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Maui Real Estate Radio Latest Broadcast
Show 8: Understanding the escrow process with Pam Teal of Fidelity National Title
(Click the play button below.)
Intro The following is a paid program and does not necessarily reflect the opinions of the staff or management of visionary-related entertain.
Clint Hansen Aloha. This is Clint Hansen with Maui Luxury Real Estate broadcasting at 11:10 AM, 98.7 FM, 96.7 FM, the KAOI Radio Group. Welcome to this beautiful Monday morning. I have a wonderful guest with me today, Pam Teal. Pam say, "Hello."
Pam Teal Aloha.
Clint Aloha. So we're going to be talking about escrow today and you can also find us at mauirealestateradio.com. That's mauirealestateradio.com where we have all of our previous transcripts and communications on a variety of escrow and real estate related topics like you can listen to anytime. Whether that be insurance or even the local community like hospital stuff which was awesome.
They actually broadcasted it twice. I was really surprised by that. And mauirealestate.net which is our family website. I've been working with my mom and dad forever [laughter]. She said I sold my first property when I was a baby. My mom's had her license for 40 years and I'm 38. So right, young right age, she handed me to him and showed me the property. I still haven't seen that commission check but I did a referral but I've had my license for 17 years.
My dad's had it for 36 and we've been the number one agents on island many a time and I've been top 100 several. My dad, you know, he's been doing it for 36 years beforehand. He was-- you didn't probably didn't notice but he was a CEO of Bayview Federal Savings, a bank out there.
He ran every single position from janitor to teller all the way up. So we have a wide breadth of experience, you know, not just real estate even though it's mostly real estate. And so introduce us a little bit about yourself and your role as a insure while a title officer.
Pam Well, my name is Pam Teal. I'm a Fidelity National Title located in Kahului I have been doing this for thirty-nine and a half years. And I'm a Senior Escrow Officer at that office. I can be reached at 808-446-8200 and my email address is firstname.lastname@example.org.
Clint And title insurance is one of those things a lot of people don't even realize they're getting when they're purchasing the home, you know. Tell us a little bit about what title insurance is and, you know, kind of the basics of it and what it covers.
Pam Okay. So a title insurance is the insurance that goes with the property. It's actually the land that we're insuring. We're not insuring the homes. So when you purchase a piece of property or sell a piece of property, we run the title report so we can review that information. And then that is it transferred over by the form of a deed of some sort to the new buyer and that town insurance just keeps moving along with the new owner until they sell.
Clint All right. So what's your particular role in all of this? You know you're an escrow officer. Are you like a transaction facilitator or an insurer? I mean that it's this kind of this--.
Clint --you know, you help out with a great number of things. But what at the end of the day, do you think you, your was?
Pam I'm the transaction facilitator.
Pam Yeah, the talent I was telling people to tell insurance is the insurance part of it and the escrow officer is the person who communicates with the individuals and is like the one who handles, make sure all the funds are taking care of and all the rules.
Clint And that's one of the things that's kind of funny comparatively to the mainland, you know. Well, it does [depends] to state by state, county by county issue how they deal with it but, you know, you watch these TV shows and they're like, "Hey." They're hammering back negotiations back and forth and here we're like, writing, writing, writing.
It's going to be in writing to mean anything and then they're like, "Okay, let's give it to the lawyers to hammer out the details." But that's not really how we do it here on Maui, you know. We have you, guys. You know we work out all the paperwork ahead of time and make sure everything goes smoothly and well, at least on paper, it's supposed to. Sometimes, a little disagreement about what things mean but it usually gets hammered out and you're that intermediary to kind of help us out.
Pam Correct. Our title is but a neutral third party taking mutual instruction. When you're talking about like the East Coast, that's when we talk to people that come here to visit. They don't know what we do and why we're here. Title insurance is always across the United States but not the escrow version of it. So when we get to the West, basically Colorado West, you start having escrow officers take care of the transactions. Lawyers don't have to anymore.
Clint And you know, one of the things that-- it's kind of a rare question I get. But it does happen especially on cyberspace. But people always are asking about the chain of title and how far it goes back, you know, to-- 'cause, you know, with Hawaii being illegally overthrown and, you know, the conquest of these lands.
People are like, "Well, you can't ever get title insurance on it." But most people don't realize that this goes back to the Great Mahele which is before the illegal overthrow of Hawaii. Can you touch on that a little bit about insurance? I mean I know it's a sensitive subject for a great number of people and probably a debate that could take a whole hour. But just in brevity, can you tell us a little bit about it?
Pam Basic, my understanding, because coming from the Mainland I did 15 years ago is that when the properties were transferred over at the time with Great Mahele. That information was then conveyed to as perpetual. So, therefore, the-- and then Prince Kuhio came forward and also did the same thing to where we can now have access to the properties, the [draft]. The transfers are of public record. You cannot, sometimes, understand what you're reading, your interpretation of it.
Pam But it does allow the property to be transferred over. So that's how we go off of our information.
Clint So it goes back, you know.
Pam Yeah, as far back as we have to go.
Clint Precisely. And so what happens in those, you know, we're going and talking about the full chain of title? So you know and there's been properties that come up. Can you tell us a little bit about, you know, that chain, like what comes in, what kind of encumbrances and you know, why would we even need this, you know?
Pam Well, we have to definitely make sure we have ownership. That's the number one question, go back for. When we search properties, we go all the way back. That's what Fidelity National Title 'cause it's a nation, National Insurance Company.
So we go back to the first deed and go forward and with every transfer, there is a release of a deed or release of mortgage or whatever the case may be. So we're looking for all those documents to be taken care of.
So by the time we get to our title report on the property that were in currently in escrow, it's conveying the new-- the correct owner of the property and all the information is just solely about that person. The covenants, conditions, and restrictions, the easements, and [the] declarations definitely are perpetual. They go through the property from the beginning to end. But the rest information's only solely about the person signing the property.
