Closing Real Estate Transactions in Texas

The seller

Grants the property that's being sold to the buyer and receives payment for the property.

The buyer

Pays for and receives clear title to the property that's being purchased.

The seller or buyer's agent

Supports clients, brings transactional files, and earns commissions from the property sale.

The lender's attorney

Examines all the documents and ensures that the property has a clear title if financing is involved.

Seller's or buyer's attorney

Supports client's best interests and ensures the legality of documents.

Title company representative

Ensures the title is marketable and delivers a title commitment.

Real estate transaction

The process where the property's title is transferred to the buyer, the seller receives payment, and the broker receives commission.

Closing statement

A document that accurately and correctly states all money-related agreements.

Final walk-through

A final inspection by buyers to ensure all fixtures and personal property remain, repairs are completed, and no damage has occurred.

Abstract of Title

Includes all liens, easements, encumbrances, conditions, and restrictions that impact the title and are on the record.

Title Policy

An insurance policy that must be sent to the buyer within 20 days of the sales contract if the buyer obtains a title policy.

Survey

Provides information about the land, including its exact location, measurements, and any improvements to it.

Title Insurance Commitment

A document that includes questions about the seller's marketable interest in the property and any liens that need to be paid off at closing.

Cash or Loan

Options for a buyer to pay for the property, resulting in the seller's current loan being paid in full at closing.

Mortgage Assumption

When the buyer assumes the current loan, they should get an estoppel certificate from the seller's lender.

Releasing an Existing Lien

The process of obtaining payoff information from the lienholder, holding back money from the seller's profits, and delivering the title to the buyer.

Closing Process in Texas

Involves paying the seller the balance of the purchase price and ensuring funds are provided in the form of a cashier's check, certified check, or wire transfer.

Conditions and contingencies

Terms that must be reviewed and confirmed by the parties prior to signing their documents.

Mortgage loan commitment

A contract signed by a lender to provide a loan to a borrower for purchasing property.

Title insurance contract

A contract that protects against losses from defects in the title to real property.

Face-to-face closings

Meetings where parties gather at specific locations like title companies or notary publics to finalize a real estate transaction.

Closing agent

The individual responsible for overseeing the closing process and ensuring all documents are in order.

Escrow agent

A neutral third party that holds funds and documents during a real estate transaction until all conditions are met.

Escrow process

A method of closing where a neutral third party holds funds and documents until all conditions are satisfied.

Texas Department of Insurance

The regulatory body that licenses escrow agents in Texas.

Trust account

A special account where the escrow agent must deposit earnest money.

Seller responsibilities

Obligations of the seller to provide necessary documents such as the title abstract and payoff statement.

Buyer responsibilities

Obligations of the buyer to bring necessary funds and documents to complete the purchase.

IRS 1099-S Form

A form provided to the seller by the broker for tax reporting purposes when necessary.

Lender's role at closing

The lender reviews documents, ensures clear title, and verifies that all conditions are met before finalizing the loan.

Earnest money

A deposit made by the buyer to demonstrate serious intent to purchase the property.

Affidavit as to debts and liens

A document provided by the seller to confirm there are no outstanding debts or liens on the property.

Loan documents

Documents required by the lender to process and finalize the mortgage loan.

Property insurance policies

Insurance coverage that protects against damages to the property.

Deed of trust

A legal document that secures a loan by transferring the property title to a trustee until the loan is paid off.

Settlement agent

An individual or entity responsible for conducting the closing and handling the funds.

Certificate of occupancy

A document issued by a local government agency certifying that a building is suitable for occupancy.

Pest inspection

An examination of the property for signs of pest infestations, often required by lenders.

Debits

Amount already paid, reimbursed, or promised

Credits

Amount owed

Proration

Divided proportionally between the buyer and seller

Buyer's Closing Checklist

A list of tasks the buyer must complete before closing on a property.

Seller's Closing Checklist

A list of tasks the seller must complete before closing on a property.

Closing Disclosures

Forms that ensure consumers receive necessary information to make informed decisions about buying a home.

RESPA

Real Estate Settlement Procedures Act, which requires disclosures about loan types, fees, and payment schedules.

TILA

Truth in Lending Act, also known as Regulation Z, which mandates disclosures regarding loan terms and costs.

Loan Estimate Form

A form that lists charges the buyer is likely to pay at settlement, provided within three business days of a loan application.

Closing Disclosure Form

A form that provides disclosures about transaction costs, given to borrowers at least three business days before closing.

Escrow closing notice

A notification related to the closing of an escrow account.

Mortgage servicing transfer

A notice regarding the transfer of mortgage servicing rights.

