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© 2013 All rights reserved. 1 Chapter 7.2 Title Closing New York Real Estate for Brokers, 5th e By Marcia Darvin Spada Cengage Learning
© 2013 All rights reserved. 2 Chapter 7.2 Title Closing Chapter 7 Conveyance of Real Property and Title Closing Part II: Title Closing
© 2013 All rights reserved. 3 Chapter 7 Key Terms Abstract of title Accretion Acknowledgment Actual notice Adverse possession Assessment Bundle of rights Chain of title Closing statement Constructive notice Conveyance Credits Debits Dedication Delivery and acceptance Erosion Escheat Executor/executrix Chapter 7.2 Title Closing
© 2013 All rights reserved. 4 Chapter 7.2 Title Closing Chapter 7 Key Terms (continued) Full covenant and warranty deed Habendum clause Intestate Involuntary alienation Lien foreclosure sale Marketable title Proration Quitclaim deed Real Estate Settlement Procedures Act (RESPA) Reconciliation Survey Tacking Testate Title Title closing Title insurance Title search Voluntary alienation
© 2013 All rights reserved. 5 Chapter 7.2 Title Closing Those Present at Closing Seller Buyer Real Estate Agent Title company rep Lender’s, buyer’s and seller’s attorney
© 2013 All rights reserved. 6 Deed and Other Closing Documents Deed Survey Title insurance Mortgage approval Homeowner’s insurance Structural inspection/other tests Title search-evidence of marketable title Chapter 7.2 Title Closing
© 2013 All rights reserved. 7 Wood Eating Insects Chapter 7.2 Title Closing
© 2013 All rights reserved. 8 Role of Licensee Before Closing Buyer has a final walk through on the day before closing or immediately before closing The buyer agent (if there is one, or seller agent usually accompanies the parties Broker commission generally paid at closing Chapter 7.2 Title Closing
© 2013 All rights reserved. 9 NYS Commission Escrow Act The Commission Escrow Act (2009) applies to one- to-four unit residential properties And individual condominiums and cooperatives sold by real estate brokers and sales agents Protects the broker’s real estate commission when a seller does not pay the full commission upon closing Chapter 7.2 Title Closing
© 2013 All rights reserved. 10 Homeowner’s Insurance Protects home or income/business against damage or loss in case of fire, theft or vandalism Two types of property insurance Section I covers property Section II covers liability Chapter 7.2 Title Closing
© 2013 All rights reserved. 11 Standard Homeowner’s Policies Homeowners-1 (HO-1) insures home and contents Homeowners-2 (HO-2) insures home and contents from additional perils Homeowners-3 (HO-3) covers home for most risk of physical loss Homeowners-5 (HO-5) same as HO-3, plus personal possessions covered for most losses Chapter 7.2 Title Closing
© 2013 All rights reserved. 12 Standard Homeowner’s Policies Homeowners-8 (HO-8) provides actual cash value coverage in place of replacement cost coverage for a building Tenants or Coop Owners (HO-4) reimburse tenants for increases in living expenses if home becomes inhabitable Condo Unit Owners (HO-6) insure against damage to contents of apartment plus liability Chapter 7.2 Title Closing
© 2013 All rights reserved. 13 Chapter 7.2 Title Closing Real Estate Settlement Procedures Act (RESPA) RESPA Residential federally financed properties Eliminate kickback/ Referral fees Provide information Prevent abusive practices Good faith estimate Buyer’s Guide to Settlement Costs HUD Form No. 1 Settlement cost disclosure
© 2013 All rights reserved. 14 Possible Seller Closing Costs COSTS Real estate transfer tax FIRPTA Certificate Broker commission Attorney fee Recording documents to clear title Satisfy existing property liens Condo/ coop fees Chapter 7.2 Title Closing
© 2013 All rights reserved. 15 Chapter 7.2 Title Closing Existing Liens Mortgages Real Property tax liens Mechanic’s liens
© 2013 All rights reserved. 16 Chapter 7.2 Title Closing Possible Purchaser Closing Costs Appraisal/credit report fees Structural and other tests/inspections NYS Mortgage Recording Tax Returns Title Insurance Attorney fees Lender fees (escrow account, discount fees, loan origination fees, mortgage insurance) Survey (sometimes paid by seller) Homeowner’s insurance
© 2013 All rights reserved. 17 Purchaser Closing Costs for a Condominium Real Estate Tax Deductions Right of First Refusal Mortgage Recording Tax Mansion Tax Common Charges Chapter 7.2 Title Closing
© 2013 All rights reserved. 18 Chapter 7.2 Title Closing Debits and Credits
© 2013 All rights reserved. 19 Chapter 7.2 Title Closing Calculating Prorations A closing is held September 15 th. The annual property taxes of $6,000 have been paid. What will the entry for the seller be on the closing statement? 6,000 ÷ 12mos = $500 8 mos x $500 = $3,500 500÷2 = $250 $250 + $3,500 = $3,750 Credit to seller: $3,750
© 2013 All rights reserved. 20 Chapter 7.2 Title Closing Prorations at Closing A sale is closed August 23, with the real estate taxes of $600 per year unpaid. What is the entry on the closing statement? $600 ÷ 12 = $50 per month $50 x 7 mos = $350 $50 ÷ 31 days =$1.6129032 per day $1.6129032 x 23 days = $37.096773 =$37 rounded $350 + $37 = $387 debit to seller
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