In my interview today with Justen Brown from Alliance Escrow in San Diego, California. My primary purpose was for you to understand what happens at the back end of a real estate transaction.
Justen talked about states being Judicial or Non-Judicial, what does that mean?
Well, Judicial and Non-Judicial mainly pertain to the foreclosure process. In a judicial state, the Lender has to go to court to get a judgment to foreclose on a property. In a non-judicial state, the Lender does not need to go to court. Every State allows the Lender to get a judicial foreclosure process. However, not every State provides the non-judicial foreclosure.
Justen also mentioned different closing methods: Escrow companies, Real Estate Attorneys, and also Title Companies. In California, we close on a real estate transaction with Escrow Companies. The role of the escrow officer is to make sure that they balance and have all the information, documents within the transaction in good standing. The officers communicate between the buyer and seller representatives.
We also discussed what EMD is, this is a critical step of the buying and selling process. Not all the transactions involved Earnest money, also called EMD, good faith deposit, security deposit. It shows commitment from the buyer that indicates that they are serious about purchasing a company. The EMD could be delivered via check directly to the Escrow Company office; Cashier Check also works as well as Wire Transfer. This money is held in a trust account and is tagged as part of a specific transaction to a particular property to a specific buyer. It is audited, secured for that buyer in a particular transaction.
What are the closing costs? The cost varies depending on the type of transaction or the contractual purchase price of the property. The typical cost is between 1-2% of the contractual amount of the sale. This is the total cost, who pays for what, it all depends on what was agreed upon in the contract. Typically in San Diego, this cost is shared between the buyer and the seller. On the title side, it’s customary that the seller pays for the buyer’s title insurance; it shows that the seller is conveying a clean and clear title to the buyer of the property. The Lender may also require the buyer to purchase title insurance, and it will be a buyer’s expense.
My last question was to discuss wire fraud and how Alliance Escrow prevents it from happening on the transactions that they handle. Wire fraud is on the rise. There are multiple layers in use to encrypt the data. The wire instructions go out to the buyer in an encrypted e-mail, Justen mentioned double encryption which sends two separate e-mails, 1 with the information, a different e-mail for the user to create an account to have access to the information submitted on the first e-mail. The third step is the old school way of doing things, give them a call, and verbally speak with the escrow officer to confirm that indeed the wire needs to be sent.
Hackers are using keywords to filter the e-mail traffic to intercept those e-mails that have specific words that mean money, wire, transaction. Etc and that draws their attention.
What is the “dark web”? It is a network of untraceable online activity and websites on the internet. It cannot be found using traditional search engines like google or bing. It requires specific software, configuration, and authorization, it keeps all the web activity hidden. The notary is a critical element of the real estate transaction in California.
A Notary is an individual appointed by the Secretary of State to serve the public as a neutral witness when performing Real Estate transactions; it’s another measure to deter fraud. A Foreign national a.k.a. an international buyer, still needs to use a Notary to complete a real estate transaction successfully in California, Escrow will arrange that at the U.S. embassy or consulate to have the individual sign docs and have them notarized.
Thank you, Justen Brown, from Alliance Escrow in San Diego for the time. This is Cristobal Jimenez, Revolutionizing Real Estate.