Unit 22

Question 1

Buyer issues to inspect before closing

Answer 1

• The title evidence
• the sellers deed
• any document demonstrating the removal of undesired liens and encumbrances
• the survey
• results of inspection
• any leases (if tenants reside on the premises)

Question 2

Walk through

Answer 2

The buyer usually reserves the right to make a final inspection shortly before the closing takes place.

Question 3

Seller issues

Answer 3

• Receive payment for the property

- must relieve the purchase agreement to ensure that they have completed their tasks.

Question 4

Title or opinion of title

Answer 4

Discloses all liens , encumbrances, easements, conditions and restrictions on the property. Quality of the sellers title.

Question 5

IRS Reporting Requirements

Answer 5

• includes sale or exchange of land/ air space, an inherently permanent structure, condominium unit, and shares in a cooperative housing corporation
• Info reported includes sales price, about of property tax, reimbursement credited to the seller and the sellers social security number.
• if the closing agent does not notify the IRS it is the responsibility of the mortgage lender (brokers or the parties to the transaction could be held liable)

Question 6

proprations

Answer 6

costs to close the transaction

Question 7

Real Estate Settlement Procedure Act (RESPA)

Answer 7

federal consumer law that requires certain disclosures about the mortgage and settlement process and prohibits certain practices that increase the costs of settlement services such as kickbacks and referral fees that can increase settlement costs for homebuyers.

• Apply to first- lien residential mortgage loans made to finance the purchase of 1-4 family homes, cooperatives, and condominiums for either investment or occupancy as well as second or subordinate liens for home equity loans when a purchase is financed by a federally related mortgage loan.

Required GFE and HUD-1 forma to be consolidated into the TILA-RESPA Integrated Disclosure rule (TRID) which includes a booklet Your Home Loan Toolkit: Step by Step Guide Loan estimation and the closing disclosure
The toolkit and loan estimate must be mailed or delivered 3 days after receipt of application.

If the lender makes changes the lender must provide new disclosure and allow the buyer 3 business days to consider these changes.

Question 8

Affiliated Business Arrangement (AfBA)

Answer 8

package of services to streamline the settlement process.

Question 9

Loan Estimate

Answer 9

Licensees should encourage their buyers to discuss all loan options with their lender before signing a purchase agreement. Then lender can provide disclosures in a timely manner. The LE breaks down the loan costs, such as interest rates, mortgage insurance, and closing costs. Lender can explain risky loan features such as prepayment penalty and large balloon payments.
Lender must deliver the LE to the borrower no later than 3 business days after the loan application.

Question 10

Closing Costs

Answer 10

Closing costs are those required to complete a mortgage loan. The LE discusses necessary settlement costs including origination fees, appraisal costs, title insurance, taxes, settlement services, inspections, and homeowners hazard insurance.

Question 11

Closing Disclosure

Answer 11

An accounting of the parties debits and credits. A debit is a charge and a credit is an amount entered in a persons favor.
The CD must conform to the loan estimate perviously given to the buyer and borrower.

Question 12

Recording expenses

Answer 12

The seller usually pays for recording charges necessary to clear all defects and finish the purchaser with clear title according to the terms of the contract.

The buyer pays for recording charges that arise from an actual transfer of title such as the deed the buyer received and the mortgage the buyer executed.

Question 13

Tax and Insurance Reserves

Answer 13

Most mortgage lenders require that borrowers provide a reserve fund to pay future real estate taxes and insurance premiums. The funds are held in escrow account or impound account. A borrower starts the account at closing by depositing fund to cover the amount of unpaid real estate taxes from the date of the lien to the end of the current month. After the amount equal to one moths portion of the estimated taxes is included in the borrowers monthly mortgage payment.

Question 14

Accrued Items

Answer 14

expenses to be prorated that are owed by the seller but will be paid later by the buyer. The seller therefore pays for these items by giving the buyer a credit at closing.

Question 15

Prepaid Items

Answer 15

Expenses to be prorated that have been prepaid by the seller but not fully used. They are therefore credits to the seller.

Question 16

Real Estate Taxes

Answer 16

proration of real estate taxes varies widely depending on how the taxes are paid in the area where the real estate is located.
- Tax year runs from jan 1 to dec 31 (taxes paid on jan 1)
30 days in a month and 360 days in a real estate year.

Question 17

Prorated

Answer 17

some charges are divided between the buyer and the seller in one of two ways: A yearly charge divided by 360 days or 12 months of 30 days each or the yearly charge divided by 365 days to determine the daily charge. The actual number of days in the proration period is determined and the number of days is multiplied by the daily charge.