Tuesday, November 27, 2007

What is the Role of the Escrow Company in Real Estate Probate Sales?

What is the Role of the Escrow Company in a Probate Sale?

By Nancy Sanborn

The sale process for both probate and non-probate properties varies from state to state, but in California, the standard of practice includes escrow. Since escrow is all about details, it’s absolutely essential to work with a skilled escrow officer. This is especially true in the case of real property sales through probate, trust or conservatorship, in which deadlines and rules are unforgiving, and failure to follow them can undermine a transaction or mean very expensive delays.
While escrow officers and real estate agents do not have to have a special license or certification to handle probate or trust sales, their lack of knowledge or experience can be extremely expensive to the unsuspecting client.
The role of escrow is to serve as a neutral party in the transaction. This involves many vital steps, including holding secure any deposits that are made by potential buyers; holding, processing and issuing the reams of documents that are generated by the sale; and accounting for and distributing the proceeds of the sale to all of the parties at the closing.
Each party to a probate or trust sale has specific requirements and it is the role of escrow to record, coordinate and monitor compliance with all of them. In probate sales, the court has requirements above and beyond those of the seller and buyer, their representatives, the title company and the lender(s). Escrow prepares a set of instructions that includes all of the requirements of the sale and monitors the deadlines and exchange of paperwork for each requirement.
In California, various inspections (pest control, physical, geological, plus locally-mandated inspections) are required during a property sale. The real estate agent typically helps their client choose an inspector, orders the inspection, often attends the inspection on behalf of the client, and then advises the client regarding their options following the inspection. Each inspector is required to submit a report to the client and to escrow. The escrow officer has to verify receipt of all of the necessary reports and approval of the reports by the various parties before the sale can go through.
While the real estate agent is advising their client, marketing the property, advising other agents and their clients on how to make offers, working closely with the clients’ attorneys, and coordinating the offers in court, the escrow officer is making sure that reports are being approved and signed, that copies of documents are provided to the parties and that any problems discovered by the title search are promptly resolved for a timely closing.
Escrow also gets involved with lenders, insurance and taxes, providing necessary paperwork to the buyer’s lender, ordering insurance and tax records on the property, making sure a policy of title insurance is purchased by the buyer, and determining how insurance and taxes will be prorated at the time of closing.
If the property is a rental, escrow handles the proration of rents as well.
When the lender’s requirements have been met and the buyer’s loan is funded, and all of the other T’s are crossed and I’s are dotted, escrow submits paperwork to the county recorder’s office for official recording of the order or grant deed. Complete copies of all signed documents are provided to the parties and finally, escrow calculates and distributes the funds and the buyer gets the keys to their new property.
With so many participants, documents, deadlines and dollars involved in a probate or trust sale, it’s critical to work with real estate and escrow professionals who understand the probate process and have experience to back that knowledge. Don’t be afraid to ask hard questions or to ask for and check references before engaging the services of a real estate or escrow professional to handle your probate sale. Those answers can make the difference between a streamlined transaction and a nightmare.
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Nancy Sanborn is Executive Director of Prudential California John Aaroe's Probate and Trust Sales Division and a 30-year veteran of the competitive Los Angeles real estate marketplace.

Learn more about probate sales at http://www.sanbornteam.com/