objective 2: describe the procedures involved in face to face closings from those in escrow closings

Question 1

In some areas closing may also be called __ or ___

Answer 1

settlement or transfer

Question 2

When parties to the transaction sit around a single table and exchange copies of documents is another name for closing called…

Answer 2

passing papers

Question 3

If one says “we passed papers on the new house wednesday morning” what does this mean?

Answer 3

Closed the house

Question 4

In some regions, the buyer and seller may never meet at all. Instead the paperwork is handled by an escrow agent. What is this process closed?

Answer 4

Closing escrow

Question 5

Closing through escrow means that….

Answer 5

Buyer and seller never meet, and paperwork is handled by an escrow agent

Question 6

What are the 2 main concerns in the closing process?

Answer 6

1) Buyer receives marketable title
2) Seller receives purchase price

Question 7

In IL, who customarily prepares the closing statement?

Answer 7

The seller’s attorney

Question 8

The IL Supreme Court decision in Chicago Bar Association, et al, v Quinlan and Tyson, Inc, ruled that ___ are prohibited from completing formal closing statements.

Answer 8

real estate licensees

Question 9

The IL Supreme Court decision in Chicago Bar Association, et al, v Quinlan and Tyson, Inc, ruled that real estate licensees are prohibited from…

Answer 9

completing formal closing statements.

Question 10

Preparation of ___ includes the expenses and prorations of costs to close a real estate transaction

Answer 10

closing statement

Question 11

During a face to face closing, the ___ orders and reviews the title insurance policy or title certificate, surveys, property insurance policies, and other items.

Answer 11

Closing agent or closing officer

Question 12

After reviewing the ___, the closing agent prepares a closing statement indicating the division of income and expenses between the parties.

Answer 12

agreement of sale (purchase agreement)

Question 13

After reviewing the agreement of sale (purchase agreement), the closing agent prepares a(n) ___ indicating the division of income and expenses between the parties.

Answer 13

closing statement

Question 14

After reviewing the agreement of sale (purchase agreement), the closing agent prepares a closing statement indicating the ___ and ___

Answer 14

division of income and expenses between the parties.

Question 15

During the exchange, the seller delivers the ___ to the buyer.

Answer 15

Signed deed

Question 16

During the exchange, all pertinent documents are recorded in the ___ to ensure ___.

Answer 16

correct order to ensure continuity of title

Question 17

The buyer’s new mortgage or deed of trust must be recorded ___ the deed because the buyer cannot pledge the property as security for the loan until he owns it.

Answer 17

After

Question 18

Why must the buyers new mortgage or deed of trust be recorded AFTER the deed?

Answer 18

Buyer cannot pledge the property as security for the loan until he owns it

Question 19

Even though a few states prohibit transactions that are closed in this way, ___ closings used to some extent in most states.

Answer 19

Escrow

Question 20

Who can NOT be a disinterested party in a transaction that is being closed in escrow?

Answer 20

Real estate licensees who expect to collect a commission

Question 21

Because this is a position of great trust, many states have laws regulating ___ and limiting who may serve in this capacity

Answer 21

escrow agents

Question 22

When a transaction will close in escrow, when will the buyer and seller execute escrow instructions to the escrow agent?

Answer 22

AFTER the sales contract is signed

Question 23

How is it determined which party will select the escrow agent when closing in escrow?

Answer 23

Either by negotiation between the parties or by state law.

Question 24

When closing in escrow, what happens once the contract is signed?

Answer 24

Broker turns over earnest money to the escrow agent, then the escrow agent deposits it in a special trust or escrow account

Question 25

When closing in escrow, when do the buyer and seller deposit all pertinent documents & other items with the escrow agent?

Answer 25

BEFORE the date of closing

Question 26

What 11 things does the seller normally deposit to the escrow agent?

Answer 26

1) deed conveying property 2) Title evidence 3) existing hazard insurance policies 4) letter or mortgage reduction certificate from title lender stating exact principal remaining (if buyer is assuming loan) 5) affidavits of title (if required) 6) payoff statement (if loan is paid off) 7) bill of sale 8) survey 9) transfer tax declarations 10) paid water bill 11) other instruments or documents necessary

Question 27

When the buyer is assuming the seller's loan, what must the seller deposit to the escrow agent before closing?

Answer 27

letter or mortgage reduction certificate from title lender stating exact principal remaining

Question 28

If the seller's loan is paid off, what must they deposit with the escrow agent before closing?

Answer 28

Payoff statement

Question 29

What 4 things does the buyer normally deposit to the escrow agent?

Answer 29

1) balance of cash needed to complete the purchase 2) Loan documents (if buyer secures a new loan) 3) proof of hazard and flood insurance (if required) 4) other necessary documents such as inspection reports required by the lender

Question 30

When the buyer deposits the cash needed to complete the purchase to the escrow agent prior to closing, the cash is usually in the form of either a(n) ___ or ___.

Answer 30

Wire transfer or certified check

Question 31

When closing in escrow, who has the authority to examine the title evidence?

Answer 31

Escrow agent

Question 32

When is the escrow agent authorized to disburse the purchase price to the seller, less all charges and expenses?

Answer 32

When marketable title is shown in the name of the buyer and all other conditions of the escrow agreement have been met

Question 33

If the escrow agent's examination of the title discloses liens, what happens?

Answer 33

A portion of the purchase price can be withheld from the seller. The withheld portion is used to pay the liens or clear the title

Question 34

When closing in escrow, what happens if the seller cannot clear the title, or if the sale cannot be consummated for any reason?

Answer 34

Escrow instructions usually provide that the parties be returned to their former statuses as if no sale occurred.

Question 35

When closing in escrow, what happens to the title and purchase money if the seller cannot clear the title, or if the sale cannot be consummated for any reason?

Answer 35

Escrow agent usually reconveys title to the seller, and returns purchase money to the buyer

Question 36

When closing in escrow, what happens if the seller dies before the closing date, but had already given a signed deed to the escrow agent before passing?

Answer 36

Closing may still proceed. Escrow agent transfers title to buyer, and turns purchase price over to the seller's estate

Question 37

Which 4 real estate closings must be reported to the IRS on form 1099-s?

Answer 37

1) land (improved or unimproved) including air space 2) inherently permanent structure, including any residential, commercial, or industrial building 3) condo unit and its appurtenant fixtures and common elements (including land) 4) shares in a cooperative housing corporation

Question 38

Certain real estate closings must be reported to the IRS on which form?

Answer 38

1099-S

Question 39

When reporting certain real estate closings to the IRS, what information needs to be reported (3 things)?

Answer 39

1) sales price 2) amount of property tax reimbursement credited to the seller 3) seller's SSN

Question 40

If the closing agent does not notify the IRS, then responsibility for filing form 1099-S falls on ___, however ___ or ___ could be held liable.

Answer 40

responsibility falls on the mortgage lender real estate licensees or parties to the transaction could be held liable

Question 41

When is a real estate licensee's job essentially finished?

Answer 41

As soon as the sales contract is signed

Question 42

Who takes over in the closing process after the contract is signed?

Answer 42

Attorneys

Question 43

Lenders want ___ to have priority over ___.

Answer 43

their mortgage lien to have priority over other liens

Question 44

Lenders want to ensure that ___ is kept up to date.

Answer 44

insurance

Question 45

In order to ensure that the buyer takes good and marketable title at closing, lenders generally require a(n) ___.

Answer 45

mortgagee's title insurance policy