CV Escrow» Escrow Archives – CV Escrow

Loan Documents are in Escrow. We’re Ready to Close Then, Right? Not Necessarily…

CV Escrow — Thu, 01 Jul 2010 13:00:48 +0000

As the close of escrow date draws near, the buyer and seller are usually eager to close. And, loan documents arriving in escrow represent a big step towards the completion of the escrow and the transition of the property to the new owner. However, it is often mis-understood that the close will occur immediately after loan documents are received at escrow and signed. That is not always the case. There are many details (such as lender conditions) that escrow must still verify, and depending on the lender, the funding process may take several days after the signing. This post is designed to educate the buyer as to the steps that escrow goes through in dealing with loan documents that are received in escrow. As you will see, there are several items that have to happen once loan documents are received at escrow before a transaction can close. Understanding this process can help to set the proper expectations about the closing process and help buyers be better prepared to work with both their lender and escrow to facilitate a smoother escrow process.

1. Once your loan has been approved and all prior to loan document conditions have been received and approved by the Lender, the Lender will prepare loan document and send them to escrow for signing.

2. Escrow reviews the loan documents to comply with the Lender’s requirements and reviews the escrow file for any outstanding conditions.

3. Escrow will prepare the buyer’s estimated HUD1/closing statement and put together any required paperwork needing the buyer’s signature. Escrow will make arrangements for signatures on these papers.

4. Escrow will prepare the seller’s estimated HUD1/closing statement and put together any required paperwork needing seller signature. Escrow will make arrangements for signatures on these papers.

5. In some instances the Lender may have documents that may also need signatures from the listing agent, selling agent or loan agent, so escrow will also make arrangements for these items to be signed.

6. If still needed, escrow will order insurance, closing protection letter, etc as required by the lender.

7. Once the buyer’s loan documents have been signed and/or received back into escrow, escrow will package the documents to be returned to the funding Lender. This package of documents is referred to as the loan package. Ideally, by this time, all paperwork that has been sent for signature to the seller, listing agent, selling agent and loan agent have been signed and returned to escrow to include in this package. Lender’s work differently, and some will be prepared to fund the loan when they receive the loan package, others will require 24-72 hours after the loan package is received by the lender to review the package prior to advising if there are any additional requirements/conditions to fund the loan (this is the most common scenario we run across on the West coast). Buyers are advised to understand the timeframe associated with funding the loan from the lender that they are working with. This timeframe is outside the control of escrow.

8. Escrow will request funds from the lender. It is important to note, that although the loan package has been completed and received by the lender, there may be other issues/conditions related to the transaction (for example, outstanding termite repairs) that will hold up the request of loan funding from escrow. In other words, escrow has to be in a position to close escrow, meaning all conditions of the escrow have been met and all the Buyer’s closing funds have been received.

As you can see there is more to getting the Escrow closed once loan documents are in escrow than just signing, so coordinating and getting conditions cleared with your loan officer in an efficient manner is very important for a timely closing. It is important to reiterate that all loan documents are time sensitive and each Lender works differently.

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The Short Sell Process: Escrow Explains What You Need to Know

CV Escrow — Thu, 10 Jun 2010 13:00:02 +0000

In a prior post we explain the terminology associated with Short Sales. In order to further clarify the short sale process, this post explains the process a seller must go through if they find themselves facing a short sale.

A Short Sale comes in to play when a seller must sell their home and the value of the property is just not sufficient to cover the balance owed to the existing lender. In order to accomplish this the seller must work with their existing lender(s), and any other existing lien holders, to request approval of the sales price, the sale terms, and payoff of their loan to be at a reduced amount.

The Short Sale process is as follows:

The owner or their agent/negotiator must contact the existing lender.
The lender will direct them to their website, or will advise how, to obtain specific forms, instructions and lender requirements.
This group of documents, along with the lender’s financial forms (Short Sale Package*) is then sent to the lender as per the lender’s instructions.
After the lender receives the package it is then assigned to a contact person in the lender’s Loss Mitigation Department. This process can take anywhere from two weeks to two months and sometimes even longer.
At this point the Loss Mitigation Dept then reviews the package and will contact the homeowner to request any additional items that may be required by the lender. This request is usually made verbally to the homeowner or negotiator but can sometimes be found via the lender’s website.
The lender will then request a Broker’s Price Opinion (BPO) from an agent chosen by the lender.
Once the lender has received the BPO as well as the Short Sale Package they submit it for final review. Once the lender has completed their final review they may give approval as is or their approval may be subject to changes such as sales price changes. Or the lender, at this time may decide that the seller did not have ample reason for the short sale and therefore deny the request for the short sale.

*Short Sale Package can consist of 100 to 200 pages including, but not limited to, the following items:

1. Listing Agreement

2. Short Sale Addendum

3. Offer to Purchase

4. Proof of Buyer’s funds

5. Owner’s Tax returns

6. Paystubs

7. Owner’s Bank Statements

8. Hardship letter from owner (explaining why the short sale is needed)

Remember that every lender and every situation is a different story so it will help to keep a handle on each request by staying in touch with the lender constantly through the process.

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What Buyers Need to Be Aware of After Close Of Escrow – Part 1: Taxes

CV Escrow — Thu, 03 Jun 2010 13:00:14 +0000

As Escrow Holders we often get inquiries from Buyers and Sellers well after the close of an escrow. It is a common belief that our responsibility as Escrow Holder continues after the close of escrow, when, in fact, escrow no longer has any connection with the transaction once it is officially closed. As a neutral third party in the transaction, escrow may not always have all the answers but your escrow officer can guide you to a source that can help you.

In this series of posts, we will address some of the most common questions asked by new home owners after the close of escrow. This first post addresses the issue of taxes.

TAXES

Almost always, we get calls from Buyers after the close of escrow, asking about property taxes. As a new home owner it is important to remember the following dates:

The fiscal year begins July 1 and ends June 30 of the following year.
The first installment of taxes is due November 1 and is delinquent December 10.
The second installment is due February 1 and is delinquent April 10.

It is the Homeowner’s responsibility to make tax payments on time. Keep in mind the County Tax Collector will not waive tax penalties, regardless of the reason. To avoid paying any penalties, make sure to pay the bill on time. If you have not received a bill as the due date approaches, contact your County Tax Collector and request for a duplicate bill.

Keep an eye out for our next post where we will explain what a home buyer needs to know about the Residential Property Report.

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What is the Foreclosure Process? Escrow Explains.

CV Escrow — Thu, 20 May 2010 13:00:22 +0000

With the increased amount of foreclosures on the market today, escrow officers are often asked about the foreclosure process. The first thing to know is the foreclosure terminology, which we discussed in a prior post. What is important for homebuyers and sellers to understand is that foreclosures happen to loans not properties therefore it is a process that is handled between the lender and the lender’s trustee company. In an effort to answer the many foreclosure questions that we get following is a simplified breakdown of the steps that lead to and complete the foreclosure process.

The borrower fails to make more than one monthly mortgage payment
The lender would have their trustee company prepare, record and send the borrower a Notice of Default (NOD)
The borrower now has 90 days to bring the loan current (reinstatement period)
If the borrower is still unable to bring the loan current the trustee company will set a sale date approx. 4 weeks out
The trustee will prepare, record and send to the lender and borrower a Notice of Trustee Sale (NTS)
The NTS will also be posted at the property in a conspicuous place and published in a local newspaper (publication period)
This Notice will contain the date, time and place where the Trustee Sale will take place
During the publication period the borrower can still bring the loan current up to 5 days prior to the sale date
The sale is held at the courthouse in the county where the property is located
The lender sets an opening bid that would cover the loan balance, interest, attorney fees and any other accrued fees and costs
The property is then sold to the person with the highest bid over the opening bid set by the lender
If no one bids over the opening bid then the lender retains the property as a banked owned property (REO)- Real Estate Owned

During the foreclosure process there are several stages in which the homeowner has the opportunity to bring the loan current and avoid foreclosure. Foreclosures contain many nuances and affect each party involved differently. Don’t hesitate to ask your agent for information about foreclosures and your situation or for further information see the links below.

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Per Diem: Two Little Words that Can Impact a Buyer in an REO Sale

CV Escrow — Thu, 13 May 2010 13:00:56 +0000

Buyer’s of a “bank owned” property, or REO sale as they are often referred to, may come across some verbiage in the Banks Addendum to the Real Estate Purchase Contract that catches their eye: Per Diem Penalty. Escrow Officers are often asked, what does this mean?

Latin for “per day”, per diem has many uses. What per diem is referring to in this instance is in the event escrow does not close by the date set forth in the contract, the Seller can impose a daily penalty to the Buyer for each day beyond the initial agreed upon closing date until the day the escrow officially closes.

The amount of this penalty differs depending on terms of the contract. It can be a percentage of the purchase price or a set daily amount (ie $100 per day). It is important to note, agreements can be made between the Buyer and Seller to waive the penalty when applicable.

One way a Buyer can strive to close escrow on time and avoid penalties is to complete escrow and mortgage paperwork and provide requested documents in a timely manner. However, circumstances may still arise that are beyond the Buyer’s control. In this event, a Buyer should ask their agent to renegotiate the terms of the contract to extend the closing date or to waive the penalty with the Seller and Seller’s agent.

In REO transactions, as with any real estate transaction, it is very important to be sensitive to all time frames in order to alleviate unnecessary charges.

If you have further questions about the Per Diem Penalty, do not hesitate to contact your escrow officer for further clarification or leave us a note in the comments.

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Life of an Escrow – Buyer’s Perspective

CV Escrow — Thu, 06 May 2010 13:00:28 +0000

When purchasing a home the escrow process can appear to be complex, especially for a first time home buyer. Following is an overview of the escrow process from the buyers perspective:

Escrow is officially “open” once the Escrow Holder receives a purchase contract signed by both the Buyer and Seller. Escrow holder then assigns an escrow number, opens a title order and follows up on the Buyer’s initial deposit. The initial deposit must be received by the Escrow Holder within 3 business days after acceptance. Now that escrow is open – what happens next?

Like anything else – things usually have a beginning, a middle and an ending. Escrow is no different and we will attempt to demystify the Buyer’s escrow process by breaking it down into three distinct parts:

1) Opening
2) Processing
3) Closing

Opening: The opening phase is the information gathering segment of the escrow. It allows the Escrow Holder to gather the necessary information from the Buyer and to communicate with all applicable parties. In order for the Escrow Holder to do this effectively, it is very important for the Buyer to complete and expediently return all documents in the initial escrow package.

Opening escrow packages for the Buyer will typically contain the following:

1) Escrow Instructions
2) Statement of Identity
3) Vesting Form
4) New Lender Info
5) Fire Insurance Info
6) PCOR
7) Buyer’s Affidavit

This may appear to be a mountain of paperwork, but it’s purpose is designed to let the Escrow Holder know who their Buyers are, which lender is in need of an escrow lender package, how the Buyer(s) are taking title and who will be insuring the subject property.

Processing: The second phase of escrow is commonly referred to as the processing phase. In this segment, the Escrow Holder gathers and distributes reports and disclosures to applicable parties. Depending on the specific terms of the purchase contract, reports and disclosures may include all or some of the following:

1) Preliminary Title Report / CC&Rs / Plotted Easements
2) Natural Hazard Disclosures
3) Termite Report – Inspection/Completion
4) Homeowner’s Association Documents
5) City Report
6) Rent Statement

These reports provide information regarding various aspects of the subject property such as title, taxes, liens, hazardous zone determinations, pest infestation assessment and rental amounts to name a few. These disclosures may be information overload but are necessary and mandatory to provide full disclosure to Buyers. Buyers are asked to review all reports/disclosures provided and acknowledge receipt of same via signature within the time frames specified in the purchase contract.

Closing: In the final phase of the escrow process, the Escrow Holder gathers information in the opening and processing segments and incorporates same with terms of either lender financing or an all cash closing.

In the case of lender financing, Escrow Holder will contact Buyers as soon as loan documents have been received and schedule a time for signing with a notary public. Signing of loan documents will take approximately 30-45 minutes and ideally should occur several business days prior to the scheduled close of escrow to allow ample time for the following:

1) Signing of Loan Documents
2) Lender Review of Loan Documents
3) Lender Release of Loan Funds

Upon signing of loan documents, Buyers will review an estimated closing statement prepared by the Escrow Holder. The estimated closing statement provides an accounting of all applicable fees, closing costs, credits and prorations pertinent and particular to the transaction such as lender fees, title and escrow fees, property taxes, HOA dues, and Seller credits etc. The estimated closing statement also provides Buyers with the dollar amount required to close the transaction. Note: all closing funds must be certified and received by Escrow Holder via wire transfer or cashier’s check 2 business days prior to close of escrow.

In an all cash closing, the estimated closing statement and final escrow amendments are also be presented to Buyers for review and signatures. Funds will then be requested from Buyers and the escrow will be considered “funded” upon Escrow Holder’s receipt of Buyer’s certified closing funds.

Upon Escrow Holder’s confirmation that loan funds have been released, Buyer’s certified closing funds received, receipt of signed documents from both Buyer and Seller, and all terms of the purchase contract fulfilled – the transaction is now ready to close/record. Recording typically takes place 1 business day after all of the above has occurred. The term “close” refers to the day on which the transfer deed (grant deed) is stamped and recorded by the County Recorder’s Office. This is the official date on which transfer of ownership occurs and the Buyer becomes the new owner of the subject property.

