Real Estate Closing Documents Explained
Are you confused by the terminology used regarding your real estate closing? This checklist will assist home buyers and sellers to understand the closing documents.
- Deed, which transfers ownership of real estate, contains the names of the buyer and seller and a legal description of the property. The most common, as well as the most advantageous, type of deed is the “warranty deed” in which the seller guarantees that he has the right to sell the property and that the property is free of encumbrances.
- Mortgage creates a lien upon real estate as security for the payment of a debt. A separate promissory note is also signed by the borrowers which is their personal guarantee to repay the loan.
- Receipts for school, county/town and city/village taxes and water, sewer and refuse charges
- Certificate of occupancy is a statement by a municipal building inspector that the building complies with all building codes and zoning regulations.
- Closing statement contains adjustments for such items as: the purchase price, down payment, assumed and seller-held mortgages, taxes, heating oil, rents, deposits and flat water charges.
- Judgment affidavit states that the buyer or seller has no judgments, warrants, bankruptcies, or incompetency proceedings against him or her.
- Amortization schedule shows the monthly mortgage interest, principal and balance.
- Assumption statement and escrow assignments are used if the mortgage is being assumed. The statement sets forth the balance of the mortgage principal and escrow account. The assignment transfers the insurance and tax escrow from the seller to the buyer.
- HUD Form 1 Disclosure Settlement Statement, required by Real Estate Settlement and Procedures Act, contains all of the actual settlement costs and amounts.
- Insurance binder must name the lender as a loss payee.
- Mortgage discharge/satisfaction, removes the lien of the seller’s mortgage.
- Search, or abstract of title, is a historical digest of every document that has been recorded concerning a particular piece of property, including deeds, easements, mortgages, rights-of-way, oil and gas leases, bankruptcies, estate proceedings, tax liens and judgments. Excerpts of each legal document are arranged chronologically with the names of the parties involved, the type of document and the date the document was signed and recorded.
- Assignment of Leases from the seller to the buyer
- Survey is a blueprint drawn by a licensed surveyor showing the measurements, boundaries and area of the property. It also shows fences, driveways, waterways and all buildings located on the property.
- Title insurance: A mortgagee policy protects the bank. A fee policy protects the owner.
- Federal and State Estate Tax Affidavit is necessary if a prior owner died.
- Mortgage commitment is a written notice from a bank informing a loan applicant that it will grant the mortgage loan under certain terms and conditions.
- Health department approval from the County Health Department is required if there is a septic system or well.
- Smoke alarm and CO2 detector affidavit stating that there is a smoke alarm and CO2 detector on the property.
- Transfer tax return/credit line mortgage certificate, which is filed with all deeds and easements, is used to compute the state and local transfer taxes.
- Early occupancy agreement is drafted if the purchaser is moving in before the closing. It usually requires the purchaser to pay rent, utilities and maintenance costs.
- IRS form W-9 and Sellers Certification are used to verify the sellers’ Social Security number and details of the sale to comply with income tax regulations.
- Sump pump certificate is required for Town of Tonawanda properties.
For further information on real estate closings, send a stamped ($.63) 4″ x 9½” self-addressed envelope to the address below with a request for pamphlet “R” or visit the wny-lawyers.com website.