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Are All Title Companies "Impartial"?

By Thomas Rose | Tue, 16 Dec 2008

Every once in a while, you may run across a title company that does something really aberrant for an "impartial" escrow agent. On one occasion, my client entered into contract negotiations with a contractor for the construction of a new home. They submitted a revised offer (bearing initialed strikeouts and additions) to the builder for his review, approval and signature along with their earnest money check.  The builder intentionally never accepted the contract changes, but he deposited the unapproved contract documents and the earnest money check with a title company, which accepted both, receipted the "contract," and deposited the check.

My client then asked me to review the situation, and I discovered some unacceptable matters affecting title and other serious issues. My client decided to pull the plug on the transaction, they formally withdrew their contract offer to the builder (which the builder still had never approved), and then they asked the title company to return their earnest money which should never have been deposited in the first place - and the title company refused! Now it is a perfectly normal practice to ask for mutual releases from the buyer and seller to release the title company from future liability. But the title company wasn't holding an executed contract, and they should never have deposited the check in the first place.

Polite oral demands didn't produce any results, nor did a written demand. I finally had to go directly to the general counsel of the title company before matters were straightened out.  The moral of this story: not all title companies are equal, especially if one of the parties to a contract sends a significant amount of business to a title company which might influence otherwise impartial behavior.

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