Title & Escrow Archives - The Phoenix Real Estate Guy

What Happens in Escrow When Buying a Home?

April 7, 2015 By Bill Risser

What Happens in Escrow When Buying a Home

Buying a home is an exciting time, but the steps you need to take to finalize your transaction can sometimes be confusing or even frustrating. The safe and efficient transfer of real estate involves a number of steps. Title searches are performed, inspections and appraisals normally take place, a variety of documents are prepared and signed, and the actual transfer of funds is organized and completed. In addition, issues that might arise during the process are addressed and resolved. This activity then leads to the closing.

The first step in determining which home you will buy is to find a REALTOR and lender to help you estimate what you can afford and ensure you have the cash for a down payment and closing costs. Once you determine your budget, find your dream house and have your offer accepted by the seller, the countdown to the closing begins. Timing is crucial in a home closing. You can shop around to select a settlement agent to handle all of the closing details, or you can ask your real estate professionals for a recommendation. Once you’ve selected a title company and escrow officer, he or she will direct the closing process.

The Escrow Process

Now, all of the behind-the-scenes work starts. A title professional will search and examine the public records for information related to the title of your prospective home. This search provides information about liens or debts of the current owner and can identify warnings of title flaws that should be resolved before the property can change hands.

After resolving any title “clouds,” the escrow officer is ready to prepare the closing documents, which outline the fees associated with the closing for both the buyer and seller.

By the time you are ready for your closing day, all of the behind-the-scenes work has been completed. Your escrow officer will help explain the content of many of the documents you will then sign. Once the signing is completed and the proper documents are recorded, the house is legally yours!

After closing, while you’re unpacking boxes, the escrow officer sends the funds to pay off the seller’s lender, gives the seller their proceeds check, and disburses checks to all of the parties who provided services in connection with your closing.

Generally, you don’t have to be involved in any of this because your escrow officer coordinates everything.

In our next installment, we will cover how title insurance protects your investment, or, in other words, your new home.

The Hectic Last Days of an Escrow

July 20, 2012 By Bill Risser

A post on Facebook prompted me to compose this post.

Yep, Facebook.

Although I am now VP – New Media and Education for Chicago Title Agency, in my recent past I managed a branch operation for the company for ten years. During those ten years, I witnessed thousands of different HLDE’s (Hectic Last Days of Escrow). A quick disclaimer ”“ I am writing about residential real estate transactions in Arizona. Each state has their own rules.

It is important to note that 90% of the work on an escrow file occurs in the first few days after opening and in the last few days before recordation. There is calmness to a file a couple weeks out from closing. It would be great if this work could be evenly spread throughout the escrow period, but like the excitement of an NBA regular season game, it all happens in the last two minutes. Or for escrow, in the HLDE.

There is no way to change this. Arrival of the loan documents signals the HLDE. In a perfect world, the loan documents arrive 3 days prior (or better yet, earlier) to close of escrow. This is required in the AAR Residential Purchase Contract. Unfortunately, circumstances arise that delay delivery of the loan documents to escrow a large percentage of the time. Please note that the lender is not always responsible for these delays. The number one culprit is the borrower. They need to get documentation to their lender quickly.

(Sidebar ”“ If you are a lender that delivers loan documents 100% of the time to escrow on time, scream that message from the top of every brokerage in the valley!)

The delayed arrival of the loan package to escrow guarantees a more tension filled HLDE. It can’t be helped. The buyer wants to move into the house. The seller (or bank in the case of a short sale) wants their proceeds. Both agents want to close so they can be paid. Same for the lender. And all this pressure reverts to the escrow officer. By the way, escrow officers are paid to handle this type of pressure. Some are very good at it. In fact, a few are so exceptional, agents and lenders never know how much stress they are under. These are the superstars. If you find one, hold on to that escrow officer.

My reason for picking this topic for this post is to let you know what happens during the HLDE. I also want to suggest one tiny edit to a phrase uttered by loan officers all over the valley every day that can help reduce the stress and tension of most HLDE. I’ll get to that sentence in a minute. First, the HLDE timeline.

