real estate chapter 9

How to terminate escrow

Escrows are voluntarily completed by full performance and closing or they are terminated by mutual consent and cancellation. The escrow holder does not have authority to determine that a principal has not performed. CANNOT BE CANCELLED BY DEATH

When does fiscal year start and end in CA

July 1st and ends on June 30

Can a real estate agent decide which escrow company to use

No

do banks, title insurance companies, and attorneys need special licenses to act as escrow holders?

No, only escrow companies require such

Who may see bilateral escrow instructions in mutual items in transactions

both principals and their agents in the transaction & escrow holder

An escrow holder can be a

corporation, an attorney, or a real estate broker who acts as a real estate agent in the transaction - NOT an individual

When ALL parties to the escrow have signed mutual instructions,

escrow becomes effective

Who is the neutral party in escrow?

escrow holder

Who pays escrow fee

negotiable in california

Proration

the process in which expenses, are divided proportionately between the buyer and seller. All escrow companies use 30 days as a base month in figuring out proration, but any date may be used if all parties to the transaction agree.

If, however, the instructions contain terms in conflict with the original contract,

then the escrow instructions, acting as the later contract, usually control.

How to complete an escrow enforceable contract

when all terms of instruction are met

Escrow procedures

Escrow procedures: 1. Prepare the escrow instructions. 2. Order the preliminary title search and report. 3. Request the lender's demand, including any amount owed, and the pay-off statement. 4. Request for new loan instructions and documents. 5. Accept Structural Pest Control Report and Other Reports. 6. Accept Fire Insurance Policies and Complete Settlement. 7. Request Closing Funds. 8. Audit File. 9. Order Recording. 10. Close Escrow by preparing settlement statements for buyer and seller; disbursing all funds and delivering documents to the appropriate party or parties.

Can a proposed escrow be terminated

If only one party has signed, that party may terminate the proposed escrow at any time prior to the other party's signing

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.

All officers, directors, trustees, and employees having access to money or negotiable securities in the possession of the corporate licensee must

furnish a bond of indemnification against loss.

All money deposited in escrow must be

placed in a trust account exempt from execution or attachment

The conditional delivery or transfer of the transfer instruments and funds to the escrow holder, as discussed earlier in this chapter, must be accompanied by

specific confidential instructions for escrow holder

if escrow instructions are unilateral who may see these instructions?

the involved party and his agent & escrow holder

If an agent in a transaction has financial interest in an escrow company

this must be disclosed to both buyer and seller prior to decision

Can a party change instructions to waive performance on certain conditions

yes through mutual agreement if change doesn't hurt other party

only takes care of the proper paperwork, but he also handles the fund disbursement at the property sale closing/settlement

1. There must be a binding contract between buyer (grantee) and the seller (grantor); AND 2. There must be the conditional delivery of transfer instruments and funds to a neutral third party.

escrow holder makes sure that

all parties to the transaction comply with the terms and conditions of the agreement as set forth in the escrow instructions. Also only takes care of the proper paperwork, but he also handles the fund disbursement at the property sale closing/settlement

Before closing an escrow, the escrow holder must

audit the file, accounting for all items to be handled, recorded, and delivered, including cleared funds.

Any applicant for an escrow license must be

be financially solvent and furnish a surety bond in the amount of $25,000.00, or more, based upon yearly average trust fund obligations

Once the escrow closes, dual agency

becomes single agency

escrow

is the process in which a neutral third party, for a fee, acts as the closing agent for the buyer and seller

The escrow holder must

maintain records and files on a daily basis, providing excellent and efficient customer service, and ensuring that the account is NEVER overdrawn (it is forbidden).

Escrow instructions must contain

mutuality and the understanding of the principals to the escrow. Properly drawn instructions are clear and certain as to the intentions of the parties, the duties of the escrow holder, and the fact that it is the principals themselves who must perform the escrow contract by complying fully with the instructions

Can a party change instructions after signed by both parties to escrow

no but can change through mutual agreement at any time

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."

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. • The escrow services are usually performed by independent escrow companies or financial institutions. • The escrow service fees are usually split 50-50 between the buyer and the seller.

The following regulations also 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) 108 C.A. 3d 939, when a Court of Appeal decided that cancellation of an escrow by mutual agreement of the parties did not rescind the purchase contract between them. (A real estate broker seeking to carry out the principal's decision to cancel a contract of purchase or sale should be sure the other party to the contract agrees in writing to do precisely that, and not simply settle for written advice to cancel the escrow.) • A broker cannot advertise that he conducts escrows without specifying in the advertisement that such services are only in connection with the broker's real estate brokerage business. • A broker may not use a fictitious 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 broker who 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 Commissioner's Regulations 2950 and 2951. • An escrow agent is required to keep accurate accounts and records that are subject to 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 Accountant. • No escrow agent licensee may disseminate misleading statements or describe as an "escrow" any transaction that is not included under the definition of "escrow" in the Financial Code.

In Northern California,

• The escrow instructionsare usually not signed until one or two days just before the close of escrow. • The escrow services are usually performed by title insurance companiesthat have extensive escrow departments and many branch offices. • The escrow service fees are usually paid by the buyer.