RE Principles Ch.20 Closing the Real Estate Transaction

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  1. The title to the real estate is transferred in exchange for payment of the purchase price, signing of the loan documents and the disbursal of mortgage funds by the lender, are all actions of what?
    closing
  2. A ____________ is the blueprint for the completion of a real estate transaction.
    sales contract
  3. Before closing, the parties should assure themselves that the various conditions and stipulations of their sales contract have been met and that the closing statement correctly reflects all agreements regarding money. What are the 6 main buyer's issues to be covered and 2 main seller's issues to be covered before closing?
    Buyer:

    • -The commitment for title insurance: received within 20 days of the contract date; buyer has a number of days to comply or object to commitment
    • -The seller's deed: clear, good and ready
    • -Any documents demonstrating the removal of undesired liens and encumbrances; payoff statment (release from previous mortgage) or estoppel certificate (assume mortgage; balance, requirements, etc.), title check (abstract checked by attorney)
    • -the survey: new (checked) or old (T-47)
    • -The results of any required inspections, such as termite or structural inspections, or required repairs (walk-through)
    • -Any leases if tenants reside on the premises

    Seller:

    -receiving payment; buyer has obtained financing and has sufficient funds to complete the sale

    -Seller will want to be certain that he has complied with all the buyer's inspections and repair requirements
  4. The Texas Real Estate License Act requires that a broker advise a purchaser in writing, at or before closing, to have the abstract examined by an attorney or to obtain title insurance policy.
    true; this advice is included in Texas promulgated sales contract form
  5. Abstract of the title and checked by an attorney will disclose what?
    • -all liens, encumbrances, easements, conditions, or restrictions that appear on the record and to which the seller's title is subject. 
    • -title insurance makes policy
  6. When a title insurance policy is used, the buyer receives a title commitment from the title insurance company within ___ days of the contract date.
    20
  7. When a purchaser pays cash or obtains a new loan, the seller's existing loan is paid in full and released of record. A ___________ is provided from the lender stating the release of the old loan.
    payoff statement
  8. In a transaction in which a buyer assumes the seller's existing mortgage loan, the buyer will obtain an estoppel certificate and waiver of acceleration from the lender, which states what?
    • -the exact loan balance due
    • -the last interest payment made
    • -the fact that the lender permits the assumption.
  9. For liens that are not released before closing, the closing agent must take what steps?
    • -obtain the payoff info from the lienholder
    • -withhold the money from the seller's proceeds
    • -close the transaction
    • -pass title to the buyer, and
    • -pay the escrowed money to the lienholder and get a release.
  10. If a property on which a lien exists to be transferred without paying off the lien within 30 days of the closing and without title insurance, the seller must give the buyer a written notice disclosing the lien and the possible risks to the buyer. The disclosure must be given ____ days before the earlier of the contract effective date or the date of closing.
    seven
  11. A survey gives information about what on a property?

    If an existing survey is used a seller must sign a...
    • -location
    • -description
    • -dimensions
    • -any improvements
    • -easements and encroachments

    -T-47
  12. Closing usually takes place where?
    at a title company
  13. A closing that involves all interested parties, such as the lenders, agents, buyer and seller, etc., is called what?
    round table close
  14. What are the preparation responsibilities of a closing agent?
    • -assembles all the documents necessary to finalize the purchaser's loan and the seller's transfer of title
    • -prepares the HUD-1 Settlement Statement following the provisions of the contract and the lender's instructions
    • -arranges the time and place of closing with all parties; and 
    • -in most cases, conducts the closing.
  15. In Texas, title companies can prepare legal documents.
    false; title companies are not permitted to prepare legal documents, it is practice of law and must be done by an attorney, who often is used by the title company for such purpose
  16. Buyers have more paperwork to fill out than sellers.
    true
  17. What responsibilities does the closing agent have at and after closing?
    -collects all funds

