CO Real Estate - Closing and Settlement

Question 1

In colorado who is responsible for closing statements for the parties?

Answer 1

The designated broker that represents them

Question 2

What are debits?

Answer 2

Money owed

Question 3

What are credits?

Answer 3

Money received (or deducted)

Question 4

who pays for title insurance?

Answer 4

The seller

Question 5

Who pays broker fee and fee to notarize on warranty deed?

Answer 5

The seller

Question 6

Common seller closing statement outline

Answer 6

+ Credit sales price to seller (received)
- Debit what seller owes based on when bills are owed (broker and notary fees, prorated share of water)
- Debit seller portion of taxes for the year

Question 7

What does the buyer typically pay for at closing?

Answer 7

Tax certificate
Documentary fee
Fee to record deed
Portion of water if paid in advance

Question 8

Common buyer settlement statement outline

Answer 8

• Debit Sales price from buyer
• Debit tax certificate, notary fee and recording
• Debit prorated share of water

Question 9

What are brokers duties at closing?

Answer 9

ensuring correct paperwork is drafted, signed by correct parties and recorded with the County Clerk

Question 10

How long does a listing broker have to deposit earnest money received relating to an accepted offer?

Answer 10

3 days - in an escrow account that belongs to a brokerage firm or title company

Question 11

Who is responsible for the closing of a transaction?

Answer 11

The designated broker - they must also sign and be responsible for the closing statement as it applies to the party with whom the broker has a BROKERAGE RELATIONSHIP

Question 12

When are closing statements delivered?

Answer 12

License law requires delivery at the time of delivery and acceptance of title

Question 13

What if a broker can’t attend a closing?

Answer 13

The employing broker can designate another broker from the firm to attend closing who will then share the responsibility of the closing with the original broker and the employing broker

Question 14

Are closing companies authorized to prepare legal documents in a closing?

Answer 14

No, so the closing company does so under the authority and responsibility of the listing broker who hires them as a scrivener

Listing broker is obligated to pay for the legal documents that are prepared by the closing company

Question 15

Typical seller debits include

Answer 15

Owner’s Title Insurance
Unpaid property taxes for preceding year
Prorated property taxes for portion of current year
Notary fee for warranty deed
Broker’s commission
Prorated water and HOA if paid in arrears
Loans of the seller that are assumed by the buyer
Seller’s loans that are to be paid off
New seller carry loans
Closing fees determined by the contract

Question 16

Typical buyer debits include

Answer 16

Selling price from contract
Loan closing costs
Premium for new hazard insurance
Recording fees for warranty deed and deed of trust
Documentary fee
Notary fee for documents buyer signs
Closing fees
Tax certificates
Prorated water and HOA if paid in advance

Question 17

Typical seller credits includ

Answer 17

Selling price from contract
Proration of bills if paid in advance

Question 18

Typical Buyer credits include

Answer 18

Earnest money already paid
Security deposits transferred from seller
Current year’s prorated property taxes
Amount of any loans assumed by the buyer or any new loans created as part of the purchase price

Question 19

What is the broker column used for on the 6 column worksheet used to draft closing statements?

Answer 19

To keep track of bills the broker needs to pay for the responsible party or to note earnest money that will be a credit to buyer HOWEVER NO CLOSING STATEMENT IS CREATED FOR BROKERS

Question 20

Debit on 6 column

Answer 20

An amount the party owes, reduces party’s bottom line

Question 21

Credit on 6 column

Answer 21

An amount the party receives, increases party’s bottom line

Question 22

Broker debit on 6 column

Answer 22

An amount deposited into the broker’s escrow account

Question 23

Broker credit on 6 column

Answer 23

A check out of the broker’s escrow account

Question 24

Selling price

Answer 24

ALWAYS a debit to buyer
Always a credit to seller

Question 25

Seller loans to be paid off (not assumed)

Answer 25

Always a debit to seller

Question 26

Title insurance

Answer 26

Always a debit to seller

Question 27

Extended Title coverage

Answer 27

Negotiable

Question 28

Mortgagee's policy premium

Answer 28

Always a debit to the buyer

Question 29

Title examination by buyer's attorney

Answer 29

Always a debit to buyer

Question 30

Recording fees

Answer 30

Typically a debit to buyer except for recording of any release of prior liens

Question 31

Recording the warranty deed

Answer 31

Always a debit to buyer

Question 32

Recording the deed of trust

Answer 32

Always debit to buyer

Question 33

Recording a release of deed of trust

Answer 33

Always a debit to seller

Question 34

documentary Fee

Answer 34

$0.01 per $100 of purchase price Always a debit to buyer

Question 35

Certificate of taxes due

Answer 35

Always debit the buyer

Question 36

Unpaid Taxes from Preceding years

Answer 36

Always a debit to seller

Question 37

Unpaid taxes from current year

Answer 37

Always debit to seller

Question 38

Special Taxes/Assessments

Answer 38

Always debit to seller - even if assumed by buyer then it won't appear on the closing statement

Question 39

Broker's fees

Answer 39

Always a debit to seller

Question 40

Loan Origination fees

Answer 40

Typically a debit to buyer

Question 41

Loan discount points

Answer 41

Debit the buyer unless contract states otherwise

Question 42

Survey costs

Answer 42

Negotiable

Question 43

Credit Reports

Answer 43

Always debit to buyer

Question 44

Appraisal fee

Answer 44

Negotiable

Question 45

Loan transfer fee

Answer 45

Typically, debit buyer

Question 46

Loan payment Due

Answer 46

Never prorate a monthly payment that is passed due Always debit seller

Question 47

Lender Reserve Impound Accounts

Answer 47

Established with lender to holds funds to pay taxes and insurance bills that come due Buyer/borrower funds may be held for following: Annual property taxes Annual hazard insurancepremium Always a debit to buyer

Question 48

Premium for new insurance

Answer 48

Always debit buyer

Question 49

Closing Fees

Answer 49

Negotiable per contract

Question 50

Earnest money deposits

Answer 50

Always a credit to buyer

Question 51

Should a closing statement balance?

