LESSON 5: CLOSING AND POSSESSION Flashcards
What is the closing date in the One to Four Family Residential Contract (Paragraph 9A)?
The closing will be on or before a specified date or within 7 days after objections under Paragraph 6D are resolved, whichever is later. If either party fails to close by the Closing Date, the non-defaulting party may exercise remedies in Paragraph 15.
What happens if the closing date needs to be extended?
If the closing date needs to be extended, all parties must sign an Amendment to the Contract.
Who is responsible for curing timely objections from the buyer or third-party lender?
The seller is responsible for curing timely objections within 15 days of receiving them, at no expense to the seller.
What happens if the seller does not cure the objections within the cure period?
If objections are not cured within the cure period, the buyer can terminate the contract or waive the objections within 5 days. If the buyer doesn’t act, the objections are deemed waived.
When must the buyer receive the commitment for title insurance?
The buyer must receive the commitment for title insurance within 20 days of the title company receiving the contract.
What are exclusions in title insurance?
Exclusions include issues related to zoning laws, eminent domain, usury, and matters created, suffered, assumed, or agreed to by the insured claimant. Some exclusions can be covered with an endorsement to the policy.
What are restrictive covenants in real estate?
Restrictive covenants are deed restrictions that govern the use of the property. They are usually set by the original developer and can include requirements on the size, construction type, and number of homes on the property. Buyers should review these carefully before purchasing a property.
What is considered “good funds” for closing?
Good funds for closing include a wire transfer, cashier’s check, or certified check. A wire is directly transferred via the Federal Reserve, and cashier’s checks are immediately available. Certified checks are personal checks guaranteed by the bank.
How can a buyer ensure they have “good funds” for closing?
The buyer should contact their bank early to ask about wire instructions, fees, and lead time for sending funds to the closing.
When does the buyer receive the Closing Disclosure?
The buyer receives the Closing Disclosure 3 days before the closing.
What is required if the closing date needs to be amended?
An Amendment to the Contract must be signed by all parties if the closing date needs to be amended.
When does the buyer take possession of the property?
The buyer takes possession upon closing and funding, unless otherwise agreed in a temporary residential lease or another written agreement.
What is the difference in leases for temporary buyer and seller possession?
In a Buyer’s Temporary Lease, possession is granted before closing, and rent is paid at lease commencement. A Seller’s Temporary Lease allows the seller to remain after closing, typically for no more than 90 days.
What must the seller provide regarding leases on the property?
The seller must provide copies of any leases, including mineral leases, and move-in condition forms within 7 days of the contract’s effective date.
What is the role of Special Provisions in the contract?
Special Provisions are used to add factual statements or business details applicable to the sale, and cannot be used to add new negotiations or items that require a contract addendum or other form from TREC.
What expenses must be paid by the Seller at or prior to closing?
The Seller must pay expenses such as releases of existing liens, prepayment penalties, recording fee release of Seller’s loan liability, tax statements, preparation of deed, one-half of escrow fee, and other expenses specified in the contract.
What expenses must be paid by the Buyer at or prior to closing?
The Buyer must pay appraisal fees, loan application fees, credit reports, loan documents preparation, recording fees, loan title policy, loan-related inspection fees, underwriting fee, and other expenses specified in the contract.
What happens if an expense exceeds the stated amount in the contract?
The party responsible for the expense may terminate the contract unless the other party agrees to pay the excess.
What are Discount points in real estate?
Discount points are pre-paid interest, where one point equals 1% of the loan amount. Borrowers pay points to reduce the interest rate on the loan, thus lowering the monthly payment.
What is a Buy-down in real estate?
A Buy-down is a mortgage subsidy where the seller contributes funds to an escrow account to lower the buyer’s mortgage payments for a period of 1-5 years, making it easier for the buyer to qualify for the loan.
What is a Commitment Fee in real estate?
A Commitment Fee is charged by a lender to compensate for the lender’s commitment to lend, typically associated with unused credit lines or undisbursed loans.
What are the five constitutional rules for property tax in Texas?
- Taxation must be equal and uniform. 2. Property must be taxed on current market value, with exceptions for agricultural land. 3. Property is taxable unless exempt. 4. Property owners must be notified of increases in appraised value. 5. One appraised value for each property.
What are the three main parts of the property tax system in Texas?
- Appraisal District sets property values. 2. Appraisal Review Board resolves disputes over property values. 3. Local taxing units (county, city, school districts) determine tax rates and collections.
What is the process for property appraisal in Texas?
The process includes valuing taxable property, protesting values, adopting tax rates, and collecting taxes, with January 1 marking the start of property appraisal.
What is a casualty loss in real estate?
