Closing Real Estate Transactions – Vocabulary Flashcards

Vocabulary flashcards summarizing key terms and concepts related to real estate closing, settlement procedures, RESPA requirements, proration, and associated documentation.

Accrued Expense

An item on a settlement statement for which the cost has been incurred but not yet paid; treated as paid in arrears.

Affiliated Business Arrangement (AfBA)

A situation in which a party in a position to refer settlement services has a 1%+ ownership interest in the provider and refers or influences selection of that provider; must be properly disclosed under RESPA.

Bill of Sale

A document used to transfer ownership of personal property from one party to another.

Closing (Settlement / Loan Consummation)

The final stage of a real estate transaction in which ownership transfers from seller to buyer in accordance with the purchase agreement.

Closing Disclosure

Standardized, final accounting document for RESPA-related transactions that lists each party’s debits and credits; must be delivered at least three business days before loan consummation.

Credit

A sum of money to be received by a party on the settlement statement.

Debit

A sum of money a party owes on the settlement statement.

Deed

A written instrument by which a grantor transfers ownership or interest in real property to a grantee.

Discharge of Mortgage (Release of Lien / Satisfaction of Mortgage)

Document issued by a lender once the seller’s mortgage is paid off; should be recorded to clear title.

Escrow Closing

A settlement procedure conducted by a disinterested third party (escrow agent) where buyer and seller are not present.

Escrow Reserves

An account held by a lender into which borrowers deposit 1/12 of annual tax and insurance costs each month to pay future bills.

Evidence of Title

Proof of marketable title provided through a title report or title insurance policy.

Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)

Federal law imposing income tax withholding on foreign persons who sell or dispose of U.S. real property interests.

Home Warranty (Home Protection Plan)

A contract that provides discounted repair or replacement service on a home’s major components.

IRS Form 1099-S

Form a settlement officer files with the IRS reporting the seller’s proceeds from a real estate sale.

Kickback

Undisclosed fee or compensation for a business referral without services performed; prohibited by RESPA.

P.O.C. (Paid Outside Closing)

Expenses related to a real estate transaction that are paid outside of closing; noted on the settlement statement but not debited or credited.

Prepaid Expenses

Items the seller has paid in advance that the buyer will use; result in seller credit and buyer debit on the settlement statement.

Proration

Allocation of expenses between buyer and seller in proportion to actual usage as of closing.

Real Estate Settlement Procedures Act (RESPA)

1974 federal law (Regulation X) governing real estate closings that requires cost disclosures, bans kickbacks, and regulates affiliated business arrangements.

Recording Fees

Charges for filing documents in the county recorder’s office so they become part of the public record.

Referral (RESPA definition)

Any oral or written action that affirmatively influences the selection of a settlement-service provider.

Roundtable Closing

Face-to-face settlement meeting with all parties present, typically at a title company, brokerage, lender, or attorney’s office.

Settlement Officer (Closing / Escrow / Title Agent)

Person responsible for coordinating documents and funds to complete a real estate transaction and preparing the settlement statement.

Settlement Services

Any services provided in connection with the closing of a real estate transaction (lending, title, brokerage, inspection, appraisal, etc.).

Statutory Year (Banker’s Year)

A 360-day year consisting of 12 months of 30 days each, often used in proration calculations.

Title Insurance

Policy that protects lenders or owners against losses from undiscovered title defects or encumbrances.

Title Report

Document issued by a title company disclosing the current condition of title and any defects or encumbrances.

Transfer Tax

Tax levied by a state, county, or municipality on the transfer of real property; often calculated per $1,000 of purchase price.

TRID Rule

TILA-RESPA Integrated Disclosure rule that created the Loan Estimate and Closing Disclosure to provide consumer-friendly, standardized forms.