Housing Market: 2000-2008 Review

During the first half of the past decade, California experienced a remarkable period in which home values began rising at incredible rates. By 2005, some markets saw home values double and triple as buyers flooded the market, enticed by easy financing and the promise that values would continue to increase in California. While there was talk of a housing bubble by some, there was an equally convincing group that suggested that California real estate values would only go up as more and more people flocked to the Golden State. However, soon cracks started appearing in the market and the boom was followed by a nationwide housing market bust of historic proportions that eventually spread fear among holders of stocks, corporate bonds, and government and municipal bonds. Credit-default swaps threatened to destroy insurance giant AIG, the company having been ultimately saved by a titanic government bailout. Mortgage giants such as Countrywide, Wachovia, and Washington Mutual, facing insolvency, were bought by stronger competitors, who were also severely weakened and ultimately bailed out by the U.S. government. Investment banks, such as Bear Stearns and Lehman Brothers, which were century-old beacons of high finance and trade, were left bankrupt. Even companies such as General Motors and Chrysler Motors, far removed from the housing market, were driven to
declare bankruptcy. Arguably further removed still, international markets all over the globe also crashed.

The history and many of the causes of the biggest housing crash since the Florida Land Crash of the 1920s are becoming well-understood. The crisis originated with the Federal Government’s Community Reinvestment Act, which encouraged home ownership and a monetary policy that kept interest rates historically very low. These policies caused real estate values to begin a steady ascent that progressively picked up steam. Wall Street was making a lot of money packaging and selling mortgage-backed securities. Credit agencies determined those investments to be very safe, and the mortgage bonds received high credit ratings. The demand for such bonds seemed endless. Banks and mortgage brokers discovered that they could make very high profits originating loans. So the competition to capture market share gave birth to creative loan products such as teaser rates (where loan rates are low for a short time and adjust to market rates at a later date), option adjustable rate mortgages (which gave the borrower the option to make less than a full payment), and Alternate-A stated income loans (where loans were underwritten based on unverified statements of income and were nicknamed “liar-loans”). Prior to 2003, those Alternate A loans, which allowed for loans to be underwritten less stringently, were a small portion of the loan market. But between the years of 2003 and 2006, those loans increased by an incredible 340%.i In higher-priced markets, such as California, Option ARM loans (those in which a borrower could pay an amount below that required to pay even the interest, and could allow the difference to be added to the loan) were also very popular. Influenced by loan brokers and reassured by climbing values, appraisers became overly-optimistic with regard to valuations. The lucre from those loans wrought fraud and misrepresentation throughout the system, since those loans were sold to Wall Street and no risk exposure remained with most lenders involved in their origination. When the demand for those products subsided and the news of the crumbling housing market spread, the value of those mortgage-backed bonds crashed. Seemingly overnight, the mortgage-origination business virtually disappeared and was irrevocably changed. Many businesses related to lending went bust. The website ml-implode.com began tracking the instances of mortgage lender failures. As of this writing, the number was 374. Nearly 300 closed during the years 2007 and 2008.

From our analysis, it is evident that the California real estate market peaked in 2005 and 2006, then started showing signs of weakness in mid-to-late 2006. In the latter months of 2006, it was evident that the housing bubble had popped. Sellers began to reduce their prices. Unsold inventory began to build. Where there was smoke in 2006, there was fire in 2007. Home buyers had vanished and sellers were unable to sell their homes at once-prevalent high prices. The inventory of unsold homes began to pile up at a rapid rate as private sellers and banks with newly acquired foreclosed homes flooded the market. Absorption rates for sales of homes plummeted. Financing began to dry up as banks reduced their exposure by withdrawing from the market and tightening lending standards. Buyers who wanted to buy were unable to act, limited by the availability of favorable financing. Throughout 2007 and 2008, the housing market seemed to be in free fall. Some parts of California saw home values decline by 75%. The declines were most evident and severe in areas where the most affordable homes could be found, and where home prices were within reach of the lower tiers of income earners and investors. The declines were also plaguing areas where developers had overbuilt small communities on the edges of cities, and prescient builders began to liquidate new tract homes. But the symptoms soon spread to the upper levels of the housing market. The market crash in 2008, and the credit crisis that erupted in the fall of that year, caused the crash to affect the wealthiest individuals. Consequently, all rungs of the housing ladder, including homes in the top tier priced at over $1 million, were negatively affected. In 2005, the number of $1 million-plus homes sold was 54,773. In 2006, it was 50,010; while in 2007, it was 42,506. Then, in 2008, it dropped 42.5% to 24,436.ii So although top-tier housing was resilient to price declines during the initial housing correction, during 2008 and 2009 significant weakness developed to cause foreclosures and price corrections to be manifested within this upper-level price market.

