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Colorado Real Estate Exam > CO Real Estate - Closing and Settlement > Flashcards

CO Real Estate - Closing and Settlement Flashcards

1
Q

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

A

The designated broker that represents them

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2
Q

What are debits?

A

Money owed

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3
Q

What are credits?

A

Money received (or deducted)

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4
Q

who pays for title insurance?

A

The seller

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5
Q

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

A

The seller

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6
Q

Common seller closing statement outline

A

+ 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

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7
Q

What does the buyer typically pay for at closing?

A

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

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8
Q

Common buyer settlement statement outline

A
  • Debit Sales price from buyer
  • Debit tax certificate, notary fee and recording
  • Debit prorated share of water
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9
Q

What are brokers duties at closing?

A

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

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10
Q

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

A

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

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11
Q

Who is responsible for the closing of a transaction?

A

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

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12
Q

When are closing statements delivered?

A

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

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13
Q

What if a broker can’t attend a closing?

A

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

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14
Q

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

A

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

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15
Q

Typical seller debits include

A

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

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16
Q

Typical buyer debits include

A

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

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17
Q

Typical seller credits includ

A

Selling price from contract
Proration of bills if paid in advance

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18
Q

Typical Buyer credits include

A

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

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19
Q

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

A

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

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20
Q

Debit on 6 column

A

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

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21
Q

Credit on 6 column

A

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

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22
Q

Broker debit on 6 column

A

An amount deposited into the broker’s escrow account

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23
Q

Broker credit on 6 column

A

A check out of the broker’s escrow account

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24
Q

Selling price

A

ALWAYS a debit to buyer
Always a credit to seller

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25
Q

Seller loans to be paid off (not assumed)

A

Always a debit to seller

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26
Q

Title insurance

A

Always a debit to seller

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27
Q

Extended Title coverage

A

Negotiable

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28
Q

Mortgagee’s policy premium

A

Always a debit to the buyer

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29
Q

Title examination by buyer’s attorney

A

Always a debit to buyer

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30
Q

Recording fees

A

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

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31
Q

Recording the warranty deed

A

Always a debit to buyer

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32
Q

Recording the deed of trust

A

Always debit to buyer

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33
Q

Recording a release of deed of trust

A

Always a debit to seller

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34
Q

documentary Fee

A

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

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35
Q

Certificate of taxes due

A

Always debit the buyer

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36
Q

Unpaid Taxes from Preceding years

A

Always a debit to seller

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37
Q

Unpaid taxes from current year

A

Always debit to seller

38
Q

Special Taxes/Assessments

A

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

39
Q

Broker’s fees

A

Always a debit to seller

40
Q

Loan Origination fees

A

Typically a debit to buyer

41
Q

Loan discount points

A

Debit the buyer unless contract states otherwise

42
Q

Survey costs

A

Negotiable

43
Q

Credit Reports

A

Always debit to buyer

44
Q

Appraisal fee

A

Negotiable

45
Q

Loan transfer fee

A

Typically, debit buyer

46
Q

Loan payment Due

A

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

47
Q

Lender Reserve Impound Accounts

A

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

48
Q

Premium for new insurance

A

Always debit buyer

49
Q

Closing Fees

A

Negotiable per contract

50
Q

Earnest money deposits

A

Always a credit to buyer

51
Q

Should a closing statement balance?

A

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

52
Q

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

A

A deficit closing

53
Q

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

A

TO CLOSING (not through)

54
Q

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

A

365

55
Q

Months have ___ days in Colorado when prorating?

A

Exact number of days

56
Q

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

A

Certificate of taxes due

57
Q

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

A

Recording

58
Q

Who are the four parties in a typical closing?

A

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

59
Q

Four most typical ways to close a real estate purchase

A

Cash
Assumable Loan
Seller-carry loan
New Loan

60
Q

What is a seller-carry loan?

A

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)

61
Q

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

A

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)

62
Q

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

A

Debit to seller, credit to buyer

63
Q

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

A

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

64
Q

How do calculate interest prorations on an assumed loan?

A

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

65
Q

When should a loan payment due be prorated?

A

Never

66
Q

Who pays to record the deed of trust?

A

The buyer

67
Q

Who pays to record a warranty deed

A

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

68
Q

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

A

Negotiable

69
Q

The broker credit total column is a combination of what?

A

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

70
Q

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

A

Listing brokerage and listing broker

71
Q

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

A

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

72
Q

Deed of trust payoff to:

A

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

73
Q

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

A

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

74
Q

Release of deed of trust paid by

A

Seller, debit to seller

75
Q

Loan origination fee?

A

Debit to buyer

76
Q

Discount points/loan discount fee?

A

Negotiable, but usually buyer unless stated otherwise in contract

77
Q

Lender reserves?

A

Always debit to buyer

78
Q

Gross amount of new loan?

A

A credit to the buyer (single entry)

79
Q

What are examples of lender payouts?

A

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

80
Q

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

A

Real Property Transfer Declarations TD1000

81
Q

Definition of good funds

A

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

82
Q

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

A

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

83
Q

State law on nonresident sellers?

A

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

84
Q

Exception to the withholding law

A

If the property was the seller’s principal residence

85
Q

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

A

release of deed of trust

86
Q

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

A

a mortgagee’s title insurance policy

87
Q

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

A

Conventional loan

88
Q

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

A

Private Mortgage Insurance

89
Q

An assumption loan close uses ____ entries

A new loan close is mostly _____ entry

A

Double

Single

90
Q

Four main types of entries on a settlement worksheet

A
  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)
91
Q

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

A

Immediately to the Colorado department of revenue

92
Q

Interest on a new loan or seller carry second?

A

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

Colorado Real Estate Exam (9 decks)

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