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Escrow and Escrow Companies

Various Ways to Hold Title

What is Title Insurance?

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ESCROW AND ESCROW COMPANIES

Buying or selling a home (or other piece of real property) usually involves the transfer of large sums of money. It is imperative that the transfer of these funds and related documents from one party to another be handled in a neutral, secure and knowledgeable manner. For the protection of buyer, seller and lender, the escrow process was developed.

As a buyer or seller, you want to be certain all conditions of sale have been met before property and money change hands. The technical definition of an escrow is a transaction where one party engaged in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder. This third person holds the money or items for disbursement upon the happening of a specified event or the performance of a specified condition.

Simply stated, the escrow holder impartially carries out the written instructions given by the principals. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon the successful completion of the escrow.

The escrow must be provided with the necessary information to close the transaction. This may include loan documents, tax statements, fire and other insurance policies, title insurance policies, terms of sale and any seller-assisted financing, and requests for payment for various services to be paid out of escrow funds.

If the transaction is dependent on arranging new financing, it is the buyer's or his agent's responsibility to make the necessary arrangements. Documentation of the new loan agreement must be in the hands of the escrow holder before the transfer of property can take place. A real estate agent can help identify appropriate lending institutions.

When all the instructions in the escrow have been carried out , the closing can take place. At this time, all outstanding funds are collected and fees, such as title insurance premiums, real estate commissions, termite inspection charges are paid. Title to the property is then transferred under the terms of the escrow instructions and appropriate title insurance is issued.

Payment of funds at the close of escrow should be in the form acceptable to the escrow, since out of town and personal checks can cause days of delay in processing the transaction.

The following items represent a typical list of what an escrow holder does and does not do.

THE ESCROW HOLDER DOES:

• Serves as the neutral "stakeholder" and the communications link to all parties in the transaction;
• prepares escrow instructions;
• requests a preliminary title search to determine the present condition of title to the property;
• requests a beneficiary's statement if debt or obligation is to be taken over by the buyer;
• Complies with fender's requirements, specified in the escrow agreement;
• receives purchase funds from the buyer;
• prepares or secures the deed or other documents related to escrow;
• prorates taxes, interest, insurance and rents according to instructions;
• secures releases of all contingencies or other conditions as imposed on any particular escrow;
• records deeds and any other documents as instructed;
• requests issuance of the title insurance policy;
• closes escrow when all of the instructions of buyer and seller have been carried out;
• disburses funds as authorized by instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs;
• prepares final statements for the parties accounting for the disposition of all funds deposited in escrow. (These are useful in the preparation of tax returns.)

  THE ESCROW HOLDER DOES NOT:

• Offer legal advice;
• negotiate the transaction;
• offer investment advice. The Maverick Company will be happy to provide additional information upon request.

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  UNDERSTANDING COMMON WAYS OF HOLDING TITLE

  How should I take ownership of the property I am buying?

  This important question is one California real property purchasers ask their real estate, escrow and title professionals every day. Unfortunately, though these professionals may identify the many methods of owning property, they may not recommend a specific form of ownership, as doing so would constitute practicing law.

  Because real property has become increasingly more valuable, the question of how parties take ownership of their property has gained greater importance. The form of ownership taken, the vesting of title, will determine who may sign various documents involving the property and future rights of the parties to the transaction. These rights involve such matters as: real property taxes, income taxes, inheritance and gift taxes, transferability of title and exposure to creditor's claims. Also, how title is vested can have significant probate implications in the event of death.

  The California Land Title Association (CLTA) advises those purchasing real property to give careful consideration to the manner in which title will be held. Buyers may wish to consult legal counsel to determine the most advantageous form of ownership for their particular situation, especially in cases of multiple owners of a single property.

  The CLTA has provided the following definitions of common vestings as an informational overview. Consumers should not rely on these as legal definitions. The Association urges real property purchasers to carefully consider their titling decision prior to closing, and to seek counsel should they be unfamiliar with the most suitable ownership choice for their particular situation.

  COMMON METHODS OF HOLDING TITLE

  SOLE OWNERSHIP

  Sole ownership may be described as ownership by an individual or other entity capable of acquiring title. Examples of common vestings in cases of sole ownership are:

  1. A Single Man / Woman:

  A man or woman who has not been legally married.

  (Bruce Buyer, a single man)

  2. An Unmarried Man / Woman:

  A man or woman who was previously married and is now legally divorced.
  (Sally Seller, an unmarried woman)

  3. A Married Man/Woman as His/Her Sole and Separate Property:

  A married man or woman who wishes to acquire title in his or her name alone.

  The title company insuring title will require the spouse of the married man or woman acquiring title to specifically disclaim or relinquish his or her right, title and interest to the property. This establishes that it is the desire of both spouses that title to the property be granted to one spouse as that spouse's sole and separate property.

  (Bruce Buyer, a married man, as his sole and separate property)

  CO-OWNERSHIP

  - - - Title to property owned by two or more persons may be vested in the following forms:

  1. Community Property:

  A form of vesting title to property owned by husband and wife during their marriage which they intend to own together. Community property is distinguished from separate property, which is property acquired before marriage, by separate gift or bequest, after legal separation, or which is agreed to be owned only by one spouse.

