• What can I expect during the escrow process?
Escrow is a neutral third party who performs the many details required to safely close your real estate transactions. Escrow protects both buyer and seller and acts as an impartial, independent party in working with lenders, attorneys, brokers, agents and others in the parties to the transaction.
• What happens during escrow?
During escrow, payment of existing liens or mortgages and adjustment of taxes and rents is made. Documents such as deeds, are recorded with the Hawai‘i Bureau of Conveyances.
Escrow creates a final settlement statement between buyer and seller. Upon closing, a lasting record of the transaction available to establish the terms and conditions of conveyance or settlement.
Below are 12 escrow tips for buyers and sellers:
— Buyers and sellers, talk with your real estate agent or escrow officer about how you want to communicate during the escrow period. E-mail, phone, fax, mail? Will your real estate agent communicate to escrow on your behalf?
— Buyers and sellers, be prepared to submit to escrow one of following: Social security number, individual taxpayer identification number for non-U.S. citizens, or employer identification numbers for entities.
— Buyers, discuss with your attorney how you want to hold title and tenancy. This information will be required by escrow shortly after opening of escrow. Provide trust, corporate authority documents, or original power of attorney to escrow, if applicable.
— Buyers and sellers, doing a 1031 Exchange? Provide the name of the exchange company to escrow within two weeks of opening escrow.
— Sellers, discuss FIRPTA/HARPTA tax with your real estate agent if you are either a non-Hawai‘i resident or a non-U.S. citizen. Forms are sent with the opening letter to seller; completed copies are provided to the buyer.
— Buyers and sellers, you will receive an opening letter from escrow with documents for you to sign. Please read all documents carefully and return signed documents promptly to escrow.
— Buyers, provide to escrow your new lender’s name and contact information for your new loan (if applicable). Sellers, provide to escrow your lender’s name and loan number to enable payoff of your loan.
— Buyers and sellers, write down your escrow number, the name of your escrow officer and escrow associate. You will find it in the opening letter. For security reasons, escrow will not provide you with information unless you know your escrow number.
— Buyers and sellers, are you going to the mainland or another foreign country any time during the escrow? If so, be sure to let your lender, real estate agent and escrow officer know.
— Buyers and sellers, read the “Preliminary Title Report” you receive from escrow to learn about any easements or encroachments on the property. Talk with your real estate agent if you have questions.
— Final document signing will take place approximately four to 10 days prior to recording or closing. Signing date depends upon whether you are in Hawai‘i or on the Mainland. If outside the U.S., allow more time. You will receive a tentative closing statement for costs and/or income prior to recordation. Upon recording/closing, you will receive a final statement (HUD-1).
— Buyers, when you or your lender transfers funds for your purchase, you must use either a Hawai‘i bank cashier’s check or Federal Reserve wired funds.
• What is an easement?
An easement is defined as an interest one has in land owned by another. This easement right entitles the holder to limited use or enjoyment of the other’s land.
There are various types of easements for access, sewer and utility. The easement holder may use the land burdened by the easement, but may not occupy and possess it.
An exclusive easement grants use of the easement to the grantee only. A non-exclusive easement may be used by others.
Easements are also either appurtenant easements or easements in gross. An appurtenant easement must be created to benefit an estate in the physical use of land. There must be two tracts of land — the benefited estate (land that is benefited) and the burdened estate (the land on which the burden or servitude is laid). An appurtenant easement runs with the land and continues until quitclaimed from all benefited estates back to the burdened estate.
An easement in gross is described as a right in another’s land not created for benefit of any land owned by the easement holder. It is not appurtenant to any particular land and exists without a “benefit estate.” An easement in gross can also be a personal right, which is revocable, the benefit is given to the individual rather than a dominant estate and it must be expressly transferred.
• What is estate planning?
Estate planning is the process of planning for the orderly administration and disposition of assets after the individual’s death.
The top 10 estate planning techniques include:
— Revocable living trust: A device used to avoid probate and provide management of your property, during life and after death.
— Property power of attorney: Instrument used to allow an agent you name to manage your property if you become incapacitated.
— Health care power of attorney: Instrument used to allow a person you name to make health care decisions for you should you become incapacitated.
— Annual gift tax exclusion: Technique to allow gifts without the imposition of estate or gift taxes.
— Irrevocable life insurance trust: A trust used to prevent estate taxes on insurance proceeds received at the death of an insured.
— Family limited partnership: An entity used to: 1) provide asset protection for partnership property from the creditors of a partner; 2) provide protection for limited partners from creditors; 3) enable gifts to children and parents maintaining management control; and 4) reduce transfer tax value of property.
— Children’s or grandchildren’s irrevocable education trust: A trust used by parents and grandparents for a child’s or grandchildren’s education.
— Charitable remainder interest trust: A trust whereby donors transfer property to a charitable trust and retain an income stream from the property transferred. The donor receives a charitable contribution income tax deduction, and avoids a capital gains tax on transferred property.
— Fractional interest gift: Allows a donor to transfer partial interests in real property to donees and obtain fractional interest discounts for estate and gift tax purposes.
— Private foundation: An entity used by higher wealth families to receive any otherwise taxable property so as to eliminate estate taxes on the death of a surviving spouse.
(Info from the American Academy of Estate Planning Attorneys; www.aaepa.com)
• The Kauai Board of Realtors is a nonprofit organization comprised of 700 Realtors and associates from the bank, mortgage and escrow industry. For more information, visit www.kauai-realtor.com