Escrow Explained

TITLE Toolkit

WAYS TO TAKE TITLE IN ARIZONA

THE LIFE OF AN ESCROW

CLOSING COSTS: WHO PAYS WHAT

CRITICAL DATE LIST ESTIMATED COST SHEET - CASH ESTIMATED COST SHEET - NEW LOAN

EXPLANATION OF ESTIMATED COSTS

WAYS TO TAKE TITLE IN ARIZONA COMMUNITY PROPERTY

Requires a valid marriage between two persons.

JOINT TENANCY

COMMUNITY PROPERTY

WITH RIGHT

OF SURVIVORSHIP

Parties need not be married; may be more than two joint tenants.

Requires a valid marriage between two persons.

Parties need not be married; may be more than two tenants in common.

TENANCY IN COMMON

Each spouse holds an undivided one-half interest in the estate.

Each joint tenant holds an equal and undivided interest in the estate, unity of interest.

Each spouse holds an undivided one-half interest in the estate.

Each tenant in common holds an undivided fractional interest in the estate. Can be disproportionate, e.g.,20% and 80%; 60% and 40%; 20%, 20%, 20% and 40%; etc.

One spouse cannot partition the property by selling his or her interest.

One joint tenant can partition the property by selling his or her joint interest.

One spouse cannot partition the property by selling his or her interest.

Each tenant’s share can be conveyed, mortgaged or devised to a third party.

Requires signatures of both spouses to convey or encumber.

Requires signatures of all joint tenants to convey or encumber the whole.

Requires signatures of both spouses to convey or encumber.

Requires signatures of all tenants to convey or encumber the whole.

Each spouse can devise (will) one-half of the community property.

Estate passes to surviving joint tenants outside of probate.

Estate passes to the surviving spouse outside of probate.

Upon death the tenant’s proportionate share passes to his or her heirs by will or intestacy.

Upon death the estate of the decedent must be “cleared” through probate, afﬁdavit or adjudication.

No court action required to “clear” title upon the death of joint tenant(s).

No court action required to “clear” title upon the ﬁrst death.

Upon death the estate of the decedent must be “cleared” through probate, afﬁdavit or adjudication.

Both halves of the community property are entitled to a “stepped up” tax basis as of the date of death.

Deceased tenant’s share is entitled to a “stepped up” tax basis as of the date of death.

Both halves of the community property are entitled to a “stepped up” tax

Each share has its own tax basis.

Note: Arizona is a community property state. Property acquired by a husband and wife is presumed to be community property unless legally specified otherwise. Title may be held as “Sole and Separate.” If a married person acquires title as sole and separate, his or her spouse must execute a disclaimer deed to avoid the presumption of community property. Parties may choose to hold title in the name of an entity, e.g., a corporation; a limited liability company; a partnership (general or limited), or a trust. Each method of taking title has certain significant legal and tax consequences; therefore, you are encouraged to obtain advice from an attorney or other qualified professional.

BUYER SELECTS A REALTOR

THE LIFE OF AN

SELLER SELECTS A REALTOR

ESCROW BUYER

SELLER

PRE-APPROVED BY LENDER

PREPARES HOUSE FOR

IF NEW LOAN NEEDED

SHOWING & SELLING BUYER SELECTS HOME AND

BUYER

SUBMITS CONTRACT WITH

SELLER

LOAN STATUS REPORT (LSR)

REVIEWS & ACCEPTS CONTRACT

VIEWS HOMES WITH REALTOR

INSPECTION REPORTS SENT TO APPLICABLE PARTIES & REVIEWED. NOTIFICATION SENT

FROM BUYER

VARIOUS INSPECTIONS ORDERED

ESCROW OPENED AT

First American & TITLE COMMITMENT ORDERED

BUYER

TITLE COMMITMENT RECEIVED

APPRAISAL

& APPROVED BY BUYER

ORDERED BY & COMPLETED FOR LENDER

CLOSING DOCUMENTS

LOAN DOCUMENTS PREPARED

BUYER

COMPILED BY

BY LENDER

RECEIVES FINAL LOAN

First American

& SENT TO ESCROW

APPROVAL FROM LENDER

SEPARATE APPOINTMENTS SET: BUYER & SELLER SIGN DOCUMENTS

BUYER DEPOSITS REQUIRED FUNDS

ADVISES First American OF HOME INSURANCE COMPANY

LOAN DOCUMENTS RETURNED TO LENDER FOR REVIEW

DOCUMENTS RECORDED

LENDER “FUNDS LOAN”

