Escrow is the neutral third party in a transaction. It is basically the nucleolus of the entire transaction. Join your host Jeff Rutkowski and his guest Justen Brown on the escrow process. Justen is the owner and operator of Alliance Escrow, Inc. Listen in so that you can learn how to open and close escrow. Discover why teamwork and communication are key, not just in escrow but in any business. It’s all about being good to your investor, keeping in contact with them, and answering all of their questions. So what are you doing now? Take action and don’t be afraid to fail. Learn all about escrow today!
Listen to the Podcast here:
Understanding The Job Of Escrow In A Transaction With Justen Brown
I’m here with my cohost, JD Esajian.
It’s a pleasure to be here.
This may be one of the first times we have cohosted. I’m excited.
It’s a landmark show.
I’m excited about this show. We have a guest that I have met for the first time but JD has known for years, Mr. Justen Brown, the Owner and Operator of Alliance Escrow here in San Diego, with 3 different offices and 28 employees. He closes thousands of deals every single year. You’re going to love this guy. We’re going to get him up here. As always, we’re going to kick it off with the word of the week.
We got a good one, Jeff.
The word of the week, ladies and gentlemen, is EMD.
That’s a strong acronym to start the show. EMD stands for Earnest Money Deposit or good faith deposit. It’s the first important part of the transaction that ratifies the contract and shows that someone is putting skin in the game. Without that, you don’t have a deal. We’re going to get into that but it’s a very important part of the start of a transaction.
That’s three days after you sign a contract typically.
Normally, it’s faster if you want to have good deal etiquette.
You’re going to learn that. We’re going to ask our guests what they like to see in a customer. Let’s get into the show. I’m excited. Justen Brown, welcome to the show. How are you doing?
It’s always good to see you.
I’m excited to be here.
We’re excited to have you. It has been a great chat with you and to get to know you a little bit. I gave you a little introduction with some of your credentials. You’re also a real estate investor. You got a lot going on there.
You’re back from Idaho, looking at a new deal for your portfolios.
I’m taking action.
He’s cruising in his RV in 2 states and 8 more. What are the remaining states?
All the Northeast.
I’ll save you the trip. It’s cold up there.
When is the best time to go? That’s where I want to go.
Are you talking New York or the New England States?
Yes. New Hampshire, New England, Connecticut, and New Jersey.
It’s not now.
Can you imagine Connecticut being on his bucket list?
No. It’s a great state but I don’t know about a bucket list state.
I’m assuming 50 is to go.
When are you going to hit those?
Maybe in 2022. We’re going to try to do it.
It’s really important to have a great relationship with everybody that you work with.
We got some spots in Connecticut that would be stop-worthy with the family van.
I don’t want to knock Connecticut. It’s not San Diego but you will enjoy it. We will give you some good places to get some good food. There’s pizza for sure. There’s Pepe’s Pizza.
Pepe’s is right near where we lived when we were working there in Dan’s condo. That was where it all started for CT Homes.
Let me get some inspiration now.
You should go visit the original office.
We could do that. It’s 153 East Street. It was the first office outside of our condo that we lived in outside of our living room.
I want to kick off the show with a question for you, JD. You do over 100 deals a year and 1,500 or so transactions. You have escrow companies all over the place trying to get your business. This is your main guy. Why?
I’m looking at Justen and thinking about him and his business partner, Josh. For us, the first reason that we work with someone is they do a great job. They have to be competent and more than competent in what they do. They have to be good at what they do. Justen and Josh run a great company and do a great job. Secondarily, we have to like them and get along. That’s important.
I do like Justen. I would and do spend time with them outside of work. We’re talking about going on a fishing trip because he’s an avid hardcore fisherman. For us, in choosing a company to work with, we have to like them. It’s doing a good job. We have to like them. They provide a great service. They have to treat everyone that they do business within the transaction like they’re their number one customer.
That is also what Alliance does. Over time, when you develop that relationship, then you can start discussing fees and things like that, which we have that going on. To start out of the gate, they do a great job, they are customer service-oriented, you get along with them, and they have a great business and great employees. Alliance has that. Not every state uses escrow.