Answer 51

Yes, every debit should have a matching credit in another column

Question 52

If the seller has more debits than credits at the end of a closing statement what is this?

Answer 52

A deficit closing

Question 53

Colorado contract to buy and sell states proration items will be _____ closing

Answer 53

TO CLOSING (not through)

Question 54

How many days does a year have when prorating in Colorado?

Answer 54

365

Question 55

Months have ___ days in Colorado when prorating?

Answer 55

Exact number of days

Question 56

The document from the county treasurer that summarizes the current status of taxes

Answer 56

Certificate of taxes due

Question 57

_________ a document creates constructive notice of the contents of the document

Answer 57

Recording

Question 58

Who are the four parties in a typical closing?

Answer 58

Buyer, Seller, brokers, closing company hired by buyer and seller in the closing instructions

Question 59

Four most typical ways to close a real estate purchase

Answer 59

Cash Assumable Loan Seller-carry loan New Loan

Question 60

What is a seller-carry loan?

Answer 60

When the seller agrees to accept the buyer's promissory note and record a deed of trust, which will be in second position behind the original deed of trust. This loan helps the buyer with the down payment money but reduces the cash available to the seller at closing (basically the buyer is paying for some of the seller's equity)

Question 61

What should a broker do if they think the figures in a lender's new loan statement are incorrect?

Answer 61

Verify with the employing broker or closer that the figures are incorrect Call the lender to get the figures checked (only the lender can change them)

Question 62

How is a deed of trust mortgage treated on a closing statement if being assumed?

Answer 62

Debit to seller, credit to buyer

Question 63

Who pays interest on a loan for closing month if it is paid in arrears?

Answer 63

Seller will owe buyer interest for the portion of the month they owned

Question 64

How do calculate interest prorations on an assumed loan?

Answer 64

12 months!! All other interest proration calcs should be using 365 days

Question 65

When should a loan payment due be prorated?

Answer 65

Never

Question 66

Who pays to record the deed of trust?

Answer 66

The buyer

Question 67

Who pays to record a warranty deed

Answer 67

The seller or buyer depending on if new deed or releasing old deed

Question 68

In a typical contract to buy and seller who pays for the appraisal?

Answer 68

Negotiable

Question 69

The broker credit total column is a combination of what?

Answer 69

Credits for bills paid and the amount of the check due to the seller

Question 70

Who has the overall responsibility for the proper accounting of a closing done in the listing broker's office?

Answer 70

Listing brokerage and listing broker

Question 71

Deed of trust payable to: on a closing statement is typically seen as:

Answer 71

the only entry from the new lender that will be a credit

Question 72

Deed of trust payoff to:

Answer 72

Included in the lender pay out and is a single entry debit to the seller

Question 73

Who is responsible for costs directly associated with borrowing money/a new loan?

Answer 73

The buyer, unless stated otherwise in the Contract to buy/sell if seller has agreed to pay anything

Question 74

Release of deed of trust paid by

Answer 74

Seller, debit to seller

Question 75

Loan origination fee?

Answer 75

Debit to buyer

Question 76

Discount points/loan discount fee?

Answer 76

Negotiable, but usually buyer unless stated otherwise in contract

Question 77

Lender reserves?

Answer 77

Always debit to buyer

Question 78

Gross amount of new loan?

Answer 78

A credit to the buyer (single entry)

Question 79

What are examples of lender payouts?

Answer 79

Recording the new deed of trust and payment of loan origination fees (no broker entry or offsetting credit, just a debit to the responsible party) then the net proceeds show as a debit to the broker

Question 80

Document who's purpose is to provide essential information to the county assessor to help ensure fair and uniform assessments for all property for property tax purposes

Answer 80

Real Property Transfer Declarations TD1000

Question 81

Definition of good funds

Answer 81

Cashier's check from a commercial bank Teller's check from a thrift institution such as a savings and loan or credit union Wire transfer NOT CASH

Question 82

What should be issued if a minor issue found and corrected by both parties before closing?

Answer 82

A memorandum of the adjustment settled by check or cash (signed by both parties)

Question 83

State law on nonresident sellers?

Answer 83

Requires the closing entity withhold potential income tax for sales in excess of $100K, which is 2% of the sales price or the entire net proceeds, whichever is less

Question 84

Exception to the withholding law

Answer 84

If the property was the seller's principal residence

Question 85

A document recorded to indicate that a lien has been paid off is a

Answer 85

release of deed of trust

Question 86

To protect against defects in title, a lender will usually require the buyer to purchase

Answer 86

a mortgagee's title insurance policy

Question 87

A loan that is neither guaranteed nor insured by a government agency is called a

Answer 87

Conventional loan

Question 88

A conventional loan with a loan to value ratio greater that 80% will typically require

Answer 88

Private Mortgage Insurance

Question 89

An assumption loan close uses ____ entries A new loan close is mostly _____ entry

Answer 89

Double Single

Question 90

Four main types of entries on a settlement worksheet

Answer 90

1. Seller and buyer exchanges of funds 2. Funds held by the broker until closing 3. Bills paid by the broker on behalf of seller or buyer 4. New loan items handled by the lender, not the broker (no broker entry and no offsetting credit, just debit the party that pays)

Question 91

Where should closing entities forward withheld income tax after a transaction closes?

Answer 91

Immediately to the Colorado department of revenue

Question 92

Interest on a new loan or seller carry second?

Answer 92

Always debit the buyer (borrower) and credit the seller for days owed for the month of closing