EDUCATIONAL: Commonly Asked Questions
Escrow and Title Insurance
Questions with Answers
- What Do I have to do while in Escrow?
After you read this page, you are encouraged to read What Customers Need to Know About Escrow/ Title Insurance. Then, 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.
- Can A Spouse Be On Title That Isn't On The Mortgage?
- No. The lender may require a spouse to "sign off" the title. Then, as soon as the escrow records, you can then put a spouse back on. You will need to acquire a deed and complete it and then record it yourself See: Common Forms of Ownership, Sample Deeds and Homesteading. An escrow officer can help you with this.
- What is a Reconveyance?
- Upon payment in full on a Note secured by a Deed of Trust the beneficiary (lender) relinquishes his original note and original deed of trust to the borrower. The note and Deed of Trust are given to the trustee who, for a small fee, issues a “Deed of Reconveyance” and records it. A Deed of Reconveyance wipes a lien (Deed of Trust) off the property record.
Escrow and Your New Loan
If you are obtaining a new loan, your escrow officer will be in touch with the lender who will need copies of the escrow instructions, the preliminary title report and any other documents escrow could supply. In the processing and the closing of the escrow, the escrow holder is obligated to comply with the lender’s instructions.
It has become a practice of some lenders to forward their loan documents to escrow for signing. You should be aware that these papers are lender’s documents and cannot be explained or interpreted by the escrow officer. You have the option of requesting a representative from the lender’s office to be present for explanation, or arrange to meet with your lender to sign the documents in their office. One of the duties of the Loan Officer is to order the homes insurance (structural, flood, quake, hazard etc) and provide this information to the escrow officer. A mortgage company takes about 48 hours to review and fund your loan application. Your loan officer will make sure he has all needed information from you for submission several days prior to expected closing date. You and/or your Realtor can call the Loan Officer for a status on your loan at anytime. This will help you plan for the U-Haul and NOT having to live in a hotel or car due to a delayed closing of escrow.
NOTE: An escrow officer can not force a lender to fund.
(Mortgage): What is a Closing Statement?
A closing statement is an accounting, in writing, prepared at the close of escrow which sets forth the charges and credits of your account. The items shown on the statement will reflect the purchase price, the funds deposited or credited to your account, payoffs on existing encumbrances and/or liens, the costs for all services and a determination of the funds you are entitled to at the close of the escrow. When you receive your closing papers, review the closing statement; it is extremely logical and reflects the financial aspects of your transaction. If anything does not make sense to you, you should ask your escrow officer for an explanation.
When going through your closing papers, examine all of them; there may even be a refund check hiding in there. Cash the check quickly, please. Be sure to have the check properly endorsed. All payees must endorse the check. This will eliminate the check being returned unpaid due to irregular or missing endorsements. Your closing statement and all other escrow papers should be kept virtually forever for income tax purposes.
Your accountant will need the information about the sale or purchase of the property. IRS and other agencies may require you to prove your costs and/or profit on the sale of any property. The closing statement will assist in this task.
Do not rely on your escrow holder retaining the escrow file so that you can "always call and get copies of the closing statement." Most escrow holders will be destroying the files after the statutory retention period, usually five years. Maintaining and storing the closed escrow files is a costly endeavor to the escrow holder. Therefore, a nominal fee may be charged by your escrow holder for the retrieval of a file from storage, photocopying the requested documents and returning the file to storage.
What Escrow Fees and Closing Costs will be Charged?
Escrow fees are not regulated by the State. Escrow holder, like any other businesses, will charge fees that are commensurate with the costs of producing the service, the liability undertaken, and the overhead expenses which include a profit factor. Therefore, the fees will vary between companies and from county to county. Normally, the escrow holder will follow its minimum fee schedule, which will provide for extra charges based upon the differing elements of your escrow. On occasions, an additional fee will be charged for unusual expenditures of time on a given transaction. The escrow holder has no control over the costs of other services that are obtained, such as the title insurance policy, the lender’s charges, insurance, recording charges, etc. Your escrow officer, upon request, can provide you with an estimate of the escrow fees and costs as well as fees charged by others, provided such information is available. The Escrow / Title Insurance Fees page may help give you a general idea.
