Closing

Question 1

What are the styles of closing?

Answer 1

Escrow Closing (CA Closing)

New York Closing

Question 2

Escrow Closing

Answer 2

DEED RECORDED BEFORE PAYMENT TO SELLER

NO GAP WHERE SELLER HAS BOTH DEED AND THE MONEY

PARTIES NEVER MEET FACE TO FACE - documents are prepared/executed in advance and placed with an escrow agent

Seller provides deed, buyer provides money, lender requests nothing happens until they know they have a good lien on the property

Escrow Agent must follow the instructions of the parties.

Title Bringdown - make sure no encumbrances or liens were placed between the title report and closing

Question 3

New York Closing

Answer 3

MONEY PAID TO SELLER BEFORE DEED IS RECORDED
[GAP EXISTS]
– Buyer’s title insurance covers gap
– Seller signs gap indemnity to protect the insurance co.

GENERALLY IN PERSON

Question 4

Duties of Escrow Agent

Answer 4

Generally to review the K, order initial title report, issue title commitment, if relevant requests a mortgage payoff letter from seller, compute prorations, arrange for distribution of documents

Disburse funds appropriately - seller, taxes, lender, broker

Escrow Instructions
– follow or be sued
– if buyer and seller instructions conflict, do nothing - inform the parties and let them figure it out (or give issue to the court through an interpleader)

Question 5

If seller thinks the buyer is going to default, seller should…

Answer 5

seller should tender performance (sign the deed and place with escrow

Question 6

What is a Mortgage Note?

Answer 6

Note stating the mortgage on the property

Question 7

What is a settlement statement?

Answer 7

Chart which shows the allocation of money coming in, where it is going

– prorations, closing costs, broker fee, etc.

Question 8

What Acts protect consumers?

Answer 8

RESPA

TILA

TRID

Question 9

What is RESPA?

Answer 9

Real Estate Settlement Procedures Act

Prohibits kickbacks and referral fees that increase the cost to consumer.

(prohibits referral fees from title insurers, agents, attorneys)

Question 10

What is TILA?

Answer 10

Truth in Lending Act

(1) Statutory time periods before closing when the closing statement can no longer be altered.

(2) Closing Disclosures - provide information about the transaction as a whole, including closing costs, not just the loan itself.

Provides buyer security knowing whether or not they can afford and obtain financing w/in reasonable time

Question 11

What is TRID?

Answer 11

Truth in Lending RESPA Integrated Disclosure

Requires Lender to provide a Loan Estimate - sets forth the material aspects of the loan applied for (amount, interest, monthly principle, prepayment penalty)

If numbers changes occur within 3 days before closing, delay of closing is proper.

Question 12

What are the kinds of deeds, and which is the default absent clear language in the K?

Answer 12

General Warranty Deed (Default)

Special Warranty Deed

Quit Claim Deed

Question 13

General Warranty Deed

Answer 13

Even if not stated, a GWD has 6 implied covenants.

Present Covenants

(1) Covenant of Seisin - grantor promises that he owns what he conveys

(2) Right to convey covenant - grantor is not a minor or incompetent, grantor is able to convey

(3) Covenant of Encumbrances - there are not encumbrances against the grantor’s title

Future Covenants

(4) covenant to warrant and defend title against other claims

(5) covenant of quiet enjoyment - no one with superior title will disrupt the grantees possession of the property

(6)Future Covenant - grantor will perform reasonable acts to effect the conveyance

Question 14

Special Warranty Deed

Answer 14

(1) only warrants against defects from their own conduct - free from encumbrances done by the seller/grantor

Common in commercial transactions

Question 15

Quit-Claim Deed

Answer 15

No covenants

Whatever I have, if anything at all, I give to you

often used in boundary disputes

Question 16

A deed must:

Answer 16

List the name of owners and grantors

be signed by owners, grantors, and attorneys (competent as to legal age, sound mind, and mental capacity to understand)

Some states require witnesses

Acknowledge by a notary

Contain present words of conveyance such as “I hereby grant…”

Legal description of land/attachments to land

Does not require date to be valid

Question 17

Power of Attorney

Answer 17

Attorney can sign their own name in place of absentee with recorded permission

Question 18

Deed Exceptions and Reservations

Answer 18

Exceptions - a reference to a previously created interest affecting the deed
– i hereby grant __ except___

Reservations - new interests in favor of grantor
– i here by grant you the property with reservation to me with a life interest on the property

Question 19

Types of Recording the Deed

Answer 19

Common Law Rule = first in time is first in right

Race
– First to record, even w/notice

Notice
– If B does not know that A had deed first, and pays valuable consideration, B is bona fide purchaser, and wins.

Race-Notice
– first in time to record w/out notice

Question 20

Types of Notice

Answer 20

Constructive Notice = if on record, presumed everyone knows

Actual Notice = grantor told B that A already had it

Imputed Notice = When a relationship among parties is such that it imputes knowledge to each other (legal agent to principle, partnerships, spouses, sometimes employee to employer)

Inquiry Notice - what would a reasonable person see if you survey the property