Upon Escrow Holder’s notification from the title company that the recording has been confirmed – escrow has officially “closed”. The Escrow Holder will then prepare the final accounting of the file and disburse funds and documents accordingly, normally by the next business day.

Escrow is closed – congratulations!

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Escrow 101: Foreclosure and Short Sale Terminology Explained

CV Escrow — Thu, 29 Apr 2010 13:00:33 +0000

Short sales and foreclosures are the current hot topic in real estate with many of these types of transactions coming across the Escrow Officers desk. Foreclosures and short sales are often confused but they are two distinct processes supported by their own individual terminology. Following is a summary of many of the most common terms that a buyer and seller will experience in purchasing/selling either a foreclosure or short sale property.

Foreclosures

Pre-foreclosure: The period beginning with initial mortgage default up to when the distressed property is sold
Notice of Default (NOD): official notice from the lender that the Borrower has defaulted. The NOD formally starts the foreclosure process and it outlines the reinstatement period.
Reinstatement Period: The time frame stipulated in the NOD that the borrower has to reinstate the loan by making payments and bringing account back to good standing.
Trustee Sale: if after the reinstatement period has expired the loan is still in default the lender can then sell the property as soon as 21 days after the Notice of Trustee Sale is recorded.
Publication Period: begins once the redemption period has expired and must be at least 21 Days prior to trustee Sale. A notice is published once a week for three weeks in the local newspaper.
Notice of Trustee Sale (NTS): Recorded document explaining when and where the foreclose sale will be held.
Redemption Period: The time period that the distressed borrower has to redeem the loan after the NOD is recorded. In California, that time period is 90 days. (not to be confused with statutory right of redemption)
Statutory Right of Redemption: One year after the Trustee Sale the borrower can make payment of loan in full plus costs to redeem.
Real Estate Owned (REO): the status of the property when the ownership is transferred involuntarily from the homeowner to the bank.

Short Sales

Short Sale: When a lender agrees to accept less then what is owed on the mortgage and release its lien on the property.
The Property is “upside down”: This phrase is commonly used to describe a situation where the amount due on the existing loan is higher than what the property is appraised for or will sell for.
Loss Mitigation Department: The department at the lender that is responsible for reviewing all short sale documentation, ordering a BPO, and approving or denying short sale.
BPO: Brokers Price Opinion (BPO), typically ordered by lender, is a property valuation report to help determine what the property might sell for.

This list of terms serves as a foundation for future posts where we will further describe the process of a foreclosure and short sale as well as compare and contrast the differences between the two. Stay tuned!

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We Can’t Make the Scheduled Escrow Closing Date? Why Not?

Julie Ekstrom — Thu, 08 Apr 2010 13:00:23 +0000

If there is one thing that seems to create intense panic during the course of escrow, it is when the contract closing date draws near, and the Buyer’s loan is not quite ready to go.

In this age of new and changing loan regulations and requirements, it is important to give your transaction time to accommodate the process. A 30 day escrow with new financing, although may be possible, is generally not probable. Lender’s rely on a host of information, from the buyer, escrow, title, appraisers, etc. Also, chances are that once the loan is submitted, additional supporting documents will be requested from the buyer.

All of us involved in the transaction – agents, escrow, lenders, etc., want our customers to be happy with our services. We all rely on repeat business and referrals, so why would we want it any other way! In my years of experience, I have learned that remaining calm and refraining from finger pointing will show my customers that I am in control and empathize with their frustration.

If you want your clients to remain calm, prepare them in the beginning – when the contract is presented. Explain that the closing date may change in the event financing takes a little longer than expected. Keep them updated along the way, so they can plan accordingly.

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Pros and Pitfalls of the Buyer’s Choice Act

CV Escrow — Thu, 11 Mar 2010 13:00:09 +0000

The Buyer’s Choice Act (AB 957) was established to protect the buyer’s right in an REO transaction in having a choice as to which Escrow Company and Title Company is used. This sounds great, although in many cases it can be a benefit to the buyer to choose the companies that the REO Bank use on a regular basis for the following reasons:

The REO Banks require the settlement companies to use their online systems (only the companies selected by the REO Banks are given authorization to log onto the online systems) in order to obtain necessary documentation for your transaction. Without access to the online systems there may be delays in the closing process.
The REO Banks have special internal requirements that must be completed before they can move forward to closing. The Escrow Companies and Title Companies used by the REO Banks know the requirements and are able to provide the seller with the necessary items in advance therefore getting the job done quicker and more efficiently.
The Title Companies that work with the REO Banks have documentation already in place that is necessary to clear the title on the properties. Using Title Companies that work with the REO Banks creates a much smoother transaction process for you.
The REO Banks must approve an estimated HUD settlement statement prior to authorizing the close of escrow. In order to accomplish this each REO Bank has special requirements for certain items they need prior to approving said settlement statement. All these items again must be sent to the seller via their online systems. Using the companies that know the REO Bank’s requirements helps to get your transaction completed much quicker and smoother.
Each REO Bank is different and has different requirements. Using an Escrow Company and Title Company that has experience with that particular Bank’s requirements will inevitably make your transaction smoother.

For further information on the Buyer’s Choice Act you can read the following article: AB 957 “The Buyers Choice Act” Passes

When making your choice or accepting the seller’s choice of escrow or title companies, consider asking the following questions to the prospective companies:

Do they retain an Errors & Omissions Insurance Policy and a Fidelity Bond each with a minimum of $2,000,000 which protects your transaction to the fullest value?
Do they conduct background checks on all new hires through the Department of Justice including stockholders, officers, directors and managers?
Are Potential employees barred if they have drug convictions, moral turpitude or theft of any type on their record?
Do they have set minimum financial requirements by their licensing entity?
Are their trust funds and processing of files audited by their licensing entity, or in-house auditors and CPA?
Are their trust funds balanced every day?
Is their computer systems capable of handling the paperless file required for processing an REO transaction?
Are they proficient in a variety of REO software platforms?
Do they have an extensive back up computer systems, which includes a disaster preparedness plan?
Can they handle all transactions in a professional, honest and diligent manner?

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Revised HUD Forms Has Buyers Best Interests in Mind

CV Escrow — Thu, 04 Mar 2010 13:00:38 +0000

The New Year is here, you are ready to purchase a new home, what’s new?? The biggest and most significant industry change in years, maybe even decades, has come from the US Department of Housing and Urban Development (HUD). HUD has revised the Good Faith Estimate (GFE) and the HUD-1 Settlement Statement to try and make it simpler and easier for the consumer to make responsible and informed decisions before purchasing a home.

As a consumer, most of the changes and revised forms have been made with your best interests in mind. HUD has tried to prepare a simpler more direct way to help you understand your options and fees up front so that you have as much information as early as possible to be able to make the best decision for you and your family. The new rules and forms have been put in place to help provide a loan shopping tool that accurately discloses terms and fees, and prevents last minute changes to either at closing.

In anticipation of the new rules, HUD has released a publication to help guide you, the consumer, through the loan decision process: Shopping For Your Home Loan: HUD’s Settlement Cost Booklet. Real Estate Settlement Procedures Act (RESPA) requires that loan originators provide consumers with the booklet within three days of a loan application. This booklet, albeit lengthy, provides a basic overview of the home buying and mortgage lending process. It also explains in detail each part of the new GFE and the new HUD-1 Settlement Statement.

The intention of the new GFE is to encourage consumers to shop and compare fees from various lenders before choosing a mortgage. It shows what services are lender chosen (and thus cannot change), and also what services the consumer can go out and shop for. It clearly states important dates, loan terms, and settlement charges should you decide to move forward with the loan.

The new HUD-1 Settlement Statement then allows borrowers to easily compare those quoted fees to their final costs before closing on a loan. A new page has also been added to the HUD-1 Settlement Statement that contains a chart which shows the actual fees charged compared to those fees that were listed on the GFE. The chart identifies charges that should not have increased at all compared to the GFE, those that should not have increased by more than 10% compared to the GFE, and those that can fluctuate.

Origination charge: cannot increase.
Transfer taxes: cannot increase.
Appraisal fees: can only increase up to 10%.
Government recording fees: can only increase up to 10%.
Title insurance: can only increase up to 10% if borrower uses the title insurer selected by the lender

It also shows whether the consumer’s monthly payment will increase and, if so, when. This gives the borrower a very clear picture of what the closing expenses will be compared to what was shown on the GFE, so he or she can note any discrepancies and ask about them up front and prior to closing –preventing surprise fees and delays at the time of signing.

With these new tools now available and with a clearer disclosure of fees and terms, hopefully consumers will be able to make informed and responsible decisions that will help them and their families achieve financial success and home ownership.

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Understanding the Statement of Information Form From Escrow

CV Escrow — Thu, 25 Feb 2010 13:00:30 +0000

What is the Statement of Information?

Upon the opening of escrow, Buyers and Sellers receive their initial escrow package – the Statement of Information (also known as the Statement of Identity) is included in this package for completion and return to the escrow holder.

The statement of information is a one page document which requests the party’s name, date of birth, social security number, current and previous addresses etc.

Who requires the Statement of Information?

The Title Company of record requires this completed form to ensure successful and expedient transfer of title. This document assists in eliminating untimely delays in closing of real estate transactions.

How does the Statement of Information work?

The Statement of Identity establishes and confirms identity. Confirming identity will assist the Title Company to eliminate/resolve matters that affect real property such as child support liens, judgments, bankruptcies etc., filed against persons who have the same or similar names.

This is important as such liens and judgments are recorded against real property and against individuals on a daily basis.

Why Should Buyers/Sellers Complete the Statement of Information?

Consider these scenarios:

Scenario #1: Seller is Robert Smith. The title company runs a name check on Robert Smith. Title company finds recorded liens and judgments filed against a Robert Smith that must be paid.

How will title eliminate our Seller, Robert Smith against these potential liens? Title will compare social security numbers, previous address, etc. (as per Statement of Identity) to determine which Robert Smith is liable for payment of said liens/judgments.

As result, our Seller Robert Smith has been eliminated as the potential party owing thousands of dollars due to liens.

Scenario #2: Buyer/Borrower is John Williams. Once again, title runs a name check and discovers that a John Williams has defaulted on his child support payments. Upon further investigation it has been determined that YES this is our Buyer/Borrower. Now escrow has the heads up to advise their Buyer/Borrower to bring his account current and also escrow can then secure an updated statement that will be sufficient for title transfer.

In conclusion:

The title company requires that buyers/borrowers and sellers fill out the Statement of Information to be able to complete their fiduciary duty to return clear title for the real estate transaction. The documents the title company requires comes from the escrow company after it has been completed by the Buyer or Seller, so your Escrow Officer can discuss the Statement of Information with you. Each transaction is case specific. Your Escrow Officer can clarify the points that are needed to finalize the transaction.

If the Statement of Information requirements give you cause for discomfort, talk to your Escrow Officer about the specific needs of your escrow. Your Escrow Officer will be able to explain the Privacy Act Notice with which CV Escrow is in compliance.

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Knowledge of the Escrow Duties and Responsibilities Can Lead To An Easier Transaction

CV Escrow — Thu, 14 Jan 2010 13:00:06 +0000

The escrow process can be a complicated and often technical necessity of buying and selling real estate. The escrow company and its officer have many duties to juggle on behalf of the Realtor, Seller, and Buyer during the real estate transaction. Understanding the various duties and functions of the escrow can assist all parties in ensuring a successful and timely transaction, as everyone involved has a part to play.

The escrow officer’s main duty is to remain as a neutral third party between buyer and seller in a real estate purchase transaction at all times. The escrow officer is not to be involved in negotiations between buyer, seller and/or lender.

Additional escrow officer duties and responsibilities are as follows:

1. Receive and hold buyer’s funds in a non interest paying trust account during escrow

2. Read and comply with all agreements as detailed in the Purchase Contract and Joint Escrow Instructions as it pertains to the escrow process

3. Follow mutually signed, written instructions agreed upon by buyer and seller during escrow

4. Prepare Escrow Instructions/General Provisions, Amendments, Grant Deed (for seller’s signature), Estimated Closing Statement and any additional documents required to clear title or as required by the new lender

5. Although in many cases reports are ordered by the buyer, seller or agents outside of escrow in some cases the escrow officer will obtain reports as required by the purchase contract and provide same to the buyer during escrow for their review

6. Make sure escrow is in receipt of buyer and seller signatures on Purchase Agreement and Joint Escrow Instructions, Escrow Instructions/General Provisions, Grant Deed, any Amendments, Estimated Closing Statements and any other documents required during escrow

7. Receive loan documents from the buyer’s new lender (IF APPLICABLE) and prepare amendments and estimated closing statements as required by the lender on their lender’s instructions

8. Order the evidence of insurance from the buyer insurance agent as per the requirement of the new lender

9. Send the signed loan documents and all lender required items to the new lender for funding

10. Send original recordable documents along with any releases required to clear title to the title company for recording at the close of escrow

11. Make sure that escrow is in receipt of all funds necessary to pay the seller their proceeds as well as all invoices agreed upon by buyer and seller during escrow

12. Make sure the seller has sufficient equity in the property to cover all costs, payoff of liens and any invoices agreed upon by buyer and seller during the escrow

13. Make sure that all the proper paperwork is in escrow to provide the buyer with clear title to the property

14. Make sure that all the conditions agreed upon by the buyer and seller on the purchase agreement and in writing through escrow have been satisfied prior to closing the escrow and transferring the property into the buyer’s name

The Buyer and Seller should also be aware that they will be receiving many additional items that may require their signatures from their agents and lenders directly.