Clint All right. That's very nice. So now getting those things and I often and asking and requesting the preliminary title report, why do you think a preliminary title report is something that's a good idea to get before even deciding to sell or purchase?
Pam I think it's a very good idea. Basically, we're going to be able to get to see everything about that property at the time.
Clint A glance. Yeah.
Pam Yeah. And what we look at is that we're checking, first of all, of course, to make sure that the person does own the property. If there's been a death on the property with some of the persons or if they've transferred the way they've held title, that information is now available to you. As to those to the agents, you know how to write up your contract accordingly.
Also, in that, we find out if there's any liens or judgments. Anything that's going to come up that's adverse so that we can address them. And you can address them right away with your client. And then when you open escrow, you've already got the information available for us [to be] able to search it. The escrow we'll take care of all of that. We don't have to-- you don't have to go into it but it is nice to know that the seller is aware that those are on there for us to be able to take care of through escrow.
Clint And address. I mean--.
Clint --it's not easy. You know it depends on--.
Clint It depends on every transaction is unique. But there sometimes comes a little bit difficult to go through that whole process.
Pam Yes. The circumstances I'd like to sort of speak for a little bit about that is the fact is if you've got liens and the capacity of an IRS link. Those response times from the IRS can take six weeks up to three, four months relative to what our government is doing at the time like shut down was not a good time.
Pam But basically when you find that information out ahead of time, you have the seller give, get as much information they can from whomever he can speak to which, sometimes, is also hard to do. And then whereas head of the game a little bit when we go to order the statements.
Clint And that's one of things, the very first things I do when I go to a listing presentation. I have that preliminary title report in hand. You know, talk about potential issues anything, you know. And I go to realists, you know, which is actually just, you know, check permits and things of that nature too. Just so that we can all go in with our eyes open and know what we can do and head off those problems beforehand.
And you know, so I really appreciate it when, you know, we put that request out for a preliminary title report. I know it's not easy to do with everything you guys are juggling on a day to go and get one of those printed out and sent to us. But I really do appreciate. It makes it a lot easier for us.
Pam Thank you and it's good for us as well. [Things that are not saved], easier to get us to type report when we get to open escrow. So it's helpful.
Clint So here's, you know, I wanted to talk a little bit about something that is a bit risky. You know those quitclaim deeds and versus and actual insured transaction. Can you tell us a little bit about, you know, quitclaim, you know, the transferring title over like say, A family member comes up and you want to make sure or get it over. I never recommend and I've-- people always say, [got into this] quitclaim, went over to my name or something along those lines.
Pam Well, we're talking about the fact without title insurance. Yeah, basically, when you have a quitclaim deed to another family member, you are inheriting what is on the title--.
Clint Without knowing.
--without knowing. Yeah.
Pam Or yes or knowing and going ahead doing it anyway. But all in all what happens is the fact is that when that deed goes on, the person who is originally on title now is no longer accessible and you're now responsible for whatever debt is left behind.
Clint And it's not fully recorded every time either.
Pam No. No.
Clint That's the scary part.
Pam Yes. Yes. It's interesting here because the Bureau of Conveyances does record on a first come first serve basis. But at the time, there is no one actually checking to see where that document is. And so there's very much, there's times when documents are not recorded at all.
Clint Nuh. I mean it would be somebody get a loan on a property and then sell it to a family member or a friend or something along those lines that might not show up on a hard money or whatever but that lien is actually there and then it shows up later. You know you said first come first served so there can be a little push versus shove. But at the same time, having full title insurance really protects the buyer and the seller.
Pam Exactly. And it's reviewed on every base, every line from beginning to end. So nothing is missed at the time so for sure.
Clint So. And when we come down to the different kinds of transactions that you're dealing with, I know that there's everything from short sales, OREOs, and you know, our normal transactions that we go through but what do you think is the toughest short sale OREO standard transaction?
Pam I think the short sales are the toughest.
Clint Yeah, because it doesn't have anything official yet. It's just an agreement or this idea to sell the property.
Clint So just so you know, everybody out there in layman's terms what a short sale is is you're selling the property for less than what's necessarily owed on it. And if you're going to do that, you're going to have to go and get permission from those lien holders. You know, whether that be a construction lien or you know a loan to that effect.
So a short sale is saying, "Hey, I have this need to sell a property because I'm way behind on my fees." "You know, I haven't been paying my mortgage." "I haven't been able to pay for these construction costs." "We've got to get through this.".
So at that point you know, we have to go through extraneous. I don't know. It's tough. I'll tell you that. It's a very difficult process to go through and get everybody to agree to sell for less than what they've put out on a property. In the end, it's usually the best interest of the bank in order to do that because doing a full foreclosure or taking the property back is like $50,000 in legal fees and takes a long period of time. And you know, it's much better for the credit of everybody involved.
And obviously, you want to certainly talk to your tax accountant but there can be some tax implications if you're getting rid of a property for less because you're basically getting that free cash on hand and make sure it's been depreciated out so you don't have those excess fees later on. You might think you're washing your hands of the property but that debt can follow you even if you get it forgiven from you so.
Pam Absolutely. You have to have a deferment. Yeah.
Clint So bank owned properties, OREOs.
Pam Well, bank owned properties they've gotten better since 2008 when everything was going crazy. They do rely on usually a single source when it comes to the escrow and title. So fidelity is approved to work with the OREO then we work with that one entity the whole time. They're very streamlined and they're also very precise and they're also wanting to do things very quickly.
Clint And also they want to do it their way.
Clint That's the toughest part.
Pam Yes, the rules and regulations, and those documents. So we have to follow that out all the way. The one thing about the OREO is we can talk a little bit about as the homeowners associations and the way that the State of Hawaii statute reads at this point in time is the fact this that there are dues that are delinquent that are earned to be paid through the OREO process and who has to pay it Is that a negotiable base.
Clint Other limitations on that.
