Are you speaking Greek? Common terms that you should know for a residential real estate closing.
The real estate world can be a confusing place whether you are a first time home owner or you own multiple investments properties. It’s easy to get lost as your realtor, lawyer and lender are helping you thru the process of buying, selling or refinancing. Unfortunately, the professionals you work with may have forgotten what it was like being new to the industry or not realize that you may be hearing terms for the first time. Below are some common terms that may have you scratching your head when you are involved in a residential real estate closing.
Offer to Purchase (Offer to Purchase Contract): a document where the terms for purchasing a home or piece of property are spelled out.
Due Diligence: time for the buyer to examine and inspect the property if the purchaser discovers substantial problems they can cancel the sale or can ask for changes to the contract (reducing the price, paying for repairs, credits, etc.)
Due Diligence Fee: money paid by the seller (typically non-refundable) to allow a period of time where they can cancel the contract for any reason without other penalty. Typically deducted from the sales price.
Earnest Money: money paid by the seller as a show of good faith that they will complete their part of the contract. This money is typically refundable provided the buyer cancels prior to the end of the due diligence period. Deducted from the sales price.
Conveyance/Conveys: to grant rights to. These can either be purchased or given as a gift.
Title search/Title work: In NC this search is at least a 30 year search of the public record performed by an attorney. This search is looking at prior deeds, liens, and making sure that the seller owns the property and has the ability to convey it to someone else.
Closing Disclosure: a document required by TRID. This spells out all of the buyers and sellers costs in a real estate transaction. These disclosures are typically made in separate documents to protect the privacy rights of both parties. They are simple to read and should list ALL costs associated with the transaction. These should be given to the borrower 3 days prior to any purchase or refinance
TRID: short for TILA/RESPA Integrated Disclosure Rule (These are the disclosures that lenders must make so that the borrower can “Know What You Owe” prior to closing.) TILA is the Truth in Lending Act and RESPA is the Real Estate Settlement Procedures Act.
Deed: a document signed by the seller which conveys the land to the buyer
Quit Claim Deed: a deed where a person conveys any interest they have in the property to another. They make no assurances that they actually own the property. (“I’m not saying I own any part of this land but any part I do own is now yours) These are often used when one party with a prior interest no longer wants to be on the land (say after a divorce)
General Warranty Deed: a deed where a person conveys their property to another and they make assurance that they do have good title and that they will defend the new owner’s claim to the property
Deed of Trust: a document that gives a third party (who is not on the deed) an interest in the property. Typically a lender will require a borrower sign one of these prior to receiving money for their home.
Recording/Recordation/Recorded: this means a document has been submitted to the register of deeds and has now become a part of the searchable public record. This allows other people to be aware of who owns or has an interest in the property.
Power of Attorney: a document that allows for one person to act on behalf of another person
Closing: When all the documents are signed typically this date is agreed upon in the offer to purchase
Closing Table: where the buyers sign their portion of the documents related to the purchase. In the past it was common for buyer and seller to both be present and sign at the same time with a formal exchange. While occasionally formal “Closing Table” transactions do occur now it is seldom that the buyer and seller will ever meet and even less common for them to close at the same time.
Disbursement: The distribution of funds from closing
Trust Account: Account where funds not owned by the account owner are held (all earnest money and any other closing funds are held in this type of account until closing occurs and it can be disbursed)
Common Sense Warning: This blog is for informational purposes and not intended to provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.