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Escrow Tip: What is the time table for Payoff of Seller’s Loan?

November 18 in Blog by admin No Comments

Remember that Seller’s loan is not paid off the same day as their signing. As a rule of thumb your Escrow Officer will collect 5 extra days of interest, to account for the time between signing and the payoff, which occurs after the buyer’s lender funds. After the buyer’s lender funds, we can record. It is after recordation that we can send the seller’s payoff. If extra interest has been collected that is not needed for the payoff, it will be refunded by the seller’s lender thru the refund of their impound account.

An Example:
Seller signs on Monday November 4th and interest is collected thru Friday the 8th. Buyer’s loan funds on afternoon of Thursday 7th and the transaction records on Thursday at 4pm, which is past the wire cutoff time of 2pm. Seller’s payoff wire would go Friday Nov 8th.

For FHA loans the interest is collected for each month up front and is not calculated in days.
Keep that in mind, if the calendar month advances between seller’s signing and recordation.

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Some of our emails to you are now encrypted – why?

September 17 in Blog by admin No Comments

The Consumer Financial Protection Bureau (CFPB) continues to put policies in place that follow their ongoing efforts for consumer protection. In response to these efforts, ALTA (American Land Title Association) has implemented some Best Practices for all title and escrow companies. One of these Best Practices is around how title and escrow companies handle Non Public Information (NPI).

NPI includes any information we hold in our systems and/or files that is non-public – specifically in our industry, that would be a social security number or personal tax ID numbers. ALTA now recommended that all companies that handle NPI information in files take every precaution to protect this information against security risks.

In response Title Security Agency has implemented a procedure and now all emails that contain NPI information will be encrypted. We are utilizing an encryption program by McAfee to secure these emails.

If we send you an email that may contain NPI, you will receive an email in your regular inbox. The subject line will state “secure web mail: outbound email encryption”. And it will show the email address of the Title Security employee who sent you the email. You will then be asked to click on a link to “access your secure web mail account”. Click on that link, and it will step you through how to set up your McAfee account. Once you have completed this set up process, you will be able to access the email by entering a password you have set up and can also respond to the email, if necessary.

I know that this may take a bit of time to get used to, but it is a system that is being put into place for an important reason – to protect you and your client’s personal information. With the increased cyber-fraud and identity theft in today’s world, we need to take every precaution to protect our consumers.

Please contact us with any questions you have about our new email encryption.

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Escrow Tip – IRS Form 1099-S

August 7 in Blog by admin No Comments

When is a 1099-S issued in the sale of Real Property?

For sales or 1031 exchanges of certain real estate, the Escrow Officer is legally required to report the proceeds to the IRS using form 1099-S.

Some sales of principal residences are exempt from 1099-S reporting; in these cases an “IRS Form 1099-S Certification Exemption Form” is signed by the seller under penalty of perjury. Not all principal residences are exempt.

Some sellers exempt from 1099-S reporting are Corporations, Governmental Units and builders.

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What Is Escrow?

June 25 in Blog by admin No Comments

As a buyer or seller, you want to be certain all conditions of your sale have been met before property and money changes hands. The technical definition of an escrow is, “A transaction where one party engages in the sale, transfer or lease of real or personal property with another person who delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder.” The third person holds the money or items for disbursement upon the happening of a specified event or the performance of a specified condition.

Simply stated, the escrow holder impartially carries out the written instructions given by the principals. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon successful completion of the escrow.

The escrow holder must be provided with the necessary information to close the transaction. This may include loan documents, tax statements, fire and other insurance policies, terms of sale and any financing obtained by buyer, and requests for various services to be paid out of the escrow funds.

If the transaction is dependent on arranging new financing, it is the buyer’s responsibility to make the necessary arrangements. Documentation of the new loan agreement must be in the hands of the escrow holder before the transfer of property can take place. When all instructions in the escrow have been carried out, the closing can take place. At this time, signatures are obtained by all parties, all outstanding funds are collected and fees such as title insurance premiums, real estate commissions, termite inspection charges, etc, are paid. Title to the property is then transferred under the terms of the escrow instructions and the appropriate title insurance policies are issued.