First American ENSURES ALL

AND ESCROW CLOSED

(SENDS FUNDS TO ESCROW)

CONTRACT CONDITIONS MET

AFTER RECORDING CONFIRMED,

First American DISBURSES FUNDS

FINAL DOCUMENTS

BUYER

SENT TO

RECEIVES KEYS FROM REALTOR

INTERESTED PARTIES

CLOSING COSTS: WHO PAYS WHAT THIS CHART INDICATES WHO CUSTOMARILY PAYS WHAT COSTS

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39.

Downpayment

CASH

CTM

FHA

CONV

BUYER

SELLER

Termite (Wood Infestation) Inspection (negotiable except on VA) Property Inspection (if requested by Buyer)

BUYER

Property Repairs, if any (negotiable)

SELLER

New Loan Origination Fee (negotiable)

BUYER

Discount Points (negotiable)

BUYER

SELLER

BUYER

Document Preparation Fee (Charge Seller on FHA/VA)

SELLER

BUYER

Credit Report Appraisal or Extension Fee (negotiable) Interest Proration on Seller’s Existing Loan

SELLER

Existing Loan Payoff

SELLER

Existing Loan Payoff Demand

SELLER

Loan Prepayment Penalty (if any)

SELLER

BUYER

Next Month’s PITI Payment

BUYER

Prepaid Interest (approx. 30 days) Mortgage Transfer Fee

SPLIT

Reserve Account Balance (Credit Seller / Charge Buyer)

PRORATE

FHA MIP, VA Funding Fee, PMI Premium

PRORATE

BUYER

PRORATE

BUYER

SELLER

BUYER

Assessments payoff or proration (sewer, paving, etc.) Taxes

SELLER

PRORATE

Tax Impounds Tax Service Contract Fire/Hazard Insurance

BUYER

Flood Insurance Homeowners Association (HOA) Transfer Fee

SPLIT

SELLER

SPLIT

SELLER

PRORATE

BUYER

Realtors’ Commissions

SELLER

EAGLE Homeowners Title Policy

SELLER

BUYER

HOA/Disclosure Fee Current HOA Payment Next Month’s HOA Payment Home Warranty Premium (negotiable)

Lenders Title Policy and Endorsements Account Servicing Set-up Fee (negotiable)

SPLIT

Escrow Fee (NOTE: Charge Seller on VA Loan)

SPLIT

SELLER

SPLIT

Recording Fees (Flat Rate)

SPLIT

SELLER

SPLIT

SELLER

SPLIT

SELLER

SPLIT

BUYER

SELLER

BUYER

Reconveyance/Satisfaction Fee

SELLER

Courier/Express Mail Fees

SPLIT

Wire Fees

SPLIT

Email Loan Documents

Note: Prorated items will appear on Closing Statement as charges for one and credits for the other.

CRITICAL DATE LIST SELLER : ___________________________________________________________________________________________________________________ BUYER : ___________________________________________________________________________________________________________________ PROPERTY ADDRESS : _____________________________________________________________________________________________________ Escrow Company : __________________________________________

Escrow Number : __________________________________________

Escrow Officer : _____________________________________________

Fax : ______________________________________________________

Listing Agent Name : ________________________________________

Company : ________________________________________________

Phone : _____________________________________________________

Fax : ______________________________________________________

Selling Agent Name : ________________________________________

Company : ________________________________________________

Phone : _____________________________________________________

Fax : ______________________________________________________

This is a CRITICAL DATE LIST, for the transaction listed above as of this date: ____ /____ /____ . Any time this document is modiﬁed in any way copies should be sent to the Principals and Agents.

