Unit 14

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prelim also lists

any liens or claims against the property such as property taxes, income taxes, mortgage payments, or other unpaid debts. Any problems that arise should be corrected during the escrow period so the title is clear for the new owner.

Southern California

escrow companies or banks conduct escrows. the responsible par ties send the instructions, required deeds, purchase money encumbrances, and notes to the escrow company designated to handle the transaction

clouds the title.

if a deed was recorded in error or is incomplete,

Good funds

include cashier's checks, certified checks, or wired funds. A personal check is not considered "good funds" because it may take several days for the check to clear. If buyers plan to use a personal check, remind them to send it at least ten days before the close of escrow.

Buyer's Statement

is a record of costs and credits incurred for the purchase of the property.

Seller's statement

is a record of the financial proceeds the sellers will receive upon the transaction's closing.

closing statement

is an accounting of funds made to the sellers and buyers individually, and it is required of the escrow holder at the completion of every real estate transaction. The sellers and buyers are both credited and debited for their agreed-upon share of costs

Orders a Title Search

sellers and buyers reach an agreement about the sale of the property, they also select a title company they also select a title company

beneficiary statement

sets forth the unpaid balance of the loan amount and the condition of the debt is requested from the lender by the escrow holder.

payoff demand

shows the unpaid principal balance, the daily interest rate, and any other amounts due. The lender must disclose the exact amount of the loan payoff so the escrow officer's accounting will be correct at the closing.

closing

the process in which agreed-on costs are paid and legal title is transferred from seller to buyer in exchange for consideration—usually cash from the buyer.

escrow instructions

the written authorization to the escrow holder or title company to carry out the directions of the parties involved in the transaction

unilateral,

where the buyers sign one set of instructions and the sellers sign another

bilateral

where the sellers and buyers sign the same set of instructions

escrow coordinates the receipt and disbursement of all funds

whether from the buyer or a lender. the escrow holder coordinates the payoff or assumption of the seller's existing loans on the property, any new loans the buyer is arranging for the purchase of the property

marketable title

would be accepted as clear and free from likely challenges-reasonably free from risk of litigation over possible defects

Seller's Credit

• Amount of the total consideration, or sales price, debit the buyers. • Any property taxes paid, debit the buyers • Monthly homeowners' association dues, debit the buyers. • Interest on loan if paid in advance (from recordation to date of next loan payment).

Seller's Debits Loan payoff on existing loan plus any interest charges

• Selling commission • Title insurance including title policy premium, reconveyance fee, and documentary transfer tax •Recording fee (reconveyance) • Escrow fee (seller's share) • Legal fees • Prepayment penalty • State or local transfer tax • Pest control inspection fee • Pest control work • Recording fee• FHA or VA points • Termite report

The American Land Title Association offers an owner extended coverage policy known as ALTA Owner's Policy that includes the same coverage as a standard policy, with the following additions:

(1) protection against claims of parties in physical possession of the property but no recorded interest, (2) reservations in patents, and (3) unmarketability of title

Prorates and Allocates Costs

A real estate transaction closes by prorating any expenses between the buyers and the sellers. This ensures that they are responsible for their share of expenses such as taxes, homeowner's dues, rental income, or fire insurance on the property during the tenure of his or her ownership. The escrow older prorates insurance, taxes, rents, etc. and prepares a final statement for each party indicating the amount to be disbursed for services and any other amounts necessary to close escrow.

the California Residential Purchase Agreement and Joint Escrow Instructions (RPA-CA)

California Association of REALTORS® (C.A.R.) created a form known as

Lender

During the loan origination phase, the lender orders all employment, income, and deposit verifications, orders an appraisal, orders a credit report, and prepares the loan for underwriting.

escrow holder, seller, buyer, and lender

Each party to the escrow

Buyer's New Loan Instructions and Documents

Escrow accepts loan documents or instructions about financing the subject property and completes them as directed. The escrow officer gets the buyers' approval of and signature on loan documents then receives and disburses loan funds as instructed.

Escrow Holder

Escrow holder's first responsibility is to open an escrow file and create escrow instructions. Once escrow is opened, the escrow holder will serve as a depository for documents and funds and will complete a variety of tasks until closing the escrow when title is transferred and funds are appropriately disbursed.

What are escrow instructions?

Escrow instructions outline all terms required to complete the transaction. The escrow holder is the only one authorized to perform the activities specified in the escrow instructions.