Upon arrival of the loan package, the escrow officer must read the entire set of loan instructions. These vary for each lender, and can be anywhere from 4 to 25 pages long. Escrow officers must follow these instructions to the letter, because if they don’t, the lender can file a claim on their ALTA policy and seek the entire amount of the loan. This happens more than you think.

After reading the instructions, the escrow officer prepares the pre-audit, or preliminary HUD-1. This is then sent to the lender, buyer agent and listing agent for approval. This is an important step. Everyone needs to approve the numbers. Once approved, the buyers and sellers are scheduled for signings. By the way, by lender I mean the funding department or document department, not the loan officer.

Once the signatures are obtained, the loan package is prepared per the lender’s instructions and either scanned or delivered for funding. Escrow also prepares a recording package with all the recordable documents as well as instructions for the title department regarding recordation of the file. (I just used recording in one form or another three times in one sentence! Awesome!)

After reviewing the loan package to make sure escrow complied with their instructions, the lender ( once again, not the loan officer) either calls or emails a funding approval to the escrow officer. Funding is not to be confused with the receipt of the lenders funds. Funding is simply the funder and escrow officer agreeing on the amount the lender will be forwarding to escrow. The funder then requests a wire to be sent to escrow, and upon receipt of the wire, the escrow officer instructs the title department to record the file with the County Recorder. Whew! Buyer now gets the keys and seller gets the proceeds!

As you can see, a lot of work is crammed into just a few hours of a typical thirty day escrow. Combine that with the fact that a good escrow officer closes between 30-50 files a month and you can see why I’ve called it HLDE. I do, however, have an idea or two that can help ease the tension associated with HLDE. It involves setting expectations properly.

Here is my idea: (excuse me while I climb my soapbox)

Nearly every lender will call the buyer agent (and usually the listing agent) as soon as docs are delivered to escrow. They usually say something like “The loan docs are at title”, or maybe “The docs are now at title so we can get buyers in to sign.” While both of these statements are true, I feel they are incomplete. We learned above that a lot of prep and approval is needed before escrow can schedule a signing. My mission is to get lenders valley-wide to append their phone call in the following way. “Loan docs are at title, so in a couple hours or so you should be receiving a pre audit to review and approve so we can get the buyers in to sign. We are expecting one as well, so we will make sure everything is good to go.” As I mentioned before, it’s all about setting expectations. Reasonable expectations.

I will try not to sound like a grumpy old man, but that is getting more and more difficult (probably has something to do with me getting older). Countless times in my branch we would receive docs at 4:45 in the afternoon and the lender would insist on the buyer coming in at 5pm to sign. Really? This is the most important financial transaction in our client’s lives and we are supposed to rush through the prep process? I don’t see how we are serving the clients interest when we do that. As a branch manager, I’ve done many things to get a deal closed. Drive to Marana to get signatures from an inmate. Memorize all the FEDEX pickup times from Mesa to Sky Harbor. Meet a client for signatures in the hospital. And I know many other escrow officers that have done the same types of things. However, rushing through the prep process while clients wait in the lobby is just not good business.

So, in closing, let’s consider my request. Let’s all work together to make sure our buyers and sellers are taken care of professionally. Let’s work on setting each other up for success, which will lead to future successes. And while we’re at it, we can ratchet down the stress of the dreaded HLDE just a bit”¦

Photo Credit

What can Title Companies do for Real Estate Agents? (and brokerages)

May 10, 2011 By Jay Thompson

As real estate professionals, one of our primary “partners” in every real estate transaction is a title company (along with lenders, appraisers, inspectors, stagers, landscapers, plumbers”, Visit Here for more professionals.

I was recently asked by a title company representative, “What is the most important thing a title company can do for you, a real estate broker?”

My response was simple:

Communicate.

Ask a home buyer or seller what is the most important thing their agent can do for them, and I bet you’ll find Communicate at or near the top of the list.

Communication is key in this business.

The Escrow Process

There are a TON of steps in the escrow process that have to be completed ”“ sometimes in a specific order, sometimes things can be done in parallel ”“ for a real estate transaction to close. It is important for the agent, and to a lesser extent the agent’s broker, to know when these steps are initiated and/or completed.

