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What Is an Escrow?


Express Escrow Company provides the following information. This material is presented to promote understanding for persons unfamiliar with the subject matter. While the material is deemed accurate, in some instances it may be technically incorrect. Seek advice of counsel when planning to take or release an interest in a manufactured home or mobile home.

Section 17003 of the California Financial Code provides a technical definition of the term "escrow". In simple terms, an escrow agent acts as a neutral third party and middleman in sales, leases or refinances of real estate or personal property. A Glossary has been provided at the end of this writing. Please use it to familiarize yourself with unknown terms.
 

Frequently Asked Questions

 
Q. What is the ‘mobile home escrow law’?
 
A. Mobile home escrow law is a very unique body of law contained in §18035 of the California Health and Safety Code. Written primarily by manufactured home consumer advocates, the Department of Housing and Community Development and the California Banking Association, the law was crafted to mandate the rights of the parties. The law presumes a consumer will not know what duties should be imposed upon an escrow agent, so the law mandates what must be done. It is against the law for the consumer to waive their rights, so even if the escrow agent is unaware of the law or attempts to get a consumer to waive certain protections, such waivers are deemed a violation of public policy and are therefore null and void. It should be noted that the mobile home escrow law is only applicable to transactions involving someone acting as a dealer. Unfortunately, most escrow agents are unaware of this code section, so it is not uncommon for some consumer rights to be unintentionally overlooked.
 
Q.Why doesn’t mobile home escrow law treat the registered owner as a principal in the escrow?
 
A. Even though dealers can list manufactured homes and mobile homes for sale and / or resale, their relationship to the transaction differs from that of a real estate broker; the dealer will actually be in the chain of title. The dealer is deemed the ‘seller’ in the mandated escrow, while the actual homeowner is treated much like a lien holder. Technically this means a double transfer is occurring simultaneously at the close of the dealer escrow. The Department of Housing and Community Development once described this procedure by saying that for a brief instant in time, the dealer takes title to the home, thereby enabling the dealer the ability to report the sale and guarantee the buyer will get clear title. Although the registered owner is not a principal in the state mandated escrow, that same law also provides considerable protection through the escrow for the registered owner. For example, the escrow agent is required to obtain a beneficiary demand from the registered owner that specifies the amount of money the registered owner requires as a condition for releasing their interest in the home. From the buyer’s perspective, the mobile home escrow is most consumer friendly escrow in the state. In addition to having great protection, the dealer is required to guarantee clear title without having to purchase a title insurance policy. While no law is perfect, it should be noted other states are contemplating adoption of the California mobile home escrow law.
 
Q.What are some of the most common violations of mobile home escrow law?
 
A.Perhaps the biggest issue involves dealers who select unknowledgeable escrow agent and open escrow as if it was not subject to mobile home escrow law. It is true that mobile home escrow law is biased in favor of the consumer, but the dealer does not have the right to ignore the requirement even with the consent of the consumer. Another violation concerns the disclosure of commission. The law requires full disclosure of a commission to the registered owner. Prior to close of escrow, the registered owner must submit a written declaration to escrow wherein the amount of the commission disclosed by the dealer is identified.
 
Q. Is an escrow required if I buy or sell a home without the assistance of a dealer?
 
A. As with real estate, there is no statutory escrow requirement. However, if the buyer is getting a loan, the lender will probably require an escrow. If a broker is involved, the broker will probably insist on escrow. While the escrow requirements in these instances are not stipulated by law, usually the presence of a knowledgeable broker, lender or escrow agent will cause the transaction to proceed properly.
 
Q. What are some of the most common violations in mobile home escrows that do not involve a dealer?
 
A. Perhaps the biggest problem is the failure to deliver clear title to the buyer at the end of the transaction. If a broker is involved, the Business and Professions Code requires the broker to provide for the title transfer. Even so, this has been a problem area. Some escrow agents refuse to accept a non-dealer manufactured home escrow unless the escrow is permitted to complete the transfer. Another problem is failure to comply with the mobile home residency law (§798.75(a) of the California Civil Code). This law requires that the purchaser must enter into an agreement with the park to lease a space prior to closing an escrow. This process assures the purchaser of knowing in advance the park’s rules and regulations and having an accurate disclosure of the monthly lease payments.