Foreign Investors Need To Wire Funds To Expedite Escrow

Cindy Mozingo — Thu, 03 Dec 2009 13:00:47 +0000

Do you have a foreign investor or buyer looking to purchase a home in California? Our experience has been that if the client writes a personal check drawn on a foreign bank, it may take several weeks to be able to verify that the check has actually cleared. On the other hand, deposit checks we take from a customer drawn on a U.S. bank typically clear within 3-4 days.

Wire Transfers Expedite Process
There are steps you can take to ensure the escrow closes on time by working with your buyer to understand the need for a wire transfer to expedite the closing process. When you write an offer and are presented with a check drawn on a foreign bank, write on the first page of the purchase agreement that the buyer will arrange to wire transfer the deposit to the escrow company upon acceptance of the offer. Sometimes Realtors will go so far as to actually take the check to present with the offer, but state that the check will be replaced with a wire transfer upon acceptance. Either way works. Please keep in mind, that some escrow companies may require a wire from a foreign buyer (and not accept a check at all) due to the possibilities of delay. Contact the escrow company directly to inquire what the required procedures are.

There are problems that could arise if a check drawn on a foreign bank IS deposited into escrow:

Buyer could call his bank to put a stop-payment order on the check and escrow may not even be notified of this for 6 to 8 weeks. Our escrow officers have experienced buyers who decided against the purchase of the property and placed a stop payment on the check and then were unaware the stop-payment had been done.
Costs are being incurred on the strength of the buyers’ earnest money deposit. If the Sellers are holding their property off the market, they deserve to be assured that the buyer has “good funds” in escrow to back up the offer they have made to purchase
If the escrow is scheduled to close rather quickly, for example 14 days, and the initial deposit check drawn on a foreign bank is deposited into escrow, the escrow company may not be able to verify clearance of the check as a way of guaranteeing that there are “good funds” in the escrow and allowing the escrow to close.

Our experience has been that there has been little resistance from the buyer to following these suggestions. We have seen that if a buyer is told up-front by the Realtor that any funds coming into escrow must be made by wire transfer, it conveys to the client that we are all on the same page and have the same goal: closing the escrow successfully.

Here is an example of a wire transfer request

Tighter RESPA Rules To Take Effect in 2010

CV Escrow — Fri, 20 Nov 2009 13:00:34 +0000

To help consumers more easily understand settlement costs and prevent big price discrepancies between the preliminary Good Faith Estimate and the HUD-1 settlement statement, the U.S. Department of Housing and Urban Development (HUD) has created stricter Real Estate Settlement Procedures Act (RESPA) regulations are scheduled to take effect by April, 2010. (The regulations originally were to take full effect on January 1, but HUD provided a four month respite for compliance to the industry.)

For a review of what RESPA is, see our prior blog post.

New RESPA Rules

The upcoming Real Estate Settlement Procedures Act (RESPA) Reform requirements aim to provide customers with the essential information and adequate time to understand their home purchase and refinance options. HUD is requiring that loan originators provide borrowers with a standardized Good Faith Estimate (GFE) which clearly discloses key loan terms and closing costs.

The loan industry, in an effort to dissuade consumers from shopping for a loan, created separate Good Faith Estimates for each company, so that consumers could not equally compare costs. With the new standardized GFE, consumers now will have a chance to compare “apples to apples” when looking at competitive loan products.

In a busy year of reforming the mortgage industry, there are new federal governmental regulations called the Mortgage Disclosure Improvement Act (MDIA) (see below) which went into effect in July of this year. To clarify why RESPA and MDIA are related, if a lender is out of compliance with the MDIA, they are subject to a RESPA violation. The new standardized GFE, the MDIA, and stricter RESPA laws will all assist consumers in understanding the complexities of the mortgage process.

While HUD requires the RESPA Reform regulations to take effect in 2010, many lenders have begun implementing the required changes early. We, at CV Escrow, have experienced that interpretations of the RESPA Reform requirements vary from lender to lender and as a result have caused delays in closing. Below is information about the MDIA from an attorney that specializes in RESPA law to help clarify the new requirements which will assist in closing transactions on time.

Compliance with Mortgage Disclosure Improvement Act/RESPA Requirements:

1.The 3/7/3 Rule requires a seven business day waiting period once the initial disclosure is provided before closing a home loan (business days are everyday except Sundays and Holidays). This means that before a borrower can close on a transaction the borrower must receive the initial Good Faith Estimate (GFE) and initial Truth in Lending (TIL) statement disclosing the final Annual Percentage Rate (APR) seven days prior to closing.

2. If the final annual percentage rate is off by more than .125% for a fixed rate loan or .25% for an ARM loan, from the initial GFE disclosure, then the lender must re-disclose and wait yet another three business days before closing on the transaction. Note: If the rate fluctuates EITHER WAY, up or down, more than .125% on a fixed or .25% on an ARM, the re-disclosure takes effect.

3. Lenders are forbidden from collecting money for appraisals, loan applications, etc. prior to the delivery of the truth in lending statement. Lenders can only collect the credit report fees from the borrower at the time of prior delivery of the final TIL. No other fees are permitted to be collected at the time of the application. If the TIL is sent by mail, additional charges can occur after the 3rd business day after the borrower receives the TIL in the mail.

4. The following language must be clearly written on the initial and final TIL: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”

5. Any Lender or Settlement Service Provider found in violation of the new RESPA regulations will have 30 days after the close of escrow to correct any errors and compensate the consumer for any overage.

What do these new MDIA/RESPA regulations mean to a Realtor?

Plenty. These rules help the buyer make sure that their lender does not say one thing and then do another. Here is how Realtors can help their clients:

* Make sure to check the initial Good Faith Estimate and Truth In Lending form for a buyer and look for discrepancies in charges. The new rules were put in place to protect consumers from being low balled one figure by a loan officer only to find out at the closing table that the fees charged were much higher. The new MDIA rules will absolutely delay closings if these steps are not followed carefully.

* Buyers, sellers, and real estate professionals should not schedule a closing until the borrower has completed the seven day waiting period as required in the initial Truth In Lending statement.

* Contact your Escrow Officer for an Estimated Settlement Statement as soon as the Good Faith Estimate is available. Many lenders do not contact escrow for fees and/or recurring closing costs.

To learn more, go here for the new RESPA rule FAQ’s and here for the RESPA final rule.

Go here to learn more about the 120-day delay in the RESPA regulation enactment.

What is RESPA And What Affect Does It Have On The Real Estate Transaction?

CV Escrow — Thu, 12 Nov 2009 13:00:32 +0000

How would you react if you had a limited amount of funds in the bank to pay for closing costs and then were hit with hundreds of dollars in extra “unexpected” closing costs? This is a problem that the Real Estate Settlement Procedures Act (RESPA) was enacted to eliminate. The goal of RESPA is stop hidden fees and charges by settlement service providers and to stop kickbacks to ensure the integrity of the real estate transaction for the consumer.

In 1974, RESPA was enacted by Congress. Its intent was consumer protection by regulating the disclosure of all costs and business arrangements in a real estate transaction settlement process.

Enforced by the U.S. Department of Housing and Urban Development (HUD), RESPA requires that consumers receive disclosures at various times in the transaction and outlaws “kickbacks” that increase the cost of settlement services.

Specifically, Section 8 of RESPA prohibits a person from giving or accepting a referral fee, kickback, or anything of value in exchange for the referral of settlement-service business.
An example of an illegal “kickback” was when title companies would pay for rounds of golf, provide free administrative services, or sponsor educational classes for Realtors and lenders to encourage referral business.

A common RESPA violation, with direct impediment to consumers, occurred with lenders during the housing boom. Consumers would apply for a loan, receive a Good Faith Estimate providing the cost to obtain that loan, and then, they would go search for a new home. After making an offer on the home, they would get the final loan documents to sign at close of escrow. When they sat down to sign the final loan documents (HUD 1 settlement statement), they were oftentimes surprised to find extra and ambiguous closing costs and fees that had come up during the escrow process, sometimes along with higher interest rates. These fees were added by lenders who lured consumers with promises of low cost loans.

RESPA has done away with many of these types of unsavory business practices, as well as leveled the playing field between lenders and others in the real estate industry.

To help consumers more easily understand settlement costs and prevent big price discrepancies between the preliminary Good Faith Estimate and the HUD-1 settlement statement, HUD has created stricter RESPA laws, which take effect in January 2010. HUD has published a Frequently Asked Questions about RESPA which is a good resource for further information.

Mello-Roos: What it is and How it Affects Your Property Taxes

CV Escrow — Thu, 29 Oct 2009 13:00:41 +0000

When purchasing real property in California you may discover that the property is subject to Mello-Roos. Mello-Roos is the common verbiage used to describe a tax that is imposed upon real property that falls within a Mello-Roos District. This tax or fee, which is a form of financing, can be used by cities, counties, and special districts (such as school districts) to help pay for major improvements and services within the district which might include schools, roads, libraries, police and fire protection services. Mello-Roos taxes are imposed in addition to the normal tax base applied to the real property for that area or development.

The tax was initially developed due to the limited ability of local governments to use property taxes to construct public facilities and services. The taxes usually are levied on a specific development for approximately 10-15 years or until the infrastructure bonds are paid off. You will need to check with your County Assessor’s office for the fees for your particular property.

It is important to know about this long-term additional expense when buying a home within a Mello-Roos District due to the costs added to the property’s tax base.

The California Land Title Association has written an in-depth description of Mello-Roos. You can read the full article. Below are key points from that article:

What is a Mello-Roos District?

A Mello-Roos District is an area where a special tax is imposed on those real property owners within a Community Facilities District. This district has chosen to seek public financing through the sale of bonds for the purpose of financing certain public improvements and services. These services may include streets, water, sewage and drainage, electricity, infrastructure, schools, parks and police protection to newly developing areas. The tax you pay is used to make the payments of principal and interest on the bonds.

What are my Mello-Roos taxes paying for?
Your taxes may be paying for both services and facilities. The services may be financed only to the extent of new growth, and services include: Police protection, fire protection, ambulance and paramedic services, recreation program services, library services, the operation and maintenance of parks, parkways and open space, museums, cultural facilities, flood and storm protection, and services for the removal of any threatening hazardous substance. Facilities which may be financed under the Act include: Property with an estimated useful life of five years or longer, parks, recreation facilities, parkway facilities, open-space facilities, elementary and secondary school sites and structures, libraries, child care facilities, natural gas pipeline facilities, telephone lines, facilities to transmit and distribute electrical energy, cable television lines, and others.

When do I pay these taxes?
By purchasing an interest in a subdivision within a Community Facilities District you can expect to be assessed for a Mello-Roos tax which will typically be collected with your general property tax bill. These special tax payments are subject to the same penalties that apply to regular property taxes.

How much will the Mello-Roos payment be?
The amount of tax may vary from year-to-year, but may not exceed the maximum amount specified when the district was created. In the case of the purchase of a new house within a subdivision, the maximum amount of the tax will be specified in the public report. The Resolution of Formation must specify the rate, method of apportionment, and manner of collection of the special tax in sufficient detail to allow each landowner or resident within the proposed district to estimate the maximum amount that he or she will have to pay.

How are Mello-Roos taxes affected when the property is sold?
The Mello-Roos tax is assessed against the land, but is not based upon the value of the property, therefore, the possible increased value of the property does not affect the amount of the tax when property is sold. The amount of the tax may not exceed the original maximum amount stated in the Resolution of Formation. Any delinquent payments must be satisfied before the sale of the real property, since the unpaid amounts are a lien against the property.

When purchasing a home in California, buyers should be proactive in ascertaining if the home falls within a Mello-Roos District so they are knowledgeable about the additional tax on the home. Here are some avenues to obtain more information about the precise amount of taxes that will affect the property you are considering purchasing:

Inquire with your Realtor who has the resources to investigate if the property has a Mello-Roos tax associated with it.
The information can be found on the Seller’s transfer disclosure statement disclosing if the property is in a Mello-Roos District.
The information is in the Mandatory Natural Hazard Disclosure report that the seller is required to provide to the buyer during the escrow process.

Reappraisal Exclusion Program–Tax Savings For Sellers 55 And Over

CV Escrow — Thu, 22 Oct 2009 13:00:42 +0000

To help homeowners over the age of 55 be able to afford to move to a different home in California or purchase a “move down” home and not suffer an increase in property taxes, Propositions 60 and 90 were passed. The Propositions, also known as the Reappraisal Exclusion Program, provide a one-time property tax relief by preventing a property valuation increase when someone over the age of 55 sells their home and purchases another home of equal or lesser value, effectively saving the seller thousands of dollars each year.

Both Sellers and REALTORS need to understand that there are specific timelines to apply for the exclusion, they need to know which counties in California allow the transfer, and what are the qualifications for the exclusion. Let’s start by defining Proposition 60, 90 and 110.