    • -writes all disbursement checks arising from the closing
    • -prepares the final disbursement sheet to prove that money paid in equals money paid out, and transmits the appropriate documents to the county clerk for recording
  18. When does the buyer take possession of the property?
    -on closing and funding; when seller gets money; or on a date specified in a TREC temporary residential lease form
  19. An escrow is a method of closing whereby a disinterested third party is authorized to act as an escrow agent and is given the responsibility to coordinate the closing activities. The escrow agent may be an attorney, a title company, a trust company, an escrow company, or broker.  What are two requirements by Texas law for an escrow agent?
    • -must be disinterested (no commissions)
    • -Licensed by the Texas Department of Insurance and obtain and maintain a surety bond
  20. Who chooses the escrow agent?
    both buyer and seller
  21. The ___________ sales contract sets forth the details of the transaction and the instructions to the escrow agent.
    TREC-promulgated sales contract
  22. TREC Rules require that the broker deposit the earnest money when?
    -by the end of the second business day after the contract has been signed by all parties.
  23. What are all the documents the seller deposits to the escrow before closing?
    • -the deed 
    • -title evidence (abstract or title insurance policy)
    • -the payoff letter or an estoppel certificate
    • -affidavits of title
    • -other instruments or documents necessary to clear the title or complete the transaction
  24. A seller gives a _______________, a sworn statement in which the sellers assure the title company (and buyer) that there are no liens, unpaid bills for repairs or improvements, or undisclosed defects in the title. It is required by the title company before it issues an owner's policy to the buyer.  It establishes the right for the title company to sue the sellers if statements are proven incorrect.
    affidavit as to debts and liens
  25. What documents must the buyer submit to escrow before closing?
    • -the balance of the cash needed to complete the purchase, usually in the form of a certified check
    • -loan documents (for new loan)
    • -a hazard insurance policy, including flood insurance (if needed)
    • -a survey, if requested
    • -other documents needed to complete the transaction (such as an appraisal)
  26. Fees charged by the escrow agent typically are split between buyer and seller according to the agreement of the parties as stated in the sales contract.
    true; however a buyer may not pay charges and fees expressly prohibited by the FHA, VA, Texas Veterans Land Board, or other governmental loan program regulations.
  27. After the contract is signed and the earnest money is delivered to the title company, the loan company, title company, and attorneys take over. What is the agents or the broker's role  through closing?
    • -make sure all details are taken care of; ensuring that arrangements are made for obtaining title evidence, surveys, appraisals, inspections, repairs, and other items listed in the contract. 
    • -At closing; the broker's role can vary from simply collecting the commission to conducting the proceedings
  28. In most cases, capital gains on a principal residence are not reported by the title company because they do not exceed how much for singles and how much for married couples?
    • 250,000
    • 500,000
  29. The federal Real Estate Settlement Procedures Act (RESPA), administered by the Consumer Financial Protections Bureau, was enacted to what?
    • -protect consumers from abusive lending practices
    • --help consumers become better shoppers for settlement (loan closing) services by requiring disclosures the spell out the costs associated with closing, and,
    • --eliminate kickbacks and unearned referral fees that unnecessarily increase the costs of closing a transaction
  30. RESPA requirements apply when a purchase is financed by a federally related mortgage loan. Federally related loans include...
    • -loans made by banks, savings associations, or other lenders whose deposits are insured by federal agencies
    • -Loans insured by the FHA and guaranteed by the VA; loans administered by HUD; and loans intended to be sold by the lenders to Fannie Mae, Ginnie Mae, or Freddie Mac.
  31. RESPA applies to all federally related residential mortgage loans except...
    • -a loan on property of 25 acres or more
    • -a loan for business, commercial, or agricultural purposes
    • -a temporary construction loan
    • -a loan on vacant land
    • -assumption without lender approval
    • -a conversion of a federally related mortgage loan to different terms, if a new note is not required 
    • -transfer of a loan in the secondary market
  32. At the time of loan application or no later than three business days thereafter, mortgage brokers/lenders must give the borrowers which three disclosures?
    -Shopping for Your Home Loan: HUD's Settlement Cost Booklet; general info on closing costs, RESPA provisions

    -Good Faith Estimate (GFE): lists the charges the buyer is likely to pay at closing; states what could be the maximum amount and tolerances OR Loan Estimate form (same thing as GFE)

    -Mortgage Servicing Disclosure Statement: discloses (a) the possibility of a future transfer of loan servicing, (b) the rights of the borrower if that occurs.
  33. Tolerances on the GFE statement, specify the maximum amount by which an actual charge on a HUD-1 closing statement can vary from the estimate on the GFE. There are three tolerance levels: zero, 10% and unlimited tolerance. List example fees that would fit under each category that must be disclosed in the GFE.
    Zero Tolerance: quoted fees from lender (discount points, origination fees, underwriting and processing fees); must be exact

    10% Tolerance: estimates for settlement services (appraisals and recording fees); if the lender or the borrower select the provider from a list provided by the lender.

