Chapter 21 Closings Flashcards
Closing:
A meeting of principal parties where a seller transfers title and a buyer pays monies owed the seller and lender.
Buyer’s Walk-Through:
A final inspection that should be conducted by the buyer as close to the closing date as possible. The buyer should inspect the property to make certain that the property is in the condition in which the seller states that it is, and that any repairs or other required actions have been performed.
Payoff Statement:
A statement provided by the lender if the seller’s mortgage lien(s) are to be satisfied at closing specifying the amount of unpaid principal and any interest due as of the closing date, plus fees that will be due the lender and any credits or penalties that may apply.
Beneficiary Statement:
A statement provided by the holder of a note secured by a trust deed to show any unpaid balance. Even if the buyer is assuming the seller’s mortgage loan, the buyer will want to know the exact amount of the unpaid balance as of the closing date.
Escrow:
A closing where the principal parties deposit funds and documents with the appointed escrow agent, and the escrow agent disburses funds and releases documents to the appropriate parties when all the conditions of the escrow have been met.
Real Estate Settlement Procedures Act:
A consumer protection statute enacted in 1974. Its purpose is to clarify settlement costs and to eliminate kickbacks and fees that increase settlement costs.
Closing Costs:
Final expenses that buyer or seller must pay at closing to complete the transaction. The sale contract identifies all selling terms and who pays which costs.
Debit:
An amount that one party must pay at closing or has already paid prior to closing.
Credit:
An amount that a party must receive at closing or that has already been received prior to closing.
In Advance:
At the time of closing, the seller has paid some items in advance that cover a period of time that goes beyond the closing date. In effect, the seller has prepaid some of the buyer’s expenses, and the buyer must reimburse the seller.
In Arrears:
At the time of closing, the seller has incurred certain expenses that have not been billed or paid at the time of closing and that the buyer will have to pay later.
Transfer Tax:
Most states impose a tax when real estate is conveyed. The tax is usually paid when the deed is recorded, often in the form of documentary stamps purchased from the recorder where the deed is recorded.
Proration
Apportionment of expense and income items at closing. Examples of items prorated between buyer and seller include interest, insurance, taxes, and rent.
