Closing Cheat Sheet

Learn to close like a pro with the information contained within the Closing & Transactions cheat sheet

Closing Terminology:

Agreement of Sale (Offer and Acceptance/Contract of Sale)
Essentially a written agreement where the buyer agrees to buy certain real estate and the seller agrees to sell upon direct terms of the written agreement
As Is/As Is with Right to Inspect
In a nutshell, the buyer of an “as is” property can add on to the offer and have it “as is with right to inspect”; the seller makes no warranties for the property other than the marketability of the title and, usually, will make no repairs to the property; if the inspection finds more than a certain amount of repair costs, the buyer can elect to split the cost of the repairs or make other decisions; beyond repairs, the inspection may find open permit(s) and improvement(s) made to the property without required permits, and these will need to be remedied by the seller before the closing date; all appliances, air conditioner, water heater, and wood-destroying organisms (WDO) are exempt from this clause and must be addressed by the seller to be in working order the time of closing, and WDOs must be treated; cosmetic items such as a stained rug, holes in a wall, or cracks in tile are examples of non warranted items; a burner on a stove that will not get hot or a refrigerator that does not get cold enough is an example of a warranted item
Closing Agent
A third, nonpartial party that takes care of the paperwork and often runs the closing; it can be a title company, an attorney, or an escrow agent; it cannot be a real estate broker, a sales agent/realtor, the seller, or the buyer
Closing/Settlement
The transfer of ownership of a property from seller to buyer; must be in accordance to the executed, written sales contract
Closing/Transaction Costs
Expenses and various fees payable by the seller and buyer at the time of a property closing; some of the closing/transaction costs are brokerage commission (usually paid by the seller), lender fees/discount points for mortgage, title/abstract search, title insurance premium, deed recording fees, state tax/stamps to record the deed, inspection fee, appraisal fee, attorney fee, taxes, HOA fee, and condo maintenance and/or association fee; closing costs for a home buyer are approximately 2%-4% of the purchase price; closing costs for a seller are approximately 3%-10% of the sale price- this includes the commissions, which can range from 5%-7%, split between the listing agent and selling agent (these costs may vary by state; check with closing agent)
Disclosure of Property Statement/Seller's Disclosure
Required by law in most states; seller must disclose specific information and any and all dangerous conditions to potential buyers, such as disclosure of foundation repairs; termite infestation and treatment; age of roof and repairs; age of appliances and equipment; any repairs made to the property; any alterations to the property; whether the property is in a flood zone, sinkhole area, mining area, etc.; randin gas, energy efficiency; homeowners/condo association; if the property had water damage; and any other information that would affect the property value
Due Diligence
The responsibility of the buyer to exercise the appropriate care before closing on the purchase. Due diligence includes verifying all of the seller’s representations and uncovering any other pertinent facts that have not been disclosed but have a bearing on whether or not you want to purchase the property
Earnest Money Deposit
The earnest money deposit is money provided by the homebuyer to the seller to prove her earnest intent to purchase the property. The amount varies, and the check is typically submitted with the purchase agreement. If the sale goes through, the earnest money deposit is applied to the down payment. If the buyer walks away from the sale, through no fault of the seller, he may forfeit his earnest money deposit
Escrow
The money given to a third party to hold funds until the transaction/contract closes
Escrow Impounds
The lender requires a deposit, as prepayment of taxes and insurance, at the close of escrow. This deposit goes into an escrow account and protects the lender in the event that you allow your insurance to lapse or don’t pay your property taxes. By law, the lender can only request an amount that is equal to no more than two months’ payments
Final Walk-through
The buyer is allowed one last chance to walk through the home prior to the close of escrow. This inspection is not to turn up newly-discovered defects, but to ensure that the home is in the same condition as when the offer was tendered
HUD Form 1 (HUD-1)
Uniform settlement statement prepared by closing attorney or title company and given to the buyer and seller; required by the Real Estate Settlement Procedures Act (RESPA) for federally related mortgages; contains closing information
Prorate
To allocate funds between a buyer and seller for their proportionate share of an obligation paid or due; prorated funds can be property taxes, maintenance or HOA fees, and insurance
Real Estate Settlement Procedures Act (RESPA)
A consumer protection law intended to ensure that buyers are informed of the amount and type of charges they will pay at closing; also attempts to eliminate kickbacks and referral fees that can increase closing costs; applies to federally related and residential loans on one-to-four-family homes; these include most purchase loans, assumptions, refinances, property improvement, and equity lines of credit
Termite/Wood Destroying Organisms (WDO) Clause/Inspection
a provision in a sales contract that allows a buyer to have the property inspected for termite infestation by a qualified termite inspector; if any termites are found, the buyer may require the seller to treat the property or the buyer may cancel the contract; these insects can be drywood termites, subterranean termites, carpenter ants, or powderpost beetles
Transaction management process
A continuous, cyclical four-stage process in which a transaction manager is involved with qualifying, matching, closing, and adding value for clients.

2015 Consumer Reviews




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