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What is Escrow and Title Insurance
by Marisa Joyner
What are the elements of an escrow
Essentials of a valid escrow
Fours steps are involved in Escrow
Title Insurance was developed over a period of
many years...
Types of Policies
Escrow is a service which provides
the public with a means of protection in the handling of funds
and documents.
What are the elements of an escrow:
1. Seller: individual,corporation or partnership
who wants to sell their property.
2. Buyer: Individual, corporation or partnership
who wants to buy their property.
3. Escrow Officer: individual who acts as a dual
agent He/She is not estate licensed and is an independent contractor.
He is not allowed to offer investment advice.
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Essentials of a valid escrow:
1. Binding contract between buyer and seller (may
be deposit receipt, agreement of sale, exchange agreement).
2. Conditional delivery of transfer instrument
(deed) to third party escrow.
a. Delivery is a companies with instructions to
deliver instrument on performance of stipulated condition
b. If signed instructions are in conflict with
original contract, escrow instructions usually prevail.
It is recommended to the buyers and sellers to
read everything on the escrow instructions before signing the
documents.
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Fours steps are involved in Escrow:
I. Opening Escrow:
1. When escrow receives the purchase agreement
and joint escrow instructions with he statement of identity
signed and approved by the parties.
2. A file is opened with the escrow number, the
purchased agreement is checked for terms, names, legal description,
etc..
3. If everything checks out, a complete set of
escrow instructions are prepared and sent to the buyers and
sellers.
3.1 Government loans: buyer and seller are sent
3 copies of escrow instructions. Two to sign and one to keep.
3.2 Conventional and cash: buyer and seller are
sent two copies. One to sign and one to keep.
II. Processing your Escrow:
1. The Title Company will run a General information
on the buyers for any liens, judgments, etc..
2. After clearing the General information, the
Title company will issue a Preliminary Title report to escrow
and the lender.
3. The escrow officer will check the preliminary
report, names, legal descriptions, existing trust deeds and
items of record.
4. A certified copy of each set of the escrow
instructions (buyers & Sellers) are sent to the lender.
5. Wait for loan approval
III. Closing escrow: Start with loan approval.
1. Loan documents are delivered to escrow, they
are checked for spelling, lenders charge and made ready for
buyers to sign
2. An estimate is done of the total amount of
money needed prior to recording. Closing costs are the total
of credits less debits.
Credits of:
1. deposit
2. loan amount
3. any additional credits through escrow
Debits of:
1. sales price
2. lenders charges
3. title charges and recording charges
4. escrow fees
5. insurance
6. proration of taxes
3. Escrow orders an insurance policy. Lenders
receive the original policy.
4. Buyers come to sign documents with funds in
hand (cashiers check.)
5. Ready for the closing. The notice of completion,
the trust deed and the grant deed are sent to the title company
and lenders funds are ordered the day before recording.
IV. Day of Recording.
1. The title company calls with the final charges
from the recorder and also the title company charges.
2. The file is again balanced out to the exact
penny on both the buyers and the sellers.
3. Money is disbursed, Respa statements are typed
and all closing papers sent to the parties.
4. Escrow sends title policy to the owners.
Title insurance ** This is important because assure
a marketable title and protect owner against recorded and unrecorded
matters. They are controlled by insurance commissioner but insurance
rates are set by each company.
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Title Insurance was developed
over a period of many years in the following sequence:
1. Abstract of Title.
1.1 Title Plants: Summarize histories Real Estate
Transactions.
1.2 Chain of Title: History of all recorded conveyance
and encumbrances.
2. Certificate of Title
3. Guarantee of Title.
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Types of Policies:
1. Standard policy of title insurance: CLTA California
Land Title Association issued to most home buyers. No on-site
inspection needed.
2. American Land Title Association: ALTA is required
by California lenders or out of state lenders. Or if the owner
wants an extended coverage. The Title insurance fees are negotiable
but in Southern California, the sellers usually pay for the
title insurance fee.
With all of the above events happening during
the escrow period and culminating at the close of escrow, you
can see that it is quite a trick to get it to all come together
at the same time. For this reason we ask that you work with
us,be everything possible to make your escrow period as smooth
and easy as possible. Thank you in advance for your help and
cooperation in serving you.
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