The Real Estate Closing Process and RESPA - Research Paper Example

When a property is transferred from the seller to the buyer as per the sales contract, the buyer becomes the rightful owner of the property and the seller gets the money. Closing deal of a property carries some costs other than the cost of the property. These costs incur from the sales contract, as per the customs and local, state, and federal laws (Real Estate Closing, 2011). Pre-closing Procedure Pre-closing Procedures are followed exactly before the closing to ensure that all documents are in order for the buyer to have a look.

As per sales contracts, general practice of checking the premises for any violation of the sales contract is carried out by the buyer along with the broker. An updated survey of the property is conducted to satisfy the lender or the title company and payment for the survey is decided in the sales contract, identifying the entity. Pre-closing procedure provides assurance to the seller also that the buyer has the ready funds to finalize the transaction (Real Estate Closing, 2011). Any mortgage or other liens on the property needs to be cleared by the seller by providing a pay-off statement as of the date of closing.

Such a statement normally shows not only the remaining principal and interest but also any pre-payment penalties and certificate-issuance fee. The seller gets acknowledged for any funds in escrow to pay for taxes and insurance (Real Estate Closing, 2011). . The buyer may also deposit funds in an escrow account to pay for insurance and taxes for the property, to secure its collateral, as and if asked by the lender (Real Estate Closing, 2011). Title Procedures Title procedures are followed by the buyer and the lender to ensure that the title is free from any debts.

The seller provides either a latest abstract of title, detailing any charge or an assurance from a title insurance company, the payment for which is made by the seller. The buyer’s advocate checks all charges to give an opinion of the title, as shown in the title record but this opinion is not a promise of good title. A second search on the title is recommended to the buyer in case the first search has been conducted months before the closing to ensure that no new charges have been leveled.

Normally, the seller signs an oath, the affidavit that the title is clean from any encumbrances so that if anything wrong done is found, the buyer or the title insurance company could file a case against the seller in the court of law (Real Estate Closing, 2011). Closing Procedures Closing is the final settlement and transfer of the property. Closing procedures happen either face-to-face or through the third-party, a escrow agent who is not a stakeholder in the transaction of the property. Mostly, property closing details are registered with the Internal Revenue Service (IRS) by using Form 1099-S, detailing the seller’s social security number, the sales price, and any compensations to the seller in case of prepaid property taxes.

Generally, the IRS or sometimes the lender is reported to by the closing agent on the closing (Real Estate Closing, 2011).