The Escrow Process

WHAT IS AN ESCROW? An escrow is a process wherein the Buyer and Seller deposit written instructions, documents and funds with a neutral third party until certain conditions are fulfilled. In a real estate transaction, the Buyer does not pay the Seller directly for the property. The Buyer gives the funds to an escrow company who, acting as an intermediary, verifies that title to the property is clear and all written instructions in the contract have been met. Then the com­pany transfers the ownership of the property to the Buyer through recordation and pays the Seller. This process protects all parties involved.

HOW IS AN ESCROW OPENED? Once the Buyer has completed the contract (or Purchase Agreement) and the Seller has accepted the offer, the Buyer's Realtor will open the escrow. The earnest money deposit and the contract are placed in escrow.

WHEN DO I SIGN ESCROW INSTRUCTIONS AND WHERE DO I DO THIS? Generally, your escrow instructions are mailed to you.

DO I CONTINUE MY MONTHLY MORTGAGE PAYMENT? Yes, your mortgage payment(s) must be kept current through out the course of the escrow transaction. If the payments are not kept current, the Lender(s) can/will assess and collect late charges.

HOW LONG IS AN ESCROW? The length of an escrow is determined by the terms of the Purchase Agree­ment and can range from a few days to several months. An escrow often averages 30-to-60 days.

PRELIMINARY REPORT. The escrow officer orders the preliminary report from our tide department. Upon receiving this request, an examination begins of all historical records pertaining to your property. Barring any unusual circumstances, the title company issues a preliminary tide report indicating a clear tide or items which must be cleared prior to closing. The Buyer receives a copy of the preliminary report when the title search has been completed.

SELLER REQUIRED DISCLOSURE. If directed by the contract, the Seller will provide the following items which require a response from the Buyer. Your Sterling Realtor can help you with these.

A. Seller's Property Disclosure State­ment listing any existing problems known to the Seller.

B.Information pertaining to the Homeowners Association (HOA) or Planned
Unit Development (PUD), such as Covenants,Conditions and Restrictions (CC& Rs), if applicable.

C. Flood Hazard Disclosure if die property is in a flood zone.

D. Termite and septic inspections are required.

Who Pays Closing Costs?

Your contract and any applicable government regulations determine who pays which closing costs. Your Sterling Realtor can explain these costs to you.

THE SELLER GENERALLY WILL PAY:

• Owner's tide insurance premium
• Realtor's commission
• Escrow fee, one half (except Seller pays all on VA)
• Any loan fees required by Buyer's lender, i.e., FHA, VA
• All loans in Seller's name (unless Buyer assumes exist­ing loan)
• Interest accrued on loan being paid off, statement fees, reconveyance fees, prepayment penalties
• Termite inspection and termite repairs, per contract
• Home warranty premium, per contract
• Homeowners Association transfer fee, one half
• Homeowners Association Disclosure Fee
• Any unpaid Homeowners Association dues
• Any judgements, tax liens, etc., against Seller
• Recording charges to clear all documents of record against Seller
• Property Taxes: prorated to the date the title is trans­ferred plus any delinquent taxes
• Any bonds or assessments, per contract
• Courier fee if applicable
• Septic fees and any repairs, per contract

THE BUYER WILL GENERALLY PAY:

• Lenders title policy premium, if new loan * Escrow fee, one half (Seller pays all on VA)
• Document preparation, if applicable
• Notary fees, if applicable
• Recording charges for all documents in Buyer's name
• Homeowners Association transfer fee, (one half)
• Two months Homeowners Association dues
• All new loan charges (except those lender requires Seller to pay)
• Interest on new loan from date of funding to 30 days prior to first payment date
• Assumption/change of records fees, for takeover of existing loan
• Beneficiary statement fee for assumption of existing loan
• Home Warranty premium, per contract
• Hazard insurance premium for first year
• All prepaid items, such as interest, or funds for an escrow account
• Courier fees, if applicable
• Professional home inspection

Closing Your Escrow

THE CLOSING APPOINTMENT. Your escrow officer or escrow technician will contact you to schedule your closing appointment. The Buyer will sign separately from the Seller.