What are Propositions 60 and 90?
Propositions 60 and 90 are constitutional amendments passed by California voters that provides property tax relief for persons aged 55 and over. it allows these persons, under certain conditions, to transfer a property’s factored base year value from an existing residence to a replacement residence. ?Typically the property tax of a newly purchased or constructed residence is based on its current market value upon change of ownership. However, the provisions of Propositions 60 and 90 may result in substantial tax savings since it allows the property tax of the original (sold) property to be transferred to the newly purchased or constructed home if eligibility requirements are met.
Proposition 110 allows the transfer of a base year value for severely and permanently disabled persons. Except for the disability factor, the qualifications for Propositions 60/90 are same as Proposition 110.
What is the difference between Proposition 60 and Proposition 90?
Proposition 60 allows transfers of base year values within the same county (intracounty). Proposition 90 allows transfers from one county to another county in California (intercounty) and it is the discretion of each county to authorize such transfers. As of January 2007, only seven counties have passed an ordinance authorizing intercounty transfers; however, it is recommended that you call your assessor for verification as it could change at any time.

Here are the counties currently allowing the Exclusion Program:
Alameda, Orange, San Mateo, Los Angeles, San Diego, Santa Clara and Ventura.

Here is a list of counties that have rejected Prop 90:

Butte, Calaveras, El Dorado, Fresno, Lake Madera, Mendocino, Merced, Mono, Monterey, Napa, Nevada, Placer, Sacramento, San Benito, San Bernardino, San Luis Obispo, Santa Barbara, Santa Cruz, Shasta, Siskiyou, Solano, Sonoma, Stanislaus, Tulare, Trinity and Yolo.

What does “equal or lesser value” mean?

Sellers are able to take advantage of the Reappraisal Exclusion Program when they sell a home and purchase another home of equal or lesser value. What does that entail?

Equal or lesser value means that the fair market value of the replacement property does not exceed one of the following:

100% of the market value of the original property as of the date of the sale if the replacement property is purchased before an original property is sold.

105% of the market value of the original property as of its date of sale if the replacement property is purchased within 1 year after the sale of the original property.

110% of the market value of the original property as of its date of sale, if the replacement property is purchased within the 2nd year after the sale of the original property.

If you purchase a property of greater value than the original sale property, there will be no exclusion.

Timeline:

You must buy the replacement property within two years of selling the original property in order to qualify. You have three years following the purchase date or new construction completion date of the replacement property to file an application for the exclusion. As of the date the original property sold, the seller or the spouse of the seller must be 55 years or older or be permanently disabled.

Proposition 110 creates an exception to the one-time-only limitation for anyone who becomes permanently disabled after having received a reappraisal exclusion as a claimant over the age of 55 years. If a person over the age of 55 years transferred the base year value from an original property to a replacement property and subsequently becomes disabled, then that person may now transfer his or her base value a second time.

A seller may apply for this exclusion in the county of the replacement property by completing and submitting the necessary application form. Contact the County Assessor or download the application directly from the County Assessor’s website.

For more information about the Propositions, frequently asked questions and more, go here.

What is a Title Binder? If You Plan On Owning A Home A Short Time, It’s For YOU!

CV Escrow — Thu, 15 Oct 2009 13:00:27 +0000

What is a title binder? No, it’s not the binder you take to keep your notes in concerning your title and escrow proceedings. It IS something that you should know about to save money if plan on selling your home within 2 years after its purchase.

A title binder, also known as an interim binder, is not a title insurance policy, but is, instead, a commitment to issue a title policy. The key to the title binder is asking yourself, “How long do I plan to keep this property?” The title binder is a cost saving tool for people (i.e. investors) who intend to “flip” a home or for those who are subject to frequent relocation or who just find themselves not wishing to remain in a specific home for more than two years.

Every time you sell and buy a home, you incur costs to have the title searched. Title insurance protects the buyer of a property or the lender for the property against unknown defects in the title. For a one-time premium, the title insurance company, which is in the business of examining public records, preparing title abstracts, and selling title insurance, issues the insurance after doing a title search on the property. By purchasing a title binder up front, you can save hundreds of dollars in title fees because it allows the purchaser of real property to resell the same property and have a policy of title issued to his/her buyer at fraction of the cost.

For example, if an investor purchases a “fixer upper” they would purchase a title binder as soon as they bought the property, knowing they plan on fixing up the property and selling it within a year. When they go to sell the property, they use the same title company they originally used and avoid having to incur the costs of having the title searched again for the new buyer.

The binder was designed for a special purpose and cannot be used in every real estate transaction. The standard term for a title binder is two years. However, some title companies do offer an extension for another year at an additional cost of another 10% of the Owners Policy Cost. It is very important to note, the same title company that issued the title binder must be used when the property is sold. Sometimes, the listing agent for the former buyer (now the seller) was not aware of the title binder purchased at the time the property was purchased.

Under normal circumstances in California, the seller of real property pays for the buyer’s title insurance. The interim binder provides a method to avoid duplicative costs. An Interim Binder gives its holder the option to obtain coverage during the period set forth in the Interim Binder, sell the property, and provide a title insurance policy for the new buyer, all at the cost of a single owner’s policy plus a “binder fee”, usually 10% of the premium for the owner’s policy. Accordingly, where a buyer or developer intends to resell the property within a defined time period (usually two years), an interim binder may constitute a useful and cost effective alternative.

It is important to repeat, however, that an interim binder is not insurance, it is a commitment to issue an insurance policy. However, if a claim arises during the interim binder period, the person to whom the interim binder was issued may convert the interim binder to an owner’s policy of title insurance naming him as insured and tender that claim pursuant to the policy. Title binders are only for buyers, not lenders and are issued in lieu of an Owner’s Policy.

More information about the legalities of title binders can be found here

Exclusion from Reassessment of Property Tax Can Save Homeowners Money

CV Escrow — Fri, 09 Oct 2009 03:38:53 +0000

Did you know that in several counties in California, Propositions 58 and 193 can save homeowners money in the transfer of property between parents and children and even grandchildren? These propositions are geared towards keeping property “in the family” and both propositions help avoid a forced sale if the home is reappraised and the taxes go up exponentially making it too difficult for the family member to make the payments on the home.

Proposition 58 provides property tax relief by preventing an increase in property taxes when real property is transferred between parents and their children.

Proposition 193 broadens the tax relief to include transfers between grandparent and grandchildren, or from grandchildren to grandparents. This transfer is only exempt in cases where both parents of the grandchild are deceased.

The Parent-Child Exclusion applies to any real property purchases or transfers between parents and children, which occurred on or after November 6, 1986.

The exclusion applies to natural children, children adopted before the age of 18, stepchildren (as long as the parents are still married), and sons- and daughters-in-law are considered children under this exclusion program.

What most homeowners do not know is that the claim must be filed within three years after the date of the purchase/transfer or prior to the transfer of the property to a third party, whichever is earlier or within six months after mailing of the notice of supplemental assessment.

What type of property can be transferred without a tax increase?

A parent may transfer their principal residence and any other property valued up to $1,000,000 to their children. The properties will not be reappraised providing that the proper Claim for Exclusion from Reappraisal form is filed and approved by the Assessor’s Office.

An inheritance or transfer to children within a trust may qualify for this exclusion. The trust documents must be provided with the claim.

You may request a Parent-Child or Grandparent-Grandchild Exclusion claim form by contacting your local County Assessor/Recorder/Clerk office. You may ask your Escrow Officer for the contact information for your local Assessor’s office, too.

The Los Angeles County Office of the Assessor did a great writeup on this topic, as well, and included links to the forms that are used in exclusion claims. Their summary can be found here.

The points presented here are meant as an informational summary and are not inclusive of all of the nuances of the propositions. For full definitions of Prop. 58 & 193, please view Revenue and Taxation (R & T) Code Section 63.1 online at www.leginfo.ca.gov and consult with your tax or legal professional.

Understanding The Timeline To Foreclosure

CV Escrow — Thu, 01 Oct 2009 13:00:09 +0000

Whether you are a REALTOR considering getting into the niche business of dealing with REO’s, a buyer looking to find a deal on a home by seeking a foreclosed property or a seller looking for information on what happens when a foreclosure proceeding is started, you need to know and understand the foreclosure process. By understanding this process, you will know how long the process may take, which entities are involved, and when the proceedings can be halted. Below is a simplified version of the process.

Defaulting on one’s loan causes the start of foreclosure, the process by which the lender takes over the home in order to recover their principal investment. Once the house is either sold on the steps of the title company or the court house at the Trustee’s Sale or “repossessed” by the lender, it is sold and the former owner must vacate at the discretion of the new owner. When there is a power of sale clause in the deed of trust the non-judicial process of foreclosure is used.

Notice of Default:

In California, the timeline of non-judicial foreclosure begins when the trustee files a notice of default. This is a letter that is sent to the owner/trustor notifying him or her of their default of the loan. This notifies the owner of the intent of the lender to follow through on their right to collect on the debt. The copy of the notice, which is recorded at the County Recorders Office of the appropriate county, is mailed to the address of notice as per the deed of trust.

Notice of Trustee’s Sale

No sooner than ninety (90) days after the trustee records the Notice of Default, the Trustee must publish a notice of trustee’s sale in the local paper and simultaneously file that notice with the county recorder’s office. No sooner than twenty days (20) after the notice of trustee sale is filed, the home may be sold at public auction for the amount of the debt plus foreclosure costs. If no one bids at the auction, the lender assumes ownership of the property, and may dispose of that property to recover their cash investment.

Federal Tax Credit Helps First Time Homebuyers: Tax NOT Deducted at Escrow

Vickie Donati — Thu, 24 Sep 2009 13:00:54 +0000

The Federal Government, in an effort to stimulate the economy, enacted a first time home buyer tax credit earlier this year that would give homebuyers up to $8,000 to help offset the costs of purchasing a home. Many REALTORS and homebuyers alike, have asked for the refund to be “given back” during the close of escrow. Since the program is a “tax credit” the money comes back from the government when the new homeowner files their income tax return as opposed to receiving the money at the close of escrow. Escrow officers want their clients to know this ahead of time to help avoid frustration when a buyer thinks they will receive an additional $8000 to help them close their escrow.

To help avoid confusion, here is more information about the tax credit and the form that needs to be filled out in order to apply for the tax credit.

The credit:

Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.
Applies only to homes used as a taxpayer’s principal residence.
Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
The credit is claimed using Form 5405.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000 or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS has a new YouTube video $8000 Tax Credit Explained and other resources that provide details about the tax credit.

This is not intended as legal or tax advice. To fully understand the tax credit and apply successfully for the refund, please consult a tax professional.

The Advantages and Disadvantages of an All Inclusive Trust Deed and Note

CV Escrow — Thu, 17 Sep 2009 13:00:08 +0000

In these tough economic times, many homes have been languishing on the market, making it difficult for Sellers to move on to other homes and locations. In order to make a sale, a Seller can offer to do a “carryback”. A carryback loan, also known as a “seller carryback” or “seller’s second”, is a loan which is financed by the Seller of a property to help a Buyer purchase the house. Normally, this aids in the completion of the sale of the property. It could also refer to the part of the purchase price the Seller is able and willing to finance for the buyer.

For instance, the typical seller carry back situation is 10% down, 10% seller carry back and 80% first mortgage. This is a percentage of the purchase price. An example is a $1,000,000 house would have a $100,000 down payment, a $100,000 seller carry back and a $800,000 conventional first mortgage deed. Another scenario for a seller carry back is if the seller owns the property free and clear and the seller carries a first mortgage or trust deed. Sometimes there is a first trust deed which the buyer can take over and the seller carries a second mortgage.

Utilizing a seller carryback works well when the Buyer cannot come up with a big down payment or they may not fit into the “conventional” loan process because of their career or past credit history. Understanding the potential pitfalls of doing a seller carryback, but also knowing the rewards, is crucial to this type of sale. In a seller carryback scenario, both parties need to exucute an All Inclusive Trust Deed.

An “All Inclusive Trust Deed” or AITD is a “Seller Carry” that “wraps” or includes an underlying loan or loans of record. It is usually recorded at the close of escrow with a Grant Deed conveying full to title to Buyer and Title Insurance is issued. The AITD’s face amount includes the unpaid balance(s) on underlying encumbrances, plus the remaining unpaid balance of the Sellers equity.

Sellers remain responsible for the payment on the underlying loan(s) or until they are paid in full. The Sellers equity position in the note is always the difference between what is owed to the Seller and what the Seller owes the underlying lender.

The AITD becomes a junior trust deed, subordinate to the underlying trust deed(s). The inputed interest rate (9% or applicable Federal securities rate, which ever is lower) is the minimum interest rate allowed for Seller financed transactions. The Documentary Transfer Tax on the grant deed is based on the purchase price LESS the liens of record.

Advantages:
The Buyer does not need to qualify for a loan with a lender and closing costs are minimal. The Seller has advantage of installment sales income tax recording method, so long as payments are received in more than one tax year. The Seller, by agreement in writing with buyer, may prohibit prepayment of up to a 12 month period following the sale.

Because the underlying loan(s) may have a lower interest rate, or may have been paid down considerably, the Seller’s effective interest rate yield may be higher than the actual note rate. The Seller benefits from the “Interest Override” which is the difference between the interest rate on the existing loans of record and the rate negotiated on the AITD.

Disadvantages:
Recording may alert an underlying lender to enforce the “Acceleration Clause” or “Due on Sale Clause” and require the underlying loan to paid in full. At this time, the underlying loan would be considered in default and said lender could start foreclosure proceedings.

Paying off an AITD:

There are two types of AITD payoffs: Equity Payoff and Full Payoff.

The AITD should not be reconveyed until such time as any equity of the seller and the existing deed(s) of trust have been paid in full. At all times the seller is responsible for the underlying loan(s) of record, since there has been no release of liability given by the existing lien holder(s). Any late payments and/or default, will reflect on the Seller’s credit accordingly.