GLOSSARY

Accessory
Refers to exterior items such as an air conditioning unit, driveway, landscaping, skirting, awning, shed(s), porch, etc. From a practical point of view, this term is only relevant to items that are not installed at the time a purchaser signs a purchase contract. All other items are deemed included with the sale unless otherwise specified. HCD refers to this principle, as “What you see is what you get.”
 
Broker
In the context of a manufactured home / mobile home sales agent, the term ‘broker’ usually means a person licensed by the Department of Real Estate. Dealers loosely refer to themselves as mobile home brokers, but in fact they do not truly act as a broker on homes they list for resale, although the role they play is somewhat similar. When used elsewhere in this glossary, the term “broker” shall refer to a real estate licensee. With respect to chattel manufactured homes, brokers may not sell new homes, which means the home must already be registered on the title records with HCD.
 
Certificate of Occupancy
When a manufactured home is not installed at the intended situs address at the time the purchase contract with the purchaser is signed, the sale is most likely subject to inspection by the local building department pursuant to §18613 of the California Health & Safety Code. There is a possible exception when the purchaser is willing to install the home on his or her own. This is a very rare occurrence for a home that is to be installed in a park. Thus, most always the close of escrow is conditioned upon the home installation passing inspection by a state or local building department official. When a home passes inspection, the building department official will issue either a certificate of occupancy or installation acceptance to facilitate close of escrow.
 
Certificate of Title In most instances, homes located in parks are considered “chattel”. This means title to the home is perfected with the HCD. Upon perfection, HCD will mail the certificate of title to the legal owner. If money was borrowed to purchase the home, the lender is the legal owner and they receive the certificate. If no money was borrowed, then purchaser receives the certificate. The certificate of title is a pink 8½” x 11” sheet of paper bearing the State of California emblem. This document is the equivalent to an automobile pink slip. 
 
Chattel
Personal property. With respect to a manufactured or mobile home, chattel means the home is not affixed to the underlying real property. Title will be issued by HCD indicating it is separate and distinct from that of the underlying land.
 
Cooperation
Listing and sales of conventional single-family dwellings have the buyer represented by one agent and the seller represented by another, i.e., cooperating. The same is true with the resale of manufactured or mobile homes although not as common. It is not unusual for dealers to cooperate with other dealers, or brokers to cooperate with other brokers. Dealers and brokers can cooperate in certain specified situations on the sale of a manufactured or mobile home. The laws governing sales through a dealer are very different from laws governing brokers in the same situation. For years it was unlawful for a DRE licensee to even offer a mobile home for sale. When it was finally allowed, brokers were not able to cooperate with dealers. The reason for the prohibition was due to the fact that it was impossible to comply the requirements applicable with a broker and also comply with the laws that govern a dealer. Both licensees wanted the ability to cooperate with the other, so the California legislature finally provided a means to accomplish the task. Senate Bill 259 by Senator Haynes became effective on January 1, 1998. Senator Haynes introduced the following narrative as part of this new law:
 
“The intent of this amended section is to permit manufactured housing dealers to pay real estate licensees a fee for the referral of business on the resale of manufactured homes. However, dealers are regulated pursuant to sections of the Health and Safety Code, while real estate licensees are subject to provisions in both the Civil Code and Business and Professions Code. The different codes have very different regulatory schemes governing the sale of property. Hence it is important to clarify that while Section 18040 of the Health and Safety Code now permits cooperative arrangements for the resale of manufactured homes, it was not the intent of the bill to change the governing statutes for the sale and resale of manufactured homes. Thus, so far as the provisions of SB 259 are concerned, any resale of a manufactured home accomplished through a cooperative brokerage arrangement between a manufactured housing dealer and a real estate licensee is still governed by the provisions contained in the Health and Safety Code.”
 
