Escrow Q & A - Tiempo Escrow II

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Frequently Asked Questions

Q. What should a real estate agent know about foreclosure?

A. The Home Equity Sales Contracts law imposes strict guidelines on the real estate agent for the sale of any residence while it is under foreclosure. The agent representing the buyer of such property must: 1) be licensed and bonded,
2) provide written proof to the seller, and 3) provide a statement, under penalty of perjury, as to licensure and bonding, to all parties to the contract prior to transfer of interest in the property. The law requires cancellation language and discloses in the contract, and a five business day right of recession by the seller, and also allows a seller to recover treble damages and attorney's fees in a suit against a buyer for certain violations of the law.

Q. What are the risks of a lease option agreement?

A. One common problem is in a falling real estate market when the lessee cannot obtain financing to exercise the option., and is unwilling to accept loss of a nonrefundable deposit. If the lessee defaults on the lease payments and the lessor seeks to evict, the lessee may contest the eviction and litigate. To reduce the risks: 1) include all terms of the agreement in a written document; make sure the lessor provides a T.D.S. to lessee; 2) us an experienced escrow company to handle the whole transaction including transfer of possession and the potential purchase escrow; 3) obtain advice from a real estate attorney and CPA; and 4) take time to understand and explain the transaction to the parties.

Q. What are some of the pitfalls for parents who are going on the deed to help an adult son or daughter buy a home?

A. Many parents assist their adult children in buying their first home, either by making a gift of the down payment or a loan for part or all of the down payment. To co-sign on the mortgage, parents may find their own borrowing ability impaired since the remainder of the debt on the child's house will show up as their debt on their credit report. If the child defaults, the default could ruin their credit.

Q. When property values in a neighborhood have risen, does this mean that the home owner can drop his private mortgage insurance if the rise in value makes the equity in the home 20% or more?

A. The lender's decision may depend on whether or not all payments have been made on time. It is wise for the home owner to contact his lender to see if this insurance can be dropped, since most lenders allow the insurance to be dropped if the loan-to-value declines to 80%. If the non-FHA mortgage has been sold in the secondary mortgage market to Fannie Mae or Freddie Mac, the private insurance can be dropped after two years.