As such, communicating with the real estate agent is crucial for any title company. Some title companies communicate very well. Others”¦. let us just say, “not-so-much.”

Recently, First American Title company developed “myFirstAm”, and online tool that agents and brokers can use to search for property information, open escrow, calculate title and escrow fees and create “estimated cost sheets” for their clients. First American isn’t the first title company to do this, most major title companies provide some of these services. What puts myFirstAm ahead of their competition, as far as I can see, is the ability of this system to send text messages and/or emails when title and escrow processes are initiated and completed. The agent, the broker, and even the client can be set up to get all these notifications, or a user-definable subset of the services.

I was fortunate to be able to provide some input into this system prior to launch, and to help beta test it, and it really does solve the problem of communicating between title and agent/client. Gone are the sometimes incessant phone calls between agent and escrow officer. “Where’s the preliminary title report?” “Do you have loan docs yet?” “Are the buyer/seller scheduled to sign?” “Has the loan funded?” Blah blah blah. Answers to those questions, and more, are swift, accessible and fully automated.

Now, I have no idea who difficult this system is to use from the escrow officer’s perspective. To be blunt, I don’t really care ”“ that’s their problem. Where I do care is how easy the system is to use from an agents perspective. And myFirstAm has that covered. It’s a powerful, but simple and user-friendly system.

Enough about that”¦

This post wasn’t intended to be a review of myFirstAm (though it headed down that path). I am curious as to what other title companies have an all-inclusive product like this? Not just “ordering escrow” online, but also a system to monitor, track and receive process updates via text and email. Are there others? What I’d really love to see here is a discussion about what title companies can do to improve their service to agents, and agent’s clients. Do we even agree that communication is the key component for a title company? (I’m assuming here that their title insurance products and related services are worthy, with competitive rates).

I know a LOT of people in the title business. Some of you are reading this right now. I know you are, so don’t be shy! Agents, here’s an opportunity to chime in with what you’d like to see a title company offer. How can a title company help you? Real estate buyers and sellers ”“ you’re welcome to participate too!

Please don’t bash any company or individual by name, this isn’t the place for that. But an open honest discussion would be interesting to have.

Go!

Disclosure: I was not compensated by First American for beta testing, participating in the myFirstAm focus groups, or for writing this post. Well, I did get a sandwich and a pen for being on the focus group. But other than that, no compensation was requested nor delivered.

Photo Credit: Last Conversation Piece by Cliff1066 on Flickr. CC Licensed.

Why Do You Need Title Insurance? In Plain English

July 1, 2010 By Bill Risser

Why do you need title insurance? It’s the second most asked question in our office. The most asked question is – When do we get the keys? That was discussed in an earlier post here at TPREG.com.

Let’s start with the official definition for title insurance. From www.ctic.com, we have the following:

Title Insurance ”“ Assurance of indemnification for loss occasioned by defects in the title to real property or to an interest therein which is insured.

Huh? Clear as mud, right?

Let’s get away from the legalese and talk in plain English. Title insurance is an insurance policy. It is different from other forms of insurance. Automobile insurance, for example, protects you from some “future” event, be it a fender bender or theft of the car. Title Insurance also protects you from some future event, like a claim or loss due to a title issue. The difference is that these issues were caused by a past event. The event causing the claim occurred prior to your purchase of the property.

Another big difference from other insurances you may carry is that title insurance on your real property is a one-time premium. There is no annual premium to keep the policy in effect. It covers your real property as long as you or your heirs own retain an interest in the property.

Let’s go back to our original question. Why do you need title insurance? The easiest answer is to protect what is probably the biggest and most important investment you will ever make.

What sorts of issues are covered? Here’s a short list of some of the more common risks that can cause a loss or encumbrance of title:

False Impersonation
Forged Deeds
Fraud
Undisclosed or missing heirs
Deeds by persons purported to be single when actually married
Liens for unpaid inheritance, income, or estate taxes

What happens if any of these defects or hidden risks are discovered? Title insurance covers the cost of defending any lawsuit against your title as insured. It will also rectify any issues discovered, or pay any losses for the insured. According to experts from Lowered Rates, it is important to understand that these claims can arise from a past event that could not be discovered in a public record search. Therein (oops, legal word) lies the true value of title insurance.

