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What is Escrow? What are the Red Flags?

September 18, 2012

What is Escrow? What are the Red Flags?

Part II of a series on the escrow process. Thank you to Kartikay Escrow for contributing portions of this blog.

Red Flags

A “red flag” is, of course, a signal to pay attention. In the escrow world, a red flag is a situation that may cause delays or other problems within an escrow and must be addressed well before the escrow is expected to close. The Preliminary Report or “Commitment of Title Insurance” will reveal many red flags, so the escrow officer will review it carefully. Agents and parties to the transaction should also review the preliminary report for situations which could cause delays.

Many life changes cause a “red flag” situation, as can other outside influences. Your escrow officer will help locate the red flags to keep the process moving forward. But here are a few things to watch for:

  • Bankruptcies
  • Business trusts
  • Clearing liens and judgments, including child or spousal support liens
  • IRS and FTB liens
  • Encroachment or off-record easements
  • Family trusts
  • Foreclosures
  • Probates
  • 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

But how would a red flag look in real life?

Here is one example: The Sellers are recently married. Is the new spouse going to be a seller in this transaction? Or will that spouse be required to sign a quitclaim deed conveying his or her community property interest in the property to the other spouse?

Another example: The buyers want to hold title in the name of a trust. Does the new lender allow this type of vesting?

There are many other red flag examples, but you can see that addressing red flag situations as quickly as possible will speed your escrow along.

Next blog will be on escrow Closing Costs.

If you are ready to jump into escrow on a property, don’t forget to contact me. I will work with escrow to make the process as smooth as possible for you.

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