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NYREI > 6-A Real Estate Closing > Flashcards

6-A Real Estate Closing Flashcards

1
Q

Marketable Title

A

= title that is free and clear from encumbrances or other defects

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2
Q

Title Search

A

= thorough examination of public records to verify property’s legal ownership , discover liens, encumbrances etc.

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3
Q

Actual Notice

A

= information that has been received rather than implied

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4
Q

Chain of title

A

= clear unbroken, chronological record of ownership of property
- in NY going back to grant from King of England

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5
Q

Suit to quiet title

A

= lawsuit filed to remove cloud on title
- in NY article 15 Proceeding
- court can issue a quitclaim or judicial deed

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6
Q

Cloud on title

A

= any document, claim, lienor encumbrance that results in unmarketable title
- gap in chain of title

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7
Q

Abstract of title

A

= result of title search
= summary of legal history of property, shows chronological overview of all recorded documents and transactions affecting the title

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8
Q

Title insurance

A

= protects lenders and homebuyers from financial loss due to defects in title (undisclosed heirs, improper deed etc.)
- paid with one time premium

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9
Q

RESPA

A

= Real Estate Settlement Procedures Act=Regulation x
- measurements to provide homebuyers and sellers with settlement cost disclosures
- reducing closing costs by prohibiting kickbacks and referral fees
- applies when 1-4 family house is financed by mortgage (not vacant land or 25 + acres)
- overseen by CFPB- Consumer Financial Protection Bureau
- two purposes: 1 ensuring buyers can make informed decisions, 2. Prohibit unlawful practices by real estate settlement providers (kickbacks, referral fees), which increase settlement cost for buyers

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10
Q

RESPA Section 6

A

= protects homeowners against fraudulent activity in connection with mortgage loan, lender is required to reply in writing within 20 days of complaint, resolve complaint within 60 days

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11
Q

RESPA Section 8

A

= prohibits settlement providers from offering, accepting or participating in 1. Kickbacks, 2. Fee splitting, 3. Unearned fees

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12
Q

RESPA Section 9

A

= prohibits seller, developer or attorneys from requiring the buyer to use a particular title insurance company.

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13
Q

RESPA Section 10

A

= limits the amount of escrow a mortgage lender can collect during loan term

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14
Q

RESPA settlement Service

A

= prohibits a required use of a specific settlement service provider

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15
Q

settlement service

A
  1. Origination of a loan
  2. Mortgage Broker Services
  3. Title Services
  4. Attorney Service
  5. Document Preparation
  6. Inspections
  7. Insurance
  8. Credit Reports
  9. Real estate Agents
  10. Taxes and Assessments
  11. Transaction Details by real estate broker to ensure proper closing
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16
Q

Kickback

A

= per RESPA 8a cash or other things of value, offered to agent as incentive for business referrals under the table

17
Q

afBA

A

= affiliated business arrangement
- RESPA allows referrals as long relationship is disclosed
- referring party must give afba disclosure to consumer at or prior to referral

18
Q

Closing/ settlement

A
  • final exchange in purchase of property
  • 2 closings take place at the same time: 1. closing of buyers mortgage loan 2. closing of sale/transfer of title
19
Q

Parties involved in closing

A
  1. Homeowner/Seller: grant property to buyer and receives payment
  2. Buyer: pays for and receives title
  3. Licensed Real Estate Agents: full filling fiduciary role
  4. Real Estate Attorneys: to protect clients interests
  5. Lender Representative: Mortgage company representative executes all loan documents, ensure that property has clear title, prepare settlement statement, disburse funds to seller
  6. Title Company Representative: reviews documentation, finalizes deed and title transfer
  7. Real Estate Broker: commission is paid
20
Q

Closing Documents

A
  1. Sales Contract: most important, terms and conditions of transaction
  2. Closing Disclosure Form: when mortgage loan is involved seller receives 2 page closing disclosure form, buyer 5 pages (details of mortgage loan, purchase price, loan fees etc)
  3. Mortgage Promissory Note: buyer agrees to pay mortgage loan
  4. Deed of Trust: gives lender legal right to foreclose on the property if buyer fails to pay loan
  5. Deed: transfers ownership from grantor to grantee
  6. Closing Disclosure: buyer (and seller) has to receive this 3 days before closing per RESPA regulations from lender, informs what funds must be brought to the closing
  7. Escrow Disclosure Statement: agreement to pay monthly certain amount into escrox account to pay taxes and insurance premiums
  8. Survey: buyers lender might require survey to ensure valid property description
  9. NY Real Estate Transfer Tax Return: purchase price x 0.004
  10. IRS Form 1099 S: settlement officer is required to submit documentation to IRS to report sellers proceeds
  11. Real Property Transfer Report: form RP5217 ensures update of tax records
  12. Real Estate Settlement Procedure Act Document : given to buyer, provides additional info about closing documents and mortgage obligations
  13. Homeowner insurance lenders require homeowner insurance be sufficient to replace home in case of fire etc.
21
Q

additional Closing forms required in NY State

A
  1. Form TP 584: NY state Real Estate Transfer Tax Return
  2. Form RP 5217: Real Property Transfer Report
22
Q

Special Assessments

A

= charges imposed on property for improvements or obligations (street repairs, installation of sidewalks etc)
- paid by seller

23
Q

Settlement Statement

A

= documents summarizing closing costs expenses to be paid by seller and buyer prior closing
- any cost to buyer or seller can be listed here
- escrow deposits and homeowner insurances must be listed

24
Q

Closing Cost

A
  • all debits owed but buyer are totaled and added to purchase price, then credits are totaled and subtracted= how much money buyer needs to bring to closing
  • mortgage amount shows up as credit for buyer since lender will bring the money
25
Q

Seller Closing Cost (buyer everything else)

A
  • Attorney Fees
  • Brokers commission
  • Condo or coop fees
  • Escrow fees
  • Equalizations fee
  • Existing Liens Payments
  • Miscellaneous title fees
  • Mortgage Satisfaction fee
  • NYC Transfer tax
  • Property Tax
  • Recording fees
  • State Transfer tax
26
Q

Transfer Tax

A

=$4 per $1000 of purchase price and rounded up to the next $2 ($4 when higher than $500): $120000/$1000=$120.30 x$4=$481.20 = $483
- Mansion tax: additional tax of 1% when purchase price higher than $1mil
- NYC in addition to real estate transfer tax NYC has additional transfer tax 1% for properties up to $500k and 1.425% for higher

27
Q

Mortgage recording tax

A
  • paid buy buyer
  • in NY 0.75% of mortgage amount
  • in counties with public transportation its 1.25% (buyer pays 1%, lender0.25%)
28
Q

Proration

A

= division of expenses between buyer and seller in proportion to the actual usage
- Expenses can be accrued or prepaid
-

29
Q

Accrued Expenses

A

= cost has been incurred but not paid (seller will be debited, buyer credited)
- Mortgage interest (paid at the end of month),
- special assessments
- property taxes
- utility used but not yet billed

30
Q

Prepaid Expenses

A

= charges already paid by seller (seller will be credited, buyer debited)
- homeowners insurance,
- NY property tax (due beginning of the year),
- HOA fees

31
Q

Calculate Proration

A
  • either 365 day- used when closing occurs mid months-
  • or 360 day – 12 month each 30 days
    1. Determine if expense is accrued or prepaid
    1. Divide expense by 12 then divide that amount by 30 for day rate
    1. Determine usage period to be allocated to each party
    1. Multiply monthly/daily rate by usage period
    1. Calculate which party receives credit and which debit
  • Note: buyer responsible for closing date

NYREI (9 decks)

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