Being able to sell a house quickly by not having to wait for a mortgage company to approve a buyer or having to rely upon an appraiser to come in with the “right” price can sometimes make this type of an arrangement attractive. However, be sure to consult a real estate attorney and professional tax advisor on the implications (or benefits) before entering into a transaction.

Understanding the Terms of Foreclosure

CV Escrow — Thu, 10 Sep 2009 13:00:25 +0000

If you are either in the process of buying or selling a foreclosure property, understanding the basic terms will help you ask appropriate questions of your REALTOR, the escrow officer, the lender or other parties involved in the transaction. This can expedite the timeframe of the process for everyone involved.

Below are the most common terms used in connection with the foreclosure process:

A Deed of Trust:
A Deed of Trust is the security for your loan. It is the document that is recorded in the public records.
A deed of trust contains three parties:

The Trustor, which is the borrower
The Trustee, which is an entity that holds “bare or legal” title
The Beneficiary, which is the lender

The deed of trust is an instrument that identifies the following:

Original loan amount
Legal description of the property being used as security for the mortgage
The parties
Inception and maturity date of the loan
Provisions of the mortgage and requirements
Late fees
Legal procedures
Acceleration and alienation clauses
Riders, if any, regarding such clauses as prepayment penalties or terms of an adjustable rate mortgage

Notice of Default:
Lenders file in the public records where the property is located a public notice called the Notice of Default. It states that the borrower is in default, behind in the mortgage payments, and if the payments are not paid up, the lender will seize the home. In California, lenders typically do not file a Notice of Default until the borrower is at least 60 days behind in making payments. Lenders must then wait 90 days. During that 90-day period, the borrower has the right to make up the back payments and reinstate the loan. After 90 days, the lender is required to publish a notice in the newspaper for 20 days and then may sell the property to the highest acceptable bidder on the courthouse steps. If no acceptable bid is received, the trustee then conveys the property to the lender.

Deed-in-Lieu of Foreclosure :
A potential option taken by a mortgagor (a borrower) to avoid foreclosure under which the mortgagor deeds the collateral property (the home) back to the mortgagee (the lender) in exchange for the release of all obligations under the mortgage.

Foreclosure:
Legal proceeding by which a borrower’s rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. The lender may then declare the entire debt due and owing and may seek to satisfy it by foreclosing. Foreclosure is commonly by a court-decreed sale of the property to the highest bidder, who is often the lender.

As we all know, foreclosures continue to be in the news and continue to dominate the market. This means that REALTORS, struggling homeowners, and potential buyers need to have information about the process and terms of foreclosure in order to make important decisions about the sale or purchase of a property.

Escrow Terminology Explained, Part 2

CV Escrow — Thu, 16 Jul 2009 19:17:39 +0000

This is the second article (see the first one here) in our series on the specific terms and phrases you can encounter during a real estate transaction. The language of escrow and the real estate transaction doesn’t need to be a stumbling block; once you know the terms, these words become what they are meant to be – valuable tools to help smooth the road to a successful transaction.

Contingency

This is a clause in the sales contract that says something must happen before the sale goes through. The sale is contingent on this event, in other words. Common contingencies are the arrangement of financing, a successful home inspection or wood pest inspection, or a roofing or sewer report. Negotiate contingencies carefully, as they can cause the failure of a deal.

FIRPTA

The Foreign Investment in Real Property Tax Act of 1980 is important if you are buying a property from a person or corporation that is not US-resident. It is up to you to find out if the seller is a foreigner. FIRPTA rules state that the buyer must withhold 10% of the realized sale price for tax purposes. A common exception is if you are buying a personal residence for under $300,000. Talk to your broker or escrow officer, who will know all the details.

Cal-FIRPTA

The California version of FIRPTA, this legislation requires the withholding of a percentage of the sales price for most California real estate transactions. Talk to your realtor or escrow officer to get a full explanation of how this law affects your transaction.

Easement

An easement is an allowance, written into the property’s title, for another person or company to have access to a portion of the land for some purpose. Often an easement allows access to power lines or utilities running through the property. A registered easement gives the other party legal access, and restricts what the owner can do on that piece of the property.

Encroachment

An encroachment is any structure or physical thing that intrudes on somebody else’s space. This could be a neighbour’s building or fence encroaching on your land, your building or other structure encroaching on your neighbour, or your structure encroaching on city or state property. Encroachments must be agreed upon before building, resolved if discovered, or removed if objected to.

Watch for more terminology posts in the months ahead.

New CV Escrow Office Opens In Palm Springs

Scott Akerley — Thu, 09 Jul 2009 17:41:01 +0000

CV Escrow continues our strong commitment to the Desert. On behalf of everyone in the company I am pleased and proud to announce the opening of a new Palm Springs office. This addition to our service locations enhances our ability to provide personal service to the area’s real estate community.

Our Office Manager and Escrow Officer is Julie Eckstrom. She is a SoCal native who has lived and worked in the Coachella Valley since 1985, where she has built many outstanding relationships with area Realtors. Working in escrow since 1976, her strong skills in project management, in team management and in the technical details of escrow put her in a great position to help Realtors with all of their escrow needs. “Throughout my career”, Julie noted, “I’ve been fortunate to work on projects and develop expertise in many kinds of escrows including sales, commercial, Indian lease land, loan, REO and short sale transactions.”

Please feel welcome to stop by to see Julie and to share with her your thoughts on how she can help you. She can be reached at:

CV Escrow, Palm Springs Office (map)
850 N. Palm Canyon Drive
Palm Springs, CA 92262

Phone: 760.325.7314
Fax: 760.325.7324

Email: jekstrom@coachellavalleyescrow.com

Concurrent Closings – A Complex Escrow Challenge

CV Escrow — Thu, 02 Jul 2009 13:00:53 +0000

Concurrent closings are a common escrow situation where a client is conducting two real estate deals, and wants them both to close on the same day. It sounds like a simple, straightforward matter of timing; in reality, the request for a concurrent close can be a difficult and stressful affair for all concerned. It’s like trying to line up two flocks of ducks at the same time.

Reasons For Concurrent Closings

A client may ask for concurrent closings for several reasons. Perhaps they are buying a new house, and using the proceeds from selling their current house to pay for it. Perhaps it’s a business deal with a need for close timing. Perhaps they are involved in a 1031 exchange, and the timing of the closings has strong financial implications. For whatever reason, the less time between the closing of the two deals, the more the client benefits.

The challenge in executing a concurrent closing arises because any real estate transaction involves a multitude of agencies and stakeholders. Title agencies must work through the process of transferring title; spouses, business partners, or other parties with an interest in the property need to be consulted; lenders have approval processes that depend on other paperwork being completed in a timely manner. In short, the escrow officer works an impressive feat of organization and coordination in a concurrent close.

It May Be Out Of Escrow’s Hands

The escrow officer is the director of the two transactions. The escrow officer makes sure people have the right information and forms at the right times, follows up to ensure timely completion of the paperwork, and does whatever is necessary to keep things on track. The plain fact is, however, that a concurrent close runs across many desks besides the escrow officer.

There are ways that a buyer can streamline the process, and help bring the timing of two concurrent transactions closer together. The two biggest considerations would be to have the same title company and the same escrow agency handling both transactions. This opens the possibility for workers in the same office to coordinate their efforts, to the buyer’s benefit. Having the same lender will help, too. Keeping the sale and escrow considerations as simple as possible give the transactions a better chance of coming to a concurrent close.

These are some ways to help make two related transactions close on the same day, or close together. However, because of a real estate sale’s inherent complexity and the number of agencies involved, no timing of a concurrent closing can be totally guaranteed. Dealing with a professional, experienced and skilled escrow company can however help to effectively manage the transaction and meet the closing goals of all involved.

An Explanation of Property Tax Prorations in Escrow

CV Escrow — Thu, 18 Jun 2009 13:00:39 +0000

One of an escrow officer’s simpler jobs is calculating the amount of property tax that is payable by the buyer and the seller on any given real estate transaction. One of the agent’s tougher jobs can be explaining to the buyer why they may get an official property tax adjustment bill months after the sale is done. Let’s wade into the arithmetic and explain the situation.

Property Tax Defined

Every property gets assessed by the county assessment office every year, establishing the amount of tax due on that property. At the time of a sale, it’s a simple matter for the escrow agent to find out the property’s tax for the full year, and apportion the correct amount to the seller for the year to that date, and the right amount to the buyer for the remainder of the year.

Say, for example, the property tax of the year is $1200, and the transaction closes on May 1. The seller pays $400 for the first 4 months, and the buyer pays $800 for the last 8 months. These numbers show up on the closing statements.

Sale Triggers Assessment

The complication arises because a property sale triggers a new assessment. This assessment happens according to the schedule and timetable of the county assessment office; this means it could happen months after the transaction has closed, when the buyer has long since thought the sale over and done with.

When it eventually occurs, the property has a new assessed value – and a new tax burden – retroactive to the date of the sale. It might be more or less than what the buyer paid on the closing statement, but chances are good that it will be different. Therefore, the assessment office will issue an adjustment notice. If it’s a tax increase, the buyer needs to pay more. If it’s a decrease, each county handles the situation differently. Check with the links below for your own area’s procedures.

Escrow Works With The Numbers

The escrow officer’s job with prorating property tax is just to work with the existing numbers. They use the property tax amount provided to them by title at the time of the escrow (the current property tax amount). They take this current tax information and allocate the charges to the parties accordingly.

That’s why, in an appreciating market, a buyer can get an additional tax bill, months after the sale, when they thought it had already been covered. And that is why, in a depreciating market, the potentially reduced taxes on the home cannot be determined and applied at escrow. For specific tax questions related to a particular parcel, further information can be gained by contacting your county’s tax recorders office:

Escrow Terminology Defined

CV Escrow — Fri, 12 Jun 2009 18:27:38 +0000

Real estate transactions, and the escrow processes that make then happen, sometimes have a level of industry jargon that can be confusing or intimidating to buyers and sellers who aren’t familiar with the meaning behind the words.

This is the first in a series of definitional posts designed to better inform buyers and sellers about the escrow process and the terminology used during the course of a transaction.

Escrow

The escrow procedure, at its core, is where a neutral, trusted third party holds onto an item for sale until something happens, usually until the buyer pays the seller. As real estate transactions have grown in complexity, so has the business of escrow. Now an escrow agent watches over all the details of the sales agreement, facilitates the transaction paperwork, and coordinates the interests of many different parties with an interest in the sale. They also make sure that the seller gets their proceeds, and the buyer gets their title, when all is said and done. For a detailed explanation of escrow, see this earlier post.

Deed of Trust

In many states, including California, this document takes the place of a mortgage. The Deed of Trust places a property’s title in the hands of a Trustee, usually a title company, along with the specifics of the buyer’s loan and repayment provisions. If the owner defaults on the loan, the Trustee has the legal right to foreclose, and give the lender the proceeds. When the loan is paid off, the Trustee reconveys the title to the owner.

Lien

This is a legal claim on a property by someone the owner owes money to. In real estate transactions, the lender will attach a lien to the property title, saying any money from sale of the property will first be used to pay off the loan.

Prorations

In a real estate deal, the escrow agent will need to figure out the buyer’s and seller’s portions of expenses that get paid according to a certain date – eg taxes, interest or utility bills. The agent will pro-rate the expense, doing the arithmetic based on the transaction’s closing date.

Grant Deed

This is the actual document of the real estate sale. It states that the seller, or Grantor, is selling the property to the buyer, or Grantee. It states the specifics of the property, and that the seller has revealed any liens or encumbrances. The Grant Deed is usually notarized and recorded.

HUD-1 Statement

This is the Department of Housing and Urban Development’s official settlement form, used in most real estate transactions to detail exactly what settlement costs occur in the sale, and whether the buyer or the seller is paying them. You get this form at or shortly before the closing. It represents a complete accounting of every cost of the transaction.

Title Insurance

This is an insurance policy for buyers that protects them against unanticipated defects in the property title. These could be anything from hidden liens, ex-spouses, unrevealed heirs, or recording errors, to forgery. Title insurance policies carry different specifics and exceptions, so examine yours carefully.

Additional terminology will be defined in future posts. If you have a term you would like clarified or definied, leave us a note in the comments section of this post.

Demystifying the Closing Statement: Line Item Escrow Fees Explained

Administrator — Thu, 04 Jun 2009 14:36:53 +0000

Closing fees are a prickly part of any real estate deal. This is where everybody involved in the sale and transfer – lenders, lawyers, government agencies, and the escrow company – add their numbers to the bottom line. Perhaps the worst thing about closing fees is that they often seem to come as a surprise. This can lead to anger and frustration for the buyer and seller, and inconvenience and headache for agents.

Escrow fees are part of a deal’s closing costs. Let’s explore the typical fees that can show up on a buyer’s closing statement, and help to avoid future cases of sticker shock.

Buyer’s Escrow Costs

Escrow Fees

This is the fee for the escrow service itself, usually a certain amount per $1000 of the sale price. With the escrow fee you are paying to make sure:

The escrow agent is properly licensed in your state
They have the knowledge, training and expertise to handle supplemental and unusual escrow situations
Your escrow process follows all applicable laws, and the sale will be legal and valid
The escrow agent is an independent third party, competent and trustworthy to caretake and disburse your money.

