Closing the Real Estate Transaction

1
Closing the Real Estate Transaction
2
Prior to Closing?

• What is the goal of the buyer in this
  transaction?
• Inspect
• title evidence
• sellers 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 sellers 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 persons 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.