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The Importance Of The Title Commitment

June 4 in Blog by admin No Comments

Have The Best Closing Experience – Read The Title Commitment When You Receive It!

When a title commitment is received by the parties, it should be reviewed for content and accuracy. A title commitment has three schedules: Schedule A, Schedule BI – Requirements, and Schedule BII – Exceptions.

Here is what you will find in each Schedule and what you should look for:

Schedule A

The first part of the title commitment provides the names of the proposed insured. This should be the buyers in the transaction. If these names do not match the names as your buyer has told you they would like to take title, you should contact your escrow officer to have this information corrected. The escrow officer may not have the latest Amendment to the contract. The escrow officer and the loan officer (if there is a loan) will rely on this information to prepare the necessary documents to close the transaction, if it is wrong then all documents may need to be redone which could potentially cause a delay in the closing.

The Policy Amount should match the purchase price, if wrong maybe the escrow officer does not have the latest Amendment. Again, contact your escrow officer to have the correction made.

The name of the seller should be listed as the party that has “Title to the fee estate or interest in the land as of the Effective Date”. If the name is different, there may be a title issue such as a deceased individual or a spouse that still owns the property, a trust or LLC that has an interest in the property, or some other issue that may require immediate attention. The name listed should be the same party that entered into the contract. If the name is not as the seller had indicated to you, check the requirement page (Schedule BI) and see what requirements have been made. There may be a requirement, for instance the spouse may need to quit claim their interest.

The land referred to in the title commitment should match the land being sold. This will be the legal description of the property not the property address, as title companies insure legal descriptions not property addresses. Review the legal description to see if it looks right, especially when dealing with a Condominium or multiple lots or parcels.

Schedule BI Requirements

This part of the title commitment provides a list of the requirements that must be satisfied in order to close on the transaction. If the seller is a corporation there may by be a requirement that states: Furnish currently certified copy of a Resolution of the Board of Directors of the Corporation authorizing the execution and delivery by the proper officers of all instruments required to consummate this transaction. The requirements will call out any unusual issues that must be dealt with at closing. For instance, if the seller is deceased a call for the Personal Representative to be appointed may be made or probate to be finalized.

The requirements section will call out any loans that show on the property so that the loans are paid and the release of the loan is obtained upon payment through the escrow. Sometimes the title commitment will show two deeds of trust on a property, yet the seller has only a single loan. Let your escrow officer know right away, they will need to obtain a Release of Deed of Trust from the previous lender, or a letter of indemnity from the previous title company that issued the title insurance. Additionally, any judgments, tax liens or taxes will show in the requirement section so that these items are also satisfied during the closing. Occasionally, these liens will show up as a result of a common name. In that case, the client may be asked to supply additional information showing that they are not the same person in the judgment. These are all items which will need to be cleared and it is important to be sure that they are being taken care of. Be sure the escrow agent has all loan payoff information e.g. account numbers etc.

An Owner’s Policy on vacant land may require an ALTA survey, this will be noted in the requirement section.

Schedule BII Exceptions

This section shows all of the title “issues” that are excepted from coverage – in other words, the title company will not insure for these issues. These include items such as covenants, conditions, and restrictions (CC&Rs); easements (utility or access) and/or mineral rights and reservations.

Reviewing is not Advising

When reviewing the title commitment with your buyer or seller, you should not advise them about the legal meaning or effect of any document contained in the title commitment. That would constitute legal advice and is prohibited under Arizona law. When the parties involved in the transaction spot a problem on the title commitment, that should be brought to the attention of the parties involved.

The title commitment is a crucial part of the closing process and provides all parties and their agents with notice of the current state of title. A thorough review of the title commitment immediately after issuance can save everyone time in the end and lends to the successful closing of transactions.

Contact Title Security Agency for all your title and escrow needs. We are committed to making each transaction a smooth one.

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FIRPTA – IS YOUR TRANSACTION SUBJECT TO WITHHOLDING?

