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Benefits of Hiring a Real Estate Fraud Investigator for Your Case

real estate fraud investigator for litigation

Real estate fraud can be particularly devastating. Not only are their large amounts of money on the line, but problems concerning our homes are uniquely stressful and emotional.

Unfortunately, real estate fraud is not uncommon. Unscrupulous people try to take advantage of the fact that most people are unfamiliar with these types of transactions and then disappear with thousands of dollars in ill-gotten gains.

Hiring a real estate attorney to investigate potential fraud is a great first step toward taking back control of the situation and hopefully recovering your money.

Investigating the Fraud

If you’ve fallen victim to real estate fraud, don’t beat yourself up over it. The people committing these acts are often very sophisticated in terms of technology and expertise. Now it’s time to get people on your side who have even more expertise to build a case against the fraudsters.

Building a fraud case means investigation and lots of it. There can be many paperwork, interviews, and even surveillance to sift through. The benefits of hiring a real estate fraud investigator are numerous. Fraud investigators know what they are looking for, where to look, and how to do it lawfully. Furthermore, an experienced investigator will know how to proceed swiftly, which is important for resolving the case promptly and ensuring you don’t miss crucial court deadlines.

Because the goal of a fraud investigation is ultimately litigation, it makes more sense to go ahead and hire an attorney rather than a private investigator. Law firms can typically carry out their investigations and hire specialists if and when necessary. This way, all the work is centrally coordinated for one purpose: litigating your case and getting your money back.

Pursuing Your Claim in Court

It’s like fraud cases; even when confronted with irrefutable evidence of their wrongdoing, the guilty party rarely says, “You got me; here’s your money.” You will likely have to claw any money back through the court system to recover it.

Like other types of litigation, real estate fraud claims can take a long time to resolve. As a “white collar” type of case, they can also be quite complicated. That’s when you’be glad you hired an investigator to uncover evidence that will stand up to legal scrutiny.

Pursuing your claim in court may be your only option, but it’s not something you should try to do on your own. Instead, hiring a real estate litigation attorney is the best way to go.

Talk to a Real Estate Fraud Specialist

The most effective way to fight against real estate fraud is to bring in outside help—people who can investigate your case, negotiate on your behalf, and take your claim to court. At Hoffman & Forde, our attorneys have years of experience handling real estate transactions and litigation in California. We know how to uncover fraudulent activity and pursue a resolution that’s fair for you.  Contact our office to set an appointment for your first consultation.

The Benefits of Hiring an Attorney to Help with Your Tax Problems

benefits of attorney for tax problem

Tax problems are a special kind of misery. The U.S. Tax Code is so complicated most people just try to muddle through it every year and hope no one is paying too much attention. Then one day, a letter arrives and it turns out the government was paying attention—now they’re demanding money you don’t have, threatening fines or even jail time.

If you find yourself in a situation like this, you shouldn’t go it alone. Here are the benefits of hiring a tax attorney to relieve the burden and drastically improve the outcome. 

You Need Expertise

As the saying goes, “When you find yourself in a hole, the first thing is to stop digging.” Maybe you’ve made mistakes; don’t worry. As we said before, tax laws are very complex and always changing. So the important thing is not to make any more mistakes going forward.

You’re probably not a tax expert and will unlikely become one in the next few weeks. But, on the other hand, the people who work for the IRS or California’s Franchise Tax Board are tax experts, and they don’t give points for not understanding the law. So you’re going to need help.

Someone who understands the tax system can help you correct mistakes from past filings and chart a path forward. For example, if you owe money in back taxes, there are options beyond making a single lump-sum payment. There are even programs to have your debt forgiven. A tax attorney will be familiar with all of this.

Reduce Penalties

Tax problems are often accompanied by fines, penalties, and interest that has accrued in the meantime. A $1000 mistake can quickly balloon into a $5000 or more debt. The good news is that what you have to pay is often negotiable. Attorneys that regularly deal with the IRS, FTB, and other tax authorities may be able to reduce the total amount you owe significantly.

