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Q: Who closes the transaction? at closing, and all funds paid by you and the seller agreement between the parties and match the terms set Q: What are special assessments? consult an attorney regarding the impact of a possible
A: The closing will probably be handled by an for various expenses of the transaction (real estate out in the purchase contract. You may be committing A: Local governmental units can assess property delay in closing.
attorney chosen by you. In many transactions, broker commissions, loan payoffs, fees for inspections, loan fraud if you make a false representation to owners for certain improvements to their property
the attorney may also represent the lender and the property taxes, etc.). For all closings involving federally a lender on the HUD-1, the loan application, or such as sidewalks, sewer lines, street repairs, and Related reading available from the Real Estate
seller. The seller may hire his or her own attorney insured loans, the Real Estate Settlement Procedures elsewhere in order to obtain a larger loan amount or a drainage systems. Since these assessments run with Commission:
or pay your attorney to prepare the deed to give Act (RESPA) requires that this information be reported loan on more favorable terms than you are otherwise the property, you should verify with the closing • Questions & Answers on : Earnest Money Deposits Questions and Answers on:
qualified for under the lender’s guidelines. Loan fraud • Questions & Answers on: Condos and Townhouses
REAL ESTATE
to you. Make sure you know “up front” who the on a form from the federal Department of Housing and attorney before closing that there are no existing special
attorney is representing. Others involved in the Urban Development (HUD) — a HUD-1 form. is a federal crime punishable by up to 30 years in prison assessments (either pending or confirmed). • Questions & Answers on: Home Inspections
transaction may recommend or offer you financial and $1 million in fines. If you are asked to do any • Questions & Answers on: Residential Subdivisions
CLOSINGS
incentives to hire a particular closing attorney, but of the following, refuse and immediately contact the Q: If I’m a seller, when should I get my proceeds from & Planned Communities
you have the final word. Prior to closing, the seller North Carolina Real Estate Commission: the sale of my property? • Working with Real Estate Agents
should give the closing attorney a copy of the deed • create a false gift letter for down payment funds. A: The closing attorney may disburse funds
to the property. Also, if there is an outstanding • make it appear you made a deposit when, in fact, immediately after closing has been completed, the
mortgage on the property, the seller should give you did not. title has been updated, and the documents have been
the attorney any personal information needed to • give the seller a secret or even false or “forgivable” recorded. Often, time may not permit the closing
obtain a loan payoff figure so any existing loan(s) second mortgage. attorney to record the documents, update title, and
can be paid off in full at closing. As the buyer, you • make payments outside of closing which are not disburse funds, or the lender may not be able to
will need to give the closing attorney a copy of your Typically, you must pay a portion of the property disclosed on the HUD-1, such as additional fees wire the loan proceeds, all in the same day. When
contract and contact information about your lender, taxes, the cost of all inspections, and all costs associated paid to service providers, to the seller, or third this happens, a “dry closing” is sometimes held with
any inspectors, or other persons who provided with the loan, title search and closing. These costs parties. the funds being disbursed the next business day. If
services in connection with the transaction. include the appraisal fee, survey, pest inspection, • make a false statement that you will occupy the you are a seller, you should discuss the timing of
Since closing involves several complex lender fees, fees to establish an escrow balance for property. disbursements with the closing attorney in advance so
phases (examination of the title, completion and homeowner’s insurance, taxes and any required private • give false personal information about yourself to the you can be aware of any possible delays. If you are
explanation of legal documents, and resolution of mortgage insurance, attorney fees, title insurance, and lender. a buyer, be aware that the seller may not be willing to
any possible title problems), you should carefully recording fees. The seller normally pays the balance give you possession of the property until he receives
consider having an attorney assist you throughout due on any existing loans, his portion of the taxes, Q: What is “prorating”? his proceeds from the sale.