June 3 in Blog by Title Security No Comments

blogHORZThe Foreign Investment in Property Tax Act (FIRPTA) Among the many documents which are presented and processed during escrow is a certificate of non-foreign status. The reason for this document is to protect the property buyer from liability for the IRS withholding tax which applies if the seller is a foreign person. If the Seller is a US Citizen or a US Resident then FIRPTA does not apply. If the Seller is not a US Citizen or a US Resident then the Buyer may have to withhold 10% of the sale price at the closing. Although the taxable gain of a transaction is earned by and thus taxable to the foreign seller, the buyer is held liable for the tax if it is not paid by the foreign seller. When is the last time you encountered a transaction with a foreign seller? Foreign seller’s are coming to Tucson and here is some information on FIRPTA.

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Short Sale and the Agreement Notice

April 27 in Blog by admin No Comments

Short Sale Agreement

ESCROW TIP

The Short Sale Addendum lines 22 – 27 and 40 reference the Agreement Notice. Delivery of the Agreement Notice is what prompts the deposit of the Earnest Money.

Including the Agreement Notice with the contract when opening escrow, will assist your Escrow Officer and complete the opening process.

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Arizona Notary Requirements

March 7 in Blog by admin No Comments

Do You Know the Requirements

of your Notary Public?

Arizona Notary Public requirements for the purchase of Real Estate are specific and the forms of identification which are acceptable are very specific.  The  client’s identification must have the following characteristics:

  • Valid/unexpired
  • Issued by the US Government – establishing legal presence in the US
  • Includes a picture and described physical features
  • Where there is a loan the lender requires 2 Forms of ID be shown at closing
  • For purposes of real estate conveyance and financing, a notary may accept the following forms of ID:
  1. A valid unexpired passport issued by a national government other than the United States government and that is accompanied by a valid unexpired visa or other documentation that is necessary to establish an individual’s legal presence in the United States.
  2. Any other valid unexpired identification that is deemed acceptable by the United States Department of Homeland Security to establish an individual’s legal presence in the United States and that is accompanied with supporting documents as required by the United States Department Homeland Security; passports without visas from qualified individuals who are visiting from countries participating in the Visa Waiver Program.  Visit www.state.gov for a list of such countries; Identification accepted from certain visitors from Canada and Mexico under the Western Hemisphere Travel Initiative.  Visit www.getyouhome.gov for more information.

If the Seller or Buyer have any questions relating to the forms of identification, which may be required at closing by the Notary Public, contact your Escrow Officer to determine what ID may be acceptable.

Title Security Agency is committed to assisting in making every closing a successful transaction.  Each Escrow Officer involved in a closing is well versed in the requirements of the Notary Public.  Contact your Escrow Officer today for further details!

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Remember to provide the LSU – “Loan Status Update”

February 2 in Blog by admin No Comments

Your Escrow Officer, at Title Security Agency, is here to assist with the prompt closing of every transaction. When opening escrow one of the important documents to provide to your Escrow Officer is the Loan Status Update aka “LSU”. The LSU allows for delivery to the Seller within five days after contract acceptance. Since escrow is oftentimes opened prior to those five days the transmittal to escrow of the LSU is overlooked. If at any time during the transaction the lender changes, notify your Escrow Officer right away. There are instances where the buyer may be denied a loan from the lender they have chosen. Submittal of the LSU within the prescribed time period, after the acceptance of the Contract, is crucial to the transaction. If the LSU is not submitted to escrow, and cancellation due to denial of the loan is submitted inside of 3 days of the original closing date, buyer may not automatically be entitled to a refund of their earnest monies.

Lines 59-61 of the Arizona Residential Resale Real Estate Purchase Contract outlines the return of the earnest monies.

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“Fiscal Cliff” averted – 1031 Exchange Helps Investors

January 2 in Blog by admin No Comments

The Senate bill passed the House and contained a number of important issues relative to the housing market. Brigitte Echave, with Leverage Exchange Group, LLC, (1031 Exchange company) has written an article that highlights some of the provisions contained in the bill.

The Bush-era reduced tax brackets remain intact, except for income earners in the $400,000 + range. Even the AMT was reviewed and repaired. This new tax bracket will affect taxpayers in the higher incomes by implementing a 39.6% tax rate. Coupled with the 3.8% surcharge on investment income some investors could see capital gain rates of 23.8% on real estate investment sales.

