Understanding Forbearance in Escrow

Due to the 2020 pandemic, millions of homeowners have requested a forbearance plan from their loan servicer. Under the Coronavirus Aid, Relief, and Economic Security Act (CARES) homeowners were given the option to suspend their mortgage payments by entering into a forbearance agreement with their loan servicer if they have a federally backed mortgage.

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Pre-Sale Inspection Reports

Cities in California that Require Building Reports

The cities shown below mandate a variety of prerequisites for the sale or transfer of real estate. These may include specific inspections, fees or taxes. They may also include mandated low-flow toilets, water heater strapping or mandatory affordable housing waivers. Be aware of the requirements in the city in which you are considering buying or selling a property. If you have questions, contact the particular city’s building and safety department.

Click Pre-Sale Inspection Reports to download a pdf version of this report.

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Click Pre-Sale Inspection Reports to download a pdf version of this report.

Property Taxes: Understanding Escrow

Perhaps one of the most confusing aspects of dealing with real estate is the taxes. Taxes can be addressed in several ways in your escrow. If you are obtaining a new loan, the lender may require tax impounds and tax service. If you are involved in a purchase, the seller may require a tax proration. There may be taxes to be paid based on delinquent or current tax bills. Your escrow instructions may contain a disclosure and release regarding future supplemental taxes. Below is a review of each of these aspects of taxes

Taxes to Be Paid

The fiscal tax year commences on July 1st of each year, BUT liens for that tax year begin on the preceding March 1st. This means that every property in the state subject to taxes automatically has a tax lien on it commencing March 1st of each year for the coming fiscal year. The end of each fiscal year is the following  June 30th. Taxes are payable in two installments (although you have the option to pay them in full when you pay the first installment,) with the first installment due on November 1stand delinquent after December 10th; the second installment is due and payable on February 1st of each year and delinquent after April10th of each year. NOTE: If the tenth falls on a Saturday or Sunday, the delinquent date is extended until 5:00 p.m. of the next business day.

Tax Impounds

The lender may collect taxes monthly with the loan payment. The amount is equivalent to 1/12th of the projected tax payment due annually. At closing, the lender calculates the number of payments that they need to be in receipt of at the time the next tax installment is due. Then, at closing, they collect the necessary monthly taxes to ensure that when the taxes become due they are in receipt of a minimum of six months of tax payments.  Each lender differs slightly on their calculation; therefore, it is important to check with your lender regarding the formula they use.

Tax Service Fee

Since in the majority of cases the tax bill is mailed to the taxpayer and not the lender, the lender will secure the help of a tax service company. The tax service company notifies the lender if borrowers do not keep their property taxes current. This helps lenders protect their access to collateral if a borrower defaults.

Tax Prorations

At closing, if required, the escrow agent will determine what portion of the next tax installment is the seller’s responsibility; they will then charge the seller and credit the buyer with said amount. When the next installment is due, the buyer will pay the total amount since the buyer was reimbursed the seller’s portion at closing. Likewise, if the seller has prepaid his taxes, then the portion that he has prepaid will be charged to the buyer and credited to the seller.

Supplemental Taxes

Due to “Proposition 13” after a property has been assessed(as of March 1st of each year) and a property transfers, the law provides for an increase of the tax basis of the property based upon the sales price. The difference between that year’s tax base and the increase caused by the sale, if any, is charged to the buyer. For instance, if a property is valued at $275,000 on March 1st of the taxable year and is sold during the year for $327,000, the increase in the tax bill as a result of the sale and subsequent reevaluation will be separately billed to the new buyer for that portion of the fiscal tax year that they owned the property. If the property transfers more than once during the tax year there may be multiple supplemental tax bills to each new owner if the sales represent increases in value.

If taxes are impounded, the buyer is advised to notify his loan servicer of the supplemental tax bill. The servicer will then advise the borrower whether he is responsible for the payment of that bill or alternatively if the servicer will pay that bill.

