Deck 12: An Introduction to the Closing

Question 1

Explain the various sections of a HUD-1 Uniform Settlement Statement.

Answer 1

The HUD-1 Uniform Settlement Statement is a three-page document. The first two pages of the HUD-1 are divided into alphabetical sections, from A through L. Section A is simply the title of the closing statement. Section B pertains to specifics of the loan. Section C is a note pertaining to items paid outside of closing. Section D requires the name(s) and address(es) of the borrower(s). Section E requires the name(s) and address(es) of the seller(s). It also provides a space for the insertion of the taxpayer identification number of the seller, which, if the seller is an individual, is the seller's Social Security number. Section F requires the name and address of the lender. Section G is where the property location is inserted. The county and parcel identification number may be inserted as well. Section H is for the insertion of the name and address of the settlement agent. The closing date is inserted in Section I. Section J is a summary of the borrower's transaction. Section K is a summary of the seller's transaction. Section L itemizes the closing costs charged to each party.  On the third page of the HUD-1, the purchaser is provided a side-by-side comparison of the borrower's closing costs as they appear on the GFE and the actual closing costs set forth on the HUD-1.

Question 2

Explain the way an escrow closing works.

Answer 2

In an escrow closing, a third party, such as a title company, law firm, or escrow company, acts as the escrowee or escrow holder. Both parties deposit their closing documents with the escrowee, and the escrowee proceeds to close the transaction as an impartial agent, attending to the requirements of each party. If the parties know at the time of contracting that an escrow closing will be required, the contract for sale and purchase may indicate the name of the person or firm to act as escrowee. The parties and the escrowee would then sign an escrow agreement. The escrow agreement stipulates the responsibilities of each signatory as well as the documents each party must prepare and deposit with the escrowee prior to the date of closing.

Question 3

What closing documents typically are prepared by the seller's attorney?

Answer 3

The seller's attorney typically prepares the deed, seller's affidavit, bill of sale, nonforeign certification (if applicable), continuous marriage affidavit (if applicable), satisfaction of mortgage, and any other document necessary to transfer marketable title.

Question 4

The following items are prorated on a closing statement except:

A) real property taxes
B) title insurance
C) special assessments

Question 5

A bill of sale must include the actual purchase price of the personal property sold with the real property.

Question 6

Outline the steps to be taken to prorate an item.

Question 7

On a title commitment, the current owner listed is the buyer.

Question 8

If no type of deed is specified in the contract for sale and purchase, state law in most states indicates that a special warranty deed be used.

Question 9

A ___ is a sworn statement signed by the seller stating that there are no existing liens on the property that would encumber the purchaser's title.

Question 10

If the seller(s) is/are married, a            should be prepared.

Question 11

What disbursements typically are made after closing?

Question 12

A ___ certifies that the seller is not a foreign person as that term is defined in section 1455 of the Internal Revenue Code and that monies need not be withheld from the sale for tax purposes.

Question 13

When setting up a tickler system and worksheet for a real estate file, the best place to start is with the contract for sale and purchase.

Question 14

It is the closing agent's responsibility to fill out a 1099-S reporting form.

Question 15

A closing agent is also known as:

A) a settlement agent
B) an escrow agent
C) both a and b

Question 16

Items that are paid in advance or arrears and are to be apportioned between the parties are referred to as ___.

Question 17

On a HUD-1 Uniform Settlement Statement, the section that summarizes the seller's transaction is:

A) Section J
B) Section K
C) Section L

Question 18

A written request to a lender for information specifying the amount to be paid to satisfy a debt is called a ___.

Question 19

On a HUD-1 Uniform Settlement Statement, the section that summarizes the borrower's transaction is:

A) Section J
B) Section K
C) Section L

Question 20

On a HUD-1 Uniform Settlement Statement, the section in which prorated items are itemized is:

A) Section C
B) Section J
C) Section L