Modern Real Estate Practice in Illinois Eighth Edition Chapter 23: Closing the Real Estate Transaction ©2014 Kaplan, Inc.

Preclosing Procedures Buyer’s issues –Title inspection –Final property inspection –Survey Seller’s issues Title procedures

Conducting the Closing Face-to-Face Closing –Closing agent or closing officer –The exchange Closing in Escrow –Escrow in procedure

Conducting the Closing IRS reporting requirements Broker’s role at closing Lender’s interest in closing Mortgage Disclosure Improvement Act –3 business days provide provide TIL & GFE –7 business days final TIL & GFE –3 business days wait for closing if APR changes

RESPA Requirements Applicability Settlements exempted Prohibits practices Controlled business arrangements Disclosure requirements –Kickbacks and referral fees –Special information booklet –GFE

How the Closing Statement Works 1.Calculating buyer cash at closing 2.Calculating amount to be received by seller 3.Attorney’s fees 4.Broker’s commission 5.Recording expenses 6.Transfer tax 7.Title expenses

How the Closing Statement Works 8.Loan fees 9.Tax reserves and insurance reserves (escrow or impound accounts) 10. Appraisal fees 11. Survey fees 12. Additional fees –FHA –VA –Conventional Accounting for Expenses

Prorations The Arithmetic of Prorating –Statutory method –Actual number of days method Accrued Items Prepaid Items General Rules for Prorating –Real estate taxes –Mortgage loan interest

Sample Closing Statement Basic Information of Offer and Sale –Computing the prorations and charges The Settlement Statement (HUD-1)