- What About Escrow Cancellations?
No escrow is opened with the intention that it will cancel, but there are occasions when a contingency cannot be met or when the parties disagree during the pendency of the escrow. Some escrow holders provide for such an event by incorporating an instruction in the typed or printed General Provisions. Ordinarily, an escrow holder will take the positions that no funds on deposit can be refunded until the escrow holder is in receipt of mutual cancellation instructions signed by the principals. The escrow holder cannot normally make a determination as to who is the "rightful" party in a dispute on a cancellation and therefore will not return the funds or documents until the principals agree; the escrow holder is not a judge. Do expect to be charged a cancellation fee, as this is a charge for professional services rendered and quite often for several "out of pocket" expenses that have been incurred on the client’s behalf. These fees can vary from company to company depending upon their policies. Sometime, when a dispute exists, the escrow holder may be forced to allow a court to decide which party is entitled to what documents or funds; this is called an Interpleader Action. Fortunately, most disputes are resolved before the Interpleader is filed, as the costs for such legal actions are extreme. Those costs, incidentally, are normally paid out of the funds on deposit in the escrow.
- However, if you can show that you not qualify for your
loan (your lender must put this in writing) you can have
your earnest money (deposits) returned and walk away from
the home purchase. The seller cannot keep it.
What about Title Insurance?
Title Insurance is usually obtained when real property is purchased. The policy of title insurance insures the owner and/or the lender of ownership of the property. There are various coverage's afforded, but a basic policy insures that the buyer is the owner and that any lender shown on the policy is an "insured" lender. Many different types of extended coverage's are available; for example, an ALTA policy is quite often required by institutional lender to afford them additional protection under the title insurance policy. The title policy is written after an extensive examination of the public record is made and the recording of the required documents as called for in the escrow.
The title insurance policy fee is a one-time fee, paid at the close of escrow. The determination of who pays for the policy is not uniform from county to county in Nevada. In some counties, the buyer will pay while in others the seller will pay. In other counties the seller will pay for the lender’s title policy. But in almost every case, the question of who pays closing costs is a matter of agreement between the parties. Usually this agreement is based on the customary practice in your county or area. In the case of some FHA or VA transactions, the escrow officer must follow the guidelines as required by the lender and/or government.
What About Property Taxes?
The terms of your transaction and the resultant escrow instructions determine how the property taxes will be handled. If there is no mention of the proration of taxes, your escrow officer will not deal with any credits or charges for prorated taxes. However, if your escrow calls for a proration of taxes, there will be an item in your closing statement that will reflect either a credit or charge to your account. If the taxes are not paid (even though there has been a credit or charge against your account), the buyer is obligated to obtain a tax bill and pay the taxes. If the buyer does not have a tax bill with which to pay the taxes, you can request a bill from the Tax Collector; send a photocopy of the deed.
Supplemental Property Taxes is another concern of the buyer. Upon transfer of real property, a supplemental tax bill is generated. This is accomplished in cooperation with the County Assessor and the County Tax Collector.
Shortly after the close of an escrow involving the conveyance of real property, the County Assessor will request information about the property from the buyer. This information assists the Assessor in determining the value of the property for taxation purposes. The escrow holder may have previously supplied some of the information at the time of the closing of the escrow, via Preliminary Change of Ownership form that should accompany each deed when it is recorded. See "Property Tax Schedule for Nevada".
- What is a Transfer Tax?
- All real property transactions (sales or otherwise) in Clark County, Nevada for instance, are subject to a transfer tax. It is $5.10 per $1000.00 of the price of the property (effective October 2002) by the Clark County Recorder. This amounts to about ½ of a percent of the sales price. However, a new spouse (marriage after a property purchase) is exempt from paying the transfer tax if one chooses to ad the spouse to the deed. The new spouse need not be on the mortgage loan to do this. An escrow officer can help you.
