Closing the Real Estate Transaction
Unit 17
How to Maximize this Unit
❏ Have your book open to the Unit❏ Have your recorder (iPhone voice command
recommended or voice recorder on Android) ready to record, with proper title prepared.
❏ Follow the Timed Module, completing each task. You must complete to move forward.
❏ Record your progress as you go.❏ Use this audio later for review.❏ Visit FORUM on www.agentrising.com for
questions.
Chapter 17: Closing the Real Estate Transaction
The conclusion of the real estate transaction is the closing, when title to the real estate is transferred in exchange for payment of the purchase price. Until closing preparations begin, a real estate
professional’s relationship is primarily with the buyer or the seller. During the closing period, new players come on the scene. A
thorough knowledge of the closing process is the best defense against the risk of a transaction failing.
Chapter Objectives❏ Describe the specific steps and processes involved in order to
achieve conveyance of clear and marketable title, including compliance with all applicable laws.
❏ Describe the closing procedures and the respective roles of all parties.
❏ Explain the provisions of the Real Estate Settlement Procedures Act (RESPA) and the Mortgage Disclosure Improvement Act (MDIA). TILA RESPA.
❏ Describe and explain all buyer and seller charges and credits contained in the closing statement.
❏ Explain the financial entries and mathematical calculations contained in the closing statement.
❏ Review and confirm the accuracy of a closing statement.
Key Terms to Record
accrued itemsaffiliated business arrangement (ABA)
closingclosing statementcreditdebitescrow accounts
escrow closingGood Faith Estimate (GFE)
impound accountsMortgage Disclosure Improvement Act (MDIA)
mortgage servicing transfer statement
prepaid itemsprorationsReal Estate Settlement Procedures Act (RESPA)
Settlement Statement (HUD1)
surveyTILA RESPA
Define the Following Key Terms
❏ accrued items❏ closing❏ closing statement❏ credit❏ debit❏ escrow accounts❏ escrow closing❏ impound accounts
❏ Mortgage Disclosure Improvement Act (MDIA)
❏ mortgage servicing transfer statement
❏ prepaid items❏ prorations❏ Real Estate Settlement
Procedures Act (RESPA)❏ survey
Stricken Vocabulary...on the test still?❏ CFPB- Consumer Finance Protection Bureau❏ RESPAS Consumer Protections❏ CLO Regulation❏ CBA Disclosure❏ Settlement Cost booklet❏ Good Faith Estimate (GFE)❏ Settlement Statement (HUD1)❏ Prohibition of holdbacks and uncarried fees❏ Prorations debits/credits
Affiliated Business Arrangement (ABA)
New TermsTILA RESPA
Pre-closing Procedures
Buyer’s Issues:● Final property inspection● Survey● Title evidence
Seller’s Issues:● Receiving payment● Payoff statement
Roles at Closing
Real Estate Professional’s Role at Closing:● Varies by state● Involved on behalf of client
Lender’s Interest in Closing:● Protect its security interest● Mortgage lien priority
IRS Reporting Requirements:● Form 1099-S
Conducting the Closing
● Face-to-face● In escrow
Conducting the Closing
● Legislation Related to Closing○ Real Estate Settlement Procedures Act (RESPA)○ Mortgage Disclosure Improvement Act (MDIA)
● Disclosure Requirements● CFPB Settlement cost booklet
Preparation of Closing Statements(Changed with TILA-RESPA)
A debit is an amount to be paid by the buyer or the seller.
A credit is an amount payable to the buyer or the seller.
Prorations:Accrued items = Buyer credits
Prepaid items = Seller credits
TILA-RESPA Integrated Disclosure Rule
The new TILA-RESPA Integrated Disclosure rule (also called the Know Before you Owe mortgage disclosure rule) will replace the four current disclosure forms with two new forms. The Loan Estimate form will replace the initial Truth in Lending statement (TIL) and the Good Faith Estimate (GFE). The Closing Disclosure form will replace the HUD-1 Settlement Statement and the final TIL. The new forms are required for transactions originating on or after October 3, 2015.
Loan Estimate Form
The new Loan Estimate form highlights the information that has been the most important to consumers historically. Interest rate, monthly payment, and total closing costs are clearly presented on the first page. The Loan Estimate form must be provided to the consumer
three business days after a loan application is submitted to the lender. Blank copies of several alternate versions of the form can be found
here. A completed sample form can be found here.
Closing Disclosure Form
The new Closing Disclosure form provides more information about the costs of taxes and insurance and how the interest rate and payments
may change in the future. It will also warn consumers about things they may want to avoid such as prepayment penalties. The Closing Disclosure form must be provided to the consumer three business
days before the loan closes. A completed sample form can be found here.
For more information and updates from the Consumer Financial Protection Bureau (CFPB) regarding this rule, visit the CFPB Website
After the Unit...
● Read the Key Point Review in the Unit.● Read the quizzes and answers. Are you right or wrong? Why?● Go to QBank and customize a quiz on this Unit, selecting the
boxes on the bottom to show progress as you go, and to show explanations.
● Take the quiz- recording your thoughts and how you did.● Send us the recording for you to use as accountability.● Text us or email us any questions.
Unit 17 QuizLegal title ALWAYS passes from the seller
to the buyer
a. on the date of execution of the deedb. when the closing statement has been signedc. when the deed is placed in escrowd. when the deed is delivered and accepted
D. When the deed is placed in escrow
A mortgage reduction certificate is executed by a(n)
a. abstract companyb. attorneyc. lending instituted. grantor
C. lending institution
On a settlement statement, the principal amount of a purchaser’s new mortgage loan is a
a. credit to the sellerb. credit to the buyerc. debit to the sellerd. debit to the buyer
B. credit to the buyer
At closing, the listing agent’s commission is usually shown as a
a. credit to the seller b. credit to the buyerc. debit to the sellerd. debit to the buyer
C. Debit to the seller
Security deposits should be listed on a closing statement as a credit to the
a. buyer b. sellerc. lenderd. real estate professional
A. Buyer
At closing, the listing agent’s commission is usually shown as a
a. credit to the sellerb. credit to the buyerc. debit to the sellerd. debit to the buyer
C. debit to the seller
Which item would the lender generally require at the closing?
a. Title insurance commitmentb. Market value appraisalc. Applicationd. Credit report
A. Title insurance commitment
WE are here to help you…. Rise to the TOP!Agent Rising Real Estate School
and Training Center
Kate Lanagan MacGregor | Instructor/Owner [email protected] | 508-728-3648 | www.katelanaganmacgregor.com
Marie Greany | Dean of [email protected] | 508-207-3186 | www.agentrising.com