Pam Yes, there are. Basically, they look at what they call acquisition date which is the date that the OREO definitely takes over. From acquisition date back six months, We can ask for this or the association can ask for the six months of dues with no taxes, no interest, and no liability, and no attorney's fees.
From acquisition date forward, it is actually the responsibility of the OREO to keep the dues current or to pay them at closing and they can be subject to the attorney fees and the late fees.
Clint Now or the association themselves can go after.
Clint I've seen that a couple of times.
Clint You know and I kind of feel for a lot of the banks, it really kind of depends. They can just get things thrown and they don't even properties. They didn't even know they had.
Clint You know and all of a sudden, there's all these back fees and you know, when you get to a leasehold property when those can be pretty high.
Pam Yes, they did.
Clint You know many times are like, you know, what association you can just keep [is].
Pam Go back and figure it differently.
Clint Yeah, exactly. So you know with that, tell us a little bit, you know, when the whole subprime crisis happened, a lot of these foreclosures and I mean there's a long process. Tell us a little bit about the difference between judicial and a non-judicial foreclosure.
Pam Well, as of today, there is no longer any non-judicial foreclosures allowed.
Clint Thank God.
Pam Yes. Hallelujah. Jubilee. But basically, what they came about with back in 2008 when it actually did hit and we had the debacle, we call it.
Pam Yes, the non-judicial foreclosures, these attorney are actually lenders trying to get these foreclosures done as fast as possible and so they hired attorneys to do the non-judicial which means the judge.
Clint Attorneys, no quote.
Pam Yes [laughter]. So the judges were not allowed, not part of that process. So the serving orders, the requirements of the foreclosure were supposed to be followed exactly like a judge's judicial foreclosure. But unfortunately, we're not. So that's when the State of Hawaii came forward and said, "That's it." "We're now doing traditional foreclosures.".
Clint And that it [crosstalk]. Yeah. So with that, let's just [say], you know, and you know lots of different title companies did the nonjudicial process because I mean that's there. They're there to facilitate and allow for the free flow of commerce to happen. I mean it's one of your main reasons for existing to ensure this, you know, transaction of assets to be done properly.
Clint And so your insurance protected a lot of these people, you know, from judicial and non-judicial. Now, there are very rare cases and it's not really a Hawaii problem specifically. But tell us a little bit about the nonjudicial issues that some people and you know you guys could be fronting the legal fees to make sure that that property's future values is preserved and that things were properly foreclosed on.
Pam That's true. So what has happened since the non-judicial went away is the fact is that we found out through our attorneys looking through the foreclosures that they weren't done properly. They were clients rather not served in the timeframe that they were supposed to do in 35 days and how they were served. So those actually broke down the system.
They-- the previous owners that had the properties were actually approached by attorneys that says, "You know you might have the opportunity get your home back." So that started it all up. And so now, basically, what the consumer does that owns the property if they get served there to immediately contact the title company that did insure them. They will file a claim. The title company then has an actual attorney represented going forward to speak to the existing owner of the property. The owner that's on record. And make sure that.
Clint [Recent] recordation.
Pam This, yes. The one that we think is supposed to be there. So that's taken care of. And then they go forward and either go to court and challenge it or have them walk away from it. Right now everything is being challenged.
Clint And there's a bigs ah-- Is there not supreme, what's the word I'm looking for? I know there's a large number of cases that are pending right now but very, it's not really a whole Hawaii-specific problem. But you know, they're going through and hopefully will tie up a lot of these, you know, on a-- case by case or is a--?
Pam It's a case by case basis.
Pam Yeah, definitely.
Clint Have you ever had any issues associated with those non-judicials? I mean I'm sure they come up from time to time.
Pam We do. We, unfortunately, have to deny the title insurance going forward. They have to go back to the title company that insure them. That's basically what's happening right now. And there are cases where our title company along with that telecom is saying, "We can ensure that just did not get done properly." So this point, this is our owner and anybody else have that has to file a claim.
Clint And that seller though is protected off of the non-judicial insurance that they got from the first place which you know basically protects them from their original purchase value, not future values or--.
Pam Correct. This value of--.
Clint Of when they purchase.
Clint So you know and that's a pretty hefty amount of money normally and that can cover a lot of legal fees, you know. So they can either get that back. At least, they're protected up to that amount. But you know there's never a full guarantee. But how--? I mean I know it's relatively rare but have you known of any cases where people get the property back.
Pam Not yet.
Clint Me neither.
Pam I haven't heard anything.
Clint I know.
Pam I'm still waiting to see what's going to come up and they get. They update us as time goes on in certain areas but we haven't anything about that yet.
Clint From what I understand, it's really more in the mass, you know, the areas of the United States that have been, you know, like those robo-signer when they were going through and just blank and signing everything and people who did not miss mortgages and things that nature were like foreclosed on.
So those are the ones that have the real case. That didn't happen so much here in Hawaii because we were relatively protected, you know, from the subprime crisis. We definitely had major drops in values, you know the market decline and we were affected but like the rest of the nation. But we didn't have the same number of foreclosures that many other places does, you know. So we don't have [inaudible] but it's good to know.
Pam Yes, it is.
Clint And that's the concern, you know. A lot of the title companies are having. So yeah, if you do have an insurance policy and you didn't go through non-judicial foreclosure, don't worry. You're probably not going to have a problem. But you know, you just got to know that you're probably going to have to go through your original insurer when you purchase the property. And you know I've done it quite a few times and we're not really too concerned about going forward with a non-judicial process but it is something to be aware of and educated on.
Pam Absolutely. Give us a call. Any questions for sure.
Clint And speaking of, what's your phone number again?
Clint This is it again, Clint Hansen with Maui Real Estate Radio. You can find us at mauirealestateradio.com or go to our website, mauirealestate.net. Always feel free to call, text. My cell phone is 808-280-2764. I have a question and actually, I want, Cindy also. I have an Apple phone and I have deleted messages. I have deleted them from the trash and my voicemail says it's a 100% full. I've restarted. I've reinstalled software. I'm like losing my mind. Have you had any of these problems?