Note: Contact an attorney immediately if you are facing a criminal tax investigation. These cases can result in hefty fines and jail time; you will need legal representation.

Take the Burden Off Your Shoulders

The emotional stress of dealing with tax problems can be immense. The underlying legal problems are complex, and the amount of money at issue is often daunting. This stress can drive people to make more mistakes or, even worse, just ignore the problem.

You need someone who can look at your documents and say, “Okay, I see what happened. Here’s what we’re going to do….” Hearing these words can be a great relief, and so much of the stress you’ve been carrying will fade once you hand your tax problems over to an expert.

Get Started with a Consultation

The first step in dealing with your tax problems is to schedule an appointment with an attorney. At Hoffman & Forde, our tax attorneys have years of experience resolving these matters and improving client outcomes. Book a consultation to learn more about your options.

Property Dispute Litigation: What Is It and Do You Have a Case?

property dispute litigation

Something unique about our homes provokes a deep emotional response during disputes. Not only is it the place where we live, but for most families, it is by far the largest financial investment they will make. Combine this with the complexity of modern property conveyances, and one can see why property disputes are so common.

Sometimes these disputes can be resolved, but if not, litigation may be the only way forward.

Common Types of Property Disputes

There are many types of property disputes, but some of them tend to come up over and over again.

Breach of Contract

In a real estate transaction, the most common breaches of contract occur when (1) the buyer backs out of the deal or (2) the seller back out and sells to someone else for a higher price.

In the first scenario, the fight may be over the return of the buyer’s earnest money. Also, if the seller was forced to sell to someone else at a lower price, they may try to recover the difference.

In the second situation, the buyer may seek “specific performance,” i.e., a court order for the seller to complete the original deal at the original price. Of course, judges are reluctant to give such orders, but specific performance may be appropriate if there is something unique about the property.

Failure to Disclose

If a defect affects the value of the property and is not obvious to the buyer, the seller has a duty to disclose that fact.  For example, if there are termites in the walls and the seller knew or should have known about it, this is a defect that must be disclosed. On the other hand, if there’s a massive hole in the roof, the seller should notice this on their own.

Boundary Disputes

Boundary disputes arise when neighbors can’t agree on the property line. The boundary may have been poorly marked in the past, or the practical use of the property doesn’t match the legal line. These disputes are common when one party builds an improvement such as a home, shed, or fence close to the property line without surveying first.

Homeowners Associations

There is often conflict between a homeowners association’s common standards and a homeowner’s wish to use their property as they see fit. Litigation may be necessary when the HOA overreaches or the homeowner simply refuses to comply.

Litigation and Other Options

Whether the dispute is between neighbors or a buyer and seller, sometimes the parties can come to some agreement. However, property dispute litigation or mediation, may be necessary if that is not the case.

Especially in a dispute between neighbors, attempting mediation first is usually a good idea. Parties often feel satisfied with mediation results, and neighbors will continue living next to each other for many years. It also tends to be faster and cheaper.

If property dispute litigation is the best option, property owners should hire an attorney. They should also be sure to retain all documentation in their possession. After that, the best thing they can do is be patient because litigation can take a long time.

Speak to the Property Attorney

In a property dispute, your first step should be to gain an understanding of your legal position. Then, determine if you have a case against the other party or if they have a case against you to decide your next steps. Our property litigation attorneys have years of experience in resolving such disputes. We can review your situation, lay out your options, and create a plan for a fair outcome. 

Contact our office to set up a consultation today.

What You Should Know Before Filing for Bankruptcy

filing for bankruptcy

When debt piles up beyond what you can manage, it can feel like drowning. You receive a constant flood of letters and phone calls from collectors, and the compounding interest takes on a life of its own. For people in this situation, declaring bankruptcy can be an attractive option. It wipes out many, if not all, of your debts and allows you a fresh start. 

However, bankruptcy is not to be taken lightly and is a complicated process. Here is what you should know before filing for bankruptcy.

