When purchasing real property in California you may discover that the property is subject to Mello-Roos. Mello-Roos is the common verbiage used to describe a tax that is imposed upon real property that falls within a Mello-Roos District. This tax or fee, which is a form of financing, can be used by cities, counties, and special districts (such as school districts) to help pay for major improvements and services within the district which might include schools, roads, libraries, police and fire protection services. Mello-Roos taxes are imposed in addition to the normal tax base applied to the real property for that area or development.

The tax was initially developed due to the limited ability of local governments to use property taxes to construct public facilities and services. The taxes usually are levied on a specific development for approximately 10-15 years or until the infrastructure bonds are paid off. You will need to check with your County Assessor’s office for the fees for your particular property.

It is important to know about this long-term additional expense when buying a home within a Mello-Roos District due to the costs added to the property’s tax base.

The California Land Title Association has written an in-depth description of Mello-Roos. You can read the full article. Below are key points from that article:

What is a Mello-Roos District?

A Mello-Roos District is an area where a special tax is imposed on those real property owners within a Community Facilities District. This district has chosen to seek public financing through the sale of bonds for the purpose of financing certain public improvements and services. These services may include streets, water, sewage and drainage, electricity, infrastructure, schools, parks and police protection to newly developing areas. The tax you pay is used to make the payments of principal and interest on the bonds.

What are my Mello-Roos taxes paying for?
Your taxes may be paying for both services and facilities. The services may be financed only to the extent of new growth, and services include: Police protection, fire protection, ambulance and paramedic services, recreation program services, library services, the operation and maintenance of parks, parkways and open space, museums, cultural facilities, flood and storm protection, and services for the removal of any threatening hazardous substance. Facilities which may be financed under the Act include: Property with an estimated useful life of five years or longer, parks, recreation facilities, parkway facilities, open-space facilities, elementary and secondary school sites and structures, libraries, child care facilities, natural gas pipeline facilities, telephone lines, facilities to transmit and distribute electrical energy, cable television lines, and others.

When do I pay these taxes?
By purchasing an interest in a subdivision within a Community Facilities District you can expect to be assessed for a Mello-Roos tax which will typically be collected with your general property tax bill. These special tax payments are subject to the same penalties that apply to regular property taxes.

How much will the Mello-Roos payment be?
The amount of tax may vary from year-to-year, but may not exceed the maximum amount specified when the district was created. In the case of the purchase of a new house within a subdivision, the maximum amount of the tax will be specified in the public report. The Resolution of Formation must specify the rate, method of apportionment, and manner of collection of the special tax in sufficient detail to allow each landowner or resident within the proposed district to estimate the maximum amount that he or she will have to pay.

How are Mello-Roos taxes affected when the property is sold?
The Mello-Roos tax is assessed against the land, but is not based upon the value of the property, therefore, the possible increased value of the property does not affect the amount of the tax when property is sold. The amount of the tax may not exceed the original maximum amount stated in the Resolution of Formation. Any delinquent payments must be satisfied before the sale of the real property, since the unpaid amounts are a lien against the property.

When purchasing a home in California, buyers should be proactive in ascertaining if the home falls within a Mello-Roos District so they are knowledgeable about the additional tax on the home. Here are some avenues to obtain more information about the precise amount of taxes that will affect the property you are considering purchasing:

• Inquire with your Realtor who has the resources to investigate if the property has a Mello-Roos tax associated with it.
• The information can be found on the Seller’s transfer disclosure statement disclosing if the property is in a Mello-Roos District.
• The information is in the Mandatory Natural Hazard Disclosure report that the seller is required to provide to the buyer during the escrow process.

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Every Tuesday, here at the American Trust Escrow blog, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

You may have noticed that we’ve been providing some escrow education and answering a lot of great questions here on our blog (even though you may be getting this in your inbox, the article is still also part of the American Trust Escrow Blog and permanently archived/available there). Topics like Options for How to Hold Title – The Vesting Form Explained and What Day Is Best To Negotiate Close of Escrow? Although there is new topics/articles on our site every week, the old topics remain on the site and are available for you and your clients anytime. And, it is simple to share these articles via email with your clients. Here’s how:

Step 1:

Go to the site and find the post you are looking for.

