Chapter 9 escrow

An applicant for escrow license must?

Be financially solvent and furnish a surety bond in amount of $25,000 or more, based upon yearly average trust fund obligations

What are the 2 forms of escrow instructions that are employed ?

Bilateral, which binds both buyer and seller Unilateral, which sre seperate instructions of buyer and seller If the instructions contain terms in conflict with the original contract, then the escrow instructions, acting as the later in the contract, usually control

Termination

Escrows are voluntarily completed by full performance and closing or they are terminated by mutual consent and cancellation.

How does California civil code section 1057 define an escrow ?

Essentially a small and short lived trust arrangement A grant may be deposited by the grantor with a third person, to be delivered on the performance of a condition, and, on delivery by the depositary, it will take effect. While in the possession of the third person, and subject to condition, it is called an escrow.

California Fiscal Year

In California, the county fiscal year begins on July 1st, and ends on June 30th. January 1st marks middle of the fiscal year

What must escrow instructions contain?

Mutualality and the understanding of the principles to the escrow.

What are the obligations of an escrow holder when dealing with an escrow ( limited agency )

Only instructions given in regard to the specific transaction

How long is the holding period when escrow closes

1-10 days depending kn the type and location of lender

What are the 2 essential mandates for an escrow to be valid?

1. Binding contract ( can appear in any legal form, including a deposit receipt, an agreement for sale, mutual escrow instructions of the buyer and the seller, or an exhange agreement ) between the buyer ( grantee ) and seller ( grantor ) 2. Conditional delivery of transfer instruments and funds to a neutral third party

What are the basic escrow procedures in order ?

1. Prepare escrow instructions, including all signatures of all parties to the transaction. For a home purchase, these instructions must include: purchase price and terms, agreements as to mortgages; how buyer's title is to vest; matters of record subject to which buyers is to acquire title; inspection reports to be delivered into escrow; proration adjustments; date of buyers possession of property; documents to be signed by the parties, delivered into escrow, and recorded; the disbursements to be made, including costs, charges, and sho is to pay for them; and date of closing 2. Order the preliminary title search and report 3. Request the lenders demand, including any amount owed, and the oaynoff statement 4. Request for new loan instructions and documents 5. Accept structural pest control reports 6. Accept fire insurance policies and complete settlement 7. Requests closing funds 8. Audit file 9. Order recording 10. Close escrow, after confirming recording

All money deposited in escrow must be placed where?

A trust account that is exempt from execution or attachment.

Some extra facts regarding escrow holder

An escrow holder can be held liable for violating written instructions but an escrow holder is really only a stakeholder not concerned with controversies between buyer and seller Escrow holder is prohibited from offering legal advice. If the disagreement isnt a legal matter, and inly involving the transaction the parties real estate broker should handles it. The escrow holder is NEUTRAL. NOT A MEDIATOR OR LAWYER. escrow holder must forward immediately to the title company any document that is to be recorded and furnish a copy to any concerned party

Escrow cannot be terminated by death. It can only be terminated by one of the following three means

Completion of escrow Mutual agreement to terminate Court action

Signed escrow instruction delivery

In Southern California, the bilateral escrow instructions are signed by the buyer and seller shortly after they've signed their purchase agreement, just after the start of escrow, which is about 30 or 60 days prior to the actual close of escrow In Northern California, the escrow instructions are usually not signed until one or two days just before the close of escrow

Paying the escrow service fees

In Southern California, the escrow service fees are usually split 50-50 between the buyer and the seller In Northern California, the escrow service fees are usually paid by the buyer

The escrow services

In Southern California, the escrow services are usually performed by independent escrow companies or financial institutions. While title insurance companies provide the title services, the escrow companies do the actual closing of the sale In Northern California, the escrow services are usually performed by title insurance companies that have extensive escrow departments and many branch offices

What type of agency is an escrow ?

Limited agency which is most commonly used for the sale and transfer of real estate

What is proration?

Proration is the process in which expenses, such as property taxes, interest, rent and/or assessments are divided proportionately between the buyer and seller. this applies to both expenses that are pre-paid by the seller, such as fire insurance, or that will be paid after closing by the buyer, such as property taxes

Under article 19, section 2950 of the regulations, a real estate broker cannot conduct escrows, unless?

That broker is acting as a real estate agent or principal within that specific real estate transaction

Regulations that apply to California escrow procedures

The cancellation of escrow may not also cancel a purchase contract. Legal precedent for this regulation was set forth in Cohen v. Shearer (1980) When A Court of Appeal decided that cancellation of escrow by mutual agreement of the parties did not rescind the purchase contract between them A broker cannot advertise that he conducts escrow without specifying in the advertisement that such services are only in connection with the brokers real estate brokerage business A broker may not use a fig Tisha's business name or a corporate name containing the word " escrow ", Or advertise in any other manner that would tend to be misleading to the public A real estate brokerWho conducts an escrow under the exemption must maintain all escrowed funds in a trust account and keep proper records. The broker must follow the provisions of commissioners regulations 2950 and 2951 And escrow agent is required to keep accurate accounts and records that are subjects examination by the commissioner of corporations.The corporation must also, at its own expense, submit annually an independent audit prepared by a certified public accountant or public account No escrow agent license he made disseminate misleading statements or describe as an " escrow " Any transaction that is not included under the definition of " escrow " In the financial code

What date is used in figuring out proration

The fate the escrow closes( This date is not the same as the possession date ), But any day may be used if all parties to the transaction agree

What is an escrow holder ?

The neutral third party. California financial code 17004-person engaged in the business of receiving escrows for deposit or delivery Makes sure all parties to the transaction comply with the terms and conditions of the agreement as set forth in the escrow instructions Also coordinate the activites and professional services involved in the transaction. Not only handles paper work but also thebfund disbursement at the property sale closing/settlement The escrow holder does all this for a fee

What are escrow instructions?

These instructions set forth the specifics of the delivery of the instruments and funds, which will occur once the conditions of the contract are performed as set forth in the contract.

After an escrow company is chosen, who should pay the fee?

This decision is between the buyer and seller. Also depends on geographical location within the state. In some areas, the buyer or the seller pays, and in other areas, both parties share the cost

Prohibited escrow related activities

• A licensed escrow agent may not pay fees to real estate brokers or others for referral of business. Such prohibited "fees" would include gifts of merchandise or other things of value. • An escrow agent cannot disburse a real estate broker's commission prior to closing of the escrow. • Escrow licensees may not solicit or accept escrow instructions, or amended or supplemental instructions, containing any blank to be filled in after signing or initialing. • They may not permit any person to make any addition to, deletion from, or alteration of an escrow instruction unless it is signed or initialed by all persons who had signed or initialed the instructions. • As noted earlier, a real estate broker may not decide on an escrow holder as a condition of the transaction, but may suggest an escrow holder if requested to do so by the parties. • Note that Civil Code Section 2995 prohibits any real estate developer from requiring, as a condition precedent to the transfer of real property containing a single-family residential dwelling, that escrow services effecting such transfer be provided by an escrow entity in which the developer has a "financial interest."