Two Types of Bankruptcy

The first thing to be aware of before filing for bankruptcy is that there are two primary types of bankruptcy for individuals: Chapter 7 and Chapter 13. Chapter 7, also called liquidation bankruptcy, is the more common type. The debtor’s “non-exempt” assets are sold off, and creditors receive the proceeds; after this, the debts are canceled. California, in particular, has generous exemptions regarding the types of property that must be sold, allowing people to keep more of their essential property. However, there is a means test for Chapter 7 bankruptcy, preventing it from being used by high-wage earners.

Under Chapter 13 bankruptcy, debt is reorganized, and the debtor must follow a pre-approved repayment plan over three to five years. After completing this plan, the debts are considered satisfied. Chapter 13 is more appropriate for people with a steady income.

Not All Debt Is Canceled by Bankruptcy

People may get the wrong idea that any debt is wiped out by filing for bankruptcy, but that is not the case. Bankruptcy can only eliminate “unsecured” debt, such as credit card debt and medical bills. A debt is secured when it is backed by collateral, as is the case with home and car loans. Creditors of secured debt may still seek to repossess the collateral assets. Also, student loans are not covered by bankruptcy.

Hiding Assets or Going on a Spending Spree Can Get You in Trouble

When people know they will file for bankruptcy, they sometimes convey their assets to others to keep them from being liquidated. They may also go on a big spending spree, thinking the new debt will be canceled, so it’s free money. Both behaviors are considered fraud and can get you in legal trouble. Creditors can also object to recent debt, which will keep you from getting the clean slate you need.

Bankruptcy Is Not Fast or Free

Don’t expect an overnight solution by filing for bankruptcy. Chapter 7 bankruptcy typically takes around four to six months to close, while Chapter 13 cases stay open for years. You should also be aware that both types of bankruptcy require hundreds of dollars in filing fees.

Long-Term Consequences

Declaring bankruptcy can provide you with the debt relief you need, but there are lasting consequences. For example, a bankruptcy stays on your credit report for ten years, making it harder to take out a loan or find a place to live.

A Bankruptcy Attorney Can Be a Big Help

It’s important to know what you should expect when filing for bankruptcy.  Hiring a bankruptcy attorney may not be the first thing that comes to mind, but doing so can help you avoid costly mistakes. Filing for bankruptcy is a complicated legal process, and the clerks and judges cannot give you legal advice. A lawyer can also help ensure that you are maximizing the amount of property you are allowed to keep from being sold off, so you’re not starting over from scratch. Schedule an appointment today to meet with an experienced bankruptcy attorney and discuss your options.

Why Hire a Real Estate Attorney Before Buying a House?

Why Hire a Real Estate Attorney

Buying a home consistently ranks as one of the most stressful life events people experience. Not only is a lot of money on the line (for most of us, it is the single largest purchase we’ll ever make), but our hopes and dreams for the future are tied up in it. Home buyers regularly consult with a slew of experts along the way—real estate agents, inspectors, mortgage bankers, title examiners, etc.—and yet, despite the fact that it is a complex legal transaction, they rarely hire a real estate attorney.

Though many people will not find it necessary to hire a real estate attorney before buying a house, there are several reasons why it may still be a good idea.

Negotiation

There is usually a lot of wiggle room when it comes to housing prices. Still, buyers regularly leave money on the table because they are simply not comfortable with negotiating. While many real estate agents are great at their jobs, they are generally paid a percentage of the purchase price, so they have every incentive to close the deal and not much motivation to drive the price down.

Real estate attorneys, on the other hand, love to negotiate. The net savings gained from letting a lawyer haggle on your behalf generally more than justifies the expense of hiring them.

Smoothing Out Title Issues

Title and lien issues can derail a home purchase or make your life a nightmare if they are only discovered after the fact. A real estate attorney can perform the title and lien search for you. If the search turns up any potential problems, they can either help resolve them or, just as importantly, let you know when it’s time to walk away from the transaction.

Reviewing Contracts

As anyone who has ever purchased a home can attest, there is a lot of paperwork involved. Most buyers have no frame of reference and are simply told everything is “standard,” so they sign whatever is put in front of them: HOA covenants, inspection reports, disclosures, and more.