Published with permission from "A STATE IN TURMOIL: Why The California Residential Real Estate Market Has Just Begun To Fall" By Eli Tene, Gil Priel and Jeff Woodsworth. This text may not be redistributed or reproduced without the written consent of its authors.

Mortgage Workouts, Now Tax-Free for Many Homeowners

Homeowners whose mortgage debt was partly or entirely forgiven may be able to claim special tax relief by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attaching it to their federal income tax return.

Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude certain debt forgiven on their principal residence up to $2 million ($1 million for a married person filing for a separate return.

for additional information visit the IRS website
IRS Publication 4705 (2-2009)
Catalog number 51765 C

Our Services

Escrow of the West is one of the leading independent escrow companies in Southern California. We are licensed by the Department of Corporations and a member of the Escrow Agents Fidelity Corporation. Our principals bring with them more than 70 years of real estate experience in both the residential and commercial sectors. This is why top brokerages, lenders, real estate agents, and corporate clients continue to choose Escrow of the West as their trusted escrow provider. At Escrow of the West, we view each transaction as a partnership. Adhering to the “customer comes first” philosophy, we employ the most dedicated and highly qualified team of senior escrow officers, sales professionals and support staff. We pride ourselves in upholding the highest ethical standards, utilizing cutting-edge technology, and expediently closing each transaction.
At Escrow of the West, we constantly strive to perform at the highest level of service in a consistent effort to surpass our customers' expectations.

• Independent Advantage


• Trust Sale


• Technology


• Experience & Knowledge


• Residential Re-Sale


• Commercial & Industrial


• Investment Properties


• New Home Sales


• Refinance


• Short Sales


• R.E.O.


• Holding Escrows


• Probate/Estate Sales


• Trust Sales

Trust Sale

When a trustee is directed to sell a property as a condition of a trust, such transactions often require the prolonged holding of sale proceeds for the benefit of the beneficiaries. By working with Escrow of the West, you can rest assured in knowing that we have the expertise to adhere to the trust document and disburse according to those terms.

Holding Title

How You Take Title

Advantages and Limitations
Title to real property in California may be held by individuals, either in Sole Ownership or in Co-Ownership. Co-Ownership of real property occurs when title is held by two or more persons. There are several variations as to how title may be held in each type of ownership. The following brief summaries reference eight of the more common examples of Sole Ownership and Co-Ownership.

Sole Ownership

A Single Man/Woman
A man or woman who is not legally married. Example: John Doe, a single man.

An Unmarried Man/Woman
A man or woman, who having been married is legally divorced or, a man or woman, having been in a registered domestic partnership that has been legally dissolved. Example: John Doe, an unmarried man.

A Married Man/Woman or Registered Domestic Partner,
As His/Her Sole And Separate Property
When a married man, woman or a registered domestic partner wishes to acquire title in his or her name alone, the spouse/partner must consent, by quitclaim deed or otherwise, to transfer thereby relinquishing all right, title and interest in the property. Example: John Doe, a married man, as his sole and separate property; or Jane Smith, a domestic partner, as her sole and separate property.

Co-Ownership

Community Property
The California Civil code defines community property as property acquired by husband and wife, or by either. Real property conveyed to a married man or woman is presumed to be community property, unless otherwise stated. Under community property, both spouses have the right to dispose of one half of the community property. If a spouse does not exercise his/her right to dispose of one-half to someone other than his/her spouse, then the one-half will go to the surviving spouse without administration. If a spouse exercises his/her right to dispose of one-half, that half is subject to administration in the estate. Example: John Doe & Mary Doe, husband and wife as community property. Example: John Doe & Mary Doe, husband and wife. Example: John Doe, a married man. Registered domestic partners shall have the same rights and protections.

