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Thanks for your response Skip – I really appreciate it.
Hopefully you can help me understand this.
In 30 calendar days (14 in a pinch) we can:
Run title work (and issue title insurance on said title work)
Have an inspection done on the property
Order and receive an appraisal
Do a social security number and patriot act check (the resulting report is around 30 pages long)
Verify employment on both borrowers
Verify assets including a detailed paper trail on all large deposits
Order and receive tax returns from the IRS
Negotiate and make needed repairs on the property
Have a survey done
And an addition to 6 to 12 other processes dependent on a given property.
And fund the transaction
And to the tune of about 500 a day being the 10th largest lender in the US.
Why does it take your industry effectively 7 to 8 weeks (or longer) to run a title search and pay the lease?
I think there are additional factors at play here.
I can understand two to four weeks but the time frames are excessive and what it effectively does is gives you an executed and valid lease while the landowner’s payment is in escrow for close to 2 months (or more). This seems deliberate as your industry is the only one that still uses this archaic instrument and you gain benefit for 2 months prior to the landowner. I can’t imagine a seller allowing a buyer to move in before the property is closed and the seller paid.
I mentioned in my post we close 500 transactions a day. I’d say any reasonable person could construe we’re quite busy as well and not twiddling our thumbs either – but we seem to get it done in a timely manner 500 times a day.
We run title plus all the items mentioned.
What would make much more sense is to put the total transaction in escrow with a specific calendar day timeline. Or even issue a cashiers check at the end of a specific and given time frame instead of I’ll pay when I feel like it after 6 weeks (or more) after your bank mails a bank draft to my bank that I’ll then cancel and issue a cashiers check for (when and if I feel like it).
I am Skip
I just can't make sense of the draft thing - I've been in the banking industry in one form or another for over 25 years (the real estate end for 15). I was told it was to give time to run title but it's just not adding up.
Russell,
Running mineral title is far more complicated than real estate title. This is especially true outside of LA where we don't have the benifits of prescription. Couple that together with poor records and closed up abstract plants and crowded courthouses there can be a tough road ahead. Also, you have to keep in mind that the landmen may have quite of few tracts to run.
Personally, I think a 60 day draft is extreme, but not unheard of. Keep in mind that the terms of the draft are negociatable.
Baron 30 business days is in effect around 60 calendar days the way it's set up. As the time frame doesn’t start until the issuing bank physically receives the draft back from the depositing bank and then the draft is canceled after the given time frame elapses and a cashiers check is cut and mailed back to the presenting bank (at least in my case).
Thirty days (calendar) is probably not extreme (it could be done faster) but 60 is no question excessive, especially when the other party has an executed lease in hand. As mentioned escrow makes much more sense, and as I researched the use of the draft In the oil and gas industry I learned that was the original intent. Both the lease and draft were presented to the depositing bank and the lease was not released until funds were deposited. The oil and gas industry has moved away from this and is requesting the executed lease up front now.
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