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Use of the Closing Disclosure form enforces what RESPA prohibitions?
RESPA's prohibitions against a lender's requiring a buyer to deposit an excessive amount in the tax and insurance escrow account or to use a particular title company for title insurance.
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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.
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What is the Correction Statement and Agreement?
It's an agreement between buyer and seller to execute corrected documents should any errors exist or to provide replacement documents in case any are lost.
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What does the Affidavit of No Liens provide?
It provides the assurance to the buyer that there are no liens on the property, that they are indeed the owners of the property, and that there are no mechanic liens on the property.
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What is the purpose of the FIRPTA Certificate?
It requires a buyer to withhold estimated taxes equal to 10% of the sale price in any sale or exchange of property owned by a foreigner (not a US citizen). The IRS keeps this 10% to ensure that any capital gains on the sale are paid.
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A mortgage loan inspection (MLI) is and is not what?
It is a survey of the property to locate improvements on the land for the lender's purposes only. It is not a boundary survey or a property inspection.
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What items are contained in the preliminary title report?
- Owner's name and property description
- List of outstanding assessment
- Covenants, conditions, or restrictions
- Recorded liens or encumbrances to be removed
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Explain how the required funds must be brought to the closing.
Funds under $10,000 must be in a cashier's check, not a personal check. Funds over $10,000 generally must be in a wire transfer into the title company's escrow account.
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Closing documents
– discloses settlement costs to the buyer.
Closing Disclosure form
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– the most important document at closing because it transfers ownership of the property to the purchaser.
Deed
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Closing documents
assures title is free and clear and completed prior to closing.
Title search report
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In addition to the closing statement and deed, Indiana requires the following documents:5
- Correction statement and agreement – in case there are errors on any documents.
- Flood zone statement – states flood zone status of property and that the buyer will get flood insurance if needed in the future.
- Flood insurance – lender may require if property is in flood zone.
- Buyer/seller name affidavits – to assure name/signature are legal and certify any "known as" names.
- Non-foreign affidavit – seller states he/she is not a foreign person.
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(also known as conveyance tax or as revenue stamps) is a tax imposed on any deed or instrument which conveys interest in real property in that state. The amount of the tax is based on how much money the seller gets in the transaction. The tax is due at the time of the filing of the deed or instrument and is paid by the seller and collected by county clerks throughout the state.
Real Estate Transfer Tax
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The liability for withholding estimated taxes equal to 10% of the sale price in the sale of a property owned by a foreigner is shared by
Buyer and broker
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Which of the following documents are specifically required by Indiana?
Affidavit of No Liens
Non-Foreign Affidavit Under Internal Revenue Code 1445
Name Affidavit of Seller
All of the above
All of the above
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In preparation for the real estate closing, a major portion of the closing agent's job is to
gather information and documents from various sources.
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The Indiana requirement that certifies there are no liens on the property is called
Affidavit of no liens
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A preliminary title report
shows those items that the title company would exclude from coverage if a policy is issued at a later time.
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Which document transfers property to the buyer?
Deed
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If a buyer does not withhold estimated taxes equal to 10% of the sale price of any sale or exchange or property owned by a foreigner, who could be held liable for the full amount of any taxes not paid?
The broker
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The most complex of the required documents in closing is
the settlement statement.
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Which of the following documents is not normally completed at closing but is mailed to the buyer at a later date?
The lender's title insurance policy
The survey
The lien waivers
The owner's title insurance policy
The owner's title insurance policy
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What are the five basic steps to the settlement process?
- Identify selling terms and closing costs
- Determine non-prorated debits and credits
- Determine prorated debits and credits
- Complete the closing statement
- Disburse funds
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What is included in the selling terms and closing costs?
Selling terms are the price of the property, buyer's deposit and down payment, and terms and amounts of buyer's financing arrangements.
Closing costs are the final expenses the buyer or seller need to pay at closing to complete the transaction.
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Who pays which recording expenses(title)?
Unless specified differently in the contract, the seller usually pays the filing fees related to clearing the title. The buyer pays for transferring the title.
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What is the difference between non-prorated and prorated items?
Non-prorated items are costs incurred by one party only, while prorated items are partly the responsibility of the buyer and partly the seller.
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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.
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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.
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What are the primary methods of calculating prorations?
The 360/30-day method (a statutory year), which computes prorations on the basis of a 360-day year and 30-day month, and the 365-day method, which computes prorations on the basis of a 365-day year (a calendar year).
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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.
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Buyers Jim and Sandy will take over the seller’s prepaid insurance policy. The premium is $570 and the closing is set for April 11. The seller owns the day of closing. Using the 12month/30 day method, which statement is true?
Credit the seller $410.08; debit the buyer $410.08
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Which of the following is NOT part of the settlement process?
Determine prorated debits and credits
Identify selling terms and closing costs
Confirm property appraisal
Disburse funds
Confirm property appraisal;
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Seller Paul's real estate taxes are $1500 for the year. Buyer Sid is closing on May 17. According to the 365-day method, what is Sid's share of the taxes?
$936.99
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Which of the following is an item that is NOT normally prorated?
Title fees
Taxes
Mortgage interest
Utilities
Title fees
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A prorated expense on the settlement statement is
a debit to the buyer and seller.
a debit and credit to the buyer and seller.
a credit to the buyer and seller.
a debit to one party and a credit to the other.
a debit to one party and a credit to the other.
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Tonya has sold her home to Jesse, and the closing is set for January 8. The flood insurance for the year is $985. According to the 365-day method, what is Tonya's share of the flood insurance?
$21.59
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Which of these items would NOT need to be prorated on the day of closing?
Property taxes
Homeowner’s association fees
Rents for investment property
Attorney fees
Attorney fees
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Which party is responsible for expenses that will be paid in arrears?
The seller
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Buyers Tom and Mary have arranged to take over the Joe and Sue’s insurance policy. The premium is $550 per year paid in advance on March 1. Closing on the property is set for June 11. According to the 365-day method, what is Joe and Sue's share of the insurance cost?
$155.53
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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?
599.75 will be credited to the seller and debited to the buyer.
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With a prorated item, there is always
a sharing of the expense between both parties.
a debit to one party and a corresponding credit for the same amount to the other party.
a sharing of the credits between both parties.
a debit to the buyer and a credit in the same amount to the seller.
a debit to one party and a corresponding credit for the same amount to the other party.
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Costs incurred by one party only are
prorated items.
credited to the other party.
apportioned items.
non-prorated items.
Non prorated items
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What does a buyer owe at closing?
The amount in excess of the seller's debits over the seller's credits.
The amount in excess of the buyer's debits over the buyer's credits.
The amount in excess of the seller's credits over the seller's debits.
The amount in excess of the buyer's credits over the buyer's debits.
The amount in excess of the buyer's debits over the buyer's credits.
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A buyer will receive a water bill for an estimated $100 at the end of the month. At closing, the seller has used an estimated $43 in water. What should appear on the closing statement?
A debit to the seller and credit to the buyer for $57.
A debit to the seller and credit to the buyer for $43.
A debit to the buyer and credit to the seller for $57.
A debit to the buyer and credit to the seller for $43.
A debit to the seller and credit to the buyer for $43.
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The charge for recording all of the documents involved in a closing is paid to
The county clerk
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Which of the following are examples of closing costs?
Taxes and rents
Title insurance and inspection fees
Utilities and hazard insurance
Condominium assessments and special assessment payments
Title insurance and inspection fees
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