S.E.C. Real Estate Observer

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In 1961 I showed a home to a family at 1:00 p.m.; wrote up a proposal on a paper bag on the hood of my car; presented it that afternoon, got accepted, and opened escrow that day (Sonoma Title Guaranty – Denny Daw.) It closed with title insurance the next afternoon and they moved in that night. I took my wife to dinner to celebrate next month’s groceries. (The family grew and later bought a larger home next door to me, which they self-subdivided with plywood to accommodate all the kids.)

Today, it takes that long to sign the plethora of documents required to protect all the non-parties to the deal, and escrow and title insurance folks can’t go faster than about 3 weeks. If you have an institutional lender – forget it (Bill Gates would take 2 months to qualify for the loan).

When I first joined S.E.C., we still had carbon paper documents done on real typewriters, spirit duplicators, and we sent expedited documents by Greyhound bus, or by going to the airline counter with them. (This was long before Fax, Email, co-operative escrow companies, etc.) Extended long distance calls were expensive. The phone company had thousands of operators and million dollar computers were shown on TV as taking up large rooms and they could compute as fast as your pocket cell phone does today. (We had calculators and interpolation logs.)

Now the escrow companies have contracts they want the transactors to sign that are really an attempt to supersede the original agreement with their interpretation of the deal, including a whole lot of protection for them in case they screw up. In the old days, if there was a problem, the escrow or title company solved it by negotiations right away. Today, its denial, then see your attorney about the documents. (75% of all the attorneys in the world are in the U.S.A.)

We used to be hired to teach exchange escrow handling by escrow/title companies. In those days, it wasn’t required to disclose sale prices, so we taught “pot deeding,” especially for multi-leg transactions. Escrow officers wanted to start their accounting sheet with a sale price at the top, then through the plusses and minus’ down under. We taught “no price” closings which was like teaching Trigonometry to 14 year old blond song leaders.

No party signed escrow instructions that showed what other parties were doing. Each signed unilateral instructions and there were no sale prices.

Example: We hand you herewith:
1) a deed (to—)
2) a bill of sale conveying _____–
3) an assignment of note together with assignment of D.T.
4) a cashier’s check in the amount of $x ; which you may deliver/record (to whomever you want we don’t care) when you have for our account:

a) A title policy showing we own property described in your prelim #— dated — vested to ________subject only to items #__ __.,

b) The title to the Green Bentley ID # —- vested to ____
c) A contract with Dr. _____ that he provides free medical services to ________ and _______ for 6 years,
d) That diamond ring held in your safe labeled “I gave up __________ to get this ring.”
e) A bill of sale showing ownership of 4 yr. old gelding Palomino horse named Trigger boarding at _____stables shall pass to Trixie Lovesit. We agree to pay 1/2 escrow, title insurance and transfer tax on property we are conveying and $x document delivery, etc.

If you can’t close following these instructions by X, cancel and return all that’s been handed you herewith. THE ESCROW MIGHT TAKE 5 OR 6 OF SUCH UNILATERAL SETS OF INSTRUCTIONS, AND THE LIABILTIY TO CLOSE SOLVING ALL OF THEM (sometimes there were some re-negotiations of instructions to accommodate all). Escrow officers were experts and had diplomatic skills only seen in international circles.

Because there are too many attorneys, lots of eastern states still do not allow escrows with non-attorneys and think that closings have to require all parties to gather around the same table to pass deeds or whatever. (Make work for under skilled attorneys.) We were to close a small deal in Massachusetts a few years ago just as we were leaving the U.S. for a year of travel overseas. I asked the closing attorney to send the docs and instructions and we would get the signatures acknowledged by a notary. “We don’t accept notarized signatures; you have to come to the closing.” I said, “Listen, my horse and buggy is too old to get 3,000 miles to close a little deal like this. What do you guys do when you have a 3 or 4 state simultaneous closing to accomplish a multi-leg exchange?” “Huh?” They accepted a bank verified signature and a limited attorney in fact to agree to closing adjustments.

Now, I propose deals on the Internet finding the properties on real estate exchange data bases, email contracts, submit escrow instructions, do 1031 delayed acquisitions, find and later close the next leg and never meet any person involved except my notary and only see the property involved 50% of the time. (I still own property I have never seen.)

I do remember stopping by a little shack at the mouth of a recreation subdivision “out in the weeds” and talking to an “overweight glinty eyed hayseed kindah guy” with a straw hanging from his mouth; and listening to why “a guy oughta puddah little down” on a 5 acres site and come camping until the rest of the world finds out how great this spot is, and then they will want to make me wealthy. He never got off his rocker during the whole pitch.

Some of the progress is good, some places have not made progress (eastern roundtable closings), and some of the progress is regress (90 days taken to close). Only old guys think some of it used to be better. The young guys don’t carry paper bags to make proposals with, and they wouldn’t want to scratch the hood of their BMW.