Loan Tie-in Fee

This fee provides for the escrow company’s time and supplies to print out lender documentation, comply with various lender requirements, and fill out and submit the forms and applications requested by lenders to facilitate the transaction.

E-Document Fee

More and more documents are being sent to escrow companies over the Internet, however they still need to be printed out in order to be archiveable and useful. This fee helps to defray document printing costs.

Processing Fee

Very few escrow situations come without any supplemental or unusual needs. Spouses, ex-spouses, grantees, trustees, business partners, extra government agencies or authorities, all may need to be dealt with in order to facilitate the escrow. All of these contacts take time and documentation. Most escrow companies include one or two added contacts in their escrow fee; a significant number of added contacts will result in a processing fee.

Archive Fee

Legal escrow documents need to be stored by the escrow company for a minimum of five years. This fee helps with the storage and retrieval of the large volume of paperwork involved.

Seller’s Escrow Costs

The seller’s closing statement contains escrow costs as well. The seller will have the same Escrow fee as the buyer, the same Processing and E-Document fees, and an Archive fee.

Closing costs from the escrow company are not a mystery, and don’t need to be a surprise, either. With a little bit of preparation and a phone call or two, both buyers and sellers can know in advance what their closing costs will be, and clear a potential obstruction on the way to a completed sale.

Indian Leased Land Escrows | Part 2 – You Need Extra Time

Julie Ekstrom — Thu, 14 May 2009 15:51:41 +0000

As you learned in Part 1 of our series on Indian Leased Land Escrows, when you’re dealing with Indian Leased Land, it’s just that: a lease. The person leasing the property is the Lessee. Most of the properties on Indian Leased Land are owned individually by tribal members who are considered to be the Lessors. The lease is managed by the Bureau of Indian Affairs (BIA) and the Lessors work with an Agent to formulate the lease. The lease pays for long-term legal use of the land for the duration of the lease contract.

It’s important to remember that additional procedures and processes may be required when selling or representing leasehold property. These procedures can extend the time needed for escrow.

You might need additional time if:

The Lessor, or Agent for the Lessor, is out of town. Escrow is often at the mercy of the Lessor/Agents day to day schedule and/or other obligations. Executing the necessary documents that are required may not be a priority.
Several Lessors use either Fey’s Canyon Financial or Joanne Allen & Associates to act as agents for their transactions. Each of these leases, and thereby the Agents who manage them, have many requirements, including reviewing and approving specific loan documentation, title report, contract, insurance, etc.. Fulfilling all of these additional requirements will add at least 3-5 days to your process, no matter how organized you are.
If you are obtaining a loan, it may be more complicated than a non-lease land transaction. In a standard transaction, the loan itself is the most complicated part of the process. In an Indian Leased Land transaction, there may be loan restrictions imposed by the lease, which may dictate how much down payment is required, the length of the loan, and insurance liability requirements. Their protocol may or may not require signing additional documents which will then be returned for the Lessor to review and approve. Obviously, this can add days onto the process.
The Buyer resides, or is presently located, outside of the country. In this instance, the timing can be delayed due to notary, going through the U.S. Consulates office, etc. Other issues may be present. What’s most important to know is that in this situation, even if it is an all cash deal, you won’t be able to have a rapid closing (5 days, for example) you won’t be able to within 5 days.
If the property is in foreclosure and owned by a Bank, the Bureau of Indian Affairs has additional requirements that can delay the process.

In subsequent posts, we’ll address the specific items or situations – rather than simply the process itself – that add more time to your escrow transaction time.

Indian Leased Land Escrows | Part 1

Julie Ekstrom — Thu, 07 May 2009 13:00:40 +0000

In the Coachella Valley, we often handle real estate escrows for property that is located on Indian Leased Land. The Bureau of Indian Affairs-Palm Springs Agency, has federal jurisdiction over the land on the Agua Caliente Indian Reservation. This reservation encompasses approximately 28,000 acres in the western Coachella Valley, including portions of Palm Springs, Cathedral City, Rancho Mirage and unincorporated Riverside County.

It’s important to realize that additional procedures are required when handling transactions on Indian Leased Land. We will go into further details on these procedures in future posts. For now, we want to define aspects of these unique transactions so you can understand what is involved and how it can affect the escrow process.

When you’re dealing with Indian Leased Land, it’s just that: a lease. The person leasing the property is the Lessee. Most of the properties on Indian Leased Land are owned individually by tribal members. They are considered to be the Lessors. All the leases are administered by the Bureau of Indian Affairs (BIA) which is part of the US Department of the Interior. The lease pays for long-term legal use of the land for the duration of the lease contract.

According to the BIA (which provided the information and details that follow) , there are more than 11,000 leases on land within the reservation boundaries. The leases generally fall into one of two categories:

Residential Leasing

Master Lease
Residential Sublease

Commercial Leasing

Master Lease
Commercial Sublease

Most of the leasing on the Agua Caliente Indian Reservation falls into the category of residential leasing.

Residential master leases are typically negotiated by developers on large tracts of land. After building single family residences or condominiums, developers then sublease the land to the individual homeowners.

If you are an individual homeowner leasing land from a developer you would hold what is commonly referred to as a Residential Sublease, whereas the developer who leased the land from the landowner would hold the Master Lease.

What’s the difference between “Trust” land and “Fee” land?

The term “Trust Land” refers to land held in trust by the United States for the beneficial use of an individual Indian landowner or Tribe. In contrast, “Fee” land is land not held in trust by the United States. Typically, when you buy real estate, you are buying the house and the land it sits upon. This is called “Fee” land. In contrast, “Trust” land is where you own the house, but lease the land underneath that is in Trust.

The U.S. Department of the Interior holds thousands of acres of land in “Trust” on behalf of the Agua Caliente Indian Tribe and the individual Indians of the Agua Caliente Band of Cahuilla Indians.

The U.S. Department of the Interior, through the BIA, has been designated by federal law as the “Trustee” of all Indian lands. As trustee, the BIA has a fiduciary responsibility to ensure Indian landowners receive fair consideration for the use of their land.

We’re often asked, if you have a residential sublease, does that mean the land is in “Trust”? The answer is: Not necessarily. Residential leasing is not exclusive to Indian Trust lands. In fact, developers in the Coachella Valley and elsewhere have purchased land in Fee, developed the property, and then leased the property to the landowners. When property is leased on Fee land the BIA does not have jurisdiction.

What is the role of the BIA?

The BIA-Palm Springs Agency provides technical assistance to Indian landowners on matters of real property management. The BIA also holds approval authority for leasing of Trust land on the Agua Caliente Indian Reservation.

The BIA does not represent developers, homeowners, or those who lease the land; however the Palm Springs Agency staff is available to answer questions regarding the leasing of federal trust lands on the Agua Caliente Indian Reservation. It’s important to realize that Indian Lease Land is a multifaceted topic whose intricate details cannot be fully explained in one blog post. You should definitely consult with the BIA and an escrow officer – like one of ours – whose experience and expertise focuses specifically on Indian Lease Land transactions.

In future posts, we’ll inform you of the different title and lease options, as well as how to prepare for the different situations that may require more transaction time. With these posts, Leesees will become more informed on the process of buying and selling with Indian Land Leasing Agents and Lessors.

Dealing with a Foreign Seller in Your Transaction? Prevent Escrow Delays by Understanding the Process.

Julie Ekstrom — Thu, 30 Apr 2009 15:06:43 +0000

When you’re dealing with a Seller who is not a U.S. citizen and is considered by the government as a non-resident alien for purposes of United States income taxation, you can avoid escrow delays and minimize the Seller’s frustrations by knowing and understanding the basic process that all Foreign Sellers have to go through when selling property in the United States.

First of all, the U.S. government will get its taxes when a property is sold, no matter who the Seller is. While you should always advise your clients to consult with their CPA or tax consultant for specific information for their transaction, the following information should lay the groundwork to let you know how unique the Foreign Sellers process can be. Hopefully with this information, and advice from the Sellers CPA, Sellers can get everything in order ahead of time to keep the escrow process on a reasonable timeline.

Apply for a SSN or Tax ID Number

Begin by checking whether the foreign seller who is transferring U.S. real estate has a Social Security number and/or Tax ID number. If they don’t, start the selling process by submitting an application for IRS Individual Taxpayer Identification Number Form W-7. Married sellers need to submit one for each spouse. The application must be notarized and include a current, certified U.S. passport. The process of obtaining a Tax ID number will take at least seven to eight weeks and the Seller should seek the guidance of a Tax consultant or CPA for the proper forms and further assistance.

Early Submission Ensures Proper Tax Withholding

Any non-resident of the US who sells real estate in the US will have 10% federal withholding as well as 3 1/3% California withholding. If the sellers do not start the Tax ID application process early, it delay any refund and/or reduction due to them.

Request a Reduction of Withholding

If your sellers feel that the 10% withholding exceeds their capital gains, they can submit a Form 8288-B Application for Withholding Certificate for Disposition by Foreign Persons of US Real Estate Interests. This document will be provided by the Escrow holder and should be submitted to the IRS requesting Reduction of Withholding upon receipt of the document. This document needs to be approved early so the Escrow holder processing the sale has time to obtain approval to submit less than the 10% U.S. withholding. This process takes several weeks as well.

In summary, it’s important to remember:

It takes seven to eight weeks to submit IRS Individual Taxpayer Identification number Form W-7. Married sellers must submit one notarized application for each spouse with a current, certified U.S. passport.

Any nonresident who sells U.S. real estate will have 10% federal withholding and 3 1/3% California withholding. Not having a Tax ID delays any tax refunds or reductions.

The Seller might be able to reduce their withholding but must allocate several weeks to be approved before submitting less than the 10% U.S. withholding.

For further information and forms, seller’s should consult their CPA or tax adviser and can visit:

IRS: http://www.irs.gov/pub/irs-pdf/p515.pdf
Tax ID Number: http://www.irs.gov/businesses/small/international/article/0,,id=96696,00.html
Withholding Reduction: http://www.irs.gov/pub/irs-pdf/f8288.pdf

Register as Domestic Partners in California to Expedite Escrow

Vickie Donati — Thu, 23 Apr 2009 17:58:49 +0000

Across California, as we process escrows for same-sex buyers and non-married couples over the age of 62 who are buying permanent residences or vacation homes, the topic of registered domestic partnerships arises. It’s important when choosing how to hold title to know how California law defines a Domestic Partnership, as outlined below. Buyers who meet these qualifications must register with the State of California to receive their Rights of Survivorship. Any other Domestic Partnership registration or out-of-state same-sex marriage will not be accepted by the State and can delay the escrow process.

California law states that in order to hold title as Community Property with or without Rights of Survivorship you must be either Husband and Wife or Registered Domestic Partners. Why are Buyers interested in Rights of Survivorship? Rights of Survivorship defines co-owners as having equal possession and interest in the property, so if, for example, one of the partners were to pass away, the property simply transfers to the surviving partner.

Sometimes, same-sex couples, as well as opposite-sex couples who are not married and over 62, will begin the escrow process assuming that because they’re registered as Domestic Partners in their home state (or perhaps were married in Canada) that they qualify as Domestic Partners in California. This is false and can result in the buyers having to vest title as single persons. It may be an option for the buyers to go through the process of registering as Domestic Partners with the State during escrow in order to hold title as community property, but this can run the risk of delaying escrow as there is time and hassle associated with appearing in court to file the appropriate papers, etc. If buyers are aware of the facts surrounding Domestic Partnership ahead of time, they can register on their own time and save everyone involved stress and delays in order to take title as community property.

By clarifying California’s Domestic Partnership rules and regulations to your Buyers, you will help them create a lasting financial arrangement that properly and legally reflects their relationship.

To be registered Domestic Partners in California, both persons must:

Have a common residence;
Agree to be responsible for each other’s basic living expenses;
Neither be married, nor a member of another domestic partnership;
Not be related by blood;
Be at least 18;
a: Be members of the same sex, or
b: If at least one is over age 62, be of opposite genders;
File a Declaration of Domestic Partnership with the California Secretary of State wherein each partner must consent to California court jurisdiction if the couple seeks a dissolution or nullity of their relationship.

It’s also important to consider certain clarifications to these stipulations:

Legislators limited domestic partnership for opposite-sex couples to only those where one partner is over aged 62 in order to protect benefits like Social Security.
To be eligible for the rights and responsibilities of domestic partnership, under California law you must be registered with California’s statewide registry. The state of California does not recognize same-sex marriages performed in Canada or Domestic Partnerships registered in other states in the U.S., nor does it offer the benefits to couples registered as domestic partners by cities within California.

It is important to keep in mind that there are potential tax and other legal implications to how you take title in the purchase of property. The implications are generally unique to the specific situation at hand and we at CV Escrow advise buyers and sellers to consult with their CPA and/or attorney for advice pertinent to their specific situation.

Buying or Selling a Lennar Home in the Coachella Valley? It’s a Detail that Matters in Escrow.

Cindy Mozingo — Thu, 16 Apr 2009 14:39:26 +0000

For years here in California, the Lennar Charitable Housing Endowment (part of the Lennar Family of Homebuilders) has been helping the transitionally homeless – those made homeless because of domestic violence, unemployment, a catastrophic illness – by supporting charities that help people get back on their feet.

Each time a Lennar home is purchased and resold, a mandatory fee of 1/20^th of one percent of the gross sale price is collected from the Buyer and paid to the Foundation.

