Escrow and Real Estate Questions
NOTE: In the following definitions, “the Escrow Agent” means agents of Sunwest Escrow.
What is a Real Estate Contract?
In New Mexico, a Real Estate Contract is a legally enforceable agreement whereby an owner of real property agrees to sell the property to a purchaser on a deferred or installment type payment schedule. Transfer of legal title is delayed until all of the payments have been made. When the Purchaser fulfills his/her obligations under the agreement, the proper deed is released by the Escrow Agent and can be recorded, giving the Purchaser legal title to the property. If the Purchaser fails to meet the obligation as outlined in the Real Estate Contract, then the Seller may, at his/her option, forfeit the Purchaser’s interest in the property without court action, or declare the entire unpaid balance due and payable and file suit to collect.
With Real Estate Contracts, the Purchaser does not have legal title to the subject property until the deed held in escrow is released. Instead the Purchaser has what is called “equitable title.”
How soon after closing can I expect to hear from my Sunwest Escrow agent?
Sunwest prioritizes new set-ups by the first payment due date, but you can expect to hear from us within two weeks of closing. Your agent will send a welcome letter to both the Purchaser and the Seller outlining special services that we offer. We’ll assign an account number, and send the Purchaser payment coupons.
Purchaser: Why is the payment amount referenced on my coupons more than the amount stated on my contract? Seller: Why is the payment I received from Sunwest Escrow less than the amount stated on my contract?
The reason is probably that Sunwest has added or subtracted its disbursement fees. Contract/Notes should address which party is responsible for fees. The Purchaser can pay all fees, the Seller can pay all fees, or the fees can be equally split. If no reference is made as to who pays fees, Sunwest will deduct the fees from the Seller’s proceeds.
Purchaser: Why did I get coupons from your office and from a mortgage company? To whom do I send payment?
If the property is purchased subject to an underlying mortgage, the real estate contract usually calls for the escrow agent to make disbursements to the mortgage company from the purchaser’s total payment. While the mortgage company will continue to send payment coupons to their obligor of record, the purchaser must use the escrow company coupons because the mortgage is usually just part of the total obligation on the real estate contract.
Does Sunwest Escrow need my Social Security number?
Yes. Sunwest will contact you if your Social Security number is needed to complete the file. The IRS can impose a penalty if Social Security numbers are not of record with the Escrow Agent.
How is interest calculated?
a. “Monthly” interest is based on a 360-day year. Monthly interest is calculated as if payments were received on their respective due dates with a fixed 30-day interest period per month. This type of calculation will follow an amortization schedule. This method is also referred to as “periodic” interest or “scheduled” interest.
b. “Daily” interest is based on a 365-day year. Daily interest is calculated from the date the Escrow Agent receives payment to the next date payment is received. Weekends and holidays should be taken into consideration. Note: If the interest calculation method is not addressed in your contract, most agents will compute interest on a “daily” basis.
c. Interest only payments are calculated on a monthly interest/360 day year basis to avoid the possibility of a principal credit/interest deficit per payment. In addition, the first payment may be greater than or less than subsequent payments due to the interest start date.
Can I get an amortization schedule?
Sunwest Escrow will provide an amortization schedule upon request. If your contract/note calls for interest to be calculated on a “daily” basis, the schedule can be used as an estimate only.
What do I do if I have a change of address?
To protect the interest of all parties to a contract/mortgage, Sunwest Escrow requires that changes of address be made in writing and signed by any parties affected by such a change (ex-spouses, parties with one-half interest each). Sunwest can provide you with “Change of Address” forms.
When are late charges assessed?
Late charges vary per contract and may not even be addressed. The period of time between the due date and the date late charges are assessed is sometimes mistakenly construed to be a “grace period” similar to that of a mortgage company. Please be advised that there is no grace period on Real Estate Contracts. It is possible that a Seller will have a letter of demand issued PRIOR TO the date late charges are assessed. The demand letter engages the start of the “default period.”
What is the default period on contracts?
The default period is defined as the number of days from the date a Demand Letter is mailed to the date the Escrow Agent must receive all payments demanded. About 90% of all contracts use a thirty day default period.
If a demand letter is sent, who pays the attorney fees?
Contained within all contracts should be a reference to the exact amount of fees the Purchaser shall pay if the Seller’s attorney makes written demand for payment. The Purchaser is responsible to pay these fees along with payments demanded within the allotted time. Sellers may write their own demand letters, but may not in that case demand attorney’s fees.
What happens once the default period has expired?
Once the default period has expired, the Escrow Agent is required to release the deeds held in escrow to the Seller or the Seller’s agent upon presentation of a “recordable affidavit” of Default.
Once payment is received, how long does it take to send payment to the Seller and to any underlying mortgage company?
While payments may be processed on the day they are received, processing may take up to 72 hours. Some escrow agents have a 24-hour turnaround time, while some require three to five days. It is important to know your agent’s processing time to account for late charges that may be assessed by underlying mortgage holders.
What happens if Sunwest Escrow receives a Purchaser’s check back from the bank due to insufficient funds?
Normally, payment is sent to the Seller/Mortgagee before a Purchaser’s check has cleared the bank. The Escrow Agent may then assess a service charge and/or require cure for the returned check in the form of certified funds (cash/certified check/money order). The agent may also have a policy requiring future payments to be made with certified funds. Since each case is unique, in the event this situation arises, contact Sunwest Escrow directly.
