Unit 17. Closing the Real Estate Transaction

Transcription

1 Unit 17 Closing the Real Estate Transaction

2 How to Maximize this Unit Have your book open to the Unit Have your recorder (iphone voice command recommended or voice recorder on Android) ready to record, with proper title prepared. Follow the Timed Module, completing each task. You must complete to move forward. Record your progress as you go. Use this audio later for review. Visit FORUM on for questions.

3 Chapter 17: Closing the Real Estate Transaction The conclusion of the real estate transaction is the closing, when title to the real estate is transferred in exchange for payment of the purchase price. Until closing preparations begin, a real estate professional s relationship is primarily with the buyer or the seller. During the closing period, new players come on the scene. A thorough knowledge of the closing process is the best defense against the risk of a transaction failing.

4 Chapter Objectives Describe the specific steps and processes involved in order to achieve conveyance of clear and marketable title, including compliance with all applicable laws. Describe the closing procedures and the respective roles of all parties. Explain the provisions of the Real Estate Settlement Procedures Act (RESPA) and the Mortgage Disclosure Improvement Act (MDIA). TILA RESPA. Describe and explain all buyer and seller charges and credits contained in the closing statement. Explain the financial entries and mathematical calculations contained in the closing statement. Review and confirm the accuracy of a closing statement.

5 Key Terms to Record accrued items affiliated business arrangement (ABA) closing closing statement credit debit escrow accounts escrow closing Good Faith Estimate (GFE) impound accounts Mortgage Disclosure Improvement Act (MDIA) mortgage servicing transfer statement prepaid items prorations Real Estate Settlement Procedures Act (RESPA) Settlement Statement (HUD1) survey TILA RESPA

6 Define the Following Key Terms accrued items closing closing statement credit debit escrow accounts escrow closing impound accounts Mortgage Disclosure Improvement Act (MDIA) mortgage servicing transfer statement prepaid items prorations Real Estate Settlement Procedures Act (RESPA) survey

7 Stricken Vocabulary...on the test still? CFPB- Consumer Finance Protection Bureau RESPAS Consumer Protections CLO Regulation CBA Disclosure Settlement Cost booklet Good Faith Estimate (GFE) Settlement Statement (HUD1) Prohibition of holdbacks and uncarried fees Prorations debits/credits Affiliated Business Arrangement (ABA) New Terms TILA RESPA

8 Pre-closing Procedures Buyer s Issues: Final property inspection Survey Title evidence Seller s Issues: Receiving payment Payoff statement

9 Roles at Closing Real Estate Professional s Role at Closing: Varies by state Involved on behalf of client Lender s Interest in Closing: Protect its security interest Mortgage lien priority IRS Reporting Requirements: Form 1099-S

10 Face-to-face In escrow Conducting the Closing

11 Conducting the Closing Legislation Related to Closing Real Estate Settlement Procedures Act (RESPA) Mortgage Disclosure Improvement Act (MDIA) Disclosure Requirements CFPB Settlement cost booklet

12 Preparation of Closing Statements (Changed with TILA-RESPA) A debit is an amount to be paid by the buyer or the seller. A credit is an amount payable to the buyer or the seller. Prorations: Accrued items = Buyer credits Prepaid items = Seller credits

13 TILA-RESPA Integrated Disclosure Rule The new TILA-RESPA Integrated Disclosure rule (also called the Know Before you Owe mortgage disclosure rule) will replace the four current disclosure forms with two new forms. The Loan Estimate form will replace the initial Truth in Lending statement (TIL) and the Good Faith Estimate (GFE). The Closing Disclosure form will replace the HUD-1 Settlement Statement and the final TIL. The new forms are required for transactions originating on or after October 3, 2015.

14 Loan Estimate Form The new Loan Estimate form highlights the information that has been the most important to consumers historically. Interest rate, monthly payment, and total closing costs are clearly presented on the first page. The Loan Estimate form must be provided to the consumer three business days after a loan application is submitted to the lender. Blank copies of several alternate versions of the form can be found here. A completed sample form can be found here.

15 Closing Disclosure Form The new Closing Disclosure form provides more information about the costs of taxes and insurance and how the interest rate and payments may change in the future. It will also warn consumers about things they may want to avoid such as prepayment penalties. The Closing Disclosure form must be provided to the consumer three business days before the loan closes. A completed sample form can be found here. For more information and updates from the Consumer Financial Protection Bureau (CFPB) regarding this rule, visit the CFPB Website

16 After the Unit... Read the Key Point Review in the Unit. Read the quizzes and answers. Are you right or wrong? Why? Go to QBank and customize a quiz on this Unit, selecting the boxes on the bottom to show progress as you go, and to show explanations. Take the quiz- recording your thoughts and how you did. Send us the recording for you to use as accountability. Text us or us any questions.

17 Unit 17 Quiz Legal title ALWAYS passes from the seller to the buyer a. on the date of execution of the deed b. when the closing statement has been signed c. when the deed is placed in escrow d. when the deed is delivered and accepted

18 D. When the deed is placed in escrow

19 A mortgage reduction certificate is executed by a(n) a. abstract company b. attorney c. lending institute d. grantor

20 C. lending institution

21 On a settlement statement, the principal amount of a purchaser s new mortgage loan is a a. credit to the seller b. credit to the buyer c. debit to the seller d. debit to the buyer

22 B. credit to the buyer

23 At closing, the listing agent s commission is usually shown as a a. credit to the seller b. credit to the buyer c. debit to the seller d. debit to the buyer

24 C. Debit to the seller

25 Security deposits should be listed on a closing statement as a credit to the a. buyer b. seller c. lender d. real estate professional

26 A. Buyer

27 At closing, the listing agent s commission is usually shown as a a. credit to the seller b. credit to the buyer c. debit to the seller d. debit to the buyer

28 C. debit to the seller

29 Which item would the lender generally require at the closing? a. Title insurance commitment b. Market value appraisal c. Application d. Credit report

30 A. Title insurance commitment

31 WE are here to help you. Rise to the TOP! Agent Rising Real Estate School and Training Center Kate Lanagan MacGregor Instructor/Owner Marie Greany Dean of Students