Financially distressed owners of homes with underwater mortgages can rest easy now that the Mortgage Forgiveness Debt Relief act was extended through 2013. This means that those homeowners who face foreclosure or short sale, on their primary residence, will not face a large tax bill on the “phantom” income derived from these two events. Great news for the distressed home owner.

Tax credits for energy efficient home improvements remains available. This tax credit is modest ($200 – $500) but does allow owners a credit on their tax bill for installation of energy-efficient windows, insulation and other upgrades. A tax credit for energy-efficient new homes is in play and allows builders and contractors to claim $2,000 tax credit on new homes that meet federally specified energy-conservation standards. Even U.S. based manufacturers of energy efficient appliances are able to obtain credits for appliances produced with energy efficiency!

Now may be the time for all investors to consider the use of a 1031 Exchange. Brigitte indicates that with the Obamacare surcharge and Arizona’s own state capital gain tax rate, taxpayers could see a capital gain rate of 28.8% on investment properties. Find out more about 1031 Exchanges by calling Brigitte at 520-979-8256 or find more information online at www.leverageexchange.com

For a full copy of the Bill go to:

http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf

Read more in the1031 Newsletter – Fiscal Cliff

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BENEFICIARY DEED

December 6 in Blog by admin No Comments

In 2001, Arizona became the second state to enact a statute (ARS §33-405) which permitted the use of a beneficiary deed to transfer real estate upon the death of the owner. In other areas of the country the deed is referred to as a transfer-on-death (TOD) deed. The beneficiary deed is similar in all respects with other deeds used to transfer real estate, except the one crucial difference being that the deed does not take effect until the death of the conveying party. The owner of real property is permitted to designate by deed, a beneficiary of the real property, and, on the death of the owner, the property passes to the beneficiary without the need for probate. In 2007 there were only 9 states that recognized the beneficiary/TOD deed. Currently there are 17 states which allow the use of beneficiary/TOD deeds.

The 17 states are: Arizona, Arkansas, Colorado, Hawaii, Illinois, Indiana, Kansas, Minnesota, Missouri, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, and Wisconsin. On January 1, 2013 Nebraska’s death deed act will go into effect.

                Each state has specific laws that govern the use of the deed in their state.

Aside from states that recognize transfer on death deeds by state statute, at least three states – Florida, Michigan and Texas – recognize an “enhanced life estate deed,” also called a “Lady Bird Deed,” under state common law. In these states, an enhanced life estate deed functions in a manner similar to a transfer on death deed.

                The beneficiary deed is a relatively easy and inexpensive way to transfer real property and aids in avoiding probate. Since this type of transfer is seen by many as an easy and inexpensive way to transfer real estate, many assume that the use of an attorney to prepare the document is unnecessary. However, as with any estate planning, a consultation with an attorney is probably best. Estate tax limits change constantly and consideration must be given to the tax implications which may arise upon the death. The taxes are just one consideration when contemplating the use of a beneficiary deed there are many others factors to consider. The attorney drafting the estate plan will review and discuss the clients entire estate. The attorney will also ensure that a durable power of attorney exists, with specific provision to permit the revocation of a beneficiary deed. A revocation may become necessary if the grantor becomes incapacitated. Such incapacitation without a durable power of attorney could further complicate matters especially for caregivers of the incapacitated party.

              Upon the death of the grantor to the beneficiary deed, further documentation is necessary to effect the end intended result of the deed. Such as, recordation of the death certification and an affidavit. A beneficiary deed which is executed but never recorded has no effect on the property as the statute in Arizona (§33-405) requires that the deed be recorded. This requirement prevents any transfer to occur on someone’s deathbed.

If you would like to read more about beneficiary deeds we have found the article written by Thompson Law Group to be most helpful. The article can be found here.

The preparation of documents by Title Security Agency and its Escrow staff can only take place when a transaction is opened for the purchase, sale, loan or refinance of a property. As such, preparation of beneficiary deeds are not part of the services offered by Title Security Agency.

If you have questions or comments regarding this blog post contact Brigitte Echave at Brigitte.Echave@TitleSecurity.com or 520-722-2578.

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