Say you want to email the article Choosing A Notary When It’s Time to Sign Your Escrow Documents. Go to the site and locate the post so that it appears in the main area on the left of the site:

Step 2:

Scroll to the bottom of the post and locate and click on the “Share This” icon.

Step 3:

Click on the Share This link and select the Email option under Send.

Step 4:

Fill in the form and select the Send button.

That’s it! Your client will now receive an email from you that links them to the post and includes your message.

It works for any of the posts we do. Share away!

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Short sales and foreclosures are the current hot topic in real estate with many of these types of transactions coming across the Escrow Officers desk. Foreclosures and short sales are often confused but they are two distinct processes supported by their own individual terminology. Following is a summary of many of the most common terms that a buyer and seller will experience in purchasing/selling either a foreclosure or short sale property.

Foreclosures

• Pre-foreclosure: The period beginning with initial mortgage default up to when the distressed property is sold
• Notice of Default (NOD): official notice from the lender that the Borrower has defaulted. The NOD formally starts the foreclosure process and it outlines the reinstatement period.
• Reinstatement Period: The time frame stipulated in the NOD that the borrower has to reinstate the loan by making payments and bringing account back to good standing.
• Trustee Sale: if after the reinstatement period has expired the loan is still in default the lender can then sell the property as soon as 21 days after the Notice of Trustee Sale is recorded.
• Publication Period: begins once the redemption period has expired and must be at least 21 Days prior to trustee Sale. A notice is published once a week for three weeks in the local newspaper.
• Notice of Trustee Sale (NTS): Recorded document explaining when and where the foreclose sale will be held.
• Redemption Period: The time period that the distressed borrower has to redeem the loan after the NOD is recorded. In California, that time period is 90 days. (not to be confused with statutory right of redemption)
• Statutory Right of Redemption: One year after the Trustee Sale the borrower can make payment of loan in full plus costs to redeem.
• Real Estate Owned (REO): the status of the property when the ownership is transferred involuntarily from the homeowner to the bank.

Short Sales

• Short Sale: When a lender agrees to accept less then what is owed on the mortgage and release its lien on the property.
• The Property is “upside down”: This phrase is commonly used to describe a situation where the amount due on the existing loan is higher than what the property is appraised for or will sell for.
• Loss Mitigation Department: The department at the lender that is responsible for reviewing all short sale documentation, ordering a BPO, and approving or denying short sale.
• BPO: Brokers Price Opinion (BPO), typically ordered by lender, is a property valuation report to help determine what the property might sell for.

This list of terms serves as a foundation for future posts where we will further describe the process of a foreclosure and short sale as well as compare and contrast the differences between the two. Stay tuned!

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Every Tuesday, here at the American Trust Escrow blog, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

Are you looking for an international buyer for your listing which would make a fabulous second home? Interested in getting your listings exposed to those potential foreign buyers? Although sites like Realtor.com do a great job of reaching a national audience, wouldn’t it be better if your listing was appearing in the currency of the country that it is appearing in? How about having your listing translated into the language of the country you are targeting? Or maybe you just want to make sure your listings are appearing on sites that rank well with Google in foreign countries. Although still fairly new and evolving, a growing area of online real estate marketing is in international listing websites and portals. Some are specific to a country, while others are trying to develop a global listing database. It is still too early to determine who the winner of this latest phase of real estate website positioning is going to be, but here are a few sites to watch, and check out for your current and future listings:

GlobalEdge:

Billing themselves as “The Business Portal for Overseas Properties” this site is based in the UK is “an award-winning trade portal designed to help real estate agents and property developers do business overseas”. In order to participate on this site, you need to create an account. They have several pricing models which range from free to £250/month. For £15/month you can showcase 3 of your best listings. In addition, this site has a property portal section which is an “independent analysis of the best overseas property portals” presented by region and by country. This is an excellent resource if you are trying to target a specific country for your listing.

