped from them is $100,000. BancServ carries $15 million in errors and omissions insurance. Had a BancServ notary been used, instead of an approved notary, we would stand a better chance of being reimbursed our losses.

Moral Of The Story

Company policy prohibits settlement agents from accepting assignments of proceeds to unrelated third parties. Company policy also prohibits splitting up proceeds. Instead, settlement agents should make one disbursement. To add insult to injury, neither of these disbursements appeared on the closing statement and the lender knew nothing about them. In this story, had the escrow officer followed policy she might have been able to avoid a very expensive claim for fraud and forgery.

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