How to Avoid Trouble – Part 3

How to Avoid Trouble – Part 3
23 Dec 2014

 


How to Avoid Trouble

In Part 2, I addressed the second step, Ask the Right Questions to Get the Right Answers,’ in the four-step process that will help a new bail agent avoid the risk of writing bad bail and being put in a position of possibly losing their business. In this blog, we’ll look closely at what types of collateral is acceptable to cover a bond and what type of research is necessary to verify its validity.

Securing Collateral

 

The first step when presented with any form of collateral to secure the full amount of a bond is to verify that the client actually owns the property and that the equity value is what, or close to being what he claims it to be. You should always have at least 15% to 25% more than the actual amount of the bond to cover any additional fees and possible depreciation in the property.

Collateral Determines If Writing the Bond is a Good Risk…

 

  • Automobiles – To confirm market value of an automobile the best source is Kelley Blue Book online at www.kbb.com. Ideally, you should look over the car in person and also ask if there are any features or accessories that might add value to the car. Present condition will also dictate the value, so it is advisable to take the lowest value (Trade-in Value) as the total you could receive for the car if you had to sell it to cover the cost of the bond, even though you might get more. This will help you determine whether or not the car will provide sufficient collateral to justify writing the bond a good risk.
    • Risks to consider:
      • Do you trust this person not to skip town in the car, hide it or sell it and then claim they lost the title?
      • Do you want to just hold the title in the client’s name or change it to your name for security? If you leave the title in the client’s name, he can go to DMV and say he lost the title and they will give him a new one. Even though this is a fraudulent act, it boils down to whether or not you trust this person to not commit fraud.

The bottom line comes down to doing the complete due diligence that I can’t stress enough. The risk is your decision, but I highly recommend that you perfect the title in your name and/or take possession of the vehicle ASAP.

  • Homes – When taking a home as collateral, your first due diligence step should be taking a drive by the property and the neighborhood not only to see what it looks like, but to be sure that it hasn’t caught firs, been condemned or put on the market for sale. Also, regardless of what the house looks like on the outside, you might be very surprised with the condition inside. However, you may not have this opportunity initially, so look as closely as you can.
    • Determining the true value of the home:
      • Most home owners believe their home is worth more than the current market will bear – you must check this out yourself.
      • Check on the current comparables in that area with homes that have the same beds/baths and similar square footage.
      • Check out the mortgage(s) on the property, as well. How much is still owed?

If the bond is $10,000 a co-signer will probably look for another way to pay off the bond if the defendant skips, but if it’s $100,000 he might be willing to give you the house, especially if he doesn’t have close to that amount of equity in the home. To NOT get stuck with bad collateral, complete your due diligence.

    • Title Searches are VERY Important
      • Title searches are particularly important with large bail bonds – www.Dataquick.com costs only $2-$5 per search just to confirm ownership. This is information used to file a deed of trust and could be adequate for smaller bonds.
        • You might want to establish a relationship with a title company because Dataquick.com will not give you everything you need to know about ownership and liens on a property.
      • Ownership can be more complicated and it might cost as much as $200 to run a full title report, which will tell you who owns the property, how many liens and for how much, where the amount of liability outweighs the cost of the title report. Safe choice!
      • Consider that their might be more than one or two owners, like a family trust. So, running a full title report will be the only way you will know this, as it gives you every possible detail on the property and who owns it (everyone on title). I strongly recommend this approach, especially when faced with a six figure bail bond. Your complete due diligence will protect you and influence your decision.
        • For Example: If the property is owned by a family: Mother, Father, Son and Daughter, and the Mother is the only person available to sign, this is not good enough. If the mother were to die before the case runs its course, and no one else on title signed, then the collateral will be worthless to you and you’ll be liable for the total amount of the bond.
  • Collateral with no Equity – Not only can a full title report save you from the risk with multiple ownership cases, but it can also reveal situations where the equity is not what the client states it to be.
    • I had a client for a $100,000 bond. I researched his background and it all checked out. From appearances, his parents looked like honest, respectable people and an acceptable risk of parents bailing out their son. I did a title search on dataquick.com and determined they had sufficient equity in their house making the property also acceptable as collateral. I had a good feeling at this point and decided to write the bond. A few days later I filed my lien on the property just in case the defendant skipped.
    • Timing is Everything:
      • Six months later I received notification that the defendant never appeared for his court sentencing, so the bond was in forfeit and I could lose $100,000 if I don’t find him. To avoid paying the court I would have to foreclose on the property. To my surprise, as a lien holder, I received a foreclosure notice on the property only to learn that I was 5th in line.
        • What happened was that on the same day the parents contacted several loan companies and took out ALL the equity in their home in cash. They managed to do this before I filed my lien. By the time I discovered this, six months had passed and the defendant was long gone. I had to pay the forfeited bond and didn’t have enough money in my BUF account, so I had to make payments for one year to the surety company to pay it off.

The moral to this scenario: For larger bonds pay the $200 for a full title report because if I had done this, I would have known about the other loan activity and never written the bond. Also, the premium was $10,000, so $200 was a small investment to protect my risk. Things would have played out with a better ending had I gotten the full title report within the first couple of days and/or weeks and known what had transpired. Due diligence in this case should be done two times to catch this type of situation much earlier than six months down the road when I could do nothing to find and re-arrest the defendant.

Look for: How to Avoid Trouble – Part 4

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