The transaction was very unusual. The owners had leased their commercial property and the tenants were operating a successful business.

The buyer offered to purchase the property for $1.5 million dollars, and recommended the owners add the proposed buyer to the title; rather than divest all of the interest in the property — both the buyer and the seller would each hold 50% fee title ownership interest.

The buyer would obtain a new loan for $1 million to purchase a 50% interest in the property, pay off the seller's liens and rehab the property. The sellers would net $123,000 from this first sale.

The rehab was scheduled to take three months. After that, the buyer would refinance the property to buyout the remaining 50% ownership interest. The sellers would net $750,000 from this second (and remaining) sale and the buyer would be reimbursed the cost of rehabbing the property. Title to the property would be transferred to the buyer's limited liability company at that time.

The buyer memorialized these terms in a non–binding Letter of Intent to Purchase Real Estate. The buyer also presented a Commitment for Title Insurance to the seller, issued by a competitor title company; it was attached to a Conditional Loan Quote, from an unlicensed lender, to prove he fully investigated the property and had a lender ready and willing to provide a loan — using the property as collateral.

The order was placed by the lender with Crystal S. Robinson, Commercial Escrow Officer with Fidelity National Title in the National Commercial Services division. Crystal was not familiar with any of the parties to the transaction — this was her first red flag. She was also alerted by an email wherein the loan officer stated Fidelity is the, "…go–to title company, and they understand their funding process."

The title officer prepared the Commitment for Title Insurance, which revealed some title issues to be addressed prior to closing. As soon as the Commitment was issued, the lender rushed to close.

Crystal kept asking for title curative information to clear the title issues. Each person involved in the transaction passed her question to the next person. She searched for contact information for one of the lien holders listed on Schedule C of the Commitment and contacted them to request a payoff demand.

The buyer's lender knew the sellers and found the status of title confusing. The lender put Crystal in contact with the seller's family attorney. Crystal contacted the seller to obtain approval to discuss the details of the transaction with their attorney.

The attorney also contacted her clients to find out what was going on. The attorney reviewed the title commitment and discovered various deeds in the chain of title were forged.

After reviewing all the paperwork and discussing the transaction with her client, the attorney advised her clients not to proceed. They agreed with her advice and authorized her to issue a cease and desist letter to the buyer and his counsel.

Simultaneously, Crystal, realizing the title to the property was not insurable, resigned as escrow holder from the transaction.

The letter from the attorney described that the parties were not licensed to conduct business in the state where the property was located, and the forms did not conform to state law.

The attorney proved the Commitment for Title Insurance (prepared by another title insurer) that was provided to the seller to legitimize the transaction — was bogus.

The attorney concluded her letter, "Based on my review of the Transaction Documents and my preliminary due diligence on you and ABC Holdings, it is my belief the transaction you are attempting to perpetrate is unfair, deceptive and fraudulent and unenforceable."

Crystal Robinson did a great job. She did not wait for the parties to present documents to her to clear up the title issues, as they most likely would have been fraudulent. She took the bull by the horns and researched the title clearance matters herself, an action all good escrow officers do. She pushed until she received sensible answers.

Due to her persistence Crystal was able to confirm many of her suspicions were true. The chain of title was clouded. The buyer was attempting to strip the equity from the property and, most likely, leave the sellers without any improvements to the property and with supplemental debt.

Way to go Crystal! For your efforts and protecting the Company by contacting the seller's attorney and getting her to review the transaction, you are being rewarded $1,500. Thank you for protecting the Company from a potential title claim and for protecting the public we serve.

Article provided by contributing author:
Diana Hoffman, Corporate Escrow Administrator
Fidelity National Title Group
National Escrow Administration