DONT FORGET YOUR IDENTIFICATION. You will need valid photo identification. A driver's license is preferred. This is necessary so that your identity can be sworn to by a notary public. It's a routine step, but it's very important for your protection.

WHAT HAPPENS NEXT? If the Buyer is obtaining a new loan, the Buyer's signed loan documents will be returned to the lender for review. The title company will ensure that all contract conditions have been met and will then ask the lender to "fund the loan." If the Buyer's loan documents are satisfactory, the lender will send the check directly to the escrow company, usually within twenty four hours. When the loan funds are received, the escrow company will verify that all necessary funds are in. We will then record the deed at the County Recorder's Office and disburse the escrow funds to the Seller and other appropriate payees. The Realtor will present the keys of the property to the Buyer.

ESCROW TERMS YOU SHOULD KNOW

AMORTIZED LOAN. A loan that is paid off (both interest and principal) by regular payments that are equal or nearly equal.

AMEMDMENT. A change (either to alter, add to, or correct) part of an agreement without changing the principal idea.

APPRAISAL. An estimate of value of property resulting from analysis of facts about the property; an opinion of value.

ASSUMPTION. Taking over another person's financial obligation; taking title to a property with the Buyer assuming liability for paying an existing note secured by a deed of trust against the property.

BENEFICIARY. The recipient of benefits, often from a deed of trust; usually the lender.

CLOSE OF ESCROW. The date the documents are recorded and title passes from Seller to Buyer. On this date, the Buyer becomes the legal owner, and title insurance becomes effective.

CLOUD ON TITLE. A claim, encumbrance, or condi­tion that impairs the title to real property until disproved or eliminated through such means as a quitclaim deed or a quiet title legal action.

COMPARABLE SALES. Sales that have similar characteristics as the subject property, used for analysis in the appraisal. Commonly called "comps".

CONVEYANCE. An instrument in writing, such as a deed or trust deed, used to transfer (convey) title to property from one person to another.

DEED OF TRUST. An instrument used in many states in place of a mortgage.

DEED RESTRICTIONS. Limitations in the deed to a property that dictate certain uses that may or may not be made of the property.

EARNEST MONEY DEPOSIT. Down payment made by a purchaser of real estate as evidence of good faith; a deposit or partial payment.

EASEMENT. A right, privilege or interest limited to a specific purpose that one party has in the land of another.

HAZARD INSURANCE. Real estate insurance protect­ing against fire, some natural causes, vandalism, etc., depending upon the policy. Buyer often adds liability insur­ance and extended-coverage for personal property.

HOMESTEAD. A statutory protection from execution or the establishment of title by occupation or real property in accordance with the laws of various states or the federal government.

IMPOUNDS. A trust type of account established by lenders for the accumulation of borrower's funds to meet periodic payments of taxes, mortgage insurance premiums and/or future insurance policy premiums, required to protect their security.

INDEMNITY. Insurance against possible loss or damage. A title insurance policy is a contract of indemnity.

LEGAL DESCRIPTION. A description of land recognized by law, based on government surveys, spelling out the exact boundaries of the entire piece of land. It should so thoroughly identify a parcel of land that it cannot be confused with any other.

LIEN. A form of encumbrance that usually makes a specific property the security for fhe payment of a debt or discharge of an obligation. For example, judgments, taxes, mortgages, deeds of trust.

MORTGAGE. The instrument by which real property is pledged as security for repayment of a loan.

PARCEL. Any area of land contained within a single description.

PITI. A payment that combines Principal, Interest, Taxes and Insurance.

POWER OF ATTORNEY. A written instrument whereby a principal gives authority to an agent. The agent acting under such a grant is sometimes called an "Attorney-in-Fact."

PURCHASE AGREEMENT. The purchase contract between the Buyer and Seller. It is usually completed by the real estate agent and signed by the Buyer and Seller.

QUITCLAIM DEED. A deed operating as a release, intending to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title by the grantor.

RECORDING. Filing documents affecting real property with the County Recorder as a matter of public record.