Joint Tenancy
A joint tenancy estate is defined in the Civil Code as follows: A joint interest is owned by two or more persons in equal shares, by title created by a single will or transfer, when expressly declared in the will or transfer to be joint tenancy. A chief characteristic of joint tenancy property is the right of survivorship. When a joint tenant dies, title to the property immediately vests in the surviving joint tenant(s). As a consequence, joint tenancy property is not subject to disposition by will. Example: John Doe and Mary Doe, husband and wife, as joint tenants; or John Doe and Jane Smith, registered domestic partners, as joint tenants.

Tenancy In Common
Under tenancy in common, the co-owners own undivided interests; but unlike joint tenancy, these interests need not be equal in quantity or duration, and may arise at different times. There is no right of survivorship; each tenant owns an interest which, on his or her death, vests in his or her heirs or Devisee. Example: John Doe, a single man, as to an undivided 3/4ths interest, and Jane Smith, a single woman, as to an undivided 1/4th interest, as tenants in common.

Trust
Title to real property in California may be held in a title holding trust. The trust holds legal and equitable title to the real estate. The trustee holds title for the trustor/beneficiary who retains all management rights and responsibilities.

Community Property With Right Of Survivorship
Community Property of a husband and wife, when expressly declared in the transfer document to be community property with the right of survivorship, and which may be accepted in writing on the face of the document by a statement signed or initialed by the grantees, shall, upon the death of one of the spouses, pass to the survivor, without administration, subject to the same procedures as property held in joint tenancy. Registered domestic partners shall have the same rights and protections.



The preceding summaries are a few of the more common ways to take title to real property in California and are provided for informational purposes only. For a more comprehensive understanding of the legal and tax consequences, appropriate consultation is recommended. There are significant tax and legal consequences on how you hold title. We strongly suggest contacting an attorney and/or CPA for specific advice on how you should actually vest your title.

Con-Current Co-Ownership Interest

The comparison below is provided for information only. It should not be used to determine how you hold title. We strongly recommend that you seek professional counsel from an attorney and/or CPA to determine the legal and tax consequences of how title is vested.

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Property Tax Segregation

Property Tax Dates: The following are important property tax dates that will be useful in determining how to handle the proration of unsegregated taxes for a subdivision.

January 1st: Assessment Date. Taxes become a lien not yet due and payable for the Fiscal Tax Year starting July 1st. This is also the valuation date for new construction. If a subdivision map or condominium plan has not been recorded by this date, the tax bill will not be segregated when issued in October and estimation will be required.

February 1st: 2nd installment regular taxes are due.

April 10th: 2nd installment regular taxes last day to pay without penalty.

June 30th: Any unpaid property taxes become defaulted. (Property may be sold at public auction after five years of delinquency.)

July 1st: Fiscal tax year begins. Taxes are due after this date, but not yet known or payable. Even if taxes will be segregated for this new fiscal year, an estimate will be required for closings from now to when the bill is issued in October. If an estimate has been used to collect future unsegregated taxes from the buyer, the estimated amount will now be prorated between buyer and seller. The Assessor can now advise if the taxes will be segregated and provide the valuations being used for the upcoming bill(s). This will be helpful for determining your estimate or confirming the estimate you are using.

October: Sometime during the month, regular tax bills will be issued.

November: 1st installment regular taxes are due.

December 10th: 1st installment regular taxes last day to pay without penalty. Both installments of the unsegregated taxes for a subdivision should be paid.

How Property Taxes are Determined

Property taxes are governed by California State law and collected by the county. The County Assessor must first assess the value of your property to determine the amount of property tax. Generally, the assessed value is the cash or market value at the time of purchase. This value increases not more than two percent per year until the property is sold or new construction is completed. The County Auditor-Controller applies the appropriate tax rates, which include the general tax levy, locally voted special taxes and city or district direct assessments. The Tax Collector prepares property tax bills based on the Auditor-Controller’s calculations, distributes the bills, and then collects the taxes.

With a subdivision, an increase in the assessed value due to a change in ownership and new construction can be under review with the Assessor during sales to individual buyers, causing a change in assessed value after bills have been issued and resulting in additional bills issued after sales.

How Property Taxes are Segregated

Segregation is a word commonly used by the development industry to refer to what the Assessor calls a “parcel change.” A parcel change occurs when a property is divided by a new subdivision map, condominium plan or lot line adjustment. Segregation is the term the Assessor and Tax Collector use to describe the separation of a single tax bill which then becomes prorated among individual owners. So the segregation is the separation of the tax amounts after the parcel change has occurred. The first event to cause a parcel change is the recording of the tract or parcel map. In a condominium development, a second parcel change will occur after the condominium plan records. In each case, a new Assessor’s parcel number is assigned to each new lot or unit. In general, a subdivision map or plan recorded prior to December 31st will have a parcel change in the following year. A new tax bill or bills reflecting this parcel change can be expected by October of the year following the recordation of the map or plan.

