Have you ever taken the time to read the language of an owner's policy jacket? If you are like most attorneys I know, you have little time to read the title commitment for a closing let alone the dry, dull and technical language of a policy jacket. You may even think that all owner's policies are basically alike. Think again.

The scene runs a little something like this: Your client calls you and says he is interested in buying a piece of property. He asks you to draft a purchase contract. You carefully do so and send it to the Seller's attorney for review. A few days (or maybe hours) later your beautifully crafted document is returned to you scarred beyond recognition.

Although commonplace in the title insurance industry, reinsurance is a concept which is frequently misunderstood. When confronted with the idea that the title insurance company selected to write a policy is in fact sharing the risk with its competitors (i.e. other title insurance companies), it is no wonder that people become confounded and perplexed with reinsurance.

[Date]



[Addressee]



Re: [Name of Project]
$[Type and Amount of Policy; Name of Insured]
[County, State]
[Ceder’s File Number]
Our File No. _______

Dear _________:

1. Thou shalt not walk into the deed vault nor close a real estate transaction unless thou knowest what thou art doing or thou has learned brethren or sistren to lend a helping hand. The days when "anyone can close a loan" are gone.
2. Thou art not a title insurance company nor is thy malpractice carrier.
   

This is the first in a series of articles dealing with the identification and prevention of potential claims in the closing process. Our company has noted an ever increasing number of inquiries from closing attorneys in which they are being asked to disguise, camouflage, or misstate the true nature of the transaction. Perhaps an innocent motive underlies some of these requests, but fundamentally there is nothing right about manipulating loan documentation to make the transaction seem to be something it is not.

In the last two or three years but especially within the last year, illegal flip real estate transactions (FLIPS) have virtually exploded in numbers around the country. Much of the credit for this proliferation in fraudulent transactions can be attributed to "Infomercials" on how to "buy real estate with no money." If you are an insomniac, tune in to any one of these usually late night presentations and you will be treated to some very "creative methods" to obtain real property.

On August 25, 1997, the Internal Revenue Service issued a Private Letter Ruling that has been hotly debated among exchange experts. PLR 9748006 involved a taxpayer who, through a qualified intermediary, transferred relinquished property to an unrelated buyer and acquired replacement property from his mother. Relying on § 1031(f)(4) of the tax code, the IRS ruled that the transaction did not qualify as a like-kind exchange.

Introduction

Individual Bankruptcy, Generally