Tuesday, August 13, 2013

When does escrow typically open and how does it work?

A common question from consumers is “When does escrow typically open and how does it work?”  The answer to that question varies, depending on the type of transaction, but the below guide can be used as an overview for the usual process.
In the typical escrow, the principals to the real estate transaction that requires an escrow (borrower, lender, buyer and/or seller) cause escrow instructions to be created, signed, and delivered to the escrow officer. In the case of a real estate sale/purchase, escrow usually opens when a fully executed purchase agreement has been delivered to an escrow holder. The good faith deposit or initial down payment may or may not be deposited at the same time. The delivery of the signed purchase agreement and/or accompanying deposit to an escrow company is usually facilitated by the listing or selling broker involved. Upon receipt of a fully executed purchase contract and/or good faith deposit, the escrow officer will normally assign the transaction an escrow number.  When calling your escrow officer with questions or concerns, it is helpful to have this escrow number handy because this will allow the escrow officer to locate your file more easily.
The applicable broker will typically provide the escrow officer with important information regarding the transaction, such as the names and contact information for the principals, lending and title information, selection of service providers, and other necessary details.  After escrow opens, the escrow officer will order a real property title search with the title company designated by the parties, if this has not already been done by the listing broker, and prepare escrow instructions. These instructions are normally pre-approved by the brokers involved in the transaction. Once they are deemed to be error free and finalized, the instructions are sent to the parties for signature. These instructions essentially tell the escrow officer what to do and when to do it, and basically give the escrow officer the authority to act. It is worth pointing out that there are some aspects of a real estate transaction that are not part of the escrow. For instance, the purchase agreement contains several items that are not handled by escrow holders, such as buyer and seller agreements regarding property fixtures, personal property, removal of contingencies, liquidated damages, arbitration and mediation. It is important to remember that if you have specific questions about the purchase agreement, you should contact your licensed real estate broker or licensed attorney.
Basically, the escrow officer can only process the escrow in accordance with the escrow instructions. Therefore, without signed instructions, the escrow officer cannot act or proceed. The escrow officer will then perform those functions that they were authorized to do in writing by the mutual agreement of the parties to a transaction, unless an instruction(s) is unlawful and/or against the policy of the escrow holder. The required conditions, processing, and facilitation of the escrow may differ depending on the type of transaction and property involved. However, regardless of the type of escrow being performed, it is only when all of the conditions required in the escrow instructions have been satisfied that the escrow will be complete. At the close of escrow, the escrow officer will release funds and documents in accordance with the escrow instructions, pay all bills as authorized, and prepare and deliver a final closing statement to the parties.


Friday, May 17, 2013

Escrow Tips for Buyers

Most first-time home buyers, and some returning home buyers are not familiar with the escrow process when buying a home. At first, the process may seem confusing and frustrating to home buyers. So, we have created an easy-to-understand  buyers escrow checklist that covers many of the documents that you will encounter during a typical closing scenario.

In order to ensure a successful escrow process without any delays, the following documents must be reviewed, completed, signed and returned to your escrow officer. Failure to complete and return the following items in a timely manner could result in a delay in closing your escrow on time.

  • Escrow instructions
  • Confidential Statement of Information
  • Request for insurance information
  • Preliminary change of ownership
  • Vesting worksheet
  • Any other miscellaneous documents that your Escrow Officer has specified

Escrow Instructions : The key to any transaction is to read and understand your escrow instructions. If you do not understand them, you should ask your escrow officer to explain the instructions. Also, please review your escrow instructions to ensure accuracy.

Confidential Statement of Information: In order to expedite the completion of your transaction and ensure the successful transfer of title, the title company requesting that you complete the “Statement of Information” form. If any item on this form does not pertain to you, please indicate by entering 'N/A' (Not Applicable).

Request for insurance information: Your new lender will require proof of hazard insurance before funding your loan if insurance has not already been set up as an impound. Please select an insurance agent or company and provide the contact information to your Escrow Officer as soon as possible.

Preliminary change of ownership: This form must be completed by the buyer prior to a transfer of the subject property and filed with each conveyance in the County Recorder's office for the county where the property is located. Please answer all questions in each section, and sign the certificate before sending it to your Escrow Officer. This information is used by the Tax Assessors Office to determine the tax basis for the property.  Please note that there are penalties assessed by the county for failure to complete this form.

Vesting worksheet: After you have determine the manner in which you wish to hold title, please complete, sign and return this form to your Escrow Officer. Your new lender will need this information before your loan documents are drawn.