    Unlimited Tolerance: If the borrower chooses the providers, including escrow and title insurance; reserves for taxes, per diem interest, and the cost of homeowners insurance.
  34. Servicing the loan involves duties relating to...
    collecting PITI payments, making escrow account disbursements for taxes and insurance, and loan analysis.
  35. What disclosures must be given by the mortgage broker/lender to the borrower before closing occurs?
    • -HUD-1 Settlement Statement: form that shows all charges imposed on borrowers and sellers in connection with the closing; items that lender requires to be paid before closing are marked, "paid outside of closing" (POC); items paid outside of closing, not required by the lender, are NOT included in the HUD-1.  Also HUD-1 reflects (1) GFE expense categories and estimated charges, (2) the actual charges, (3) disclosure regarding loan terms such as  "Can your interest rate rise?"
    •  Or 
    • Closing Disclosure

    -Affiliated Business Arrangement (AfBA) Disclosure: if one closing provider refers to another party for other closing duteies, the provider must give an AfBA disclosrue stateing: describes the business relationship between the two providers and gives estimates
  36. At closing, the borrower is given the following from the lender/mortgage broker...
    -HUD-1 Settlement Statement: shows actual closing costs

    -Initial Escrow Statement: itemizes the estimated taxes, insurance premiums, and other charges anticipated to be paid from the escrow payment amount and any required cushion; lender still has 45 days form closing to deliver.
  37. After closing, loan servicers must deliver the following to the buyers:
    -Annual Escrow Statement: summarizes all escrow account deposits and payments during the servicer's 12 mo computation year; notifies of shortagaes or surplueses in the escrow account