the process and during the closing. Also, read each commissions to real estate brokers, fees for deed A: Certain items (real estate taxes, some utility bills,
closing document so you fully understand each step preparation, cancellation of existing liens, and revenue occasionally special assessments, etc.) are prorated at Q: What if I can’t close by the time stated on the
of your real estate transaction. stamps payable to the state. In most transactions, closing. “Prorating” occurs when you and the seller contract? The North Carolina Real Estate Commission
If a non-attorney is handling your closing, that payment of these fees is negotiable between the parties. are each responsible for a portion of an expense. For A: The standard form Offer to Purchase and Contract P.O. Box 17100
person may render only administrative services However, if you are getting a VA or FHA loan, the example, property taxes are assessed as of January includes a 14-day extension provision to allow the Raleigh, North Carolina 27619-7100
related to the transaction — not give you legal lender may require the seller to pay particular closing 1 but not normally payable until the end of the year. parties a short time to complete settlement. After 14 919/875-3700
advice. costs, such as the pest inspection. The seller is responsible for his share of the property days, if there is no settlement or written agreement Web Site: www.ncrec.gov
taxes from January 1 through the closing date. You to extend the settlement, the delaying party will be in
Q: What is a closing statement or “HUD-1”? Q: I am being asked to put something on the HUD-1 will be responsible for the remainder of the year. 0,000 copies of this public document were printed
breach and the other party may terminate the contract.
at a cost of $.000 per copy.
A: A closing statement is a document that that is different than what I agreed to. Is that ok? Review the contract carefully to be sure you know If you are not using the standard form Offer to
summarizes all funds received by you and the seller A: Probably not. The HUD-1 should reflect the what items, if any, will be prorated at closing. Purchase and Contract in your transaction, you should REC 3.56 3/1/12
Questions and Answers on: Q: Does a “loan commitment letter” guarantee that I states that “closing shall constitute acceptance of the were told by the seller or real estate brokers and what • Radon from the seller “as is.” A special warranty deed contains
REAL ESTATE CLOSINGS have a loan to buy the property? property in its then existing condition unless provision is shown in the purchase contract. You should also be Radon is a radioactive gas that can be found in homes limited warranties from the seller. If you are given
A: No. A loan commitment letter does not guarantee is otherwise made in writing.” In other words, once aware that the title insurance company may exclude all over the United States. Any home can have a radon anything other than a full or general warranty deed,
that the lender will make the loan. It simply means closing is completed, you may be found to have from coverage problems shown on the survey which problem, regardless of its age or condition. Therefore, immediately consult with your attorney.
In the typical residential real estate transaction, that, based upon an initial review, your credit appears accepted the property in its existing condition. are not resolved before closing. you should have the property tested for radon to make
a buyer offers to purchase property from a seller. sufficient to qualify you for the necessary loan amount. sure that any detectable radon is at or below EPA’s Q: What is a “homeowner’s association”?
After negotiating the price and terms, the buyer and After issuing the letter, the lender may refuse to The most important inspections are: guidelines for an “acceptable” level. A: If you buy in a residential subdivision or
approve your loan if there are any changes in your planned community, it is likely you will be joining a
seller sign an offer to purchase and contract, and
employment, creditworthiness, or other changes which • Home Inspection Q: What is title insurance? homeowner’s association. A homeowner’s association
the buyer gives the seller (or the seller’s broker) might affect your ability to repay the loan, or based A home inspector typically examines the condition of A: The lender will probably require you (the is a group of property owners that acts like a private
an earnest money deposit to show good faith in upon further review by its underwriters. The lender the property, including the plumbing, heating, cooling, borrower) to purchase title insurance to protect its local government, providing services or benefits
the transaction. Under the standard form Offer to reserves this right until the deed is recorded transferring and electrical systems, and the structural components. interests from potential title problems. Before issuing to its members such as a clubhouse, pool or trails.
