Chap13

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Chap13

  1. 1. ESCROW & TITLE INSURANCE CHAPTER 13
  2. 2. ESCROW Escrow is the last step in a property transaction. An escrow agent is an impartial third party who receives and disburses documents, money and papers from every party involved in a real property transaction. The escrow operates in an agency capacity.
  3. 3. When a sum of money is offered by the buyer to the seller and the seller’s acceptance is transmitted to the buyer, a binding contract is formed. The broker should track the escrow to make certain that the escrow is receiving what is required, and when it is required.
  4. 4. BUYER ESCROW SELLER Purchase Price ($) Deed Purchase Price ($) Deed
  5. 5. OPENING THE ESCROW The first step when both parties have signed the deposit receipt is to open escrow.
  6. 6. ESCROW CHART OPEN ESCROW SIGNING Both Buyer & Seller Escrow is Opened PROCURE Title, Signing of deeds FUNDING RECORDING DISPURSEMENT OF FUNDS CLOSE ESCROW * * Never close on Friday
  7. 7. PARTIES TO AN ESCROW Buyers Sellers Lenders Broker
  8. 8. ESCROW INSTRUCTIONS Escrow instructions are the written directions from principals (seller, buyer, lender and borrowers) to the impartial third party, the escrow agent, to do all the necessary acts to carry out the escrow agreement of the principals.
  9. 9. CLOSING STATEMENTS Part of the closing statements are here to help you understand the closing statements. Most escrows today will use a HUD closing statement. For simplicity we will use the escrow closing statements.
  10. 10. Seller’s Statement Debts Credits 1st TD $160,000 SP $200,000 Commission 12,000 Preps 200 Prop Tx. 500 Title Ins 400 Escrow 300 Interest 800 Subtotals $174,000 Cash 26,200 Total $200,200 $200,200
  11. 11. Buyer’s Statement Debts Credits PP $200,000 1 st TD $160,000 Escrow 200 Prepd I 200 Cas. Ins. 300 Prop. Tx 300 Subtot. 160,500 Down 40,000 Total $200,500 $200,500
  12. 12. POC – paid outside of closing. 1 year casualty insurance paid up front.
  13. 13. PRELIMINARY TITLE REPORT Prior to the issuance of a policy of title insurance, the insurer issues a preliminary title report. This report indicates that the insurer will issue a policy of title insurance subject to stated exceptions.
  14. 14. TITLE INSURANCE An abstract is a recorded history of a property. Title insurance insures the ownership of real property (land, building and minerals below the surface) against any encumbrances and other items that may cloud the title. A title opinion based on an abstract does not reveal defect such as forgery, lack of capacity, unknown spousal interests.
  15. 15. STANDARD POLICY CLTA California Land Title Association CLTA is also called the standard policy. CLTA covers matters of record, if not specifically excluded from coverage, and certain risks not recorded.
  16. 16. EXTENDED POLICY ALTA American Land Title Association ALTA is also called the extended policy . Purchased for the benefit of the lender.
  17. 17. It insures the lender for the amount of the loan. There are three basic ATLA policies: 1. Homes described by lot, block and tract. 2. Homes described by Metes & Bounds, or government survey. 3. Construction loans.

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