We would close with attorneys in Connecticut. Those are some of the same criteria that we look for. Whether you’re reading and you close with escrow, with attorneys or some states only use a title, you start out of the gate with competency, you like who you’re doing business with, get referrals, and check out.
I just met you but I know anybody that JD brings on board is somebody I want to get to know. We have a variety of people that read this. They’re mostly real estate investors, experienced investors, brand new investors, and some thinking about getting into the business. Why don’t you break down for the audience what is escrow?
Escrow is the neutral third party in a transaction. In California, we act as the glue between buyers, sellers, investors, and title lenders. We’re like the nucleolus between the entire transaction. We’re the neutral third party, meaning we’re unbiased to everybody. Our sole focus is to take instruction and close the transaction. There’s a lot more that goes on within the life of the escrow.
It’s by this diagram and all that goes on. It’s more than what Justen said.
I love this little roadmap. There’s a lot going on in this process.
On average, there are about 30 to 35 parties to one escrow transaction.
I never thought of it that way.
A lot of times, people don’t because they’re like, “I’m one person. I’m the buyer, investor, and real estate agent.” When you think about who you communicate with if you’re the investor, you’re talking to your private lender, title, inspector, termite company, attorney, escrow provider, and anybody on the other side of the transaction.
As an escrow provider and escrow closing service, you want a good one and somebody competent. As JD said, we treat everybody the same. If it’s their 1st or 1 millionth transaction, they’re all important to me and they’re important to them. We go to that same level of importance. It’s exciting. Escrow is a very interesting world. We’re going to get into some of those things.
Every guest we bring on the show, we ask them to fill out this little survey sheet and get to know a little bit about them. For the title, you described yourself as a business developer, janitor, and partner. Break that down for us.
With a net sheet, sellers know exactly what they want for the price they want.
Business development is I go out and create relationships. It’s important to have a great relationship with everybody that you work with. I go out there, create the relationships, and get them to understand why they want to use a good escrow company like us, our team, or one of our offices. Janitor is because I come from a perspective of I’m not better than or above anything. If somebody calls me and needs something, I want to jump on, take care of it, and be the solutions provider for them. I want to be the very first phone call when they say, “I need a dog walker. I need somebody to take out my trash. I’m sick. Can you bring me some soup?”
I will because I believe in taking care of people. If it’s in a transaction, “Justen, we need you to pick up these documents because we need to push this thing to recording,” I’m there. I’m Johnny-on-the-spot. I want to come and save the day. A janitor cleans up everything. They’re usually your fail-safe. Usually, when we think about it in school, janitors come after hours. They’re cleaning everything up, so the next day is perfect and fresh. In escrow, we want to be able to clean everything up inside the transaction. That way, we have a clear closing, and everything’s perfect.
I can echo that from firsthand experience that you do that. You can come and pick up docs if they need to be recorded quickly. You go out of your way to come help us when we’re prepared to get a transaction closed on a 21-day escrow in 18 days. Not to mention after he goes fishing, sometimes he will bring us a pretty awesome catch. A fish Toro that you brought melted in my mouth.
I got a new sauce for you. The holidays are my favorite time of the year, especially Halloween. I love chocolate and all the sweets. At Thanksgiving, I love all the pies. At Christmas time, I’m always giving recipes out, “This is what I’m going to do and how I’m going to cook it.” I take that same passion in business to cooking and everything else. I helped create the company. Josh Baker is my business partner. He’s the brains behind everything.
He’s a wizard when it comes to structures, legality, setting certain things up, putting things in motion, what we can and cannot do, what an investor agent can and cannot do, and what they should and should not do. Especially when oversight is lacking in some areas, it’s important to have somebody that knows exactly what they’re doing and is competent. Also, you can reach out to them. They’re accessible and give you that oversight to keep you protected.
That’s a good point because, in states that close with attorneys, you have an attorney looking over. Escrow doesn’t give legal advice but having someone that has that competency level and understands what you legally can and can’t do and what you should and shouldn’t do is so important. A great escrow company like a good attorney can help keep the transaction going but also keep you safe.
Let’s start with the basics here and then we will work our way into some high-level stuff. As an investor, you’re going to hear the language, “I opened escrow on a property. I’m in escrow to buy a house.” That’s where it starts. They find a property and the contract is accepted by the seller. How does one open escrow with an escrow company?
