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The Escrow Process
Your escrow is opened shortly after you execute the purchase agreement
to sell your home. It cannot be successfully completed until all
escrow instructions have been complied with and all parties have signed
escrow documents. The length of escrow can range from a few days
to several months, depending on the terms of the purchase agreement.
OPENING THE ESCROW
Often, the real estate agent opens the escrow for you. As soon as
you execute the sales agreement, the buyer’s agent will place the
initial deposit into an escrow account. At the opening of escrow,
you may be asked to provide identification information such as your
birth date and social security number. This information remains
confidential.
THE LOAN PROCESS
Unless the buyer is paying all cash, the next step will be for the buyer
to select a lender and apply for a mortgage loan. Your real estate
agent will keep you informed of the buyer’s loan progress.
The loan(s) on your property will be paid off at the close of escrow,
unless the buyer takes over your existing loan(s). It is important
that you still make your mortgage payments so that you do not damage
your credit by incurring late fees.
Also, it is very important for you to provide complete information on
each loan against your property as soon as possible so the escrow
officer can order loan payoff demands. The information should
include the name of the lender, the lender’s address and phone number
and your loan number.
If your property has a Homeowner’s Association, you may be asked to
provide the name, address and phone number.
THE CLOSING PROCESS
Signing Escrow Instructions
Your escrow officer or real estate agent will contact you to make an
appointment to sight your escrow instructions and your grant deed.
At this time, the escrow officer will inform you of the estimated amount
of proceeds you will receive from the sale of your home.
At your appointment, it is important that you bring either your valid
drivers license or passport so that signatures can be notarized.
When the buyer’s loan is approved, the loan documents are sent to the
escrow officer. When the buyer has signed loan documents, the
escrow officer will give them to the lender for a final review.
The review usually occurs within a few days, after which the lender
advises the escrow officer that the lender is ready to fund the loan.
If all conditions of the escrow have been satisfied, the escrow officer
will inform you of the date the escrow will close and will take care of
the technical and financial details.
The Close of Escrow
Close of escrow signifies legal transfer of the title and occurs when
your grant deed is filed with the county recorder.
Your escrow officer will prepare a final settlement statement and
transfer the proceeds of the sale.
After your existing loan is paid off, your lender is required by law to
issue a full reconveyance (release of their loan). The deed of
reconveyance will be recorded and the original returned to you.
Title Insurance
WHAT IS TITLE INSURANCE?
Title insurance, unlike other forms of insurance, such as automobile or
life insurance, involves a one-time premium, which insures against
previous actions resulting in a compromise of the integrity of your real
estate ownership.
When your escrow closes, the title company issues a policy of title
insurance to Buyer. An additional policy insuring the new lender
is often issued concurrently.
HOW DOES IT WORK?
The title company conducts a thorough search and evaluation of the
Public Records, looking for situations that may cloud the title to your
new home, such as: |
- Are all taxes and special assessments paid?
- Does anyone have special rights to the property that would limit
your ownership?
- Has the death of a former owner or the filing of a will affected
title to the property?
- Are there undisclosed heirs or spouses of the seller?
- Are there any lawsuits or claims recorded against the property
itself, or suits or judgments filed against the seller?
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WHAT ABOUT HIDDEN RISKS?
Claims that cannot be discovered by examination of the Public Records
called “hidden risks” could arise long after you’ve purchased the
property.
Here are just a few of the most common hidden risks that can cause a
loss of title or create an encumbrance on title: |
- False impersonation of the true owner of the property
- Forged deeds, releases or wills
- Other types of fraud
- Undisclosed or missing heirs
- Instruments executed under invalid or expired power of attorney
- Misinterpretation of wills
- Deeds by persons of unsound mind
- Deeds by minors
- Deeds by persons supposedly single, but in fact married, or have
registered domestic partners
- Liens for unpaid estate, inheritance, income or gift taxes
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WHAT ABOUT PREMIUMS?
Title insurance involves a one-time premium, paid when you close the
real estate transaction. Who will pay the premium is negotiable
between the parties, but the typical breakdown is shown on the following
page.
TITLE INSURANCE: THE END RESULT
By obtaining a title policy from a reputable Title Company, you are
backed by the strength and security. |
Loan Process
THE LOAN APPLICATION
The key to the loan process going smoothly is the initial interview.
At this time, the lender obtains all pertinent documentation so
unnecessary problems and delays may be avoided. The Realtor opens
escrow with the title company at this time.
ORDERING DOCUMENTATION
Within 24 hours of application, the lender requests a credit report, an
appraisal on the new property, verifications of employment and funds to
close, mortgage or landlord ratings, a preliminary title report and any
other necessary supporting documentation.
AWAITING DOCUMENTATION
Within one to two weeks, the lender begins to receive the supporting
documentation. As it comes in, the lender checks for any problems
that might arise and requests any additional items needed.
LOAN SUBMISSION
Once all the necessary documentation is in, the loan processor assembles
the loan package and submits it to the underwriter for approval.
LOAN APPROVAL
All parties are notified of the approval and any loan conditions that
must be cleared before the loan can close. The loan approval is
the beginning of the closing process.
DOCUMENTS ARE DRAWN
Within 1 to 3 days after the loan approval, the loan documents
(including the note and deed of trust) are completed and sent to the
title company. The Escrow Officer will make an appointment for the
borrowers to sign the final documents. At this time, the borrowers
are told how much money (if any) they will need to bring in to close the
loan. Payment is usually made by a cashier’s check.
FUNDING
Once all the parties have signed the loan documents, they are returned
to the lender who reviews the package. If all the forms have been
properly executed, a check is issued to fund the loan.
RECORDING
Upon receipt of the loan funds, the title company will record the legal
documents necessary to transfer the property into the buyer’s name.
At the same time, the deed of trust is recorded to show the new loan on
the property. Escrow is now officially closed and you now own your
home!
Inspection Process
THE INSPECTION PROCESS
During the contingency period, your Realtor will order physical
inspections as specified in your purchase agreement. Legislation
mandates, (under civil code 1102), that the seller has the
responsibility to reveal the true condition of the property on a
disclosure statement. This may help you determine what kinds of
property inspections you feel are desired or necessary. Your
Realtor will help you arrange for these.
STRUCTURAL PEST CONTROL PROCESS
A licensed inspector will examine the property for any active
infestation by wood destroying organisms. Most termite reports classify
conditions as Section I or Section II.
SECTION I CONDITIONS
Section I conditions are those currently causing damage to the property.
These conditions generally need to be corrected before a lender will
make a loan on a home. The seller generally pays for the
inspection and any Section I repair work.
SECTION II CONDITIONS
Section II conditions are those not currently causing damage but which
are likely to, if left unattended. Costs for repairs are generally
negotiated.
GEOLOGICAL INSPECTION
A soils engineer will perform an inspection of the soil conditions and
the stability of the ground beneath the structure, as well as research
past geological activity in the area. Typically, the buyer pays
for this inspection.
HOME INSPECTION
This inspection encompasses roof, plumbing, electrical, heating,
appliances, water heater, furnace, exterior siding, and other visible
features of the property. A detailed report will be written with
recommendations, often times the recommendation is to consult a
specialist (such as a structural engineer). The buyer usually pays
the inspection fee.
WHO PAYS
Your Purchase Agreement will specify who is responsible for the costs of
inspections and for making any needed corrections or repairs. The
cost is negotiable between the parties and should be considered
carefully. Your Realtor will advise you what is customary and
prudent.
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