Our local Lennar developments include:

The Bridge @ Jefferson
Escena
Esperanza @ Desert River Estates
Cala Rosa
Vista Serena
La Morada
La Quinta del Oro
Las Plumas
San Milan @ Paradiso
Tapestry @ Esplanade
Terra Lago
Cordoba
Marquesa

How does this affect your escrow?

If you’re working with properties from these communities, it’s important that Realtors and Buyers know that the listing is a Lennar home so they can account for this fee during their escrow transaction.

Many times the original Buyer (whom we now know as the Seller) may not remember paying the endowment when they acquired the property from Lennar. When you take a listing on a Lennar home, the Seller must disclose to the potential Buyer that paying this fee is part of selling the property and that this fee will affect the new Buyer when they go to sell the property in the future.

Who pays the fee is negotiable, except when the property is first transferred from Lennar to the purchaser when the Buyer pays on the first sale out.

It’s important to disclose the endowment on the MLS when you take the listing. The agent representing the Buyer can take advantage of line items eight or nine on page two of the Residential Purchase Contract. If you get a contract that does not address the endowment, be sure to list it on the counter offer.

As Escrow Officers, our first clue concerning this endowment would be disclosed to us only through the Preliminary Title Report. Therefore, it could take some time before we discover the issue through title. Our responsibility as escrow holders is to obtain the proper demand through Lennar and pay the endowment at closing, just as we would a Trust Deed or any Lien that encumbers.

Remembering these important points will make your escrow with a Lennar property go smoothly and successfully:

A mandatory fee of 1/20^th of one percent of the gross sale price is paid to the Lennar Foundation each time a Lennar home is purchased and resold.
The Seller must disclose to the potential Buyer that paying this fee is part of selling the property. This fee will affect the new Buyer when they go to sell the property in the future.
It’s important that Realtors and Buyers know if the listing is a Lennar home so they can account for this fee during their escrow transaction.
The Buyer’s agent can take advantage of line items eight or nine on page two of the Residential Purchase Contract. If you get a contract that does not address the endowment, list it on the counter offer.
Our responsibility as escrow holders is to obtain the proper demand through Lennar and pay the endowment at closing.

For more information about calculating a Lennar donation, or how escrow is affected by the Lennar Charitable Housing Foundation, please visit: http://www.lchf.org/escrow_title.htm

Patience Is Key for a Successful REO Escrow

Joyce Cooper — Fri, 10 Apr 2009 23:37:42 +0000

In a recent post, the nuts-and-bolts differences between REO (Real Estate Owned) escrows and standard escrows were discussed. This post is designed to highlight a significant psychological difference that can help you and your clients successfully navigate the REO terrain: patience.

For a number of reasons, the process for an REO escrow can take longer than a standard escrow:

The Seller of an REO is a Bank or Lending Institution who may have many properties in escrow at once. This means that what may seem like a simple response to a question can take days to be considered, much less answered.

An accepted offer or contract may take several days to be uploaded onto the Seller’s online system where it will only then be listed as a “task” to open escrow.

Banks must follow specific, strict procedures that can take longer than a standard escrow.

Finally, the HUD process takes approximately five days after the Buyer has signed the loan.

Realtors: Realizing these differences and delays can help you keep your Buyer calm and confident while working through an REO escrow.

Buyers: Knowing it can take longer to work through an REO escrow can help make the process much less stressful.

When all parties understand how these differences add time to the process, they can sit tight and allow the escrow officers to focus their time on processing the transaction. Ultimately, your patience can lead to a successful (and less stressful) transaction for everyone.

Notary Choices When it Comes to Signing Your Escrow Documents

Karen Guess — Thu, 26 Mar 2009 22:48:35 +0000

The typical real estate escrow requires the buyer to sign 70 – 120 pages of documents, several of which require notarization. The seller also will have to notarize, at the minimum, the grant deed. Notarization, or the act of an uninvolved witness (the Notary) verifying that the signor (the buyer or seller) is indeed who they say they are, is an essential part of the escrow process. And, if notarization is not properly done, it can cause delays which can impact the closing of the escrow. When it comes to notarizing documents during escrow, clients can choose to go to the escrow office or hire an outside notary.

Option 1: Notarize and sign at the escrow office

Escrow offices all have a notary on staff. Therefore, a common option for notarizing documents is to have the parties go to the escrow office to sign documents. With customer satisfaction as our highest priority, at CV Escrow we prefer that our clients physically come to our office to sign closing documents. This not only ensures that buyers and sellers feel they are receiving the highest level of service, but also we can personally correct any errors that may have been overlooked by the many parties involved in the transaction as well as answer any questions that may arise.

However, circumstances do not always allow for clients to sign at the escrow office (for example, in the case of an out of town buyer). When this occurs, working with an outside notary is the alternate solution.

Option 2. Notarize and sign with an outside notary

If you are to hire an outside notary, you have two options: A Certified Document Signor or a Mobile Notary.

Both Certified Document Signors and Mobile Notaries are certified by the State of California to verify signatures. However, a Certified Document Signor also undergoes regular continuing education training specific to real estate transactions. They are familiar with the documents that are signed in the transaction. Mobile Notaries are not required to have this specific training and as a result, are not always familiar with the documents that are being signed.

A Certified Document Signor will cost more, but clients should be aware that our most common reason for the delay of a transaction is due to the incorrect signing of closing documents. With the amount of paperwork that needs to be signed and notarized, it is easy to see how someone without the proper training could overlook a detail here or there. As a result, Certified Document Signors are our preferred option if the client is not able to sign in person at the escrow office. That said, it is possible to have an accurate and successful closing with a mobile notary. The choice is really up to the client and will be impacted by many factors specific to the transaction.

So when choosing, ask yourself what is more valuable in a real estate transaction, your time or your money? If time is not of paramount concern, a mobile notary may be a great choice for you. If it is imperative you close on time, your risk of signing issues will decrease by going with a certified document signor. And, if you have the ability to sign at your escrow office, you will run the lowest risk of delays.

Explaining Probate and Understanding its Escrow Implications

Administrator — Thu, 19 Mar 2009 15:00:23 +0000

A probate sale is defined as the sale of a property where the owner is deceased and the sale is being conduced by the deceased estate. An Administrator or Executor signs on behalf of the deceased person with either full or limited authority. Sometimes the deceased has a will. Sometimes they don’t. Although the escrow process is fairly similar for both scenarios, the time frames associated with the two situations can vary dramatically. Understanding the core differences between the two can assist agents and clients in successfully closing a transaction.

Situation #1 – The Deceased Left a Will:

From the standpoint of escrow and most buyers, this situation is a far preferable probate sale due to the predictable time frames this situation provides. When the deceased leaves a will, the property falls under the Independent Testamentary Act and the court designates an Administrator or Executor of with full authority over the estate. Typically this person will be a close remaining relative. It then becomes the responsibility of this person to decide the future of the property. Because this person has full authority, the process from an escrow perspective is very similar to that of a standard sale. However, there is one additional document that will be required by title in order to close the transaction. They will need certified copy of the “Decree of Distribution of Letters of Testamentary”. This is official paperwork issued by the court that designates the Administrator of Executor and is required by title in order to insure the transfer of the property. CV Escrow also will want to receive a copy of this document in order to proactively review it for potential hiccups in the transaction.

Situation #2 – The Deceased Did Not Leave a Will:

In the event that the deceased did not leave a will, the property sale will have to go through the court probate process. The court will approve and assign an Executor or Administrator for the Estate of the Deceased. This Executor will be an independent court representative. The court will also issue an Order Confirming Sale which basically stating that the listing price is at fair market value and it authorizes the sale of the property. A certified copy of this document will be required by title in order to close the transaction.

The challenge for escrows on Probate Sale listings in this situation where the deceased did not leave a will is that the time frame for the court probate process can vary from 60 days to 6 months or beyond. This creates a challenge in negotiating escrow times. Agents should be prepared to properly set buyer expectations about the time it can take to close a court appointed probate sale. It is not uncommon to require an extension of escrow. And, unfortunately, sometimes the extended escrow duration can become a deal breaker.

If you’re ever in a probate property sale transaction, understanding the process and what you must do to transfer the property can affect the success you have in closing the deal. Your escrow officer can be an excellent resource to inform you of the paperwork and time frames that will be required to complete the transaction. In addition, consulting your family attorney or estate planner is your best course for answering specific and legal questions in these types of transactions.

What Day Should You Negotiate Close of Escrow?

Julie Ekstrom — Thu, 12 Mar 2009 14:00:46 +0000

What day should you negotiate to close escrow in order to meet the needs of the buyer and seller? When negotiating a contract, the actual day of the week that the close is on is not often considered. More typically, contracts call for 30 or 45 or “x” day escrows. But, considering that:

Most buyers prefer to move into their new home on the weekend, and
Most sellers want to get their funds as soon as their sale closes,

we at CV Escrow suggest taking a look at the specific day that you are projecting to close with your “x” day escrow, and attempt to avoid a Friday close. Thursday or earlier is often best. This is because you allow for a day from the recording of the sale for a seller to receive their money and a day of wiggle room for the buyer in case any part of the process encounters a snag. In the case that a hiccup with any part of the closing process does occur, this leaves at least an extra business day to close before the weekend.

Other considerations:

Should we close at the end of the month?

Some people are concerned with closing at the end of the month. The benefit of closing at the end of the month is that the buyer does not have to come in with as much money to pay for outstanding interest that may be due. Closing at the end of the month is generally not a problem if all the documents are turned in on time. However, buyers and sellers should be aware that generally the county recorder’s office has more volume on the last day of the month. Confirmations of recording tend to come later in the day as a result, and the risk of delays in proceed disbursements can increase as a result. Of more common concern to most buyers and sellers is to avoid closing on a Friday and perhaps facing a delay that would force the buyer and seller to wait until after the weekend to close.

Holidays

Be sure to take holidays into account when negotiating a closing date as well. The county recorders office, banks, and often escrow are closed for all public holidays and this can impact your closing date. If for example, you plan to close on a Thursday, but the next day is a holiday, you might prefer to target a Wednesday close in order to best plan for the property closing before the long holiday weekend.

The escrow agent will present all the details of your closing to you and explain the process step by step. Keeping in mind the best day to close however will help your escrow go more seamlessly.

Clarifying “Assumption” vs. “Subject To” Loans

Cindy Mozingo — Thu, 26 Feb 2009 14:00:31 +0000

There are many implications of loans that are either “Assumptive,” or “Subject To.” Here is a general overview of some of the definitional differences between the two and how the differences affect the escrow process.

Let’s define Assumption Loans:

The term “assumption” is used when a buyer incurs personal liability for an existing deed of trust. If the buyer were to default on their future mortgage payments, the seller would no longer have any responsibility as the buyer has “assumed” the loan.

When a buyer “assumes” a loan it is with the lender’s knowledge and approval. An assumption agreement is prepared by the existing lender of record and signed by the buyer as part of the escrow process. The seller may also be required to sign the assumption agreement and the terms may release the seller from responsibility. The lender usually requires a credit history from the buyer before approving the assumption and the payment of assumption fee(s). The loan will be brought current (if it is delinquent) and interest will be pro-rated through escrow and charged to the seller.

Let’s define Subject To Loans:

In contrast to an Assumption Loan, the term “taking subject to” is when the buyer incurs no liability to repay the loan. The loan stays in the seller’s name, but the buyer gets the deed and therefore controls the property. Although the buyer makes the mortgage payments, the seller remains responsible for the loan.

When a buyer takes title to property “Subject To” the loan of record, the lender is not notified of the transaction or asked for their approval. The Lender has not approved the transfer of title; therefore the seller is not released from responsibility. In this case, the buyer is simply making the payments instead of the seller. The seller will be asked to provide escrow with their last payment record which will be used to calculate the exact principal balance at close of escrow. The lender may have the right to accelerate their due date or call the loan all due and payable when (and if) they receive notification of a transfer of ownership.

If you have additional questions about assumption vs. subject to loans, please don’t hesitate to one of our knowledgeable escrow officers here at CV Escrow.

In Plain English – What is an REO and What Does That Mean For Escrow?

Cindy Mozingo — Thu, 19 Feb 2009 14:00:54 +0000

The term REO stands for Real Estate Owned properties. These are properties that are owned by a bank or lender and are for sale to the public. These properties were reverted back to the bank after the homeowner was foreclosed upon. If the home fails to sell at auction, the bank will put up the property up for sale through a Realtor much in the same way a homeowner lists their property for sale with a Realtor when selling their home. The key difference with REO listings is that the bank (or lender) is the seller verses the homeowner as the seller in a traditional listing.

REO properties are a hot commodity right now as roughly half of the foreclosures going to auction are reverting to REOs. More and more people are seeing that they can get a great price on an REO property and still enjoy a buying process that is very similar to buying a home in the traditional fashion. However, because the property is owned by the bank or lender, in an REO purchase transaction, there are a few differences in the escrow process from a traditional home purchase transaction.

REO listings offer viewings and inspections just like traditional home buying; the big difference is really in the often rock bottom price and the closing procedures. This is because banks are not in the business of owning Real Estate; their interest is to resell the property as quickly as possible to avoid further risk exposure. As a result, REOs come with a very strict and tight escrow timeline. Most REOs have a 30 day closing, in some states it can be 45 days, and either way banks are not willing to be flexible.

