Life of an Escrow – Buyer's Perspective

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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What is the Foreclosure Process? Escrow Explains.

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.

• http://www.biggerpockets.com/foreclosure-process.html
• http://www.realtytrac.com/foreclosure-laws/california-foreclosure-laws.asp

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Answering the Realtor Question: What is a Widget Anyways?

Tuesdays, here at the Glen Oaks Escrow website, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

As I speak with Realtors I am reminded that technology is bringing to agents a whole new vocabulary. In my constant endeavor to discuss the opportunities that technology provides the modern Realtor, I have written on many basic technology terminology which Realtors need to understand in order to put together a strategy for success in today’s market. Terms such as: Web 2.0, Social Media, Social Networking, and Blog. Today I’m adding another terminology to the list – Widgets. Many have heard the term, but most don’t have an understanding of what a widget is or how a widget can help them. This post is designed to clarify a thing or two.

A widget is a piece of code that can be embedded within a web page. Basically, it is a mini-application provided by a 3^rd party that you choose to install on your website or blog. Why would a Realtor do this? Well, because there is lots of information out there that consumers want and this is a good way to give it to them. Many 3^rd party vendors are offering a no-maintenance way for you, the Realtor, to provide valuable information on your site. If you are interested in providing the consumer what they want on your website (and why wouldn’t you…this is how you get traffic and have people come back to your site), you should look into the myriad of real estate widgets that are available out there. Many of them are even free.

This great article lists a few widgets for the Real Estate world, it was authored by Nicole Nicolay of MyTechOpinion.com. In it, she points out that there are great real estate widgets out there that provide helpful information for visitors in a variety of categories such as Property Search, Home Valuation, Industry News, Information and Statistics, and Calculators. The article was written a couple years ago so things have evolved (for example, check out some of the neat free real estate widgets that Trulia now offers Realtors here), but her article still gives a great list of useful real estate widgets by functional category.

Think widgets might be for your website or blog? Great. Widget-away. BUT, a word of caution – plan your widgets carefully. There is a thing as too many widgets on a site! It is very easy to add too many widgets to your website and the result can not only be disruptive to the visual integrity of your site, but also cause your site to load slowly. I’d say a good rule of thumb is to add 1-3 widgets to your site.

Lets look at a great application of widgets by a Realtor:

Heather Elias of Century 21 in Ashburn Virginia incorporates widgets into her her blog at www.locomusings.com:

Heather has included a widget on the right hand side that provides consumers with a slideshow of featured listings. This is a widget or what the company calls a module on their website but it’s effectively the same thing (a piece of code added to your website). The featured listings module that Heather uses is available through Diverse Solutions as an MLS IDX search option for agents. Diverse Solutions has three available website modules for featured listings, the Slideshow, Map and Map Search modules. When a visitor clicks on the featured listing they are taken to a page hosted by diverse solutions that provides a very detailed property listing and a way to contact the agent.

Heather also incorporates a Facebook widget lower down the right hand column. This widget displays her current Facebook activity and allows the visitor to become a fan with one instant click.

She has a Chat widget that invites the visitor to “Chat with Heather Elias”. At the moment of this screen capture, Heather was busy, but when she is online and available, visitors have the ability to simply type her a question and have her respond in real time. Talk about rapid feedback and being available to the consumer! There are several chat widgets that are out there such as the one provided by Meebo.

Heather Elias is an outstanding example of an effective use of widgets. Her use of widgets is useful to consumers, not overwhelming, and maintains the attractiveness of her site and blog.

So, widget sparingly and appropriately, and you too can effectively extend the value of your website and/or blog.

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Escrow 101: Foreclosure and Short Sale Terminology Explained

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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An Explanation of Property Tax Prorations in Escrow

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:

• Riverside County
• Orange County
• Los Angeles County
• San Diego County

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How to Email Articles (Posts) to Your Clients

Tuesdays, here at the Glen Oaks Escrow website, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

You may have noticed that we’ve been providing some escrow education and answering a lot of great questions here on our blog (even though you may be getting this in your inbox, the article is still also part of the Glen Oaks Escrow Blog and permanently archived/available there). Topics like Options for How to Hold Title – The Vesting Form Explained and What Day Is Best To Negotiate Close of Escrow? Although there is new topics/articles on our site every week, the old topics remain on the site and are available for you and your clients anytime. And, it is simple to share these articles via email with your clients. Here’s how:

Step 1:

Go to the site and find the post you are looking for.

Say you want to email the article Choosing A Notary When It’s Time to Sign Your Escrow Documents. Go to the site and locate the post so that it appears in the main area on the left of the site:

Step 2:

Scroll to the bottom of the post and locate and click on the “Share This” icon.

Step 3:

Click on the Share This link and select the Email option under Send.

Step 4:

Fill in the form and select the Send button.

That’s it! Your client will now receive an email from you that links them to the post and includes your message.

It works for any of the posts we do. Share away!

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Concurrent Closings-A Difficult Escrow Process Clarified

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.

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List Local, Promote Global | International Websites For Your Property Listings

Tuesdays, here at the Glen Oaks Escrow website, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

Are you looking for an international buyer for your listing which would make a fabulous second home? Interested in getting your listings exposed to those potential foreign buyers? Although sites like Realtor.com do a great job of reaching a national audience, wouldn’t it be better if your listing was appearing in the currency of the country that it is appearing in? How about having your listing translated into the language of the country you are targeting? Or maybe you just want to make sure your listings are appearing on sites that rank well with Google in foreign countries. Although still fairly new and evolving, a growing area of online real estate marketing is in international listing websites and portals. Some are specific to a country, while others are trying to develop a global listing database. It is still too early to determine who the winner of this latest phase of real estate website positioning is going to be, but here are a few sites to watch, and check out for your current and future listings:

GlobalEdge:

Billing themselves as “The Business Portal for Overseas Properties” this site is based in the UK is “an award-winning trade portal designed to help real estate agents and property developers do business overseas”. In order to participate on this site, you need to create an account. They have several pricing models which range from free to £250/month. For £15/month you can showcase 3 of your best listings. In addition, this site has a property portal section which is an “independent analysis of the best overseas property portals” presented by region and by country. This is an excellent resource if you are trying to target a specific country for your listing.

Enormo:

With the tagline “Every Property, Everywhere”, this site aims to be an international listing portal and translates your listing into approximately 30 languages for a moderate monthly fee. Realtors can list their properties on the website, provided they have a website of their own. Specific details and pricing information is available by viewing the add a listing page found here.

Property Showrooms:

Based in Spain and a respected site amongst the European investor community, this site allows agents to post unlimited listings for 75 EURO/month with a 3 month minimum sign up period. Their site describes itself as:

Winner of CNBC Best Portal, frequently mentioned in the worlds press such as The Telegraph, The Wall Street Journal, and The South China Morning Post. As a result we appear at the top of Google, Yahoo and the other major search engines providing extensive background information, up to date news and services for both the public and industry alike.

Point2Homes:

A listings syndication service based in Canada, Point2Homes has a free 3 month trial membership where you can upload your listings and choose where they are distributed. After 3 months, the price is $19.99/month. Point2Homes is a great way to exposure your listings to many sources at once, including leading national, and international websites. The process is manual and requires you to create an account and upload your listing data.

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Options for How to Hold Title – The Vesting Form Explained

Demystifying the escrow process for buyers is part of our goal here at Glen Oaks 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:

1. 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.

2. 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.

3. Joint Tenancy

   1. This includes equal interests with rights of survivorship, but where the partners aren’t necessarily married.

4. 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 Glen Oaks 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.

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