FinCEN Geographic Targeting Order

FinCENOn July 26, 2016, the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the United States Department of Treasury, issued a Geographical Targeting Order (“GTO”) requiring title insurers, their subsidiaries and agents, to report certain information in connection with the purchase of 1-4 unit residential real properties in Covered Transactions.

A “Covered Transaction” is an all-cash transaction in which the property is being purchased by a limited liability company, corporation, partnership or a similar legal or business entity, and the purchase price is $2,000,000 or more (for properties in the counties of San Diego, Los Angeles, San Francisco, San Mateo or Santa Clara, California).

If a property is being purchased in a Covered Transaction that meets these criteria, the proposed insured purchaser must provide all information necessary for the Title Company to complete IRS form 8300.

What are Covered Transactions?

* The property being purchased is 1-4 unit residential property;

* The property is located in any of the designated counties of California

* The sales price meets the designated threshold amount;

* The purchaser is a legal entity (i.e., a corporation, LLC, partnership or similar business entity);

* The property is purchased without a loan or similar form of external financing; and

* Any portion of the purchase price is paid using currency, cashier’s check, certified check, traveler’s check, money order, personal check or business check.

 

To satisfy this requirement, we may need to obtain additional information from other parties involved in the transaction.

For more information, please visit the following links:
http://www.alta.org/fincen/081216_FAQ_FINCEN_GTO.pdf
https://www.fincen.gov/news_room/nr/pdf/GTO_Phase_2_FAQs%20_081916.pdf

City Property Report Requirements

Screen Shot 2016-08-12 at 3.29.46 PMSeveral cities have updated their retrofitting and property report requirements. We have the latest report requirements here on our website: http://americantrustescrow.com/city-property-report-requirements/. Check back often for updates!

Our First Giveback Homes Build

CollageWe had a great time at our first build day with Giveback Homes in Inglewood. Giveback Homes was founded with the goal of bringing a new giving model to the world of real estate. We are the first escrow company to partner with GBHs in the country and this year we’ve committed to raise $20,000 and help build 4 homes through build projects in LA, OC, SD and the Desert. Help us reach our goals! More information for each of the remaining builds can be found below.

Orange County is here.

San Diego is here.

Pango Group Wins Best Place to Work

Pango Group Best Places to WorkFor the third consecutive year, Pango Group, American Trust Escrow’s parent company, has been recognized as one of the best companies to work for in Los Angeles. The Best Places To Work in Los Angeles list, launched ten years ago by The Los Angeles Business Journal, honors companies that achieve business success while fostering a positive work environment.  Read more here.

Form 593-C: An Explanation For Sellers

When real estate is sold in California, the state requires that income tax for that sale must be withheld.  In this post we will discuss sellers who are individuals or who may qualify as an individual.  We will also explain qualified exceptions and exemptions to withholding.

What is the 593-C Form?
The seller will need to fill out the State of California Real Estate Withholding Certificate, form number 593-C.  The escrow company will provide this form to the seller, typically when the escrow instructions have been prepared and sent out for signatures.

Completing the 593-C Form

The standard amount of taxes to withhold is equal to 3 1/3% of the total sales price.  (Note: If the seller is claiming an exemption by filling out the 593-E form, the percentages will be different on if it is reduced withholding.  Those percentages are reflected on the form itself.)

If the seller is an individual, enter the social security number (SSN) or individual taxpayer identification number (ITIN) as indicated on the 593-C form.  If the sellers are spouses/registered domestic partners (RDPs) and plan to file a joint return, enter the name and SSN or ITIN for the spouse/RDP on the 593-C form in the space provided.  If there is more than one seller and the sellers are not married/RDPs, then each seller must complete their own 593-C form.

Entities That May Be Considered “Individuals” by the Franchise Tax Board

Single Member LLC:
If the seller is a single member disregarded LLC, enter the name and the tax identification number of the single member.

Grantor Trust:
A grantor trust is created when the trust is formed by the grantor(s) and the grantor(s) are also the trustee(s) of the trust.  A good example of a grantor’s trust is a Family Trust.  The grantor trust is disregarded for tax purposes and the individual seller must report the sale and claim the withholding on his/her/their individual tax returns.  If the trust was a grantor trust that became irrevocable upon the grantor’s death, enter the name of the trust and the trust’s federal employer identification number (FEIN) on Form 593-C.  Do not enter the decedent’s name or trustee’s name or SSN.

