The RatItE Blue Book of Co,Lifornia

62 The RedLtABLueBook of Cauforni,a

Escrowsin Connectionwith Title

Insurance
89, DoNzELSToNEY

Eltokftian ol Es,nd,tlingLo,rul,Tittres-Legal, Escrou q,nd

Age W-Aathoization to S?U lhe Staftina point-Debus
Eli ittit?(L Procpdure-For-ms-Withd rauhg-Sltstp , in-
erpenafue -Rel,ie"ring the Tran$Lctiolr ol BurtJens.

f N the early history of land ritlesin this sjate title e\idencecon-

I sisted of an absiract of- title preparedby an Abstraclor and con-
tatnrng a more or less brieJ sl,atempDlo[ the substanceoI all
matte$_ obtainable fr.om the public records afiecting the propety
involved. This sas submitted to an attorney to determine wh;the;
the title was_good;ifso, the necessarydocuments\verepreparedand
the transaclion closedin rhe atlomey s office. or at a bank, and in
someinatancesat t}Ie recordels offfce-
The evolution of the businessled to the consolidation of all these
functions in one. The Title Insurance Company maale its owll
abstract, report€d on the titlg and if merchantable, received the deeds
and other documents and the money, attended to the recoidina- and
t}Ie distribution of t}Ie money,and then insuredthe purchaser.

I,EGAL ESCROW AND AGENCY

There are now in operation two distinct methods of handlins
thesetransactionsby title companies,one through the medium of i
legalescrow. Such escrowconsistsin an agr€emententeredinto and
execuledby all the psflies direclly and indjrectlyintcresled,settins
forth all the termsof saleand pur.hase,and providingfor all possibli
contingenci€s that may adse between the date of the agreement and
the recording of the doclrments. The other is the use of the Tifle
Insurance Companyas an agencyof the respectiveparti€s, to hold
their money or documentsuntil recording,and at thal time to make
the deliveriesand disrribuiplhe money. Theseare senerallvdesis-
natecL as escrov/s,bul are nol striclly legalescrows. Underthis lattdr
system any of the parties can, upon surrender of his receiDt. receive
the documcrlsor moneylherain mentionFdat any time 6eforethe
transactionis finally closed.
AU'IHORIZATION TO SEITI]THD STARTINQ POINT
Under the system developed through real estate boards, a real
estate agent receives written authority from an owner to sell his
 Tke Rdrl,tu BLueBook of Cdifot"tuilr 63

for a certain price, and the owner agreesto pay a cornmb-

rle is madewithin a definite time. Thp agent 6nds a pur_
lo in lq'ritinE asreps to pay the sum dcmanded. The agent
the owner t-o approve tJre sale in writing. The standard
the real €statebotrds are becomingmore and more in general
rhen signed and apprcved, constitute a legal binding-a€ree-
lobiigati"onon both padies. Provisionis madefor delectsin
Ior pio-raling taxes,agenl'scornmissionand other coniingen-
t}er party caincompeithe pelformanceof the agre-ement.if
is m;rch;ntabto.and if it ia not, and cannot be madeso. the
ld aot be efiected anyhow, but the buver srould have his
iD t}Iat event, and the ag€nt would l€gally be entitled to his
woulal not. therefore. seem to be a necessity for a new
If there are mortgages or other liens, they can be paid out
pulchasemoney.
DELAYS DI,IMINATED
rv unnecessarv expenaliture of i,imeand labor in connectionwith
;state transactionadds the already heavy burden it has to
to
Any ulnecessary delay in closing a transaction makes real estate
tmehtsless attractive. If an owner can complete a loan and get
in one or two days, or a seller can leceive the purchase
within a few days after a sale, conditions would be greatly
sd.and the intrinsic value of real estate would be increased,
Our iunction is merely i,o lake up a matjer after i,Ie buyer and
lave elready entered into an agreement as to the pnce and
of pa]'ment, analsee that the seller gets the money to which he
;ntitled and $al the buyer gets a mprchanlabletiile.
in ordinary transaction it is not necessary that the sarne
ltative of the Title Insurance Company should handle all parts
the €sclow. One of our employeesmay take in the deed, another
leaseof mortgage and still a third the money. This all works Jor
improvemenfof the service to the public and saves a great deal
time
' to the man on the outside of the counter.
The trme required to tal<e in a deed or othe} document and give
rcceipt for it is very tittle. Where the parties come in together it
usual and natural t}.at a $eaI deal of conversation ensuesand a
.gearnountof timq is consum€d. Ordinarily an employe will handle
times the amount of business where the parties comeseparat€-
. or don i .ome at all (bul lei tlp agent do it), than he wouid if the
rties came together. Many a deal has been ieopardized under the
tter circlmatances.
PBOCEDllRE
lte systemin vogue around San FranciscoBay is the result of
aim to conform to these businesspnnciples. When a sale has been
throush a real eslatebroker, the lai,ter,or the buyer, or both,
b tldTirle InsuranceCompanyfor a Policy of Title Insurance.
die preparation of deedsand mortgages is the matter of a few min-
utes,and it is more satisfactory not to sttempt to prepare them until
th€ r€port is issueal,and the r€cord na.mesof the owners vedfied as well
 64 Tke Realta Bhte Baok ol Cq,l,ifornia

