Allied Real Estate - Escrow - Unit 1

interpleader action

A civil lawsuit in which a judge will decide which parties are entitled to what documents and/or funds.

fiduciary relationship

A relationship that implies a position of trust or confidence.

cash reconciliation statement

A statement completed by the escrow agent after examining each file to make sure all accounting has been accurate.

The term escrow describes a temporary, short-lived trust arrangement between parties wishing to transact business and exchange money or property. [Escrow Fundamentals]

A temporary, short-lived trust arrangement between parties wishing to transact business and exchange money or property is known as a(n):

escrow

A temporary, short-lived trust arrangement.

An escrow is closed when all of the conditions of the escrow have been met, the loan has funded in the case of transactions involving new financing, documents have been recorded, and the property and funds have legally changed hands. [Creating and Terminating Escrow]

An escrow is when all of the conditions of the escrow have been met, the loan has funded in the case of transactions involving new financing, documents have been recorded, and the property and funds have legally changed hands.

kickback

An illegal payment made in return for a referral that results in a transaction.

preliminary report

An offer to issue a policy of title insurance in the future for a specific fee.

binding contract

Any legal agreement, such as a residential Purchase Agreement, that is a requirement for a valid escrow.

beneficiary statement

Document requested by the escrow agent if the seller's existing loan is to be assumed by the buyer.

demand for pay-off

Document requested by the escrow agent if the seller's existing loan is to be paid in full through escrow.

cancellation agreement

Document used when a transaction fails to close.

b. Buyer Although principals are parties to the escrow, not all parties involved are principals. These other parties may include claimants within the chain of title, persons placing demands for payment into the escrow, persons submitting reports/inspections to be delivered through the escrow.

Escrows may include other parties who are not principals to the escrow and, therefore, to whom fiduciary duties are not owed by the escrow agent. Of the other parties below, which one is a principal? a. Notaries Public b. Buyer c. Appraiser d. General Contractor

Every sale escrow has two basic requirements to be valid: a binding contract between the buyer and seller and conditional delivery of transfer documents and funds to a neutral third party, e.g., escrow. [Creating and Terminating Escrow]

Every sale escrow has two basic requirements to be valid. One is the conditional delivery of transfer documents. The other is a(n):

c. A valid sale escrow is a binding contract between the buyer and seller and conditional delivery of transfer documents and funds Every sale escrow has two basic requirements to be valid: a binding contract between the buyer and seller and conditional delivery of transfer documents and funds to a neutral third party, e.g., escrow.

Every valid sale escrow has two basic requirements. Three statements below are incorrect. Which statement contains the two valid basic requirements? a. A valid sale escrow is a non-binding contract between the buyer and seller and unconditional delivery of transfer documents and funds. b. A valid sale escrow is a non-binding contract between the buyer and seller and conditional delivery of documents and funds. c. A valid sale escrow is a binding contract between the buyer and seller and conditional delivery of transfer documents and funds d. A valid sale escrow is a binding contract between the buyer and seller and unconditional delivery of transfer documents and funds

principals to a real estate escrow

In a real estate sale escrow, the buyer and the seller and, if applicable, the lender(s) making the purchase money loan.

c. the escrow agent In a real estate sale escrow, the principals to the escrow include the buyer and the seller and, if applicable, the lender(s) making the purchase money loan. The escrow agent is involved in the escrow, but is not one of the principals.

In a real estate sale escrow, the principals include three of the following. Which one is not a principal? a. the seller b. the lender c. the escrow agent d. the buyer

d. The escrow agent's role is to side with the buyer to the detriment of the seller. The escrow agent is the agent and fiduciary of the principals to the escrow. The role an escrow agent has in the escrow is to direct diverse participants toward a common goal. An escrow agent's fiduciary duty is generally limited to the faithful performance/execution of the instructions given by the principals to the escrow. The escrow agent's position is like that of a trustee.

Of the following statements, which one does NOT define the escrow agent? a. The escrow agent is the agent and fiduciary of the principals to the escrow b. The role of an escrow agent is to help the participants (i.e., buyers and sellers) reach a common goal. c. The escrow agent's fiduciary duty is generally limited to the faithful performance/execution of the instructions given by the principals to the escrow. d. The escrow agent's role is to side with the buyer to the detriment of the seller.

a. Estate/Garage sales Although escrow may be most commonly known for real estate-related transactions, it is often used for the transfer of a business or personal property, such as manufactured homes, bulk sales, stock transfers, or any item of value.

Of the transactions below, three often use escrow. Which one does NOT use escrow? a. Estate/Garage sales b. Bulk sales c. Stock transfers d. Real estate-related transactions

b. beginning The beginning stage of escrow deals with basic information that must be collected before getting into processing the escrow.