As an investor, I’m specifically going to talk about investors. Generally, they’re going to be communicating directly with the seller. They have already negotiated whatever their acquisition price is and they have their purchase agreement. You have one from the dashboard within FortuneBuilders. Download that, fill it all out, and get it executed and signed by both parties. They’re going to send us an intro email or they’re welcome to stop by our offices and do it in person. Everything is done these days electronically.
Send us an email, “My name is Joe Investor. I’m going to be buying 123 Maple Lane. Here’s the seller.” They’re going to send us all the information. Key point number one is to send all the contact information upfront. As an investor, I want and need them to be successful because I need them to do another deal so that way I get more escrows. Send us full contact information and that is the offer, the price, and the deposit, EMD, or good faith. That’s going to be given to us by a check money order or cashier’s check from that investor. They’re going to identify who their lender is and their full contact information.
Once they send us all the seller’s contact information like legal name, address, phone number, email, Snapchat, or whatever it is, get us as much information as possible. We take that, open escrow, and drop all that information into our escrow instructions, which also we mix in and sprinkle on all of our civil codes to keep everybody protected. From that point forward, we start communicating with each party independently and individually. That would be the first step as an investor in opening escrow.
Jeff, you have heard me talk on different trainings about the open escrow email or a template for that. That’s what Justen’s alluding to as an investor. When you have all that information, a lot of it is the same every time when you go to open an escrow when you’re buying something and also when you go to sell.
There’s a different set of things that need to go. As an investor, the more that we can be organized, the faster escrow can work, and the faster we can buy the house. When we finish it, we sell the home. Having all that information that Justen went through in a template somewhere is a system because it’s very similar every time.
To those of you reading that are Mastery students, the document that JD referenced is right within the Mastery site. You can download that. Escrow is open. From this point, the investors are going to begin working on contingencies, getting inspections going, and things along those lines. When is your next point of contact with the investor? What should the investor’s next point of contact be with you?
During escrow processes, there are many different events happening that are completely outside of escrow. What’s happening in escrow is we’re communicating directly with the seller and getting their lender’s contact information so we can order the payoff. That’s important. The seller wants to know what they’re going to pay off and what they’re going to walk away with after all fees, commissions, and expenses. It’s their net sheet. We’re going to build all of that. In escrow, we’re going to reach out to the title and pull the preliminary title report. That’s going to tell us all the good, bad, and indifferent on that property.
With the net sheet, it’s important and one of the most important things to the sellers, “What am I going to walk away with? If I accept this investor’s offer or as I go through this escrow, how much do I stand to make?” Also, on the other side as an investor as you’re selling is equally important, “What am I going to make? I got to refill the coffers.” In escrow, we’re communicating with title, lender, insurance agents, termite company, home warranty company, and natural hazard disclosure company. We’re doing all these things at the same time and running multiple races simultaneously.
You’re the quarterback in the deal.
The investor’s job is to go out and make sure that what I’m buying is exactly what I want and I’m getting it for the price I want. Also, they’re building their pro forma of, “What am I going to be into this?” It’s going through the investment mindset of, “What do I have to rehab? What’s my projected cost? Are there any skeletons in there? Maybe a stem wall is cracked, a joist is rotted, or all that good stuff.”
It’s not required certainly to choose an escrow company or a closing agent. The fact that if they have investing experience like Justen has a lot of is a value add too. Adding onto what you asked me earlier, it’s not required, but if they have an investing experience and do their own investing, that’s a good another criteria to layer into a decision on using someone or not. It’s not the first thing we look at.
I touched on that at the beginning of the show. You have some pretty cool stuff going on. I want to take a little detour here. Talk to us about what you got going on in the real estate world.
I got back from Coeur d’Alene, Idaho. I like that market up there. It’s a great destination city. It’s beautiful. I have a project that I went up and flew up there. I locked up a property like an investor would and made an offer.
Who did you use for escrow?
When you’ve made a commitment to get back to somebody, make sure you get back to them even if it’s at 9:30 at night.
