Home Buyer s Guide To the Title and Escrow Process

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Realizing

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REALTOR ®

A Realtor® is a licensed real estate agent and a member of the National Association of Realtors®, a real estate trade association. Realtors also belong to their state and local Association of Realtors.

REAL ESTATE AGENT

A real estate agent is licensed by the state to represent parties in the transfer of property. Every Realtor is a real estate agent, but not every real estate agent has the professional designation of a Realtor®.

LISTING AGENT

A key role of the listing agent or broker is to form a legal relationship with the homeowner to sell the property and place the property in the Multiple Listing Service.

BUYER'S AGENT

A key role of the buyer's agent or broker is to work with the buyer to locate a suitable property and negotiate a successful home purchase.

MULTIPLE LISTING SERVICE (MLS)

The MLS is a database of properties listed for sale by Realtors who are members of the local Association of Realtors. Information on an MLS property is available to thousands of Realtors.

TITLE COMPANY

These are the people who carry out the title search and examination, work with you to eliminate the title exceptions you are not willing to take subject to, and provide the policy of title insurance regarding title to the real property.

ESCROW OFFICER

An escrow ofcer leads the facilitation of your escrow, including escrow instructions preparation, document preparation, funds disbursement, and more.

The

Professionals

Involved In

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The Life Of An Escrow

Prepare Escrow Instructions and all pertinent documents Preliminary report received

and reviewed

Order demands at Seller’s request

Buyer and Seller sign Purchase & Sale Agreement (Deposit Receipt)

Buyer’s or Seller’s Broker/Agent opens Escrow Escrow holder orders preliminary report

from the Title company

Receive Demands and review. Notify Seller

Buyer and Seller sign and return Escrow instructions to Escrow

Order Statement of Information on Buyers & Sellers and clear Title General

Index matters

Order Beneficiary Statement at Seller’s request

Receive Beneficiary Statement. Review terms of transfer and notify Seller Bills from termite company, roofers, appliance inspection

company and home warranty company are forwarded to Escrow at the direction of the Seller

Loan documents received from Lender Buyer’s loan documents executed and returned to

Escrow with funds

Review file to determine that all conditions have been met and all documents properly executed, notarized and good

funds received (for Buyer & Seller)

Final documents sent to interested parties Close file, prepare statement and disburse funds

Loan funds received and deposited

Forward documents to the Title Company And review title insurance requirements

With Title Officer Request funds from the

Loan Company

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WHAT IS AN ESCROW?

The escrow is the process of having a neutral party manage the exchange of money for real property. The escrow holder is known as an escrow or settlement ofcer or agent. The Buyer deposits funds and the Seller deposits a deed with the escrow holder along with all of the other documents required to remove all "contingencies" (conditions and approvals) in the purchase agreement prior to closing.

WHY DO I NEED AN ESCROW?

Whether you are the buyer, seller, lender or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed. The escrow holder has the obligation to safeguard the funds and/or documents while they are in the possession of the escrow holder, and to disburse funds and/or convey title only when all provisions of the escrow have been complied with.

ESCROW - HOW DOES IT WORK?

The principals to the escrow- buyer, seller, lender, borrower - cause escrow instructions, most usually in writing, to be created, signed and delivered to the escrow ofcer. If a broker is involved, he will normally provide the escrow ofcer with the information necessary for the preparation of your escrow instructions and documents.

The escrow ofcer will process the escrow, in accordance with the escrow instructions, and when all conditions required in the escrow can be met or achieved, the escrow will be "closed." Each escrow, although following a similar pattern, will be different in some respects, as it deals with YOUR property and the transaction at hand.

The duties of an escrow holder include; following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with instructions; paying all bills as authorized; responding to authorized requests from the principals; closing the escrow only when all terms

and conditions have been met; and distributing the funds in accordance with instructions and provide an accounting for same - the Closing or Settlement Statement.

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Life Of A Title Search

Escrow Officer Opens Title Orders with Open Order Desk

Customer Service Verifies Legal And Vesting if Needed

Title Orders to Searching Plant

Computerized Property Chains -

General Index Seller/Buyers Searcher Examines - Chain & General Index Title Examiner Completes Search Package

and Writes Prelim Title Report

Word Processing Department Types Prelim

Messenger Service Delivers Prelims to Escrow and Lenders

Escrow Submits New Documents, Demands, & Statements of info To Title Unit Escrow Authorizes Recording Upon

Notification of Funding

Documents Record & Encumbrances of Record Are Paid Off

Title Officer Writes Title Polices Word Processing Dept Prepares Final

Title Policy

Title Policy Sent to Escrow & Lender

The Process

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The purchase of a home is one of the most expensive and important purchases you will ever make. You and your mortgage lender will want to make sure the property is indeed yours and that no one else has any lien, claim or encumbrance on your property. The following Q&A answers some questions frequently asked about an often misunderstood line of insurance, title insurance.