Partial payment notices

Notifications regarding partial payments made on a mortgage.

Unearned Kickbacks or Rebates in Texas

Prohibitions against giving or accepting anything of value for referrals related to federally related mortgage loans.

Kickbacks

Illegal payments between service providers for referring business, violating RESPA.

Consumer Financial Protection Bureau (CFPB)

The agency responsible for adopting specific mortgage rules under the Dodd-Frank Act.

Dodd-Frank Wall Street Reform and Consumer Protection Act

Legislation that changed previous requirements under RESPA and TILA.

Affidavit of title

A sworn statement confirming the ownership of a property and the absence of liens.

Identification to closing

A requirement for buyers and sellers to bring identification to the closing meeting.

Home inspection results

Findings from an inspection of the property that must be reviewed by the buyer.

Settlement statement

A document that outlines the financial details of the closing transaction.

Utilities contact

The process of notifying utility companies about the change of ownership.

Security deposit return

The process of requesting the return of a security deposit from a landlord.

Loan application

The process of applying for a mortgage loan, requiring specific documentation.

Title insurance

Insurance that protects against losses due to defects in the title of a property.

Hazard insurance

Insurance that covers damages to a property from specific hazards, such as fire or theft.

Settlement service providers

May not pay one another fees for referring business if that is the only service provided.

Rebates

A form of kickback that is also prohibited; RESPA prohibits an exchange of anything of value for referrals, or even the anticipation of future referrals, among settlement service providers.

Debit

A charge or an amount a party has to pay.

Credit

An amount in the party's favor-an amount a party has already paid, an amount that must be reimbursed, or an amount that is promised.

Buyer's Costs on the Statement

Shows how much the buyer needs to bring to closing.

Seller's Costs on the Statement

Also totaled separately, credits will include the purchase price plus the buyer's share of any prorated items that the seller has prepaid.

Signoff and Adjustments

A reconciliation of each party's financial obligations.

Customary Closing Charges in Texas

Includes seller closing costs such as broker commission, attorney fees, recording expenses, satisfaction of existing liens, and state transfer taxes.

Buyer's Closing Costs

Includes appraisal and credit report fees, inspections, title insurance, loan fees, recording fees, mortgage insurance, and tax reserves.

Accrued Items

Go in the seller's debit column, and are expenses that the seller owes on the day of closing.

Prepaid Items

Go in the seller's credit column and the buyer's debit column.

General Rules for Prorating

Based on a statutory year (360 days in a year, 30 days in each month) or on a calendar year (365 days in a year, the actual days in each month).

Calculating Prorations Step 1

Divide the yearly cost by 12 to find out the monthly cost.

Calculating Prorations Step 2

To determine the daily cost, divide by 365 (calendar year) or 360 (statutory year).

Calculating Prorations Step 3

Find out the number of months or days in the proration period.

Calculating Prorations Step 4

Multiply the number of months and/or days in the time period by the monthly and/or daily cost.

Voluntary Conveyance

The voluntary conveyance of real property by deed.

Deed

A written and signed legal document that legally transfers title to real property from the grantor to the grantee.

Grantor

The old owner who conveys property to the grantee.

Grantee

The new owner who receives the property.

Recorded Deed

Proves that the previous property owner conveyed the property to the person named as the grantee on the deed.

Essential Elements of a Deed

The grantor must be of sound mind and of lawful age, must sign the deed, and signatures must be notarized.

Delivery and Acceptance

Required to effect a transfer of title by deed.

Consideration Acknowledgment Clause

Acknowledges the grantor's receipt of consideration.

Nominal Consideration

A customary recitation of a small amount, such as one dollar, for deeds that convey property as a gift in Texas.

Granting Clause

Contains words that state the grantor's intention to convey the property and the legal description of the real estate.

Subject to Clauses

Clauses that contain any reservations or exceptions placed by the grantor.

Habendum Clause

Defines or limits the ownership interest of the grantee.

Warranty Clause

Words that state the nature of the grantor's warranties.

Signature of Grantor

A deed must be signed by all grantors named in the deed to be valid.

Acknowledgment

Acknowledgment by a notary public.

Full Covenant and Warranty Deed

Has the strongest and broadest form of guarantee of title of all the deed types.

Bargain and Sale Deed

May come with or without covenants of warranty.

Quitclaim Deed

Offers no warranties to the grantee and releases any rights of the grantor to the property.

Executor's Deed

Type of bargain and sale deed with a covenant; conveys real property from a decedent's estate to a buyer.

Referee's Deed

Contains no covenant or warranties, but does imply ownership and is used in bankruptcy proceedings.