Exceptions to Withholding
Certain real estate transactions are exceptions to state income tax withholding.  The exceptions are:

  1. the total sales price is $100,000.00 or less;
  2. the property is being foreclosed upon pursuant to a power of sale under a deed of trust, or sold by a deed in lieu of foreclosure;
  3. the transferor is a bank acting as a trustee other than a trustee of a deed of trust;
  4. the seller certifies to an exemption.

Exemptions to Withholding
There are several exemptions.  The most common exemption is the seller’s principal residence as set forth under Internal Revenue Code (IRC) Section 121.  Generally speaking, the seller must have owned and lived in the property as their main home for at least two years during the five-year period ending on the sale of sale.  Another exemption would be a loss or zero gain.  Claiming this exemption will require form number 593-E to be filled out and signed by the seller.

If any of the first three exceptions are applicable, the seller checks the appropriate exception on the 593-C form and signs the form.  If the seller checks number 4 on the 593-C form, claiming an exemption, there is an additional form which will need to be filled out.

The California Franchise Tax Board website has provided more information with a complete list of exemptions, as well as forms 593-C and 593-E.

It is always important for the seller to check with their tax advisor when filling out the 593-C and it is even more important if the seller is filling out a 593-E exemption form.

Pango Group Expands To Service Growing Business

New RepsPango Group has added three new Business Development Representatives to help service their growing client base. John VazquezRachel Gallagher, and Tamara Kalama will head up sales in areas including GlendaleOrange CountyLos Angeles, and surrounding cities.With more than four decades of collective real estate experience, the executive management team is growing the organization organically, opening new offices where opportunities exist. Most recent office openings include Sherman Oaks.
“Strategic growth has been and always will be one of Pango Group’s initiatives,” Jessica Kalkin, Sales Manager, said. “Building a strong sales team to support the growing market and new offices is critical in achieving this initiative.”

Read more here!

New Partnership with Giveback Homes!

Giveback Homes Pango GroupWe are excited to announce our new partnership with Giveback Homes. Giveback Homes was founded with the goal of bringing a new giving model to the world of real estate. Founded by former employees of Toms, Giveback Homes saw an opportunity to infuse social responsibility into the real estate industry. The company has grown rapidly over the past two years and has built over 50 houses in areas where housing is desperately needed including NicaraguaHaiti and El Salvador.

We are the first escrow company to partner with GBHs in the country.  This year we’ve committed to raise $20,000 and help build 4 homes through build projects in LA, OC, SD and the Desert.

Read more here!

TRID Closing Timelines

We did an analysis of what effect the ‪#‎TRID‬ implementation had on the median days to close for all closings before the 10/3/2015 implementation of TRID and all closings under the new rule which were opened after 10/3/2015.

Here’s the data for Refis (R) and Resales (S).

We have seen no significant closing delays since the TRID rule was implemented.

How have your transactions been going since the TRID rule rollout?

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Owner’s Title Insurance Policy Update

New RegulationThe CFPB is requiring that the owner’s policy be disclosed as “optional” due to the fact that unlike the lender’s policy which is required by most institutional lenders in the country, an owner’s title insurance policy is not a transactional requirement nationwide.

This new descriptor was written to and applied nationwide with no allowance for customary contractual requirements in Southern California. Some parts of the country do not have the risk and liability of real estate transactions as we do in the highly populated State of California and thus Owner’s policies are considered optional and not a contractual obligation as they are here. As a reminder, the Closing Disclosure is a lender document and does not release the seller of any obligation to provide the buyer with required items per the mutually signed purchase agreement.

Here is a consumer friendly link on title insurance that might be helpful to your clients: http://www.consumerfinance.gov/eregulations/sxs/1026-38-g-4/2013-28210?from_version=2015-01321

LexisNexis® Discontinues The Sale of C.L.U.E.® Reports

news-1C.L.U.E.® Home Sellers Disclosure Reports will no longer be available through American Trust Escrow or any other disclosure companies. LexisNexis®, the company that owns the C.L.U.E.® Report, has decided to discontinue the sale of the report through third party vendors such as California disclosure companies. Should a buyer request this report, sellers can obtain one free copy of his/her consumer file during each twelve month period. If a second report is needed in a 12 month period, a $19.50 fee will be charged. Proper C.L.U.E.® Reports can be ordered here.