    -Serving Transfer Statement: if the loan servicer sells or assigns the servicing rights to another loan servicer; 15 days before effective date of the loan transfer with info of contact; new loan servicer contact borrower within 30 days of the transfer.
  38. What restrictions does RESPA place on brokers, lenders, and title companies in order to protect consumers?
    • -Prohibit kickbacks: buying someones business, bribe; no referral fees when no service was provided
    • -Selection of the title company: illegal for the seller to require that the buyer purchase title insurance from a particular title company. 
    • -limitation on escrow (or reserve) account: amount required in escrow
    • -Computerized loan origination: broker charge a fee for these as long as it is mentioned in the GFE.
    • -Controlled business arrangements (CBA): one-stop shopping; offer a package of services (insurance, broker, moving, etc); as long as a consumer is clearly informed of the relationship amount the service providers and that other providers are available.
  39. Offering a discount to a buyer if the buyer uses the developer's lender does not violate RESPA.
    True
  40. TREC Rule 535.148 prohibits a licensee from entering into a contract with a service provider, such as a home warranty company, if that agreement would prohibit the licensee from offering similar services on behalf of a competing service provider.
    • true. is also prohibited from accepting a fee from a service provider to a real estate transaction if the payment is contingent upon a party's purchasing a contract or service from the provider. 
    • **A licensee who is paid for performing service for a residential service company (home warranty company) must disclose such payment to the party the licensee represents.
  41. At closing, principal amount of new mortgage is credited to who? Prorated?
    buyer
  42. At closing, payoff of existing mortgage is debited to who? Prorated?
    seller
  43. At closing, unpaid principal balance if assumed mortgage is credited to who and debited to who? Prorated?
    • -credited to buyer
    • -debited to seller
  44. At closing, accrued interest on existing assumed mortgage is credited to who and debited to who? Prorated?
    • -credited to buyer
    • -debited to seller
    • -prorated
  45. At closing, tenant's security deposit is credited to who and debited to who? Prorated?
    • -credited to buyer
    • -debited to seller
  46. At closing, purchase money mortgage is credited to who and debited to who? Prorated?
    • -credited to buyer
    • -debited to seller
  47. At closing, unpaid taxes and utility bills are credited to who and debited to who? Prorated?
    • -credited to buyer
    • -debited to seller
    • -prorated
  48. At closing, Buyer's earnest money is credited to who? Prorated?
    buyer
  49. At closing, Selling price of property is credited to who and debited to who? Prorated?
    • -credited to seller
    • -debited to buyer
  50. At closing, Fuel oil on hand (value at current market price) is credited to who and debited to who? Prorated?
    • -credited to seller
    • -debited to buyer
    • -prorated
  51. At closing, prepaid taxes (possible Oct to Dec) is credited to who and debited to who? Prorated?
    • -credited to seller
    • -debited to buyer
    • -prorated
  52. Who pays broker's commission?
    usually seller, but can be split by seller and buyer
  53. In most cases, attorney fees are charged to the __________, for preparation of the deed and a release of lien. The _______ pays attorney fees for the preparation of the note and deed of trust.
    • seller
    • buyer
  54. Recording fees for filing documents to clear all defects and furnish clear title (releases of liens, quitclaim deeds, affidavits, mechanic's liens, etc.), must be paid to the county clerk most likely by the _______, if neither party is mentioned in the contract to pay.  The _________ usually pays for recording charges that arise from the actual transfer of the title--the deed and the deed of trust or mortgage.
    • seller
    • purchaser
  55. In Texas, each country sets the charges for recording documents to the county clerk. What is the usual charge for the first page and for each succeeding page?
    $16, $4; $5 for first page by statute
  56. The _________ usually pays for the expenses of having the abstract prepared or brought up to date; the _________ pays for an attorney to inspect the abstract and issue an opinion of title.
    • seller
    • buyer
  57. An escrow account held by the borrower is usually required by the lender, to have sufficient funds to cover taxes and insurance policies.  Funds are paid by closing and _______ restricts the amount required in the escrow account, which is no more than __ months worth of taxes, insurance and other expenses.  Amount is adjusted each year.
    • RESPA
    • 3
  58. It is customary that the ______ pay for the the lender-required appraisal.  An urban residential loan appraisal may cost from ____ to _____; a rural appraisal, ____ to ____.
    • buyer, unless stated in the contract
    • $375-$540
    • $600-$1,200
  59. When a transaction is closed through a title company, an ______ is charged for the services of the closing agent. A title company will furnish a real estate agent with an estimate of its customary charges for these services, which also may include charges from third-parties for electronic filing fees and ad valorem tax reports.
    escrow fee
  60. A purchaser who obtains new mortgage financing often pays the survey fees because the survey is a lender requirement.
    true
  61. The buyer most likely receives back their earnest money at closing.
    true
  62. Of real estate closings in Texas, the buyer usually pays the expenses for the day of closing.
    false; seller does
  63. Security deposits on rental property being sold should be listed on a closing statement as a credit to the buyer.
    true
  64. The purpose of RESPA (Real Estate Settlement Procedures Act) is to...
    protect consumers from abusive lending practices
  65. Legal title passes from the seller to the buyer when...
    the deed is delivered and accepted.
  66. All encumbrances and liens shown on the title commitment, other than those waived or agreed to by the purchaser and listed in the contract, must be removed so that the title can be delivered free and clear. The removal of such encumbrances is the duty of the
    seller
  67. Which item would NOT be prorated between buyer and seller at the closing on an apartment complex?
    recording charges
  68. Unpaid accrued real estate taxes are a credit to the buyer and debit to the seller.
    true
  69. The broker's commission is usually shown as a debit to the seller.
    true
  70. The interest proration on an existing assumed mortgage is a credit to the seller and debit to the buyer.
    false; credit to the buyer and a debit to the seller
  71. The doctrine of relation back is MOST closely associated with...
    escrow
  72. The RESPA Settlement Statement must be used to illustrate all settlement charges for
    residential transactions financed by federally related mortgage loans.
  73. What would a lender generally NOT require to be produced at or before the closing?
    homestead declaration
  74. The annual real estate taxes amount to $1,800, payable in arrears. If closing is set for June 15, using a statutory how much will be credited and debited to who?
    credit buyer $825; debit seller $825
  75. The seller collected rent of $400, payable in advance, from a tenant on November 1. At closing on November 15, the ...
    seller owes the buyer $200
  76. A buyer of a $100,000 home has paid $12,000 as earnest money and has a loan commitment for 70% of the purchase price. Disregarding closing costs, how much more cash does the buyer need to bring to closing?
    $18,000

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Author:
Blue2xa88
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322239
Filename:
RE Principles Ch.20 Closing the Real Estate Transaction
Updated:
2016-08-08 22:38:05
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closing
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