Real Estate
What to Expect at Closing
The most fundamental real estate transaction is a “cash closing.” This type of transaction can be consummated by executing a handful of documents such as a Settlement Statement, Seller’s and Purchaser’s Affidavits, and Transfer Tax Forms. However, a transaction involving a mortgage loan can require execution of (60) sixty or more documents. Some of these will be prepared by the closing attorney’s office, 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 others ranging from various affidavits to taxes. The following is a list of typical documents found in a loan closing package. This list is not conclusive as each loan is unique and may vary somewhat according to the type of loan.
HUD-1 Settlement Statement:
Developed by the U.S. Department of Housing and Urban Development, this document itemizes the services provided, and fees and charges associated with closing the mortgage loan.
GRMA Disclosure:
Required by the State of Georgia as a disclosure to the Borrower(s) that failure to comply with the terms and conditions of the loan could result in foreclosure against the subject property.
Representation Disclosure:
Informs the Borrower(s) that the Closing Attorney’s Office represents the Lender/Investor and not the Purchaser or Seller.
Truth-In-Lender Disclosure:
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 cards. Additional information is also provided, such as finance charges, schedule of payments, late payment charges, and whether or not there is a prepayment penalty.
Promissory Note:
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.
Security Deed:
(With Appropriate Riders.) This 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.
Riders:
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.
Waiver of Borrower’s Right:
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.
Survey/Termite Waivers or Hold Harmless Forms:
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:
Federally required disclosure on every residential mortgage loan with escrow accounts for payment of future taxes and insurance, reflects anticipated receipt and disbursement of escrow funds over the next (12) twelve months.
IRS Form W-9:
Used by the Lender as verification of Borrower’s Social Security Number and for reporting interest deduction by the Lender to the IRS.
IRS Form 45-6/8821:
Authorizes the Lender to request a copy of Borrower(s) income tax return directly from the IRS.
Occupancy/Employment Affidavits:
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.
Flood Insurance:
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.
Correction/Errors and Omissions/Compliance Agreement:
Borrower’s Agreement to cooperate with Lender and Settlement Agent in correcting typographical or clerical errors in any mortgage documents.
Borrower’s Certification and Authorization:
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.
First Payment/Coupon Letter:
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.
Notice of Right of Recission:
Used in case of Refinance and Second Mortgages, not when property is subject to a sale. Gives the Borrower(s) the right under Federal Law to cancel the transaction, without cost, within three business days.
The Remainder of Documents Pertain to Seller
Seller’s Affidavit of Residence:
Verifies the Seller(s) is not subject to State of Georgia Capital Gains Tax withholding requirements.
Seller’s Certificate of Exemption:
Used in conjunction with above affidavit is Seller is not a resident of the State of Georgia. Verifies Seller’s exemption from State of Georgia Capital Gains Tax withholding.
Warranty Deed:
Instrument conveying title to real property from Seller(s) to Purchaser(s).
Owner’s Affidavit:
Affidavit of Seller(s) certifying that the property is conveyed “free and clear” of any liens, claims or judgments.
Closing Checklist
To be ready to close on your new home be prepared for the following:
- First, any individual whose name appears on the loan must sign the loan documents.
- Copies of Photo Identification and/or Social Security Card are required.
- Copy of Purchase and Sale Agreement plus Addenda.
- Any documents necessary to satisfy underwriting requirements (e.g. goft letter).
- Home Owner/Hazard Insurance Policy: Mortgagee’s copy of Declaration and Paid Receipt.
- Certified Funds (GA Law will not allow personal checks in excess of $5,000.00.
Homestead Exemption
Homestead Exemption for the State of Georgia
Homestead Exemption
A regular homestead exemption from state and county taxes is available to legal residents of Georgia occupying their homes. They are entitled to claim partial exemption from taxation on the first Two Thousand ($2,000.00) to Ten Thousand ($10,000.00) (depending on the county where you live) Dollars for tax value, which can amount to substantial annual savings for the homeowner.
Who is Entitled to Homestead Exemption
Any person having both owned and occupied the house prior to January First.
Where to File
For the first year, the homeowner must go in person to the office of the Tax Commissioner of the county in which the property is located.
When to File
A written application must be filed between January 1st and March or April 1st (depending upon the county in which you file).
