UNIT 22 CLOSING THE R.E. TRANSACTION Flashcards
CLOSING( PG 458 UNIT 22)
CLOSING is:
-typically, up until closing starts the licensing deals primarily with the buyer or the seller
– once the closing process starts the licensee will probably be dealing with others such as
- CLOSING when ownership of the property is transferred in exchange for the payment of the selling price
- appraisers, inspectors, loan officers, insurance agents, and lawyers
CLOSING (PG 459 UNIT 22)
-Closing involves two major events, what are they?
-Two major events during closing are:
-the PROMISES in the sales contract are
fulfilled
– and the mortgage funds are distributed to the
buyer
CLOSING (PG 459 UNIT 22)
- the buyer and the buyers lender needs to make sure that the seller can deliver the title that was promised in the purchase agreement and that the property is in the condition as promised when the contract was a made.
- this involves inspecting (6 items)
-title evidence
– the sellers deed
– any documents demonstrating the removal of
undesired liens and encumbrances
– the survey
– results of inspections such as termite or structural
inspections or required repairs
– any leases of tenants reside on the promises
FINAL INSPECTIONS AKA WALKTHROUGH
(PG 461 UNIT 22)
(NO CARD /REVIEW / MOST IS COMMON SENSE)
SOME ADDITIONAL NOTES THOUGH
BUYER ISSUES
-During the final property inspection/
walk-through, the licensee and the buyer verifies
NECESSARY REPAIRS of been made in the
property has been well-maintained, fixtures are in
place…….(etc.)
– note: it is NOT AN OPPORTUNITY to reopen
negotiations
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SURVEY ( PG 461 UNIT 22)
SURVEY
BUYER ISSUES
-A survey provides information about the what?
-Typically the survey indicates the location of all what?
-surveys provide information about
– exact location and size of the property
-their survey indicates location of all buildings,
(structures) driveways, fences, and other
improvements that are on the premises
-In addition to this, surveys should also indicate EXISTING EASEMENTS AND ENCROACHMENTS
IN PRACTICE: Relying on an old survey is
NOT A GOOD IDEA, a new survey should be done
by a competent surveyor EVEN IF the title
company or lender does not require it
– a current survey confirms that the property
purchased is exactly what the buyer wants
SELLERS ISSUES (PG 461 UNIT 22)
(MOST IS COMMON SENSE)
SOME ADDITIONAL NOTES THOUGH
-The sellers main interest is to receive payment for the property
– sellers want to know that the buyer has received the necessary financing and has enough funds to complete the sale
– both parties accompanied by their attorneys or real estate licensee will want to inspect the _________
to make sure that all money involved in the transaction has been accounted for properly
-Both parties, accompanied by either the real
estate licensee or their attorney will want to
review or inspect the CLOSING STATEMENT to
make sure that all money involved in the
transaction has been accounted for properly
TITLE PROCEDURES
(PG 461 UNIT 22)
-Practices very from state to state, but most states require that the seller produce a what?
-when an abstract of title is used, the (WHOSE ATTORNEY) examines it and issues a ____________
-The opinion of title is a statement of the Attorney’s quality of the sellers title, and lists all what ?
TRUE/FALSE The attorneys opinion is a guarantee of title
- most states require that the seller produces a CURRENT ABSTRACT OF TITLE OR A TITLE COMMITMENT FROM THE INSURANCE COMPANY
- when an abstract of title is used, the PURCHASERS ATTORNEY examines it and issues a OPINION OF TITLE
-The OPINION OF TITLE is a statement of the QUALITY and is the ATTORNEYS OPINION of the sellers title, and lists all
-liens, encumbrances, easements, conditions,
restrictions that may appear on the record and to
which the SELLER is subject (also on the title)
-FALSE The attorneys opinion
IS NOT A GUARANTEE OF TITLE
TITLE PROCEDURES (PG 461 UNIT 22)
WHEN BUYER PAYS CASH OR ACQUIRES A NEW LOAN
EXISTING LOANS OF THE SELLER ARE PAID OFF…….
-what does the payoff statement show?
- when the PURCHASER/ BUYER pays cash or get a new loan to purchase a property then, the SELLERS EXISTING LOAN IS PAID IN FULL and is satisfied on the record.
– CURRENT PAYOFF STATEMENTS show the required amount to pay the existing loan, this is provided from the LENDER effective the date of closing
-The payoff statement shows the
-unpaid amount of principal- interest do through the date of payment
-fees for issuing the certificate of satisfaction or
the “release date“
- credits if there are any for tax and insurance
reserves
-the amount of any prepayment penalties
-The same procedure is done for any other liens that
must be released before the buyer can take title
- interest do through the date of payment
TITLE PROCEDURES
(PG 461-462 UNIT 22)
ASSUMING THE SELLERS EXISTING LOAN
-What is a mortgage reduction certificate?