While there is usually nothing sinister going on, these documents are important, and the fact that you signed them may come up later. At a minimum, a real estate lawyer can review them and let you know what you’re getting into, but they can also draft new agreements and eliminate many of the junk boilerplate clauses.

Facilitating Complex Transactions

Even a typical home purchase is complicated, but some transactions are significantly more complex. Sales involving trusts, corporations, and other legal entities present different issues, and the assistance of an attorney is strongly encouraged.

Easier Closing

Closing a real estate deal involves orchestrating multiple complicated components, such as filing the deed, closing escrow, and delivering the final payment. Having an attorney on your side can help greatly with keeping everything on track and negotiating any last-minute issues that pop up, such as unexpected home repairs.

Talk to a Real Estate Attorney Today

The best way to find out what a real estate lawyer can do for you is to talk to one. Whether you want full-service assistance throughout the transaction or just need to deal with a specific issue, our experienced attorneys can help ensure your home purchase goes as smoothly as possible. Contact our office to schedule an appointment.

Your Rights as a Tenant in California

Your Rights as a Tenant in California

Everyone deserves a home; in California, nearly half of all households rent their home. Luckily, California also has some of the strongest tenant protections in the country. However, these protections don’t have much meaning if renters don’t know about them, so we’ll cover some of California’s most important tenant rights.

Right to Non-Discrimination

Both federal and state law prohibits landlords from refusing to rent a property to someone (or renting it to them on unequal terms) for discriminatory reasons. These laws protect specific classes (personal characteristics), including:

  • Race or color
  • Age
  • Ancestry
  • National origin
  • Religion
  • Disability, mental or physical
  • Sex or gender
  • Sexual orientation
  • Gender identity or gender expression
  • Genetic information
  • Marital status
  • Familial status
  • Source of income (including housing vouchers)
  • Military or veteran status
  • Immigration Status
  • Primary language

Right to Habitable Premises

Landlords must provide a safe and habitable rental unit to tenants. This means keeping the property in good condition and including certain basic amenities. The tenant may break the lease and move out or withhold rent if the property is uninhabitable. 

Requirements that make a property habitable include:

  • Hot and cold running water
  • An electrical system, including lighting, that is in good working order
  • A functioning deadbolt on the main entry door and locking devices on the windows
  • A working toilet and bathtub or shower
  • Natural lighting from windows or skylights in every room
  • Clean and sanitary property grounds
  • Smoke detectors
  • Free from structural defects
  • And more

If a condition makes the property uninhabitable, the tenant should bring it to the landlord’s attention and allow them a reasonable amount of time to fix it. Tenants also have their responsibilities, such as keeping the property clean and sanitary; if the tenant created the problem, the landlord may not be responsible for repairing it.

Refundable Deposits

Almost all landlords require renters to pay a security deposit before moving in. The total amount of the deposit required may not be more than the cost of two months’ rent for unfurnished properties or three months’ rent for furnished properties. Landlords may not require a non-refundable pet deposit or any other non-refundable deposit. When the tenant moves out, the landlord may deduct unpaid rent or the reasonable repair cost for damage beyond normal wear and tear. They may also deduct cleaning costs if the property is less clean than when the tenant moved in.

Right to Privacy

Except in an emergency, a landlord may not enter the premises without first giving the tenant written notice at least 24 hours in advance.

Rent Control

Statewide rules about how much landlords can raise the rent annually in California. For most multifamily properties at least 15 years old, the rent may only be raised once per year and by no more than 5% plus the cost of inflation (for a maximum 10% total increase).

Eviction Protections

In most cases, a landlord needs a cause to evict a tenant. The most common cause is failure to pay rent, but it can also be due to a violation of the lease’s material terms (e.g., having a pet when pets are prohibited). The landlord must serve a 3-day notice on the tenant to cure the violation or quit (leave) the premises. The landlord may file formal eviction proceedings if the tenant does not cure the violation.

