lesson 13 Flashcards
important questions in any real estate transaction
- how does a buyer actually know that the seller owns the property?
- what problems can exist if the seller has debts or liens?
- how are old liens or judgements eliminated?
- how does the lender/bank protect the loan made to the purchaser?
key documents in real estate transaction
contract, deed, promissory note, deed of trust, settlement statement
initial stage involves the
contract
contract
the first document that is prepared and signed by the buyer and seller. it describes the property, cites the sales price, notes if the buyers will get a loan, closing date, and other terms.
a contract is usually subject to
significant negotiation between the parties over several days or weeks
the other 4 documents are handled when
at closing
deed
the document that is evidence of the real estate being transferred from the seller to the buyer, must be recorded
promissory note
evidence of the loan from the bank to the buyer. it recites the amount borrowed, interest rate, how and when the buyer will pay it back, penalties and remedies to the lender if buyer goes into default
deed of trust
recites the promissory note and real estate that is purchased. this is what makes the real estate act as collateral for promissory note, must be recorded
in some states deed of trust is called a
mortgage
settlement statement
shows how money moves between all parties in transaction
typical closing fees and costs
title examination, attorney’s fees, title insurance, real estate taxes, inspection
attorney’s fees
deed preparation, deed of trust, other docs, closing fee
real estate taxes
montgomery county, town of blacksburg
taxes are usually due
June 30 and December 30 of each year
if taxes are pro-rated, and it’s $2,157 annually, calculate the percentages
- determine date of closing (March 21)
- calculate number of days each party will own real estate
- seller owns from Jan 1 - March 20 = 79 days (43.9%)
- buyer owns from March 20 - June 30 = 101 days (56.1%) - apply percentages to tax due
- 43.9% of 2157 = $946.92 for seller - add these to settlement statement
the typical commission for residential property is
6%
if there is one real estate agent:
their sale of a house for $500,000 earns them $30,000 in commission
if there are 2 real estate agents:
they split the commission and take 3% each
