What is a closing statement? Deeper definition A closing agent prepares the closing statement, which is settlement sheet. What home sellers need to know about iBuying platforms Yes, you can sell your house with a few mouse clicks. Is now a good time to sell your home? Home security cameras change how buyers, sellers approach showings Security cameras are now ubiquitous.
Fourth-quarter housing trends: Seasonal slowdown ahead The fourth quarter should remind buyers and sellers of pre-pandemic winter real estate patterns. The final walkthrough before closing: Checklist and tips There are several items you should confirm during the final walkthrough of a home.
In a transaction where an existing loan is being assumed and there is a tax or insurance trust account, this amount is credited to the seller and debited to the buyer. Special Taxes. Special assessments, such as street paving, storm sewer, etc. The reason for debiting the seller is that the buyer has contracted for clear title other than named exceptions. Special taxes are often amortized and paid in installments with the on-going ad valorem taxes, and therefore it is not unusual for the buyer to agree by contract to assume the balance of taxes due for special improvements.
If special assessments are assumed, notation should be made of the amount assumed in the description column on this line, and no entry in either the debit or credit column. On a new loan, the lender may require that the seller pay special taxes at time of closing. Personal Property Taxes.
Personal property taxes will not be involved unless the property was used for business purposes or income producing purposes.
If such personal property is included in the sale, these taxes are prorated as ad valorem property tax would be prorated. When title passes, the tax responsibility also passes from seller to buyer. Personal property tax situations are more frequently encountered in business opportunity transactions.
Some counties demand advance payment of these taxes for the current year and they will be prorated to date of closing. This is a premium paid by the borrower to the lender to FHA to insure the lender against loss in the event the borrower defaults on the loan.
In , the Cranston-Gonzalez Act modified the premium collection system by requiring a monthly risk-based premium in addition to the up-front MIP. The closing entity should prorate both of these items unless the contract states otherwise. Debit seller and credit buyer for the monthly risk- based premium used.
This elimination of refunds is effective for those mortgages endorsed for insurance on or after December 8, The broker may request further information on this subject and related matters from the U. This applies only to an FHA loan made prior to September 1, now being assumed — almost never. The reserve amount currently held by the lender is a debit to the buyer and a credit to the seller. On FHA loans made on or after September 1, the entire mortgage insurance premium was paid at inception of the loan.
Loan Discount Fee. Although not used in this sample closing, discount points are charges made by a lender to increase the yield over and above the interest received on a loan.
This fee is payable by anyone but would normally be the buyer as a condition of loan approval. This premium is expressed as a percentage of the total loan, e.
The appraisal fee is charged to any party who agrees to pay it. In such a case, the broker should seek advance agreement as to who will pay the appraisal fee.
If the broker should pay an appraisal fee and expect reimbursement from either buyer or seller, he or she must include such provisions in the sales contract. Rental Income. Adjustment should be made for any rent paid to the seller by a tenant in advance, and a prorated share for the rental period credited to the buyer and debited to the seller. Delinquent rents are not prorated. Loan Transfer Fee. This is a charge by the lender for changing the loan records from seller to buyer.
Unless otherwise agreed between buyer and seller, this would be a debit buyer and credit broker. Loan Payment Due. Any loan payment due or delinquent should be charged to the seller. This could change the interest and reserve account picture.
In this case, the buyer will pay this amount outside of closing. Many other complications may arise in the closing of a real estate transaction. Not all variations can be foreseen. When all parties are present at a closing, new contracts may evolve, there may be a necessity for escrow agreements, rental. The broker is responsible for insuring any contractual changes made at closing are reduced to writing.
Licensees should continue their education on the subject of closings throughout their careers. Federal law places certain requirements on lenders in regard to closing real estate transactions and related matters. Almost all lenders who make first lien loans on one-to-four family units, including condominiums, cooperative units, and mobile homes are subject to RESPA.
Construction loans are not covered. The estimate must include origination fees and discount points. It need not include tax and insurance reserves or property taxes. The lender must state the maximum amount that can be collected at the time of settlement. Also under RESPA no seller of property may require, directly or indirectly, as a condition of selling the property, that title insurance be purchased by the buyer from any particular title insurance company.
The penalty for violation of this provision is a fine of up to three times all charges made for the title insurance. In the usual Colorado transaction, the seller contracts to pay for the title insurance policy and may therefore select the title company without fear of penalty.
It may be advisable for the broker to have a buyer designate a title insurance company in the written contract. The HUD-1 must be mailed or delivered to the borrower and the seller on the date of settlement, or as soon thereafter as is practicable. The lender must retain a record copy for two years. The borrower has the right to inspect the HUD-1 during the business day immediately preceding the day of closing. The lender may ask the broker for help in preparing the HUD-1, believing that the broker has easier access to some of the information that must be recorded.
The Federal government has not pre-empted the states in the area of closing real estate transactions. Colorado law and commission rule prevail for Colorado closings. The commission has presently taken the position that buyers and sellers are better protected under law and rule administered by the commission in regard to closing statements.
Introduction A real estate closing, or settlement, is the formal procedure by which title passes from seller to buyer and a final accounting is given for all funds received or paid. Closing Statements. Colorado Real Estate Manual ownership, according to the contract or governing law. Chapter Closing Statements The following examples illustrate preparation of several real estate closing statements. A Simple Real Estate Transaction This sample illustrates the broker conducting the closing, collecting and disbursing all the money through the sales escrow account.
Facts On April 22nd, you secure a written offer from Harold R. Colorado Real Estate Manual 4. Both are the obligation of the buyer. When the escrow agent prepares the settlement statement, it does so using information provided by many sources.
The purchase and sale agreement, title abstract, and associated documents all contain information that must be properly transcribed onto the settlement statement. Failure to retrieve or properly transcribe necessary information could result in unpaid liens or other fees. The escrow agent must ensure that the settlement statement is free of clerical errors or figures that differ from those found in any associated contracts, liens, or invoices.
Real estate agents and professionals often do not get paid until the loan closes. He holds a master's degree in management and a bachelor's degree in interdisciplinary studies. By Tony Guerra. Related Articles. What Are Title Fees for a Mortgage? Settlement Statement Preparation Settlement agents are responsible for preparing the HUD-1 statement that's given to home sellers and buyers. Statement Preparation Process A HUD-1 is required for real estate transactions that involve federally regulated mortgages.
Ultimate Statement Responsibility Sellers and buyers are ultimately responsible for reviewing their HUD-1 statements for accuracy and for ensuring that any errors are corrected before the end of closing.
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