Title Insurance -
What is Payoff?
SUB-ESCROW (loan payoff) is an extremely important service provided by title companies to facilitate the handling of money in the closing of a real estate transaction. The performance of the payoff function, exclusive of escrow services, is unique to Southern California. This is because the majority of transactions require payoff service.
The Sub-escrow department does not draw escrow instructions or documents (i.e. Grant Deeds, Trust Deeds, etc.). They do not order demands for payoff, but do make the payoffs at the close of escrow.
Commonly Used Terms:
Payoff:
The receipt of funds from buyer and the payment of the obligations of the seller in conjunction with a real estate transaction. The title company performs the payoff function.
Payoff Fees:
Title fees for handling a payoff vary slightly from county to county. The fee is strictly a processing charge and does not cover special handling charges or potential shortages.
Pre-figures:
Estimated payoff figures calculated and given prior to closing upon request. These figures are only valid through the date given and are based on the information provided at the time.
Good Funds:
The title company must be in receipt of “good funds” prior to disbursing on a payoff. Types of good funds include: a) funds wired into the title company’s Sub-escrow account; b) a cashier’s, teller’s or certified check (provide next-day availability after deposit to comply with AB512); c) other local checks (provide availability of funds two days after deposit), and d) out-of-area checks (provide availability of funds five days after deposit).
Demands:
Demands must include specific payoff information concerning the particular property and must be signed. It is the responsibility of the escrow officer to order and provide all necessary demands, including any updates or changes on a timely basis.
Taxes:
Outstanding property taxes can be paid out of the payoff proceeds.
Refunds:
Any over-payment of demands will be refunded to the escrow upon receipt from the lender. Refunds typically take two to six weeks to process.
Shortages:
The Title Company will contact the escrow officer if there is a shortage of the necessary funds to cover the outstanding obligations. The shortages must be received prior to payoff.
Disbursement Checks:
Checks are delivered locally to lending institutions by a contracted messenger service. Checks to individuals and to out-of-area lenders are typically sent via an overnight delivery company.
Wire Transfers:
Funds can be wired into and out of the Title company offices with the bank.
Out-of-County Transactions:
Title offices can receive and disburse payoff funds through any of their offices.
Drafts:
Title drafts are used to disburse the balance of the payoff proceeds to the escrow companies. Drafts are authorized individually through the bank based on the draft number.
Source: Chicago Title Company