as the correct descdption of the property, and it is known that the

transactioncan be consurnmated.The repod is jssuedwithin a very
few, da,ysand delivelcd to l,heagent. Tl ihe rille is good the ageni
s€nds_foJthe seller. preparesand has the deed exec-uted, whic-his
depositedwjth lhe TiUe Insurance Company with instructions to
collecta definitesum of money,and what to do with it. viz: Dav lor
v/ar slamps on lhe deed,pay off incumbrances,pay lirr pro raia of
taxes and for recording releases.if any, and pay the batanceto the
seller, or in many caseslo the Realtor. If a bank modgage is in-
\aDlved the seller has the bank send us a statementnecesi{, for its
release,which is paid when the transactioD is closed and the release
tlere€fter procured and recorded. In casesof private loans the ;;lI;;
has the moltgagee deposit with us a release with his statement as to
the amount to be-paid therefor. The buyer then brings in the pur-
chaso.mlney and expenses,the titl€ is run down an.-dthe pai:erg
recoroeo.
FOBMS
In nearly every insl.anceihe only evidenceol [he instructions is
contalneorn.srmpte-receiptsgrven by the Title lnsurance Company.
rnere are Duttwo ol thesereceiptsin use,onefor the monevreceived.
I and one for the documenis. There are slight variations i; the form
and langlage.of these receipts as betweei the different companies,
ouE-meunderiytng prrncipte is the same. With the aid of carbons,
cluplrcate_recerpts
are madeout, one deliveredto the clienl,,the other
retainedby the companyand altachedto the applicalion and report.

Following are forms showing the instructions and directions in

craesol-a simple salc and showinghow lhe blanks are fillad out:
 Tke RedltlJ BIue Book of C'ttlifornia 65:

PAPERS
Sdn Frsncisco, 1s

@to deliye. o. @.ord only o! recdptby us or t (-*,) Dolla6 !s!

iB tc be di$bu6ed by us .s lolows i

Irll,ll INAUTiANOE Ai{D OUARANTY COMPANT.

By

MONEY
No.
No_ san Imncs@, 19_

($_) Dollars

Ded 5-Mr'se l--- D{d ol Trusra

d Agm,. t -R€1. t -RecoD. 3-
ias, B.Dk Fee
or Stref Asssmetrt
TA-

Total i
TITT]D INAUR.{NOI! AI{D CUAIiANTY CDI|IPANf.
By
66 TkeRq,l,tuBtrueBookal Cavforniat

No. 1682203 Sdr Frscioco. 3/7,

Reived Imm Jd6 G. Blak
D€€d io H@ry L Reel

which re @ to deliver on record olly on.€ceip[ by u ol127500 DolbE sq

Abo!€ 6um iB to be djsbNed by u E follos:

" SuDboldt Bdk. a Der stafement

" Re@rdins R€l*e of }{orfgase

IIII,E IN€IIR,ANOE AND OU'FANfY @IITP4.I{Y.

By
WEIE!' O-ILLINE FOR O

MONEY
Appli@tio! No. 1682203
3-8 1984
Resiv€d frcD Heuy I. Reel
($2?617.10)

PuchasEllo'tsaceDped oi Trsl

Rec'd De€d tr.10 Mt'ee S- D@d ol Tr$t 3- _l_llll'"

XBc'dAsrbt. .- X€I. | --Rson
Conveydailg, Saak Fe

TueB or Si. tusessetrt

TffTi] INATTNANOD ANI' GUAIIANTY COIIPANT.

Bv
 The Rea],tuBkte Book of CdiforlLia 67

WITHDBAWINC
heretoforestated, either of the parties can surrenalerhis
and receive back his papers and money. It is the p&ctice of
Lpanyin caseauch request is made to first rotifv the other in-
party. as lhereby trouble to both pa ies is often obviated.
one of the part-iesFit}draw his money or papers.no legal
are aff€cted, as there is already a binding agreement in efict
settles those rights. We have no recollection in our twentv-
yea$ of expedence of enyone €ver attempting to make suih
iaral, excepting where the other palty was believed to be in
Dudng that time we have had but two instances where we
written.notice from one of the parties not to retlrm papers
'case,depositedby the other party, and a lawsuit result6d.' In
as'wehad the moneyand all the papers,we coulalsufer no
9a.we ilr €ach case merely deposited them in court and vrere

