Closing Flashcards
These documents should be there at closing:
F-E-D-S-B-S-H-I-P
(not all this information is applicable for all closings)
Financial document Evidence of title Deed Settlement statement Bill of sale Survey Homeowners insurance IRS form Property inspection report
Sellers are paid the balance of the purchase price an existing liens like mortgages are satisfied. All contingencies and conditions must be met.
Closing
This must be provided by the seller at closing to prove that he has marketable title. This means that the title is free and clear from undisclosed encumbrances or other defects that would expose the purchaser to litigation/impede their ability to enjoy the property or sell later.
(The buyers lender is especially concerned about this)
Evidence of title
This is also known as the transfer of property.
Settlement
A written promise to pay money owed, the basic evidence of the debt.
Promissory note
Provide security for the debt by creating a voluntary lien against the property.
Mortgage
This must be recorded at the county clerks office in the county where the property is located.
Mortgage
Once the seller’s lender is paid, that lender will issue a_____ __ ______, A document which the seller should record as evidence that the lien has been released.
Discharge of mortgage
A document that transfers the title of personal property from the seller to the buyer.
Bill of sale
The process of determining the physical size and boundaries of the property. A type of document showing measurement, boundaries, an area of the property. This is expensive, but it may be required for the secondary mortgage market.
Survey
A bank is more likely to request a ____ _____.
This determines whether a properties buildings encroach on to adjoining property, or any adjoining property’s building encroach on the subject property.
Location survey
These may include inspection for termites, structural integrity, septic systems/soil/water flow, radon gas among others. These may be part of the purchase agreement.
Property inspection reports
A seller could be required to provide this evidence that the property is habitable.
Certificate of occupancy
The closing agent is responsible for filling out this form with the IRS. If the closing agent failed to notify the IRS, the responsibility is been passed to the mortgage lender. However, any parties involved in the transaction could be held liable if the transaction goes unreported.
IRS form 1099
This is generally the person responsible for conducting the closing proceedings. This person prepares the settlement statement or closing statement, which involves calculating the division of credits and debits between the buyer and seller.
Closing officer
Closing can be handled by…
An escrow agent
A broker
A buyer’s or seller’s attorney
A representative from the lender or title company
A buyer attends around table closing in order to:
Approve the settlement statement, sign all necessary documents, pay additional funds, and receive title to the property, as well as the deed in the keys.
A seller attends around table closing in order to:
Grant their property to the buyer’s via a signed deed, approve the settlement statement, give the keys to the buyer, and receive payment.
Attorneys attend the roundtable closing in order to:
Collect the necessary documentation and review all closing statements. Collect their fee at settlement.
Real estate agents attend the roundtable closing in order to:
Represent their clients, confirm that the necessary documents are there, and help ensure that all elements of the sales contract are satisfied. Of course also to collect commissions.
A lender representative attends the roundtable closing in order to:
Examine all loan documents and make sure the property for which a mortgage is being used has a clear title. They also provide a check for the loan amount and bring the mortgage and promissory note for the buyer to sign.
The title company representative attend the roundtable closing in order to:
Review the documents and, once satisfied, deliver evidence that the title is insured.
_______ closings are conducted by a disinterested third-party referred to as a ____ agent and is not usually attended by the buyer and seller.
Escrow closing/Escrow agent
At closing the deed or other title documents such as land contract is supplied by:
The seller
At closing evidence of title, such as the title report or title insurance is supplied by:
The title company
At closing discharge of mortgage is supplied by:
The seller’s lender
At closing The loan documentation such as a promise Siri notes and mortgages are supplied by:
The buyer’s lender
At closing checks are usually supplied by:
The buyer, the buyers lender, or an escrow officer
At closing the settlement statement is generally supplied by:
A Settlement officer or escrow officer
At closing The Home warranty (which is optional by request of the buyer and covers mechanical failures within the house for a one year period) is often paid for by:
The seller
At closing bill of sale for personal property is supplied by:
The seller
At closing homeowners insurance is supplied by:
The buyer
At closing the IRS form 1099 is supplied by:
The settlement officer or escrow officer
This is a document prepared by the closing agent, usually a title company, which itemizes all expenses and costs paid by both the buyer and the seller in order to close the real estate transaction.
Settlement statement
While not as precise as the settlement statement, this shows the buyer and or seller what he can expect to pay to close the real estate transaction.
(lenders are required by RESPA to provide loan applications with this within three days of applying for a loan)
Good faith estimate
RESPA
Real Estate Settlement Procedures Act
This is the balance sheet where all the money that a buyer or seller pays closing or that is due at closing is itemized.
Settlement statement
The most common standardized form and
Is required for all 1 to 4 family dwellings under RESPA.
One of these must be completed and given to the borrower at least one day business day before closing.
HUD-1 settlement statement
This is used for RESPA compliance and shows how much was paid, to what companies or parties, and for what purpose.
HUD-1 Settlement statement
These are required in New York. Attacks on the conveyance of the title to real property. This tax is $4 per $1000 of the sales price.
(in New York the city tax is 1% of the sales price. If the sales price is more than 500,000, the New York City SalesTax is raised to 1.425%)
Transfer taxes
Are the sum of money that is old at the moment of closing. Is charged to a particular party on the closing statement to represent money that must be paid at the closing.
Debits(like debts)
To understand the final amount that a buyer will have to pay or a seller will receive a closing, it is important to understand this concept:
The concept of debits and credits
These are any sum of money to be received or that has already been received. If, at the closing, the buyer or seller is getting money, having money paid for by another (mortgagee), or has already paid for one or more of the closing expenses. Then that item is considered to be a ______to the buyer or seller.
Credit
If John were supposed to pay $100,000 for a house, but the seller agreed to reimburse him 500 spent for a termite inspection, he needs only to pay $99,500. This is an example of a:
Credit
If Sarah was supposed to receive $100,000 from the sale of her house, but she agreed to pay for a termite inspection that cost $500, she only receives $99,500. This is an example of a:
Debit
This is the allocation of an expense between buyer and seller in proportion to the actual usage of the item represented by that expense.
Proration
Items on the settlement statement for which the cost has been incurred, but the expense has not yet been paid.
These items start from that nothing has yet been paid,so the sellers portion must be calculated so that she could be debited and the buyer can be credited for this amount.
Accrued items, or retrospective expenses
These are the settlement statement the seller has already paid, usually at the beginning of the year for the rest of the year or longer. In New York, property taxes that most typical example.
Prepaid items, for prospective expenses
POC
Paid outside of closing
If an item is paid outside of closing, the party is directly paid the cost of the service personally not appear on the settlement statement.
This act was passed by Congress in 1974, detect consumers by disclosing actual costs in a timely manner. It was administered by the HUD, the US department of housing and urban development.
RESPA
These laws were designed to let buyers compare the cost of services from different lenders or closing agents and to help them understand the differences.
RESPA laws
Gives the borrowers the right to obtain title insurance from a provider of their choice.
RESPA
This is the estimate of the money so I would receive from a real estate transaction based on a certain selling price after all cost and expenses have been paid. Not a guarantee but an approximation.
Seller Share or Net to Seller
Start with the sales price and deduct all known costs for which the seller is responsible to arrive at this
The seller’s share
What document is most critical to the closing, and basically lays the foundation for the closing?
Sales contract