What is title insurance?

Title insurance is used by homebuyers and lenders for protection against back taxes, undisclosed liens, legal judgments, forgeries, fraud and a host of other potential legal/nancial problems that can arise when purchasing or renancing property. Title companies perform upon an exhaustive search of the public record to identify and correct liens and encumbrances on property. Most of the title insurance premium goes towards identifying and eliminating these potential problems before the close of escrow. Consumers pay only once for title insurance – there are no monthly premiums – for coverage that lasts as long as they own the property.

Who needs title insurance?

Both buyers and lenders in real estate transactions need title insurance. Both want to know that the property they are involved with is insured against certain title defects. Title companies provide this needed insurance coverage subject to the terms of the policy. The seller, buyer and lender all benet from the insurance provided by title companies. Title companies routinely issue two types of policies: An “owner's” policy that insures the homebuyer for as long they own their home; and a “lender's” policy that insures the priority of the lender's security interest over the claims that others may have in the property.

Understanding

Title

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Statement of Information

You will be asked to ll out a Statement of Information that enables the title company to distinguish you from others with identical names during their search of County records. It also provides basic information that will be useful to your escrow ofcer.

Home Loan

Unless you are paying cash, assuming a loan, or the seller is nancing, you will need to apply for a home loan if you have not already done so. Apply as soon as possible to comply with the purchase contract and prior to insuring in order to avoid a delay in the closing.

Response to Seller's Notices

If directed by the contract, you may receive the following items which require a response from you:

Ÿ Seller's property disclosure statement listing any existing problems known to the seller

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

Ÿ Flood hazard disclosure if the real property is in a ood area

Ÿ Independent inspections, such as termite and septic, and any repairs as required

Preliminary Report

have questions about the preliminary report, contact your real estate agent or your escrow ofcer.

Escrow Transaction

One escrow transaction could involve over 20 individuals, including real estate professionals, Buyer, Seller, attorney, escrow ofcer, escrow technician, title ofcer, loan ofcer, loan processor, loan underwriter, home inspector, termite inspector, insurance agent, home warranty representative, contractor, roofer, plumber, pool service, and so on. And often one transaction depends on another.

When you consider the number of people involved, you can imagine the opportunities for delays and mishaps. While your experienced real estate professional, escrow, and title team can't prevent unforeseen problems from arising, they can help to ensure as smooth a closing as possible.

to the Buyer?

What happens Next

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an unpleasant and costly surprise. Some examples include:

Ÿ Previously undisclosed errors with claims against the property

Ÿ A forged deed that doesn't transfer title to real property

Ÿ Instrument executed under expired or fabricated powers of attorney

Ÿ Mistakes made in public record

themselves against loss or damage due to potential problems with the title to their property.

The Preliminary Report

The title company will perform a title search before issuing a title insurance policy. This Labor intensive process searches the history of the property from the county records. The search results may uncover items that need to be corrected before a clear title can be conveyed, such as:

Ÿ Outstanding Mortgages, Liens, Judgments and tax liens

Ÿ Deeds that contain improper vesting and incorrect names

Ÿ Improper notary acknowledgments

Ÿ Easements and restrictions

The title company will issue a preliminary report on the property. A preliminary report gives the buyer, seller and lender an opportunity to review any potential title defects that are to be cured or shown on the title policy.

Reviewing the preliminary report

Your real estate agent should review the preliminary report as soon as it arrives, paying particular attention to certain areas:

Verify the ownership vesting

The name on the report should match the names on the purchase contract. Sometimes the names of an unexpected owner will appear and a corrective document may be required.

Verify the property address

The plat map and legal description should match the address. An owner could own two properties adjacent to or across the street from each other, causing confusion in identifying the correct property.

Verify the exceptions

Carefully review the exceptions. Common exceptions include current taxes, bonds, Mello-Roos assessment, Covenants, Conditions and Restrictions (CC&R), easements and deeds of trust. Be sure the CC&R's or existing easements don't interfere with the buyer's future plans. For example, an easement across the backyard could have a profound effect on the buyer's ability to add a swimming pool.