The __________ stage of escrow deals with collecting basic information before getting into processing the escrow. a. processing b. beginning c. reconciliation d. closing

loan closing

The closing that refers to the time when the borrower/buyer signs loan documents, loan funds are distributed, and the borrower/buyer is legally required to repay the mortgage.

legal closing

The closing that refers to the transfer of legal ownership from the seller to the buyer.

The escrow agent is an impartial third party who collects all documents and money, through the escrow, and transfers them to the proper parties at the close of escrow. An escrow agent may be an independent escrow company, a lender, title insurance company, attorney, or real estate broker. The broker may conduct the escrow as a service only if he or she is the listing or selling broker to the subject sale. [Parties to Escrow]

The escrow agent is an impartial third party who collects all documents and money, through the escrow, and transfers them to the proper parties at the close of escrow. Who cannot act as an escrow agent?

c. Receive and accept reports/inspections In the closing phase, the escrow officer requests closing funds, audits the files, orders the recording, and closes escrow.

The escrow agent must complete four procedures in the closing phase. Three of the following procedures are correct. Which one is not a closing phase procedure? a. Order recording of transaction documents b. Close escrow c. Receive and accept reports/inspections d. Request closing funds

escrow agent

The neutral third party who holds funds or something of value in trust for another or others.

Escrow reduces the potential risk of fraud by acting as a trusted third party that collects, holds, and disburses funds according to buyer and seller instructions. [Escrow Fundamentals]

The purpose of escrow is to:

No one is required by law to use an escrow for any transaction, including the sale of real property. [Escrow Fundamentals]

The real estate law requires which type of real estate transaction to use an escrow?

conditional delivery

The second requirement for a valid escrow is that the seller will deliver a signed instrument of conveyance and the buyer will deliver to escrow whatever funds are required for the sale, per the contract.

closed escrow

The term used when all of the conditions of the escrow have been met, the loan has funded in the case of transactions involving new financing, documents have been recorded, and the property and funds have legally changed hands.

completed escrow

The term used when each of the terms of the instructions have been met or performed (satisfied or waived).

a. Deliver the signed purchase agreement to escrow. A sale escrow can be terminated by canceling the escrow; by rescinding or canceling the residential Purchase Agreement; or by the expiration of the time limit in the escrow instructions.

Three of the following choices will terminate an escrow. Which one would not terminate an escrow? a. Deliver the signed purchase agreement to escrow. b. Rescind or cancel the residential Purchase Agreement c. Cancel the escrow by mutual agreement of the buyer and seller d. Terminate by the expiration of the time limit in the escrow instructions

b. Escrow is a service that protects consumers and minimizes the potential risk involved in any real estate transaction; describes a temporary, short-lived trust arrangement between parties; escrow can be thought of as a clearinghouse for the receipt, exchange, and distribution of the items needed to transfer ownership of real property.

Three of the statements below describe escrow. Which one does NOT describe escrow? a. Escrow is a temporary, short-lived trust arrangement. b. Escrow is a process that maximizes risk in a real estate transaction. c. Escrow is a service that protects consumers and minimizes risk. d. Escrow is a clearinghouse for items transferring ownership of real property.

In a real estate sale escrow, the principals include the buyer and the seller and, if applicable, the lender(s) making the purchase money loan. The principals execute and perform the escrow instructions and make conditional deliveries. [Parties to Escrow]

Which of the following is a party to the escrow, but would not be considered a principal?

The 10 basic escrow steps include preparing escrow instructions, ordering a prelim, requesting demands and/or beneficiary statements, accepting reports, new loan instructions, and insurance policies, requesting closing funds, auditing the files, ordering the recording, and closing escrow. [Basic Steps in an Escrow]

Which of the following is not one of the basic escrow steps? a. Preparing escrow instructions b. Advising the buyer on ways to take title c. Requesting closing funds d. Closing escrow

The escrow agent does not act as a mediator. The escrow agent must advise anyone seeking legal advice to get counsel from a lawyer. As agent for both principals (buyer and seller), the escrow agent may only perform acts described in the contents of escrow instructions. [Parties to Escrow]

Which statement is correct regarding escrow agents? a. The escrow agent may give legal advice. b. The escrow agent does not act as a mediator. c. During escrow, the escrow agent represents the buyer. d. During escrow, the escrow agent is the agent for both the buyer and the seller.

The principals (buyer and seller) have the right to select the escrow agent. Even though a real estate broker may suggest an escrow agent, he or she may not designate an escrow agent as a condition to a transaction. [Parties to Escrow]

Who has the right to select the escrow agent?

Escrow Escrow is the process whereby parties to the transfer or financing of real estate place documents, funds, or other things of value with a neutral, disinterested third party.

_________ is the process in which parties who are transferring or financing real estate place documents, funds, or other valuables with a neutral, disinterested third party.