The important date to remember is January 1st. The status of the property, i.e. what maps or plans have recorded, the status of construction and the status of the ownership, as of this date will determine what the bill will be and who it will be sent to in October.

Supplemental Property Taxes

A supplemental property tax bill will be issued to reflect the increase in value due to a change in ownership. Because the Assessor cannot reflect an increase immediately, the Supplemental Bill is issued after the transfer and will automatically be prorated from the date of transfer to the end of the tax year.

Depending on when the transfer occurred, two Supplemental Bills can be issued to cover more than one tax year. With a subdivision, a developer’s supplemental bill that is issued for the tax year in which there are sales can be included in the tax proration with the buyers. Normally though, a supplemental bill is issued to the correct property owner and is their responsibility to pay.

Filing a Builder’s Exclusion (or Conex)

With the exception of condominium conversions, commercial condominiums and condominiums or four units or less, the Assessor no longer requires the filing of an exclusion to exempt a subdivision from reassessment due to the recording of a Notice of Completion. However, the Assessor has the right to reassess a property that is under construction as of January 1st. An adjusted bill can be issued to capture this increase in valuation. The possibility of an adjusted bill should be taken into consideration in preparing an estimate for future unsegregated taxes.

If your project is not exempt, you can obtain the Construction Exclusion (ConEx) form from the Assessor’s website. The form must be filed within 30 days from the start of construction in order to qualify for the exclusion.

Need For Estimating Future Unsegregated Taxes

Often the property taxes are not segregated at the time of sales to new buyers. This occurs most often with condominium developments. January 1st is the assessment date for the Fiscal tax Year, starting July 1st. The property owner as of January 1st will likely receive the bill that is issued in October, even if a subsequent sale or subdivision has occurred. Because of this, if the first sale of a subdivision interest occurs between January 1st and when the bill is issued in October, an estimate will be necessary to prorate and collect from buyers their portion of this estimated unsegregated bill.

It is important that the payment of any unsegregated property tax bill be made on time. Therefore, a buyer may be required to pay through escrow their estimated portion of the unsegregated taxes for the full year.

This estimated future payment is either made to the seller, who will be receiving the bill, or is put in a holding account for payment by the Homeowners Association or chosen Title Company.

If the payment of future unsegregated property taxes is not handled in escrow, it may be necessary for the individual owners to get together to pay the bill. Condominium CC&R’s usually cover this possibility and outline the penalties against owners who do not pay the proportionate share. In the case of small condominium projects of four units or less, the Assessor will assist with this segregation. In all other cases, the homeowners, through the Condominium Owners Association, will need to pay their share of the bill to the Association in time for payment to be sent by the Association to the Tax Collector. It is important to note that, except in cases of four units or less, the Assessor/Tax Collector will not segregate a second installment; therefore, whatever method is used for payment of the first will have to be done again for the second installment. Therefore, it is recommended that both installments be paid with the first installment.

Buyers who qualify for Prop 60 or Prop 90 Base Value Transfer will not be able to complete their exemptions until after the segregation is complete. If a credit is due because they paid their portion of an unsegregated bill which was larger than it would have been with the exemption, the credit will appear on their supplemental bill.

Conclusion

Knowing the status of your project on January 1st, having a plan in place for estimating future taxes and being in contact with the District Office of the Assessor for your project will assure a smooth transition from an undeveloped single parcel property to a fully segregated and successfully sold development.

Escrow of the West is here to help. Contact your Escrow Officer for updates and specific information for your area

Your Escrow

Opening Statement: Escrow of the West is an independent escrow company, licensed by the Department of Corporations and a member of the Escrow Agents Fidelity Corporation.

Our principals bring with them over 70 years of real estate understanding and experience in both residential and commercial real estate. Our professional escrow officers are determined, dedicated and produce the desired results for you. We constantly strive to perform at the highest level of service in a continual attempt to surpass our customers' expectations.

The combined knowledge and professionalism of our team allows us to offer the highest level of professional service in the industry.

What is Escrow: Simply defined, an escrow is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a particular condition or event. The California Escrow Law - Section 17003 - provides the complete legal requirements.