Any other miscellaneous documents that your Escrow Officer has specified : In special circumstance, your Escrow Officer will inform you if additional documentation is needed. Please be sure to return all documents as quickly as possible to your Escrow Officer so that your escrow closes smoothly.

Monday, March 25, 2013

Little Known Valuation Tool for Listing a Home

It is apparent that homes are selling faster in California than they were a year ago, and even faster than they were two years ago.  As a result of low inventory, the California Association of Realtors has concluded, "homes are moving off the market faster in January, with the median number of days it takes to sell a single-family home decreasing to 36.6 days in January, down from 38.1 days in December and down from 59.6 days for the same period a year ago."
Nevertheless, even in a seller's housing market, it is imperative to have a house priced to sell. One little-known research tool that can be useful for sellers  to find information to price their home to the best of their knowledge is the Los Angeles County Office of the Assessor Property Assessment Information System (maps.assessor.lacounty.gov). There you can find up-to-date information on recent sale information, roll values, property boundary description, building description, and when applicable, recent parcel change activity.

Furthermore, the Assessor's user-friendly website provides the assessed land value and improvement value of the home, which can be helpful to ascertain a more accurate valuation of the property. However, be aware that properties that have not been on the market for a significant amount of time will have a lower assessment value. Use information from the PropertyAssessment information system in conjunction with other tools at your disposal to determine property value.
Whether we are in a seller's market or a buyer's market, the houses that are priced to sell at a fair market value will always be the houses that make it to escrow the quickest.

Friday, September 21, 2012

The History of Escrow

In the very early days of our country, property was transferred from the seller directly to the buyer. Often the parties knew one another. The seller handed over the deed when the buyer paid the money. This process worked well as long as the seller was sure the buyer’s consideration such as cash or bank check was good, and the buyer knew the seller’s deed was valid. However, as communities grew, more and more strangers arrived until buyer and seller were no longer acquainted. A system was needed to put the trust back into the transaction.

Even before California became a state, buyers began to hire attorneys to search the public records for proof the seller owned the land but there were no ownership guarantees. Sellers began giving buyers a written history of the recorded documents affecting a piece of land, called an Abstract of Title, with an attorney’s legal opinion attached. Abstract companies began to appear close to the courthouse to assist attorneys with their search.

In the 1870’s, abstract companies began issuing a brief summary of the history of the property called a Certificate of Title. However, the courts ruled that abstractors were not liable if the Certificate of Title contained errors or omissions. A guarantee or form of insurance was needed to protect consumers.  In 1886, California Title Insurance and Trust Company was incorporated; they issued their first policy of title insurance on March 17, 1887.

Reasons for Escrow: Escrow practitioners perform a very important function, yet there is no state law requiring all property transfers go through escrow, nor are escrow practitioners licensed by the State of California to perform escrow duties. The law does require certain types of transactions use an escrow, namely probate sales, liquor license transfers, new Dealer manufactured homes and securities or stock sales.

It is recommended that all property transfers use escrow services for the following reasons:

• Escrow serves as a neutral depository for money and documents. The escrow practitioner acts in a fiduciary or trust capacity. The escrow practitioner does not favor any one party and acts impartially towards all.

• An escrow practitioner assures that all conditions are satisfied before the deeds are recorded or other transfer documents filed or distributed.

• Escrow practitioners provide expertise in escrow practices, document preparation and in understanding the title insurance process.

• Escrow provides a clear, concise accounting of all funds involved in the escrow process.

• The escrow practitioner arranges for safe delivery of all funds and documents to their proper recipient.

• The consumer is protected by the secure and impartial nature of the escrow process.

