Unit 14: Closing the Real Estate Transaction

Vocabulary-style flashcards covering the key concepts, legal acts (RESPA, MDIA, TRID), and financial calculations involved in closing real estate transactions as described in the Unit 14 transcript.

Closing

The point at which ownership of a property is transferred in exchange for the payment of the purchase price.

Survey

A document providing information about the exact location and size of the property, including markings for buildings, driveways, fences, easements, and encroachments.

Attorney's opinion of title

A statement of the quality of the seller's title, listing all liens, encumbrances, easements, conditions, and restrictions appearing in the record.

Payoff statement

A document from a lender noting the unpaid principal, interest due through the date of payment, and fees for issuing a certificate of satisfaction to release a lien.

Mortgage reduction certificate

A document provided by a lender when a buyer assumes the seller's existing mortgage, certifying the amount owed, interest rate, and the date of the last interest payment.

Bring down

A second search of the public record made after the closing and before any new documents are filed to show the status of the title.

Affidavit of title

A sworn statement in which the seller assures the title insurance company and buyer that no other defects in the title have occurred since the date of the title examination.

Form 1099-S

The Internal Revenue Service (IRS) form used to report the sales price, property tax reimbursement, and the seller's Social Security number for real estate closings.

Face-to-face closing

A closing process, sometimes called passing papers, where the parties meet in person to execute and exchange documents.

Escrow closing

A closing process where a disinterested third party is authorized to act as an agent to coordinate closing activities without the buyer and seller meeting.

Real Estate Settlement Procedures Act (RESPA)

A federal law requiring disclosures about the mortgage and settlement process while prohibiting practices like kickbacks and referral fees.

Mortgage Disclosure Improvement Act (MDIA)

A law intended to prevent consumers from receiving low interest rates at application only to have fees increased at settlement.

TILA-RESPA Integrated Disclosure rule (TRID)

A rule implementing provisions of the Dodd-Frank Act to combine and clarify financing disclosures to consumers using the Loan Estimate and Closing Disclosure forms.

Federally related loan

A loan made by a bank with deposits insured by a federal agency, a loan insured by the FHA or guaranteed by the VA, or a loan intended to be sold to Fannie Mae, Ginnie Mae, or Freddie Mac.

Affiliated business arrangement (ABA)

A system where a real estate firm, title company, or mortgage broker with at least $1\%$ common ownership offer a package of services to consumers.

Mortgage servicing transfer statement

A required notice given to the borrower at least $15$ days before the effective date that the lender intends to assign the right to service the loan to another servicer.

Loan Estimate (LE)

The form that replaced the Truth in Lending Statement and the Good Faith Estimate, highlighting interest rate, monthly payment, and total closing costs.

Closing Disclosure (CD)

The form that replaced the HUD-1 Settlement Statement and final TIL, itemizing all charges paid by the borrower and seller in connection with settlement.

Debit

A charge or an amount that a party owes and must pay at closing.

Credit

An amount entered in a person's favor, representing an amount already paid, being reimbursed, or promised in the form of a loan.

Accrued items

Expenses to be prorated that are owed by the seller but will be paid after the sale by the buyer, resulting in a credit to the buyer and a debit to the seller.

Prepaid items

Expenses to be prorated that have been paid in advance by the seller but not fully used, resulting in a credit to the seller and a debit to the buyer.

Prorations

The allocation of financial responsibility between the buyer and the seller for items like loan interest, taxes, and utility bills.

Banking year

A system for calculating prorations based on a $360\text{-day}$ year, consisting of $12$ months of $30$ days each.

Interim interest

Interest paid in advance by the borrower for the period from the day of closing through the end of the closing month.