Pam No, but I just got a new phone to me and has something to do with it [laughter].
Clint You know, I think my wife and I were on like a shared Apple account and I think the two storage is it. So anyway, all I'm going to say is I love text and I love emails. If for some reason it says my voicemail is full. I've done everything I can. It's happened twice over the last month and I don't know what's going on. But if you want--.
Cindy Paulos You will have to delete, delete, delete.
Clint I did.
Cindy I actually deleted it and showing-- it showing deleted.
Clint So it is. It's showing deleted. In addition to that and you go to deleted messages and you cleared again because it holds it there for like a month and I've done some research online. And from what I understand it is I think more of a provider issue because what they're doing is, you know, they have their own cache memory--.
Cindy Oh, my gosh.
Clint --on their servers--.
Cindy And they're holding of them.
Clint --from, so I actually called my brother and this is when I kind of came wise to it's not a hardware problem or software problem with my phone. It's a problem with my provider.
Cindy Who's your provider?
Clint It's Verizon. They're fantastic. I love Verizon. You know obviously, I wish it was cheaper and you know a better service but their-- life, well, at the best.
Cindy No one likes-- no one likes to have that happen when you think your voicemail is available and it's not valuable. But I have to say, I've been getting so many scam.
Clint Oh, so much spam.
Cindy So much spam phone calls. I mean to the point where it was like 10, 15 a day that I actually got a thing called RoboKiller. At first couple weeks of free and maybe three weeks and then I went and bought it because they do a very good job, very good job--.
Clint Of screening those calls. Yeah.
Cindy --of screening. They also have a national number of known spam numbers which they will block.
Clint All right. I'm writing this down. What is it called?
Cindy The only problem with it is they do know your phone numbers. They get your contacts. So they will let numbers in your contacts through.
Clint Oh, I get so many from everywhere though.
Cindy But there's a possibility that you might be getting a call that they don't know and that's not on your list.
Clint Oh, they [shouldn't them].
Cindy Well, you can try for a couple of weeks and find out. Usually, if it's not on your list and it's not in the typical terrible people are trying to reach you and some of them are really terrible people saying that they're from the IRS and people [crosstalk]--.
Clint With an Indian accent [crosstalk]. I'm from the IRS and you are going to federal prison. How-- What is going on?
Cindy Oh, some of them. Some of them are just terrible.
Clint No, you're not.
Cindy But you can actually look at the number and if it's okay, then put it in your contact, could you say it's okay and use it. But that will cut out-- some of these people-- I can't believe they actually leave voicemail messages. Some of these people who are scam artists actually leave a voicemail. I mean that takes a lot of--.
Cindy Right. Did go ahead [crosstalk]. You gotta leave [crosstalk]. Yes, really go.
Pam Call me back.
Cindy So yeah they do actually do that. But providers really should need to clear those out and it kind of makes you wonder what they've got, what else they've got on you. I'm sorry to say but.
Clint Oh, no problem [laughter]. So we're a little off topic but I wanted to get back, you know, we're just talking about scams just now. So I noticed and I saw. I'm sure you saw it as well and I know [here] it's happened here on Maui too where a phishing email goes out right like, they've been basically spying on somebody is email throughout the transaction process and they basically like the day of the wiring instructions are like, no, no, no, don't wire that money. Instead, wire it to me, you know, and it looks very official. It looks like an official email. So can you tell us a little bit about that?
Pam Yes, I would love to address this.
Clint And thank goodness we have realtors 'cause this is-- I haven't heard of any successes where somebody has gotten money wired, you know. But you know.
Pam They are definitely [turning] in.
Pam Yeah, they're-- well, they're zooming in more on the buyers. Unfortunate at this point in time because the buyers are the ones that are sending money in. When the moneys are going out on the seller side where it's actually the proceeds of the payoffs but the escrow holder is taking care of it. So we are having that information verified.
But what is transpiring is yes, it's the subject line. So whenever you're working anything on a subject line if you put the word wire funds, escrow number. Actually, we actually don't say that anymore so--.
Clint And its the end.
Pam --the subject line. So the basically, what they are-- they're monitoring it. They're monitoring it for the whole source of the escrow just to see what they can find out. And then when they know from an email that's come through that says there's a wire, they actually intercept that wire information. They alter it in the way that they need to alter it and then send it right back out. And in that timeframe from the escrow officer sending the email--.
Clint That day.
Pam --until the time the buyer gets it, it would just and usually in half a minute and or so two minutes, that information has been altered and the buyer has no idea what's happened. So we actually in our-- as you when you're sitting out hold at Fidelity, we have a long dissertation of email, voicemail that's going to tell you, "Please listen to what we have to tell you. And wire fraud is on the rise and it's not going to go away very soon. They're going to find out different ways of doing it.". So we ask that you contact the escrow officer immediately on any information.
Clint Suspicious. Yeah.
Pam And even if you're sending out a wire from the very first time to the end, call us. We'll go over it again one more time with you. And we're going to let you know yes we did send that email. Yes, that is our information or no, it isn't. And then we immediately turn it over to the FBI.
Clint Good. Yeah. And-- I think been successful on Maui because I haven't heard of any who.
Pam There was one actually.
Clint Wow, really.
Pam Yeah. And unfortunately, what has happened is the information went to the consumer, the buyer directly and it was CC-ed to their [requested] agent.
Clint Bless their souls.
Pam [crosstalk] agents decided they wanted to help. And that's when that interpretation hacking got taken care of. But the rest of it nationwide it's into the millions and millions of dollars every month. And definitely, the percentage of this buyers are the ones being hacked is into the 70, 60%.
Clint So it is usually the buyers they have the spyware on them and then they're seeing the opportunity in phishing then. Okay.