-The buyer needs to know the exact balance of the loan as of the closing date
– usually the lender is required to provide the buyer
with a “mortgage reduction certificate“
- the MORTGAGE REDUCTION CERTIFICATE
CERTIFIES the
-amount owed on the mortgage loan
- the interest-rate
- and the date and amount of the last interest
payments
TITLE PROCEDURES
(PG 462 UNIT 22)
THE CLOSING AGENT
TRUE/ FALSE There is a chance that liens could have been made during the interval of when the contract was made and closing
THE CLOSING AGENT examines the title commitment or the abstract that was issued several days or weeks before the closing
–TRUE/ liens may have been filed during the interval, so there are TWO SEARCHES of public records are often made
– the first search shows the STATUS OF THE SELLERS TITLE ON THE DATE
– the second search known as a BRING DOWN is made AFTER THE CLOSING AND BEFORE ANY NEW DOCUMENTS ARE FILED
– the TITLE OF OPINION OR THE TITLE discloses ALL
-liens
- encumbrances
- easements
- conditions
-restrictions to the property
TITLE PROCEDURES
(PG 462 UNIT 22)
IN PENNSYLVANIA
-BUYERS are responsible for determining that they are taking a good title to the property
– either the abstract of title, OR
a title commitment from the title insurance
company will disclose whatever
liens, encumbrances, easements, conditions, or
restrictions that appear on the record that affect
the sellers title
– as part of the title of commitment FROM a
TITLE INSURANCE COMPANY, the SELLER
may be required to get an AFFIDAVIT OF TITLE, a
sworn statement in which the SELLER ensures
the TITLE INSURANCE COMPANY and
THE BUYER that no other
judgments, bankruptcies, divorces,
unrecorded deed or contracts,
or unpaid repairs or improvements that might
lead to a mechanics lien have occurred since the
date of the title examination
-If the sellers statements on the affidavit are
incorrect, the title insurance company could sue
the SELLER.
-There are areas where real estate sales transactions are closed through an escrow, escrow instructions usually provide for an EXTENDED COVERAGE POLICY to be issued to the buyer effective the DATE OF CLOSING. The seller has NO NEED to execute an affidavit of title
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CLOSING AGENT AND CLOSING OFFICER (PG 463 UNIT 22)
-A closing officer maybe:
-RESPONSIBILITIES OF THE CLOSING OFFICER
-A closing officer may be:
- the attorney of the buyer or seller
– a real estate broker
– a representative of the lender or title company
– SOME TITLE COMPANIES AND LAW FIRMS
employee PARALEGAL ASSISTANT who
conducts closings for their firms
-RESPONSIBILITIES OF THE CLOSING OFFICER
The closing officer orders and reviews the:
-title insurance policy or the title certificate
- surveys
– property insurance policies
– and other items
– After reviewing the
agreement of sale (the purchase agreement)
the agent prepares a closing statement indicating
the DIVISION OF INCOME AND EXPENSES
BETWEEN THE PARTIES
– NEXT, the time and place of closing needs to be arranged
IRS REPORTING REQUIREMENTS (PG 463 UNIT 22)
-Properties that need to be reported to the IRS on a form 1099-S are:
-Properties report attached to the IRS on form 1099 – S are
– land improved or unimproved including air space
– inherently PERMANENT STRUCTURES
INCLUDING
-any residential, commercial, or industrial
building
– condo units and it’s a pertinent fixtures and
common elements including land
– shares in a co-op housing Corporation
- Information to be reported includes: (ALL INCOME)
-sales price
– amount of property tax reimbursement
- credit to the seller
– sellers Social Security number
– the responsibility for filing the form falls on the mortgage lender, although the brokers or parties to the transaction ultimately could be held liable
BROKERS ROLE IN CLOSING
(PG 464 UNIT 22)
-Licensees must be thoroughly familiar with
the process and procedures involved in
preparing a CLOSING STATEMENT, which
includes the EXPENSES AND PRORATIONS of
COSTS TO CLOSE THE TRANSACTION
IN PRACTICE:
Licensees SHOULD AVOID RECOMMENDING sources for INSPECTIONS AND TESTING SERVICES, the licensee could NAMED IN A LAWSUIT
– it is a BETTER PRACTICE TO GIVE SEVERAL PROFESSIONAL NAMES WHO GIVE HIGH QUALITY SERVICE
– licensees that receive ANY COMPENSATION OR
REWARD FROM SOMEONE THEY RECOMMEND
TO A CLIENT MUST BE DISCLOSED TO THE
CLIENT
– licensees MUST NEVER RECEIVE
COMPENSATION FROM
AN ATTORNEY
OR A LENDER
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FEDERAL LAWS THAT IMPACT CLOSING
(PG 464 UNIT 22)
-R.E. SETTLEMENT PROCEDURES ACT (RESPA)
-R.E. SETTLEMENT PROCEDURES ACT
-Is a federal consumer law
– requires certain disclosures about mortgage
and settlement processes
– PROHIBITS certain practices that
increase the cost of settlement such as
KICK BACKS AND REFERRAL FEES AND
OTHER PRACTICES THAT COULD INCREASE
SETTLEMENT COSTS FOR HOMEBUYERS