What is the Difference…Between “Signing” and “Closing?”

When it comes to real estate transactions and escrow, the terms “signing” and “closing” are often used interchangeably and with some degree of confusion. There are however a few key steps in between these two important moments in a transaction. Check out the following information to fully understand the important differences in preparation for the official closing.

PREPARING FOR SIGNING

CD2 Before the signing appointment, your escrow team will receive instructions to prepare an official “Closing Disclosure” in order to review and approve all terms of the transaction. The buyer/borrower will then review and sign for acceptance which initiates the required waiting period.

During the waiting period, your escrow team will prepare the necessary escrow and title transfer documents. After the required waiting period, the lender will send to escrow all documents required for the “signing”.

YOUR SIGNING APPOINTMENT

doc signing At your signing appointment, you will be presented with all final documents requiring signatures. You will need to have with you any required funds to close as well as an acceptable form of identification for notarization. Check with your Escrow Officer for complete details and always be sure to confirm wire instructions directly with your Escrow Officer before completing any transfer.

AFTER SIGNING: FUNDING

 Once the loan documents have been signed, the escrow officer will deliver them to the lender for review. Upon completion of all requirements and receipt of signatures, the lender will notify the escrow officer that: it is time to “release funds” to escrow – “funding”. The review is typically completed within 24 to 48 hours.

Upon receipt of the funds from the lender, the escrow officer sends the transfer documents to the county for “recording”.

PREPARATION FOR CLOSING: RECORDING

property-document-recordingOnce the lender confirms authorization for recording and all funds are received, the documents are either electronically recorded or hand-carried to the county recorder’s office by the title insurance company.

Recording numbers are unique and specific numbers given by the county recorder’s office to a properly executed legal document thereby making it part of the public record. Once a recording number is issued, the buyer is considered “on record” as the new party holding title to the property.

YOUR OFFICIAL CLOSING

When the transaction is “on record” with the county, the ownership of the property has been officially transferred to the buyer and funds are disbursed to the seller. Depending on the specified possession date agreed to within the purchase agreement, the new owner may then receive the keys to their new property and take possession.

Handing Over the House Keys in Front of a Beautiful New Home.

QUESTIONS?

 Let us know. We are always here to help and to ensure that our clients feel confident and comfortable every step of the way.

 

Computer Security 101

With recent reports of fraud targeting real estate transaction on the rise, it is now more important than ever to help protect and educate our clients. Through education and awareness, together we can help to ensure that you have the knowledge to protect yourself from the anguish and consequences of cybercrime and fraud. While there is never a fool-proof formula, there are a few simple tactics to help avoid the potential devastation of getting hacked:

Passwords

PasswordChange your username or, at least, your password(s) on a regular basis. Ensure that you select a strong password using more sophisticated tactics perhaps even deploying the use of a “password manager” to generate them for you. As our passwords have evolved, so have the systems engineered to crack the code. Today, systems built to hack passwords can attempt as many as 350 BILLION guesses per second. Choosing a password you can remember tat is still considered secure has become an art form. At the very least, be sure to utilize a combination of letters, cases, numbers and symbols and be prepared to update it regularly.

WIFI

Coffee Shop securityBe aware of unsecured public WiFi While there is no denying the convenience of public WiFi, special precautions are required to ensure that you are not susceptible to crafty hackers. Protect yourself by keeping your WiFi off when you don’t need it. Further protect yourself by turning off sharing in your system preferences or Control Panel. Enable the “https” option on websites that you visit to add an extra layer of encryption to your online activity.

PROTECT YOURSELF

relevantantivirus-keyBe sure that you have updated your system’s antivirus software or malware detection. Because cyber-threats change so quickly, it is especially important to ensure you have the latest version installed to be prepared for new attacks.

