ESCROW, INSPECTIONS AND APPRAISAL 6.1 Escrow. Escrow is a neutral depository for funds and documents needed to complete a real estate transaction. The escrow process is as follows: A copy of existing deed is ordered by the escrow officer to obtain the legal description of the property and the names of the recorded owners. A preliminary title report is ordered which is a search of public records, laws and court decisions pertaining to the property determining any recorded liens or encumbrances or any other matters of record that could affect the title to the property. Copies of the preliminary commitment for title insurance are forwarded to the buyer, seller and lender for their approval. The escrow officer orders statements of payoffs, Homeowner's Association fees, taxes, etc. needed to prepare the settlement statement. Upon receipt of the buyer's loan documents, the escrow officer completes the settlement statement (or HUD), based on the information provided by the purchase contract. The buyer and seller are contacted separately to schedule signing appointments. Upon receipt of the loan proceeds from the lender, the escrow officer will release the documents in the transaction for recording with the County Recorder's Office on the recording date. After recording, the funds are disbursed and copies of all documents are provided to REALTORS®, buyers and sellers. 6.2 Title Commitment. The Arizona Residential Purchase Contract requires the title company to obtain and distribute to the buyer a Commitment for Title Insurance. The buyer has five days after receipt of the Title Commitment and documents that will remain as exceptions to provide notice to the seller of any of the exceptions disapproved. 6.3 The Title Insurance Policy. As per the purchase contract, the buyer shall be provided at seller's expense an American Land Title Association (ALTA) Homeowner's Title Insurance Policy. This title insurance policy will be issued as of the close of escrow. Title insurance does not insure that a title defect will not occur. It insures that if a defect that occurred prior to the policy date becomes apparent, the buyer will be indemnified if the defect cannot be cured. 6.4 Contingencies. A contingency is a clause in a contract that requires the completion of a certain act before the parties are obligated to perform their contractual agreement. The most common contingencies are: financing, acceptable property condition and appraisal. Financing: The buyer's obligation to complete this sale is contingent upon buyer obtaining loan approval for the loan described in the Loan Status Report. If the buyer is unable to obtain loan approval without conditions by the close of escrow date, the buyer shall deliver a notice to the seller or the title company no later than the close of escrow date. This contract shall be cancelled and the buyer shall be entitled to a return of the earnest money. Home Inspections: Probably the most common type of contingency is a satisfactory home inspection. If problems are found, the inspector will identify them in the report and recommend repair or evaluation by the appropriate specialist. In Arizona the default is 10 days for the inspection period during which time the earnest money is 100% fully refundable for any reason. Appraisal: The buyer's obligation to complete this sale is contingent upon an appraisal of the property acceptable to lender for at least the sales price. If the property does not appraise, the buyer has five days after notice of the appraised value to cancel this contract and receive a refund of the earnest money or the appraisal contingency shall be waived. 6.5 Disclosures. Disclosures refer to providing information known by the seller or the broker/agent to the buyer concerning the condition or other aspects of the property that would affect the property's value or desirability. Seller Property Disclosure Statement (SPDS): The seller shall deliver a completed SPDS to the buyer within five days after contract acceptance. The buyer shall provide notice of any SPDS items disapproved within the inspection period. Insurance Claims History: The seller is also obligated to deliver a written insurance claims history from the seller's insurance company or an insurance support organization such as the Comprehensive Loss Underwriting Exchange or C.L.U.E., a consumer reporting agency, within five days after contract acceptance. Lead-Based Paint Disclosure: If the property was built prior to 1978, the seller shall provide the buyer with all the necessary disclosures and addendums. The buyer shall return a signed copy of the Disclosure of Information on Lead-Based Paint and Lead-Based Paint Hazards to the seller prior to the close of escrow. For more information or if you have any questions, please contact Garry and Mary at any time.