Property Taxes

Homeowners usually pay annual property taxes in December and April. The escrow company will prorate the taxes for the closing date to ensure that neither the buyers nor the sellers overpay

impound account (reserve account)

If the down payment is less than 20%, the lender may require that the hazard insurance premium and a payment for property tax be added to the monthly payments. The insurance and property tax portion of the payments will be kept in an impound account (reserve account). In this way, the lender pays the insurance and property tax bills when they come due

Northern California

In Northern California, title companies conduct escrows. the escrow officer prepares the instructions at the end of the escrow period.

legal closing

In the purchase of property, there is a transfer of ownership from the sellers to the buyers, which involves a legal closing. Care must be taken to ensure a legal transfer of ownership.

Property Condition

Make sure your buyers respond in a timely manner regarding all inspections and contingencies

Arranges for Financing

Once the loan is reviewed and there are no outstanding conditions, the lender will send the buyers' loan funds directly to escrow

Buyer

Remind the buyer to read the escrow instructions before signing them because it is important to verify that the escrow instructions accurately state the terms of the purchase agreement.

Seller

Remind the seller to read the escrow instructions before signing them because it is important to verify that the escrow instructions accurately state the terms of the purchase agreement.

Review Closing Statement

Review and approve any items to be proratedin escrow including property taxes, interest, fire insurance, and rents (if applicable). Before close, escrow will send the buyers a summary of the estimated closing costs.

(1) a binding purchase agreement contract made between the parties, (2) conditional delivery of funds, and (3) conditional delivery of transfer documents

The basic requirements for a valid escrow include

Possession

The buyers may be able to move in immediately, or wait a few days until the sellers have actually moved ou

Prepares and Records Deeds

The escrow holder prepares the grant deed and sends it to the seller. The seller needs to sign the grant deed in front of a notary public and return it to escrow before the closing date. At close, the escrow holder records the deed and other documents

Prepares Escrow Instructions

The escrow officer must know all facts of the purchase to carry out the expectations of all parties to the transaction.

financial closing.

The final responsibility of the escrow holder is to close escrow. Escrow cannot close until all financial and legal items have been completed. A refinance and the purchase of a property that includes financing will require a financial closing

open escrow.

The first step in the closing process. usually is done by the listing salesperson, who gives the escrow officer the signed purchase agreement along with the buyers' good faith deposit.

is a binding purchase contract between the buyer and seller.

The most important item needed for a valid contract

Accepts Documents and Inspection Reports

The parties to an escrow may request reports regarding the condition of the property. Therefore, the escrow holder accepts and holds reports such as the structural pest control report (termite report), property inspection report, soil condition report, or environmental report.

California Land Title Association®(CLTA) or the American Land Title Association (A LTA)

The two types of title insurance policies normally used are standard and extended coverage

escrow officer will order a preliminary report for the buyer to review. The buyer's salesperson should be prepared to explain any of the easements or liens that might be shown on the report.

WHO DOES WHAT DURING ESCROW?

walk-through

before the actual closing (generally within five days before the close of escrow), schedule a final walk-through of the property to be certain it is in the same condition as when the purchase offer was made.

Title

check for any unusual easements, taxes, or anything that would affect use and title of the property. Review and approve any Conditions, Covenants, and Restrictions (CC&Rs), whether of record or not

How to Calculate the Documentary Transfer Tax.

is charged to the owner of the property whenever real property transfers to another person. The county recorder places stamps (doc stamps) on the recorded grant deed to indicate the amount of the documentary transfer tax paid. In most cases, it is based on $.55 per $500 of purchase price, or $1.10 per $1,000 of purchase price. The money goes to local government, either city or county.

preliminary report (prelim)

is prepared to verify the legal ownership of the property. This report indicates whether the seller currently holds title to the property and includes a list of the previous owners, purchase dates, and sale dates to make sure the chain of title is correct

chain of title

is the public record of prior transfers and encumbrances affecting the title of a parcel of land. If there is a missing connection in a property's history or ownership,

extended coverage policy

of title insurance covers everything that a standard policy covers, plus other unrecorded hazards, such as outstanding mechanic's liens, unrecorded physical easements, facts a properly conducted survey would show, certain water claims, and rights of parties in possession—including tenants and owners under unrecorded deeds.

standard policy

of title insurance issued to homebuyers only covers matters of record. No physical inspection of the property is required and the buyers obtain protection against all recorded matters, and certain risks such as forgery and incompetence.

escrow holder

or escrow officer, is a neutral third party who carries out the provisions of an agreement between a seller and buyer, or a lender and a borrower if the transaction is a loan closing.

Title insurance

protects real estate owners from challenges to their property titles. It protects against loss due to errors in searching records and in reporting the status of title and guarantees that the property is free of liens

Hazard Insurance

protects the borrower and the lender against loss due to fire, windstorm, vandalism, and other hazards. The escrow holder will accept, hold, and deliver any policies and will follow instructions about transferring them.


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