ACTION

DATE DUE

DATE DONE

N/A

____ /____ /____

Mutual Acceptance of Purchase Contract : Earnest monies deposited to escrow :

IMMEDIATELY

____ /____ /____

S.P.D.S. completed and delivered to Buyer by :

____ /____ /____

B.I.N.S.R. ( Buyers Inspection Notice & Sellers Response ) due by :

____ /____ /____

Sellers response to B.I.N.S.R. due by :

____ /____ /____

Buyer to apply for Homeowners Insurance by :

____ /____ /____

Receipt of Title Commitment/Sch. B :

____ /____ /____

Deadline for Buyer disapproval of above :

____ /____ /____

HOA documents ordered :

____ /____ /____

HOA documents received and accepted by Buyer :

____ /____ /____

In the event of low appraisal Buyer must cancel by :

____ /____ /____

Repairs ( if any ) completed no later than :

____ /____ /____

Buyers walk through inspection no later than :

____ /____ /____

Failure to qualify notice delivered by Buyer no later than :

____ /____ /____

Buyer to sign closing and loan documents no later than :

____ /____ /____

Recordation of Documents ( COE ) :

____ /____ /____

Keys Delivered :

____ /____ /____

OTHER ACTIONS REQUIRED SPECIFIC TO TRANSACTION

ACTION

DATE DUE

DATE DONE

“ADWR” Registration of Existing Well :

____ /____ /____

Septic / Alternative System Certification :

____ /____ /____

Lead Paint Disclosure :

____ /____ /____

Home Protection Plan Ordered :

____ /____ /____

Other :

____ /____ /____

CURE PERIOD ACTIVATED DATE : ____ /____ /____ REASON : __________________________________________________________________________________________________ CURE DEADLINE : ____ /____ /____

DATE CURED : ____ /____ /____

or DATE CANCELLED : ____ /____ /____

DATE : ____ /____ /____ REASON : __________________________________________________________________________________________________ CURE DEADLINE : ____ /____ /____

DATE CURED : ____ /____ /____

or DATE CANCELLED : ____ /____ /____

CLEAR FORM

E S T I M AT E D C O S T S H E E T

TYPE OF SALE

SELLER ___________________________________________________________________ CASH

NEW LOAN

FHA

CONV.

BUYER ___________________________________________________________________ Sales Price..............................

$ __________________________

Down Payment .......................

$ __________________________

PARCEL# __________________________________ TAXES $ ____________________

Loan Amount ..........................

$ __________________________

ESTIMATED COST SHEET PREPARED BY: ___________________________________

Points/Loan Serv. Fee Quote ______________________________

ADDRESS _________________________________________________________________

CASH SALE

- E S T I M AT E D C O S T S :

SELLER

BUYER

Reconveyance/Satisfaction Fee .......................................................................................

$ ____________________________

$ __________________________

Tax Proration See Note ....................................................................................................

$ ____________________________

$ __________________________

Insurance: If new; 1st year. If assumed; proration .............................................................

$ ____________________________

$ __________________________

Assessments payoff or proration (sewer, paving, etc.) .....................................................

$ ____________________________

$ __________________________

Homeowners Association Transfer Fee ............................................................................

$ ____________________________

$ __________________________

Current Homeowners Association Payment Proration ....................................................

$ ____________________________

$ __________________________

Next Month’s Homeowners Association Payment ...........................................................

$ ____________________________

$ __________________________

Termite Inspection ............................................................................................................

$ ____________________________

$ __________________________

Property Inspection ..........................................................................................................

$ ____________________________

$ __________________________

10.

Home Warranty Premium .................................................................................................

$ ____________________________

$ __________________________

11.

Owners Title Policy Based on sales price ........................................................................

$ ____________________________

$ __________________________

12.

Recording Fees ................................................................................................................

$ ____________________________

$ __________________________

13.

Escrow Fee Based on sales price ....................................................................................

$ ____________________________

$ __________________________

14.

Real Estate Commission – Listing Agent..........................................................................

$ ____________________________

$ __________________________

15.

Real Estate Commission – Selling Agent .........................................................................

