Modern Real Estate Practice in Pennsylvania 12th Edition

1. Modern Real Estate Practice in Pennsylvania 12th Edition Chapter 22: Closing the Real Estate Transaction

2. 22 Closing the Real Estate Transaction • Learning objectives • Identify the issues of particular interest to the buyer and the seller as a real estate transaction closes • Describe the steps involved in preparing a closing statement • Explain the general rules for prorating • Distinguish the procedures involved in face-to-face closings from those in escrow closings • Define key terms

3. 22 Closing the Real Estate Transaction • Preclosing procedures • Buyer’s issues • Title evidence • Seller’s deed • Removal of liens and encumbrances • Survey • Inspection results • Leases • Seller’s issues • Payment • Buyer financing • Compliance with buyer requirements

4. 22 Closing the Real Estate Transaction • In Pennsylvania • Buyer responsible for determining whether title is good • Abstract of title • Title commitment from title insurance company • Sellers may execute affidavit of title • Real estate licensees can be of assistance

5. 22 Closing the Real Estate Transaction • The closing • Face-to-face closing • Passing papers • Settlement and transfer • Closing in escrow • Attending may include • Buyer and seller and their attorneys • Licensees and lender representatives • Title insurance representative • Closing agent

6. 22 Closing the Real Estate Transaction • IRS requirements • 1099 • Sale or exchange • Exemptions for certain residential transactions • Closing agent and/or mortgage lender responsible • Licensees role • Continue to be involved • Should avoid recommending any specific sources

7. 22 Closing the Real Estate Transaction • Mortgage Disclosure Improvement Act • Lender may require only reasonable fee prior to providing disclosures • 3 business days from application • Good-faith estimate (GFE) of settlement costs • Truth-in-lending (TIL) statement • 7 business days before signing (final disclosures) • 3 business days for closing • If annual percentage rate (APR) has changed more than 0.125 percent • GFE and TIL changes

8. 22 Closing the Real Estate Transaction • RESPA requirements • One- to four-family residential unit • Disclosure requirements • Prohibition • Kickbacks and referral fees • Prohibits requiring title insurance from one company • Prohibits excessive escrow account deposits

9. 22 Closing the Real Estate Transaction • Affiliated business arrangements (AfBA) • Package of services to consumers • Disclosure requirements • Participation not required • Fees must be reasonably related to competition • Fees must be disclosed on HUD-1 • Computerized loan originators • Fees must be reasonable • Disclosure on HUD-1 • Availability of other providers

10. 22 Closing the Real Estate Transaction • Disclosure requirements • Special information booklet • Good-faith estimate • No tolerance • Up to 10 percent change • Unlimited tolerance • Mortgage servicing disclosure statement • Uniform Settlement Statement (HUD-1) • Borrowers can review one business day before

11. 22 Closing the Real Estate Transaction • Closing statement • Debits and credits • Broker’s commission • Attorney’s fees • Recording expenses • Transfer tax • Title expenses • In PA: rates set by Title Insurance Rating Bureau • Reduced rate for previous issue • Loan fees • Tax and insurance reserves • Appraisal fees • Survey fees • Other fees • Accounting for expenses

12. 22 Closing the Real Estate Transaction • Prorations • Accrued items • Prepaid items • Rules for prorating • Ownership on closing day • Calendar for calculating prorations • Assessments • Interest • In PA • Seller owns property closing day • Special assessments often assumed • Rents adjusted by actual days • Security deposits to buyer (tenant permission)