Escrow Do’s and Don’ts

A handy guide for buyers and sellers

By Cathy Madrid-Garibaldi
AVP/Commercial and Residental Escrow Officer

  • Buyers: DO remember to arrange for fire/hazard insurance for your new property. Different insurers may quote premiums that vary by hundreds of dollars for the same property! It’s a great idea to get at least three quotes, and start that process early; each agent will have many questions for you, and some will want to do at least a drive-by inspection of the property before giving you a quote. Once you’ve settled on the agent you want to use, give his or her contact information to your Escrow Officer. Your new lender will require proof of your insurance from the Escrow Officer prior to funding your loan into escrow.

  • Buyers: DON’T forget to tell your Escrow Officer how you want to hold title to the property. You may need advice from your accountant on this as well. The California Land Title Association website has some very useful information about the various methods of holding title to real property at the California Land Title Association

  • Buyers: DO consider the different types of Owner’s title insurance policies available in California. The CLTA Standard Owners policy and ALTA Residential Owners policy offer basic coverage, and the Homeowners policy provides many additional coverages for a 10% higher premium. You can access more information on the differences between those policies at Fidelity National Title Insurance Company’s website.

  • Sellers: DON’T be surprised to find you are subject to California capital gains tax withholding on the sale of property that was not your principal residence. A portion of your net proceeds will be paid to the Franchise Tax Board in escrow. If the property was not your principal residence but you are realizing no gain (or taking a loss), you may be able to have the withholding waived if you complete Franchise Tax Board form 593-E. This form requires information about your adjusted tax basis in the property, including the cost of improvements made and depreciation taken, which might necessitate a call to your tax advisor. You can get information and forms at the Franchise Tax Board’s website.

  • Buyers: DO ask your Escrow Officer about getting a Binder for the title insurance if you plan on selling the property within the next three years. This will cost you approximately 10% more for the owner’s title insurance premium in your purchase escrow, but entitle you to an almost 80% rebate of the premium when you sell the property, as long as you go back through the same title insurance company.

  • Buyers: DON’T lose track of your property taxes. The property tax bills in California are mailed in October of every year, covering the period from the previous July through the following June. The process of generating the bill actually begins on the preceding March 1st. If your purchase takes place after March 1st, the bill will be sent to the former owner; but you will be assessed a penalty for late payment if you do not pay it! You can go to the Tax Collector’s website and print a copy of the bill and use that to pay your taxes; the first half of the year is due November 1st and late after December 10th, and the second half of the year is due February 1st and late after April 10th. In San Francisco print your duplicate tax bill at: https://services.sfgov.org/ptx/intro.asp

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