LGS 200 (Lisenby)
CHAPTER 22 – REAL PROPERTY
I. Ownership of real property
A. Fee Simple – exclusive ownership and possession
B. Life Estate – right to use property during the person of a person’s life
C. Future Interests – may possess the property in the future. Example: remainder interest after a life estate
II. Transfer of ownership
A. Deeds
1. Warranty deed – grantor warrants title – the best deed you can get
2. Quitclaim deed – grantor deeds whatever interest, if any, he has in the property to the grantee
III. Eminent Domain – governments have an inherent power to take property for public use or purpose without the consent of the owner – must pay fair market value to the owner.
IV. The Real Estate Closing
Real Estate Closing Documents Explained
adapted from the following website:
- 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.
- Promissory Note, which creates the borrowers’ obligation to repay the loan used to purchase the property.
- 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.
- Closing statement contains adjustments for such items as: the purchase price, down payment, assumed and seller-held mortgages, taxes, closing costs, real estate commissions, etc. See HUD-1 below.
- 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.
- 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. The lender will require mortgagee title insurance which only insures the lender’s interest. A policy of owner’s title insurance will insure the buyers’ interest in the property in the case of any title defects which cause the buyers a loss.
- 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.
- 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.
- 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. .
- 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.
- Escrows for taxes, insurance and maybe private mortgage insurance, may be required by the lender. If so, in addition to your monthly payment of principle and interest, the borrowers must pay 1/12 of the annual costs for the taxes, insurance, etc.