There’s a company up there called Alliance Title & Escrow. It’s not affiliated but they should sell it to me and then I’ll be in the title and escrow game up there. I locked up the property and flew up there. I’m investing as every investor should. Don’t look at it as an expense because you’re investing in your business. I flew up there and set up some inspections to get up there and look at this project. It’s an original school building in this town and it’s super fascinating. I liked the nitty-gritty and getting into very difficult and complex situations. I looked at it and it’s a huge shell. It’s about 21,000 square feet.
We’re going to go in and frame out everything like brand-new electrical, plumbing, fixtures, flooring, walls, and lights. It’s an apartment building. There will be 17 units, 12 two bedroom, two baths, and 5 one bedroom, one bath. Part of investing is always looking at what your exit strategies are. Before even going into a deal and even as you’re writing an offer or getting accepted, always consider every possible exit. I always think of, “Plan for the worst. Hope for the best.” On this project, in particular, I’m going to take the entire first floor and Airbnb it. That’s one strategy that will add a different level of income. It could be consistent. It might not be.
It’s very seasonal in this area, so I’m excited. While you’re working with somebody, it’s always great to have an extra set of eyes and brain. If I was looking at a project or development in San Diego and I don’t know what the heck I’m doing, I’m going to call JD like, “I got this project. What do I need to look out for?” There are things that we uncover over time and we start to learn and get our knowledge bank up. As I’m going up into this project, I have to look at structural engineering, mechanical engineering, and roof.
Uncover permitting process and become familiar with that. Is it challenging there?
It’s not too bad there.
Is it better than California?
It’s a million times better. I went into the county or the planner. I got to walk in and say, “I’m inquiring about this property. Can I meet so-and-so?” They’re like, “Keith’s right here. He’s a planning engineer. Here’s zoning right here. Do you want the municipalities? Jim, come over here.”
It’s that versus in San Diego or California, “Here’s your ticket. I’ll call you in three weeks.”
I keep hearing about Coeur d’Alene.
I got back from there over the summer. From what I have heard through Justen and my family that has been there, it is an amazing place. That’s going to be a spot that I go to in 2022 for a little vacation.
I got contacts for you. I’ll set you up and get you a house right on the river or lake, whichever you prefer, and a boat.
That’s another benefit of a good escrow agent.
If your escrow agent is not giving you a boat and a place in Coeur d’Alene, you need to find a new one.
It goes back to relationships. Our relationship goes back years. Also, I know I can put my name to JD and he will do only but amazing things. Relationship is super crucial, especially in the investing world.
As a company, whether it’s CT Homes or any of the companies that we operate, we find good people to work with. We fostered that relationship and used them over and over again because of the reasons Justen mentioned. It’s a good feeling to have someone who gets it and also helps you save time and make more money.
Over time, another benefit is we get to drive costs down too. When we’re buying a transaction or a house and we offer to pay the closing costs for the buyer, I can go to Justen and have a conversation with them about fees and things like that to make the deal fit a little bit better for us. That’s something that you work on over time and develop that relationship.
Let’s get back into escrow. Before we do, as always, I want to let the audience know that if you are interested in learning how to be a real estate investor and you have been thinking about it, you watch all the TV shows, you know it’s in you, and you want to do it but you haven’t taken the leap yet, there’s FortuneBuildersShow.com. What that does is get you a free ticket to training with one of our top trainers to break down the business and lay down the foundation for you.
Also, there are some higher-level techniques to give you the confidence to get started and to know, “What are steps 1, 2, and 3? How do I make this dream a reality?” Make that happen. The question we were talking about earlier is, “What makes a good customer?” As real estate investors, once we get something under contract, we ideally want that to go smoothly and close sooner on time. How does an investor work with you? What’s the ideal customer for you that ensures or gives the highest probability of a smooth transaction?
The best customer or best investor that I can think of would be somebody that doesn’t have a know-it-all attitude. The first thing is if they come into a situation and say, “I’m here to learn,” and take that perspective with whatever team member that they’re working with or escrow company. That’s music to my ears because that means I can add on to whatever their knowledge base is and also give them the tools to say, “What’s going to make you super effective is knowing I have my LLC all set up. I have my articles of incorporation and statement of information. I’m in good standing with the secretary of state. I have everything in a concise one file.”
That’s super important. Also, “Here’s my purchase contract. It’s already ready to go. All I have to do is fill in everything.” Communication is important. It’s having the proper documentation. When you’re going through it as an investor, you look at it as a team. Your inspector, escrow, mentor, and lender are your team member. Don’t be afraid to ask these questions.
