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FAQ

What Is An Escrow?
Life of an Escrow
What do I have to do while in Escrow?
Seller Responsibilities
Buyer Responsibilities
What is a 1031 Exchange?

What Is An Escrow?
An escrow is an arrangement on which a neutral third party, called an escrow holder, holds legal documentation and funds on behalf of a buyer and seller. The escrow agent works closely with you, your realtor and lender to assure that the sale conditions are complied within the time period called for in the Residential Purchase Agreement and Joint Escrow Instructions.

After all parties have executed these documents, escrow prepares an Addendum to the Residential Purchase Agreement and Joint Escrow Instructions. Escrow then distributes them according to the buyers and sellers instructions. Both the buyer and the seller rely on the escrow holder to carry out faithfully their mutually consistent instructions relating to the transaction. Escrow holder is bound by law to notify both parties if the instructions given are not mutually consistent or cannot be carried out. These instructions are drawn by the Escrow Officer, and signed by the buyer and seller. Since the escrow instructions are not as detailed as the Purchase Contract, the information contained in the instructions is intended to direct the Escrow Officer in the specific steps that are to be completed through the escrow instruction.

Life of an Escrow
The escrow company is a neutral third party in the escrow transaction. They work closely with your realtor and your lender to fit together all the "jigsaw" pieces of the transaction, assuring that the escrow instructions are adhered to within the specified time frame.

Your Escrow Officer carries out the following procedures and responsibilities:

1. PREPARE AN ADDENDUM TO THE CONTRACT: As directed and reviewed by the Real Estate Agents.
2. ORDER PRELIMINARY TITLE REPORT: The preliminary title report is ordered from the title insurance company for the property you are buying or selling. This report reveals liens of public record and is the guideline escrow uses to assure that title is conveyed with only the liens and matters the buyer has agreed to accept.
3. ORDER PAYOFF STATEMENTS (DEMANDS): Order demands from the lender of record the current mortgage(s) on the property, the homeowner’s association statement and documents, and any other lien information, which affects the title to the property.
4. PREPARE ESTIMATED CLOSING STATEMENT: As soon as loan documents are delivered to us, we will estimate the closing costs and call the buyer to arrange for an appointment to sign the loan documents and bring the closing funds.
5. ORDER INSURANCE: Upon receipt of the loan documents and signing of the lenders instructions, escrow will order the insurance policy from the buyer’s insurance agent, per the requirements of buyer’s new lender.
6. SET UP FUNDING: When the buyer has signed all loan documents, they are then sent to the lender with a request that the loan funds be released ("funding"). Your escrow has not yet closed at this point; "recording" of the grant deed is the trigger. Lenders have different time schedules. Some fund their loans locally and need only one days notice, while others will need up to two full days to review the loan package and fund.
7. When the lender verifies that they are in a position to release the loan funds, the Escrow Officer calls the title company to "set-up" the recording. Insured documents in San Diego County record at 8:00am. The title company rechecks public county records prior to having the documents recorded, to assure that no liens have been recorded. Occasionally, a new lien will appear and the recording is "pulled" until a clearance of the new lien is obtained.
8. Between 10:30 am and 12:00 pm, the title company will call to "confirm" that all documents have been recorded and give escrow the final title and payoff of existing lender costs. Escrow will then balance your file, type closing statements and disburse funds.

What do I have to do while in Escrow?
The key to any transaction as important as your sale, purchase or loan is to read and understand your escrow instructions. If you do not understand them, you should ask your escrow officer to explain the instructions.

Your escrow officer is not an attorney and cannot practice law; you should consult your lawyer for legal advice. Do not expect your escrow officer to advise you as to whether or not you have a "good deal" or are doing things the right way. The escrow officer is there to follow the instructions given by the principals in the escrow.

In order to expedite the closing of the escrow, you should check with your escrow officer as to what specific items you could do to assist. Ask the question – "What can I do to expedite the closing of this escrow?"

Respond quickly to correspondence. This will assist in the timely closing of the transaction.

If you are required to deliver funds into the escrow, make sure that you provide "good" funds in the form required by the escrow officer. Company procedures differ in this regard, and there are many ways you can help at the time of closing; check with your escrow officer. Do not give the escrow officer a personal check and expect the escrow to close immediately; the escrow can only close on cleared funds, and the processing of a personal check can take days, possibly even a week or more.

When the escrow officer closes the escrow, some of you may want the closing papers, checks, title policies, statements, etc. made available immediately. There are many aspects to the closing of the escrow, and some of these cannot be processed on the day of the closing; they may take several days. If you have a special need, for example, a cashier’s check on the day of closing, you should communicate that need to the escrow officer early in the processing of the escrow.

Seller Responsibilities
The seller can generally be expected to pay for:

• - Real Estate Commission
• - Document preparation fee for Deed
• - Documentary transfer tax ($1.10 per $1,000.00 of sales price)
• - Payoff of all loans in seller´s name (or existing loan balance if being assumed by buyer)
• - Interest accrued to lender being paid off, Statement Fees, Reconveyance
• - Fees and any prepayment penalties.
• - Termite inspection (according to contract)
• - Termite Work (according to contract)
• - Any judgments, tax liens, etc., against the seller.
• - Tax proration (for any taxes unpaid at time of transfer of title)
• - Any unpaid Homeowners dues
• - Recording charges to clear all documents of record against seller
• - Any bonds or assessments (according to contract)
• - Any and all delinquent taxes
• - Notary Fees
• - Escrow Fee (one half)
• - Title Insurance Premium for Owner´s Policy

Buyer Responsibilities
The buyer can generally be expected to pay for:

• - Title insurance Premium for Lender´s Policy
• - Escrow Fee (one half)
• - Document preparation (if applicable)
• - Notary Fees
• - Recording charges for all documents in buyers names
• - Termite inspection (according to contract)
• - Tax proration (from date of acquisition)
• - Homeowners transfer fee
• - All new loan charges (except those required by Lender for 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
• - Inspection Fees (roofing, property inspection, geological, etc.)
• - City Transfer/Conveyance Tax (according to contract)
• - Fire Insurance Premium for first year

What is a 1031 Exchange?
A Tax-Deferred Exchange was first introduced in 1921 allowing owners of investment property to defer the payment of capital gains associated with the sale of those properties. In the summer of 1990, this procedure was finally outlined under the Internal Revenue Code section 1031, and involves a series of rules and regulations that must be met in order to take full advantage of this tax benefit.

These new rules allowed owners of certain types of like kind Real and Personal property to sell their property and other like kind property without paying the Capital Gains Tax. The rule also required that the "Exchanger" use a safe harbor to hold the proceeds while the exchange was in progress, and spelled out what the safe harbors were. The only safe harbor for most "Exchangers" is a "Qualified Intermediary." A Qualified Intermediary has a complete understanding of everything that is involved in utilizing this section of the code and will walk you through this process.