During the Escrow Period

What Happens in Escrow?

Buyer Financing

The buyer’s ability to finance the property is an important contingency in most residential transactions. Buyers must act in good faith and use best efforts to obtain a loan if the sale is contingent upon obtaining a loan. Buyers often seek pre-approval from a lender prior to writing an offer. Sellers often demand such letters as part of the transaction process. Sellers should discuss the use of pre-approval letters, including such common forms as the Oregon Residential Loan Application Status Report, with their agent.

A copy of the Oregon Residential Loan Application Status Report form can be found at: http://www.OregonRealtors.org/.docs/pg/400/rid/10608/f/Oregon_Loan_Application_Status_Report.pdf

http://www.oregonrealtors.org/

A pre-approval letter should state that the lender has reviewed the buyer’s credit report, income requirement and cash to close. The lender then pre-approves the buyer for the loan, subject to an acceptable appraisal of the property. The appraiser will normally work for the lender, not the seller. Appraiser certification and licensure can be checked at: http://www.oregon.gov/ACLB/index.shtml

Once the appraisal has been received, the loan underwriter authorizes final loan approval. Most residential sale agreement forms contain a provision that allows the buyer to cancel the transaction if the property appraises for less than the purchase price. Only when the appraisal and underwriting process is completed will an actual loan be secured.

The entire financing process normally takes approximately 30-45 days. If the bank or appraiser request repairs before they will fund, the process can take longer or extra negotiations may need to occur.

Title Report and Commitment

Most real estate transactions are contingent on the buyer’s approval of the preliminary title report and any conditions, covenants and restrictions (CC&Rs) attached to the property. The seller will be required to obtain, and pay for, a report and provide it to the buyer. The report, produced by a title insurance company, contains important information that should be reviewed by the seller, if possible, prior to marketing.

In particular, a title report will list certain “exceptions” to the policy the title company will issue for the property. Exceptions can make the seller’s title undesirable or even unmarketable. Title exceptions should, therefore, be carefully reviewed. General information about title issues can be found at: http://www.titlelawannotated.com. Questions about the title report and associated documents can be directed to the title or escrow officer issuing the report or to the seller’s attorney. Review of title reports for legal deficiencies involves the practice of law and is beyond the expertise of a real estate licensee.

Homeowners’ Association Documents, Covenants, Conditions and Restrictions

Covenants, conditions and restrictions, called “CC&Rs,” are formally recorded private limitations on the right to use real property. Often, but not always, CC&Rs are enforced by a homeowners’ association. Review of the CC&Rs is typically part of a real estate sale. Although real estate licensees are familiar with common CC&R provisions, determining the legal effect of specific provisions is considered the practice of law in Oregon and, therefore, beyond the expertise of a real estate licensee.

Homeowners’ association rules and regulations can significantly impact a buyer’s plans for the property and, therefore, affect price or desirability. Planned communities and condominiums are very likely to have detailed homeowners’ association governing documents, mandatory fees and ongoing homeowner obligations. Governing documents, fees and homeowner obligations should be reviewed by the seller prior to marketing so that any potential issues may be identified. For more information on homeowner’s associations and CC&Rs, visit http://www.realtor.com/BASICS/condos/ccr.asp.

Homeowners’ Insurance

The insurance claims history for a home may affect the cost of homeowner’s insurance, or even its insurability. Most insurance companies use a database service called the Comprehensive Loss Underwriting Exchange (CLUE) to track claims made. Depending on the content of the CLUE report, and the insurance company’s policy, home insurance may prove more difficult to get than expected.

Sellers who have made claims on their homeowner’s insurance (especially for flooding or water intrusion) may want to check their CLUE Report prior to marketing the property to make certain buyers will not have difficulty obtaining insurance. Homeowners can obtain a copy of the report for their property online at: http://www.choicetrust.com. More information on homeowners insurance in Oregon can be found at: http://www.insuranceoregon.org.

Some Content taken from the Oregon Property Sellers Advisory at http://www.oregonrealtors.org/.docs/pg/10713#topic8.