The perfect client for us is somebody that’s going to come in and say, “I have done a couple of deals or thousands of deals. How can I get better?” They’re asking that question, “What can I do to be better, smoother, faster, or more efficient?” I can look at it and say, “Let’s look at this, change this here, and add this in.” It would be communication. Always let your team members like, “These are my hours. This is the best way to communicate with me. Call, text, email, smoke signal.”
It’s how people like to best be communicated with because that facilitates faster of everything.
One thing I have started incorporating is I understand people get busy. We’re not just busy in our businesses but we’re also busy in our lives. We all have kids, parents, and grandparents. Some of us are adults taking care of our parents. One thing I have been asking is, “What is the best time that you like to be reached at?”
One thing that I have done, which is a good and a bad thing, is I made a commitment that if I say I’m going to get back to somebody, I will get back to them even if it’s at 9:30 at night. I’ll call you and you’re like, “What’s going on? Is there a problem?” “No. I told you I would get back to you. Call me tomorrow.” At least I held my word.
If you’re an investor, hold your word, do what you say you’re going to do, and have your team ready to go. If it’s a flip, an assignment, or a wholesale, have all that stuff detailed out. In escrow, we work off of direction and the contract tells us exactly what to do, who to do it with, how to do it, when to do it, and everything.
We take that. To be a very effective investor is to have this important information and identify your backend buyer if it’s an assignment, wholesale, or flip. As you’re going into the transaction and bringing in your deposit, have all that ready to go. You’re going to have the greatest transaction you have ever had.
To summarize, it’s being organized and having everything that you need ready to go. We do something as Justen knows, called pre-opening escrow, which is not even escrowed yet. This is before we find our seller or buyer. We get Justen, his team, and Cindy, who we work with primarily, everything ahead of time that they’re going to need regardless of the Xs and Os of the contract.
In moments of doubt, just take action. Take action quickly, swiftly, and often. If you fail, fail forward and keep taking action.
That’s 65% of the stuff. It gives them a chance to start the file. It’s also one of our certification points that you and I have talked about. It helps the seller get their money faster for buying. On the other side, when we’re selling, it helps the buyer move into their new home faster from us and we get our money faster as well. We pre-open escrow.
Not a lot of people do that, which everybody is available to do that. I’m not sure if you can do that in attorney states or if attorneys would like that. I can’t imagine why they wouldn’t because it makes their life easier. I already know who I’m going down this path with and a lot of information about them. We have the races here in San Diego. I would rather bet on a horse that’s already moving versus one that’s starting from a standstill out of the gate.
That’s a strong analogy. That’s a great visual. You don’t want to bet on a horse that hasn’t started yet when you can bet on the horse that’s already moving towards the finish line.
I love the pre-open. It sets everything apart and moves things a lot quicker.
A good way to back into that for those of you that are reading is to ask your closing agent, “What are the things that I can get you ahead of time?” This is how that started with you or your attorney, “What are the things I can get you ahead of time that regardless of what we’re buying it for and what the actual address is you’re going to need anyway?”
Justen already mentioned some of them. It’s your incorporation docs, a good standing depending on what state you’re in, and a variety of other things. Ask your closing agent, escrow officer, title company, or attorney, “What are those things?” Get those organized because those are going to be the things you’re going to use almost on every transaction.
This is an important part because I want to give you and your investors the best possibility to be a lot more efficient. If you’re an investor and you’re selling a property, most times, we’re using one of the funds from the team or private money. We have private beneficiaries. Get that contact information to escrow or your closing company as fast as possible, even upon pre-opening, so that way we know.
A lot of times, if we’re working with investors, they’re using private funds from a family member like Uncle Eddie, but Uncle Eddie is on the RV driving across the country. They’re on their boats or on a vacation. It’s important to know who that payoff lender is because that would be one thing that can hold up a transaction if we don’t have payoff information. If you’re an investor selling the property, you don’t want to hold up a transaction from those buyers moving into their dream home.
