1. + ESCROW 190 (Escrow I) Spring Term 2016

2. + Meet Your Instructor Started in escrow in 1992 Commercial, Residential, Builder Independents, Law Firms and Title Companies (Oh my!) The Limited Practice Officer (LPO) designation

3. + Enough About Me: Who’s here and what will we be learning? Introductions General discussion of Escrow and how it relates to real estate

4. + The Escrow Process What is “Escrow”? Process that begins shortly after the Purchase and Sale is signed Ends long after the transaction has closed Neutral third party or place: Handles the documents and money No legal advice; Confidentiality Ensures seller received “good funds”, P&S terms are fulfilled, and purchase received “clear title”

5. + The Parties Involved Two principal parties: Purchaser and Seller Relay instructions to Escrow Agent on how to transfer ownership Third Parties Real estate agent, lender, insurance agent, homeowner’s association, underlying lien holders (also provide instruction) Escrow Agent is always neutral

6. + Overview of the Escrow Process Instructions to open escrow Purchase and Sale Agreement Order Preliminary Title Commitment (“Title Report”) Title exams property for liens and defects DNA profile of the property Clearing Title Escrow Agent exams title report Identify any potential issues that could delay closing Initiate actions to clear title (payoffs, liens, court orders) Order payoff information from underlying lien holders, home owners associations, final utilities if requested

7. + Overview of the Escrow Process Coordinating the financing Purchase and Sale stipulates how the Purchaser will pay for property Loan: Lender provides instructions to escrow regarding fees and availability of funds Seller financing: Instructions to escrow regarding documents to prepare, how to prepare them and authorization to close NOTE: The Escrow process is based on obtaining instructions and carrying them out, its imperative that the documents be attached to the P&S Agreement so the Escrow Agent isn’t put in a position of “choosing” documents which can be construed as practicing law which an Escrow Agent cannot do

8. + Overview of the Escrow Process Preparing the Settlement Statement If there is financing via an institutional lender, the Escrow Agent must use the Closing Disclosure form and a Settlement Statement or the HUD Settlement Statement as directed by the lender based on the type of loan. If no institutional lender is involved, then a Settlement Statement outlining the credits and debits is used. The numbers and figures come from all the information collected by the Escrow Agent such as: Lenders instructions, payoff statements, P&S Agreement, title report, homeowner’s association, hazard insurance premiums, real estate commissions, utility bills, etc

9. + Overview of the Escrow Process Arranging Purchaser and Seller Signing Appointments Once all information is compiled, documents are prepared, and final figures are worked up the Escrow Agent arranges for the parties to sign Mobile notary phenomenon Generally Purchaser and Seller sign separately. This is unique to the West Coast Other states do “round table” funding where all parties sit together and exchange money and documents The term “Closing” refers to when the transfer deed has recorded with the county and funds are available to the seller

10. + Overview of the Escrow Process Recording and “Closing” Signed and notarized conveyance and security documents are sent to the title company “on hold”. Funds are confirmed received from the purchaser Funds are confirmed received from the lender Escrow agent received authorization to record and in turn authorizes title to record Authorization comes from the lender or private party buyer and seller, or a third party that is authorized

11. + Overview of the Escrow Process Disbursing the file Once the Escrow Agent receives confirmation that the conveyance and security documents are recorded then the funds held in the trust account are disbursed per the settlement statement Funds are never to be disbursed until recording has occurred and “good funds” are confirmed. Disbursement means the transaction is technically closed. BUT……..

12. + Responsibilities following closing Yes, folks! Escrow is still working hard for you! Escrow is required to report seller’s gross sale proceeds to the IRS via a 1099-s reporting form Escrow must ensure all liens have been cleared from record Escrow must ensure that the title policy is issued to purchaser Escrow is required to store closed files for six years to comply with Washington State Statutes Other Last stop on the blame train