$ ____________________________

$ __________________________

TOTALS:

0.00 $ ____________________________

0.00 $ __________________________

Buyer’s Approximate Monthly Payment

Estimated Proceeds to Seller

Estimated Costs to Buyer

Principal and Interest............................... $ ___________

0.00 Total Sales Price .......................... $ __________

0.00 Down Payment .............................................. $ ___________

Tax Impounds .......................................... $ ___________

Less: Current Mortgage Owed .... $ __________

0.00 Plus: Estimated Costs Above ........................ $ ___________

Fire Insurance Impounds ......................... $ ___________

0.00 Subtotal: Estimated Equity .......... $ __________

Less: Financed FHA/MIPNA Funding Fee ..... $ ___________

Flood Insurance Impounds...................... $ ___________

0.00 Less: Estimated Costs Above ..... $ __________

0.00 EST. COSTS: $ _______________________________________

PMI Impounds If Conventional loan ....... $ ___________

0.00 EST. PROCEEDS: $ _______________________ Print Form

Homeowners Association Fee................. $ ___________

0.00 EST. PAYMENT: $ _________________________________

Seller Initials _________

Date ___ / ___ / ___

Buyer Initials _________

Date ___ / ___ /

CLEAR FORM

E S T I M AT E D C O S T S H E E T

TYPE OF SALE

SELLER ___________________________________________________________________ CASH

BUYER ___________________________________________________________________ ADDRESS _________________________________________________________________ PARCEL# __________________________________ TAXES $ ____________________ ESTIMATED COST SHEET PREPARED BY: ___________________________________

NEW LOAN

FHA

CONV.

Sales Price..............................

$ __________________________

Down Payment .......................

$ __________________________

Loan Amount ..........................

$ __________________________

Points/Loan Serv. Fee Quote ______________________________ SELLER

NEW LOAN - ESTIMATED COSTS:

BUYER

1. Origination Fee 1% of base loan amount .......................................................................

$ ____________________________

$ __________________________

Discount Points _____% ...................................................................................................

$ ____________________________

$ __________________________

Credit Report ....................................................................................................................

$ ____________________________

$ __________________________

Document Preparation Fee (Charge to Seller on FHA/VA) ...............................................

$ ____________________________

$ __________________________

Appraisal or Extension Fee ...............................................................................................

$ ____________________________

$ __________________________

Interest Proration on Seller’s Loan See Note...................................................................

$ ____________________________

$ __________________________

Reconveyance/Satisfaction Fee .......................................................................................

$ ____________________________

$ __________________________

Prepaid Interest Approx. 30 days ....................................................................................

$ ____________________________

$ __________________________

FHA MIP, VA Funding Fee or PMI Premium, as applicable ..............................................

$ ____________________________

$ __________________________

10.

Tax Service Contract Never charge Buyer on VA ............................................................

$ ____________________________

$ __________________________

11.

Tax Proration See Note ....................................................................................................

$ ____________________________

$ __________________________

12.

Tax Impounds See reverse side for guideline ..................................................................

$ ____________________________

$ __________________________

13.

Fire Insurance 1st year + 2 months impounds = 14 months ...........................................

$ ____________________________

$ __________________________

14.

Flood Insurance 1st year + 2 months impounds = 14 months ........................................

$ ____________________________

$ __________________________

15.

Assessments payoff or proration (sewer, paving, etc.) .....................................................

$ ____________________________

$ __________________________

16.

Homeowners Association Transfer Fee ............................................................................

$ ____________________________

$ __________________________

17.

Current Homeowners Association Payment Proration ....................................................

$ ____________________________

$ __________________________

18.

Next Month’s Homeowners Association Payment ...........................................................

$ ____________________________

$ __________________________

19.

Termite Inspection ............................................................................................................

$ ____________________________

$ __________________________

20.

Property Inspection ..........................................................................................................

$ ____________________________

$ __________________________

21.

Home Warranty Premium .................................................................................................

$ ____________________________

$ __________________________

22.

Lenders Title Policy & Endorsements Based on loan amount .........................................

$ ____________________________

$ __________________________

23.

Owners Title Policy Based on sales price ........................................................................

$ ____________________________

$ __________________________

24.

Recording Fees ................................................................................................................

$ ____________________________

$ __________________________

25.

Escrow Fee Never charge Buyer on VA ...........................................................................

$ ____________________________

$ __________________________

26.

Real Estate Commission – Listing Agent..........................................................................

$ ____________________________

$ __________________________

27.

Real Estate Commission – Selling Agent .........................................................................

$ ____________________________

$ __________________________

28.

Endorsement ....................................................................................................................

$ ____________________________

$ __________________________

29.

Other (_____________________) ........................................................................................

