Archive for the 'Important Information' Category

What Is Escrow?

We hope you find this information helpful when trying to answer the question, “What is Escrow?”

How to Handle Power of Attorneys in Escrow

 

 

 

 

 

 

Sometimes the perfect home, or the perfect buyer comes at an inopportune time. That long planned trip is right around the corner and buyer or seller will not be in town for the escrow process. There are options. One is utilizing a Power of Attorney to execute documents on behalf of the party in escrow.

The Title Company will need to approve any Power of Attorney used during the transaction. Title will need the original to be recorded with any recordable document that was signed by the Power of Attorney (Grant Deed, Quitclaim Deed, Deed of Trust). The sooner Title can review the notarized Power of Attorney, the better, to avoid any potential problems.

If a buyer is using a Power of Attorney to sign loan documents, the Lender will need to be notified well in advance. They will want to approve the Power of Attorney ahead of loan documents being drafted to ensure the loan documents are drawn properly.

Power of Attorneys have to sign documents in a specific format. If John Doe gave Jane Small specific Power of Attorney to sell his home, Jane would need to sign and initial in cursive like the below.

Signatures:

John Doe by Jane Small, his attorney-in-fact

Initials:

JD by JS, his attorney-in-fact

If you have a client who is going to need a Power of Attorney, please reach out to us and we would be happy to assist you in any way we can.

What You Need to Know About Proposition 60 / 90

Sellers who are 55 and over may be eligible via Proposition 60 (intracounty transfer) /90 (intercounty transfer) for a transfer of property tax base on their primary residence.

Eleven counties in California have ordinances for intercounty tax transfer.

 

 

Here’s the list:

  1. Alameda
  2. El Dorado
  3. Los Angeles
  4. Orange
  5. Riverside
  6. San Bernardino
  7. San Diego
  8. San Mateo
  9. Santa Clara
  10. Tuolumne
  11. Ventura

Counties may update their ordinances. Call the county for the most current information on their policies. Each county assessor has their own 60/90 application. The application must be filed with the assessor for the county where the replacement property is located. A list of all counties (even those who do not have Proposition 90 ordinances) can be found here: http://www.boe.ca.gov/proptaxes/assessors.htm )

While the ordinances are generally understood, there are some fine points that should be noted when advising your clients.

If your seller has the home in a trust: Being the trustee of the trust does not mean they are the sole beneficiary of the trust. To be able to apply for Prop 60/90, your seller will need to be the beneficial owner of the trust, not only the trustee.

Sale price is not always the market value: The replacement property needs to be of equal or lesser market value than the original property. This is not always the sale price.

Co-owners cannot both qualify: Only one of the owners can receive the 60/90 benefit. They must discuss it amongst themselves to see who will be taking the benefit.

For more information on the propositions and the necessary qualifications to apply go to the California Board of Equalization’s website.http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#1

 

FIRPTA Affecting Transactions

The Foreign Investment in Property Tax Act (FIRPTA) is a certificate of non-foreign status. FIRPTA addresses the disposition of U.S. real property interest by a foreign person. Section 1445 of the Internal Revenue Code requires that all transferees (buyers) of real property owned by a foreign person withhold and pay to the IRS up to 15% of the amount realized on the sale.

 

When dealing with a foreign seller, at the very beginning, agents should be confirming if the seller is a foreign seller or not. If he is a foreign seller (non-resident alien) and does not have an individual tax payer identification number (ITIN), then the agent should recommend he seek the assistance of his CPA in order to apply to the IRS for his ITIN and help him through the paperwork.

 

Who is a non-resident alien? A non-U.S. citizen who does not pass the green card test or the substantial presence test is considered a “non-resident alien.” If a non-citizen currently has a valid green card, he would pass the green card test and would be classified as a resident alien.

U.S. Real property interests include: Interest in a parcel or parcels of real property.

The IRS definition of an agent: Any person who represents the transferor (seller) or transferee (buyer) in any negotiation with another person (or another person’s agent relating to the transaction in the settling of the transaction).

Liability of agents: If the transferee (buyer) or other withholding agent receives a certification of non-foreign status and the agent knows that the document is false, the agent must provide notice to the transferee (buyer) or other withholding agent. If the notice is not provided, the agent will be liable for the tax that should have been withheld but only to the extent of the agent’s compensation from the transaction.

Escrow vs. Title

We get asked this question a lot: “What is the difference between title and escrow?” We’ve created this educational infographic to help people understand, click on the image for a larger view! Contact your escrow officer if you have any questions!

SB 407 Water Conservation Retrofitting

Starting January 1, 2017, water conservation retrofitting goes statewide for single family dwellings. All homes built on or before January 1, 1994 are required to update to complying water conserving fixtures on or before January 1, 2017. Commercial buildings and multi-family units built prior to January 1, 1994 are required to make the transition on or before January 1st 2019.

A seller or transferor of single-family residential real property, multifamily residential real property, or commercial real property must disclose to a purchaser or transferee, in writing, specified requirements for replacing plumbing fixtures, and whether the real property includes noncompliant plumbing. Fixtures include water closets, urinals, showerheads, lavatory faucets, and kitchen faucets. Noncompliant fixtures can only be replaced by fixtures complying with the requirements of CALGreen and the California Plumbing Code.

As of January 1, 2014, SB 407 requires non-compliant plumbing fixtures to be replaced by water-conserving plumbing fixtures when a property is undergoing alterations or improvements as defined by the California Building Code and California Green Building Code.  These codes define alterations and improvements as any construction to an existing structure which enhances or improves the structure. Construction related to repairs or maintenance of the structure are not considered to be an alteration or improvement.

