What is an escrow?

 An escrow is a process wherein the Buyer and Seller deposit written instructions, documents, and funds with a neutral third party until certain conditions are fulfilled. In a real estate transaction, the Buyer does not pay the Seller directly for the property. The Buyer gives the funds to an escrow company who, acting as an intermediary, verifies that title to the property is clear and all written instructions in the contract have been met. Then the company transfers the ownership of the property to

the Buyer through recordation and pays the Seller. This process protects

all parties involved.

The State of Nevada licenses and regulates all escrow companies. The Insurance Commissioner and the State Banking department can inspect a company’s records at any time, providing further oversight of the company’s management and position as an impartial third party to the transaction.

In Nevada, escrow services are generally provided by a title insurance company instead of an attorney. The stability, reliability and performance of your title and escrow company are vital to protect the interests of all parties to the transaction.

How is an escrow opened? Once you have completed the contract (or Purchase Agreement) and the Seller has accepted the offer, your real estate agent will open the escrow. The earnest money deposit and the contract are placed in escrow. As a neutral party to the transaction, First American can respond only to those written instructions agreed to mutually by all “interested” parties (Seller and Buyer); Escrow cannot otherwise alter the contract or create instructions, and that protects all interested parties.

How to hold the title. you should inform your escrow officer and lender as

soon as possible of how you wish to hold title to your home and exactly how your name(s) will appear on all documents. This allows your lender and title company

to prepare all documents correctly. (Changes later, such as adding or deleting an initial in your name, can delay your closing.) A comparison of the ways to hold title in the state of Nevada you may wish to consult an attorney, accountant or other professional before deciding how to hold title.

What happens at escrow? During the escrow period, our title department begins researching and examining all historical records pertaining to the subject property. Barring any unusual circumstances, a commitment for title insurance is issued, indicating a clear title or listing any items which must be cleared prior to closing. The commitment is sent to you for review. Your escrow officer follows instructions on your contract, coordinates deadlines, and gathers all necessary paperwork. For example, written requests for payoff information (called “demands”) are sent to the Seller’s mortgage company and any other lien holders.

What happens next For the Buyer?

Identity statement. You will be asked to fill out an Identity Statement that enables our title department to distinguish you from others with identical names during our search of County records. It also provides basic information that will be useful for your escrow officer.

home loan. unless you are paying cash, assuming a loan,

or the Seller is financing, you will need to apply for a home loan if you have not already done so. Your Real estate agent should be able to recommend several reliable sources for your loan. Apply as soon as possible to comply with the purchase contract and to avoid delaying the closing, response to seller’s notices. If directed by the contract, you will receive the following items which require a response from you. Your real estate agent can help you with your responses.

a. Seller’s Property disclosure Statement listing any existing problems known to the Seller.

b. Information pertaining to the home Owners Association (hOA) or Planned unit development (Pud), such as Covenants, Conditions and Restrictions (CC&Rs), if applicable.

c. Flood hazard disclosure if the property is in a flood area. d. Independent inspections, such as termite and septic,

and any repairs as required.

Title commitment. you will receive a copy of the title commitment when we complete the title search. See across for an explanation of the title package you will receive from First American. If you have questions about the title commitment, contact your real estate agent or your escrow officer.

Consider this. One escrow transaction could involve over twenty individuals including real estate agents, Buyers, Sellers, attorneys, escrow officer, escrow technician, title officer, loan officer, loan processor, loan underwriter, home inspector, termite inspector, insurance agent, home warranty representative, contractor, roofer, plumber, pool service, and so on. And often one transaction depends on another.

When you consider the number of people involved, you can imagine the opportunities for delays and mishaps. So, much like an airline pilot can’t prevent turbulence during a flight, your experienced real estate agent and escrow team can’t prevent unforeseen problems from arising. however, they can help smooth out the bumps and, whenever possible, get you safely through to a successful closing.

open escrow and deposit your “good faith” funds in a separate escrow account.

conduct a title search to determine ownership and status of the subject property.

issue a title commitment

and begin the process to delete or record items to provide clear title to the property.

Per contract, confirm that the lender has determined you, the Buyer,

are qualified for a new loan.

ask you to complete a beneficiary’s statement if you are assuming the Seller’s loan.

meet all deadlines as specified in the contract. request payoff information for the Seller’s loans,

other liens, homeowners association fees, etc.

prorate fees, such as property taxes, per the contract, and prepare the settlement statement.

set separate appointments:

Seller will sign documents; you will sign documents and deposit funds.

review documents ensuring all conditions and legal requirements are fulfilled; request funds from the lender.

When all funds are deposited, record documents at the County Recorder to transfer the subject property to you.

