How to Place a Claim in Escrow

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You may want to place a claim in escrow if you fear losing your initial deposit on a property. Place a claim in escrow with help from a real estate and mortgage professional in this free video clip.

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Hi, this is Sidney Potter with Potter Equities in Pasadena, California, thank you for your time. I've been asked to comment about escrow, in particular on how to place a claim in escrow. This would be for a residential purchased piece of property, either it be for an investment or a home in which you occupy. Well the first question becomes, why would you put a claim in escrow? Well the reason why you would do this typically is you're in fear of losing your deposit in connection with the piece of property that you're going to buy. And that reason, rather the reason why you'd typically have a concern is, because the seller of the property has a possessory right towards the claim. So in order to navigate clearly, to put a claim in escrow in which to get the monies back, there's a couple of guidelines in which you'd want to follow. First and foremost, choose your escrow, if at all. Now that depends upon the customary location and the jurisdiction. Sometimes the seller has the right to choose escrow, sometimes the buyer does. I recommend choosing escrow, because that gives you a little bit more control of the transaction. Now let me give you a few pointers besides choosing the escrow company in which you do business with, on how to keep that money from passing through to the seller in the event that there's a breach of contract. Well, first and foremost, what I would recommend as a buyer is, put a small deposit. Now the old days schools, old school days, in where you had to put three percent of the purchase price are not what we have today, and today is 2010, 2011, 2012 reality. So instead of putting five-thousand dollars on a piece of home, I recommend a smaller amount. Of course those are negotiable. That way if things do go south and you're unable to get the claim, or put a successful claim in escrow to get those monies back, at least you've limited your exposure in terms of the actual loss. Four quick items here, in terms of how not to lose your money in escrow. Make in a financial contingency, in terms of the consummation and the inclusion of the transaction. And that is to say that with a financing contingency on a piece of property, in the event that you don't get the mortgage that you want, the monies, that being your escrow, and that being a claim in escrow, revert back to the buyer yourself. Secondly, keep this in mind as well, and I say this as a formal commercial real estate broker in Los Angeles in the 90's, make it a point that, or rather you should understand, there are third parties that may have a claim to that escrow money. As a commercial broker, and we were typically the procuring cause on a transaction, if it were thirty to forty-thousand dollar escrow, the brokers would have their fee connected to that because they weren't being paid a commission. So even though I'm giving you certainly some suggestions on how to put a claim in, you may not have a possessory right per the purchase agreement. not withstanding that, very important to get dual signatures, meaning you the buyer and the seller would have to sign a release of monies from the escrow agent, in which that money either reverts back to the buyer or goes back, what we call, the money going hard, the moneys goes back to the seller. If you've got dual signatures that gives you control in terms of the directional flow of that money. So, not withstanding that, if you find yourself at a stalemate between yourself and the seller, I would recommend, especially if you want the piece of property, and I've done that several times, fortunately it hasn't happened a lot, is you have what you call, a set aside, that's a set aside. An escrow agent will comply with a crest that in an event, let's say you've got the haggling point, who pays the HOA fee, who pays the title transfer of the fee, which may be a couple of thousand dollars, who pays a lien that came up on title. I would recommend paying that amount. Let's say for example, you're closing the property, it's a 1200 dollar amount, you hadn't anticipated paying, pay that amount just to close the property, get your home, get your investment piece of property, and then on the set aside, you'll be able to negotiate that with the seller after the close of escrow. You can also have the escrow agent do what is called, a inter-pleader. An inter-pleader is when the escrow agent refers the matter to the court and a court resolves the issue. Really, that's thinking big verses thinking small. And lastly, if there is no resolution, and you're at a stalemate with yourself and the seller, the money eventually asheets back to the state. Asheet, latin word, it means the money goes back to a third party, rather, to a neutral party and therefore the state retains possession of that escrow money. And once again, you and the seller will probably have the opportunity to split that in half. So with that, I hope these were several very good tips in terms of how to resolve a claim in escrow. This is Sidney Potter, with Potter Equities in Pasadena, California. Thanks for your time, and I'll see you at the finish line.

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