1 Chapter 16
CHAPTER 16: Title Closing and Escrow
I. Discuss the purpose of a Buyer’s Walk-Through
II. Define Title Closing Role Playing may be helpful here. It can be
fun and a
III. Discuss the Closing or Settlement Meeting nice break from this otherwise serious topic.
Everyone A. Seller’s Responsibilities at Closing
usually has an experience to share.
B. Buyer’s Responsibilities at Closing
C. Agent’s Duties
D. The Transaction Emphasize the benefits of the dry closing,
although it’s
E. Dry Closing seldom done. It may be very helpful for new
agents.
IV. Define Escrow, and discuss the procedures
A. Escrow Agent’s Duties
B. Reporting Requirements
C. The Closing
D. Deed Delivery
V. Delays and Failure to Close Emphasize how normal delays are and
licensees needn’t
VI. Loan Escrows panic.
VII. Prorating at the Closing
A. Hazard Insurance Utilize the prorations tree in the book to
graphically
B. Loan Interest show “who owes whom.”
C. 30-Day Month
D. Rents
E. Property Taxes
F. Homeowners’ Association
G. Proration Date
H. Proration Summary
VIII. Sample Closing
IX. Explain the Settlement Statement
A. Seller’s Side Emphasize the HUD-1 form
requirements.
B. Settlement
Charges
Numerous details must be handled between the time a buyer and seller sign a sales
contract and the day title is conveyed to the buyer. Title must be searched (Chapter
6), a decision made as to how to take title (Chapter 4), a deed prepared (Chapter 5),
loan arrangements made (Chapters 9 through 14), property tax records checked
(Chapter 15), and so forth. In this chapter we will look at the final steps in the
process, in particular, the buyer’s walk-through, the closing meeting or escrow,
prorations, and the settlement statement.
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263 278
Page Ref.
Hard Soft
back back Topic
255 271
255 271
Opening Remarks
Buyers’ Walk-Through
256 272 Title Closing
256 272
257 273
257 273
258 274 Escrow
258 275
262 278
Teaching Tips
Start this chapter with a general overview of everything thus far
discussed in the course and summarize how the closing is the
culmination of a lot of work by many parties.
Stress: Re-emphasize the importance of using serial and model
numbers on sales contracts.
Local Distinction: Be certain to clearly indicate which closing
method is utilized in your state, and any unique customs relating
thereto.
Closing or Settlement
Meeting
Agent’s Duties
The Transaction
Escrow Agent’s Duties
Prorating at the
Closing
Hazard Insurance
Class Activity: If possible, have your students (in groups of 2-5)
attend a closing. This may be arranged if the instructor has a close
working relationship with a real estate attorney or if he/she is
himself/herself a broker/agent. As an alternative, invite an attorney
to your class to perform a mock closing.
Stress: An agent has a duty to assist the seller and/or the buyer
with their respective responsibilities.
Local Distinction: In the absence of an actual or mock closing,
slowly and carefully “walk through” this closing procedure if
closing meetings are the custom in your area.
Local Distinction: If possible, have your students (in groups of
2-5) attend an escrow closing. As an alternative, invite a local
escrow agent to your class to perform a mock closing.
Local Distinction: In the absence of an actual or mock closing,
slowly and carefully “walk through” this closing procedure if
escrow closings are the custom in your area.
Local Distinction: Emphasize the method most commonly used
in your state when prorating the following expenses i.e., 30-day
month or actual day method (365 days in the year).
Class Activity: Have your class perform several insurance
prorations, using different amounts and with varying policy terms.
Emphasize that insurance premiums are paid from policy period to
policy period, e.g., March 17,1995 to March 16,1996 (as
opposed to a calendar year), and are generally paid annually.
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Page Ref.
Hard Soft
back back Topic
262 278
263 279 Rents
263 279
264 281
269 286
Loan Interest
Property Taxes
Sample Closing
270 286 Restrictions
270 287 Benefits
274 290 Wrap-Up
Teaching Tips
Class Activity: Have your class perform several interest
prorations, using different amounts and with different time
periods. Emphasize that interest is generally paid monthly and
that the principal is not prorated, only the interest.
Class Activity: Have your class perform several rent prorations,
using different amounts and with different time periods. Emphasize
that rents are generally paid monthly and in advance.
Class Activity: Have your class perform several tax prorations,
using different amounts. Emphasize the tax period (year) used in
your state and the frequency of tax payment.
Local Distinction: In addition to this sample closing problem,
have your class perform others for a thorough understanding of
this topic.
Stress: The Act was passed to regulate and standardize settlement
proceedings. Its purpose is to assist consumers by mandating that
certain advance information be provided so that consumers can
compare closing costs of various lenders and to avoid the
uninformed use of credit.
Stress: Define “kickbacks,” and emphasize that kickbacks are
illegal.
Reserve Accounts: Limited to 2 months (1/6) over estimated
amount due in 12 months.
Example: Taxes are due at the end of the calendar year. Closing is
in July. Lender can collect seven months (January July) plus 2
months, or 9/ 12 (3/4) of the annual tax.
Local Distinction: Make the HUD information booklet
“Settlement Costs and You” available for students to inspect. It
can be obtained from a local lender.
1. Hazard insurance generally paid annually and in advance?
(True)
2. Loan interest generally paid monthly and in arrears? (True)
3. Rents generally paid monthly and in advance? (True)
4. When are property taxes generally paid? (answer as per your
state) Generally in arrears? (answer as per your state)
5. Purpose of RESPA is to regulate and standardize settlement
practices? (True)
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