This means the dealer must control the transaction pursuant to the Health and Safety Code, while the broker is essentially paid a referral fee for having introduced his client to the dealer.
 
Dealer Manufactured / mobile home dealers are licensed by HCD. Dealers can sell both new and previously owned homes. Chattel mobile or manufactured homes sold by dealers are subject to the mobile home escrow law, which is the most consumer-protected escrow in the state. 
 
Decal
Applicable to manufactured homes installed as chattel. The decal is the rough equivalent of a license plate for an automobile. 
 
DMV
California Department of Motor Vehicles. Prior to transferring their authority of manufactured and mobile homes to HCD in 1980, DMV licensed the dealers and prepared titles on the homes. It is worth noting that the most of the laws governing the sale of manufactured housing derived from the DMV system. Remembering this point may be helpful in understanding the laws in a general sense.
 
DOH
California Department of Housing (DOH), formerly known as California Department of Housing and Community Development (HCD). This insignia is only applicable to mobile homes. 
 
DRE
California Department of Real Estate.
 
Escrow Agent 
An escrow agent is a neutral third party fiduciary that typically holds in trust the buyer’s funds and the seller’s / registered owner’s title documents until certain specified conditions have been met. Visit www.ExpressEscrow.com for additional information.
 
Federal Label The Federal Label indicates the home is a manufactured home, not a mobile home. It also means the home was built to stringent construction and engineering standards pursuant to the National Manufactured Housing Construction and Safety Act of 1974 (also referred to as the HUD Code). Manufactured homes were built on or after June 16, 1976, which is the date this took effect. It is UNLAWFUL to sell or offer for sale a manufactured home that does not have this Label displayed. Replacement labels can be obtained from HCD.
 
HCD
This stands for the California Department of Housing and Community Development. HCD licenses and regulates dealers, enforces building standards on all housing including the manufacture of manufactured and mobile homes and titles chattel manufactured and mobile homes.
 
HUD Code
Manufactured homes are built to federal building standard uniform across the country. This standard is enforced by the Department of Housing and Urban Development (HUD). The HUD code preempts local building codes. This stringent code became effective for manufactured homes constructed on or after June 15, 1976. A home built to the HUD standard is identifiable by the presence of a Federal Label.
 
 
ILT - In-lieu Tax 
In lieu tax is due upon the resale of certain items like automobiles. This tax applies to some manufactured and mobile homes manufactured prior to July 1, 1980. The taxable amount is usually not based on the sales price. The law provides a less expensive alternative method determined after referring to a value guide specified by code. A dealer or broker can help you with this. Often an escrow agent is the one asked to make the calculation.
 
Installation Acceptance 
Certificate of Occupancy
 
Junior Lien holder 
Similar to a legal owner only junior in priority.
 
Legal Owner 
As with automobiles, the legal owner is someone who owns the property. If a loan has been made to the registered owner to purchase the manufactured or mobile home, the home is used to secure the loan. Until the loan is paid in full, the legal owner will be the lending institution.
 
License Plate 
Prior to the HCD assuming titling and registration of manufactured and mobile homes on July 1 1981, the DMV had issued a license plate for each home. The DMV license plates were replaced with HCD decals upon resale of older homes. Since not all homes have resold since the1981 conversion to HCD, older homes displaying a license plate can still be found.
 
Local Property Tax 
All manufactured homes constructed after July 1, 1980 are subject to local property tax. Many homes built prior to this date were converted to local property tax as well. LPT means the home is taxed in a manner similar to but not the same as conventional housing. The principal difference is that chattel manufactured and mobile homes are placed on the unsecured tax rolls in the event of a default. Any unpaid tax obligation attaches to the registered owner as identified on HCDs titling records. Real property tax liens attach to the specified property, not the individual. A homeowner uncertain as to the tax status of their home can refer to the registration card noting the box labeled ‘Tax Type.’ This box will display either ILT or LPT.
 