Pam Absolutely. The only thing that scares us a little bit is that now we've figured out how to get into payoffs.
Clint Oh, yeah.
Pam So there-- so basically what we teach our people is that the Wells Fargo is in the world, the Chase banks, the world, Deutsche Banks. They don't change the wiring instructions. Everything is always the same. So if you see a change, question it.
Clint Absolutely. So to get to transactions, who's buying? You know it's always a question that I get every day. And this is going to very much, you know, be a question for you to talk to a tax accountant, talk to a lawyer. You know, we're not. You're an intermediary. I am a realtor. You know, I can certainly give you, you know, some off the cuff information like we're about to provide now but every case is individual. But can you tell us a little bit about the differences and you know, who's owning the property from partnerships, tenants in common, tenants in severalty, trusts, LLCs?
Pam Well, it is by individual choice. Most the time when we do see our buyers coming in with husbands and wife, you're going to see them either as joint tenants or tenants by the entirety. They are definitely requested at that time to talk to their CPA or test consultant to make sure what is advisable for them.
Clint And how they're purchasing the property.
Pam And if what purpose of, yeah, what it is being used for. LLCs are definitely on the rise. You're going to-- we see them all the time. Trusts are coming back a little bit more than they used to. People are starting to pay attention to their protection but you'll also see trusts with LLCs. And so that's broadening their perspective or taking care of there-- with the tax consultants.
Clint So say [front] of a couple of scenarios and say, I am just Joe when coming in to purchase a condo and you know, I want to buy this for myself and you know, I make a moderate income. You know, I just do my taxes myself. What do you think there? Would just be a sole proprietorship?
Pam Well, sole proprietorship the only concern is the fact is that if anything happens to you, where does that property go? It goes in [crosstalk].
Clint No errors. Yeah, it does goes [in the program].
Pam So the recommendation is a couple of things so there is actually now what they call-- No, meant going to say it's-- there's a couple things. You can go into trust. That's a definite avenue. And there's what they call it- a death upon, transfer upon death deed. They are very-- could not get my wording straight. So that is a new caveat that has come out.
Clint I have not. Tell me more about that. Actually, that's news to me.
Pam Well, that actually does help individuals and they can transfer the property to a family member and there's no probate.
Clint And automatic.
Pam Yep, it's automatic. It's in the system. It's done. When you go to sell the property if you have that transfer upon death deed and there it has to terminate so it terminates with the deed and it's already in the body of the deed itself. So that's a new buyer doesn't have that information coming forward and it works so far.
Clint So here's two other scenarios. And we'll run them side by side because there is definitely a very unique individual difference. So we're saying two married couples, they're coming to once just to you know US. They are Maui citizens. You know they're coming to buy a property here and just a house and then the same thing two Canadians married are going to go buy a property. You know what would you generally say and of course, you're not offering legal advice or anything like that? It always depends on the unique set scenario but what do you see typically? You know what choices are the Maui people making versus the Canadians?
Pam Not much difference I don't think. Basically, if you're talking about just the couple purchasing, they can do it again like joint tenants or tenants by the entirety. Same with the Canadians. They can definitely do such. It's just a matter of uhm--.
Clint Passing on.
Pam Passing on the occupancy if you're not occupying the property then you got taxation.
Clint And that's one of the big concerns I know a lot of people especially Canadians. Let's say one of the individuals passes on and they're not living in the property. Well, you know, does that mean the other person is subject to taxes?
Pam Not if they're [enduring] tenants or tenants by the entirety. Only if they are not. If they're tenants in common, then they're divisible interests of that person. So if you've got a man and woman that are married to each other but let's say they've got assets from previous marriages and children and stuff. So they decided they're going to take title as individuals a married man and a married woman as tenants in common. The person who passes away, that person is subject to probate. The other person is not.
Clint So and then when we get to LLCs and trusts, things of that [nature], I know you're known to see more of these trusts coming along, you know, especially if somebody is owning a multitude of properties. No. They're not going to want to reinvent the wheel every single time they purchase or take this new consideration or treat it as a whole. So let's just say it's a, you know, somebody coming in with the trusts. Do you usually see it on an individual property basis or a group of properties?
Pam Group of properties say consumer whenever they wish to.
Pam Yeah. There's been no concerns with the trusts. My only concern with them is all I ask my concern is to make sure that they're talking to their [trust] consulting and upgrading their trust as time goes on [crosstalk].
Clint And also where it's been made if it's a Hawaii trust versus Mainland [land]. Yeah.
Pam Mainland trust. Yep.
Clint So that being said with the purchase-- Oh geez, I had a very specific question to foreign buyers. Oh, yeah. I remember now. HARPTA/FIRPTA.
Clint An important one just change and increase and I don't even-- it went from, you know, 5 percent to seven and a half percent.
Clint And so what that is is they're just basically holding the money to make sure you pay your taxes. And then FIRPTA is the federal version of that and that's a much higher amount. That's 15%.
Clint So can you tell us a little bit about HARPTA/FIRPTA.
Pam Yes. Okay. So basically, the state of Hawaii came into existence with the HARPTA back in the 80s when our consumers were leaving the state and not paying any taxes. So this is their solution. The feds actually did that when massive gross people were leaving the United States and not paying the taxes.
Pam Yes. So basically what we go through is the fact is I tried to explain to my clients of the fact this is just a holding account. They're not keeping that money forever unless you don't file an income tax return. If you don't then yes they will gladly keep it. But basically what you want to do is just know that when you're-- if you are a seller and you do not reside in the State of Hawaii and you do not pay an annual income tax in the state of Hawaii, then you're going to have to have us hold the 7.25% unless you're taking a loss.
Clint So HARPTA H Hawaii, seven and a half.
Pam Seven and a half.
Clint Seven and a quarter.
Pam Seven and quarter.
Pam Yes. And then the FIRPTA which is the feds is a 15%.
