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REALTOR® Emeritus |  | GOING FOR THE CLOSE | | ||
|  Keep the Transaction on Track Advanced Tip Advanced Tip Advanced Tip Broker Tip Getting to Close Advanced Tip Mortgage Basics Advanced Tip Advanced Tip Advanced Tip Inspections and Repairs Broker tip Closing Countdown Advanced Tip Going for the Close Advanced Tip Advanced Tip Advanced Tip Commission Disbursements Broker Tips Broker Tip Post-Closing Strategies Quiz: Contract to Close Bright Ideas: Contract to Close Code of Ethics: Contract to Close More Resources: Contract to Close | Closing Documents Buyers Need to Know 1. HUD-1 Settlement Sheet. Provides a detailed list of all closing costs related to the sale of the home. TIP: Suggest that buyers get a copy of the settlement statement one day before the closing so that they can compare it with earlier estimates of closing costs. Buyers should ask their attorney or the title company representative about any changes they don’t understand. 2. Truth-in-Lending Statement. Outlines the cost of a loan, including the annual percentage rate, which includes any points and fees. Borrowers will have received a preliminary copy of this same statement when applying for a loan. 3. Mortgage Note. States the promise to repay the mortgage. It indicates the amount and terms of the loan, and what the lender can do if payments aren’t made. 4. Mortgage or Deed of Trust. Secures the note and gives the lender a claim against the home if borrowers fail to live up to the terms of the mortgage note. 5. Deed. Transfers ownership from the sellers to buyers. Most buyers take receive a warranty deed, by which the sellers warrant that they will protect the buyers from any legal claims; usually guarantees a good title, freedom from encumbrances, and quiet enjoyment. TIP:Be sure that the developer provides a certificate of occupancy at the closing for a newly built home so that buyers can move in. RESPA 101 The Real Estate Settlement Procedures Act is a consumer-protection act that requires lenders to provide buyers and sellers with full disclosure as to the costs of the transaction. At the time of the loan application, the lender should have provided: 1. A special information booklet explaining settlement services. 2. A good faith estimate of settlement costs that will likely have to be paid at the closing. 3. A servicing disclosure statement detailing if the lender expects to service the loan (collect the monthly payments itself) or transfer the loan to another lender. The statement also informs borrowers how they can file complaints about lenders. TIP: The settlement services provider also is required to give the borrowers an Affiliated Business Arrangement Disclosure, which explains that clients aren’t required to use an affiliate of the settlement provider to obtain services. For example, a lender couldn’t require the borrower to use a specific title insurance company. TIP: Section 8 of the RESPA guidelines prohibits the payment of referral fees or other compensation for directing customers to a specific settlement service business. Receiving fees for services not actually performed also is prohibited. Check your knowledge of RESPA prohibitions with this quiz. At the closing, the buyers should receive: 1. A HUD-1 settlement statement itemizing the services provided for closing and all the fees required to close the transaction. 2. An initial escrow statement detailing the estimated property taxes, insurance premiums, and other charges that will be paid by the lender during the first 12 months of the loan. (May be sent up to 45 days after closing.) TIP: RESPA doesn’t permit lenders to require more than two months of supplemental deposits to cover any shortages in the account due to cost increases. For the Advanced Salesperson: FIRPTA 101 The Foreign Investment in Real Property Tax Act was intended to prevent foreign sellers from selling real property in the United States and not paying taxes on the profits from the sale. FIRPTA requires buyers to withhold 10 percent of the purchase price and pay it to the Internal Revenue Service within 10 days of the sale. If the buyer doesn’t collect and the seller subsequently doesn’t pay any income tax due on the sale, the buyer could be subject to a penalty of 10 percent of the purchase price or the seller’s tax liability plus interest and penalties. Residential property sold for $300,000 or less is exempt if the seller has obtained a waiver from the IRS. Advise buyers and sellers about FIRPTA and their responsibilities. Adapted from Real Estate Sales Handbookby Gail G. Lyons, Real Estate Education Co. and the Residential Sales Council, 1994 Narrow Saves—Pulling Victories From Closing Disasters > | Keep It Ethical Before recommending any provider of real estate services or products, disclose to the parties any financial benefits or fees received for the recommendation. Article 6 |