© 2011 Cengage Learning

The Life of an Escrow Chapter 13 © 2011 Cengage Learning

RATIONALE FOR CHAPTER In order to properly represent a client’s best interests, a real estate agent needs to know what takes place during each phase of an escrow. This chapter takes the agent through every phase of an escrow from opening through closing, through the eyes of the agent.

© 2011 Cengage Learning Focus of Presentation This chapter will teach you the step-by- step process of how an escrow is conducted. You will learn how to protect the interests of your clients through diligent review of all inspections and reports.

© 2011 Cengage Learning Focus of Presentation The text gives special attention to the proper way to conduct the “red flag” transfer disclosure statement agent- walkthrough of the premises. Special emphasis is made about maintaining a “paper trail” when dealing with the client’s receipt of reports.

© 2011 Cengage Learning CHAPTER THIRTEEN OUTLINE 13.1 OPEN ESCROW 13.2 ORDER INSPECTIONS 13.3 FINANCING 13.4 REVIEW REPORTS 13.5 NEGOTIATE REPAIRS 13.6 PROPERTY INSURANCE 13.7 THE FINAL WALK-THROUGH INSPECTION 13.8 THE CLOSING

© 2011 Cengage Learning OPEN ESCROW Discuss who customarily opens the escrow and how it varies from county to county and from northern California and southern California. Discuss the importance of the timely deposit of the earnest money into escrow or the broker’s trust account.

© 2011 Cengage Learning OPEN ESCROW Discuss the difference between southern California and northern California with regards to the use of a separate title service and escrow service and when and how escrow instructions are given.

© 2011 Cengage Learning OPEN ESCROW What items of information are needed by the escrow officer? Discuss the professional courtesy of calling the co-op broker, if any, and giving the escrow information to them.

© 2011 Cengage Learning ORDER INSPECTIONS Be aware that this is the “due diligence” period, and that that any reports requested by the buyers should be ordered to allow sufficient time to conduct each report, obtain and read each report, and decide on what action to take, if any.

© 2011 Cengage Learning ORDER INSPECTIONS Discuss the agent’s role in recommending which reports to obtain and his or her role in suggesting which repairs, if any, to negotiate for. Briefly discuss the duties of each of the inspectors mentioned in the text.

© 2011 Cengage Learning ORDER INSPECTIONS Mandated disclosures difference between a disclosure and a mandated disclosure. Transfer Disclosure Statement.

© 2011 Cengage Learning ORDER INSPECTIONS Review the agent’s disclosure section of the TDS; discuss “red flag” issues and how to spot them.

© 2011 Cengage Learning FINANCING Benefit of buyers going to a lender prior to house hunting, and the importance of getting them to a lender immediately after opening escrow if they haven’t been pre-approved. Discuss the issue of giving the buyers at least two lender’s names, and the importance of telling them they may choose any lender they wish.

© 2011 Cengage Learning FINANCING Using the text, briefly discuss each item a lender will need to process a loan. Talk about the additional requirements for self-employed people. Discuss the importance of good communication between the buyers, lender and agent.

© 2011 Cengage Learning REVIEW REPORTS Role of the agent in reviewing the inspection reports and the importance of not exceeding the agent’s level of expertise, which could expose the agent to litigation. Role of the agent as being “the source of the source; not the source,” with regard to conducting or interpreting inspection reports.

© 2011 Cengage Learning REVIEW REPORTS Discuss how to properly present the TDS and title report to the buyers. Agent’s role in advising buyers regarding how to take title. It is important to compare the owners’ names on the prelim with the names on the purchase agreement; and the importance of reviewing schedule B of the prelim as soon as the agent receives it.

© 2011 Cengage Learning REVIEW REPORTS Discuss the importance of obtaining and reviewing any HOA documents, including minutes of the association meetings. Discuss which documents are required to be given to buyers and the importance of, and problematic areas of each one (i.e. limitation on number of, or size of pets, etc.).

© 2011 Cengage Learning REVIEW REPORTS Discuss the importance of carefully reading and fully understanding the Final Public Report, when purchasing a new home in a subdivision of five or more units.

© 2011 Cengage Learning NEGOTIATE REPAIRS Discuss how market conditions can affect the buyer’s ability to negotiate repairs, and that trying to negotiate for cosmetic repairs is probably not in the buyer’s best interest Discuss recommending the use of licensed contractors for repairs.

© 2011 Cengage Learning PROPERTY INSURANCE Discuss the importance of the buyers being assured by an insurance agency that they and the property are eligible for insurance and that the cost is agreeable to the buyers.

© 2011 Cengage Learning PROPERTY INSURANCE C.L.U.E. report how to obtain one Inquiry to an insurance agent potential effect on the property’s C.L.U.E. report.

© 2011 Cengage Learning THE FINAL WALKTHROUGH INSPECTION Discuss the dual purpose of the final walkthrough; it is not an opportunity to re-negotiate the contract.

© 2011 Cengage Learning THE FINAL WALKTHROUGH INSPECTION When should it take place? Conducting more than one How to conduct a final walkthrough. Discuss the issue of a seller credit in- lieu of completing agreed-on repairs, and the possibility of needing the lender’s approval of any last minute credits.

© 2011 Cengage Learning THE CLOSING Discuss the itemized list of activities that must be done in preparation for closing the escrow and transferring the property to the buyer.

© 2011 Cengage Learning THE CLOSING Discuss the advantage to all parties involved in the sale, of reminding the buyers they will need to bring a photo identification and Social Security card or permanent visa to the escrow signing appointment and any funds necessary to close the escrow must be by wire transfer or certified funds.

© 2011 Cengage Learning THE CLOSING Benefit of the agent arriving at the closing about 15 minutes ahead of time to review all of the escrow paperwork and closing statements for accuracy.