A casualty loss is damage to property from a sudden, unexpected event like fire, floods, or storms. The seller must restore the property by the closing date or the buyer may terminate or negotiate.
What options does a buyer have if the property is damaged before closing?
The buyer can: 1. Terminate the contract and get earnest money back, 2. Extend the closing by 15 days, 3. Accept the property in damaged condition with an assignment of insurance proceeds and a credit for the deductible.
What happens if the Seller is in default?
If the Seller is in default, the Buyer may enforce specific performance, seek legal relief, or terminate the contract and receive earnest money, releasing both parties from the contract.
What happens if the Buyer is in default?
If the Buyer is in default, the Seller may enforce specific performance, seek legal relief, or terminate the contract and receive earnest money as liquidated damages, releasing both parties from the contract.
What are taxes and proration in real estate?
Taxes, interest, maintenance fees, and rents will be prorated through the closing date. If the taxes vary from the prorated amount, adjustments will be made when tax statements are available. Homeowner’s insurance is not prorated.
What happens when a seller refuses to sell?
The buyer can file a lawsuit for specific performance. If the buyer wins and fulfills all obligations under the contract, the court will force the seller to proceed with the sale. The buyer can also file a “lis pendens” to prevent the property from being sold to others.
What is a “lis pendens” order?
A “lis pendens” is a notice filed against the property to inform that a lawsuit is pending. It makes the property difficult to sell because its title cannot be insured.
What are the costs associated with filing a lawsuit for specific performance?
The buyer will have to hire an attorney and go to court, spending thousands of dollars. The lawsuit can take years to resolve, during which time the buyer may need to stay ready, willing, and able to buy the property without actually owning it yet.
What is the purpose of earnest money in real estate contracts?
Earnest money serves as liquidated damages and can be kept by the seller if the buyer breaches the agreement. It also acts as an estimate of the actual damages the seller would suffer in case of a breach.
What happens if a buyer breaches the contract by failing to close title?
The seller can either keep the earnest money or sue for actual damages or force the buyer to proceed with the sale through specific performance.
How long must a broker maintain documentation related to a trust account?
A broker must maintain all documentation regarding a trust account for four years from the date the document is received or created.
What is the mediation policy in Texas for real estate disputes?
Texas encourages alternative dispute resolution, like mediation, for disputes between a seller and buyer. The costs of mediation are to be split equally between the parties. However, this does not prevent the parties from seeking equitable relief from a court of competent jurisdiction.
What are the responsibilities of an escrow agent in a real estate contract?
The escrow agent is not liable for the performance or nonperformance of any party to the contract and is not responsible for interest on earnest money or for the loss of earnest money caused by a financial institution unless it is acting as the escrow agent.
What must the escrow agent do at closing?
At closing, the earnest money is applied first to any cash down payment, then to the buyer’s expenses, with any excess refunded to the buyer. If no closing occurs, the escrow agent may require a release of liability and deduct unpaid expenses from the earnest money.
What happens if the parties cannot agree on the release of earnest money?
Either party can send a written demand for the earnest money. If there is no objection within 15 days, the escrow agent may release the earnest money to the party making the demand, minus any unpaid expenses.
What are the consequences for failing to sign a release of earnest money?
The party that wrongfully fails to sign a release within 7 days of the request will be liable for damages, the earnest money, attorney’s fees, and court costs.
What happens if a seller’s representation in the contract is false on the closing date?
If any representation by the seller is untrue on the closing date, the seller will be in default.
What is a back-up offer?
A back-up offer is an offer made contingent upon the cancellation of a previous accepted offer. The buyer signs the offer and provides earnest money and option money. The buyer can terminate the contract until the first contract goes away, and if the first contract never terminates, the earnest money is refunded, but the option money is not.
What is the Federal Tax Requirement regarding foreign sellers in real estate transactions?
If the seller is a foreign person, the buyer must withhold an amount from the sales proceeds to comply with applicable tax law and deliver it to the IRS, along with necessary tax forms. The escrow agent ensures the transaction complies with IRS regulations, including filing reports if currency exceeds a certain amount.
What happens on Page 10 of the contract?
Page 10 of the contract does not determine commission. Commission is determined by listing agreements and agreements between brokers. It violates MLS rules and the Code of Ethics to renegotiate commission amounts when writing an offer.
What are examples of antitrust violations in real estate?
Examples of antitrust violations include fixing prices or commissions, boycotting competitors, boycotting suppliers or vendors, controlling cooperative splits in the market, and attempting to fix or control the length of listings.
What are some ideas for closing gifts?
Closing gifts might include a framed photograph, paying for a few weeks of lawn service, paying for a locksmith, or giving a gift card to a home improvement store.
