How Escrow and land title insurance companies can boost growth in Ghana

I am absolutely certain that, many Ghanaians who live and own their homes in the United States of America, are familiar with how smooth the real estate sale and purchase transaction process can be, because of the use of Escrow and Land Title Insurance services, at the time they purchased their homes.

I am also absolutely certain that Ghanaians living in the Western World, or even in some neighbouring African nations, did not experience anything like the trouble of land guards threatening their lives for even daring to visit the property they were buying in the first place, usually because of a dispute over the rightful owners of the property, sometimes within the same family that’s involved in the sale of the same property!

I can state for a fact, that nothing like that ever happens in the United States (where I have lived for some decades) when you are involved in the purchase of real estate, land, or some property.

As most people do when buying property in the USA, I’m sure my Ghanaian compatriots must have applied for a loan with a mortgage lender, had their employment and income sources verified, using a VOE (Verification of Employment) system, and their source of funds for the down-payment or purchase money verified from their bankers, using the VOD (Verification of Deposit) system!

That’s in the US, and much of the Western World, I believe. In Ghana, dare make a request to a bank to verify information on someone’s bank account even if a VOD is signed and see how the bank officials will look at you as if you are from another planet!

No wonder cash buyers in Ghana – usually deploying or laundering questionable money - can start a real estate purchase transaction process, lie about their sources of funds, and hold a Seller’s property to ransom when they don’t truly have the money to buy, simply because the Ghanaian banking sector does not allow verification of deposits! Wow!

What is an Escrow?

In the real estate industry, a home is “in escrow” when a buyer sets aside the amount of the home's purchase price into a third party deposit account, (usually an account with a reputable bank,) to be released to the seller upon the completion of certain conditions.

The deposit made by the buyer is held by an escrow agency, and managed by a licensed escrow officer, who assists the home buyers and sellers with the closing process.

Again, I am also certain that, when my fellow Ghanaians were buying their homes in the USA, for example, after finally settling on the property through the services of their real estate agents, they simply opened an Escrow with a company called an Escrow company, that served as a neutral third party between buyer and seller to smoothen the real estate sale and purchase transaction process.

This way Escrow officers ensure the safekeeping and legality of all the land title and ownership documentation on the property are deposited by the seller with the Escrow company, to assure the buyers that the seller, according to the title records submitted and verified, is the real true owner of the property they are buying.

The Seller, in reverse, is also assured that the buyer involved in the purchase of his property has the funds that can be verified from his bankers and other sources or has a loan already approved by a mortgage company to successfully purchase his property.

So, to assure any property buyer in the USA that they could go home and sleep soundly after their deals closed, their real estate agents or the Escrow company must have advised them to take a land title. Insurance policy on the property.

This is done to be absolutely certain that an insurance company traced the history of the chain of title on the property over the many years of ownership, as well as the transfers of title. This way, any disputes, litigation, claims or clouds on title could be verified and resolved before transfer of title to the new buyer.

Compare this to Ghana, where you have to deal with the kingpins of the main government agency called the Lands Commission, where – for reasons of corruption and extortion - you get deliberately frustrated with delays in the process, together with their reliance or collusion with so-called “goro boys” who extort money from you, pretending to be assisting you and speeding up the process for you, but all in their subversionist agenda of create, loot and share within the real estate transaction process in Ghana.

It is an unbelievable experience trying to buy or sell a piece of real estate in Ghana today. But the USA did not get to their smooth levels without problems. America also went through the same teething problems we are going through here in Ghana in the real estate sale and purchase transaction process.

In the United States, it was the landmark case of Watson vs Muirhead, in the year 1868, that forced the legislature of the State of Pennsylvania to enact a law allowing for the incorporation of Title Insurance companies. The first Title Insurance company was organized and opened in Philadelphia in 1876.

Indeed, there was such a large consumer demand for greater security as well as expediency in real estate transactions that the concept literally mushroomed all over the US and a whole new industry was born. Today, it is the medium of choice to guarantee a title to any piece of property you purchase in the USA.

What is title insurance?

Very simply, unlike Casualty Insurance (auto, fire or health insurance) which protects against future events, Title Insurance protects against losses arising from unknown or undisclosed defects in the past chain of title.

Also, unlike Casualty Insurance premiums which are paid in recurring installments (hence a lapse in payment may mean a lapse or cancellation in coverage), a Title Insurance premium is a one-time flat fee paid at the time of closing your real estate transaction.

For this one-time premium, your Title Insurance policy remains in effect for as long as you retain your ownership interest in the property and do not sell it or engage in any real estate transactions that may affect the title to the property.

Therefore, a policy of Title Insurance is like a prepaid legal agreement with an insurance company to provide legal defense against your insured title, (depending, of course, on the type of policy coverage) and reimburse you financially for hidden defects in ownership rights.

My predictions:

Even though in Ghana, the Lands Commission is officially supposed to “become the center of excellence for land services delivery, and the mission is to provide high quality, reliable and efficient services in geographic information, guaranteed tenure, property valuation, surveying and mapping through teamwork and modern technology to stakeholders” there is serious challenges.