$ ____________________________

$ __________________________

TOTALS:

0.00 $ ____________________________

0.00 $ __________________________

Buyer’s Approximate Monthly Payment

Estimated Proceeds to Seller

Estimated Costs to Buyer

Principal and Interest............................... $ ___________

0.00 Total Sales Price .......................... $ __________

0.00 Down Payment .............................................. $ ___________

Tax Impounds .......................................... $ ___________

Less: Current Mortgage Owed .... $ __________

0.00 Plus: Estimated Costs Above ........................ $ ___________

Fire Insurance Impounds ......................... $ ___________

0.00 Subtotal: Estimated Equity .......... $ __________

Less: Financed FHA/MIPNA Funding Fee ..... $ ___________

Flood Insurance Impounds...................... $ ___________

0.00 Less: Estimated Costs Above ..... $ __________

0.00 EST. COSTS: $ _______________________________________

PMI Impounds If Conventional loan ....... $ ___________

0.00 _______________________

EST. PROCEEDS: $

Print Form

Homeowners Association Fee................. $ ___________

0.00 EST. PAYMENT: $ _________________________________

Seller Initials _________

Date ___ / ___ / ___

Buyer Initials _________

Date ___ / ___ /

E X P L A N AT I O N O F E S T I M AT E D C O S T S

APPRAISAL. A fee charged by an appraiser to render an opinion of market value as of a speciﬁc date. Required by most lenders to obtain a loan.

ASSESSMENT. A lien on a property securing payment, i.e., public improvements, delinquent homeowners association fees.

ASSIGNMENT FEE. A fee charged by the lender to cover the expense of the transfer of the loan.

ASSUMPTION PROCESSING FEES. All fees, including assumption, transfer and/or processing fees charged by the lender to process the records of the existing loan into the buyer’s name.

COLLECTION SET-UP FEE. A one-time fee

charged by a company acting on behalf of the lender and borrower to set up the servicing of the loan, according to the Note and mutual written instructions. May also be set up to impound for taxes/insurance. NOTE: Collection setup fees do not include annual or close-out costs.

CREDIT REPORT FEE. A fee charged by the lender to obtain the credit history of the buyer(s).

DOCUMENT PREPARATION FEE. A fee

charged by the lender for the preparation of documents necessary to fund the loan.

ESCROW FEE. A fee charged by the escrow

company as a neutral third party to carry out the procedures necessary to transfer ownership of property.

FIRE INSURANCE. The ﬁrst annual premium, plus 2 months, for ﬁre and extended coverage insurance to cover loss of the property. (Usually called Homeowners Insurance.) In the event of a condominium property, coverage for personal property (contents) may also be needed.

FLOOD INSURANCE. A form of hazard insurance

that may be required by the lender as a condition of making the loan. NOTE: Does not cover personal property.

HOME WARRANTY FEE. A fee charged by a

private company to cover speciﬁed defects. Coverage and deductibles vary with the provider and plan. Both new and resale homes may be warranted.

HOMEOWNERS ASSOCIATION TRANSFER FEE. The amount at close of escrow that is due in

payment of the Homeowners Association. The fee is charged by the Association to transfer ownership records.

INTEREST PRORATION. An estimated amount

of interest due at closing. Interest is collected in arrears and therefore must be collected from the last monthly loan payment to closing or payoff.

LENDER POLICY AND ENDORSEMENTS. An insurance premium charged by the title company to insure lender that encumbrance is a ﬁrst lien on the property. Fee based on loan amount. Refer to rate chart “Simultaneous Extended Loan Policy” rates. Lender is beneﬁciary.

LOAN DISCOUNT POINTS. A fee charged by the

lender to make a loan at a given interest rate. One point equals one percent of the total loan amount and ﬂuctuates depending on the interest rate and availability of money for loans.

LOAN PAYMENT DUE. The payment amount due from the seller at the close of escrow and/or, in the case of an assumption of the existing loan, the next payment due from the buyer. Jan. & Jul. – 5 Months

May & Nov. – 3 Months

Apr. & Oct. – 2 Months

Mar. & Sept. – 1 Month

Feb. & Aug. – 0 Months

Jun. & Dec. – 4 Months

MIP or PMI IMPOUND. An amount for MIP or PMI is required under certain circumstances and collected by the lender and held in the impound account to insure that adequate funds are available to pay the next year’s premium. Usually equivalent to 2 months of the annual premium.