The Perfect Escrow; Does it Exist?
Perfection is sometimes difficult to achieve, especially in dealing with the complexities of the escrow, the desires of the parties and other matters that are sometimes far beyond the control of the escrow officer. It is human nature to error on occasion, but your escrow officer has the background, training, education, support and systems in place necessary in order to accomplish the objectives of the escrow instructions.
In the event you have any problems in the handling of your escrow, you should first contact the escrow officer. If your problem is not resolved, you should next contact the management or owner of the company. If the matter requires additional attention, you can call the proper regulatory agency.
- What is
A title is the foundation of property ownership. The document which gives evidence of ownership of a property. Also indicates the rights of ownership and possession and use of the property.
What is a Title Search?
A title search is a detailed examination by the title company examiner of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the seller's right to transfer ownership and to discover any claims, defects and other rights or burdens on the property. Depending on the number of documents the examiner must review, a title search can take up to two weeks to complete. They are detail oriented and search carefully to look for any hidden problems. My company's goal is complete the search within 24-72 hours.
What problems can a Title Search find?
A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.
What problems can't a Title Search reveal?
There are some "hidden hazards" that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his marital status, resulting in a possible claim by his legal spouse. Other "hidden hazards" include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise after you've purchased your home and can jeopardize your right to ownership.
What can I take from the house?
When you purchase a home you are buying real property. Real property means anything that is attached to the land. Real property may also be anything which is incidental or appurtenant to land or which is considered immovable by law. The difference in real property and personal property are items that are movable and can be removed from the property. Ceiling fans may be considered real property in some areas, but maybe personal property in still others. One may chose to list any fixtures / objects that may be questionable in a list of personal property items which will either stay with the property or be removed by the seller. Ceiling fans, appliances, built-in's, should also be listed in the Purchase Agreement. Make a list of the personal property items that will be included in the sale and give this list to the escrow officer.
- What is an Escrow HoldBack Agreement?
These are funds held in escrow that are set aside to guarantee that seller or buyer will complete an expected variety of work or other obligations per the purchase agreement contract. This is usually required by the lender. Example: Ensures the seller will fix damages to a pool as promised in the contract. etc.
- What is a
Neutral Third Party?
The Escrow Officer and/or the Title Company are considered a "neutral third party". Independent of buyer and seller and respective agents as well as the Lender. Simply put, as an example; if you ask the question "Is this a good deal or am I getting taken to the cleaners by someone?", the title company and/or any of it's employees cannot comment or make recommendations (to you or anyone) one-way or another in regards to the loan quality, commissions, purchase agreement or whether or not you are getting a fair price on the property either as the Seller or as the Buyer. We (the third party) would encourage you to consult legal counsel if you have such questions on this topic prior to signing any legal or binding contract
- How much time will it take to do my "signing"?
- Please allow at leased one solid hour. This can be performed two ways if you will be out of state or out of town:
- 1) Overnight shipping or currier and a local notary public.
- 2) A Power of Attorney can be considered.
- I have a Prenuptial Agreement
- The state of Nevada requires you to record a new deed for each property within the state if you get a prenup. You will also need to file another homestead.
- How much time before I receive my recorded Deed?
- About 5-6 months after it's recording date.
- What if your parent needs to sell their home and has Alzheimer's?
- Title companies now require a court appointed guardianship to be in place for any one that may have Alzheimer’s disease. If you are in this situation you need to go through this process in order to sell your parents home. If you are in this situation you can no longer just use a power of attorney.
- What is the Title Escrow Process?
1) Complete all of your loan documents. Understand your loan terms and the fees given
2) Provide any requested information promptly to the escrow officer. A day
4) Tell your lender various pieces of information about your credit history or possible
5) Notify the Escrow Officer when and where they can reach you.
8) Occasionally, buyers or sellers are required to bring in additional funds to complete
9) Be sure to bring your valid picture ID when you come to sign your escrow