I am going out on a limb to bet that the following things could happen in Ghana soon if Ghanaian Insurance Companies should embrace the concept of Land Title Insurance and start offering it as a product in the insurance universe in our beloved country, Ghana.

First, the “goro boys” and their paymaster kingpins at the Lands Commission who deliberately delay the process and extort money from fellow Ghanaians will feel their livelihoods threatened once Land Title Insurance Companies start sending their title officers to the Lands Commission every blessed day to follow up on the public records for each property involved in a sale and purchase transaction, conduct a thorough search on the chain of title, and also push through on the various processes and steps currently established.
What will Land Title Insurance and Escrow companies do for our country Ghana?

Just as has happened in the United States since the first Title Insurance Company was organized and opened in Philadelphia in 1876, a proliferation of Land Title Insurance companies in Ghana will turn them into repositories of real estate recorded public data that they will be picking up from the Lands Commission records into their own databases.

This is even more feasible in this age of modern technology where even our telcos like MTN, Airtel, Vodafone are creating huge databases on Ghanaians, merely because of their use of mobile phones, mobile money technology, Whatsapp, Facebook, Instagram, et cetera.

The Lands Commission in Ghana will no longer be the exclusive preserve of real property data in our country because private companies, called Land Title Insurance Companies, will now preserve the same public records data on property within their databases, from which searches can easily be done on real property, and Land Title Insurance policies could be issued on the titles of real property in Ghana.

I can also go out on a limb and bet that the choke-hold that the Lands Commission kingpins and their “goro boys” have held for so many years now on real property data, and their deliberate forever delays in the processing of real estate transactions, will become a thing of the past because they will no longer have their exclusive monopoly on the storing, processing and sharing of that data!

When Land Title officers come marching into your offices, demanding for their sales and purchase transactions to be pushed through quickly to enable them close their real estate deals, what are you going to do? Refuse to process their files and treat them like the ordinary Ghanaian you’ve been extorting money from to perform the same services you are being paid for with our taxpayer Cedis? Hell nooooo.

This is why private industry always does better at what government agencies are not able to do so well, As we've seen in the telecommunications industry in Ghana, where Ghana Telecom and Ghana Post are now a thing of the past, and MTN, Airtel, Vodafone and …… have now completely revolutionized the telecommunications system in our beloved country.

A proliferation of Escrow companies in Ghana will now put our Landlords and property sellers on notice that the chokehold they've had all these years forcing buyers of property to deposit their monies directly into their personal bank accounts will now be a thing of the past, and a neutral third party, called an Escrow company, is now in charge of ensuring that buyers do not lose their monies again if a sale and purchase transaction collapses along the way, and the deal does not close!

A proliferation of Escrow Companies will now enable information to be verified from financial institutions and banks on the accounts from which property buyers claim are their sources of funds.

An ordinary verification of deposit document signed by that buyer will enable the Escrow Company verify that information, and assure the seller of property that their buyer truly has the funds available for the purchase of that property currently in Escrow in the real estate deal.

Again, a proliferation of Escrow Companies will enable mortgage lenders who approve loans for buyers of real estate to be sure that their buyer down-payments are safely and securely held in Escrow, and not in the bank accounts of the seller,until the transaction closes before everyone gets paid.

Maybe officers of the Lands Commission have no idea how much they turn off foreign investors who come to do business in their offices and get exposed to the unnecessary delays they deliberately create in processing real estate transactions.

Can you imagine how much business this country has lost over the years, as a result of government employees deliberately frustrating foreign investors who come to invest in our country?

Having been in the real estate business over the last 29 years, starting from when I got my first real estate license in California, and worked in the industry from my own office in Los Angeles, I am now on a mission to ensure that these modern methods that have worked so beautifully well in other countries, must operate in Ghana and change the way we do this business in our country too.

I may take some flak for my recommendations in this article but I am not bothered because I’m doing this for God and country, as a proud Ghanaian veteran in the real estate industry.

Additionally, with my three score and ten years of life, I have absolutely nothing to lose but rather seek to help millions and millions of fellow Ghanaians, especially those who live abroad and get often swindled and frustrated in their efforts to purchase lands and properties in Ghana.

Too many hardworking and well-meaning Ghanaians are losing the same land they bought and believed they owned, only to discover that land has been sold and resold over and over again by the same owners or families.

Worse still, these unscrupulous sellers get away with their criminality and evil, through the tacit connivance of Lands Commission kingpins and their “goro boys”.

If this article induces the insurance industry in Ghana to embrace the concept of land title insurance and sell it as one of the products they currently sell in our country, I will heave a sigh of relief and feel that I have also done something little for God and country, by writing this article.

I am a proud Ghanaian and I love this country too much not to see it move forward!

Peter Atsu Tsikata
CEO, Millennium Properties Ltd
Accra, Ghana.
Direct: +233-26-655-7066
Email: ptsikata@gmail.com