Closing Flashcards
What are the styles of closing?
Escrow Closing (CA Closing)
New York Closing
Escrow Closing
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
New York Closing
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
Duties of Escrow Agent
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)
If seller thinks the buyer is going to default, seller should…
seller should tender performance (sign the deed and place with escrow
What is a Mortgage Note?
Note stating the mortgage on the property
What is a settlement statement?
Chart which shows the allocation of money coming in, where it is going
– prorations, closing costs, broker fee, etc.
What Acts protect consumers?
RESPA
TILA
TRID
What is RESPA?
Real Estate Settlement Procedures Act
Prohibits kickbacks and referral fees that increase the cost to consumer.
(prohibits referral fees from title insurers, agents, attorneys)
What is TILA?
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
What is TRID?
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.
What are the kinds of deeds, and which is the default absent clear language in the K?
General Warranty Deed (Default)
Special Warranty Deed
Quit Claim Deed
General Warranty Deed
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
Special Warranty Deed
(1) only warrants against defects from their own conduct - free from encumbrances done by the seller/grantor
Common in commercial transactions
Quit-Claim Deed
No covenants
Whatever I have, if anything at all, I give to you
often used in boundary disputes
A deed must:
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
Power of Attorney
Attorney can sign their own name in place of absentee with recorded permission
Deed Exceptions and Reservations
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
Types of Recording the Deed
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
Types of Notice
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
