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Escrow and Title
The Escrow Process
An escrow is a process wherein the buyer and
seller deposit written instructions and funds with a neutral third party until
certain conditions are fulfilled. In a real estate transaction, the buyer does
not pay the seller directly for the property. The buyer gives the funds to an
escrow company who, acting as an intermediary, verifies that title to the
property is clear and all written instructions in the contract have been met.
Then the company transfers the ownership of the property to the buyer through
recordation and pays the seller. This process protects all parties involved.
The state of Arizona licenses and regulate all
escrow companies. The Insurance Commissioner and the State Banking Department
can inspect a company's records at any time, providing further oversight of the
company's management and position as an impartial third party to the
transaction.
In Arizona, escrow services are generally provided
by a title insurance company instead of an attorney. The stability, reliability
and performance of your title and escrow company are vital to protect the
interests of all parties to the transaction.
Escrow is opened once you have completed the
purchase contract and the seller has accepted the offer. You agent will open the
escrow with the fully-executed purchase contract and the earnest money deposit
check. As a neutral party to the transaction, the title company can respond only
to those written instructions agreed to mutually by all "interested" parties
(buyer and seller). The title company cannot otherwise alter the contract or
create instructions and that protects all interested parties.
Ways
to Take Title
Community
Property – Arizona is a community property state.
All property acquired by a married person is presumed to be community
property unless legally specified otherwise. Community property is
a type of joint ownership available only to married persons.
Upon the death of one spouse, the deceased spouse’s interest will pass
by either will or intestate succession. One spouse cannot partition the property
by selling his or her interest. Conveyance requires both signatures.
Community
Property with Right of Survivorship – The same as above but upon the death of
one spouse, the surviving spouse assumes full ownership outside of probate. Both
halves of the community property are entitled to a "stepped up" tax basis as of
the date of death.
Joint
Tenancy with Right of Survivorship – A
method of co-ownership that gives title to the real property to the last
survivor. Two or more individuals
hold title and need not be married. If a married couple
wishes to take title in this way, they must specifically accept the joint
tenancy in order to avoid the presumption of community property. Deceased
tenant's share is entitled to a "stepped up" tax basis as of date of death.
Tenancy
in Common – Co-ownership where two or more parties share title and own a specific and undivided
interest in the entire title.
Sole
and Separate – Real property owned by an unmarried person or a spouse before
marriage or any property acquired after marriage by gift, descent or specific
intent. If a married person
acquires title as sole and separate property, his/her spouse must execute a
disclaimer deed.
Corporation
– Real property taken in the name of a corporation provided that the
corporation is duly formed and in good standing in the state of its
incorporation.
General
Partnership – Real property taken in the name of a general partnership duly
formed under the laws of the state in which the partnership was formed.
A general partnership is a voluntary association of two or more persons
as co-owners in a business for profit.
Limited
Partnership – Real property taken in the name of a limited partnership duly
formed under the laws of the state in which the partnership was formed.
A limited partnership is a partnership of two or more persons having
one or more general partners and one or more limited partners. A certificate of limited partnership must be filed with the
Office of the Secretary of State and a certified copy must be recorded.
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