So the answer is simple. You need title insurance because it provides peace of mind in knowing that the property you are buying and the investment you are making is a safe one.

One last bit of legal-speak. Please be aware that this post is designed to be introductory and educational only. It is not to be construed as a statement of duties, liabilities or coverages.

About the Author: Bill Risser is an Assistant Vice President and Branch Manager of the Chicago Title ”“ Gilbert office. You can find him at CT-Gilbert.com and on Twitter at @billrisser, that is, when he’s not on a local golf course with his son, at the movies with his wife, or tending to one of his four fantasy leagues (NFL, MLB, PGA, and NASCAR).

So, When Do We Get The Keys?

May 7, 2010 By Bill Risser

It’s the most asked question after the buyers sign their loan package.

So, when do we get the keys?

They may be buying their retirement home in one of the 55 plus communities in the area or it could be a first time home buyer. It doesn’t matter. They all want to know the answer to that question.

The official answer is “In Arizona, the property transfers or conveys upon recordation of the deed with the County Recorder.” This official answer doesn’t really help the buyer. They want to know how long it will take to complete the transaction so they can get the keys.

With so many people relocating to the area from other states, we get lots of questions about the transfer of ownership. The first thing we recommend is to get fast and reliable valuations for stamp duty for smoother transactions. In some states, everyone attends the closing. Buyer, Seller, Agents, Lender, Attorneys, and Escrow are all at the same table. In these states, the buyer leaves the closing with keys in hand. That is never the case in Arizona. We schedule the buyer and seller for separate appointments. As mentioned in a previous post, sometimes the agent and/or lender attend, but most of the time, they don’t. And nearly every time, the buyer asks the question: When do we get the keys?

So what happens after the documents have been signed? I’ve personally signed thousands of buyers in my career, and after they finish and leave the office (hopefully with their agent and/or lender) the same scene usually occurs outside my office window. Handshakes, hugs, high fives or fist bumps are exchanged between the buyers and the agent and/or lender. I never get tired of watching this celebration, especially when it’s a first time buyer. OK, enough with the warm and fuzzies, it’s time for us to get this thing funded and recorded”¦

Here’s what happens from the escrow point of view after the signing:

The loan documents are packaged per the lenders instructions. Copies of recordable documents are made and certain items are included in the funding package to the lender.

Roughly ½ the lenders require the loan documents be returned for review prior to funding. If this is the case, the loan docs are either couriered or over-nighted to the lender.

If the documents are not required for funding, the lender usually needs a few key documents faxed in order to fund.

The recording package, consisting of at least the deed, Affidavit of Property Value, and the deed of trust is prepared and couriered to the recording desk.

The Escrow Officer now waits for contact from the lender for any final conditions or documents the lender may need to fund the loan.

When all conditions are met, the lender and Escrow Officer compare figures and agree to the amount of the loan funding.

Escrow waits for the receipt of the funds, usually via wire transfer.

Upon receipt of the wire, the Escrow Office releases the file for recording.

The Title Officer in charge of the file does one final review of the file for any liens or issues that may have occurred since the issuance of the Preliminary Title Report.

Upon the Title Officers’ approval, the recording desk scans the documents into the county system, and receives confirmation of recordation. This is immediately forwarded via e-mail to escrow.

The normal timeline from signing of the loan package to recordation is generally 24 hours or so. If the lender funds by fax, same day recordation is possible, as long as the wire can be sent to escrow. Escrow is now free to call both agents and let them know the file has recorded.

Now, they get the keys!

It’s a long answer to a simple question. Hopefully this glimpse behind the scenes makes sense… If it doesn’t, leave a comment below.

What Happens in Escrow When Buying a Home?

The Hectic Last Days of an Escrow

What can Title Companies do for Real Estate Agents? (and brokerages)

Why Do You Need Title Insurance? In Plain English

So, When Do We Get The Keys?

Who is The Phoenix Real Estate Guy?

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