Enormo:

With the tagline “Every Property, Everywhere”, this site aims to be an international listing portal and translates your listing into approximately 30 languages for a moderate monthly fee. Realtors can list their properties on the website, provided they have a website of their own. Specific details and pricing information is available by viewing the add a listing page found here.

Property Showrooms:

Based in Spain and a respected site amongst the European investor community, this site allows agents to post unlimited listings for 75 EURO/month with a 3 month minimum sign up period. Their site describes itself as:

Winner of CNBC Best Portal, frequently mentioned in the worlds press such as The Telegraph, The Wall Street Journal, and The South China Morning Post. As a result we appear at the top of Google, Yahoo and the other major search engines providing extensive background information, up to date news and services for both the public and industry alike.

Point2Homes:

A listings syndication service based in Canada, Point2Homes has a free 3 month trial membership where you can upload your listings and choose where they are distributed. After 3 months, the price is $19.99/month. Point2Homes is a great way to exposure your listings to many sources at once, including leading national, and international websites. The process is manual and requires you to create an account and upload your listing data.

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The escrow process can be a complicated and often technical necessity of buying and selling real estate. The escrow company and its officer have many duties to juggle on behalf of the Realtor, Seller, and Buyer during the real estate transaction. Understanding the various duties and functions of the escrow can assist all parties in ensuring a successful and timely transaction, as everyone involved has a part to play.

The escrow officer’s main duty is to remain as a neutral third party between buyer and seller in a real estate purchase transaction at all times. The escrow officer is not to be involved in negotiations between buyer, seller and/or lender.

Additional escrow officer duties and responsibilities are as follows:

1. Receive and hold buyer’s funds in a non interest paying trust account during escrow.
2. Read and comply with all agreements as detailed in the Purchase Contract and Joint Escrow Instructions as it pertains to the escrow process.
3. Follow mutually signed, written instructions agreed upon by buyer and seller during escrow.
4. Prepare Escrow Instructions/General Provisions, Amendments, Grant Deed (for seller’s signature), Estimated Closing Statement and any additional documents required to clear title or as required by the new lender.
5. Although in many cases reports are ordered by the buyer, seller or agents outside of escrow in some cases the escrow officer will obtain reports as required by the purchase contract and provide same to the buyer during escrow for their review.
6. Make sure escrow is in receipt of buyer and seller signatures on Purchase Agreement and Joint Escrow Instructions, Escrow Instructions/General Provisions, Grant Deed, any Amendments, Estimated Closing Statements and any other documents required during escrow.
7. Receive loan documents from the buyer’s new lender (IF APPLICABLE) and prepare amendments and estimated closing statements as required by the lender on their lender’s instructions.
8. Order the evidence of insurance from the buyer insurance agent as per the requirement of the new lender.
9. Send the signed loan documents and all lender required items to the new lender for funding.
10. Send original recordable documents along with any releases required to clear title to the title company for recording at the close of escrow.
11. Make sure that escrow is in receipt of all funds necessary to pay the seller their proceeds as well as all invoices agreed upon by buyer and seller during escrow.
12. Make sure the seller has sufficient equity in the property to cover all costs, payoff of liens and any invoices agreed upon by buyer and seller during the escrow.
13. Make sure that all the proper paperwork is in escrow to provide the buyer with clear title to the property.
14. Make sure that all the conditions agreed upon by the buyer and seller on the purchase agreement and in writing through escrow have been satisfied prior to closing the escrow and transferring the property into the buyer’s name.

The Buyer and Seller should also be aware that they will be receiving many additional items that may require their signatures from their agents and lenders directly.

In addition to the above responsibilities, American Trust Escrow views our most valuable function as acting as a personal liaison and resource for Realtors, Buyers and Sellers to accomplish a successful transaction.

Interested in what you are reading? To automatically receive these Escrow Tips in your email box, subscribe to these articles at the top right corner of this site (www.ATEblog.com) in the box titled “Subscribe via Email”.