 

 

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Common Types of LIENS and JUDGMENTS

There are a number of types of judgments and liens that can attach to your client and/or their property that affect title when they sell or refinance. Many of these will remain on title for anywhere from 7-20 years or more and must be satisfied accordingly. They may be required by their lender to pay off the lien or judgment in order to close their refinance, or if they’re selling their property, a portion of the proceeds may be used in order to satisfy the lien so they can pass on a clean title to the buyer.

Below are some of the most common types you may encounter on a preliminary title report that will notify you up front if there are any that will need to be addressed throughout the transaction process.

BLANKET LIENS

Federal Tax Liens   State Tax Liens   EDD Liens   County Tax Liens

  • All above-mentioned liens have a duration of 10 years from the date recorded unless they are released.
  • The lien can be continued for successive periods and its original priority is maintained by recording and re-filing notice before the original lien expires.
  • Like judgments, these liens are blanket liens and attach themselves to ALL property belonging to the delinquent taxpayer.
  • Escrow will order the demand and the title company will manage the payment in order for the lien holder to record the release.
  • Escrow must have an IRS Power of Attorney form to obtain a demand.
  • Title will not close without a demand on federal and state tax liens.

 

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LIENS THAT ATTACH TO A SPECIFIC PROPERTY

Mechanic’s Liens   Notice of Action  (Lis Pendens, Homeowner Association Liens, & Substandard/ Abatement Liens)

Mechanic’s liens are created when a contractor/subcontractor who has done work on a specific property was not paid when the work was completed. The duration of a mechanic’s lien is 90 days from the date recorded.

The contractor can foreclose on the property on which they recorded the mechanic’s lien but must commence the action within 90 days.

A lis pendens is a notice that a court action affecting the property has been filed. This document is also used to foreclose on a property under a mechanic’s lien. This item has an unlimited duration and must be released or withdrawn. · ·

Homeowner’s liens are recorded when a person is delinquent on their association dues. There is no fixed duration associated with this lien. Escrow must get demand.

Substandard liens are recorded by the city or county. They can be for weed abatement, hazardous substances, or substandard dwellings. This lien does not have a fixed duration. Escrow must order demand in order to find out if money is owed.

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JUDGMENTS

Money Judgments  Spousal and/or Child Support Judgments

  • A money judgment has a duration of 10 years from the date the judgment is filed.
  • A spousal/child support judgment duration will extend over 10 years. Spousal support judgments will be considered until released; child support liens will be considered up to 5 years after the child reaches the age of majority.
  • A money judgment can be extended for an additional10 years when a renewal of judgment is recorded within 10 years of the original date of entry of the judgment.
  • The only judgment that has a duration of 20 years is one in favor of the United States of America, a Federal Corporation.
  • Escrow orders the demand and full or partial satisfaction from the judgment creditor. The title company pays demands at the close of escrow.

 

 

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Solar Lease Agreements

What you need to know for a successful escrow

While residential solar panel installations have increased more than 50% each year since 2012 nationwide, disputes over solar panel leases have simultaneously increased during the transfer of properties. Ensure your successful closing by considering these helpful tips and considerations for transactions involving solar panel lease agreements:

  • Be proactive: Pre-open your escrow with Fidelity National Title and use the time early in the listing or pre-listing period to be sure you completely understand the terms of the agreement as it applies to the transfer of the lease. It is better to be prepared and informed ahead of time before going into contract with a potential buyer.
  • Know your options: Address possible scenarios for handling the lease transfer well before the close of escrow (or before the official listing) to further help ensure a smooth sale process.
  • Keep your solar panel leaseholder involved: Many companies have designated specialists available and assigned to assisting buyers and sellers through the lease transfer process.
  • Check the Records: Ensure that any solar easements have been officially recorded in public records so that it is available to be noted during the title search process. Such an omission can potentially create issues for future buyers.
  • Communication is key: Ensure that your escrow officer is informed. The more information you can offer, the better. Make sure you alert your escrow team to your current lease agreement, the status of the agreement and requirements from the leaseholder.

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