Purchase and Contract, the buyer may also give the the title and the loan proceeds are actually disbursed at In North Carolina, professional home inspectors must a title insurance policy, the title company will require Members pay for these benefits in accordance with the
seller a “due diligence fee” for the buyer’s right to closing. Note that the standard form Offer to Purchase be licensed. Read the home inspection report carefully. the closing attorney to perform a title search to association’s bylaws. Homeowner’s associations may
conduct due diligence, including any inspections, and Contract does not make the ability to obtain a Not having a home inspection may save you money discover any problems with the title to the property. also regulate the use of common areas, paint colors,
loan a condition of purchase. Therefore, you should “up front”, but it could be very costly if you find after • Appraisal Problems found during the title search (such as unpaid fences, outbuildings, etc. By exercising their voting
loan applications, and appraisals, for a negotiated
determine whether necessary financing is available prior the due diligence period or after closing that there is Virtually all lenders will require you to pay for an judgments, taxes, mortgages, etc. on the property) must rights, members have input into decision-making.
period of time (the “due diligence period”). Prior to to the end of the due diligence period. a major defect in the property. You may also need appraisal of the property to determine if its market be corrected before closing. If you are purchasing property in a subdivision or
the expiration of the due diligence period, the buyer additional inspections performed by a specialist, value meets or exceeds the purchase price. Review the For a few dollars more you can also purchase planned community, you should obtain documentation
may terminate the contract for any reason. After the such as an electrician, heating and air conditioning appraisal report prior to the end of the due diligence your own title insurance policy to cover you from title concerning any dues, assessments, covenants, rules,
expiration of the due diligence period, the buyer’s contractor, or a structural engineer. period to make sure the value of the property, its problems with the property which may not have been restrictions, and services provided. If the real estate
right to terminate is severely limited. square footage and features match what you were told discovered prior to closing. If a problem covered broker(s) or closing attorneys do not give you relevant
A real estate “closing” is the final step in the • Wood-Destroying Insect Inspection by the seller or real estate brokers and what is shown by your policy is discovered after closing, the title documentation seek out the most current copy and
Have a licensed pest control operator perform a pest in the purchase contract. insurance company will help clear up the problem or review it before the end of the due diligence period.
transaction. At closing, the buyer pays the purchase
inspection prior to the end of the due diligence period. compensate you for any losses you have sustained. Like
price to the seller (usually with the proceeds from It should reveal evidence of wood-destroying insects, if • Wells and Sewage Disposal Systems any insurance policy, there may be exceptions in your Q: What happens if the property is damaged or
a loan), and the seller gives the buyer a deed any, that could adversely affect the structure. If you are buying a property served either by a well coverage, so it is critical that you carefully read your destroyed after I sign the purchase contract but before
transferring title to the property to the buyer. Also, or a septic system (not city water or sewer), you policy and refer any questions to the closing attorney. closing?
funds are paid to an appraiser, home inspector, and/ Q: What kind of inspections do I really need to have to • Survey should have it inspected prior to the end of the due A: Typically, the purchase contract requires that the
or other service providers, and to pay off banks or find out about the condition of the property? A survey provides accurate measurements of the diligence period. A well inspection and separate water Q: What if the seller wants to give me a non-warranty, property be in substantially the same or better condition
others who may have claims against the property. A: A number of inspections are highly recommended property, its precise total area, the location of buildings test should be done to determine whether there is an or quitclaim deed? at closing as on the date you contracted to buy it
This pamphlet focuses on questions frequently asked
even if they are not required by the lender. These and other improvements to the property, and any adequate amount of water and water pressure for the A: The deed transfers the seller’s interest in the (normal wear and tear excepted). If the property is
inspections should be performed during the due encroachments, easements and possible setback property and if there are any harmful contaminants in property to you. There are many different types of damaged or destroyed by fire or other casualty prior to
about residential real estate closings. The questions diligence period so that you have sufficient time to violations. You are typically responsible for paying the water. An examination of the septic system should deeds. The best one — the general warranty deed — closing, the risk of loss is on the seller. The buyer has
raised are of special concern to real estate purchasers. determine whether to terminate the contract or continue for the survey. Examine the survey prior to the end determine if it is adequate to support the property and contains the seller’s warranty that good title is being the option to terminate the contract and recover any
Consequently, they are posed from the standpoint of to closing on the property or to negotiate further. of the due diligence period to make sure the acreage is properly performing. Repairs to these systems can conveyed to you. A quitclaim (or non-warranty) deed earnest money deposit and any due diligence fee.
the purchaser. Remember, the standard Offer to Purchase and Contract and other conditions of the property match what you be very expensive. contains no warranties at all; therefore, you accept title Continued