Will Sunwest Escrow accept payment by cash?
Some escrow companies will accept cash, while others require checks or money orders. Sunwest Escrow has an arrangement with a local banking institution to accept cash payments for Sunwest.
Will the Purchaser get a receipt when payment is made?
Sunwest Escrow will provide a Purchaser receipt upon request. A fee is charged to mail receipts to Purchasers, but if the Purchaser makes payment in person, a receipt can be requested.
Can a Seller request that payment be sent directly to his/her bank?
Yes, monies can be sent directly to a Seller’s bank account in most instances. Although some escrow companies charge an additional fee for this service, Sunwest Escrow does not.
Will Sunwest Escrow hold monies in reserve to pay the property taxes and hazard insurance?
Sunwest will hold monies to pay taxes and insurance for clients. We ask that the Purchaser be responsible for providing tax bills and insurance premiums to Sunwest Escrow for payment.
If the Purchaser pays the taxes and insurance premiums, is he/she required to let the Seller know?
The Real Estate Contract should address the proper procedure for notifying the Seller of taxes and insurance paid. Most standard forms require the Purchaser to have the property assessed in his/her name with the county assessor’s office to guarantee receipt of future tax billings. Upon request by the Seller, the Purchaser will provide proof of taxes paid. Most contracts further require the Purchaser to automatically provide proof to the Seller that insurance is in force prior to the expiration date of each existing policy. Purchasers and Sellers should familiarize themselves with the requirements for tax and insurance payments and notifications, as outlined in their Real Estate Contract.
When and why does the Purchaser make the underlying mortgage payment through escrow?
Real Estate Contracts will usually address whether or not the Purchaser’s underlying mortgage payment is to be made through the Escrow Agent. If the parties have agreed that the mortgage payment is to be made through escrow, the Escrow Agent is unable to accept the Seller’s equity payment unless it is accompanied by the mortgage payment.
Having the underlying mortgage payment go through escrow protects both parties. The Purchaser has the convenience of making just one payment per month. In addition, he/she will have assistance should a payment fail to reach the mortgage company or should information received from the mortgage company be unclear. The Seller will have proof that the underlying mortgage is being paid and that his/her interest is being protected. >
Can the Purchaser sell or assign Purchaser’s interest in the Real Estate Contract?
Contracts may require the Seller’s consent to sell, convey, or assign Purchaser’s interest. If no consent is required, Purchaser’s interest can be transferred without Seller notification.
Can the Seller sell or assign Seller’s interest in the Real Estate Contract?
Yes, Sellers often sell or assign their interest to another party. Note: Sunwest Escrow will notify all Parties to the account when they are in receipt of a Purchaser or Seller assignment.
What is a “wrap around contract”?
A “wrap” exists when the property sold on a contract is subject to an underlying lien that the Purchaser DOES NOT ASSUME NOR AGREE TO PAY. The lien remains in the Seller’s name and remains the Seller’s responsibility. The contract will usually instruct the Escrow Agent to pay the wrapped lien from the Seller’s proceeds. At the time of payoff of the contract, the Seller provides a release for the underlying lien or obligation.
Can the purchaser pay extra monies to be applied to the principal balance at any time?
To simplify record keeping, and to avoid additional escrow fees, it is usually best for the Purchaser to make principal payments along with the regular monthly payment. A note should be made on the payment coupon indicating that the overage is to be applied to principal. As long as the account is current and there is no accrued (unpaid) interest, overages will be applied to the principal balance.
Will I be furnished with an interest statement to use for tax purposes at the end of each year?
All contract payors will be provided a 1098 statement of interest for tax purposes. Contract sellers can refer to their payment remittance notice for the year-to-date principal and interest earned. Sunwest Escrow is only required to report interest paid to the Internal Revenue Service.
When I have a problem, who do I contact?
Contact your realtor if:
1. You have questions regarding your purchase agreement.
2. You have questions regarding keys.
3. You have questions regarding repairs.
4. You have concerns with fixtures or other physical aspects of the dwelling as outlined in your Purchase Agreement.
Contact your title company if:
1. You have questions regarding your closing statement.
2. You receive a late notice from your mortgage company regarding the first payment made through the title company.
3. You have questions regarding your first water bill.
4. You have questions regarding payment of your first year’s insurance premium or property taxes.
5. You need to know if your documents have been sent for recordation (usually a copy will be sent to you 1-2 weeks after closing).
6. You need a copy of your survey, title policy, or closing statement.
Contact Sunwest Escrow if:
1. You have not received payment coupons and first due date is approaching.
2. You receive a late notice from your mortgage company and you have already made payment to the escrow company.
3. You receive new payment coupons from your mortgage company or if you receive notification that they have sold your loan.
4. You do not understand how interest is being calculated.
5. You need the current balance of your Real Estate Contract.
6. You do not understand a letter you have received from either the mortgage company or the escrow agent.
Contact your underlying mortgage holder if:
1. You question why your payment increased relative to tax and insurance reserves paid by the mortgage company.
2. You want to find out your mortgage balance and/or current interest rate.
3. You need to know how much the mortgage company paid for the year’s taxes and insurance premiums.
4. You want to find out if your mortgage is assumable.