After recordation is confirmed, close escrow and disburse funds, including Seller’s proceeds, loan payoffs, Realtors®’ commissions, related fees for recording, etc.

prepare and send final documents to parties involved.

Explanation of Title Commitment

This explanation may help you understand the contents of the Title Commitment you receive from the escrow office.

Schedule A

This is the information submitted to our Title department by the escrow officer. It contains the basic information given to us by the Buyer or real estate agent, such as the legal description of the property, sale price, loan amount, lender, name and marital status of Buyer and Seller.

Schedule B

The Schedule B “exceptions” are items which are tied to the subject property. These include Covenants, Conditions and Restrictions (CC&Rs), easements, homeowners association by-laws, leases and other items which will remain on record and transfer with the property. They are referred to as “exceptions” because the Buyer will receive a clear title “except” the Buyer’s rights will be subject to conditions in the CC&Rs, recorded easements, etc. The Buyer is asked to sign a receipt for the Schedule B documents which states the Buyer has read and accepts the contents.

REQUIREMENTS

These are items that the escrow office needs to delete and/or record in order to provide a clear title to the property. Items that need to be addressed include:

- Current property-tax status,

- Any assessments that are owed such as

those for a homeowners association,

- Any encumbrances (or liens) on the property.

Sometimes items show up against a property because another person has a name similar to an involved party. This is one reason we ask for an Identify Statement, to determine if items are inaccurate and can be deleted.

NOTE

This is merely information given to us by the Clark County Recorder’s office that specifies the proper size, margins and print type to be used on documents to be recorded.

understanding TITLE INSURANCE 

THE TiTLE INDUSTRy IN BRiEF. Prior to the development of the title industry in the late 1800’s, a homebuyer received a grantor’s warranty, attorney’s title opinion, or abstractor’s certificate as assurance of home ownership. The Buyer relied on the financial integrity of the grantor, attorney, or abstractor for protection. Today, title insurance companies are regulated by state statute. They are required to post financial guarantees to ensure that any claims will be paid in a timely fashion. They also must maintain their own “title plants” which house duplicates of recorded deeds, mortgages, plats, and other pertinent county property records.

What IS TITLE INSURANCE?

Title insurance provides coverage for certain losses due to defects in the title that occurred prior to your ownership. The Seller can give only those rights that previously have been received with “good title.” Title insurance protects against defects such as prior fraud or forgery that might go undetected until after closing and possibly jeopardize your ownership and investment.

Why TITLE INSuRANCE IS Needed?.

Title insurance assures the new Buyers that they are acquiring marketable title from the Seller. It is designed to eliminate risk or loss caused by defects in title from the past. Title insurance protects the interest of the mortgage lender as well as the equity of the Buyer for as long as they or their heirs have any interest in the property.

When IS the PREMIUM DUE?

It is a one-time premium which is paid at the close of escrow. It is customary for the Seller to pay for the Owner’s Policy. If there is a new loan, the Buyer pays for the Lender’s Policy. The policy has a perpetual term and provides coverage for as long as you are in a position to suffer a loss.

Do ALL TITLE COMPANIES OFFER ThE SAME PROTECTION?

Any standard American Land Title Association (ALTA) policy covers the same basic items. However, premium title insurance policies combine the easy-to-understand Plain Language Policy with additional coverages, including coverage for events happening after the policy date.**

Some examples:

- Post-policy Encroachment. The owner has been in his home for several years when a neighbor builds a patio cover on the property. They’ll provide legal defense.**

- Post-policy Forgery. Someone forges the homeowners name on a mortgage. We’ll provide legal defense.** - Building Permit violation. A room added prior to the closing date did not receive a city permit, and the new

The homeowner is being forced to remove the structure. We’ll pay for the removal, per policy limits.**

- Automatic Inflation Coverage of 150%, a 10% increase in the policy amount for each of the first five years.

Note: If you decide to sell your home in the future, new title insurance will be needed to protect your Buyer for the time prior to and during your ownership for any defects that may have occurred. 

A home warranty is an insurance policy that covers a variety of mechanical, electrical, and plumbing items, as well as some appliances, inside the home. Optional coverage is available for more expensive systems such as air conditioners, refrigerators, pools and spas.

The Seller may purchase a home warranty plan prior to selling to protect against repairs needed during the listing period, and the Buyer may be able to assume the policy at the close of escrow. Or the Seller may offer to purchase a home warranty policy for the Buyer. Offering a home warranty plan may provide these benefits:

> Increase the marketability of your home by reassuring potential Buyers.

> help sell your home faster and at a higher price.

> Ward off potential disputes after the sale for repair and/or replacement of covered item

Most home warranty plans can be paid for at the close of escrow.

A copy of the invoice is presented to First American Title, and it becomes part of the Seller’s closing costs.