As an example of what Justen mentioned, I have an uncle. It’s not Eddie. It’s Bob. Uncle Bob lends on CT Homes transactions. To Justen’s point, Bob is not the quickest with technology or the fastest, which is fine. We know ahead of time we have to alert Uncle Bob when we’re signing a contract on a house that he lent on at CT Homes, “Coming down the pipe, we’re going to have to reconvey the deed and get you to sign some things.” We get him that information even before we pre-open the escrow so that Bob can get all that stuff ready and sign what he needs to sign. That is one of the things that we send to Justen on the pre-open.
Justen and his team have all the information for uncle Bob in this case so he can get his money back. We get the paperwork notarized because that can hold up an escrow. This is good. We opened a bunch of escrows with you. There are two that we’re selling way above our ARV and what we thought our market value would be. They’re 21-day escrows and multimillion-dollar properties.
We’re going to close one and when we do close it, that 21-day escrow will have closed in 16 days. It’s a $1.8 million sale. That’s an example of getting a transaction done. Twenty-one days is already fast but getting it done in sixteen, the way that it happened is through our relationship with a good closing team. In this case, it’s Alliance, Justen, his team, pre-opening, and getting all the lender information. That’s a great tip that you bring up for anyone reading, whether you’re buying your next home to live in or your next investment property.
One of the tips you gave in a previous show was getting preliminary title reports. Is that something that you’re going to execute in this phase as well?
We would do that. Alliance or escrow, in this case, doesn’t pull that. The title company does, but Justen knows the title company that we use 95% of the time. That’s Greg with First American, who I’m going to be interviewing on a future show down the road. All the parties and players know each and that facilitates a faster transaction. This is good advice for anyone reading. When you find good people to work with, work with them over and over again.
That’s how you develop a strong team. Whether you’re into sports or not, you look at any great sports team and that’s what happens. They have chemistry and a bond. They know what to expect of each other and you get more done. You can have more fun doing it and, at the end of the day, make more money and like what you do. Liking it at the same time is an extremely important thing to do.
Greg is a great guy. When you have those relationships, I can call him and he answers his cellphone, “We have this PR that came out on a new property. We need this one. Can you look at line seventeen? It’s this lien.” He will scrub it real quick. He is on. That’s the importance of having the same team over and over again.
That’s how it looked to me and I ended up getting better pricing. People ask me all the time, “JD, how are you getting that price for this?” It’s because you’re working with that person over and over again.
It’s one thing to walk in and demand a certain price, which I don’t think is good business. When you work with someone over time, they show that they’re doing a great job, and you’re doing a great job, then you can have that conversation. Over time, you can save quite a bit of money. Not to get into specific numbers but we invest a lot less with Alliance and they would charge a first-time customer because we use them dozens of times over the year.
We talked to folks about opening escrow. You alluded to many of the things happening during the process. Let’s talk about closing escrow. Before we do, Justen, we have a segment of the show that JD loves that we call the Fear Factor.
I’m going to bring in a tub of worms Justen, and you have to down them all.
Fear is something that messes with people on every level, like in business, personal life, and especially the past couple of years in our country. There has been a pandemic of fear, in my opinion, alongside the actual pandemic. In your mind, what advice would you give somebody? How does Justen Brown overcome fear in his life and business?
First, I want to make sure that everybody that’s reading knows I do have fear every now and then. Every person should. What I do to get over it is I take action. It’s plain and simple. They always say you have twenty seconds of courage. Even in those twenty seconds, you take action. You can make a decision and not making a decision is making a decision. I believe even in the moments when I’m looking at a large project and I’m going to have to spend over $1 million and I don’t have it, there’s a moment of fear. Some would call it a moment of oath something else.
I take action quickly, swiftly, and often. If you fail, that’s not a problem. Fail forward but keep taking action. The number one thing I tell people is even in moments of doubt because doubt is fear and you don’t think that you’re going to be able to do something or accomplish something, take action. Even for a new investor, don’t be afraid of going after that first flip or taking on that first 1 to 4 families. Take action and exercise that muscle of taking action.
JD, I would rather put my money on a horse that is taking action than one that’s just standing there doing nothing. Let’s start wrapping it up here with closing escrow. What are the boxes that need to be checked? What does an investor need to do from all parties involved to close out escrow and pocket that profit?