Documents Needed in Filing
The Warranty Deed or a copy of the closing statement may be required. The Tax Commissioner will furnish the forms for the application.
Questions Upon Filing
The property owner making the tax return will be asked these questions:
- Present and previous ownership.
- Description of property.
- Kind of title held.
- Name of mortgage company, if any.
- Amount of loan, if any.
Closing Checklist – Seller
Congratulations on procuring an offer for the sale of your property!
We will need your help with the following items in order to close your transaction.
Loan Payoff Information
We will send you a “Request for Loan Payoff Information Form.” This form will be used to contact your present mortgage lender(s) in order to prepare them for the payoff. Please return this form as soon as possible with your loan payoff information. We need the name of your company, the telephone number, your account number and your social security number. Many companies require a 3-7 day turnaround; therefore, it is very important that we get this information to order your payoff as soon as possible.
Georgia Wood Infestation Report
In accordance with the contract, you are obligated to have a termite inspection done for your property within 30 days before the closing. Please fax my office a copy of the termite report at least one week before the closing. We will then forward a copy to the lender, as the lender must accept this report prior to giving final approval of the purchaser’s loan. If you would like for us to arrange for the payment of the termite inspection to be taken out of your proceeds at closing, please fax the inspector’s bill along with the report. Please indicate on the bill “be paid for at closing.” You are required to bring the original, clear termite letter to the closing.
Legal Description
Please refer to your warranty deed for your property’s legal description. Please fax us a copy of the deed. If you have a survey on your property, please fax it with the legal description.
Home Owner’s/Condominium Association Contact Information
If your property has a home owner’s or condominium association that has mandatory dues, please fax or call us with the name and telephone number for the association. It is necessary that we receive a letter from the association either stating that all dues are paid current or indicating to prorate all dues appropriately.
Title
If there is a divorce, bankruptcy, death or other title problems which may affect this closing, please notify us immediately. Please indicate the potential problem and have contact names and telephone numbers prepared so that we may research any issues.
Identification
Please bring your driver’s license (or photo i.d.) with you to closing, as identification. If the seller is a corporation, we will require you to bring both the corporate resolution and the corporate seal.
After Closing Questions
Most Frequently Asked Questions After Closing!
When will I receive my Warranty Deed?
After closing, the Warranty Deed is forwarded to the appropriate county that you reside in to be placed of record. Depending on the county that you live in, the turnaround time for receiving the recorded Warranty Deed varies. The turnaround time for the Atlanta metro counties varies anywhere from 2-6 months. The outer surrounding counties have shorter turnarounds. As soon as out office receives the recorded Warranty Deed back from the county, we will have your Owner’s Title Policy prepared and will forward both these items to you at the property address.
When will I receive my Owner’s Title Policy?
Your Owner’s Title Policy will be returned to the home address at the time your original recorded Warranty Deed is mailed.
If I receive a tax bill after closing, what should I do with it?
You need to call your county tax office and verify payment for that year. If paid, keep for your records. If not, forward to your mortgage company for payment if an escrow account is set up. If not paid, you need to pay it. Always check your settlement statement for credit of taxes. This credit means you had less out of pocket at closing. If taxes were to be paid at the closing, contact Post Closing for instructions. If you are still unsure as to what to do after following the steps above, please contact out Post Closing Department.
I cannot file my homestead exemption because I haven’t received my Warranty Deed?
Our office will return your recorded Warranty Deed to you in ample amount of time to file your homestead exemption. If you do not receive your Warranty Deed back from our office, please call out Post Closing Department and inquire of the status.
Where, when and how do I file for homestead?
You need to contact your county tax commissioner. Our office does not file your homestead exemption. This is the homeowner’s responsibility.
Where do I make my first mortgage payment?
You may receive temporary coupons in your folder given to you at closing. You will receive your coupon book from your mortgage company within 30-45 days. If you do not receive a coupon book, please contact your mortgage company.
Was my homeowner’s insurance premium collected at closing?
Please refer to the HUS Settlement Statement on line #903. If there was an amount collected in the Buyers or Sellers column, your insurance was collected and paid at closing. If not collected, this was your responsibility to pay directly to your insurance company.
