Closing Flashcards
settlement vs closing
In settlement, the closing attorney prepares and/or gathers all the documents and funds needed to close the transaction.
Then…
In closing, the closing attorney uses the prepared documents and funds received to execute the final steps or activities of closing
Conner Act
to protect interests in real estate, the interest must be registered with the register of deeds in the county where the property is situated.
In North Carolina, what final action or event takes place after settlement but prior to closing before the transaction is considered complete?
In North Carolina, before a real estate transaction can truly be considered closed, the recordation of the deed and deed in trust in the county registry must take place. Only then, can the possession of the property by the buyer and the payment of proceeds from the sale to the seller occur.
A settlement agent is
the entity or person who conducts the closing of a real estate transaction.
More often than not, a North Carolina _______ will be selecting the closing attorney to act as the settlement agent.
buyer
When giving the buyer names of possible closing attorneys, the agent should: (4)
Educate the buyer regarding the nature of the responsibilities of a settlement agent, specifically the legal aspects of the job
Make clear that there is no obligation to use any attorney suggested
Assure the buyer that the agent will earn no referral fee from the attorney selected
Provide the buyer with multiple viable recommendations of attorneys who could fill this role
According to North Carolina Real Estate Commission rules, what is the earliest that a broker can turn over earnest money to the settlement agent before the settlement date?
Per the North Carolina Real Estate Commission rules, the broker should turn over the earnest money to the settlement agent, no earlier than 10 days prior to the settlement date.
The NCBA/NCAR 2-T Offer to Purchase and Contract gives the delaying party ____ days past the scheduled settlement date, as long as that party has been operating in good faith and communicates with the other party.
7
Related to the issue of time being of the essence, the buyer needs to understand that the NCBA/NCAR 2-T Offer to Purchase and Contract provides no provision for terminating a contract if the buyer fails to
obtain financing.
these documents should be reviewed during the DDP.
covenants, rules, and regulations
In the event that a prospective buyer chooses NOT to have a property inspected, the agent should secure a signed written statement from the buyer-client stating that they made this choice despite the agent’s recommendation to have the property inspected.
In North Carolina, the form to use is the
Professional Services Disclosure and Election Form.
Utility refers to
the degree to which something performs its desired function.
The general inspector is expected to:
The general inspector is expected to visually inspect accessible systems and components.
A North Carolina broker cannot advertise a property as having more bedrooms than are allowed by the septic permit regardless of
how many rooms in the home are being used as such! 🚨
The critical material facts to investigate/disclose when it comes to a septic system involve: (3)
Is there a permit?
Is the system in good working order?
Is the system’s capacity sufficient for the number of bedrooms (expected use)?
A home inspection reveals that the roof leaks. Buyer Nastya asks her agent Perle for her advice on what to do about the roof repair. Which of the following is the BEST response for Perle to give Nastya?
Perle should advise that she seek the professional opinion of a roof specialist, and present her with options.
Agents should do ______ during the due diligence period in order to confirm and discover material facts for themselves
walkthrough inspections
As an agent, it will be your responsibility to inquire about the “red flag” issues. Some common examples of red flags include:
Old plumbing – When you turn on the faucet, is the water pressure low? The piping could need an update.
Sewer problems – Is there standing water in the yard? Are there signs of flooding in the basement? This could point to a break in the underground sewer line.
Worn roofing – Are there water stains on the ceiling? This could be a sign of a leaky roof. Has the ceiling been freshly painted? This could indicate that the seller is attempting to conceal water stains. Consider it a red flag!
Old electrical wiring – If the home is much older, it may have hazardous aluminum wiring, creating a potential fire risk.
Pest damage – Are there small piles of wood dust visible on the floor? That’s a red flag that there may be carpenter ant damage. When you knock on a wooden beam, does it sound hollow inside? That could be a sign of termite damage.
Foundation issues – The big one. Are there cracks in the foundation or basement floor larger than a quarter-inch? Bumps on the basement floor? Misaligned door frames or windows? All could spell trouble for the foundation.
Once the home inspection is completed, the buyer then has to determine the following, based on the inspection results: (5)
What needs to be repaired?
Who will make the repairs?
What things should be credited and how much should the credits be?
What issues can, or should, be ignored?
Which problems are deal-breakers that may prevent the buyer from purchasing?
If the buyer and seller negotiate an agreement regarding repairs to be made, this should be documented on the
Due Diligence Request and Agreement
If the buyer and seller negotiate a change in the purchase price or amount the seller agrees to pay toward the buyer’s expenses associated with the property purchase, this should documented on
Agreement to Amend Contract
A home warranty is
a product offered by a company that maintains, repairs, or replaces any applicable component of a home for a specified period of time. This usually applies to major home appliances, electrical and plumbing systems, and the heating and air conditioning systems of a residence. Coverage differs from warranty to warranty. The typical term of coverage is one year.
hazard insurance is
insurance against loss or damage to real property improvements. It’s generally limited to necessary replacements and repairs resulting from damages. Some natural disasters and accidents will be covered, but general wear and tear won’t be. Policies vary,
a word of wisdom, repairs should be suggested to be
reinspected
This is a sworn statement in which the seller assures the title company (and the buyer) that there are no liens, unpaid bills for repairs or improvements, or undisclosed defects in the title.
affidavit as to debts and liens
what documents does the seller give at closing (4)
The seller typically deposits such things as the deed, title evidence, affidavits of title, and the payoff letter from their mortgagee.
what documents does the buyer give at closing (6(ish))
The buyer will typically deposit the cash needed to close, loan documents, proof of hazard insurance and flood insurance (where required), a survey, and an appraisal.
relation back doctrine
once the escrow agent has the deed in their possession, it is considered legally delivered under certain scenarios
who does the closing attorney represent
the buyer
what is a bill of sale
sometimes a documents used for the sale of personal property along with the real property
Which of these address the closing attorney’s responsibilities regarding fund verification and deed recording?
Chapter 45A of the North Carolina Good Funds Settlement Act dictates the closing attorney’s responsibilities regarding verification of funds and the recording of the deed and deeds of trust BEFORE funds can be dispursed.
That said, there are some times when it would not be necessary to report a real estate sale to the IRS. Here they are:
If the property being sold was the seller’s principal residence and the sale price is for $250,000 or less (or $500,000 if the seller is married)
If the seller is a corporation or the government (for example, if the house is foreclosed on and sold at auction)
If the net money received is less than $600
There are other exceptions you can read about by looking at the 2021 Instructions for Form 1099-S on IRS.gov/Form 1099S
