Page 33 - FNTA Buyers Guide_2020

RED FLAGS IN THE ESCROW/TITLE PROCESS
A “RED FLAG” is a signal to pay attention! Below are some of the items which may cause delay or other problems within a transaction
and must be addressed well before the closing.
• Bankruptcies
• Business trusts
• Clearing liens and judgments, including child or spousal support liens
• Encroachments or off record easements
• Establishing fact of death— joint tenancy, trusts
• Foreclosures
• Physical inspection results— Encroachments, or off-record easements
RED FLAGS EXAMPLES
CC&R’S: These are standard. The CC&R’s should be provided to the buyer by escrow. The buyer should read these thoroughly, especially if improvements to the property are contemplated.
RED FLAG: Some CC&R’s prohibit certain types of improvements.
EASEMENTS: These are also standard. Most easements in newer subdivisions (20 years or less) are contained in the streets. Some subdivisions have nonexclusive easements over portions of the property for such things as maintenance of side yards, access to common areas (like golf courses), etc.
RED FLAG: If improvements are contemplated (such as construction of a pool or spa) the buyer should request the easements be plotted on a map to determine if there will not be any interference to contemplated improvements. Easements are very difficult to get removed and your client may be better off with another property if an easement interferes with his future plans for the property.
AGREEMENTS: Theses commonly take the form of road maintenance agreements, mutual easement agreements (like a shared driveway) or improvement agreements, and will bind the owner to certain actions. A copy of the agreement should be requested from title and provided to the buyer. It is the buyer’s responsibility to contact their own counsel if they do not understand how the agreement would affect them.
• Probates
• Power of Attorney—Use of, proper execution
• Proper execution of documents
• Proper jurats, notary seals
• Recent construction
• Transfers or loans involving corporations or partnerships
• Last minute change in buyers
• Last minute change in type of title insurance
coverage
TRUST DEEDS: These are common. Escrow will order a demand from the lender(s) which will allow the title company to pay off existing loan(s) using the proceeds from the new buyer’s loan (or proceeds if all cash).
RED FLAG: Watch out for old deeds of trust from a previous owner (or sometimes the current owner if he has refinanced). If you find a deed of trust listed that has already been paid, or that looks like it was taken out by a previous owner, call your escrow officer immediately. Your escrow officer will research the deed of trust, and take the necessary steps to either remove it from the public record or by acquiring an “indemnity” from the title company who paid off the old loan. Old deeds of trust with private party beneficiaries (an individual acting as lender, such as an old seller carry-back) are difficult to get removed, especially if several years have gone by since the loan has been paid off.
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