Ch. 11 - Title Closing and Costs

Sally and Sam have sold their home to Tina and Max. The closing is set for August 23. The insurance policy of $1,700 was prepaid. Using the 12-month/30-day method, what will be Tina and Max's share of the insurance expense and how will it be handled on the settlement statement?

$1,700 ÷ 12 = $141.67 $141.67 ÷ 30 = $4.72 Seller - $141.67 x 7 = $991.69 $4.72 x 23 = $108.56 $991.69 + $108.56 = $1,100.25 Buyer - $1,700 - $1,100.25 = $599.75 will be credited to the seller and debited to the buyer.

Seller Paul will get the second quarter water bill at the end of June. The bill is $39.00 per quarter. If closing is on May 7, what will be the Buyer's share of the bill?

$39 ÷ 91 days = $.43 per day$.43 x 54 days (the Buyer's share of the 91 days) = $23.22

Jan Cook purchases a property for $625,000 in upstate New York. What will be the amount of her real estate transfer tax?

$625,000 = $625 $625/$1,000 x $4 = $2,500

List three items that the buyer usually pays for at closing. (See other correct answers on screen 26.)

-Appraisal and credit report fees -Inspections -Mortgage recording fees

Define the term "marketable title."

A marketable title is one that is so free of defects that the buyer is certain he or she will not have to defend the title.

What is an abstract of title?

A written, chronological summary of the property's title records and other public records affecting rights and interests in the property. It includes the property's chain of title and all current recorded liens and encumbrances, by date of filing.

What does the Foreign Investment in Real Property Tax Act (FIRPTA) require a seller and a buyer to do?

Any seller who is not a US citizen must deliver a FIRPTA Certificate to the buyer. The buyer must withhold estimated taxes equal to 10% of the sale price in any sale or exchange of property owned by a foreigner.

Who needs title insurance and why?

Both the buyer and the lender need title insurance. Insurance for the buyer ensures a clear title and protects his or her investment. Insurance for the lender protects the lender's interest in the property.

What role does the broker play before and during closing?

Many times the broker is involved in ordering inspections, surveys or appraisals. The broker can also help the buyer find a mortgage lender or help schedule needed repairs to the property. Just prior to closing, the broker or agent should conduct a walk through or final inspection of the property with the buyer. On the date of closing, the broker may be the closing agent, may be present to collect the commission check, or may not be present at all.

RESPA does not apply to what kinds of loans?

Seller-financed loans or loan assumptions (unless the lender has changed the terms of the assumed loan or charges more than $50 for the assumption).

What happens at the title closing?

The buyer completes his or her financing arrangements (referred to as closing the loan). The seller transfers the title. Both the buyer and seller pay the necessary taxes, fees and other charges.

If an item is paid for in advance by the seller, how will it be handled on the settlement statement?

The buyer will receive a debit and the seller will receive a credit.

What is the definition of a closing statement?

The closing statement is a detailed accounting of the transaction that is prepared before closing by the closing agent. The statement shows all cash received, all charges and credits made and all cash paid out.

What does TRID require lenders to give to borrowers?

The correct figures pertaining to their closing costs.

What is the most important document at closing and why?

The deed is the most important document because it transfers the property to the purchaser.

What do you call those items that the seller has incurred but have not been paid and how will they be handled on the settlement statement?

These items are paid in arrears. The buyer will get a credit and the seller will get a debit.