Thursday, August 23, 2012

A Step-by-Step Guide to the REO Escrow Process

• Upon agreement to sale, Asset Manager and/or Listing Agent provides completely executed Purchase Agreement and any Addendums/Counter Offers (including copy of signed Residential Listing Agreement from Listing Agent), as well as contact information for all parties to Escrow Holder.
• Escrow Holder contacts Selling Agent to obtain Buyer’s Deposit and verify contact information (Purchase Agreement usually requires that said deposit be made within 3 days of acceptance).
• Escrow Holder requests new Lender(s) information and/or Pre-Qualification letter from Selling Agent.
• Escrow Holder opens title order, requesting Preliminary Report and CC&R’S from Title Company.
• Escrow Holder prepares Escrow Instructions and supporting documents, distributing same to all parties.
• Upon receipt of Preliminary Report, Escrow Holder orders all applicable documents, including HOA disclosures, to ensure that clear title can be granted at Close of Escrow.
• Upon receipt, Escrow Holder distributes Preliminary Report, CC&R’s and other applicable disclosures (including Termite Report) for approval.
• Escrow Holder contacts new Lender(s) for status of Loan(s), including receipt of Credit Report, Appraisal and other required documentation. If loan(s) is/are approved, Escrow Holder verifies when loan documents will be ordered.
• Escrow Holder contacts applicable parties if any documents are still outstanding (ie; Receipts for Reports, Buyer’s Insurance, Statement of Information, etc.).
• If the Seller has authorized any repairs, Escrow Holder verifies if they have been completed, and how they will be paid (either outside of escrow or through escrow).
• Escrow Holder confirms receipt of Home Protection Plan or requests that the applicable Realtor order same if it has yet to be received.
• Loan Documents are received by Escrow Holder and prepared for prompt closing.
• Escrow Holder forwards Seller’s Estimated Closing Statement to Asset Manager for review and approval.
• Escrow Holder makes appointment with Buyer to sign Loan Documents, advising Buyer of the amount of money to bring to Escrow.

Tuesday, July 31, 2012

To Probate or Not to Probate, That is the Question

The big question is WHY someone would need to “probate” a property once someone passes away.

In order to sell a Decedent’s property, the heirs, if there are any, must hire an attorney that specializes in probate in order to set up the Decedent’s estate. If someone passes away with a will, it is obviously much easier on the appointed Executor or Executrix to handle that individual’s final affairs in accordance with their wishes. However, many, many people die without creating a will. In that event, the individual passes away “intestate,” or without a will and the Probate Attorney must set up the estate to have an Administrator appointed to handle the final affairs of the Decedent.

The probate that the attorney establishes for the Decedent can address many issues in addition to real property, including assets such as stock, personal property, cash in banks, etc. If one dies intestate or without a will, then all legal heirs are located by “heir hunters” (if necessary) and the total assets of the estate are divided amongst the legal heirs, whether or not that was the intention of the Decedent.

A common misconception is that if one doesn’t have children, it is not necessary to make out a will. However, once real property and large dollar amounts are involved, it is critical that one creates a will or a trust. Although the probate process can be timely and involved, and truly this is dependent on the heirs and who stands to inherit what, the attorney fees are absolutely statutory and are pre-established in accordance with the probate code, based on the size of the individual estate.

There are many arguments and issues, both pro and con, in going through the probate process or setting up and establishing a trust. The main issue to remember with regard to the probate process is that it is highly regulated and scrutinized by the Court in order to keep the individual representing the estate honest and that all matters are handled according to the last wishes of the Decedent. In a situation where the Decedent has transferred all of their assets into a trust, all of the heirs are relying on the honesty and integrity of the successors trustee(s) to comply with the terms of the Decedent’s trust agreement.

Thursday, June 14, 2012

Home Buyer and Seller Closing Costs

Buying or selling a home is a euphoric experience for both of the parties involved. However, this euphoria can cool when you get to the issue of who pays closing costs.

When looking to buy or sell a home, every person eventually arrives at the question of who pays closing costs on the transaction. To put it simply, both buyers and sellers typically pay some of the closing costs. However, the exact amounts paid can vary significantly from area to area and depending on what agreements the buyers and sellers come to in the process of writing and agreeing to an offer/counteroffer.

As these costs frequently change from state to state and often city to city, it is important to research the area you are looking to buy or sell in and be knowledgeable regarding any laws and standards of practice for the area. By knowing what you will have to pay ahead of time, you can be prepared to cover these costs.

Below are some examples of what buyers and sellers generally have to pay in Southern California:

Buyers typically pay the following closing costs: fees charged for obtaining a mortgage; inspection fees; homeowner's insurance (must be prepaid for one year at closing); lender’s title insurance (if the Buyer obtains a loan) and escrow fees.

Sellers' closing costs typically include: loan payoff fees; the real estate; owner’s title insurance (to protect the Buyer from any pre-existing liens or encumbrances on the property); termite repairs; cash payments in lieu of repairs to the property; home warranty; all or part of transfer taxes and escrow fees.

In addition to the fees described above, there are many other charges that may apply to a particular transaction and local customs will dictate which party is expected to pay for these items.