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Every Tuesday, here at the American Trust Escrow blog, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

Are you on Facebook? If not, and you are a sphere of influence (or social) farmer, you probably should be. Facebook is a Web 2.0 site that is one of the greatest ways for Realtors to create a social networking strategy. Facebook currently has over 175 million users and makes it so easy to connect with people you already know from all parts of your life. It is a great way to let those who already know you, what you are currently up to (for example, that you are a Realtor and have a particular expertise in real estate in the Southern California area – think of the potential for referrals!). Find and connect with friends from high school, college, your company, or others in the industry, like American Trust Escrow. American Trust Escrow has a new “fan page” (Facebook terminology). By becoming a fan of American Trust Escrow on Facebook, you have an easy way to stay connected to all of the training and event opportunities that we offer and support. In addition, by connecting with American Trust Escrow on our fan page, you have a way to subtly remind your other Facebook friends that you are in real estate, as they will see you interacting with other professional organizations in the industry. So become a fan! Here is how:

Step 1:

Login to Facebook. (If you aren’t yet on Facebook, it is easy to create an account. Simply fill in the Sign Up section on the homepage and follow the directions to get started)

Step 2:

Search for “American Trust Escrow” in the Search box in the upper right hand corner of the Facebook screen .

You will get this as your search result:

Step 3:

Click “Become a Fan”

That is it! Once you click “Become a Fan” the wording will change to “You are a Fan” and you will be connected to American Trust Escrow on Facebook.

Step 4:

Check out our fan page. You can now click “American Trust Escrow” and see the details of our fan page where we will keep current all of our training opportunities (stay tuned…a training session on Facebook for Realtors is coming soon!) and you can keep up with the latest events and announcements from American Trust Escrow. You can even send us a message on our fan page.

Just another great way to build your social network and establish yourself as a working Realtor who is keeping up with the latest trends and opportunities in the industry. We look forward to seeing you on our fan page!

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What is a title binder? No, it’s not the binder you take to keep your notes in concerning your title and escrow proceedings. It IS something that you should know about to save money if plan on selling your home within 2 years after its purchase. A title binder, also known as an interim binder, is not a title insurance policy, but is, instead, a commitment to issue a title policy. The key to the title binder is asking yourself, “How long do I plan to keep this property?”

The title binder is a cost saving tool for people (i.e. investors) who intend to “flip” a home or for those who are subject to frequent relocation or who just find themselves not wishing to remain in a specific home for more than two years. Every time you sell and buy a home, you incur costs to have the title searched. Title insurance protects the buyer of a property or the lender for the property against unknown defects in the title. For a one-time premium, the title insurance company, which is in the business of examining public records, preparing title abstracts, and selling title insurance, issues the insurance after doing a title search on the property.

By purchasing a title binder up front, you can save hundreds of dollars in title fees because it allows the purchaser of real property to resell the same property and have a policy of title issued to his/her buyer at fraction of the cost. For example, if an investor purchases a “fixer upper” they would purchase a title binder as soon as they bought the property, knowing they plan on fixing up the property and selling it within a year. When they go to sell the property, they use the same title company they originally used and avoid having to incur the costs of having the title searched again for the new buyer. The binder was designed for a special purpose and cannot be used in every real estate transaction. The standard term for a title binder is two years. However, some title companies do offer an extension for another year at an additional cost of another 10% of the Owners Policy Cost. It is very important to note, the same title company that issued the title binder must be used when the property is sold.

Sometimes, the listing agent for the former buyer (now the seller) was not aware of the title binder purchased at the time the property was purchased. Under normal circumstances in California, the seller of real property pays for the buyer’s title insurance. The interim binder provides a method to avoid duplicative costs. An Interim Binder gives its holder the option to obtain coverage during the period set forth in the Interim Binder, sell the property, and provide a title insurance policy for the new buyer, all at the cost of a single owner’s policy plus a “binder fee”, usually 10% of the premium for the owner’s policy. Accordingly, where a buyer or developer intends to resell the property within a defined time period (usually two years), an interim binder may constitute a useful and cost effective alternative. It is important to repeat, however, that an interim binder is not insurance, it is a commitment to issue an insurance policy.