SYSTEM INEXPENSIVE
O.xrso{alled-es.row system is so simple and lhe expenseof
lling is so relarively small thal our schedulefpe lor a policy of
iruuranceincludescompensationfor the esoow servic;s. The
California Schedrrle$as loundedupon thc chargesmade b)
for the examinationof abstr.a.rs,and jncludesill tle serv-
'of making up lhe
abslra.t, examinationthereof and the chpckins
recordingof all papem (nor the re.ordeCs fees, and the dislfibu--
! of _t-he
money, For example, the actual expeDseto the company
handling the escrows conuected with the title insurance for thi
of February, 1924, amounted to less than $2.00 per order
Il is o[ greatvaluein rhehandl;ngof real estatetransactions for
reeltorand the bankslo be able to tell their clients lrom a Drinted
supplied them by the Title Insurence Companies tha exact
they will be. compelle4 tg._pay, without knowing an!,thing
ut tle title or llouble connecladtheicwith. If the buv; is ;a;;;
,000for a pieceof real estatehe knows that his exDmsei; Si00:
mor€ nor less. and the recordefs fee for recording. If he is
ng money in connection with the deal, tfre onl| additional
is for the war stamps on his note and the recoidinq of the
RELIDVINC TIIE TRANSACTION OF BURDENS
Under t,lrelaw of this state if 1wo parties enter into an agreement
purchaseand sale of a piece of real propelty at a certain-price, in
absenceoI agreementto the contrary, th; seller can te;der hjs
I and is entitled to his money on the day set for closing the trans-
cn. He is not obliged to supply any evidenceof title, The buyer is
oneg€tling the proteationand nalurally he shouldpay for the Ti e
lmD_ce Policy, just as he pay6 for his fire insurancepolicy. For
publicconvenience scheduleof rates is distributed l,o all fte per-
inlerestedin lhe real eslarebusiness. The ral,esin the Scheiule
senta fair profit on the businessdonein wholesalelots. We can.
the books of the company, estimate the actual average expens;
68 The RealtaBlue Book ol Ca,Alerni.a

per order, and the average char:geper order, and owing to the inex-
pensive methoclof handling escrowswe have consolidatedthis expense
with Jhe e-xpenseof title insurance, and tle r$ult is reflected in the
scheduleof rates.
Ou! experiencehas taught us that everyoneis better ofi where the
principals do not meet together to close a deal. When the purchase
price has be€n agreed upon and agreement sigred at the agent s office
there is seldom necessity for such meeting. The computation of pro-
ratings is a mathematical calculation, and where eachparty can call at
his earliest convenienceand leave his documents or money without
waiting for the other, more expeditious results are obtained. Many
parties, having confidencein their realtor, leave their moDeyor papers
\Fith him, and do not cometo the Title Company's office at all.
We feel that business policy dictat€s that we should not seddle
real estatetransactionswith an additional burden that would repre-
sent several hundred thousand dollars per year around the San Fran-
cisco Bay, and causedelay in the closing of land deals in order to
possiblysavethe public or ourselvesa few slight ineonveniences and
a few nominal losses.
Dd. Note-ahe IoresoinS 4rticl$, treatiDg of the general sublect of escrow6,
di6olose wlde dtEorence of oDinton and practtce as letween the tFo most ilensely
'polulrted areas oI
Californla. Thts seems vorthy of edttortal codDert Dd thtg
occasion ts taken to I)olni out tle state-vlde chareter ol the Realty BIU€ Book
s6 ereoDlined in lbls In6tance. We itestre to sive tte reader the best obtahable
lresentations, anrl vhen dilergent views obtaln uDon vhich are Dredicateil metbods
of procedure, the reader shoulil accept that theory whtch seehs host 6oulit, siytag
due eonslderatlon to the lact lhat locetlon wtll hrve much to ito *ith Dmcucal
a!!llcouon.
Mr- FarDer heats his dubleet broadly ard codprehenslvely, assuming thot
all posible pmtectton Ghould be anorded by the !roce66 ol esdow, resariues6 ol
the extstende or absence ot bindins contract6 as a condition precedent, dilfer-
€nttated anil decenta-llzeil from the title searchins functions of ths tltle comlantes-
Mr. StoDey, o! the contnry, asstrDes the existen@ of bjniling conhacts a a
natulal couEe ir Dort iutances, anit resards tle tttle @mpanies' functlon !.om
thrt !ol!t as a cenhaltzed servlce to co4preft the tmns4tio!.
As .lfge volme of Euccosslully coEilucteit brslneAs ls concluded ulaler llans
3ponsoreil by fhe6e eDtnent autho ties, 1s it lot reasonatJle that a unlfom pEG
ttc€ may eYentually como .bout?
Brok46 Eay nld in the6e dllcls , splerdrd rrgument h fryor ol the use
ot standa.d forrd8, alil re4ltze tbe lmpo uce o! r dea! Frclerty made, and redu.ed
to l€8al .ontnet, .lld€nctrg a Eeebtrg ol tbe minils of tle conlncltng latieB,