Buyer Financing

The buyer’s ability to finance the property is an important contingency in most residential transactions. Buyers must act in good faith and use best efforts to obtain a loan if the sale is contingent upon obtaining a loan. Buyers often seek pre-approval from a lender prior to writing an offer. Sellers often demand such letters as part of the transaction process. Sellers should discuss the use of pre-approval letters, including such common forms as the Oregon Residential Loan Application Status Report, with their agent. A copy of the Oregon Residential Loan Application Status Report form can be found at: http://www.OregonRealtors.org/.docs/pg/400/rid/10608/f/Oregon_Loan_Application_Status_Report.pdf

http://www.oregonrealtors.org/

A pre-approval letter should state that the lender has reviewed the buyer’s credit report, income requirement and cash to close. The lender then pre-approves the buyer for the loan, subject to an acceptable appraisal of the property. The appraiser will normally work for the lender, not the seller. Appraiser certification and licensure can be checked at: http://www.oregon.gov/ACLB/index.shtml

Once the appraisal has been received, the loan underwriter authorizes final loan approval. Most residential sale agreement forms contain a provision that allows the buyer to cancel the transaction if the property appraises for less than the purchase price. Only when the appraisal and underwriting process is completed will an actual loan be secured.

The entire financing process normally takes approximately 30-45 days. If the bank or appraiser request repairs before they will fund, the process can take longer or extra negotiations may need to occur.

Title Report and Commitment

Most real estate transactions are contingent on the buyer’s approval of the preliminary title report and any conditions, covenants and restrictions (CC&Rs) attached to the property. The seller will be required to obtain, and pay for, a report and provide it to the buyer. The report, produced by a title insurance company, contains important information that should be reviewed by the seller, if possible, prior to marketing.

In particular, a title report will list certain “exceptions” to the policy the title company will issue for the property. Exceptions can make the seller’s title undesirable or even unmarketable. Title exceptions should, therefore, be carefully reviewed. General information about title issues can be found at: http://www.titlelawannotated.com. Questions about the title report and associated documents can be directed to the title or escrow officer issuing the report or to the seller’s attorney. Review of title reports for legal deficiencies involves the practice of law and is beyond the expertise of a real estate licensee.

Homeowners’ Association Documents, Covenants, Conditions and Restrictions

Covenants, conditions and restrictions, called “CC&Rs,” are formally recorded private limitations on the right to use real property. Often, but not always, CC&Rs are enforced by a homeowners’ association. Review of the CC&Rs is typically part of a real estate sale. Although real estate licensees are familiar with common CC&R provisions, determining the legal effect of specific provisions is considered the practice of law in Oregon and, therefore, beyond the expertise of a real estate licensee.

Homeowners’ association rules and regulations can significantly impact a buyer’s plans for the property and, therefore, affect price or desirability. Planned communities and condominiums are very likely to have detailed homeowners’ association governing documents, mandatory fees and ongoing homeowner obligations. Governing documents, fees and homeowner obligations should be reviewed by the seller prior to marketing so that any potential issues may be identified. For more information on homeowner’s associations and CC&Rs, visit http://www.realtor.com/BASICS/condos/ccr.asp.

Homeowners’ Insurance

The insurance claims history for a home may affect the cost of homeowner’s insurance, or even its insurability. Most insurance companies use a database service called the Comprehensive Loss Underwriting Exchange (CLUE) to track claims made. Depending on the content of the CLUE report, and the insurance company’s policy, home insurance may prove more difficult to get than expected.

Sellers who have made claims on their homeowner’s insurance (especially for flooding or water intrusion) may want to check their CLUE Report prior to marketing the property to make certain buyers will not have difficulty obtaining insurance. Homeowners can obtain a copy of the report for their property online at: http://www.choicetrust.com. More information on homeowners insurance in Oregon can be found at: http://www.insuranceoregon.org.

Some Content taken from the Oregon Property Sellers Advisory at http://www.oregonrealtors.org/.docs/pg/10713#topic8.