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TITLE POLICY

COVERAGE COMPARISON

Compare the Alta Homeowner's Policy

Protection From:

1 Someone else owns an interest in your title 2 A document is not properly signed

3 Forgery, fraud, duress in the chain of title 4 Defective recording of any document 5 There are restrictive covenants

6 There is a lien on your title because there is: a) a deed of trust

b) a judgement, tax, or special assessment c) a charge by a homeowner's association 7 Title is unmarketable

8 Mechanics lien

9 Forced removal of a structure because it:

a) extends on another property and/or easement b) violates a restriction in Schedule B

c) violates an existing zoning law*

10 Cannot use the land for a Single-Family Residence because the use violates a restriction in Schedule B or a zoning ordinance

11 Unrecorded lien by a homeowners association 12 Unrecorded easements

13 Building permit violations* 14 Restrictive covenant violations 15 Post-policy forgery

16 Post-policy encroachment

17 Post-policy damage from extraction of minerals or water 18 Lack of vehicular and pedestrian access

19 Map not consistent with legal description 20 Post-policy adverse possession

21 Post-policy cloud on title

22 Post-policy prescriptive easement

23 Covenant violation resulting in your title reverting to a previous owner 24 Violation of building setback regulations

25 Discriminatory covenants

Other benefits:

26 Pays rent for substitute land or facilities 27 Rights under unrecorded leases

28 Plain language statements of policy coverage and restrictions 29 Compliance with Subdivision Map Act

30 Coverage for boundary wall or fence encroachment* 31 Added ownership coverage leads to enhanced marketability 32 Insurance coverage for a lifetime

33 Policy adopted by the California Land Title Association (CLTA)

34 Post-policy inflation coverage with automatic increase in value up to 150% over five years 35 Post-policy Living Trust coverage

ALTA Homeowners ALTA Standard or CLTA X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X

*Deductible and maximum limits apply. Available for certain 1-to-4 unit residential properties. Coverage may vary based on an individual policy.

Please contact your Landwood Title Representative for more information.

Landwood Title Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions.

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Who Pays

For What

The SELLER can generally be expected to pay for: ! Real Estate Commission

! Document preparation fee for Deed

! Documentary transfer tax (County Tax)

($1.10 per $1,000.00 of sales price)

! Any city Transfer Tax

! Payoff of all loans in seller’s name ! 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) ! Home Warranty (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 Homeowner’s Association dues ! Any bonds or assessments ! Any and all delinquent taxes

! Notary Fees ! Escrow Fee

! Title Insurance Premium

The BUYER can generally be expected to pay for:

! Title Insurance Premium ! Escrow Fee

! Document preparation (if applicable) ! Notary Fees

! Recording charges for all documents in buyer’s

names

! Termite Inspection (according to contract) ! Tax proration (from date of acquisition) ! Homeowner’s Association transfer fee ! All new loan charges

! 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.)

! Home Warranty (according to contract) ! Fire Insurance Premium for first year

YOURS OR THEIRS - The Personal vs. Real Property Dilemma

The distinction between personal property and real property can be the source of difficulties in a real estate transaction. A purchase contract is normally written to include all real property; that is, all aspects of the property that are fastened down or an integral part of the structure. For example, this would include light fixtures, drapery rods, attached mirrors, trees and shrubs in the ground. It would not include potted plants, free-standing refrigerators, washer/dryers, microwaves, bookcases, swag lamps, etc.

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There are two types of costs or expenses in an escrow: the recurring costs and the non-recurring costs. This chart will define and give examples of both types.

Recurring Costs

Costs which the party pays at closing and will continue to pay after the close of escrow, as part of maintaining the property.

Non-Recurring Costs

Costs which are charged ONE TIME ONLY as an expense of closing the transaction.

! Fire Insurance Premium

! Homeowner's Association Dues

! Real Property Taxes

! Interest on the New Loan

Understanding

Recurring and Non-recurring

Closing Costs

! Title Insurance Premiums

! Recording Fees

! Endorsement Fees to Title Company

! Sub-Escrow Fee to Title Company

! Reconveyance Fees

! Documentary Transfer Tax

! Escrow Fees ! Notary Fees ! Messenger Fees ! Appraisal ! Credit Report ! Loan Origination ! Loan Processing ! Document Fees

! Tax Service Contract

! Real Estate Broker Commissions

! Fees for Property Disclosures or City Reports

! Transaction Coordinator Fee

! Home Warranty Premium

! Transfer or Document Fees to a Homeowner's Association

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Common ways to

take title

to California

residential property

Advantages and

Limitations

TENANCY IN COMMON JOINT TENANCY COMMUNITY PROPERTY

COMMUNITY PROPERTY with Right of Survivorship Parties Division Creation Possession and control Transferability Liens against one owner Death of co-owner Possible advantages/ disadvantages 1

Two or more persons Two or more natural persons Spouses or 2 domestic partners Spouses or 2 domestic partners Ownership can be divided

into any number of interests, equal or unequal Ownership interests must be equal Ownership interests must be equal Ownership interests must be equal One or more conveyances

(law presumes interests are equal if not otherwise specified)

