Chapter 7 - Opening Escrow and the Escrow Process

Question 1

Escrow

Answer 1

The deposit of instruments and/or funds with instructions with a 3rd neutral party to carry out the provisions of an agreement or contract.

Question 2

Escrow Agent

Answer 2

A disinterested 3rd party intermediary who holds all funds and facilitates the escrow process.

Question 3

Walk-thru Inspection

Answer 3

Buyer’s inspection prior to close of escrow to verify the property is in the same condition and any requested repairs have been completed.

Question 4

Joint Escrow Instructions

Answer 4

The purchase agreement is part of the escrow instructions

Question 5

Proration

Answer 5

Seller may have paid items ahead of time prior to close of escrow. To make things fair, the prepaid terms are credited back to the seller from the buyer.

Example - property tax

Question 6

Impounds

Answer 6

A lender collects property tax and homeowner’s insurance payments on a monthly basis and then pays them for the homeowner.

Example - when property tax and home insurance is collected monthly

Question 7

Escrow Closing Statement

Answer 7

Shows amounts paid to and from buyer and seller during escrow. Including property taxes and property insurance.

Question 8

Recurring Cost

Answer 8

Costs that continue to occur after close of escrow.

Examples - property taxes and homeowner’s insurance

Question 9

Loan Documents

Answer 9

Sent by the lender to escrow for buyer’s signature.

Question 10

Broker Demand

Answer 10

Sent from broker into escrow directing the escrow agent to pay the broker’s commission at close of escrow.

Question 11

Affiliated Business Arrangements/ Broker Controlled Escrows

Answer 11

A controlled escrow could be owned and operated by, but is not limited to, an attorney, real estate broker, title insurance company, among others.

Question 12

Preliminary Title Report

Answer 12

An offer by a title insurance company to issue a policy of title insurance.

Question 13

CA Land Title Associated (CLTA) Standard Coverage Policy of Title Insurance

Answer 13

Insures a property’s title against all recorded documents, forgery, incompetence, capacity, and improper delivery of a recorded deed.

Question 14

American Land Title Association (ALTA) Extended Coverage Policy of Title Insurance

Answer 14

Insures a property’s title against all CLTA coverage plus physical survey, boundary lines, unrecorded encumbrances, and encroachments.

Question 15

Encumbrances

Answer 15

Items that limit title to real property.

Two types --
Money Encumbrances (liens)
Non-money encumbrances (based on use)

Question 16

Liens

Answer 16

Money encumbrances

Question 17

Money Encumbrances vs Non-Money Encumbrances

Answer 17

Money Encumbrances - 
Deeds of Trust and Mortgages
Mechanic's liens
Attachments
Judgments
Federal and State Income Taxes
Property Taxes
Special Assessments
Mello-Roos Bonds

Non- Money Encumbrances - 
Easements (Appurtenant, Prescriptive, Easement in Gross)
CC&Rs
Public Restrictions (Zoning)
Encroachments
Leases
Setback Requirements

Question 18

Mechanic’s Lien

Answer 18

When a property owner does not pay for a contractor’s work that was completed on the property, the contractor can file a mechanic’s lien.

Question 19

Attachment

Answer 19

Court freezes a person’s assets prior to a judgment being rendered.

Question 20

Judgement

Answer 20

When a court makes a ruling.

Question 21

Writ of Execution

Answer 21

Moves the defendant’s attached assets to the plaintiff.

Question 22

Property Taxes

Answer 22

Taxes paid by a property owner

Question 23

County Tax Assessor

Answer 23

Entity that collects property taxes for the county

Question 24

Property Tax Year

Answer 24

July 1st - June 30th

First installment due Nov 1st, delinquent Dec 10th

Second installment due Feb 1st, delinquent April 10th

Question 25

Tax Base

Answer 25

Amount of property taxes paid for the entire county.

Question 26

Ad Valorem

Answer 26

Property taxes are taxed according to value.

Question 27

Assessment Appeals Board

Answer 27

Homeowners can ask the assessment appeals board to reduce their assessed value and therefore, the amount of property taxes paid.

Question 28

Clearance Certificate

Answer 28

Certificate obtained from the CA Board of Equalization verifying that the seller has paid all sales taxes that are due.

Question 29

CA State Board of Equalization (BOE)

Answer 29

CA State entity that collects sales taxes.

Question 30

Special Assessment

Answer 30

Collected from homeowners who benefit from specific local improvements.

Question 31

Mello-Roos Community Facilities Act

Answer 31

A seller of any one-to-four unit residential property must make a good faith effort to obtain a disclosure notice concerning the special tax from each local agency. Paid in addition to property tax.

Question 32

Non-Money Encumbrance

Answer 32

Encumbrance based on the use of a property.

Question 33

Prescriptive Easement / Easement by Prescription

Answer 33

Easement gained by use and lost by nonuse.

Question 34

Easement in Gross

Answer 34

Easement for a person or utility company to be able to use a parcel of land for a specific use.

Question 35

Private Deed Restrictions

Answer 35

Private restrictions restrict the use of real property. Example -- CC&Rs

Question 36

Public Restrictions

Answer 36

Public restrictions for the use of real property. Example - zoning

Question 37

Encroachment

Answer 37

When one parcel of real property crosses over another parcel of real property.

Question 38

Setback Requirements

Answer 38

Restrict a parcel of land by allowing a building to be built a certain distance from the property lines