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.

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.

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.

Why Does My Escrow Agent Insist the Final Deposit be Wired?

When preparing to close escrow, clients will regularly ask if it is acceptable to bring closing funds via personal check. When posed with this question, Escrow Agents should always respond that we’re unable to accept a personal check for closing, as GOOD FUNDS are required. One of the core functions of an Escrow company includes being a depository for funds required to comply with the instructions from the principals of the escrow. Thus, it is critical to obtain GOOD FUNDS. Good funds means that the check has been paid by the bank on which it is drawn and the funds are actually available for use as payment for closing costs, commissions and proceeds to the seller.

In California, the various laws specifically regulating Escrow Agents do not define holding or clearing times for various types of instruments. There are reasons why a deposit, including by Cashier’s Checks and ACH, may not actually pay within the timelines listed in the Federal Regulations. Escrow Agents are also occasionally the victims of fraudulent, forged or stop paid cashier’s checks.

Since Bank privacy policies in place today make it difficult to confirm a check has been paid; wired funds are the best source of ensuring you have GOOD FUNDS for closing because the funds are immediately clear. Wires are not without drawbacks, but until a better system comes along, an Escrow Agent and its clients are safest with a Wire Transfer for any final closing funds. By failing to follow these procedures, an escrow company is likely to have to advance funds for any dishonored deposit if the escrow has already closed; or face regulatory action, civil action, or both.

Why it’s important to choose your Escrow Officer and Escrow Company

Independent, licensed escrow companies are the first line of defense for homebuyers and property owners. Savvy real estate consumers and Realtors® know that buying or selling property doesn’t stop with finding the right buyer/client or the right investment. And yet, escrow remains one of the least understood elements of the real estate process.

Licensed escrow companies are consumers’ best bet for safeguarding their funds. That’s why it’s so important to work with an Escrow Officer who has met the strict licensing requirements of the California Department of Corporations and has undergone a background check and fingerprinting by the Department of Justice.

Accountability

Licensed escrow companies are required to complete a financial audit every year to ensure compliance with California regulations, and all licensees are subject to random, surprise examinations by the Department of Corporations.

Security

The Department of Corporations scrupulously regulates licensed escrow companies. Each licensee is required by law to be a member of the Escrow Agents’ Fidelity Corporation, which provides fidelity coverage for member trust accounts in the amount of $5 million. This fidelity bond guarantees that, in the event of theft of trust accounts, consumer funds are protected.

Safety

All employees must submit to California Department of Justice fingerprinting and criminal background checks.

You have the right to select your own Escrow Officer.

That’s right, smart consumers can help in the selection of their Escrow Officer by investigating those companies themselves rather than leaving this important decision solely to their Realtor® or Lending Institution.

Here’s a checklist to help you choose the right Escrow Officer for your real estate purchase:

Ask your Realtor® to make three recommendations for both escrow service and title insurance, and ask why the agent likes these companies.

For escrow, determine whether a company is truly acting as a neutral party, or is under the control of
a Real Estate broker or Mortgage broker.

Remember that price is not the only consideration, attention to your specific needs and good service can, and in most cases, should be more important.

Contact the state agency that regulates a company to determine if there are any pending complaints or disciplinary actions.

Life of an Escrow: Part One

This is the first in a series explaining the escrow process and how a real estate transaction works once the Buyer and Seller have come to terms on a purchase agreement.

An escrow begins the moment an Escrow Company receives a fully executed purchase agreement and earnest money deposit. This process is the culmination of a series of events that bring Buyer and Seller together to transfer ownership of a home, commercial building, business or many other types of transactions.

For the purposes of this discussion, we will use a traditional residential sale to describe the Life of an Escrow.

As mentioned above, escrow begins when a fully executed purchase agreement and earnest money deposit are delivered to escrow. With today’s technology, this can be within moments of pen hitting paper on the purchase agreement, but the process typically begins the following business day.

After receipt of the agreement and deposit, the Escrow Holder will review all of the paperwork, taking special care to note the terms of the transaction, the vendors to be used for inspections and other issues that will need to be addressed before escrow is closed. Following this review, Escrow Instructions will be prepared and issued with other supporting documents that are required and specific to the transaction.

Simultaneously with the issuance of the Escrow Instructions, the Escrow Holder will contact the Title Company chosen by Buyer and Seller and request that a Preliminary Report be prepared. This Report will disclose to all parties the various liens and encumbrances that are recorded against the property in question. Prior to close of escrow, any items specific to the Seller will need to be cleared by the Escrow Officer, who will obtain the proper documentation to determine what monies are owed or what documents must be prepared to remove these “Seller specific” items.

These preliminary steps are the foundation of a complex series of events that must take place prior to the close of escrow, but as the neutral third party to the transaction, your Escrow Holder will manage the transaction and guide everyone to that goal.

Stay tuned for part two of this series where we'll discuss the processing of an escrow, including how the Escrow Holder obtains the documentation mentioned above.

What is an Electronic Signature?

Technology has taken over the world and improved every industry, including the real estate industry. With technology, the real estate industry is constantly becoming innovative and making processes simpler and more efficient. The latest form of technology that has helped make the real estate industry more efficient is electronic signatures (E-signatures). The electronic signature service streamlines workflows and reduces the time it takes to complete transactions. On average, 50% of forms are completed in less than 8 hours and 97.4% are completed in less than 48 hours. And electronic signatures can easily handle last minute revisions without delaying a sale.

An electronic signature is any paperless and legally recognized means of entering into a contract, including electronic symbols, sounds, or processes logically associated with a contract. They can include agreements made by email, facsimile or entering your personal identification number into an ATM. Many people use electronic signatures on a daily basis without realizing it. Paying a bill online or purchasing a product through a website are simple daily examples of electronic signatures.

Benefits of using electronic signatures in the Real Estate Industry:

Safe and Reliable

Electronic signatures include an encrypted code ensuring its security as well as its legality and enforceability. After the signing is completed, the electronic signature database digitally stores all documents for quick and easy access when needed.

Save Time, Save Money and Go Green!

With electronic signatures, the need for paper-based contracts is totally eliminated. Documents can be signed online from anywhere and at any time you have computer access thereby saving the time, travel and money associated with chasing down volumes of paper.

As part of Escrow of the West’s ongoing commitment to provide a level of service unparalleled in the industry, we are pleased to introduce the availability of electronic signatures to our delivery options. Always on the cutting edge of technology, Escrow of the West has teamed with DocuSign®, the market leader and global standard for electronic signatures to offer a complete web-based eSign solution to help our clients close business more efficiently and safely. Our technology experts can show you everything that you need to know about DocuSign®. Give us a call for more information.