The REO Transaction Process Explained

REO (Real Estate Owned) properties make up a significant portion of the inventory in the Puget Sound real estate market. As a reality of the current real estate industry REO transactions draw plenty of confusion and frustration for many who are involved. Here at Ticor we’ve been handling a steady volume of REO properties and deal with some large REO accounts. Based on our experience with REO transactions we’ve produced the following outline.

Please understand the REO process described below represents an “average” experience and just like any real estate transaction many factors can affect time frames and conditions.  For more details, click the following link for hot tips on working with escrow on an REO closing.

The Beginning – Mutual Acceptance

The beginning is signified by mutual acceptance of the Purchase and Sales Agreement

Day 1 Escrow is opened and Title is OrderedEarnest Money is deposited
Day 2-3 Deed is prepared and sent to SellerBuyer’s vesting info is taken from the purchase contract, if incorrect the Seller will request proper vesting and an addendum will be required

Buyer’s Lender requests fees from Escrow

Escrow orders HOA, Lien Demands and other money matters associated with the property

Day 4-5 Seller will begin requesting weekly status updates from Escrow regarding specifics like the appraisal, inspections, earnest money deposits, underwriting criteria for buyer’s lender, etc.

The Middle – Underwriting (10-20 Business Days)

For the next 2-4 weeks the Buyer’s Lender will work on underwriting the loan for the transaction and await approval to move forward.

The End – Closing Process (3-7 Business Days)

Day 1 Buyer’s Lender delivers loan documents to EscrowEscrow completes an estimated HUD and sends to Buyer’s Lender for approval
Day 2-3 Buyer’s Lender approves estimated HUD and notifies EscrowUpon Lender HUD Approval, Seller’s HUD is sent for signature

Schedule Buyer to sign loan documentation

Day 3-6 Signed Buyer’s documents are received back at EscrowFunding Package is assembled and sent to Buyer’s Lender for final funding approval pending Seller Signed HUD

Seller Signed HUD is received by Escrow and forwarded to Buyer’s Lender to accompany the Funding Package

 

If the Buyer’s Lender is satisfied with the funding package and conditions the transaction will fund, the Deed will subsequently be recorded and the transaction will close.

 

Questions or thoughts?  Please leave a comment below!

What is a Closing Protection Letter in Washington State?

A closing protection letter (“CPL”) is a written indemnity agreement requested by a lending institution or bank (“lender”) and issued by the title insurance company (“underwriter”) that will issue a loan policy insuring the lender. CPLs provide specific assurances to the lender which safeguard them in the event that dishonesty, fraud, or negligence cause failure of the escrow agent to properly disburse the closing or escrow funds in a real estate transaction. A CPL also provides assurances to the lender that their written closing instructions have been complied with.

CPLs are issued in most states and some of them restrict, limit or even prohibit their use. According to Washington State law (RCW 48.05.330) CPLs may only be issued when a title insurance company or its issuing agent is handling the closing.

Occasionally a lender will request a CPL when the closing is being handled by an outside party (i.e. independent escrow company or attorney) and not the underwriter or its issuing agent. In these cases the CPL can only be issued after a sub-escrow is opened and the underwriter or its agent has been instructed to accept lender loan funds, collect title related fees and premiums, the sub-escrow fee, payoff all liens that appear in the preliminary title commitment (i.e. “title report”) and forward the balance of funds to the outside party. The CPL does not protect against acts of the outside party.

Closing protection letters are largely misunderstood and misused. A CPL is not insurance and its application is limited. However, the lender”s title insurance policy does contain provisions which, among other things, insure the lender that it has an enforceable and valid lien on the subject property. Furthermore, the escrow agent must also have errors and omission insurance which provides protection against fraudulent or dishonest acts as well as unintentional errors and omissions.

Achieving Higher & Greener Standards in Real Estate

Uniform property informationQ: Is there an organization working on standardizing and streamlining the property records & transaction process in the United States so that we can have more efficient and greener real estate transactions in the future?

A: Why yes! In fact PRIA (Property Records Industry Association) is devoted to working on such things!

And we have had the privilege of having a brief phone interview with one of PRIA’s advisory council members, Mark Monacelli. In 2007 Mark was recognized with the PRIA Carl R. Ernst Award for Unique Industry Leadership. In the interview below, Mark explains what they do and how they are working to create higher and greener standards in the Real Estate industry.

PRIA is a non profit that develops standards and best practices on specific subjects within the Real Estate Industry. They create standards for a wide range of things including document formatting, eRecording standards, and a uniform set of standards from loan origination to closing for all states in the US.

If you have ideas, questions, or feedback on how you think the Real Estate Records process could be more efficient, please chime in by commenting below.

The Anatomy of a Non-Judicial Foreclosure in Washington State

Real estate loans (usually in the form of deeds of trusts) can be foreclosed through court proceedings (a judicial foreclosure) or outside of the court’s involvement (a non-judicial foreclosure) in the State of Washington.  If a deed of trust contains a clause which provides “power of sale” to the trustee (a designated party listed on the deed of trust) and a statement which confirms that the property is not being used principally for agricultural purposes it may be foreclosed non-judicially. Otherwise it must be foreclosed judicially.

