Here are steps you may take that will eliminate these last minute surprises which can and often do occur at the eleventh hour on probate and other real estate sales and financing.
Most all closing problems can be avoided or better managed by involving yourself in the process of choosing the escrow and escrow officer long before taking on a given legal matter. Using a Realtor with probate experience can help you choose the right escrow company.
Does it make a difference who does your escrow? There are considerable differences between the entities which may perform your escrow and the margin of safety and integrity provided.
Independent escrow companies have by far the most stringent regulations for performing escrow services and are regulated by the Calif. Department of Corporations.
Real estate broker owned escrows operate under the brokers real estate license. Your transaction is as safe and secure as the financial condition of its principal. Compliance falls under jurisdiction of the Calif. Department of Real Estate.
Title companies are regulated by the Calif. Dept. of Insurance and subject to internal audit only; only as safe as the financial stability of the company providing the service.
Bank owned escrow operate under the license of the State Dept. of Banking. While offering good safety record, many banking institutions are phasing out this service.
As you can see, each of these are governed by a different regulatory agency and each has its own set of qualifications to meet for that agency. This also suggests that each may have its own respective competency level, depending on the experience of the escrow officer and the frequency of encountering probate transactions.
Escrow’s Role & Responsibilities
While the escrow holder’s duty seems simple when looked at from outside, they quickly become far more difficult given the conditions that they must operate within. These are the typical duties of an escrow officer:
- Acts as an impartial holder (depository) of documents and funds
- Process and coordinate the flow of documents and funds
- Respond to lender’s requirements (conditions)
- Keep all parties informed of progress of the escrow
- Obtain approval of reports and documents from parties, as required per escrow instructions
- Prorate and adjust insurance, taxes, rents, etc.
- Secure a title insurance policy
- Record documents relating to property transfer (grant deed or order) and loan documents
- Maintain security and accountability of all moneys owed and owing
What Can Go Wrong (Meet Mr. Murphy)
Good intentions and faulty assumptions often spell out why real estate transactions have closing problems. While not every mishap can be avoided, most can be eliminated long before a listing for sale of a buyer’s offer is accepted.
Using the services of escrow service which is not experienced with all forms of probate realty transactions is a formula for disaster. Few escrow officers will volunteer their lack of knowledge and may erroneously that no substantial differences exist between probate and a typical sale or refinance. The first clue that the escrow officer doesn’t understand your transaction should be when he or she asks: “Who’s the probation officer?” It is better to query escrow officers about their experience with probate before opening escrow by using open ended questions such as asking them to describe the most difficult probate transaction they have encountered and how their services helped save it.
Title related issues frequently tops the list of surprises. When title vests differently than expected, such as when a spouse or other relative is shown to have an ownership interest, the problem may be resolved by a simple action such as filing an affidavit death of joint tenant or a quitclaim deed. However, when a person or entity vests on title as co-owner (or sole owner!) these problems make require months to research and resolve.
Surprise liens are also a bit of a shock to a seller who believes title to property to be free and clear of all liens. Loans from private lenders paid but not reconveyed can require several months of valuable time to clear up. The likelihood of such title problems will not be disclosed in a simple title profile, either. Also, determine what documents (Court orders, etc.) your title company will require prior to issuing a title policy. Since each title company is different, develop a relationship with a specific title company well in advance and know their guidelines. Anticipating their requests is your best assurance of obtaining a title policy on a timely basis.
Finally, don’t assume that the realty agent will know what remedial actions to take, if needed. Lender delays can and do play havoc with the simplest transactions, too. If at all possible, discourage the principals from working with Realtors or lenders who are inexperienced in selling or financing real property currently held in probate.
Why YOU Must be the Driver of this Bus
Before your next transaction, you’ll save yourself and your client much grief and frustration by choosing an escrow company and real estate probate specialist well in advance of your next transaction. Developing a business relationship can assure that escrow has a long term stake in serving your best interests. Here’s a summary of points to consider:
- YOU choose the escrow service, not the Realtor
- Develop a business relationship with that escrow service
- YOU choose the title insurance company and develop a working relationship with their staff
- Purchase a preliminary [title] report (not a profile) well in advance of the transaction
- Use checklists to assure that you have complied with your title company’s guidelines
- Don’t assume that all realty agents are probate real estate experts Stay involved with the process!
The choice of an expert team can have a profound affect on the outcome of your probate real estate transaction.
Nicole Solari, Realtor®, SRS® CPRES®
RE|MAX Gold BRE# 01952567
Nicole Solari, Realtor is a real estate probate specialist serving all of Solano County including Fairfield, Vacaville and Vallejo. If you're looking for a Realtor who understands the probate system call Nicole!