If the landlord wants to terminate a month-to-month tenancy, they must give you at least 60 days’ notice if you have been there one year or more, or 30 days’ notice if you have been there less than a year. Tenancies involving rental assistance require 90 days’ notice.

Protect Your California Tenant’s Rights

California laws protect renters’ housing rights, but it can feel empty if you don’t fully understand those rights or know how to enforce them. Our attorneys have years of experience in this area and can help you protect your rights through various means, from negotiating with landlords to representing you in court. Schedule a consultation meeting today to learn how we can help you.

The Most Common Causes of Real Estate Litigation

commercial real estate litigation

Real estate transactions are time-consuming and often stressful, so we want them to go as smoothly as possible. Sometimes things go wrong, however, and litigation may be necessary due to the value and importance of the transaction. Here are buyers’ and sellers’ most common causes of real estate litigation.

Breach of Contract

Real estate transactions are primarily about contracts, so it shouldn’t be surprising that one of the most common reasons for litigation is a breach of contract. Setting obligations for everything from title clearance to closing dates, so both parties understand their respective responsibilities can minimize confusion. One of the more common types of a breach is when one of the parties backs out of the sale before it is complete. If the buyer backs out, this will usually mean losing their earnest money. On the other hand, if the seller backs out, for example, to sell to someone else at a higher price, the buyer can sue for breach of contract and sometimes even compel the seller to complete the transaction.

Breach of Duty

Real estate agents have a fiduciary duty to their clients, meaning they must act in their client’s best interest. It may breach their fiduciary duty if they have a conflict of interest and don’t disclose this. For example, suppose a real estate agent represents the buyer and doesn’t disclose that they are friends with the seller or have a personal financial stake in the property. In this case, the buyer suspects that the agent’s interest is divided and costing them money.

Failure to Disclose Defects on the Property

If a seller knows or should know about a defect on the property that affects its value, they must disclose that defect to the buyer. There are many such defects, from roof leaks to mold to electrical problems. However, the problem must not have been evident to the buyer. For instance, if there is a five-foot-wide hole in the roof, the buyer probably should have noticed that on their own. Buyers who litigate over failure to disclose defects usually seek to recover the difference in property value.

Boundary Disputes

Real estate’s legal boundaries should be registered with a government office, typically the county commissioner. However, sometimes those boundaries are registered incorrectly. Other times, the “practical” boundary line doesn’t match the registered boundary lines. For example, an owner may build a fence or even a building on their neighbor’s property, believing it to be their property. These mistakes come to light during the sale of one of the properties. Therefore, verifying the parcel’s boundaries is important to the buyer’s due diligence.

California Real Estate Specialists

The best strategy for real estate litigation is to avoid it entirely. However, consulting with one of our real estate attorneys during the buying or selling process can help bring potential problems to light so they can be dealt with in advance. If you are already in a situation where litigation is necessary, our team can help you resolve the matter fairly. Contact us today to schedule a meeting.

 

What You Need to Know About Filing a Personal Injury Lawsuit

bankruptcy attorney

If you’ve been injured through someone else’s fault and haven’t been able to recover fair compensation for your injuries, filing a personal injury lawsuit against the other party may be your only option. A lawsuit is a complex and adversarial process for determining the facts of a case and how the law applies to those facts. Here we’ll go over what you need to know about filing a personal injury lawsuit.

However, if you are considering filing a lawsuit, it’s important to consult with at least one attorney first. Because of its complexity, it is easy to make a mistake that can lead to you recover less in damages, have your case dismissed, or even a lawsuit against you.

Timing

There’s a strict time period to file a civil lawsuit established by the statute of limitations.  In California, the statute of limitations for most (but not all) personal injury claims is two years. That means a plaintiff must file their lawsuit within two years of the date of their injury. If the time limit is two years and you file a claim after two years and one day, the claim will be dismissed.  However, some claims are on “toll” or on pause. For example, if the plaintiff is in a coma for three years following their injury, the statute of limitations period begins running when they wake up.

Venue and Jurisdiction

It’s not always obvious where a lawsuit should be filed; a plaintiff may have multiple options. They must consider factors related to jurisdiction and venue. Jurisdiction refers to the power of any given court to hear a case. For instance, suppose a plaintiff is a California resident and gets into a car accident in Nevada with a Nevada resident. 

