Frequently Asked Questions
Newhall Escrow prides itself in being a proactive, aggressively involved company. Our diverse experience allows for both rational and creative solutions to escrow/title problems in even the highest profile and most complex transactions.
What determines the buyers possession of the property?
It is whatever was agreed upon in the purchase contract. Buyer and seller should negotiate a possession date and time that best coordinates with their schedule prior to opening escrow.
What is a normal escrow/lender processing timeframes?
Escrows are typically 30-45 days to give the buyer sufficient time to qualify and establish a new loan along with do necessary investigation to confirm the property is what the buyer wants. Escrows can be closed in as little as 1 week if buyer is purchasing “as is” AND all cash. In the event buyer is obtaining financing, loan documents should be in escrow roughly 5 business days prior to the closing date.
When does the seller get paid?
California State Law requires Escrow Holder to verify the transfer documents have recorded with County Recorders Office prior to disbursing any funds. Typically the Seller gets paid within 24 hours of recording. Mostly same business day, but depending on what time confirmation of recording is received by escrow holder, funds may not be available until the next business morning.
Who determines fair market value?
Fair Market value is determined by other properties that have sold and at what price in your neighborhood that are comparable to your property.
When does escrow begin to process the transaction?
Once the terms are agreed upon and the contract is accepted escrow is opened. Buyer has 3 days from acceptance to deposit money and open an account with escrow.
What are the different forms of payments that are accepted to the escrow trust account?
California State Law requires all funds to be “good funds” in order to close. Personal checks take 10 business days to clear, Official (bank) checks take 3-7 business days to clear and Cashier’s checks take 3-5 days. More and more these days, Title Companies are placing holds on Cashier’s Checks to verify issuance due to fraud and the risk of the bank going out of business before they can honor their check so we strongly recommend wire transfers only for closing funds.
Are all escrow companies licensed and bonded?
No, only independent escrow companies are required to be bonded. Independent escrow companies are also required to have a certain amount of liquid assets, have spot audits conducted by the Department of Business Oversight and also, all employees of an independent escrow company must pass a background check from the Department of Justice.
Do I have to be present at time of closing escrow to sign papers?
No. Unlike attorney states, escrow closing states are handled much different. All documents required for your signature either as buyer or seller are obtained prior to closing. Usually once the buyer’s loan documents come in, escrow will gather the balance of documents required for your signature at that time. Sometimes escrow is notified of changes in terms between the time you have signed the initial paperwork and closing. If that is the case, escrow will notify you of additional items required for your signature which can be handled via email or fax.
What is the difference between mortgage broker and direct lender?
- A Mortgage Broker qualifies your situation and finds a lender that can give you a loan that best suits your needs.
- A Mortgage Banker is a direct lender that can Broker loans to outside lenders as well.
- A Direct Lender finds a program within their organization that best suits your needs.
Do lenders accept electronic signatures on the purchase contract?
It is still questionable at this point. Some do, some don’t, it might be in your best interest to just sign the old fashioned way to avoid a big urgent inconvenience later.
What is an impound account?
A reserve account established and paid through your loan for your property taxes and insurance. The amounts are collected with your monthly mortgage payment and are set aside in an “impound/escrow account”. Your lender will pay your taxes and insurance when they become due and payable. Lenders will require you to keep at least 2 months cushion in this account at all times.
Who determines what type of insurance I need for the property?
A Mortgage Lender. Depending on whether you are located in a fire and/or flood area will determine what they will require. It is strongly advised that you confirm with your lender what type of insurance will be required in advance so that you have time to shop around for a policy that fits your needs. Lenders will require evidence of insurance urgently through escrow so it is very important you are prepared for that phone call as to who you will obtain the policy with.
What is the difference between an Escrow Account with the lender and the Escrow Account with an Escrow Company?
Completely different, but called the same for a couple of different reasons: “Escrow” is the third party holder of trust (your) funds. An escrow account established for your real estate transaction is there to hold buyer’s funds and seller’s documents until both parties have satisfied themselves and authorized an exchange/transfer. An Escrow Account established with your lender is an account set aside that you pay into monthly for your taxes and insurance payments. (see question above)
What are prorations and how are they determined?
Prorations are a debit/credit through escrow for taxes and homeowner’s association dues for the current installment. Example: If you are closing escrow in September, 1st installment taxes began 7/1 but are not due yet. The seller would credit the buyer from the first day of the installment (7/1) to the day you close escrow (last day property was owned by seller) based on the latest available tax bill. Buyer will be responsible to pay the full amount of taxes when due in November, but has already been credited from seller for the time the seller owned the property.
What is reassessment of the property and supplemental taxes?
The County Assessor’s Office will reassess the property upon transfer of ownership based on the purchase price. A supplemental tax bill is the difference between the seller’s assessed value and the buyers new value. If you are a buyer who established an impound account for taxes and you receive a supplemental bill, it is your responsibility to notify your lender.
What is Section I and Section II on Termite Reports?