Why Do I Need Escrow: Whether you are a buyer, seller, lender or borrower, you want assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed. The escrow holder has the obligation, to safeguard the funds and or document while they are in the possession of the escrow holder, and to disburse funds, and/or convey title only when all provision of the escrow have been complied with.

How Does It Work: The principals to escrow – buyer, seller, lender, borrower – cause escrow instruction, most usually in writing, to be created, signed and delivered to the escrow officer. If a broker is involved, he or she will normally provide the escrow officer with the information necessary for the preparation of you escrow instruction and document.

The escrow officer will create escrow instruction and process the escrow, in accordance with the escrow instruction, and then all condition required in the escrow can or have been met or achieved, the escrow will be “closed”. Each escrow, although following a similar pattern, will be different in some respects, as it seals with YOUR property and the transaction at hand.

The duties of an escrow holder include: following instruction given but he principles and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with the instruction; paying all bill as authorized; responding to the authorized requests form the principals; closing the escrow only then all terms and conditions have been met; and distributing the funds in accordance with the instruction and providing an accounting for the same – the Closing or Settlement Statement.

Choosing Escrow: The selection of the escrow holder is normally done by agreement between the principals. If a real estate broker is involved in the transaction, the broker may recommend and escrow holder. However, it is the right of the principals to use an escrow holder who is competent and who is experienced in handling the type of escrow at hand. There are laws that prohibit the payment or referral fees; this affords the consumer the best possible escrow services without any compromise caused by a person receiving a referral fee.

During Escrow: The key to any transaction is to read and understand your escrow instructions. If you do not understand them, you should as your escrow officer to explain the instructions.

Your escrow officer is not an attorney and cannot practice law; you should consult your lawyer for legal advice. Do not expect your escrow officer to advise you as to whether or not you have a good deal” or are doing the things the right way. The officer is there to follow the instruction given by the principals in the escrow.

In order to expedite the closing off the escrow, you should check with your escrow officer as to what specific items you could do to assist. Ask the question” What can I do to expedite the closing of this escrow?” Respond quickly to correspondence. This will assist in the timely closing of the transaction.

If you are required to deliver funds into the escrow, make sure that you provide “good” funds in the form required by the escrow officer. Company procedures differ in this regard and there are ways that you can help at the time of closing; check with your escrow officer. Do not give the escrow officer a personal check and expect the escrow to close immediately; the escrow can only close on cleared funds, and the processing of a personal check can take days, possibly even a week or more.

When the escrow officer closes the escrow, some of you may want the closing papers, check, title policies, statements, etc. made available immediately. There are many aspects to the closing of the escrow, and some of these cannot be processed on the day of the closing they may take several days. If you have a special need, for example a cashier’s check on the day of closing, you should communicate that need to the escrow officer early in the processing of the escrow.

Your New Loan: If you are obtaining a new loan, your escrow officer will be in touch with the lender who will need copies of the escrow instructions, the preliminary title report and any other documents escrow could supply. In the processing and closing of escrow, the escrow holder is obligates to comply with the lender’s instructions.

It has become a practice of some lenders to forward their loan documents to escrow for signing. The escrow officer/loan document-signing specialist will go through your loan documents with you. However, you should be aware that these papers are the lenders document. You have the option of requesting a representative from the lenders office to be available at loan signing for any question you may have.

Closing Statement: A closing statement is an accounting, in writing, prepared at the close of escrow, which sets forth the charges, and credits of your account. The items shown on the statement will reflect the purchase price, the funds deposited or credited to your account, payoffs on existing encumbrances and/or liens, the costs for all services and determination of the funds due you at the close of the escrow. When you receive you closing papers, review the closing statement; it is extremely logical and reflects the financial aspects of your transaction. If anything does not make sense to you, you should ask you r escrow officer for an explanation.

When going through your closing papers, examine all of them; there may even be a refund check hiding in there. Cash the check quickly, please. Be sure to have the check properly endorsed. All payees must endorse the check. This will eliminate the check being returned unpaid die to irregular or missing endorsement.

Your closing statement and all other escrow papers should be kept virtually forever for income tax purposes. Your accountant will need the information about the sale or purchase of property. The IRS and other agencies may require you to prove your costs and/or profit on the sale of any property. The closing statement will assist in this task.