MIP or PMI PREMIUM. An insurance premium to

protect the lender against loss incurred by loan default, thus enabling the lender to lend a higher percentage of the sales price. Mortgage Insurance Premium (MIP) is charged for FHA loan; Private Mortgage Insurance (PMI) is charged for Conventional loan. This is NOT credit life insurance that pays off the loan incase of death.

ORIGINATION FEE. A loan processing fee charged by the lender for originating a new loan.

E X P L A N AT I O N O F E S T I M AT E D C O S T S

OWNER’S TITLE POLICY. An insurance premium charged by the title company to insure buyer that the title is free from defects up to the date the conveying instrument is recorded. Buyer is beneﬁciary.

PAYOFF FEE. A fee charged by the lender or collection company for payoff information.

PAYOFF PENALTY. A prepayment penalty under a

Promissory Note that may be imposed by the lender when the loan is paid off before it is due.

PREPAID INTEREST. The amount of interest to

cover the period from close of escrow until the beginning of the ﬁrst payment.

PROPERTY INSPECTION FEE. A fee charged

by a private company or individual(s) to examine and report on the condition of a property. Report may or may not warrant condition.

REAL ESTATE COMMISSION. A fee paid to a

real estate broker as compensation for services rendered.

RECONVEYANCE/SATISFACTION FEE.

A fee charged by the lender to execute the Deed of Reconveyance, or Satisfaction, when the existing note is paid off.

RECORDING FEES. Fees charged by the

County Recorder’s Ofﬁce for recordation of appropriate instrument(s).

TAX IMPOUNDS. An amount for taxes required and collected by the lender/collection agent and held in the impound account to insure adequate funds are available to pay the taxes. The amount varies according to the closing month. Following is a guideline only; check with your lender:

TAX PRORATION. An amount due for taxes accrued but not yet due and payable. Taxes are generally prorated to the day of closing. Veriﬁcation for paid/unpaid taxes can be made through the County Assessor’s Ofﬁce.

TAX SERVICE CONTRACT. A fee charged by

the lender to insure the tax bill is mailed to the lender for payment from the appropriate impound account.

TERMITE INFESTATION REPORT FEE. A

fee for an inspection to verify there is no current wood infestation and/or current or past damage done by wood infestation.

VA FUNDING FEE. A fee charged by the Veteran’s

Administration to guarantee the loan to a qualiﬁed veteran.

ENDORSEMENT CHECKLIST

PROPERTY TAXES

This checklist comprises the endorsements most frequently requested by lenders. Should you encounter requests for other endorsements, consult your Rate Manual, your Branch Manager, or your Title Ofﬁcer for assistance.

Assessed on a calendar year (Jan.-Dec.). Payment dates are as follows:

ENDORSEMENT

DESCRIPTION

FEE

8.1

Environmental Protection

$50 - Residential (Unless Builder Rate Applies) $100 - Commercial

100.12

Violation CC&R’s

$75

100.13

Insures Lien Superior to CC&R’s

$75

103.1

Insures Against Damage by Reason of Easement Use

$75

103.5

Insures Against Damage by Attempted Removal of Water

$75

Waiver of Arbitration

Amends Arbitration Clause Contained in Policy

$75

115.2

PUD Endorsement

$50

111.5

Variable Rate

$50

FIRST HALF taxes (Jan. 1 - Jun. 30) for current year: Due on: October 1st of the current year Delinquent on: November. 1st of the current year SECOND HALF taxes (Jul. 1 – Dec. 31) for current year: Due on: Mar. 1st of the following year Delinquent on: May 1st of the following year EXAMPLE – Taxes for the year 2005: First half taxes due Oct. 1, 2005; delinquent Nov. 1, 2005 Second half taxes due Mar. 1, 2006; delinquent May 1, 2006 Examples of Prorated Annual Property Taxes of $1,200: Closing date Dec. 1: Seller should have paid ﬁrst half (Jan. 1 – Jun. 30) on Oct. 1st. Seller pays 5 months (Jul. 1 – Nov. 30) of second half or $500 at closing and any delinquent taxes. Note: Taxes for the day of the closing are traditionally the responsibility of the Buyer.