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Sub-escrow (loan payoff) is an extremely
important service provided by title companies to facilitate the handling of
money in the closing of a real estate transaction. The performance of the
payoff function, exclusive of escrow services, is unique to Southern
California. This is because the majority of title customers are independent
escrow companies, and the majority of title orders require payoff service.
The sub-escrow department does not draw escrow
instructions or documents (i.e. Grant Deeds, Trust Deeds, etc.) They do not
order demands for payoff, but do make the payoffs at the close of escrow.
Sub-escrow has a language of its own--note the following brief definitions of
commonly used terms, intended to answer some of the questions you may have
regarding the sub-escrow (payoff) function.
Payoff
The receipt of funds from the
buyer and the payment of the obligations of the seller in conjunction with a
real estate transaction. The payoff function is performed by the title company.
Payoff Fees
Title fees for handling
a payoff vary slightly from county to county. The fee is strictly a processing
charge and does not cover special handling charges or potential shortages.
Prefigures
Estimated payoff figures
are calculated and given prior to closing upon request. These figures are only
valid through the date given and are based on the information provided at the
time.
Good Funds
The title company must be
in receipt of "Good Funds" prior to disbursing on a pay-off.
Types of "Good Funds" include:
- Funds wired into title
sub-escrow account.
- A cashier's, teller's or
certified check, which will give next-day availability after deposit, in
compliance with AB512.
- All other local checks will
provide availability of funds two (2) days after deposit.
- Out of area checks will provide availability of funds
five (5) days after deposit.
Taxes
Outstanding property taxes can
be paid out of the payoff process.
Demands
Demands must include
specific payoff information concerning the particular property and must be
signed. It is the responsibility of the escrow to order and provide all
necessary demands including any updates or changes on a timely basis.
Refunds
Any overpayments of demands
will be refunded to the escrow upon receipt from the lender. Refunds typically
take two to six weeks to process.
Shortages
The title company will be
refunded to the escrow if there is a shortage of the necessary funds to cover
the outstanding obligations. The shortages must be received prior to payoff.
Disbursement/Checks
Checks are
delivered locally to lending institutions by a contracted messenger service.
Checks to individuals and to out-of-area lenders are typically sent via an
overnight.
Wire Transfers
Funds can be wired
into or out of the title company account.
Drafts
Title drafts are used to
disburse the payoff proceeds to the escrow companies.
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