Do not rely on your escrow holder always retaining the escrow file so that you can call and get copies of the closing statement. Most escrow holders will destroy the files after the statutory retention period, usually five years. Maintaining and storing the closed escrow files is a costly endeavor to the escrow holder. Therefore, a nominal fee may be charge by your escrow holder for the retrieval of a file from storage, photocopying the requested documents and returning the file to storage. Escrow fees are not regulated by the state. Escrow holders, like any other business, will charge fees that are commensurate with the cost of producing service, the liability undertaken, and the overhead expenses in which include a profit factor. Therefore, the fees will vary between companies and from county to county. Normally, the escrow holder will follow its minimum fee schedule, which will provide for extra charges based upon the differing elements of your escrow. On occasions, an additional fee will be charged for unusual expenditures of time on a given transaction. The escrow holder has no control over the costs of the other services that are obtained, such as the title insurance policy, the lenders charges, insurance, recording charges, etc.

Cancellation: No escrow is opened with the intention that it will cancel, but there are occasions when a contingency cannot be met or when the parties disagree during the transactions. Some escrow holders provide for such an event by incorporating an instruction in the typed or printed General Provisions.

Ordinarily, an escrow holder will take the position that no funds on deposit can be refunded until the escrow holder is in receipt of mutual cancellation instruction, signed by the principals. The escrow holder cannot normally make a determination as to who is the “rightful” party in a dispute on a cancellation and therefore few will not return the funds or documents until the principals agree the escrow holder is not a judge. Do not expect to be charged a cancellation fee, as this is a charge for professional services rendered and quite often several ‘out of pocket” expenses that have been incurred on the client’s behalf. These fees vary company to company depending upon their policies. Sometimes, when a dispute exists, the escrow holder may be forced to allow a court to decide which party is entitled to what documents or funds; this is called an Interpleader Action. Fortunately, most disputes are resolved before the Interpleaded is filed, as the costs for such legal actions are extreme. Those costs, incidentally, are normally paid out of the duns on deposit in the escrow holders provide for such an event by incorporating an instruction in the typed or printed General Provisions.

Ordinarily, an escrow holder will take the position that no funds on deposit can be refunded until the escrow holder is in receipt of mutual cancellation instruction, signed by the principals. The escrow holder cannot normally make a determination as to who is the “rightful” party in a dispute on a cancellation and therefore few will not return the funds or documents until the principals agree the escrow holder is not a judge. Do not expect to be charged a cancellation fee, as this is a charge for professional services rendered and quite often several ‘out of pocket” expenses that have been incurred on the client’s behalf. These fees vary company to company depending upon their policies. Sometimes, when a dispute exists, the escrow holder may be forced to allow a court to decide which party is entitled to what documents or funds; this is called an Interpleader Action. Fortunately, most disputes are resolved before the Interpleaded is filed, as the costs for such legal actions are extreme. Those costs, incidentally, are normally paid out of the duns on deposit in the escrow.

Title Insurance: Title insurance is usually obtained when real property is purchased. The policy of title insurance insures the owner and/or the lender of ownership of the property. There are various coverage’s afforded, but a basic policy insures that the buyer is the owner and that any lender shown on the policy is an “insured” lender. Many different types of extended coverage are available; for example ALTA policy is quite often required by the title insurance policy. The title policy is written after an extensive examination of the public record is made and the recording of the required documents as called for in the escrow.

The title insurance policy fee is a one-time fee, paid at the close of escrow. The determination of who pays for the policy is not uniform from county to county in California. In some counties, the buyer will pay while in others the seller will pay. In other countries the seller will pay for the owner’s policy and the buyer will pay for the lenders title policy. But in almost every case, the question of who pays the closing costs is a matter of agreement between the parties. Usually this agreement is bases on the customary practice in your county or area. In the case of some FHA or VA transactions, the escrow officer must follow the guidelines as required by the lender and/or government.

Property taxes: The terms of your transaction and the result escrow instruction determine how the property taxes will be handled. If there is no mention of the proration of taxes, your escrow holder will not deal with any credits or charges for prorated taxes.

However, if you escrow calls for a proration of taxes, there will be an item in your closing statement that will reflect with a credit or charge to your account. If the taxes are not paid (even though there has been a credit or charge against your account), the buyers obligates to obtain a tax bill and pay the taxes If the buyer does not have a tax bill which to pay the taxes, you can request a bill from the Tax Collector: send a photocopy for the deed.

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