objective 2: describe the procedures involved in face to face closings from those in escrow closings Flashcards
In some areas closing may also be called __ or ___
settlement or transfer
When parties to the transaction sit around a single table and exchange copies of documents is another name for closing called…
passing papers
If one says “we passed papers on the new house wednesday morning” what does this mean?
Closed the house
In some regions, the buyer and seller may never meet at all. Instead the paperwork is handled by an escrow agent. What is this process closed?
Closing escrow
Closing through escrow means that….
Buyer and seller never meet, and paperwork is handled by an escrow agent
What are the 2 main concerns in the closing process?
1) Buyer receives marketable title
2) Seller receives purchase price
In IL, who customarily prepares the closing statement?
The seller’s attorney
The IL Supreme Court decision in Chicago Bar Association, et al, v Quinlan and Tyson, Inc, ruled that ___ are prohibited from completing formal closing statements.
real estate licensees
The IL Supreme Court decision in Chicago Bar Association, et al, v Quinlan and Tyson, Inc, ruled that real estate licensees are prohibited from…
completing formal closing statements.
Preparation of ___ includes the expenses and prorations of costs to close a real estate transaction
closing statement
During a face to face closing, the ___ orders and reviews the title insurance policy or title certificate, surveys, property insurance policies, and other items.
Closing agent or closing officer
After reviewing the ___, the closing agent prepares a closing statement indicating the division of income and expenses between the parties.
agreement of sale (purchase agreement)
After reviewing the agreement of sale (purchase agreement), the closing agent prepares a(n) ___ indicating the division of income and expenses between the parties.
closing statement
After reviewing the agreement of sale (purchase agreement), the closing agent prepares a closing statement indicating the ___ and ___
division of income and expenses between the parties.
During the exchange, the seller delivers the ___ to the buyer.
Signed deed
During the exchange, all pertinent documents are recorded in the ___ to ensure ___.
correct order to ensure continuity of title
The buyer’s new mortgage or deed of trust must be recorded ___ the deed because the buyer cannot pledge the property as security for the loan until he owns it.
After
Why must the buyers new mortgage or deed of trust be recorded AFTER the deed?
Buyer cannot pledge the property as security for the loan until he owns it
Even though a few states prohibit transactions that are closed in this way, ___ closings used to some extent in most states.
Escrow
Who can NOT be a disinterested party in a transaction that is being closed in escrow?
Real estate licensees who expect to collect a commission
Because this is a position of great trust, many states have laws regulating ___ and limiting who may serve in this capacity
escrow agents
When a transaction will close in escrow, when will the buyer and seller execute escrow instructions to the escrow agent?
AFTER the sales contract is signed
How is it determined which party will select the escrow agent when closing in escrow?
Either by negotiation between the parties or by state law.
When closing in escrow, what happens once the contract is signed?
Broker turns over earnest money to the escrow agent, then the escrow agent deposits it in a special trust or escrow account
When closing in escrow, when do the buyer and seller deposit all pertinent documents & other items with the escrow agent?
BEFORE the date of closing
What 11 things does the seller normally deposit to the escrow agent?
1) deed conveying property
2) Title evidence
3) existing hazard insurance policies
4) letter or mortgage reduction certificate from title lender stating exact principal remaining (if buyer is assuming loan)
5) affidavits of title (if required)
6) payoff statement (if loan is paid off)
7) bill of sale
8) survey
9) transfer tax declarations
10) paid water bill
11) other instruments or documents necessary
When the buyer is assuming the seller’s loan, what must the seller deposit to the escrow agent before closing?
letter or mortgage reduction certificate from title lender stating exact principal remaining
If the seller’s loan is paid off, what must they deposit with the escrow agent before closing?
Payoff statement
What 4 things does the buyer normally deposit to the escrow agent?
1) balance of cash needed to complete the purchase
2) Loan documents (if buyer secures a new loan)
3) proof of hazard and flood insurance (if required)
4) other necessary documents such as inspection reports required by the lender
When the buyer deposits the cash needed to complete the purchase to the escrow agent prior to closing, the cash is usually in the form of either a(n) ___ or ___.
Wire transfer or certified check
When closing in escrow, who has the authority to examine the title evidence?
Escrow agent
When is the escrow agent authorized to disburse the purchase price to the seller, less all charges and expenses?
When marketable title is shown in the name of the buyer and all other conditions of the escrow agreement have been met
If the escrow agent’s examination of the title discloses liens, what happens?
A portion of the purchase price can be withheld from the seller. The withheld portion is used to pay the liens or clear the title
When closing in escrow, what happens if the seller cannot clear the title, or if the sale cannot be consummated for any reason?
Escrow instructions usually provide that the parties be returned to their former statuses as if no sale occurred.
When closing in escrow, what happens to the title and purchase money if the seller cannot clear the title, or if the sale cannot be consummated for any reason?
Escrow agent usually reconveys title to the seller, and returns purchase money to the buyer
When closing in escrow, what happens if the seller dies before the closing date, but had already given a signed deed to the escrow agent before passing?
Closing may still proceed.
Escrow agent transfers title to buyer, and turns purchase price over to the seller’s estate
Which 4 real estate closings must be reported to the IRS on form 1099-s?
1) land (improved or unimproved) including air space
2) inherently permanent structure, including any residential, commercial, or industrial building
3) condo unit and its appurtenant fixtures and common elements (including land)
4) shares in a cooperative housing corporation
Certain real estate closings must be reported to the IRS on which form?
1099-S
When reporting certain real estate closings to the IRS, what information needs to be reported (3 things)?
1) sales price
2) amount of property tax reimbursement credited to the seller
3) seller’s SSN
If the closing agent does not notify the IRS, then responsibility for filing form 1099-S falls on ___, however ___ or ___ could be held liable.
responsibility falls on the mortgage lender
real estate licensees or parties to the transaction could be held liable
When is a real estate licensee’s job essentially finished?
As soon as the sales contract is signed
Who takes over in the closing process after the contract is signed?
Attorneys
Lenders want ___ to have priority over ___.
their mortgage lien to have priority over other liens
Lenders want to ensure that ___ is kept up to date.
insurance
In order to ensure that the buyer takes good and marketable title at closing, lenders generally require a(n) ___.
mortgagee’s title insurance policy