  In California, real property conveyed to a married man or woman is presumed to be community property, unless otherwise stated. Since all such property is owned equally, husband and wife must sign all agreements and documents of transfer. Under community property, either spouse has the right to dispose of one half of the community property, including transfers by will.

  (Bruce Buyer and Barbara Buyer, Husband and wife as community property)

  2. Joint Tenancy:

  A form of vesting title to property owned by two or more persons, who may or may not be married, in equal interest, subject to the right of survivorship in the surviving joint tenant(s). Title must have been acquired at the same time, by the same conveyance, and the document must expressly declare the intention to create a joint tenancy estate. When a joint tenant dies, title to the property is automatically conveyed by operation of law to the surviving joint tenant (s). Therefore, joint tenancy property is not subject to disposition by will.

  (Bruce Buyer and Barbara Buyer. husband and wife as joint tenants)

  3. Tenancy in Common:

  A form of vesting title to property owned by any two or more individuals in undivided fractional interests. These fractional interests may be unequal in quantity or duration and may arise at different times. Each tenant in common owns a share of the property, is entitled to a comparable portion of the income from the property and must bear an equivalent share of expenses. Each co-tenant may sell, lease or will to his/her heir that share of the property belonging to him/her.

  (Bruce Buyer, a single man, as to an undivided 3/4 interest and Penny Purchaser, a single woman, as to an undivided 1/4 interest, as tenants in common)

  Other ways of vesting title include as:

  1. A Corporation*:

  A corporation is a legal entity, created under state law, consisting of one or more shareholders but regarded under law as having an existence and personality separate from such shareholders.

  2. A Partnership*:

  A partnership is an association of two or more persons who can carry on business for profit as co-owners, as governed by the Uniform Partnership Act. A partnership may hold title to real property in the name of the partnership.

  3. A Trust*:

  A trust is an arrangement whereby legal title to property is transferred by the grantor to a person called a trustee, to be held and managed by that person for the benefit of the people specified in the trust agreement, called the beneficiaries.

  *In case of corporate, partnership or trust ownership the title company will require that it be furnished legal documents so that it may satisfy itself as to ownership rights of the parties to the transaction and any limitations which may exist on the sale, transferor encumbrance of the property. Required documents may include corporate articles and bylaws, certificate of partnership and trust agreements.

  Remember:
  How title is vested has important legal consequences. You may wish to consult an attorney to determine the most advantageous form of ownership for your particular situation.

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  WHAT IS TITLE INSURANCE?

  TITLE INSURANCE:

  AS A HOMEBUYER OR REAL ESTATE INVESTOR, THE TERM IS PROBABLY FAMILIAR, BUT IS IT UNDERSTOOD?
  WHAT IS YOUR DOLLAR ACTUALLY PAYING FOR WHEN YOU PURCHASE A TITLE POLICY?

  It's a term we hear and see frequently - we see reference to it in the Sunday real estate section, in advertisements, in conversations with real estate brokers. If you've purchased a home before, you're probably familiar with the benefits and procedures of title insurance. But if this is your first real estate transaction, you may wonder, "Why do I need another insurance policy? It's just one more bill to pay."

  The answer is simple: The purchase of a home or land investment is most likely one of the most expensive and important purchases you will ever make. You and your mortgage lender, want to make sure the property is indeed yours - lock, stock and barrel - and that no individual or government entity has any right, lien, claim or encumbrance to your property.

  Title insurance companies are in business to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly and that your interests as a property buyer are protected to the maximum degree.

  Title insurance companies provide services to buyers, sellers, real estate developers, builders, mortgage lenders and others who have an interest in a real estate transfer. Title companies routinely issue two types of policies - "owner's," which covers you, the buyer; and "lender's," which covers the bank, savings and loan or other lenders over the life of the loan. Both are issued at the time of purchase for a modest, one-time premium.

  Before issuing a policy, however, the title company performs an extensive search of relevant public records to determine if anyone other than you has an interest in the property. The search may be performed by title company personnel using either public records or more likely, information gathered, reorganized and indexed in the company's "title plant."

  With such a thorough examination of records, any title problems usually can be found and cleared up prior to your purchase of the property. Once a title policy is issued, if for some reason any claim which is covered under your title policy is ever filed against your property, the title company will pay the legal fees involved in defense of your rights, as well as any covered loss arising from a valid claim. That protection, which is in effect as long as you or your heirs own the property, is yours for a one - time premium paid at the time of purchase.

  The fact that title companies work to eliminate risks before they develop, makes title insurance decidedly different from other of insurance you may have purchased. Most forms of insurance assume risks by providing financial protection through a pooling of risks for losses arising from an unforeseen event, say a fire, theft or accident. The purpose of title insurance, on the other hand, is to eliminate risks and prevent losses caused by defects in title that happened in the past. Risks are examined and mitigated before property changes hands.

  This risk elimination has benefits to both you, the purchaser, and the title company: it minimizes the chances adverse claims might be raised, and by so doing reduces the number of claims that have to be defended or satisfied. This keeps costs down for the title company and your title premiums low.

  Investing in land or buying a home is a big step - emotionally and financially. With title insurance you are assured that any valid claim against your property will be borne by the title company, and that the odds of a claim being filed are slim indeed.

  19250 Highway 18 Apple Valley California 92307	Phone: 760-242-2306 Fax: 760-242-1157 mavco@www-ware.com