What to do before the closing appointment.

Your escrow officer or escrow technician will contact you to schedule your closing appointment and inform you of the funds you need to bring with you. Obtain a cashier’s check for that amount made payable to First American Title Insurance Company. If a wire transfer is necessary, arrange for it in advance with your escrow officer.

Escrow offices are required by law to have funds deposited before escrow funds can be disbursed. Expect delays if you submit a personal check! If you have questions or anticipate a problem, contact your escrow officer immediately. don’t forget your identification.

you will need valid identification with your photo; a driver’s license is preferred. This is necessary so that your identity can be sworn to by a notary public. It’s a routine step, but it’s important for your protection.

What happens next?

During your closing appointment at First American, you will sign loan documents and instructions to transfer the title of the home you are purchasing and you will present your identification so the documents can be notarized. you will review the settlement statement and give the escrow officer your cashier’s check. (The Seller will sign at a separate appointment.)

The signed loan documents will be returned to

the lender for review. Escrow office will ensure that all contract conditions have been met and

ask the lender to “fund the loan.” If the loan documents are satisfactory, the lender will send the check directly to the escrow office, usually within 24 hours. When the loan funds are received, Escrow will verify that all necessary funds have been received. We will then record the deed at the County Recorder’s Office and disburse escrow funds to the Seller and other appropriate payees. At this time, your escrow is closed!

You get the keys.

After the escrow is closed, we will notify your real estate agent who will give you the good news and arrange for you to receive the keys to your new home.

After the Closing

We recommend you keep all records pertaining to your home together in a safe place, including all purchase documents, insurance, maintenance and improvements.

loan payments and impounds. you should receive your loan coupon book before your first payment is due. If you don’t receive your book, or if you have questions about your tax and insurance impounds, contact your lender.

Home warranty repairs. If you have a home warranty policy, call your home warranty company directly for repairs. have your policy number available when you call.

Recorded deed. The original deed to your home will be mailed directly to you by the County Recorder, generally within two to three weeks.

title insurance policy.Escrow office will mail your policy to you in about two to three weeks.

property taxes. you may not receive a tax statement for the current year on the home you buy; however, it is your obligation to make sure the taxes are paid when due. Check with your mortgage company to find out if taxes are included with your payment. For more information on your property taxes, contact:

- Clark County Treasurer’s Office: 702.455.4323

- Clark County Finance department: 702.455.3543

> adjustable rate mortgage. A mortgage that has a rate that is adjusted at certain intervals during the loan period. The adjustment can either be higher or lower depending on the current market rate at the time adjustment is due.

> amortized loan. A loan that is paid off—both interest and principal—by regular payments that are equal or nearly equal.

> amendment. A change—either to alter, add to, or correct—part of an agreement without changing the principal idea or essence.

> appraisal. An estimate of value of property resulting from analysis of facts about the property; an opinion of value.

> apr (annual percentage rate). The yearly interest percentage of the loan based on the actual interest paid on the loan. The APR is disclosed as a requirement of federal truth in lending statutes.

> assessed value. value placed upon property for property tax purposes by the tax collector.

> assessment. A levy against property in addition to general taxes. usually for improvements such as for streets or sewers, etc.

> assumption. Taking over another person’s financial obligation; taking title to a property with the Buyer assuming liability for paying an existing note secured by a deed of trust against the property.

> balloon payment: A note calling for periodic payments which are insufficient to fully amortize the face value of the note prior to maturity, so that a principal sum known as a “balloon” is due at maturity.

> beneficiary. The recipient of benefits, often from a deed of trust; usually the lender.

> buy down. A fixed rate loan where the interest rate and payment are reduced for a specific period of time by paying the interest up front to subsidize the lower payment.

> clear title. Real property in which there are no liens

> close of escrow. The date the documents are recorded and title passes from Seller to Buyer. On this date, the Buyer becomes the legal owner, and title insurance becomes effective.

> cloud on title. A claim, encumbrance, or condition that impairs the title to real property until disproved or eliminated through such means as a quitclaim deed or a quiet title legal action.

> comparable sales (comps). Sales that have similar characteristics as the subject property, used for analysis in the appraisal.

> conventional mortgage. A mortgage that is not obtained from a government subsidized program such as FHA or VA.

> conveyance. An instrument in writing, such as a deed or trust deed, used to transfer (convey) title to property from one person to another.

> covenants, conditions and restrictions (cc&r’s). Restrictive limitations which may be placed on a property.

> deed of trust. An instrument used in many states in place of a mortgage.

> discount points. A negotiable fee paid to the lender to secure financing for the buyer. discount points are up from interest charges to reduce the interest rate on the loan over a life, or a portion, of the loan’s term. One discount point equals one percent of the loan amount.

disposable income. Income, usually monthly income, left over after fixed obligations and living expenses for that period of time are paid. 

