Real Estate Closing and Escrow Chapter 16

Questions and Answers

What is the primary role of the escrow agent during the closing process?

To prepare the sales contract

To disburse documents and funds to the parties (correct)

To negotiate terms between buyer and seller

To conduct the title search

What must the seller do prior to the closing date?

Meet face-to-face with the buyer

Provide a verbal agreement to the buyer

Submit documents to the county clerk's office

Send the signed deed to the escrow agent (correct)

Which of the following is true regarding closing dates?

Closing dates are usually set for 15-30 days

A closing date is typically included in the sales contract (correct)

Only the seller can request a change in the closing date

Delays cannot extend the closing date once set

Under what condition is a seller not required to file Form 1099-S with the IRS?

If the sale is under $250,000 for a single taxpayer Signup and view all the answers

How are ongoing expenses typically handled at closing?

Expenses must be prorated between the seller and buyer Signup and view all the answers

What action can occur if there are delays in the closing process?

A mutual agreement can release a party from the sale Signup and view all the answers

What form is used to report the seller's proceeds to the IRS?

Form 1099-S Signup and view all the answers

Which expenses are typically prorated at closing?

Hazard insurance, loan interest, and property taxes Signup and view all the answers

What does the Closing Disclosure Form specifically list?

The specific information and costs included in the closing Signup and view all the answers

Which of the following is a restriction imposed by RESPA?

Prohibits kickbacks and fees for services not performed Signup and view all the answers

What benefit does a borrower receive under RESPA?

A booklet with RESPA information and estimated closing costs Signup and view all the answers

What is the purpose of the New RESPA Regulations effective January 16, 2009?

To require itemization of third-party charges paid by title agents Signup and view all the answers

What does the term 'Right to Cure' in RESPA refer to?

The ability to address issues at settlement or within 30 calendar days Signup and view all the answers

What is the role of the escrow agent in a real estate transaction?

To complete the closing on behalf of the parties Signup and view all the answers

Which document does the seller provide at closing?

Deed Signup and view all the answers

What does a settlement statement include?

An itemized accounting of funds Signup and view all the answers

In which situation is a dry closing typically conducted?

When there are delays and escrow is used Signup and view all the answers

What responsibility does the buyer have during closing?

Bringing settlement funds Signup and view all the answers

Who typically attends the closing meeting?

The seller, buyer, and potentially other parties Signup and view all the answers

What is a key function of the escrow agent regarding buyer's funds?

To deposit the funds in a trust account Signup and view all the answers

What is the main reason for conducting a walk-through before settlement?

To ensure the property's condition meets the contract terms Signup and view all the answers

Study Notes

Preclosing Procedures and Closing the Real Estate Transaction

Walk-through: final inspection of property before settlement occurs.
Title Settlement/Closing completes real estate transactions with buyer paying for property and seller delivering the deed.
Two methods of closing:
- Meeting where all parties are present.
- Escrow Settlement, facilitated by an escrow agent, mainly through mail.

Escrow Details

Escrow agent: appointed to manage the escrow process.
Escrow closing involves depositing documents and funds with a neutral third party, following specific instructions.
In the eastern U.S., closings typically occur at a meeting, while elsewhere, escrow agents handle the process.

Seller and Buyer Responsibilities at Closing

Seller responsibilities include providing the deed, tax verification, insurance documentation, proof of no liens, keys, and lease information.
Buyer is responsible for bringing settlement funds.
Lender may request various surveys, reports, and insurance information; real estate agents prepare necessary documentation.

Closing Process Overview

Both parties or their attorneys inspect documents during the closing transaction.
Seller signs affidavit confirming ownership and absence of liens.
Settlement statement provides an accounting of all funds involved in the transaction.
All financial exchanges must be detailed in the closing statement, with funds distributed by the lender shortly after.

Dry Closing and Escrow

Dry closing occurs when the closing is delayed, leading to completion in escrow; documents are signed but disbursements occur later.
Escrow agents manage the trust account for buyer funds and process required documentation from both parties.
A final title check is conducted by the escrow agent the day before closing.

Delays and Cancellations

Sales contracts include a closing date, typically set for 30 to 60 days from agreement.
Mutual agreement can release a party from the sale, while one-sided cancellations may lead to legal disputes.
Courts can influence the closing process if necessary.

Loan Escrows

Escrows can also be applied to refinancing or loan payoff situations, involving both borrower and lender.

Reporting Requirements

Seller proceeds reported to the IRS via Form 1099-S.
Taxpayer Relief Act of 1997 exempts sales under $250,000 (single) or $500,000 (married) from filing the 1099-S.
Sellers can declare qualifications in writing to the Secretary of State to avoid filing this form.

Prorating Expenses

Ongoing expenses (insurance, loan interest, rents, property taxes, HOA dues) must be prorated between buyer and seller.
Special assessments for local improvements are generally not prorated.
Closing Disclosure Form lists information and costs related to closing.

Real Estate Settlement Procedures Act (RESPA)

RESPA regulates procedures for specific real estate closings.
It prohibits kickbacks and fees for unperformed services and restricts seller control over title company choices.
Borrowers receive a RESPA information booklet and estimated closing costs from the lender.
New regulations effective January 16, 2009, require itemized third-party charges that do not exceed the actual amounts paid to service providers.

Right to Cure

Buyers have the right to address any discrepancies at settlement or within 30 calendar days post-closing.

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Description

This quiz focuses on Chapter 16 of Real Estate Closing and Escrow, covering preclosing procedures and the final settlement of real estate transactions. Test your knowledge on concepts like the walk-through inspection, title settlement, and different methods of closing, including escrow settlements.