Chapter 7 - Opening Escrow and the Escrow Process Flashcards
Escrow
The deposit of instruments and/or funds with instructions with a 3rd neutral party to carry out the provisions of an agreement or contract.
Escrow Agent
A disinterested 3rd party intermediary who holds all funds and facilitates the escrow process.
Walk-thru Inspection
Buyer’s inspection prior to close of escrow to verify the property is in the same condition and any requested repairs have been completed.
Joint Escrow Instructions
The purchase agreement is part of the escrow instructions
Proration
Seller may have paid items ahead of time prior to close of escrow. To make things fair, the prepaid terms are credited back to the seller from the buyer.
Example - property tax
Impounds
A lender collects property tax and homeowner’s insurance payments on a monthly basis and then pays them for the homeowner.
Example - when property tax and home insurance is collected monthly
Escrow Closing Statement
Shows amounts paid to and from buyer and seller during escrow. Including property taxes and property insurance.
Recurring Cost
Costs that continue to occur after close of escrow.
Examples - property taxes and homeowner’s insurance
Loan Documents
Sent by the lender to escrow for buyer’s signature.
Broker Demand
Sent from broker into escrow directing the escrow agent to pay the broker’s commission at close of escrow.
Affiliated Business Arrangements/ Broker Controlled Escrows
A controlled escrow could be owned and operated by, but is not limited to, an attorney, real estate broker, title insurance company, among others.
Preliminary Title Report
An offer by a title insurance company to issue a policy of title insurance.
CA Land Title Associated (CLTA) Standard Coverage Policy of Title Insurance
Insures a property’s title against all recorded documents, forgery, incompetence, capacity, and improper delivery of a recorded deed.
American Land Title Association (ALTA) Extended Coverage Policy of Title Insurance
Insures a property’s title against all CLTA coverage plus physical survey, boundary lines, unrecorded encumbrances, and encroachments.
Encumbrances
Items that limit title to real property.
Two types -- Money Encumbrances (liens) Non-money encumbrances (based on use)
Liens
Money encumbrances
Money Encumbrances vs Non-Money Encumbrances
Money Encumbrances - Deeds of Trust and Mortgages Mechanic's liens Attachments Judgments Federal and State Income Taxes Property Taxes Special Assessments Mello-Roos Bonds
Non- Money Encumbrances - Easements (Appurtenant, Prescriptive, Easement in Gross) CC&Rs Public Restrictions (Zoning) Encroachments Leases Setback Requirements
Mechanic’s Lien
When a property owner does not pay for a contractor’s work that was completed on the property, the contractor can file a mechanic’s lien.
Attachment
Court freezes a person’s assets prior to a judgment being rendered.
Judgement
When a court makes a ruling.
Writ of Execution
Moves the defendant’s attached assets to the plaintiff.
Property Taxes
Taxes paid by a property owner
County Tax Assessor
Entity that collects property taxes for the county
Property Tax Year
July 1st - June 30th
First installment due Nov 1st, delinquent Dec 10th
Second installment due Feb 1st, delinquent April 10th
Tax Base
Amount of property taxes paid for the entire county.
Ad Valorem
Property taxes are taxed according to value.
Assessment Appeals Board
Homeowners can ask the assessment appeals board to reduce their assessed value and therefore, the amount of property taxes paid.
Clearance Certificate
Certificate obtained from the CA Board of Equalization verifying that the seller has paid all sales taxes that are due.
CA State Board of Equalization (BOE)
CA State entity that collects sales taxes.
Special Assessment
Collected from homeowners who benefit from specific local improvements.
Mello-Roos Community Facilities Act
A seller of any one-to-four unit residential property must make a good faith effort to obtain a disclosure notice concerning the special tax from each local agency.
Paid in addition to property tax.
Non-Money Encumbrance
Encumbrance based on the use of a property.
Prescriptive Easement / Easement by Prescription
Easement gained by use and lost by nonuse.
Easement in Gross
Easement for a person or utility company to be able to use a parcel of land for a specific use.
Private Deed Restrictions
Private restrictions restrict the use of real property.
Example – CC&Rs
Public Restrictions
Public restrictions for the use of real property.
Example - zoning
Encroachment
When one parcel of real property crosses over another parcel of real property.
Setback Requirements
Restrict a parcel of land by allowing a building to be built a certain distance from the property lines
