Closing on a Real Estate Transaction

Atlanta, Georgia Real Estate Law Firm

The most fundamental real estate transaction is a “cash closing.” Real Estate agents find this to be the simplest of any closing processes. This type of transaction can be consummated by executing and reviewing a handful of documents such as a Settlement Statement, Seller’s and Purchaser’s Affidavits, and Transfer Tax Form (PT61 Form) on the closing date.

However, a transaction involving a mortgage lender can require the execution of (50) fifty or more documents needing to be reviewed and signed on the closing day. Some of these will be prepared by the closing agent/attorney’s office, and subject to our terms, but most will be prepared by the Lender. The documents furnished by the Lender will include Federal and State forms as well as a host of other things ranging from various affidavits to taxes.

Real Estate Buyer Closing Documents

The following is a list of typical documents found in a loan closing package. This list is not considered legal advice and is not conclusive, as each loan is unique and requirements may vary somewhat according to the type of loan.

HUD-1 or integrated Closing Disclosure “CD” Settlement Statement:

Developed by the U.S. Department of Housing and Urban Development and Consumer Financial Protection Bureau, this document, may it be Hud-1 or CD, itemizes the services, fees, and other closing costs associated with closing the mortgage loan or real estate transaction.

Required by the State of Georgia as a disclosure to the Borrower(s) that failure to comply with terms and conditions of the loan could result in foreclosure against the subject property.

Informs all parties the role of the Closing Attorney’s Office and who represents the Lender/Investor, Buyer or Seller in the Settlement Transaction.

Discloses the “annual percentage rate” (APR) reflecting the cost of the mortgage loan as a yearly rate. This rate will probably be higher than the rate stated on the Note because the APR includes, in addition to interest, loan discount points, fees, and other credit costs. Additional information is also provided, such as finance charges, schedule of payments, late payment charges, and whether or not there is a prepayment penalty.

The instrument the Borrower(s) sign which contains an unconditional promise to pay, on-demand or at a fixed or determined future time, a particular sum of money to the Lender, a specified person, or the bearer of the Promissory Note. This document will outline the basic terms of the loan including names of Borrower and Lender, Interest Rate, Loan Amount, and period of repayment.

(With Appropriate Riders.) The instrument through which the Borrower(s) convey the subject property to the Lender as collateral (or security) for the mortgage loan. This document will outline the terms and conditions of the mortgage loan.

Attached to the Security Deed, in certain circumstances. For example, A Planned Unit Development Rider where the subject property is located in an area with covenants providing for mandatory assessments (e.g. Homeowner Association fees) or an Adjustable Rate Rider for Adjustable Rate mortgage loans.

Acknowledges the Borrower’s understanding that failure to meet the terms and conditions of the mortgage loan could result in foreclosure upon the collateral property and that this procedure is non-judicial in Georgia.

These are included based on the requirements of the given transaction. In some instances, mostly Refinances and Second Mortgages, Surveys and Termite Inspections are not required and thereby “waived.” In cases where Surveys and Termite Inspections are required, the closing package will include a “hold harmless” agreement which serves as notice to the Borrower(s) that such services were provided by an independent contractor.

Escrow Account Statement:

If it is a requirement of Loan, this federally required disclosure to borrower on every residential mortgage for the Lender’s ability to manage an escrow account for payment of future taxes and insurance, reflects anticipated receipt of future monthly payments into escrow account, and disbursement of escrow funds over the next (12) twelve months.

Used by the Lender as verification of Borrower’s Social Security Number and for reporting interest deduction by the Lender to the IRS.

Authorizes the Lender to request a copy of the Borrower(s) income tax return directly from the IRS.

Certify that the Borrower(s) intend to occupy the subject property as a principal residence and that employment status has not changed since loan application.

The Flood Protection Act of 1973 (Public Law 93-234) requires the purchase of flood insurance in certain flood-prone areas as designated by the Department of Housing and Urban Development. Accordingly, Borrower(s) must purchase such insurance if the property is located in an area where flood insurance is required.

Borrower’s Agreement to cooperate with Lender and Settlement Agent in correcting typographical or clerical errors in any mortgage documents.

Borrower’s certification that all information provided to the Lender in association with the mortgage loan was true and correct and authorizing Lender to re-verify credit information.

Most Lenders provide a temporary coupon for the Borrower(s) to make their initial mortgage payment in case the coupon payment booklet is not received in time for such payment.

Used in case of Refinance and Second Mortgages on a principal residence, not when a property is the subject of a sale. Gives the Borrower(s) the right under Federal Law to cancel the transaction, without cost, within three business days.

HOMEOWNERS INSURANCE AND ADDITIONAL INSURANCE POLICIES:

Covers two main types of loss: damage to property and belongings and personal liability. Most standard policies also cover loss of use, meaning the insurance company will pay for the homeowner to stay elsewhere while the home is being repaired

Real Estate Seller Closing Documents

Seller’s Affidavit of Residence FIRPTA:

Verifies the Seller(s) is not subject to the State of Georgia Capital Gains Tax withholding requirements.

Used in conjunction with the above affidavit if Seller is not a resident of the State of Georgia. Verifies Seller’s exemption from the State of Georgia Capital Gains Tax withholding.

Warranty Deed or Limited Deed:

Instrument conveying title to real property from Seller(s) to Purchaser(s).

Affidavit of Seller(s) certifying that the property is conveyed “free and clear” of any liens, claims or judgments.

Real Estate Transaction Points to Note

Title Companies and Title Insurance:

Prior to a title company issuing title insurance, they will prepare an Abstract of Title. This is a summary of what was found throughout the title search such as deeds, mortgages, litigations, tax sales associated with the property. After that, the title company will issue a Title Opinion Letter, which is an instrument that speaks to the validity of the title and ability to insure at normal rates through a National Title Company.

Closing Disclosure:

This is a (5) five-page form that lays out, in detail, the most important parts of your mortgage loan, including purchase price, loan fees, interest rate, real estate taxes, closing costs, and other expenses. It’s vital that buyers review this document thoroughly.

Wire Transfers:

Georgia “Good Funds” law states that, for a closing attorney to manage the funds of a transaction, any funds over $1,000 but less than $5,000 must be sent by a certified bank check. Additionally, any funds more than $5,000 received from a buyer in a real estate closing can only be sent by wire transfer. Notwithstanding, National Title Companies and other insurers require a wire transfer for all funds received and do not differentiate between over or under $5,000.00.

Let’s Work Together!

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