The important thing is making sure that all their LLC entity docs are with us. We have covered that. The next thing would be making sure that we have already identified, connected, and communicated with their payoff lenders. In any of their subs that we’re paying off, if there’s a contractor’s invoice, which is not a responsibility of escrow, it’s making sure that your lien waivers are covered and taken care of by any of the trades. We don’t handle that but it’s important to be aware of that because that could hold up your closing.
Also, it’s making sure that we have their proceed instructions. That’s payday. We’re a little bit extra overly protective of that. We always want them to be notarized. Even with notarization, we will still call them upon sending it, “I want to verify that this is who I’m sending money to.” A lot of times, investors will partner with other investors and they will have side or separate agreements. We want to be aware of that so that we know if there are multiple investors involved, exactly who we’re paying, and how much we’re paying. That would be the biggest thing with closing.
From my experience not running an escrow company but looking in and working with a good escrow company like Alliance so often, there’s a rhythm and a routine to what they do throughout the day, week, and month depending on what time of that day, week, or month it is. It was the end of the month and that gets busy.
Cindy, who we’re working with as an example, does certain things at certain times of the day because it helps her be efficient. If you understand that from your closing agent, you can plug into that. There are certain times of the day that she will work with the loan docs because the lender is more readily available.
If you’re standing on the outside and expecting them to always be doing what you want to be done at that time, you’re out of sync and out of rhythm. I bring that up because if you can understand from your closing agent, attorney, escrow company, or title company when they do things and why they do it at that time, then you can check-in at that time. You can be more knowledgeable, update your seller or buyer depending on what side of the transaction you’re on, and help everyone work together better.
I was on that transaction. People point a lot of fingers in a transaction when things aren’t going as well. That’s human nature but if you know what your closing team is doing because you have developed a relationship and you’re asking good questions, then you can handle challenges as they come up better and get everyone to the closing table or the finish line, to use another horse analogy, faster and get money back to everyone quicker. Another good tip from my vantage point looking in is to ask that question, “Is there a rhythm and a timeframe to what you do and when you do it? Let me know that so that I can plug into that.”
It’s crazy how practical that is. It’s like asking what the preferred method of communication is. I was thinking of somebody I was dealing with. In the first week and a half of our relationship, I was using email and wasn’t getting responses. I was leaving voicemails and getting frustrated. I called him out on it like, “Shoot me a text message. I check my texts every evening and return them.” Had I asked that question at the beginning of the relationship, I would have saved a lot of trouble. That’s good practical advice. Justen, what would you say is the biggest mistake investors will make while working with escrow? Our readers know not to do that.
It’s their expectations. Some of their expectations are a little bit too high. It would be, “If I call my escrow provider, I expect them to answer my phone call. If I call and leave a message, I expect a response right away.” JD had mentioned that there is a specific rhythm like early mornings is funding stocks, recordings, and all the important stuff.
If you’re an investor, you want me to be solely focused on those closings because that’s when you get paid. Some of the other things would be that they didn’t check if there were any other liens, hidden skeletons, or if an investor has any skeletons in their closet. This would be back taxes, IRS, or child support, which we do uncover.
The escrow or the attorney find those things out. Before we close, we do a general index. The title does it to make sure that what we’re conveying as an investor, seller, or buyer is a clean and clear property free of all claims with no clouds on title. The other thing would be they send us an offer and it’s not signed or it’s partially filled out. We get those and I get to have a great conversation with them, “I appreciate this escrow. We love this. Congratulations. Who is the seller? How much are you buying it for? Do you want to make a deposit? Is there a lender? Are you getting a loan? Are you paying cash?” It’s not being prepared.
The other thing would be as you’re opening if it’s a wholesale or an assignment is identifying who their backend buyer is going to be. In other states, they’re called double escrows or double closings. It’s technically an illegal term here in California. It would be extremely important to them to identify who they’re unloading the property to or who’s going to be taking their position.
We understand as escrow, sometimes that changes. Let’s say I have a property locked up and I’m going to sell it to you but you found a seventeen-unit in Idaho, “I don’t want to buy your condo anymore,” but JD is behind me. At least I get that information to the escrow company as quickly as possible. Identifying that would be important.