> deed restrictions. Limitations in the deed to a property that dictate certain uses that may or may not be made of the property.

> earnest money deposit. down payment made by a purchaser of real estate as evidence of good faith; a deposit or partial payment.

> easement. A right, privilege or interest limited to a specific purpose that one party has in the land of another.

> equity. The market value of real property, less the amount of existing liens

> FHA. Federal housing Administration is a federal agency that insures first mortgages, enabling lenders to loan a very high percentage of the home price.

> fannie mae (fnma). A private corporation dealing in the purchase of first mortgages, at discounts.

> freddie mac (fhlmc). A mortgage that has a rate that is adjusted at certain intervals during the loan period. The adjustment can either be higher or lower depending on the current market rate at the time adjustment is due.

> ginnie mae (gnma). A federal association, working with FHA, which offers special assistance in obtaining mortgages, and purchases mortgages in a secondary position.

 > hazard insurance. Real estate insurance protecting against fire, some natural causes, vandalism, etc., depending upon the policy. Buyer often adds liability insurance

and extended-coverage for personal property.

> impounds. A trust type of account established by lenders for the accumulation of borrower’s funds to meet periodic payments of taxes, mortgage insurance premiums and/or future insurance policy premiums, required to protect their security.

> legal description. A description of land recognized by law, based on government surveys, spelling out the exact boundaries of the entire piece of land. It should so thoroughly identify a parcel of land that it cannot be confused with any other.

> lien. A form of encumbrance that usually makes a specific property the security for the payment of a debt or discharge of an obligation. For example, judgments, taxes, mortgages, deeds of trust.

> lis pendens. A legal notice recorded to show pending litigation relating to real property, and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation.

> mechanics lien. A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construc- tion or repair of improvements to land, and which attaches to the land as well as the improvements.

> mortgage. The instrument by which real property is pledged as security for repayment of a loan.

> mortgagee. The party lending the money and receiving the mortgage. Some states treat the mortgagee as the “legal” owner, entitled to rents from the property. Other

states treat the mortgagee as a secured creditor, the mortgagor being the owner. The latter is the more modern and accepted view.

> mortgage insurance. Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price. The Federal government writes this form of insurance through the FHA and VA.

> mortgagor. The party who borrows the money and gives the mortgage.

> note. A unilateral agreement containing an express and absolute promise of the signer to pay to a named person, or order, or bearer, a definite sum of money at a specified

date or on demand. usually provides for interest and, concerning real property, is secured by a mortgage or deed of trust.

> notice of default. A notice filed to show that the borrower under a mortgage or deed of trust is in default (behind on the payments).

> origination fee. A fee made by a lender for making a real estate loan. usually a percentage for the amount loaned, usually one percent.

> piti. A payment that combines Principal, Interest, Taxes and Insurance.

> proration: To divide (prorate) property taxes, insurance premiums, rental income, etc. between the Buyer and Seller proportionately to time of use, or the date of closing.

> power of attorney. A written instrument whereby a principal gives authority to an agent. The agent acting under such a grant is sometimes called an “Attorney-in-Fact.”

> prepayment penalty. A penalty under a note, deed of trust, or mortgage imposed when the loan is paid before it is due.

> purchase agreement. The purchase contract between the Buyer and Seller. It is usually completed by the real estate agent and signed by the Buyer and Seller.

> quitclaim deed. A deed operating as a release, intending to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title by the grantor.

> recording. Filing documents affecting real property with the County Recorder as a matter of public record.

> special assessment. Lien assessed against real property by a public authority to pay costs of public improvements (sidewalks, sewers, street lights, etc) which directly

benefits the assessed property.

> trust: A fiduciary relationship under which one holds (real or personal) for the benefit of another. The party creating the trust is called the settler, the party holding the property is the trustee, and the party for whose benefit the property is held is called the beneficiary.

> trustee. One who is appointed, or required by law, to execute the trust. Another definition is someone who holds title to real property under the terms of the deed of trust.

> trustor. The borrower under a deed of trust.

> v.a. (veterans Administration): An agency with the Federal government which, among other things, insures and guarantees loans for veterans.

> warranty deed. A real estate oriented document used to convey fee title to real property from the grantor (usually the Seller) to the grantee (usually the Buyer).

> wrap-around mortgage. A second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage. The mortgage under the wrap-around collects a payment based on its face value then pays the first mortgagee. It is most effective when the first has a lower interest rate than the second, since the mortgagee under the wraparound gains the difference between the interest rates, or the mortgagor under the wraparound may obtain a lower rate than if refinancing.