Manufactured home 
Manufactured homes came into existence on June 16, 1976. These homes are built to national building code called the HUD code, which pre-empted the mobile home construction codes for single-family mobile homes in every state. 
 
Occasionally someone will mistake a recreational vehicle for a manufactured or mobile home but it is easy to tell the difference. A manufactured or mobile home will have a HUD label or DOH insignia (respectively) on the left rear of the home. Second, the size of a manufactured or mobile home must be at least 40’ long or 8’ wide when converted to a traveling mode (that means ready to transport down the highway) and must be at least 320 square feet or more in size.
 
Mobile Home 
A mobile home has the same minimum size definition as a manufactured home. If a single family dwelling, it must have been built prior to June 15, 1976. After that date a new federal law went into effect requiring all single-family mobile homes be built to a federal construction standard called the HUD Code. Homes built to the HUD code are called manufactured homes. Actually mobile homes can still be built in California, but only if they are a duplex. 
 
Mobile Home Escrow Law 
A body of law covering the sale of chattel manufactured and mobile homes sold by dealers. Unlike general escrow law that essentially leaves it up to the principals to determine the conditions and stipulations for a given transaction, the mobile home escrow law provides a firm set of requirements that focus on the protection of consumers and lenders.
 
Mobile Home Parks Act 
A body of law found in the California Health and Safety Code covering the construction, use, maintenance and occupancy of mobile home parks, mobile home lots, permanent buildings / accessory buildings / structures and the utilities relative thereto.
 
Mobile Home Residency Law 
The Mobile Home Residency Law (§798 of the California Civil Code) specifies the legal rights and duties between mobile home park residents (tenants) and park management (landlord). Every year park management will provide its residents with a current copy of this law.
 
Natural Hazard Disclosure 
The buyer is entitled to receive fire, seismic and flood issues disclosures as a condition of purchasing a home.
 
Licensee 
Someone licensed by DRE to sell real estate and certain manufactured and mobile homes.
 
Receipt For Deposit 
Not to be confused with a Deposit Receipt used by a broker, the Receipt For Deposit is best described as a state mandated consumer warning applicable to dealer sales. A dealer presents this document to a buyer at the time the buyer gives the dealer a deposit for the purchase of a manufactured or mobile home. All deposits made by a buyer for the purchase of a home from a dealer must be made payable to the escrow agent.
 
Registration Card
Like a Certificate of Title, this document is only issued if the home is considered chattel. Chattel mobile and manufactured homes are titled in a manner somewhat similar to an automobile. The homeowner will receive a registration card in the mail from HCD within a few weeks after the sale has been consummated. The registration card is actually an 8½” x 11” sheet of white paper bearing the State of California emblem. The registration card is an important document; keep it in a safe place.
 
Registered Owner 
This is the same terminology used with automobiles. Therefore, the registered owner is ‘the owner’ of the home.
 
Situs
Position, especially normal or original position
 
Tax Clearance Certificate or Conditional Tax Clearance Certificate 
Most chattel manufactured and mobile homes are subject to Local Property Tax. Unlike real estate, this tax lien must be cleared at close of escrow for title to transfer to buyer. This means taxes must be prepaid through the escrow agent. Prior to closing, the escrow agent should be in possession of either a current Tax Clearance Certificate or Conditional Tax Clearance Certificate issued by the local county tax collector.
 
Transfer Disclosure Statement 
The seller of a previously owned manufactured or mobile home must provide the buyer with a disclosure statement detailing the condition of the home. The form required for this purpose is called a Manufactured Home and Mobile home Transfer Disclosure Statement and is specified in §1102.6d of the California Civil Code. When a dealer or broker is involved with the transaction, they provide the form (they have a section that pertains to them). If neither a dealer nor broker is involved, the seller may be able to procure the form from the local Board of Realtors office.
 
NOTE: Escrow agents are prohibited from giving legal advice. If purchasing or selling a home without agent representation, it is strongly suggested seeking an attorney’s counsel.