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Chapter 10 PowerPoint - Dearborn

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					  Chapter 10



PROCESSING 
    AND 
DISCLOSURES
                       Chapter Outline
           Inspections and Disclosures 
    Home Warranty 
           Liens, Judgments and Child Support Disclosure
           Amendments 
           Buyer’s Walk-through 
          Smoke Detectors, Environmental, Geologic/Seismic and Flood 
           Pest Control Inspection and Termite Report Clearance 
     Agreements and reports that cause escrow problems
    Repairs 
           Work Completed After Close of Escrow 
     Ordering Insurance by FAX 
     Irrevocable Demand
      Electronic Document/Signature
           Wiring Funds: Good Funds Law and Special Recording
     Possession Agreements
            Chapter 10
n   At the conclusion of this chapter, you will be able to:
n   1)      Understand the various types of disclosures 
                required for a typical escrow.
n   2)      Give a definition for the good funds law.
n   3)      Outline the wire transfer and electronic signature 
                       elements of an escrow
n   4)      Differentiate between escrow disclosures and 
                sales disclosures
n   5)      Explain inspections and disclosures
              Inspections and Disclosures 
n   Inspection: A visual investigation of a physical 
       components of real property
    n   Individuals or companies 
    n   DRE licensee is required to make a diligent visual 
        inspection
         n   Buyer’s agent  
         n   Seller’s agent
    n   A contractor 
    n   An appraiser 
             Transfer Disclosure Statement 
                        (TDS) 
n   California State Law Civil Code 1105
n   Effective on January 1, 1987 
n   Seller must give to the buyer 
n   With or without an agent (FSBO)
n   The buyer can cancel the transaction if not 
    given the TDS
n   Buyer has the right
    n   To pay for outside inspector
    n   3 days from receipt of TDS to cancel
                 RETROFIT
n   Compliance with any minimum mandatory
    government standards
n   If local ordinance requires that the
    property be brought in compliance with
    minimum energy Conservation Standards
    as a condition of transfer, Buyer shall
    comply with and pay for these
    requirements.
                 Personal Property
n   Bill of Sale
n   Income property: appliances
n   Trade fixtures
n   Escrow holder obtains a release from the state 
        sales tax collection agency 
n   Some items are handled outside of escrow, 
        between the parties, for which escrow is not 
        responsible 
n   Release of liability for escrow holder
                    TDS Form:
             Civil Code Section 1102.3
n   Section 1: A check box list of features for 
       the property 
n   Section 2: Asks if any significant defects or 
       malfunctions are known 
n   Section 3: Asks the seller if he or she is aware 
       of a list of specific items 
Disclosures are usually a memorandum in the 
     escrow instructions
     Disclosures: An escrow memorandum

