Land Deal Risks Prompt Tightening of Escrow Practice

Oakland Business Review (MI) (06/05/08); Marshall, Carol
Title insurance companies that are more concerned about the stability of development deals as the economy slows are less likely to hold an earnest money deposit (EMD) check for a property buyer. For years, some title insurance managers have agreed to hold an EMD check rather than deposit it to show developers they were ready to do business; and underwriters rarely suffered huge escrow losses. "But it's happening much less now as title companies have become more restricted and perhaps concerned with liability, or being left on the hook if the developer for one reason or another can't cover the check," explains Robert Leonard, senior director of iCap Realty Advisors in Farmington Hills, Mich. "Deskrow" is fairly common among larger credit-worthy developers, Tom Richardson of Ann Arbor, Mich.-based Liberty Title says he recommends that clients "ask to see the books to be sure the EMD is where it's supposed to be."