The best part of being a real estate investor is getting paid. Am I right? There are many rewarding aspects of being a real estate investor but let’s face it, the expectation is to get paid. I cannot tell you how often we are asked to pay the sale proceeds to an entity other than the owner of record.

Typically, we get the proceeds authorization form at the tail end of the transaction. This authorization directs where to send the proceeds from the sale. As an example 123, LLC should want us to send their final proceeds to 123, LLC not to Jon Smith, the managing member of 123, LLC. When we are asked to pay the proceeds to someone other than the owner of record, typically your escrow officer will say, “I’m so sorry but I can only pay the proceeds to the owner of record.” Then we typically hear back from the customer, “But I do this all the time with my no name title company.” I promise there is a method to our madness when it come to this and we are not just trying to make your life a living hell. It is an IRS reporting nightmare to say the least. Remember we are escrow people not accountants. Distributions from an entity require additional reporting that we are not equipped to deal with.

Additionally, there could be legal issues that arise from making a distribution from an entity. Although you have most likely been asked to supply your entity documents to our company, we are reviewing them for title insurability. We are not reviewing them to determine if the person instructing us to distribute proceeds to a third party has the authority to do so. We are escrow and title experts; not attorneys.

We have regulators that can audit our escrow files at any moment and regulations we must follow to keep our licenses in good standing so we tend to shy away from these types of requests.

If the buyer has a lender that adds yet another layer of regulation, that typically prevents us from paying the seller’s proceeds to anyone other than the owner of record. So please save yourself the headache, and your escrow officer the heartache of saying no to you, and obtain a bank account for the owner of record so proceeds may be easily released at close of escrow. There is nothing better than a hassle free payday!

by Jill Bright, AVP/Sr. Sales Executive, Chicago Title