n   The TDS
n   The walk thru 
n   Home inspector report
n   Appraisal
      Checklist Required to Close 
                Escrow 
n   Home Protection Policy
n   Property Disclosure
n   Termite Report
n   Home Inspection Report
n   Notary
n   Messenger/Overnight mail
n   Demand – lst T.D.
n   Demand – 2nd T.D.
         Internal Escrow Checklist
n   Instructions:       •   New Lender
n   Seller              •   Cert.Esc.Inst.
n   Buyer
                        •   Prelim Title
n   Borrower
n   S I                 •   Approval
n   Seller              •   Docs Ordered
n   Buyer/Borrower
                        •   Docs Signed
n   Lender Info Sheet
n   Prop. Info Sheet    •   Docs to Lender
n   Bene Demand         •   Funding
n   1st T.D.
                        •   Amendments
n   2nd T.D.
            Internal Escrow Checklist
•  Seller signed      • HUD-1 to lender
• Buyer signed        •  Misc. Docs
• Copy to lender
                      •  Grant deed
• Vesting
                      •   Homestead   release
• Trust Certificate
                      •   Other
• Deed
• Estimated Stmt
• Recording
• HUD-1 to 
  borrower
          Agency Relationships 
n   January 1, 1988 
n   Disclosure regarding agency
n   If no agent involved, no agency exists 
n   Handled outside of escrow
          California Civil Code §1102
n   Requires a disclosure report to be given to a 
    buyer 
    n   regarding the property address 
    n   based upon a review of maps and data cited from 
        public information 
n   A site investigation made by a
    n   Registered Geologist 
    n   licensed Professional Engineer 
n   Geotechnical and other reports are available 
    with a city or country or state or federal agency 
            Residential Disclosure Report
n   Special Flood Hazard Area (Zone A or Zone V)  designed 
    by the Federal Emergency Management  Agency 
    (FEMA);
n   Dam or Reservoir Inundation Area mapped by the State 
        Department of Water Resources;
n   State of California Very High Fire Hazard Severity Zone
n   State of California Fire Responsibility Area for which the 
    owner of the property is subject to the maintenance 
        requirements of Section 4291 of the Public Resources 
        Code;
n   State of California Alquist-Priolo Earthquake Fault Zone;
            Residential Disclosure Report
n   State of California Division of Mines and Geology 
        Seismic Hazard Mapping Act program;
n   Earthquake-induced Landslide Hazard Zone on  official 
    maps of the Seismic Hazard Mapping Act; in a 
        Liquefaction Hazard Zone on official maps of the 
        Seismic Hazard Mapping Act; 
n   Liquefaction Hazard Zone on official maps of the 
        Seismic Hazard Mapping Act;
n   Tsunami Inundation Area mapped in the County General 
        Plan Safety Element;
n   County where sites on slopes or in hillside areas may be 
        subject to Slope Instability.
         Mello-Roos Community
n   From the county auditor-controller records
n   Seller must provide to the buyer 
    n   NOTICE OF SPECIAL TAX 
    n   NOTICE OF SPECIAL ASSESSMENT 
n   A summary and details for all 
    n   Bonds
    n   Assessment districts
     Home Warranty 
n   A guarantee as to the physical premises 
n   Seller warrants that the premises are covered by 
       government permits 
n   Home Warranty Policy
n   No violations of City, County, State, Federal, 
       Building, Zoning, Fire, Health Codes or 
       ordinances, or other governmental 
       regulation 
n   Seller discloses to buyer any items that are 
       without a permit
               Law Clauses
n   LIQUIDATED DAMAGES 
n   ARBITRATION CLAUSE 
n   Liens, Judgments and Child Support 
       disclosure paid from the escrow 
       proceeds to obtain clear title
                Amendments 
n   All other terms and conditions remain the 
        same except only the specific item being 
        changed 
n   Frequently used in Southern California
n   Rarely used in Northern California
n   Alters the original escrow instructions
    Buyer’s Walk Through
n   Designed to let the seller show the buyer
       unique nuances about the property.
n   Seller warrants that appliances are
       operable.
n   Seller is to maintain premises in the same
       condition as on the date of acceptance
       of the offer.
n   The walk through is usually made within 5
       days of close of escrow
       Required prior to closing
n   Smoke Detectors
n   Environmental 
n   Geologic/Seismic 
n   Flood Disclosures
n   Pest Control Inspection and Termite Report 
       Clearance (www.pestboard.ca.gov)
                         Repairs 
   n   Appraisal requirements
   n   Lender requirements
   n   Pest Control requirements
   n   Home Inspection discovery
   n   Insurance policy requirements


Work completed:Before or after close of escrow?
                   Ordering by FAX 
n   Items are transmitted electronically
    n   certified copy of escrow instructions
    n   beneficiary demand 
    n   insurance policies 
           Irrevocable Demand
n   Subject to the good funds law
n   Wire transfer 
n   The demand states that all funds due to the 
       seller are to be transferred in total to the 
       second escrow.
                Electronic Document
n   Common documents that escrow will receive 
    via fax:
    n   statement of information
    n   the beneficiary demand statement 
    n   escrow amendments
n   Common documents received via email:
    n   escrow  instructions 
    n   scanned copy an escrow documents
    n   lender instructions
                 electronic signature 
n   Electronic business (E-business) or electronic
    commerce (E-commerce) means buying, selling,
    producing, or working in an electronic medium
    relating to the conduct of business, consumer, or
    commercial affairs between two or more persons.
n   Electronic Signatures in Global and National
        Commerce Act
n   E-SIGN
n   Became effective October 1, 2000
n   May be substituted for a handwritten signature
n   E-commerce used for potential cost savings
            E-SIGN does NOT allow 
         electronic communications for 
n   A notice of default
n   Acceleration
n   Repossession
n   Foreclosure
n   Eviction
n   The right to cure when an individual's primary 
       residence secures the loan
n   Writing or signature requirements under the 
       Uniform Commercial Code