If you’re doing business here in Southern California, we would highly recommend Justen. If you’re working in 1 of the 49 states across the country outside of California, what are some good questions an investor should be asking an escrow company? You’re doing thousands of transactions. You talked about assignments and wholesaling. I have talked to a lot of escrow title companies that aren’t even familiar with that process. We’re running a wholesale business. What do you think are some of the major questions that should be asked to an escrow company?
One would be, “What type of escrow transactions do you do?” Whether it’s a condo, mobile home, commercial, business bulk, assignment, wholesale, or double, ask them what types of transactions and if they are comfortable doing them. There’s no right or wrong answer. Honesty is the best policy here. Also, it’s having a meeting with them, “This is who I am and what I’m looking to do. How can you assist me and my business? How can I become better?” It goes back to being a student. One thing would be, “Do you work with any other investors?” It’s one of my qualifying questions with contractors or subs, “Have you worked with another investor?”
If they say no and they only go directly to the consumer, they might not be the type of person I want to work with as an investor. Investors are typically nimble and quick. They want to move things a little bit faster and work nonstop. The other thing would be what are some of the pitfalls that they have seen in their state while working with investors. A lot of times, they’re going to say, “We work with a FortuneBuilders student in Arkansas.” Jessica does a ton of deals and she has uncovered this. That’s important information to add to your checklist.
A lot of the reasons over the years that we have been able to close transactions a lot faster and more efficiently is because we have worked with you and Josh to refine that process, asked those questions, and learned the things that we can do together. What Justen’s talking about is vital because, over time, you can save a lot of time. When you add that up, it equates to quite a bit of money. We have developed that by asking questions.
One of my qualifying questions is more for a CPA or tax preparer is, “Do you own your own home? It doesn’t have to be but have you bought and sold the property?” I want to know if they’re going to be able to empathize with me and my experiences, challenges, and pains. If they can say, “I bought three properties this year and sold two of them,” that’s exciting. This is somebody I want to work with. Clint Coons, a friend of mine up in Seattle, buys and sells tons of properties. I know if I go into another state, I have somebody that I can refer to or lean on, “I’m looking at this project. Can you help me?” That’s important.
Those are some good qualifying questions for everyone reading. Let’s get you out of here, Justen, with this last question. As I alluded to earlier, many readers are right on the brink. They want to jump into real estate. They’re so close. Talk to those people. You’re a real estate investor as well. For those considering the industry and the business, what is the number one piece of advice you would give them?
Do it. Take action. Now is a time to be in the business. When you look at the macroeconomics, the state of our entire country, the financials, and the fundamentals, a lot of people would say, “We’re poised for a drop or a pullback.” Years ago, I could have easily said, “I agree with that.” After a lot of studying, I have been seeing in the different markets I pay attention to that now is an incredible time.
It’s a great time to get a coach or mentor, get plugged in, join the Facebook groups, and start the conversation. I had a meeting with a couple of friends of mine and I said, “Take action.” What that can mean is, “I’m going to call and reach out to Jeff’s team or JD’s team and have a conversation.” That’s taking action and baby steps.
I’m going to go to the next REA and meet a couple of people. It’s okay. Go and start early and young, “I’m brand-new. I don’t know anything.” That’s the best position to be in because you’re going to get a tidal wave of knowledge and wisdom that’s going to be poured on you. The next thing would be to start looking at Equity Street deals, CT Homes, deals, and anything that you’re doing.
If there’s another investor in your area, “Let me peek over your shoulder.” The more you get familiar with it, the more you’re going to take action. Action is going to lead to success and results. Now is a great time. Whatever market or state you’re going into, listen to the coaches and teachers and take action. This is one of the best times to be in it. I’m super excited.
I’m so glad you brought that up. I meant to ask you what your outlook on the market is. There are no indicators that we see pointing to a dip or drop of any sort. That’s a great opportunity. Thank you for lining up, Justen. This was great. Thanks so much for coming to the show. Thank you everybody for reading. I look forward to seeing you.
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About Justen Brown
Experienced Account Manager with a demonstrated history of working in the real estate and mortgage industry. One of the youngest licensed agents in CA at 18. Skilled in Investments, Flips, Deal Structure, Negotiation, Marketing, Social Media, Sales, and Communication. Strong business development professional, treating every client/buyer/seller/investor with respect.