Clint International clients.
Pam International. Anybody who does not reside in the state of U, in the United States.
Clint Okay. So let's say, you know, you are forming a Hawaii LLC. You're paying your taxes here in Hawaii but you're an international buyer. And as long as you have your taxes registered, do you use-- HARPTA/FIRPTA apply?
Clint All right. So you know that's one of things that I think really really surprises people. We're definitely going to have, you know, in the following weeks, we're going to have it specif-- meeting just like this specifically about international buyers financing trust accountant.
You know I'm going to do the whole nine yards and having here but just in brevity, yes, there is a way around that because like the only reason HARPTA and FIRPTA is there is to make sure you pay your taxes and if they have a guarantee and your Hawaii LLC or whatever and you've been paying your taxes have that record, you can, you know, prove to them, "Hey, please don't hold onto my money."
Pam Exactly. Another way of also helping with the sellers that are American citizens but don't reside in the State of Hawaii, if you're doing a 1031 exchange, you are going to be considered HARPTA-exempt as long as you're going into that exchange process. So that's another little avenue for them.
Clint But FIRPTA?
Pam Firpta. Nope. They're subject to FIRPTA. They have to have the 15% collected. They do file their income tax and they get those funds back.
Clint Don't touch the money.
Pam Yep, but they have to have that money come up front of the pocket to purchase other property.
Clint And 15% is a pretty big number. You know--.
Pam That's true.
Clint --you're going to have 15% amount cash to help facilitate that transaction. The escrow company is going to have an escrow account to hold onto that money until, you know, they can prove and go through that FIRPTA process. And how long does it usually take to get that money?
Pam The state-- well, that's all to the feds. I mean that's also through to the-- [I mean]. They--.
Clint Filings and--.
Pam They can take six months to a year.
Clint Yeah, I've seen it in less, you know, I've seen it in like 60 days. But yeah, usually six months to a year as most-- in most cases that I've seen.
Pam The one thing--.
Clint You get your filing done and then--.
Clint The request.
Pam Yeah, exactly. And the one thing we do talk to our buyers about is make sure you get your tax identification number as soon as you [purchase] [crosstalk]. As soon as you purchase, please get that done, get it over with and you've got something to give to the IRS and get your money back.
Clint So I wanted to let's see-- email [false wire] instructions. Oh, there it is. I found what I was going to say [laughter]. So what can people do to help facilitate your job to be easier, smooth the transaction out? You know do you want them to come in with making sure that they have documents in their name change from a marriage, have their trust documents figured out, do a preliminary title report beforehand? That kind of stuff. What are some key recommendations that you have that would make your job a lot easier?
Pam Let me-- [interesting].
Clint Smooth transactions or good transactions.
Pam Exactly. Exactly. Basically, I think the biggest thing that I like to talk to my people about is just open communication. Just pick up the phone send me an email. Tell me what's going on. Let me know right away so I can come up with this scenario and the answer is to help you. You've touched based on everything that's important. If you've--.
Clint The big ones.
Pam --someone has passed away, we have to have a copy of the death certificate. If someone's got married- the marriage license and the trust we have to have a copy of the trust when the buyers are going into escrow. The seller, we don't have to have the trust unless you've been changes to the trusts because we have our sellers sign a trust certification that's whereas that they everything is the same. When it comes to the LLC, the all the LLC documents have to be made available. We cannot access them online. The customer has to give them to us. So that's important.
Clint I got a funny story for you. So we actually had somebody we were going through the transaction. They initiated, you know, the transaction in one name and we went through the whole title process and then unbeknownst to us quick claim changed the name it to a trust from the different ownership for some particular tax reason, you know, or whatever. And then we went and sent all the docs to the Bureau of Conveyances to record and guess what they can't do it because--.
Pam It's not the same name.
Clint It's not the same thing anymore. Now, sorry we got this recording. Of course, the escrow wouldn't know. Why would they know? You know, they started it. This is what they learn. They did their initial research but that's the whole point. Let's just say somebody puts a lien on the property. I mean that's why you guys are there and you know those new things come up. I mean having that security is important no but I'm sure you had a few horror stories yourself or strange things, does anything pop out in your mind?
Pam Well, [all you've] the fact is explain a little bit how the title insurance process works is that we search the property when we first off and we also date down and the dating down processes when we finally get the property released to close. So if anything's happened in the week prior to that information that period, we're not going to know what's happened because it's not made available to us.
So again, it's what we have to be finding out. So that's what title insurance is all about is that that area there that is not-- that we don't know any information about, we're going to be able to have to cover it because now, we're insuring the new buyer. So again open communication would be greatly appreciated. Keep it going.
Clint And having all those important documents, name changes, marriage certificates.
Clint I'm going into, sell a place, and, you know, divorces happen too. I mean you're going to have, you know, things carried away and sometimes, there's a court-ordered things to be followed and, you know, having all those documents in place to again, make it be smooth as possible is important.
Pam Yeah. And we do have access to the court documents that are available to it out there. So if there is a divorce going on or a pending divorce or pending lawsuit, we're going to know about it. But we have to ask the consumer to bring in the documentation.
Clint What are other things that affect title, you know, the chain of title, [revise]. What's really constitutes to lien and what other kind of title encumbrances kind of come up? I mean a lot of people don't realize this but say, you don't pay a contractor.
Pam That's a mechanic's lien and that definitely comes up. So what happens basically, the tax brackets give us a little bit of a hint of what's going on at the property. We know there's been some construction so, therefore, we go ahead and we ask them for the documentation that shows that they've got their certificate of occupancy and that it's all been signed off.
If it's been under a year, we're going to keep checking those records to see if some mechanics liens have attached. Their mechanic's liens have to be renewed. So if they're not renewed after the year then we're not looking for them anymore.
Clint Oh, good.
Pam So you have to make sure that those are out there available to us.
Clint Ah, I feel bad for contractors. That's no fun.