However, if a claim arises during the interim binder period, the person to whom the interim binder was issued may convert the interim binder to an owner’s policy of title insurance naming him as insured and tender that claim pursuant to the policy. Title binders are only for buyers, not lenders and are issued in lieu of an Owner’s Policy. More information about the legalities of title binders can be found here.

Interested in what you are reading? To automatically receive these Escrow Tips in your email box, subscribe to these articles at the top right corner of this site (www.ATEblog.com) in the box titled “Subscribe via Email”.

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Every Tuesday, here at the American Trust Escrow blog, we post Technology Tips designed to help you, the REALTOR®, grow your business, keep up to date on the latest technologies, and move you forward into the new era of real estate.

Have you claimed your Facebook username yet? If not, you should do so! It makes it easier for friends, family, and clients to find and connect with you on Facebook.

In June of 2009, Facebook gave users the opportunity to claim a “vanity URL” that represents their profile on Facebook. Over 6 million people registered their username within the first week. This optional process gives Facebook users a distinct web address for their profile and makes it much easier to share and promote your Facebook presense with others. If you haven’t registered your username, the URL for your profile looks like the before picture below. After you register your username, the URL for your profile will look something far more friendly (see the after image below).

To claim your username, go to http://www.facebook.com/username and follow the simple process that Facebook has set up. You can select a username that Facebook suggests or create your own. Select “Check availability” to check for available usernames. If the desired username is available, click “Set Username” in order to confirm your choice.

A few notes:

• Facebook usernames are permanent. In other words, they cannot be changed or transferred! This is an important consideration. How are you branding yourself? Are you using facebook for business or personal use, or maybe for both? Should your username be your full name or something more tailored to business (staceyharmon vs. RealtorStacey). Only you can make that decision. But, keep in mind that it cannot be changed. So choose wisely and make sure it is a username that will represent you over time.
• Your username must be at least five characters in length and only include alphanumeric characters (A-Z, 0-9), or a period or full stop (“.”)
• Once you have your new friendly “vanity URL”, consider adding it to your email signature to encourage those you deal with to interact with you on Facebook.
• It is possible to also have a vanity URL for a fanpage, but you must have over 1,000 fans and have registered your page before May 31, 2009 in order to qualify. More details can be found here.

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Recent headlines have proclaimed that California’s foreclosure crisis is a long way from over. First time home buyers, predicted to make up 55% of the market in 2010, are looking at REO’s as an affordable way to get into the market. That makes REO or ‘Real Estate Owned’ properties the hot ticket right now. These are homes that fell into foreclosure and then didn’t sell at auction. So now, the bank or lender owns the property and wants to get it off their books ASAP.

Buying an REO property is almost the same as a regular home purchase. You still view the home and write an offer; the big difference is that you go into escrow with the bank- not a private seller. Dealing with the bank makes for a different negotiation process, and has some impact on the escrow process, as well.

In terms of negotiation, let’s say you make the bank of offer. They may sit on it for a while and mull it over. Depending on how close your number is to what they need to recoup their losses, they might agree right away, or wait for other offers to come in before they accept or decline yours. They may not counter you the way a traditional homeowner might…instead, they may just accept another offer. However, if they do accept, you will enter into an escrow agreement with the bank.

When you’re in escrow with a bank the process is different from a traditional home purchase. A REO sale has very strict time constraints and deadlines built into the escrow agreement. Banks are absolutely set on meeting those deadlines and because they are an institution not an individual, they can charge hefty fines if you fail to meet their deadlines. The upside – you can close fast. The downside – the bank can take back the offer without returning your earnest money (escrow deposit) if they feel the terms of the escrow will not be met on their timetable.

Don’t get discouraged though. People are purchasing REO properties in droves because they are saving between 10-30% on their purchase. It’s a fantastic way to get into a first home or buy investment property. So, if you’re ready to plunge in feet first, talk to your Realtor about testing the waters on an REO property. The market continues to have a high percentage of them, so your options are plentiful. Happy home buying!

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