           E-commerce is optional
                                 E-SIGN
n   Two types of transactions 
    n   consumer transactions
    n   business transactions 
n   Requires the disclosure of information to a consumer in 
        writing, such as the Equal Credit Opportunity Act
n   E-SIGN preempts most State and Federal statutes or 
        regulations 
n   Institution must verify the legitimacy of an E-commerce 
        communication, transaction, or access request 
            E-SIGN does not permit 
           electronic notification for:
n   Notices of default
n   Acceleration
n   Repossession
n   Foreclosure
n   Eviction
n   The right to cure under a credit agreement 
       secured by a person's primary residence
n   A rental agreement  
         Wiring Funds: Good Funds Law 
             and Special Recording 
n   January 1, 1990
n   Section 12413.1 of the California Insurance Code
n   The law imposed mandatory holding periods upon 
    escrow deposits
n   ALL funds must be deposited and collected by the 
    title insurance company’s escrow and/or sub-
    escrow account prior to disbursement of any funds 
          Escrow Funds- Received 
Ø      FUNDING: 
o  Electronic Wire Transfer (same day 
  disbursement) 
o  Cashier’s Check (one business day prior to 
  distribution of funds)
o  Personal check, local (three business days 
  from escrow bank deposit date)
o  Personal check, non-local (five business days 
  from escrow bank deposit date)
            Escrow Funds-Disbursed
Ø      DISBURSEMENT PROCESS:
O Funds received by Title company Payoff Section of 
  Accounting Department with instructions from the 
  lender
O Cleared funds before Title Officer sets up recording. No 
  disbursements prior to recording.
O After recording: Payoff Section disburses funds as 
  follows:
  §   Title charges      §         Reconveyance
  §    Recording fees    §         Balance goes to 
  §    Demands                    escrow account for 
  §     Taxes                     escrow disbursements
                     Recording
n   Special Recording is any document recorded at 
       the county recorder’s office by a title 
       company at any time other than at 8:00 A.M. 
n   County Recorder’s offices in California have 
       instituted more stringent regulations about 
       when a recording may be handled and how t
       the document must appear 
             Possession Agreement
n   the buyer is the existing tenant 
n   a lease with option to purchase 
n   the buyer may take occupancy prior to the close 
    of escrow either with or without rent 
                OCCUPANCY
n   POSSESSION AND KEYS: Possession
    and occupancy to be delivered to Buyer on
    date of recordation at 5:00 pm. When
    possession is available to Buyer, Seller
    shall provide keys, and/or means to
    operate all property locks, mailbox,
    security systems or alarms, and association
    facilities, as applicable.
                       Think About It!
             Disclosure: Real Estate Agent vs. Escrow
                              Officer
n   Local headlines earlier show that virtually everyone in the
    area knew that a mother and her four children had been
    murdered 10 years earlier in a home now for sale. The
    seller, the real estate agents, the local escrow officer, and
    the neighbors knew the gory details. The out of area
    buyer did not know anything about the episode until after
    the close of escrow when the neighbor told the buyer that
    the seller had asked the neighbors not to mention
    anything about the incident to anyone.
n   Can the buyer sue for non-disclosure of a material fact
    under Easton v. Strassburger, 152 Cal. App. 3d 90, 199
    Cal. Rptr. 383 (1984)?
            Think About It! Answer
        The buyer may sue and claim that the price
    offered would have been lower if the buyer had
    been told the truth about the property. However, the
    court will require the buyer to show the actual loss
    in market value to the property. If a value is
    established, the recovery would be against the real
    estate agent and not against the escrow officer. The
    real estate licensee only has to disclose a death on
    the premises up to 3 years after the fact. The
    escrow officer is not a real estate licensee and has
    no duty to disclose any known fact to the buyer.
n   (Reed v King, 193 Cal. Rptr. 383)

				
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