In that case, three separate court systems potentially have jurisdiction over the case: 

  • California state courts
  • Nevada state courts 
  • Federal courts (which have the power to hear cases between residents of different states)

Plaintiffs and defendants may prefer to be in one jurisdiction over another for various reasons, from the rules of procedure to the judges likely to hear the case. Venue is the choice of location within a court system. In the example above, if the plaintiff wants to file their lawsuit in a federal district court, they have a choice between the federal court in Las Vegas or one closer to their home in California.

Bear in mind that the issues of venue and jurisdiction are just about where the proceedings will take place; the question of what laws apply is a separate issue.

Filing the Lawsuit

To officially initiate a lawsuit, a plaintiff must draft a document called a “complaint.” The complaint contains:

  • A statement of facts that supports a cause of action.
  • A demand for judgment for relief.
  • The number of monetary damages sought.

The plaintiff must serve one copy on the defendant and another copy to the courthouse.

They must also file a proof of service of the defendant’s copy with the courthouse. The defendant then has a set amount of time (30 days in California) to respond to the complaint in the form of either a “demurrer” or an “answer.” A demurrer is an objection to the complaint, e.g., that it does not establish subject matter jurisdiction or fails to state facts sufficient to constitute a cause of action. An answer will likely deny some or all of the facts but does not challenge the complaint itself.

If a demurrer is successful, the judge will dismiss all or parts of the complaint. This dismissal can be with or without prejudice; a dismissal with prejudice means the plaintiff cannot try again.

Before Filing, Speak to an Attorney

Filing a lawsuit means stepping into a world full of complex legal rules that take years to learn. An innocent mistake can cost you your entire case and any hope of recovering damages. If you are even considering filing a lawsuit, consulting with an attorney is your best option. Contact us today to speak to an experienced personal injury claim attorney.

Do I Need a Bankruptcy Attorney?

bankruptcy attorney

Few situations are more stressful than having more debt than you can manage. At those times, declaring bankruptcy might be your best option, but it’s a complicated process. Before you go down that road, you should understand what bankruptcy is and whether or not you need a bankruptcy attorney.

Hiring a bankruptcy attorney might seem 100% counterintuitive—you might say, “I don’t have any money. How am I supposed to pay a lawyer?” While that feeling is understandable, there are a few reasons it’s still a good idea to at least talk to an attorney before making a decision.

Choosing the Right Bankruptcy and Knowing Your Rights

There’s not just one kind of bankruptcy; there are different options that might be better or worse, depending on your situation. The two most common types of bankruptcy for consumers are Chapter 7 and Chapter 13. 

Under Chapter 7, also called liquidation, all dischargeable debts will be wiped out at the end of the process, but your assets can be seized and sold off to pay your creditors. 

Chapter 13 bankruptcy is quite different. Called a wage-earners plan, Chapter 13 bankruptcy lets the debtor negotiate a repayment plan. After making the required payments for three to five years, the debts are then discharged, usually without liquidating any assets.

Though bankruptcy is handled exclusively by federal bankruptcy courts, state laws should be considered. Crucially, California bankruptcy laws have generous exemptions that protect many of a

the debtor’s assets from liquidation. If you don’t understand how these exemptions work, you may end up unnecessarily agreeing to sell off assets.

 Proper Filing and Documentation 

Declaring bankruptcy is a fairly complex and document-intensive process. It is easy to file your paperwork incorrectly or forget to include certain documents. Such mistakes can draw things out longer than necessary but also have more serious consequences. There are also filing deadlines that, if missed, can potentially prejudice your case.

It’s possible to navigate the legal and bureaucratic aspects of bankruptcy on your own, but it won’t be a very pleasant experience. An experienced lawyer can greatly cut down the stress of it.

No More Dealing with Creditors

The one thing most people want more than anything when they’ve reached the point of considering bankruptcy is to be done with the endless harassment from creditors. Once a person files for bankruptcy, an automatic stay goes into effect. This means that, in theory, creditors must cease trying to collect any debt from you.