For more information, please check out these useful links:
http://www.bsc.ca.gov/Codes.html

https://www.calwater.com/conservation/conservation-kits/

We Still “Like” You!

facebook_logoOne of our priorities here at American Trust Escrow is to ensure we keep you informed about topics affecting our industry! So, we wanted to share with you a few details about a pretty hot topic: Social media + RESPA

We all love social media. It’s awesome! It allows us to stay in touch with friends, family and colleagues and lets us show them we care about what’s going on in their lives.

But, unfortunately, it has opened the doors to legalities around the type of relationships that companies like ours can have with you online.  

Recently, regulators have been closely analyzing and cracking down on social media business arrangements that violate RESPA’s anti-kickback provisions and other anti-steering laws.

So what does this mean? Here’s an example: Here in California, something as simple as a Facebook “like” can lead companies receiving a cease-and-desist letter from the Department of Business Oversight (DBO), which supervises state-licensed financial institutions like banks, loan originators, broker-dealers and escrow agents.

But it’s not that straightforward.

Our team can ‘like’ a photo of your vacation or wish you a happy birthday, but we can’t ‘like’ anything you post related to a new listing or open house.

You might be thinking to yourself, “but, why?”

Basically, it boils down to certain types of “likes” being seen as promoting actions and giving a “Thing of value” – a big no-no when it comes to RESPA.

Since these rules are somewhat vague and open to interpretation, there’s a lot of talk around what’s a violation and what’s not.

So what does this all mean?

We love what we do as a company. We live to provide you with impeccable service. In turn, we want to be around for the long haul. To ensure this is possible, we will closely follow all of the rules that exist around this topic.

We just wanted to remind you that we like you, even if we can’t like your page!

Of course, please feel free to contact us if you have any questions or are interested in learning more about this topic. As always, we’re here to lend a helping hand whenever we can!

Our Sunset Strip Office Has Moved!

Beverly HillsEffective Monday, October 24th, you can find your ATE Sunset escrow officers in Beverly Hills! We are located at: 433 N. Camden Dr.
Suite 600-24
Beverly Hills, CA 90210

All phone numbers (310.550.3330) and faxes and great service remain the same.

We look forward to seeing you in our new space!

 

Escrow Terminology 101

definition

The language of escrow and the real estate transaction doesn’t need to be a stumbling block; once you know the terms, these words become what they are meant to be – valuable tools to help smooth the road to a successful transaction.

Contingency
This is a clause in the sales contract that says something must happen before the sale goes through. The sale is contingent on this event, in other words. Common contingencies are the arrangement of financing, a successful home inspection or wood pest inspection, or a roofing or sewer report.

FIRPTA
The Foreign Investment in Real Property Tax Act of 1980 is important if you are buying a property from a person or corporation that is not US-resident. FIRPTA rules state that the buyer must withhold up to 15% of the realized sale price for tax purposes.

Cal-FIRPTA
The California version of FIRPTA, this legislation requires the withholding of a percentage of the sales price for most California real estate transactions. Talk to your Realtor or escrow officer to get a full explanation of how this law affects your transaction.

Easement
An easement is an allowance, written into the property’s title, for another person or company to have access to a portion of the land for some purpose. Often an easement allows access to power lines or utilities running through the property. A registered easement gives the other party legal access, and restricts what the owner can do on that piece of the property.

Encroachment
An encroachment is any structure or physical thing that intrudes on somebody else’s space. Encroachments must be agreed upon before building, resolved if discovered, or removed if objected to.

Escrow
An escrow is a financial arrangement where a third party (the escrow company) holds and regulates payment of the funds required for two parties to complete a transaction. It helps make transactions more secure by keeping the payment in a secure escrow account which is only released when all of the terms of an agreement are met as overseen by the escrow company.

Deed of Trust
In many states, including California, this document takes the place of a mortgage. The Deed of Trust places a property’s title in the hands of a Trustee, usually a title company, along with the specifics of the buyer’s loan and repayment provisions.

Lien
This is a legal claim on a property by someone the owner owes money to. In real estate transactions, the lender will attach a lien to the property title, saying any money from sale of the property will first be used to pay off the loan.

Prorations
In a real estate deal, the escrow agent will need to figure out the buyer’s and seller’s portions of expenses that get paid according to a certain date – eg taxes, interest or utility bills. The agent will pro-rate the expense, doing the arithmetic based on the transaction’s closing date.

Grant Deed
This is the actual document of the real estate sale. It states that the seller, or Grantor, is selling the property to the buyer, or Grantee. It states the specifics of the property, and that the seller has revealed any liens or encumbrances. The Grant Deed is usually notarized and recorded.

Title Insurance
This is an insurance policy for buyers that protects them against unanticipated defects in the property title. These could be anything from hidden liens, ex-spouses, unrevealed heirs, or recording errors, to forgery. Title insurance policies carry different specifics and exceptions, so examine yours carefully.

Closing Costs
The buyer and seller have expenses associated with the transaction other than that of the actual cost of the home. For example, the buyer has a variety of fees due for obtaining a new loan and the seller must pay commission to both agents.

Closing Disclosure
A form that provides the final details about the mortgage loan. It includes loan terms, projected monthly payments, and how much the extra fees will be.

Closing
This is the final meeting where the buyer and seller sign the necessary paper-work, complete the transaction, and release/take possession of the property. Usually the representing agents and attorneys attend.

Property Taxes
These are the taxes that are enforced by the city, town, county, and state government entities. These taxes are included in the total monthly mortgage payment and are held in escrow by the lender.

Please share with your clients, these terms are a great resource for all parties in a transaction to be familiar with.

Become a fan of American Trust Escrow on Facebook! 

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

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