There are a lot of REO properties available right now so if you’re ready to buy and looking for a deal, now is a great time to consider an REO purchase. Your Realtor can advise you on the opportunities and your CV Escrow officer can walk you through a detailed explanation of the REO escrow process. To learn more about the REO buying process and its Escrow implications check out, Bargain Shopping at the Bank-An REO Purchase Overview.

Options for How to Hold Title – The Vesting Form Explained

Vickie Donati — Thu, 12 Feb 2009 16:20:39 +0000

Demystifying the escrow process for buyers is part of our goal here at CV Escrow. One of the ways we accomplish this is by providing buyer’s a detailed opening package. This package contains a particular form called a Vesting Form that is integral to the escrow process and to the buyer’s future interest in the property. Simply put, it requires the buyer to outline how they will hold title to their new property.

The vesting of a title should be given special consideration because it specifies who is responsible for the costs, benefits, and transferability of a property. The value of real property is significant and with a little forethought, conflict can be avoided down the road with partners, creditors, spouses and/or heirs, as well as the Internal Revenue Service.

The most common forms of holding title include:

Sole Ownership
1. As a single man or woman
2. As a Married man or woman
3. As a registered domestic partner, man or woman.
Co-ownership
1. Community property, which is the presumed form for married couples. This entitles each party to equal parts of the property.
2. Community property with rights of survivorship, which automatically transfers the property to the survivor in the face of a death.
Joint Tenancy
1. This includes equal interests with rights of survivorship, but where the partners aren’t necessarily married.
Tenancy in Common
1. In this form, the parties’ interests are broken up, and the costs and benefits are then divided as such.

It’s important to remember that the form of title that you choose has inheritance and/or tax implications. Your escrow officer at CV Escrow is more than happy to explain the differences between the various manners in which title can be held. However, it is beyond our scope to actually recommend what would be best for a buyer. For that, the buyer should consult an attorney, CPA or estate planner who is more familiar with the buyer’s specific situation. Research and clear communication with one of these resources will help make the transaction a smooth success.

Details that Matter in the REO Escrow and Closing Process

Karen Guess — Thu, 05 Feb 2009 06:00:08 +0000

Buying an REO (or Real Estate Owned) property is a little different escrow process than your standard home sale. Realtors and buyers need to remember that they are in escrow with a bank/lender (the “seller”) and that the bank/lender has strict procedures in place to follow during the process. Here’s a glimpse into details to look out for if you’re in an REO transaction and CV Escrow is your escrow provider:

Escrow isn’t officially open until the seller has uploaded the contract into the seller’s online systems, it’s been signed by both the buyer and seller, and it shows as a “task” in the seller’s online system to open escrow.
Escrow instructions, preliminary title and commission orders will be e-mailed 48 hours from the receipt of the seller’s fully executed contract.
Loan documents must be received 24 hours before the buyer’s appointment to sign.
Expect to wait up to 5 days from the buyer’s signing date for escrow to receive the estimated HUD approval from the seller.
Once approval is obtained, the file is set to record the following business day after the lender’s funds have been received.
Funds are usually distributed 24-72 hours after recording. This timing is subject to seller’s approval of the final HUD statement.

Also important to keep in mind is that communication with CV Escrow regarding your transaction is generally most efficient via email. Email communication provides a written record and time stamp of the communication and allows your escrow officer to respond in a timely manner.

Understanding these details can help to set the proper expectations with buyers and help ensure that your next REO escrow goes as smooth as possible.

The Opening Package from Escrow – Why It Matters

Administrator — Thu, 29 Jan 2009 05:54:15 +0000

Within 48 hours of receiving a contract, CV Escrow mails out an opening package to both the buyer and seller. These packages contain “homework”, i.e. paperwork that escrow needs back promptly in order to move forward and ensure that a transaction closes on schedule. It is integral to all deals that the buyers and sellers expect to receive these packages and understand the importance of returning them to escrow as quickly as possible.

Some of the information that the packet requests from the buyer includes:

the vesting form describing how title to the new property will be held
contact information for the lender or mortgage broker
insurance details

From the seller, our opening package forms prompt for details such as:

contact information for the HOA
contact information for the lender on the first and, if applicable, second loan
any applicable tax withholding details like the 1099 form
directions on how to distribute the proceeds from the sale

Much of our work at CV Escrow can’t begin until we have these documents completed, so in order to ensure an on-time escrow process, return your opening package documents within 3-4 days of receipt. For sellers who want their proceeds promptly at the close of escrow, and for buyers who want the keys to their new property, completing the opening package promptly is the best way to ensure that everyone gets what they want, when they want it.

Escrow Basics – What is Escrow?

Administrator — Fri, 23 Jan 2009 16:51:11 +0000

According to Merriam-Webster, escrow is defined as: a deed, a bond, money, or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition.

Whether it is the buying and selling of a home, or the transfer of a business, the amount of legal documentation and financial liabilities can easily create confusion or differences of opinion amongst the buyer, seller and/or their representatives. This is why an impartial, third-party representative becomes essential to focusing on the facts and responsibilities that must be fulfilled.

With so many parties obligated to fulfill so many responsibilities in any given real estate transaction, it quickly becomes apparent why a neutral third party (escrow) is essential to a smooth process.

Escrow is the one who facilitates (just to name a few):

drawing of escrow instructions which reflect the negotiated points of the contract and act as basis for execution of the property transfer.
confirmation of clear title from the Title Company
the recording the deed with the County Office
filing paperwork with the proper municipalities
the receiving of wires and funds to be disbursed

In addition to the above responsibilities, CV Escrow views our most valuable function as acting as a personal liaison and resource for Realtors, buyers and sellers as they tread through the complicated and often technical world of buying and selling real estate.

Bargain Shopping at the Bank – an REO purchase overview

Vickie Donati — Fri, 19 Dec 2008 21:09:27 +0000

If you’re looking for a way into the real estate market, REO or ‘Real Estate Owned’ properties are the hot ticket right now. These are homes that fell into foreclosure and then didn’t sell at auction. So now, the bank or lender owns the property and wants to get it off their books ASAP. Usually you can get these homes for a steal.

Buying an REO property is easier than you might think. It’s actually almost the same as a regular home purchase. You still view the home and write an offer; the big difference is that you go into escrow with the bank- not a private seller. Dealing with the bank makes for a different negotiation process, and has some impact on the escrow process as well.

In terms of negotiation, let’s say you make the bank of offer. They may sit on it for a while and mull it over. Depending on how close your number is to what they need to recoup their losses, they might agree right away, or wait for other offers to come in before they accept or decline yours. They may not counter you the way a traditional homeowner might…instead, they may just accept another offer. However, if they do accept, you will enter into an escrow agreement with the bank.

When you’re in escrow with a bank the process is different from a traditional home purchase. An REO sale has very strict time constraints and deadlines built into the escrow agreement. Banks are absolutely set on meeting those deadlines and because they are an institution not an individual, they can charge hefty fines if you fail to meet their deadlines. The upside – you can close fast. The downside – the bank can take back the offer without returning your earnest money (escrow deposit) if they feel the terms of the escrow will not be met on their timetable.

Don’t get discouraged though. People are purchasing REO properties in droves because they are saving between 10-30% on their purchase. It’s a fantastic way to get into a first home or buy investment property. So if you’re ready to plunge in feet first, talk to your Realtor about testing the waters on an REO property. The market is flooded with them right now so your options are plentiful. Happy home buying!

Close your REO escrow on time

Cindy Mozingo — Thu, 02 Oct 2008 18:46:01 +0000

Want to make your REO escrow go as smoothly as possible? Here are a few tips:

Fact:

The REO escrow must close on time

Fact:

The escrow cannot be opened until the purchase agreement is uploaded to the sellers (banks) online REO system and made available to escrow to download. This can occur as late as 1-2 weeks after acceptance, which delays the escrow opening and in turn may delay the escrow closing.

Tip #1:

Upon acceptance, provide the escrow holder a copy of the signed contract. This way, escrow is able to order the reports prior to the opening of the escrow and while everyone is waiting for the signed contract to be uploaded into the seller’s system. This could be essential to the escrow closing on time.

Tip #2:

Although escrow is conducted in accordance with the terms of the contract and governed by state law, the seller controls the manner in which the escrow is processed. This is the reason that agents may not be able to choose their escrow companies when the property is bank owned. You will most likely be using an escrow company (like ours) who has been selected and approved by the seller/lender to handle REO’s. Bank approved escrow companies are required to undergo extensive training on the seller’s individualized REO system.

Tip #3:

Is anyone out there still not using email to conduct their transaction? If so, you must embrace email. Email is a basic survival skill for REO escrows. The escrow is conducted via email due to time limitations, and as stated above, the REO escrow must close on time. Therefore, time is of the essence! Email is an essential tool in support of a timely transaction.

Tip of the Day – Probates

Karen Guess — Fri, 12 Sep 2008 22:17:19 +0000

What is a probate? A probate is a property owned by by a deceased person and is sold by his or her Estate, with an Administrator or Executor signing on behalf of the deceased person with full or limited authority. How a probate sale is handled depends on whether or not the deceased left a will.

Deceased left a will:

In the event the deceased left a will, the property falls under the Independent Testamentary Act, wherein the Court issues a Decree of Distribution of Letters of Testamentary appointing an Administrator or Executor with full authority. A certified copy of either document will be required by the Title Company to close the transaction. In addition, a letter from the Attorney will be required stating the following:

The heirs have been notified of the pending sale of the property and their required waiting period has elapsed, with no objections being raised by their heirs. Any Federal or State inheritance taxes have been paid in full.

Deceased Left No Will

In the event the deceased left no will, the property will be subject to court confirmation with the court approving and assigning an Executor or Administrator for the Estate of the Deceased. An Order Confirming Sale will be issued by the Court, a certified copy of which is required by the Title Company to close the transaction. During the Court hearing for confirmation, the current purchase price is subject to an over bid. A third party can come in and offer a price higher than what the first Buyer is offering; this person becomes your new Buyer.

CV Escrow» Escrow Archives – CV Escrow

Loan Documents are in Escrow. We’re Ready to Close Then, Right? Not Necessarily…

The Short Sell Process: Escrow Explains What You Need to Know

What Buyers Need to Be Aware of After Close Of Escrow – Part 1: Taxes

What is the Foreclosure Process? Escrow Explains.

Per Diem: Two Little Words that Can Impact a Buyer in an REO Sale

Life of an Escrow – Buyer’s Perspective

Escrow 101: Foreclosure and Short Sale Terminology Explained

Foreclosures

Short Sales

We Can’t Make the Scheduled Escrow Closing Date? Why Not?

Pros and Pitfalls of the Buyer’s Choice Act

Revised HUD Forms Has Buyers Best Interests in Mind

Understanding the Statement of Information Form From Escrow

Knowledge of the Escrow Duties and Responsibilities Can Lead To An Easier Transaction

Foreign Investors Need To Wire Funds To Expedite Escrow

Tighter RESPA Rules To Take Effect in 2010

What is RESPA And What Affect Does It Have On The Real Estate Transaction?

Mello-Roos: What it is and How it Affects Your Property Taxes

Reappraisal Exclusion Program–Tax Savings For Sellers 55 And Over

What is a Title Binder? If You Plan On Owning A Home A Short Time, It’s For YOU!

Exclusion from Reassessment of Property Tax Can Save Homeowners Money

Understanding The Timeline To Foreclosure

Federal Tax Credit Helps First Time Homebuyers: Tax NOT Deducted at Escrow

The Advantages and Disadvantages of an All Inclusive Trust Deed and Note

Understanding the Terms of Foreclosure

Escrow Terminology Explained, Part 2

Contingency

FIRPTA

Cal-FIRPTA

Easement

Encroachment

New CV Escrow Office Opens In Palm Springs

Concurrent Closings – A Complex Escrow Challenge

Reasons For Concurrent Closings

It May Be Out Of Escrow’s Hands

An Explanation of Property Tax Prorations in Escrow

Property Tax Defined

Sale Triggers Assessment

Escrow Works With The Numbers

Escrow Terminology Defined

Escrow

Deed of Trust

Lien

Prorations

Grant Deed

HUD-1 Statement

Title Insurance

Demystifying the Closing Statement: Line Item Escrow Fees Explained

Buyer’s Escrow Costs

Escrow Fees

Loan Tie-in Fee

E-Document Fee

Processing Fee

Archive Fee

Seller’s Escrow Costs

Indian Leased Land Escrows | Part 2 – You Need Extra Time

Indian Leased Land Escrows | Part 1

Dealing with a Foreign Seller in Your Transaction? Prevent Escrow Delays by Understanding the Process.

Register as Domestic Partners in California to Expedite Escrow

Buying or Selling a Lennar Home in the Coachella Valley? It’s a Detail that Matters in Escrow.

How does this affect your escrow?

Patience Is Key for a Successful REO Escrow

Notary Choices When it Comes to Signing Your Escrow Documents

Option 1: Notarize and sign at the escrow office

Option 2. Notarize and sign with an outside notary

Explaining Probate and Understanding its Escrow Implications

Situation #1 – The Deceased Left a Will:

Situation #2 – The Deceased Did Not Leave a Will:

What Day Should You Negotiate Close of Escrow?

Other considerations:

Should we close at the end of the month?

Holidays

Clarifying “Assumption” vs. “Subject To” Loans

Let’s define Assumption Loans:

Let’s define Subject To Loans:

In Plain English – What is an REO and What Does That Mean For Escrow?

Options for How to Hold Title – The Vesting Form Explained

The most common forms of holding title include:

Sole Ownership