In reality, some debt collectors will not stop harassing you, especially if they don’t think they’ll get much via bankruptcy. They may continue contacting you, trying to get as much money as possible. If you have an attorney, insist that any further communications go through them. If the creditors persist, your lawyer should be able to stop it.

Talk to a California Bankruptcy Expert

You don’t have to go through bankruptcy alone. Our attorneys know the process inside and out and can eliminate much of the stress in what is already a very difficult time. We also know how to work out a fee arrangement that works for you and helps you put you back on your feet. Contact us today to schedule a consultation.

Who Regulates Escrow Laws in California?

Person reviewing legal documents | Who Regulates Escrow Laws in California?

A home sale or purchase may be the largest financial transaction we will ever make. With all the work it takes to find the right home, negotiate the price, and procure a mortgage (or find a buyer if selling your home), the actual transfer of funds and title seems like a mundane affair. The orderly exchange of property and large amounts of money cannot be taken for granted, however, especially between two parties who barely know each other. Escrow services exist to make this transfer more secure, but who regulates escrow laws in California?

What Is Escrow?

You may have heard of escrow before without giving it much thought, but if you plan to buy or sell a home, you should familiarize yourself with the term. The legal definition of “escrow” is a transaction in which the buyer and seller transfer funds, evidence of title, or other items of value to a third party until the happening of a specified event or performance of a prescribed condition. At this point, the property is transferred to the respective parties as agreed. What does that mean? Let’s take a common example:

A buyer makes an offer on a house, which the seller accepts. Since the title transfer process is not instantaneous or free, the seller requires “earnest money” from the buyer to ensure they are serious. Similarly, the buyer wants to be sure the title transfer is legitimate and does not want to simply hand over a check to the seller. So, they agree to use an escrow service.

The escrow service holds the earnest money and the written instruments needed to transfer the title to the buyer. Once the various requirements have been completed (the title has been verified, the buyer’s mortgage lender has provided the remaining funds, etc.), the escrow service transfers the money to the seller and registers the property title in the buyer’s name. The transaction is finished, and both parties walk away.

Escrow works as a specialized form of trust in which the escrow agent acts as a trustee of the parties’ property for the duration of a complex transaction.

Licensing of Escrow Agents

Because of their critical role in real estate transactions and because they routinely hold large amounts of other people’s money, escrow agents must usually be licensed by the state. In California, the Department of Financial Protection and Innovation (DFPI) handles the licensing and regulation of escrow agents. While the applications for an escrow license are complex and involve extensive documentation, here are some of the main requirements:

  • Only a corporation may receive an escrow license, not an individual
  • At the main office, there must be at least one person with a minimum of five years of escrow experience and at each branch office, a person with at least four years of escrow experience
  • The corporation must deposit a surety bond with the state of up to $50,000, depending on its financial obligations
  • It must maintain a tangible net worth of at least $50,000, including at least $25,000 in liquid assets

While “independent” escrow agents must be licensed in this way, there are numerous other persons and institutions who may perform escrow services without a license. The reasoning is that so-called “non-independent” escrow agents are already regulated in other ways. The four categories of non-independent escrow agents are:

  • Banks, trust companies, building and loan or savings and loan associations, credit unions, or insurance companies doing business under California or federal law
  • A licensed attorney who has a bona fide client relationship with one of the principal parties and who is not engaged in the business of an escrow agent
  • Any person whose principal business is preparing abstracts or making searches of titles that are used as a basis for the issuance of a title insurance policy
  • Any broker licensed by the Real Estate Commissioner working as an agent or party to the transaction and performing work that requires a real estate license

Real Estate Law Experts

If you are buying or selling real estate and plan to use an escrow service (which is recommended), be sure to use only a qualified escrow agent, such as a licensed attorney. Our escrow lawyers have years of experience facilitating real estate transactions, helping to resolve disputes, and making sure the process goes as smoothly as possible. Contact us today to schedule a consultation.