Chapter 21: Closing the Real Estate Transaction

Question 1

accrued items

Answer 1

On a closing statement, items of expense that are incurred but not yet payable, such as interest on a mortgage loan or taxes on real property

Question 2

Buyer Closing Disclosure (BCD)

Answer 2

A form required (as of 2015) in most residential mortgage transactions provided to a buyer prior to closing that includes details about settlement costs, such as loan and closing costs

Question 3

closing

Answer 3

The consummation of a real estate transaction; seller delivers clear title and buyer delivers payment of the purchase price; occurs at the recordation of the deed per the standard residential sales contract

Question 4

Closing Disclosure (CD)

Answer 4

A settlement form required in most residential mortgage loans required by the TRID rules since October 2015

Question 5

credit

Answer 5

On a closing statement, an amount entered in a person’s favor - an amount the party has paid or an amount received from another party

Question 6

debit

Answer 6

On a closing statement, an amount charged; an amount the party must pay at settlement

Question 7

Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

Answer 7

Legislation passed I 2010, primarily affecting financial institutions and their consumers in an effort to prevent a recurrence of events that caused the economic recession and the mortgage market meltdown during the mid-2000s

Question 8

due diligence

Answer 8

(1) a buyer’s investigative process of having experts inspect the property, examine title, and review any leases to determine if the property meets the buyer’s needs and if the buyer wishes to proceed with the purchase. During the “due diligence period,” the buyer can terminate the purchase contract for any reason or no reason;
(2) a licensee’s affirmative duty to discover and disclose any material facts about the property in question

Question 9

Good Faith Estimate (GFE)

Answer 9

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Question 10

HUD-1 settlement statement

Answer 10

A type of settlement statement, replaced with the Closing Disclosure form in many residential transactions since October 2015

Question 11

Loan Estimate (LE)

Answer 11

As of 2015, a form required to be given by lenders to most residential mortgage borrowers outlining loan expenses

Question 12

prepaid items

Answer 12

On a closing statement,

(1) expenses paid before they are due, such as hazard insurance or rent; also called prepaid
(2) a lump-sum payment to set up a reserve account, such as deposits of taxes and insurance to set up the borrower’s mortgage loan escrow account

Question 13

prorations

Answer 13

Shared expenses, either prepaid or paid in arrears, that are divided equitably between buyer and seller at settlement

Question 14

Real Estate Settlement Procedures Act (RESPA)

Answer 14

Federal law that insures that residential buyers and sellers receive full disclosure of all settlement charges when a 1-4 family unit residence is financed by federally-related first mortgage loans. The Act mandates a HUD booklet about closing costs, a loan estimate of closing costs, and a standardized closing statement. The Act, known as Regulation X, also prohibits kickbacks from lenders

Question 15

Regulation X

Answer 15

The rules which implement and interpret the RESPA of 1974

Question 16

Seller Closing Disclosure (SCD)

Answer 16

A type of settlement statement that may be used in residential transactions that are governed by TRID regulations

Question 17

settlement

Answer 17

The process of adjusting and prorating credits, debits, and closing expenses to conclude a real estate transaction

Question 18

settlement agent

Answer 18

A third party that conducts the closing of the transaction, usually an attorney in North Carolina

Question 19

settlement service provider

Answer 19

An individual or firm that handles the facilitation of closings

Question 20

soil suitability test

Answer 20

An engineer’s test to determine the ability of the ground to absorb and drain water; used to determine suitability and location of septic systems; also called a percolation or perk test

Question 21

survey

Answer 21

The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions, and position of a house on a lot, including the determination of any existing encroachments or easements

Question 22

TILA/REPSA Integrated Disclosure (TRID)

Answer 22

Rules which integrate the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosures and regulations. The rule describes the use of the Loan Estimate and the Buyer Closing Disclosure, among other matters. The TRID rules and forms took effect on October 3, 2015.

Question 23

walk-through inspection

Answer 23

The final inspection of the property by the buyer prior to closing to assure that the seller has vacated, made required repairs satisfactorily, and delivered the property in the condition it was in the contract

Question 24

yield spread premium

Answer 24

A fee usually expressed as a percentage of the loan amount, paid by a lender to a mortgage broker for making a loan at an above-market interest rate with little or no origination fee. The lender will receive an increased yield due to the higher interest rate, thus allowing the compensation of the mortgage broker without an origination fee.