19 - Title Closing/Costs & Valuation Process

Question 1

Evidence of the right to own property is called?

Answer 1

The Title

Question 2

The legal document that conveys title to real property is called?

Answer 2

The Deed

Question 3

This protects the owner’s title against all titles not documented in any public record.

Answer 3

Recordation.

Question 4

What is a marketable title?

Answer 4

A title that is reasonably free and clear of encumbrances.

Question 5

What is the condensed history of a title that summarizes all the links in the title chain referred to as? It contains a legal description of the property and summarizes all related docs in chronological order.

Answer 5

Abstract of title.

Question 6

T or F: Title Insurance is a one-time premium paid when the policy becomes effective.

Answer 6

True

Question 7

Structural Inspections are paid for by whom?

Answer 7

The buyer.

Question 8

Name the act enacted by Congress in 1974 that regulates the activities of lending institutions in making mortgage loans for housing.

Answer 8

RESPA - Real Estate Settlement Protection Act.

Question 9

Name the important requirement of RESPA & its purpose.

Answer 9

The GFE - Good Faith Estimate. It requires that within three days of receiving a completed loan application, that a lender provide the borrower with a good faith estimate of the likely cost at settlement.

Question 10

Who pays the real estate transfer tax? And how is the amount of tax determined?

Answer 10

The seller. In NY state the real estate transfer tax cost is $4 per $1000 of the purchase price MINUS the amount of any mortgage being assumed. The tax is only on “New Money”.

Question 11

T or F: New York City charges an additional transfer tax on top of the NYS tax.

Answer 11

True. The NYC transfer tax - New York City Real Property Transfer Tax (RPTT) is 1% of the selling cost for properties sold for less than 500K and 1.425% for properties over 500K.

Question 12

Name the federal law created to impose tax on capital gains derived from foreign people from the sale of US property.

Answer 12

Foreign Investment Real Property Tax Act (FIRPTA).

Question 13

A property usually cannot transfer until what?

Answer 13

All existing liens against it are discharged (paid).

Question 14

A Flip Tax is imposed upon transfer and paid the seller in which type of real estate sale?

Answer 14

Sale of a Cooperative (Co-op).

Question 15

Name four purchaser closing cost.

Answer 15

1. Appraisal
2. Credit Check
3. Structural Inspection
4. NYS Mortgage recording Tax
5. Title Insurance
6. Lender & Attorney fees (for both lender’s attorney and personal attorney).

Question 16

A closing usually involves a proration. What is a proration?

Answer 16

A division of expenses and income between buyer and seller. prorated items are either accrued or prepaid.

Question 17

What are accrued expenses?

Answer 17

Expenses that the seller has incurred but the buyer will pay. The seller provides the buyer a credit for these expenses upon sale.

Question 18

What is Mortgage value?

Answer 18

The value the lender believes the house can fetch in the event of foreclosure should the buyer default on the loan.

Question 19

What is value in use?

Answer 19

Value in use the the value of the property based on its usefulness to the owner or investor.

Question 20

What is Investment value?

Answer 20

The amount of return a property will produce given a specific dollar amount invested.

Question 21

Explain the difference between Market Value, Price, and Cost.

Answer 21

Market Value is the most probable price of a property at a specific date. Price is the agreed upon selling price between buyer and seller, it may be above, below, or equal to market value. Cost, is the total cost of all expenditures related to the property.

Question 22

What is the difference between Direct Cost and Indirect Cost?

Answer 22

Direct Cost are also called Hard Cost and include labor and materials. Indirect Cost are all other expenses. The expenses that create and support the project.

Question 23

What is Comparative Market Analysis? Is it a type of appraisal?

Answer 23

CMA - Comparative Market Analysis is a review of the competition a property will face in the market. It is NOT an appraisal but it does help real estate agents derive a market value range for the property.

Question 24

Combining several parcels of land is called?

Answer 24

Plottage.

Question 25

What is the Sales Comparison Appraisal Approach?

Answer 25

The Sales Comparison approach uses comparable properties that recently sold (between 3 and 6) and makes plus or minus adjustments to the properties to reconcile differences in the properties to arrive at a specific value for the property.

Question 26

Name the main appraisal approach used to determine market value when comparables are limited or non-existent.

Answer 26

The Cost Approach.