- Section 1: Items are evidence of dryrot or active infestation and are required to be corrected prior to closing escrow by Buyer’s new lender if a termite inspection report is a provision in the Real Estate Purchase agreement and/or Sale Escrow Instructions.
- Section 2: Items make reference to items that may be a problem such as water stains, water damage, earth to wood contact, etc. and are not required by most lenders to be corrected prior to closing escrow.
Who determines fair market value?
Fair Market value is determined by other properties that have sold and at what price in your neighborhood that are comparable to your property.
What is title insurance? (Owner’s Premium and Lender’s Policy) Who pays?
An Owner’s Policy of Title Insurance is usually furnished by a seller to a buyer to ensure the buyer that there are no voluntary or involuntary liens of record. Title Insurance is the only type of insurance you can obtain that insures the past instead of the future. In the event an issue shows up on record that was a responsibility of the previous owner, a claim would be opened with the title policy issuer and the title company would clear or remove the item for the buyer/new owner. A Lender’s Policy of Title Insurance is usually purchased by a buyer/borrower as a requirement of a new loan. A Loan Policy insures the lender against loss caused by invalid title in the borrower (ownership) and/or seniority of position on title.
What are closing costs and how are they estimated?
Charges incurred to purchase or sell a property. Common closing costs include: Title Charges, Escrow Fees, Inspection reports, disclosure reports, Transfer Fees and Loan Charges.
What type of Valid ID will I need to complete the transaction?
Both a buyer and seller will be required to sign documents that require a notary acknowledgement. A Driver’s license, state issued I.D. or passport will be required for a document to be notarized.
If part of my down payment is a gift, What documentation will escrow need?
Anytime funds are received by a person other than our Buyer or Seller, a third party authorization form will need to be completed. This form authorizes escrow holder to use the third party funds through escrow to benefit either the buyer or seller with no consideration due the depositor.
Are all escrow companies licensed and bonded?
No, only independent escrow companies are required to be bonded. Independent escrow companies are also required to have a certain amount of liquid assets, have spot audits conducted by the Department of Business Oversight and also, all employees of an independent escrow company must pass a background check from the Department of Justice.
What is normal escrow/lender processing timeframes?
Escrows are typically 30-45 days to give the buyer sufficient time to qualify and establish a new loan along with do necessary investigation to confirm the property is what the buyer wants. Escrows can be closed in as little as 1 week if buyer is purchasing “as is” AND all cash. In the event buyer is obtaining financing, loan documents should be in escrow roughly 5 business days prior to the closing date.
When does escrow begin to process the transaction?
Once the terms are agreed upon and the contract is accepted escrow is opened. Buyer has 3 days from acceptance to deposit money and open an account with escrow.
Why does it take 5 business days to Process Loan Doc / Funding / Recording Time Frames?
Most lenders require the executed loan documents back for review prior to funding (sending buyer’s loan proceeds to escrow) Lender review times range between 24 hours to 72 hours before they will provide Buyer’s loan proceeds to escrow holder. The County Recorders Office requires 24 hour notice prior to recording the documents, so Buyer’s loan funds the day before recording/closing.
Where and what type of properties require retrofitting?
Some cities such as Los Angeles, Pasadena and now Burbank require a mandatory report certifying a property at transfer meets the requirements of the city for items such as low flush toilets, earthquake shut off valve, impact glazing, on large glass windows and sliding glass doors. A retrofitter or qualified licensed contractor can inspect a property to confirm all items are up to code per the city requirements.
What is the Certificate of Compliance?
A document signed by a licensed Contractor, Retrofitter or Realtor certifying the property to be compliant with the city ordinances.
What is an impound account?
A reserve account established and paid through your loan for your property taxes and insurance. The amounts are collected with your monthly mortgage payment and are set aside in an “impound/escrow account”. Your lender will pay your taxes and insurance when they become due and payable. Lenders will require you to keep at least 2 months cushion in this account at all times.
Who determines what type of insurance I need for the property?
A Mortgage Lender. Depending on whether you are located in a fire and/or flood area will determine what they will require. It is strongly advised that you confirm with your lender what type of insurance will be required in advance so that you have time to shop around for a policy that fits your needs. Lenders will require evidence of insurance urgently through escrow so it is very important you are prepared for that phone call as to who you will obtain the policy with.
What is an APN#?
Accessors Parcel Number. A ten digit number used by the Assessor’s Office to identify your property. You APN number can be found on your tax bill or the Deed you received from the county after you purchased your home.
What is Documentary transfer tax?
A tax charged and collected by the County and/or City the property is located. This tax is calculated based on the total sales price multiplied by a pre-determined factor per thousand of the sales price. These funds are collected to pay for community infrastructure such as libraries and road maintenance.
What is the difference between Pre-Loan Approval / Conditional Loan Approval / Final Loan Approval?
- Pre-loan approval: “based on your credit score and income to debt ratio, we think you qualify for a loan”
- Conditional loan approval: “we have reviewed your application and we want to give you a loan but need the following items first”
- Final Loan Approval: “we are ready to give you the loan now, get ready to sign”
From whom do I get a copy of my appraisal?
