“When representing a…Seller as an agent, REALTORS pledge themselves to protect and promote the interests of their client” NAR Code of Ethics, Article 1.” (emphasis added)
I’ve always loved this quote from the National Association of Realtors™ Code of Ethics. Though I’m not a Realtor™ myself, I have worked in the title industry for over 40 years. This section of the Code of Ethics is a great reminder to me of the importance of the service we provide to our customers and clients and has served as a guiding light for how I handle my business. The reality is that real estate transactions are a big deal! And as real estate professionals, we have a duty to guide our clients through one of the biggest moments of their lives. In a world that can be bogged down with technicalities and complicated language (trust me…I’m a lawyer), it’s crucial that we all educate, inform, and support consumers.
In a recent conversation with a great Realtor™ client-partner of mine, we discussed the dangers of split closings. And, naturally, this section of the Code of Ethics came up. As a Realtor™, your fiduciary duty to your client is to fully and accurately explain the risks involved in a “split” closing. If you fail to point out these risks, you are exposed to potential professional and legal action should the “split” title company mishandle your client’s funds or personal information. While your client may choose to accept a “split” offer, you need to show that you have adequately disclosed the potential problems of “split” closings.
The stakes are very high, and the consequences are serious. After this discussion, I thought, “what can I do to help my Realtor™ clients to protect themselves and their clients?”
To start, I developed a series of gut-check questions around key risk factors that every Realtor™ should ask before allowing a client to have a “split” closing.
- Financial. The “split” company will be handling all of your client’s money. What happens if they make a late or incorrect payoff? What if they won’t wire transfer funds to an individual account? What do you know about their financial controls? How often are they audited? Do their underwriters have real time access to monitor their Trust account?
- Privacy. The “split “company will have very sensitive client information, including social security numbers, copies of driver’s licenses, forwarding addresses, email addresses, and telephone numbers. What if they get “hacked” by cybercriminals? What if this information is sent via a non-secure home computer? Does the title company share a copier with every agent in the brokerage that owns them, which effectively doubles the risk of identity theft or data compromise?
- Insurance. Does the “split” company have adequate E&O insurance if they make a mistake? Do they have cyber insurance?
- Personnel. Do they have enough personnel to have adequate segregation of duties, such as different people placing and then confirming wire transfers? Do they have a lawyer on staff? Are they new to the industry? Do they have adequate staff to handle the “end of the month” crush?
- Headaches. “Split” closings are notoriously messy, with greatly increased incidences of late closings, delayed closings, lack of coordination, etc. Are you willing to have your last client contact be a disaster of a closing?
It is in your best interest – and your client’s best interest – to know the answers to these questions when a “split” transaction is proposed.
Looking to find those answers? Contact my team at Liberty Title to learn about our Umbrella by Liberty Title program, which provides enhanced policy protection and premium security protections for all parties in a transaction to ensure a safe – and smooth – closing experience. We developed this program with Realtors™ in mind. This program is here to keep you and your clients safe. It’s a program that I believe in and has been the next logical step in finding ways to protect and support my Realtor™ clients. Select benefits of Umbrella include:
- $1,000,000 wire transfer fraud coverage for the Seller and Buyer through SafeWire
- $1,000,000 malware and $250,000 Escrow/Wire Fraud coverage for the Seller, the Buyer, and their real estate agents through Lloyd’s of London
- Premiere cybersecurity protection via our stringent financial/data security controls
- Experienced service that comes with 40+ years in the business and the expertise of our seven lawyers on staff
- Complimentary upgrade to an ALTA extended coverage policy for the
Ultimately, why should your client take on the additional risk of a “split” closing? And why should the Buyer forego the benefits of Umbrella? During any real estate transaction that you are a part of, remind the other Realtor™ of their fiduciary duty and the professional and legal risks that they run by foregoing Umbrella.
I’d love to continue this conversation with you. For more information on Umbrella, “split” closings, or if you just want to talk title, send me an email today.