Those of us who work in the industry use acronyms and words that some of our clients may struggle to understand. If you have ever scratched your head while listening to escrow officers, title company representatives or real estate agents use confusing phrases, this escrow dictionary is for you!
Escrow
A deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a particular condition or event. The California Escrow Law– Section 17003 of the Financial Code – provides the legal definition. The principals to the escrow – buyer, seller, lender, borrower – cause escrow instructions, most usually in writing, to be created, signed and delivered to the escrow officer. If a broker is involved, he will normally provide the escrow officer with the information necessary for the preparation of the escrow instructions and documents.
Escrow Officer
This is the person who will process the escrow, in accordance with the escrow instructions. When all conditions required in the escrow can be met or achieved, the escrow will be “closed.” Each escrow, although following a similar pattern, will be different in some respects, as it deals with your property and the transaction at hand.
The duties of an escrow holder include:
- Following the instructions given by the principals and parties to the transaction in a timely manner.
- Handling the funds and/or documents in accordance with instructions.
- Paying all bills as authorized; responding to authorized requests from the principals.
- Closing the escrow account, only when all terms and conditions have been met.
- Distributing the funds in accordance with instructions and providing an accounting for same – the Closing or Settlement Statement.
1031 Exchanges
A swap of one investment property for another that allows capital gains taxes to be deferred. The term, which gets its name from IRS code Section 1031 is bandied about by realtors, title companies, investors, and soccer moms. Some people even insist on making it into a verb, as in: “Let’s 1031 that building for another.”
Business Sales/Bulk Sales
Sometimes called a bulk transfer, this refers to the process by which a business sells all or nearly all of its inventory to a single buyer and such a sale is not part of the ordinary course of business. We also handle liquor license transfers.
Capital Gains Taxes
A tax on the growth in value of investments incurred when individuals and corporations sell those investments. When the assets are sold, the capital gains are referred to as having been realized. The tax doesn’t apply to unsold investments or “unrealized capital gains,” so stock shares that appreciate every year will not incur capital gains taxes until they are sold, no matter how long you happen to hold them.
Closing Statement
An accounting, in writing, prepared at the close of escrow which sets forth the charges and credits of your account. The items shown on the statement will reflect the purchase price, the funds deposited or credited to your account, payoffs on existing encumbrances and/or liens, costs for all services and a determination of the funds you are entitled to at the close of the escrow.
FSBO (For Sale By Owner)
Another type of transaction for which we manage escrows, this is a method of listing a property for sale. When a house has an FSBO listing, it means the owner is selling the property without the help of a listing agent or broker. One reason sellers choose this option is to avoid paying the real estate agent commission on the sale.
Notary Services
An official of integrity appointed by state government —typically by the secretary of state — to serve the public as an impartial witness in performing a variety of official fraud-deterrent acts related to the signing of important documents. These official acts are called notarizations, or notarial acts. Notaries are publicly commissioned as “ministerial” officials, meaning that they are expected to follow written rules without the exercise of significant personal discretion, as would otherwise be the case with a “judicial” official. At Eastland Escrows, we use notaries onsite as well as mobile notaries, who travel directly to the clients’ home or place of business.
Mobile Homes
A large trailer or transportable prefabricated structure that is situated in one particular place and used as a permanent living accommodation. We service escrow accounts used to purchase this type of home.
Probate
The legal process of administering a person’s estate after their death. If you have a last will and testament, probate will involve proving that your will is legally valid, executing your instructions and paying applicable taxes. We manage escrow funds for probate.
Residential and Commercial Sales and Refinance
To finance something again, typically with a new loan at a lower rate of interest. When interest rates dip, as they have been doing over the past several months, refinances become popular. We manage escrow refinances.
Reverse Mortgages
A mortgage loan, usually secured by a residential property, that enables the borrower to access the unencumbered value of the property. The loans are typically promoted to older homeowners and typically do not require monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner’s insurance. We manage escrows for reverse mortgages.
Short Sale
In real estate, this refers to a financially distressed homeowner who decides to sell their property for less than the amount due on the mortgage. The buyer of the property is a third party (not the bank), and all proceeds from the sale go to the lender. A short sale must be approved of by the bank which holds the loan. The lender either forgives the difference or gets a deficiency judgment against the borrower requiring them to pay the lender all or part of the difference between the sale price and the original value of the mortgage. In some states, this difference must legally be forgiven in a short sale.
Title Insurance
Usually obtained when real property is purchased. The policy of title insurance insures the owner and/or the lender of ownership of the property. There are various coverages afforded, but a basic policy ensures that the buyer is the owner and that any lender shown on the policy is an “insured” lender.
Vacant Land Sales
This is the sale of land without improvements. We manage escrow accounts for this type of transaction.
ABOUT EASTLAND ESCROWS IN COVINA, CALIFORNIA
Eastland Escrows, Inc. is an independent escrow company based in Covina, CA serving all of Southern California since 1973. With over a 100 years of combined experience, we pride ourselves in working like a dog on behalf of all our clients! We have closed thousands of escrow transactions from real estate sales and refinances to business sales.
Eastland Escrow Inc. 