Chapter 15 Closing the Real Estate Transaction Flashcards
Closing Settlement
1) Promises made in the sales contract are fulfilled
2) mortgage loan funds if any are distributed to the buyer for use
*documents are recorded in the correct order to ensure continuity of title
- buyers new mortgage or deed of trust must be
recorded after the deed because the buyers
cannot pledge the property as security for the
loan until they own it.
Title of real estate is transferred in exchange for payment of the purchase price.
Transaction is closed when all documents have been recorded.
3) settlement costs or funds are disbursed
NC Due Diligence Period (DDP)
Standard Form 2 T states that a buyer can investigate the property under contract.
- Negotiations of repairs must be made.
- if buyer is not satisfied with property condition they have until 5pm of DDP.
Buyers Loan
Buyer should exercise the right of DDP and terminate the contract before the expiration of the DDP, otherwise if no financing is approved after expiration they will be in breach of contract.
Soil Suitability Test: Percolation Test
measures the soils ability to absorb and drain water.
*septic permit issued by county health department for a certain number of bedrooms.
Right to Terminate
by 5pm of the DDP
Broker Responsibility
broker is held responsible by the NCREC for the accuracy and delivery of the closing statement either at closing or within 5 days after closing
Documents: Sellers responsibility
*Deed
*Affidavit as to mechanics lien
*Bill of sale of personal property (if any transferred)
*Leases and related documents
* Payoff Statement from Sellers Lender (Loan
payoff balance)
* Proof of Repairs or services
Documents: Buyers responsibility
- Financing documents
- Title Insurance Policy
- Property Insurance Policy
- Wood destroying insect inspection report
(paid by buyer unless a VA loan, then seller
pays) - Property Survey
Settlement Meeting aka Face to Face closing
NC a lawyer frequently represents the buyer although the settlement agent does not have to be an attorney.
Escrow Settlement
Settlement agent uses this when parties cannot attend the settlement meeting.
- escrow agent is a designated impartial third party who conducts the settlement.
- Relation Back Doctrine
Settlement Agent
Non lawyer assistant under the direct supervision of an active member of the Bar may conduct the settlement meeting as long as person does not engage in unauthorized practice of law
- identify documents to be signed
- indicate the correct place to sign
- disburse proceeds
NC Good Funds Settlement Act
settlement agent can only disburse funds to the appropriate parties after recordation of the deed and the deed of trust.
IRS Reporting
Settlement agent must report on Form 1099-S
*if closing agent does not notify the IRS, the responsibility for filing the form falls on the mortgage lender, although the brokers or the parties to the transaction ultimately could be held liable.
RESPA : Regulation X
- For Federally related loans whose deposits are insured by federal agencies
- Enacted to protect consumers from abusive lending practices.
- aids consumers during the residential mortgage loan settlement process.
- Ensures that consumers are provided with important, accurate, and timely information (Uniform Settlement Statement) about the actual costs of closing the transaction.
- Eliminates kickbacks and referral fees
- Prohibits lenders from requiring excessive escrow account deposits. DOES NOT require that escrow accounts be set up.
*for second or subordinate liens for HELOC
*DOES NOT cover a
-transaction financed solely by a purchase
money mortgage taken back by seller
- Installment contract/contract for deed.
- buyers assumption of the sellers existing loan
- loans for business, commercial or agric
- property of 25 acres or more
Controlled Business Arrangements (CBA)
Permitted by RESPA as long as the consumer is clearly informed of the relationship among the service providers and that the other providers are available.