Your Lender should provide you with a copy of the appraisal report before you close escrow.
What is a preliminary title report?
A report consisting of the results of a search of the public record of the property in question. The items referenced in the preliminary title report usually consist of current property taxes, easements for access (walkways), utility easements (telephone poles) and any mortgages, judgements or liens that would need to be cleared up at closing.
What is an earnest money deposit?
The initial deposit provided by buyer to open an escrow. These funds are applied toward the total consideration (purchase price) at closing.
How is it determined if I will have Real Estate Withholding?
If you are selling your property, a Franchise Tax Board form (593) Real Estate Withhold Certificate will come to you with your initial paperwork from escrow. This form asks questions that will qualify whether or not it is necessary to send a portion of your sale proceeds to the Franchise Tax Board as prepayment of income taxes. NOTE: If you are selling your primary residence, you have lived in the home 2 out of the last 5 years, you are doing a 1031 tax deferred exchange or are subject to a loss, you will not be subject to real estate withholding.
After escrow closes, what documentation will I get to show I am owner? When should I expect it?
Once your escrow closes you will receive a closing package consisting of your final closing statement, a copy of your insurance policy and other documents that were held for you through the course of the transaction. The County Recorder’s Office will send the Deed direct to you. (typically 6-8 weeks after escrow closes).
What do I do if I don’t have an agent but I have a buyer to buy my property?
Although we suggest you seek professional advice, we also handle “For sale by Owner” transactions and would be happy to walk you through the process. Call us for more info.
How can I help make the transaction smooth?
Be Patient. Be Available. The Real Estate Industry has changed dramatically over the past couple of years. Between short sale transactions and bank requirements of a new loan, we are dealing with something new every day. All of us work very diligently to close your transaction very smoothly and quickly. In todays market, banks will require review of your file 2-4 times before they ultimately say yes, and they may require additional items prior to. You being proactive, available and cooperative will make the difference in a good experience vs bad.
1031 Exchange Q&A
Newhall Escrow prides itself in being a proactive, aggressively involved company. Our diverse experience allows for both rational and creative solutions to escrow/title problems in even the highest profile and most complex transactions.
Why do I need a qualified intermediary?
A Qualified Intermediary is necessary to create the exchange of properties required under Section 1031. The Exchange Accomodator accepts the transfer of your property, conveying it to a buyer, taking custody of the proceeds, buying the replacement property, and transferring title to you. It is a sensitive role requiring experience, special knowledge, and extreme care to preserve the tax-deferred character of the transaction.
What characteristics should my advisors and I look for in selecting a qualified intermediary?
Experience, financial stability, and customer satisfaction are factors that you should consider.
What happens if I change my mind about buying a replacement property and want to cancel my exchange?
If you transfer the relinquished property and do not replace it with another, the sale will create a taxable event and any capital gain will be subject to federal and state capital gains taxes. Additionally, if you decide to cancel your exchange after the accommodator receives the exchange proceeds, certain restrictions apply to all Qualified Intermediaries that limit access to those proceeds until certain time periods have elapsed.
Do I need to do a tax-deferred exchange for my personal residence?
No, your principal residence is not considered property held “for productive use in a trade or business” or “for investment,” and therefore, does not meet the requirements of Section 1031. However, Internal Revenue Code Section 121 allows an individual to exclude from taxation up to $250,000 of the capital gain realized on the sale of the individual’s principal residence. A married couple filing jointly can exclude up to $500,000. Section 121 has certain requirements that must be met.
Can anyone serve as a qualified intermediary?
No, there are certain persons who may not act as your Qualified Intermediary. Generally, these include certain relatives, or someone who, within a two-year period prior to your exchange, has acted as your attorney, accountant, real estate broker, or agent.
If selecting a qualified intermediary, do I still need a legal or tax advisor?
Qualified Intermediaries are appointed to carry out the exchange and prepare the necessary documentation for tax deferral, but we are precluded from counseling you on the desirability or tax implications of an exchange.
How do I identify replacement property?
The identification of replacement property must be submitted in writing, unambiguously described, signed by you, and delivered or sent before midnight of the 45th day.
What happens if I sell a property and then decide I want to make it a part of a tax-deferred exchange?
If you actually or constructively received proceeds from the sale, it might not be possible to include that property in a tax-deferred exchange. That’s why it’s important to note your intention to make this transaction part of a tax-deferred exchange in the contract to sell the relinquished property. If you have entered into a contract to sell, but have not closed, it may be possible to carry out a deferred exchange, provided you execute the proper exchange documents, identify the replacement property within 45 days of the closing, and actually receive it within 180 days or before your tax return is due. Your attorney or tax advisor can help you to make that determination.
What is Boot?
“Boot” can be cash received from the sale of the relinquished property or other non-cash consideration, including any property that is not “like-kind,” promissory notes, or debt relief (mortgage boot). If you receive boot in an exchange, it is likely that all or some portion of the boot will be taxed.