Pam Yeah, not at all but they need to make sure they get paid.
Clint Yeah and I know a few contractors over time, you know, that they've had agreements. They've done work and it's-- they've had to do it. They've had to go through the process and then in addition to that, you have your court fees, on top of it, which it took them years to get paid.
You know, they fortunately did and put a lien on the property. They did it in the barely enough time because they were trying to get paid for such a period and they were absolutely genius and specifically trying to scam them out of the work that they did.
So they go ahead. They make the decision to work on the property. They go out there and she gives them small amounts but not in the near to the full amount of the payment. And every time you'd say okay, so is this amount okay? She would not text back. She would not write back. She'd give them a phone call. And you know, but fortunately, Hawaii's laws say if there's been improvement, you can prove those improvements. You know, you are [dude] even if you don't have a specific written agreement you know.
So they were still [in] but the lean and then go through the process and get paid. But you know it's-- thank goodness for those encumbrances. Sometimes, it may seem really bad because, you know, somebody is putting a lien on your property but it's really there to protect everybody.
Clint So a refiling. You know most people don't realize that there's a lean on the property if they have a loan.
Pam That's exactly right. Yeah, so they have a mortgage. They might have a second, an equity line, per se, and they might have never borrowed against that equity line they just took it out because the lender said, "You don't get that equity line." "Put it on your property." "You might need it in the future.".
Clint Not realizing need to discharge it.
Pam Yep, so therefore when we get the information back from our owner that says that they own one mortgage and there's actually two. We give him a call and said, "Are you aware about the second?" And when I say yes--.
Clint Put in the request.
Pam Yep. Put in the request, get the zero demand and then we're off and running with no issues. So [crosstalk].
Clint Zero demand. My favorite.
Pam Yeah. We like those no money ways [laughter].
Clint Yeah, exactly. So zero demand on a property, you know, the amount owed. Sometimes, you know when a purchase of a home is made you go through and you get that zero demand but it doesn't get filed or it gets lost or peers back on it. I've been surprised. I've seen it a few times in my history where somebody has gone through and purchased a property and then they go to sell it and there's still the previous person's lien on it and loan amount because the discharge paperwork never went through. Can you explain a little bit about that?
Pam Yeah, I called it the black hole of lending. That is what I call it that basically [what it means]-- [laughter].
Clint Bureaucracy of lending.
Pam So what happens basically with the lending institutions that are supposed to as soon as they've received the funds and they secure that information to the consumer that they've paid off the loan and they'll send you a letter saying, Congratulations, you [most] and paid in full. You're supposed to do one or two things.
After send that actual release of lien to the consumer, unfortunately, do they tell the consumer what they're supposed to do with that document? No. So the consumer supposed to file that document and get it recorded or they sent it directly to the Bureau of Conveyances or they send it to the title company who did the payoff. So those are three open areas that are going forward that we have to find out who did what--.
Clint And who forgot.
Pam --and then who didn't. So basically, there's also in actually and in the State of Hawaii state-- the title companies can if they did the payoffs actually secure the release of lien and file it after like six months if there has been no movement on it. So that's sort of tightened up some of the problems that we've had in the past.
But if not the case, the lender has to be responsible to make sure that the release of lien has been put forward. So it is definitely a problem. It happens at all on a lot of files--.
Clint But it's not the end of the world. That's for sure.
Pam Nope. It can be fixed we just have to get to the person who did the payoff and confirm it's been paid.
Clint Oh, well that's good. You know it's scary when you get that there is a lien on the property. What?
Clint What's going on? You know.
Pam That's not mine [laughter].
Clint And how much of a delay is it's going to cause. Is this going to be a financing issue? How is a 1031 funds doing? I mean it's always a juggling act what you guys are doing.
Pam And that's the purpose of an escrow timeframe. Sometimes, it's that they think it's-- the escrows can be done in a short amount of time if you have an all cash purchase. But [when] things like this come up on title, it [is] just being made it where to your consumers that the fact is that the escrows going to be slowed down just a little bit because we have to get this cleared up.
Clint Yeah. Yeah.
Clint So what-- [oh], you've been doing this awhile. You mentioned. What have you noticed change about the industry? Because I've done it 17 years now and, you know, when we started out there was like 10-page contracts. I mean, you know, when my mom and dad started out, it was like two papers.
Pam Two [laughter].
Clint That's it, you know. They were on-- they didn't have computers. They had microfiche.
Pam That's right.
Clint You get--.
Pam And shaking hands was a little bit easier to get things done [laughter].
Clint You go through this whole process, you know, like that's real estate agents are an essential part of the transaction process because they really understand the individual community, the knowledge, the availability of inventory, and even back then, it was even crazier, you know, they had to go through and there was no Internet.
But as time to change, at least the biggest thing I've noticed is the reiteration and redundancy of paperwork, you know, [crosstalk] and so many things is over and over [laughter]. What have you noticed? Does made your job easier and more difficult?
Pam See easier would be the fact is that everything can now pretty much be done by computer DocuSign, things like that except for those meeting of the minds when we sit down with our deeds and our mortgages but that is definitely shortened it up. I think sometimes to the-- people aren't reading what they're signing.
Clint Why would you?
Pam I don't know [laughter]. So we get the process all completed and then they'll come back with questions that definitely would or should have been addressed before the escrow closed. So that makes you a little concerned. I think everyone needs to just take a step back, take a deep breath, read, and then go forward.
Clint So do you think crypto? I mean you might not realize this and I know that we just recently got some state approvals to do more digital signatures on your end. We've been doing it for a litt- a bit longer because ours is less specific to title and or just general information going back and forth. But are you familiar with, you know, cryptocurrencies and how they involve with contracts and things of that nature?
Pam We are. But we don't. We--.
Clint Not yet.
Pam --do not get involved with them at all. No.
Clint Because that's a nice thing.
Pam It's a-- number.