The Basics of Title Insurance
Owner’s and Lenders’s Policies
There are two primary types of title insurance policies. The first is an owner’s policy, which provides insurance to the owner or purchaser of property. This is the policy that you want to buy. The second in a loan policy, which provides insurance to a lender with a loan on the insured property. This is the policy that you generally have to buy for your lender as a condition to a loan.
General Nature of Title Insurance
An owner’s policy is not a magic shield and does not guarantee the absence of title problems. Instead, subject to its terms (of which there are many), it indemnifies you against loss if a title problem comes to light. It is not like a liability policy that protects against risks that may arise in the future. It protects against existing, although generally unknown, title issues. The risks covered are retrospective; only discovery of the detect or loss is prospective.
Importance of Title Insurance
Because buyers or real property usually obtain a warranty of title, why is title insurance important? There are two core answers. One is that the warranty of title does not prevent title issues from arising. The second is that warranty of title is worth no more than the seller.
Variations In Terms
While the terms of owner’s policies tend to be very similar, there may be differences in coverage from one insurer to another. Sometimes it makes sense to shop for coverage.
Variations In Underwriting
Different title insurers may also evaluate known title insurance issues differently, resulting in one insurer being willing to provide coverage for an issue but another refusing to do so. Again, shopping for coverage may be productive.
Amount Of Coverage
The amount of coverage under an owner’s policy is normally the purchase price of the property. Thus, value for title insurance purposes is set at the time the insurance is purchased. Potential increases in value are not generally covered. Greater coverage may exist if improvements have been made after purchase of the property.
All payments made by the title insurer under the policy, except for attorney’s fees and legal expenses in addressing a title claim, will usually reduce the amount of remaining coverage. Payments made to a lender under a loan policy may also reduce the remaining amount of title insurance coverage.
If title insurer fails to honor its obligations under a policy to address a covered defect, the insured may be able to recover additional amounts over the policy limit for damages resulting from that breach by the title insurer.
Period Of Coverage
The owner’s policy provides coverage while the insured owns the property, and even after the insured sells the property, for as long as the insured has potential liability by reason of covenants made by the insured in a warranty deed to a buyer of the property. The policy does not protect an insured against claims for other representatives or warranties made in sales contracts.
Matters Covered By Owner’s Policy
An owner’s policy generally covers loss or damage from the following: title to property being in someone else; unlisted liens or encumbrances on the title; unmarketability of the property as a result of a title issue; and lack of right of access to and from the land. Builders and developers should discuss the availability of endorsements with closing attorneys or other title insurance agents.
Common Causes of Covered Title Problems
Title problems can arise in almost countless ways. Some of the more common sources of covered title problems are mistakes by public records; forgeries; fraud; claims by previously undisclosed relatives of a former owner; undiscovered security deeds, easements, liens or other encumbrances; mistakes in the interpretation of wills or other legal documents; and confusion from similarity of names.
Common Exclusions or Exceptions From Coverage
Owner’s policies have many exclusions and exceptions from coverage. For example, they do not cover government zoning or building restrictions; rights of eminent domain; defects of encumbrances “created, suffered, assumed or agreed to by the insured;” defects or encumbrances known to the insured, but not known to the insurer and not of record; and defects or encumbrances not resulting in loss or damage to the insured.They may also not cover encroachments, overlaps, boundary line disputes and other matters that would be disclosed by an accurate survey or inspection of the property. This “survey exception,” if otherwise included in an owner’s policy, ay be deleted upon the satisfaction of certain conditions. Ask your closing attorney what must be done to eliminate a survey exception.
Asserting A Claim
An insured must promptly alert a title insurance company of a covered claim. The insured may also be required to provide a sworn proof of loss within 90 days or so after learning of the claim. If the insured fails to comply with these requirements and the insurer is prejudiced by that failure, its liability under the policy may be reduced or even eliminated entirely.
Title Insurer’s Options When Presented With Claim
Once a claim is presented to a title insurer, it has various options. Those included paying the amount of the loss, paying the policy limits if the loss exceeds those limits, defending the insured against the claim, instituting a suit to clear the title issue or settling the matter.
Claims Against Others
Even if no coverage is provided under a title insurance policy, a buyer may have claims against other persons. For example, a claim may exist against the seller for breach of its warranty of title or against the closing attorney or title examiner for missing a title issue.