Real Estate Law- Chapter 11 Flashcards

Real Estate Law- Chapter 11 Flashcards You are assisting in a real estate closing transaction. The loan is $80,000 at an interest rate of 6% per annum. The loan is closing on March 14, and the lender wants the first payment on the loan to begin on May 1. The lender also requires the borrower to pay in advance all interest accruing during March. How much interest would you collect from the borrower at closing?The amount of interest to be collected from the borrower at closing is $239.94. This calculation is derived by taking the amount of the loan, $80,000, times the interest rate of 6 percent, which equals $4,800 of interest per year. You would then divide the $4,800 by a 360-day year or 365-day year. Dividing $4,800 by a 360-day year equals $13.33 interest per day. The lender would require that interest be collected on the date of closing, March 14, through the end of March, which would equal 18 days. 18 days times $13.33 equals $239.94.You are a paralegal involved in a real estate sale transaction. The sale is to close on September 10. The title examination reports that county real estate taxes have been payed by the seller for the current year in the amount of $1640. The tax year for the county begins February 1 and ends January 31. You have been asked to calculate the tax proration between purchaser and seller. What is the amount of the tax proration, and on which line of the HUD-1 would the amount appear?$996.78, and it would appear on lines 107 and 407 of the

HUD-1. The calculation is determined as follows: The tax

amount equals $1,640 divided by 365 days, which equals $4.49 per day. Based on a tax year of February 1, which ends on January 31, September 10 is the 222nd day of the tax year. $4.49 times 222 equals $996.78.You are assisting in the purchase of a home. The contract purchase price is $115,000. The settlement costs allocated to the purchaser are $3230. Taxes for the current year in the amount of $1650 have been paid by the seller. The tax year is the calendar year, and the closing takes place on September 25. The purchaser has paid an earnest money deposit of $5000 for the property and has obtained a loan to purchase the property for $90,000. You are preparing the Uniform Settlement Statement. How much money, if any, does the purchaser need to bring to closing to consummate the sale?The purchaser must bring to closing the sum of

$23,668.44. This computation is arrived at as follows:a)

contract price, $115,000b) closing costs, $3,230c) purchaser's share of the tax proration, $438.44d) gross amount due, $118,668.44Subtract from the gross amount of $118,668.44 the $5,000 previously paid earnest money and the $90,000 loan proceeds, to arrive at a balance of $23,688.44. The tax proration is calculated by taking the tax bill for the year of $1,650 and dividing it by 365 days, equaling $4.52 per day. Because the seller has paid the taxes, the purchaser owes the seller the amount of money for the taxes from September 25 through the end of the year, or 97 days. Ninety-seven days time s $4.52 equals

$438.44.

You are a paralegal working on a real estate sale transaction. The title examination reports that real estate taxes for the current year are unpaid in the amount of $1350, and the taxes are due November 15 of the year.The closing is taking place May 10. The closing also involves a loan in which the lender wants taxes escrowed.The lender's first payment under the note will be July 1.Calculate the tax proration between seller and purchaser.

Calculate the amount of taxes to be escrowed for the lender. Are the amounts the same? If not, should they be?The amount of tax proration between seller and purchaser would be $481 credit to the purchaser. This credit is calculated by taking $1,350 divided by 365 days to arrive at $3.70 each day. The $3.70 daily tax bill is then multiplied times 130 days (May 10 being the 130 day of the year) and equals $481.Taxes to be escrowed by the lender would be $787.50. This calculation is made by taking the tax bill of $1,350 and dividing it by 12, which equals $112.50 each

month. The lender will receive $112.50 for the month on July 1, August 1, September 1, October 1, and November 1, or five months before the time the bill is due. For the lender to have enough money to pay the taxes on November 15, the lender will have to collect seven months of escrow of $112.50 each at closing.The prorations between seller and purchaser and the amount to be escrowed with lender are not the same amount. The two computations are for two totally different reasons, and therefore it would be extremely rare if they were the same amount.When is a corporate resolutions required in a closing transaction, and why is it important?A corporate resolution is required in any closing transaction if either the purchaser or the seller is a corporation. A corporate resolutions is important because it authorizes the sale or purchase of real property on behalf of the corporation and empowers certain officers of the corporation to sign the purchase and sale documents.You are preparing a title affidavit for a real estate closing.Exhibit A to the affidavit is a legal description of the real property, and Exhibit B is a list of title exceptions to the real property. Where would you get the information to complete Exhibits A and B?Information to complete Exhibit A to a title affidavit would either come from the title examination or from a legal description prepared from a survey of the property. A list of title exceptions appearing as Schedule B would come from the title examination or from a title commitment.You are assisting in the closing of a sale of a home. The contract price for the home is $86,500. Seller's real estate broker commission is 6% of the sales price, and other closing costs are $600. In addition, there is an outstanding loan on the property that is to be paid at closing in the amount of $28,400. In addition, real property taxes for the current year in the amount of $2150 are unpaid. The tax year is the calendar year, and the closing is taking place on August 15. In preparing the Uniform Settlement Statement, how much net money would the seller take home from the closing?Net money due to the seller at closing would be $50,972.97. This amount is determined by subtracting from

the purchase price of $86,500 the following expenses: a)

the real estate commission, $5,190; b) closing costs $600;

• payment of prior loan, $28,400; and d) tax proration,

$1,337.03 for a total of $35,527.03. The real estate commission is determined by multiplying 6% times $86,500, to get $5,190. Closing costs of $600 and the payment of the prior loan of $28,400 were given in the example. Real estate taxes must be prorated with a credit to the purchaser. Taxes are $2,150 divided by 365 days equals $5.89 per day. August 15 is the 227th day of the year, and therefore the credit to the purchaser is $1,337.03.What is a bill of sale, and what does it do? A bill of sale transfers ownership to personal property.What is a same name affidavit, and why was it used?A same name affidavit is used any time an owner of property is referred to in the chain of title in more than one way.What is an affidavit of no material change, and why is it used?An affidavit of no material change certifies that no change has taken place in the buyer's financial condition from the date of loan application to loan closing.You are assisting in a real estate sale transaction. The title examination reports that there is an outstanding loan to Second Bank and Trust on the property. The loan is to be

satisfied at closing. You believe the closing will take place on July 10. You obtain from Second Bank and Trust a satisfaction and payoff letter indicating how much money is needed to pay off the loan as of July 10. The loan closing is delayed and does not take place until July 15. Is there any additional information you may need from Second Bank and Trust for the July 15 closing?Because the satisfaction payoff letter from Second Bank and Trust is good only through July 10, and the closing had been delayed and does not take place until July 15, it will