Single conveyances (creating identical interests); vesting

must specify joint tenancy

Presumption from marriage or domestic partnership or can be designated in deed

Single conveyance and spouses or domestic partners

must indicate consent which can be on deed Equal Equal Equal Equal Each co-owner may transfer

or mortgage their interest separately

Each co-owner may transfer his/her interest separately

but tenancy in common results

Both spouses or domestic partners must consent to transfer or mortgage

Both spouses or domestic partners must consent to transfer or mortgage Unless married or domestic

partners, co-owner’s interest not subject to liens of other debtor/owner but

forced salecan occur

Co-owner’s interest not subject to liens of other debtor/owner but forced sale can occur if prior to co-owner’s/debtor’s death

Entire property may be subject to forced sale to satisfy debt of either spouse or domestic partner

Decedent’s interest passes to his/her devisees or heirs

by will or intestacy

Decedent’s interest automatically passes to

surviving joint tentant (“Right of Survivorship”)

Decedent’s 1/2 interest passes to surviving spouse or domestic partner unless

otherwise devised by will

Decedent’s 1/2 interest automatically passes to surviving spouse or domestic partner due to

right of survivorship

Co-owners interests may be

3

separately transferable

Right of Survivorship (avoids probate); may have tax disadvantages

for spouses

Qualified surviorship rights; mutual consent required for

transfer; surviving spouse or domestic partner may

2

have tax advantage

Right of survivorship; mutual consent required

for transfer; surviving spouse or domestic

partner may have tax advantage Entire property may be subject to forced sale to satisfy debt of either spouse or domestic partner

1 “Persons includes a natural person as well as validly formed cooperation, limited partnership, limited liability company or general partnership. Trust property is vested in the trustee (usually a natural person or corporation).

2 Transfers by spouses/domestic partners may require a quitclaim deed from the other spouse/partner for title insurance purposes.

3. If co-Owners are spouses/domestic partners, property may be subject to legal presumption of “community property” requiring consent of both spouses/partners to convey or encumber title notwithstanding vesting as “joint tenancy”

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TAX CALENDAR

JULY 1

Beginning of the fiscal year.

NOVEMBER 1

First SECURED PROPERTY TAX installment is due.

DECEMBER 10

FIRST INSTALLMENT payment deadline. A 10% penalty is added after the deadline.

FEBRUARY 1

Second SECURED PROPERTY TAX installment due.

APRIL 10

Second SECURED PROPERTY TAX installment payment deadline. A 10% penalty plus $10.00 cost is added after the deadline.

JULY 1

Delinquent SECURED and SECURED SUPPLEMENTAL accounts are transferred to delinquent tax roll and additional

penalties added at 1.5% per month on any unpaid tax amounts, plus $15.00

redemption fee.

*If a delinquent date falls on a weekend or holiday, the delinquent date is the next business day.

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Amendments

A change - either to alter, add to, or correct - part of an agreement without changing the principal idea or essence.

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 nancial obligation; taking title to a parcel of real property with the Buyer assuming liability for paying an existing note secured by a deed of trust against the real property.

Beneciary

The recipient of benets, often from a deed of trust; usually the lender.

Close of Escrow

Generally 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.

Comparable Sales

Sales that have similar characteristics as the subject real property, used for analysis in the appraisal. Commonly called “comps.”

Deed

A document through which a conveyance of property is affected.

Deed of Trust

An instrument used in many states in place of a mortgage.

Deed Restrictions

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

Earnest Money Deposit

Down payment made by a purchaser of real property as evidence of good faith; a deposit or partial payment.

Easement

A right, privilege or interest limited to a specic

Hazard Insurance

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

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.

Legal Description

A description of land recognized by law, based on government surveys, spelling out the exact boundaries of the entire parcel 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 specic parcel of real property the security for the 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.

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

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Your Title Order Number Your Escrow Number Your New Address City/State/Zip

Title Contact

Title Ofcer Email

Assistant Email

Company Phone

Address Fax

City/State/Zip

Escrow Contacts

Escrow Ofcer Email

Escrow Assistant Email

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Home Buyer s Guide To the Title and Escrow Process

Home

Buyer’s

G u i d e

To t h e T i t l e

Committed

To Service

Table Of Contents

Realizing

the American Dream

The

Professionals

Involved In

The Life Of An Escrow

Life Of A Title Search

The Process

What is title insurance?

Who needs title insurance?

Understanding

Title

Statement of Information

Home Loan

Response to Seller's Notices

Preliminary Report

Escrow Transaction

to the Buyer?

What happens Next

TITLE POLICY

COVERAGE COMPARISON

Who Pays

For What

Understanding

Recurring and Non-recurring

Closing Costs

Common ways to

take title

to California

residential property

Advantages and

Limitations

TAX CALENDAR

Title Contact

Escrow Contacts