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Closing the Real Estate Transaction

Understand the intricacies of closing a real estate transaction. Learn about title evidence, final walkthrough, conducting the closing, RESPA guidelines, and preparation of closing statements. Get insights on proration and controlled business arrangements.

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Closing the Real Estate Transaction

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  1. Closing the Real Estate Transaction

  2. Prior to Closing? • What is the goal of the buyer in this transaction? • Inspect: • title evidence • seller’s deed • documentation of removal of any problems • survey • termite letter, home inspection, etc. • leases of any tenants • Final Walk Through – IMPORTANT!

  3. What is the seller’s main issue at closing? • SHOW ME THE MONEY $$$$$

  4. Conducting the Closing • Settlement and transfer • Passing papers • Closing • Escrow closing are the norm in some areas. See page 379 for procedure. • In a face-to-face closing what parties might be at the closing?

  5. What is the role of the broker at most closings in Alabama? • How important is the lender at this stage of the transaction?

  6. RESPA – soon to be rewritten • Real Estate Settlement Procedures Act • Ensures that consumers are provided with information about the actual costs of closing a transaction. • Eliminates kickbacks and other referral fees that can increase the costs to consumers. • Applies when a purchase is financed by a federally related mortgage loan.

  7. What is a controlled business arrangement and why is it important to consumers? • Referral fees are not allowed among affiliated companies. • RESPA requires that lenders provide: • special informational booklet • Good-faith estimate of settlement costs (within 3 days after application) • Closing statement on HUD-1 closing form

  8. Preparation of Closing Statements • Credit – amount entered in person’s favor • Debit – a charge to the person • See book for various charges and sample statement.

  9. What is proration and what items are typically prorated? • property taxes • rents • interest to lender • Accrued items – expenses to be prorated that are owed by the seller, but will be paid by the buyer when the bill comes due. (not too common) • Prepaid items – already paid by seller and need to be prorated. • fuel oil, etc.

  10. Proration can be done using a 360 or 365 day year. • See book for examples

  11. Sample Closing Statement • See the book for a sample transaction and HUD-1 closing statement.

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