Clint Yeah. And it also is-- it's carried the chain is carried between just an offset people so you can follow title and everybody has the entire chain as a part of that key. So you know, as time goes on it will be decentralized process as opposed to going to specifically the state. You know you can have this crypto chain that's going through a process and you're basically instead of the value of the currency, you're actually having the value of the overall contract bid.
And you know, that value is carried and divided among all the people who are doing that server work. And the best part about that is like you know, it's not going to be really a big issue here because we're not in a corrupt society by any comparison compared to a lot of other places in the world.
But you know, let's just say you're going to a third world country that gets illegally overthrown and people go into the office, you know, tax and recordation areas of that particular country. They're like, Oh my friend who helped me get this done. Now, they have a whole bunch of property that, you know, for financial reimbursement, they can put up a [reserve] or whatnot and they just can change documents any way that they see fit.
But the nice thing about crypto, you know, you're not relying on a specific entity it's divided-- undivided among a large group. So I'm interested to see how that changes over time. You know, and it's a lot easier of a way to do it in a much more secure form. But the thing is you have to have people that are keys to the edit process in an agreement and a state certifier. So you'll still be doing the same thing. It's just going to be more secure. You know it's not going to alleviate too much pressure. And it's a kind of a future thing [worth knowing].
Pam I'm ready.
Clint So what are some reasons you've seen-- escrows fall apart? I mean the big three for me is financing. The J1, you know, going back and forth and of course, disclosure that can happen when somebody discloses something about the property that wasn't known about the initial. What would have you noticed? I mean why do transactions fall apart, you know, on your end, what do you see?
Pam It's usually when we get the title search when something comes on [then] that cannot be removed for any reason. That will be the first one that will come out.
Clint Like what? Give an example.
Pam The judgments [crosstalk]. So the judgment is for much more than the property value of it. And then and the person who is owed the money will not negotiate.
Clint And that's on a number of properties. Sometimes not just one.
Pam Not, not, yeah. It'll if it affects the person it goes across the board to every property is a property that person does own.
Clint So much more with taxes probably--.
Yeah. Yeah. And well, I just did a large one. That was pretty sizable there. There was two people just suing each other. So it just-- it locked up the property enough to where you couldn't sell it.
Clint Yeah, I mean they can always clear that up through or between themselves and go through the process to clean up and there's that's, you know, you don't have to necessarily be doing a transaction to give somebody a call and talk to a title company. So don't hesitate to give, you know, Pam a call. What's that number again?
Clint And what's that e-mail?
Pam It's email@example.com and that's T-E-A-L.
Clint So if you have questions about your property, you know, thinking about selling or your own, you know, they don't give legal advice or anything like that but you want to make sure things are cleared up. Feel free to give her a call and you know if you want to get a recordation, oh, recordation. We're talking about recordation [laughter]. If you want to get a record of today, a transcript, or listen to, you know, the - what's the word I'm looking for? - listen to the--.
Clint Podcast. Thank you. Brain fart. If you want to listen to the podcast, we do have everything at mauirealestateradio.com. So go there mauirealestateradio.com and we have all sorts of information from financing, you know, ownership, insurance, inspections, you name it. Please go there and you can always search for property Maui Real Estate.
In fact, any Hawaii real estate whether that be a Oahu. We have the best search features. In fact, I don't know if you realize this. Realtors call us up and they're asking us about listings. We're like, that's not ours. I don't know what you're thinking and they prefer our systems over the real estate association. Many agents do.
Clint And it's funny like I had somebody, a friend of a friend had-- I got an email: Hey congratulations on your new listing and this and that. I'm like, I don't what? I, that's not my new listing. But what it was is this particular person you source our website. And they shared that their new listing came on.
So they put mauirealestate.net, though [laughter] and it's like, No, even though, thank you for the free advertising, you know. But no ,that's not my-- but it's really a good idea for people to-- if they decide to list their home, list with us or at least give us a shot because I know there's a lot of personal relationships that go back and, you know, we don't try to take clients or anything of that nature. And we give back to the community, you know.
But the main if, you know, from that guilty pleasure of making sure you're getting somebody to take care of your property. I actually have my FAA-107 license so I'm a drone operator pilot. You know we spend a quarter million a year on print advertising and, you know, radio and newspaper ads and online marketing.
But the big thing is our website. Mauirealestate.net is a juggernaut. I mean it is up on often overtaking the bigger ones like Zillow and Trulia and things of that nature. So you can go on there and we have 55,000 unique individual people every single month using our website. I mean that's huge. We have webcams. We have information for taxes. So, people, we're like the Facebook of real estate.
Pam That's [nice].
Clint You know people are going on there. So if you want and you're thinking about selling a home or you're looking to buy, we have so many resources available through our website. Definitely, owe it to everybody to go check that out. And that's mauirealestate.net. And just to go over, two questions I've had. What's a different type of title policies that you offer?
Pam Oh, we offer also homeowner's policy which is for a single family, one to four. And we also offer the [all to] standard policy which is more for vacant land or commercial. And then we also have--. No, that's right. That's it. That's the two here in Hawaii.
Clint And how do you derive the cost, the difference between like a $500,000 home and a $25 million dollar home. I mean I'm assuming it's the insurance with it right? And the risk that you're taking.
Pam Absolutely and it is on a chart basis. So if it's whatever the sales prices is we arrange the fees around that.
Clint So this is Clint Hansen again with Maui Luxury Real Estate, maurealestateradio.com, mauirealestate.net transmitting on 11:10 AM, KAOI Group. That's 98.7 FM, 96.7 FM. And we've had Pam Teal today. Can you tell us again where you work and what did you do and your phone number?
Pam Thanks Pam Teal with Fidelity National Title located in Kahului and our phone number is 808-446-8200. My email is firstname.lastname@example.org. My [byline] is business goes where it's invited and stays where it's full taking care. So come take care of us.
Clint All right. Mahalo and Aloha.