Ch 32: Closing the Transaction Flashcards
What happens at title closing?
The buyer completes his or her financing arrangements (referred to as closing the loan). The buyers deposit the down payment and closing costs into escrow.
The seller transfers the title. The sellers pay off any mortgage or other outstanding liens on the property.
Both the buyer and seller pay the necessary taxes, fees and other charges.
If the buyers want to move in early or the sellers want to stay after closing, what advice should the agent give them?
The agent should recommend that the parties consult an attorney to draw up a written, temporary rental agreement that specifies what will happen if any of problem situations manifest.
What can a lender require a borrower to do with regard to taxes and insurance and why would the lender make this requirement?
Lenders can require the borrower to maintain an escrow account for property taxes and insurance, so that the lender is sure money will be available for the payments.
Who is responsible for reporting the real estate sale to the IRS?
The responsibility for filling out and submitting the form generally falls to the person who conducted the closing.
What type of transactions must comply with TRID?
Any closed end-loan secured by real property, including unimproved property.
How do mortgage lenders define a business day?
A business day is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions.
What are prepaids?
Prepaids are items paid for in advance, such as homeowner’s insurance and property taxes.
In what section of the loan application would you find if the lender intends to service the loan or transfer servicing to another entity?
Servicing
When must the Closing Disclosure be delivered to the buyers?
At least three days prior to closing
Why is the last line on page 3 of the Closing Disclosure important?
The last line on page 3 is important because it shows how much cash the borrower needs to bring to closing and how much cash the seller will receive at closing.
What information is provided in the Security Interest section of the Closing Disclosure?
The address of the property securing the loan
How does Regulation Z define consummation?
It is defined as the time that a consumer becomes contractually obligated on a credit transaction.
How does a suit to quiet title work?
Borrowers might have to file a suit to quiet title, whereby a judge will remove the fault in the title so that the loan process can move forward.
What is the term given to indicate that a title has a problem of marketability?
Any problem found with either the physical layout of the property or in the title search results creates a cloud
What type of deed is commonly used for transfers within a family and in divorce settlements?
Quitclaim deed
What type of deed is used to convey government property to private parties?
A land patent deed is used to transfer government property to private parties. This transfer is called a public grant.
List three items that a buyer usually pays at closing.
Credit fees
Loan origination
Homeowner’s insurance
When doing proration calculations for rent and utilities, which item is paid in advance and which is paid in arrears?
Rent is paid in advance and utilities in arrears.
Sally and Sam have sold their home to Tina and Max. The closing is set for August 23. The yearly real estate taxes are $2,700. Using the 12-month/30-day method, what will be Sally and Sam’s share of the taxes and how will they be handled on the settlement statement?
$2,700 ÷ 12 = $225
$225 ÷ 30 = $7.50
Seller’s portion –
$225 x 7 = $1,575 (January - July)
$7.50 x 23 = $172.50 (August 1-23)
$1,575 + $172.50 = $1,747.50 will be a debit to the seller and a credit to the buyer
Buyers Paul and Joyce have arranged to take over Steve and Julie’s insurance policy. The premium is $1,275 per year paid in advance on July 1. Closing on the property is set for November 15. What is Steve and Julie’s share of the insurance cost?
Total amount: $1,275.00
Daily amount ($1,275 ÷ 365) $3.49
Steve and Julie’s = $481.62
$3.49 x 138 days (July 1 through November 15) = $481.62
Paul and Joyce’s share = $793.38
$1,275 - $481.62 = $793.38
Since Steve and Julie paid the premium in advance, Paul and Joyce’s share of $793.38 will be credited to the sellers and debited to the buyers.
A title that a buyer does not have to defend and is free of defects is called:
a marketable title.
What is a tax law that imposes income tax on foreign persons disposing of US real property interests?
The Foreign Investment in Real Property Tax Act
What section of the Closing Disclosure deals with origination charges?
Loan costs
Generally within how many business days of receipt of the consumer’s loan application is the creditor required to provide the Loan Estimate?
Within 3 business days
What term describes money that a buyer or seller needs to pay at closing?
A debit
What does RESPA specifically prohibit?
Kickbacks
What is an attack that deceptively convinces businesses to wire funds to criminal bank accounts by pretending to be business counterparties?
A Business Email Compromise
The Real Estate Settlement Procedures Act (RESPA) is administered by:
the Consumer Financial Protection Bureau.
What must loan servicers provide to borrowers which summarizes all inflows and outflows in the prior 12 month period?
An annual escrow statement
What part of the Closing Disclosure details the total amount of all payments on the loan and the annual percentage rate (APR)?
Loan calculations
What term describes a person who transfers title to real property?
Grantor
A closing disclosure must contain the information prescribed in the:
TRID rule.
What is created on a title if there are any problems found with the physical layout of the property or in the title search results?
A cloud
A real estate firm may offer a computerized loan origination system (CLO); however, who does RESPA say must pay the fee for such a service?
The borrower
What covenant assures that the grantee will not be disturbed by third party title disputes?
A covenant of quiet enjoyment