Here’s what happens in a non-judicial foreclosure:

  • Loan payments are not made and a default occurs.
  • Once a default has occurred the lender (or the trustee) sends a written notice of default to the borrower by first class mail and either registered or certified mail. The lender must also post a copy of the notice in a conspicuous place on the premises or personally serve a copy to the borrower.
  • If the borrower does not pay the outstanding amounts (i.e. cure the default) within 30 days of the issuance of the notice of default the lender may authorize the trustee to issue a notice of sale. The sale may not take place less than 120 days from the issuance of the notice of default.
  • If the borrower does not cure the default the trustee sends a written notice of sale to the borrower by first class mail and either registered or certified mail. The notice is also sent to parties with recorded/filed monetary encumbrances (i.e. deeds of trust, mechanics liens, judgments, etc…) and the plaintiff(s) in any filed court action and any party who has recorded a request for notice as specified by law. The trustee must also post a copy of the notice in a conspicuous place on the premises or personally serve a copy to any occupant. The notice is also recorded with the county auditor and must be recorded at least 90 days prior to the sale date.
  • The sale (i.e. trustee sale) may be halted up to 11 days before the sale date if the default is cured or the loan is fully paid. After that time the lender does not have to agree to accept payment.
  • If the sale is not postponed (by the borrower filing bankruptcy) the trustee will “cry” (i.e. conduct) the foreclosure sale in the public place at the time and location specified in the notice of sale. The sale is usually held on the front steps of the county courthouse but it could be held in any location. The sale must be held on a Friday between the hours of 9 a.m. and 4 p.m. If the Friday is a legal holiday the sale will take place on the following Monday.
  • Once the sale takes place the deed of trust is foreclosed. A Trustee’s Deed is recorded soon afterwards and the successful bidder becomes the owner.

Best Regards,
Gregg Colbo
Sr. Underwriter
Ticor Title

What are the typical closing costs? And who traditionally pays them?

Click the image to download a guide to customary closing costs.

Purchasing a home generally revolves around two things: emotion and money. In this post we’d like to address the money portion, in particular we’ll touch on closing costs. Customary closing costs are a huge part of buying a home and during the purchase of a home you’ll find escrow plays a huge part in calculating these closing costs.

Definition of Closing Costs: Fees and expenses, over and above the price of the property, incurred by the buyer and/or the seller in the property ownership transfer. Examples are title searches, closing services, loan fees and deed filing fees. Also called settlement costs.

Per the definition you can see there are two sides (buyer and seller) to the equation when determining closing costs. Below is a simple customary closing cost list. Keep in mind these are typical, but should not be considered hard fast rules, feel free to consult your real estate agent for more detail.

Typical Closing Costs for a BUYER:

  • One-half of the escrow fee (according to contract)
  • Lender’s title policy premiums
  • Document preparation (if applicable)
  • Tax pro-ration (from date of acquisition)
  • Recording charges for all documents in buyer’s names
  • Home Owner’s insurance premium for first year
  • Home Warranty (according to contract)Preview
  • Inspection fees (according to contract): roofing, property, geological, pest, etc.
  • All new loan charges (except those required by lender for seller to pay)
  • Interim interest on new loan from date of funding to first payment date

Typical Closing Costs for a SELLER:

  • One-half of the escrow fee (according to contract)
  • Work orders (according to contract)
  • Owner’s title insurance premiums
  • Real estate commission
  • Any judgments, tax liens, etc. against the seller
  • Any unpaid Homeowner Association dues
  • Home Warranty (according to contract)
  • Any bonds or assessments (according to contract)
  • Any loan fees required by buyer’s lender (according to contract)
  • Recording charges to clear all documents of record against seller
  • Payoff of all loans in seller’s name (or existing loan balance being assumed by buyer)
  • Interest accrued to lender being paid off, reconveyance fees and any prepayment penalties
  • Excise Tax (% based on county and sale price)

Buying or selling your home can be one of the biggest financial decisions of your life.  But knowing what to expect by being informed can make the process easier for you!

To download a single page guide to customary closing costs, click here!

The Two Ways to Order Title and Escrow Online

Two are better than one… (even when it comes to ordering title and escrow online)

We offer two ways to order title and escrow online.

Ordering title and escrow online is not a new thing for real estate professionals in Seattle, Tacoma, and the surrounding communities. But for us at Ticor, allowing our clients to place a title and escrow order online without logging in to myticor.com is a new thing.

In the past, we have required our clients to create an account on our site that stores basic information like what real estate brokerage they are affiliated with, their phone number, email address, and who their representative is at Ticor, etc. In reality, this is the most efficient way for users to use our website. When logged in, placing a title and escrow order is quicker because the order forms will already be populated with the Real Estate agent’s or Loan Officer’s contact information. This saves a bunch of time keying in basic info when it’s time to order title and escrow.

But, we realize that not everyone wants to register on our website and remember a username and password. So we have created a title and escrow order form that is available for users that are not logged in to Ticor’s website.  There are a few required fields that are necessary for us to identify who is placing the order of course.  But the rest of the form has the same familiar fields that our loyal clients are accustomed to.

Thanks for the orders!
Matt Sweet
Marketing / Technology Integration
Ticor Title

How Green is your Escrow Transaction?

Ticor is getting GreenerWe’re very happy to announce that we have recently fulfilled the requirements for becoming certified green in our Title & Escrow Plant in Renton and in our Escrow branches around the Puget Sound!  Quite simply, that means we are using technology to save paper, recycling more, and implementing more business practices that Reuse, Reduce, and Recycle!

Ticor has certified Green branches in the following locations:

The Ticor Dashboard is a prime example of one of the technologies that we use to reduce waste and facilitate a more efficient communication flow with all parties involved in escrow transactions. For a brief demo of our dashboard, click here.

Upon hearing of our newly minted status as Greener Title & Escrow people, one of our clients responded so positively, we decided to do an impromptu video to capture some of his enthusiasm about a more sustainable approach to handling real estate transactions!