Section 876 IAC 2-12-8 - Closing real estate (sales) transactionsAuthority: IC 25-34.1-2-5
Affected: IC 25-34.1-5
Sec. 8.
(a) The competency and instructional level for subdivisions (1) through (3) is Level 4. (The prevalent closing method used in Indiana. Remainder of section on "closing" is based on this method.) The following are concepts of the closing meeting: (1) Parties present or represented.(2) Location where meeting is conducted.(3) Parties responsible for closing.(b) The competency and instructional level for subdivisions (1) through (10) is Level 4. The following are concepts of preliminaries to closing: (1) Property survey (usually the buyer's responsibility).(2) Wood-destroying insect (termite) inspection (usually the seller's responsibility).(3) Title examination (including personal property lien search and mechanic's lien inquiry) (buyer's responsibility).(4) Abstract of title or title insurance (variations of responsibility).(5) Property inspection by buyer.(6) Clearing of title defects by seller.(7) Homeowner's or hazard insurance (buyer's responsibility).(8) Sewage disposal or percolation test (usually the seller's responsibility if such a test is required).(9) Drafting and review of documents including the following: (A) Deed (and any other required documents relating to title) (seller's responsibility).(B) Note and mortgage (deed of trust) (buyer's responsibility).(C) Bill of sale for personal property (if required) (seller's responsibility).(D) Closing statement(s) (closing attorney/broker).(10) Post-closing title search (buyer's responsibility).(c) The competency and instructional level for items required at closing is Level 4. (Cover the items that must be provided at closing by the buyer and seller, either personally or through their attorney(s).)(d) The competency and instructional level for subdivisions (1) through (2) is Level 4. The following are concepts of prorations at closing: (1) The following methods of calculating prorations: (A) Three hundred sixty (360) day year/thirty (30) day month method.(B) Three hundred sixty-five (365) day year method.(C) Actual days in the month method (combines clauses (A) through (B)).(D) Proration tables, programmed calculators, etc.(E) Choice of methods (usually determined by local custom and/or agreement of parties).(2) The following items commonly prorated at closing: (A) Real estate taxes for current year.(B) Homeowner's/hazard insurance premiums on assigned policy.(C) Rents on leased premises.(D) Interest on assumed mortgage.(e) The competency and instructional level for subdivisions (1) through (7) is Level 4. The following are concepts of the closing statement: (1) Purpose and preparation.(2) Broker's responsibility for closing statements.(3) Closing statement format (HUD-1 form and others).(4) Closing statement entries as follows (Students are expected to have a good working knowledge of how to record various closing statement entries that may be required in various situations in accordance with standard practices.): (A) Explanation of "debit/credit" system.(B) Double entry items as follows: (ii) Other nonprorated items.(C) Single entry items as follows: (i) Debits (charges) to seller.(iii) Debits (charges) to buyer.(E) Balance owed by buyer.(5) Handling funds at closing.(6) Practice preparation of closing statements. (Students should be afforded extensive practice in the preparation of closing statements for various hypothetical situations involving varied circumstances. Students should be able to prepare closing statements using the HUD-1 form and other forms which may be commonly used in the local area.)(7) Requirement for settlement agent to report certain information on residential real estate sales transactions to the Internal Revenue Service (IRS).(f) The competency and instructional level for subdivisions (1) through (2) is Level 2. The following are concepts of the Real Estate Settlement Act of 1974 (RESPA): (1) Purpose and applicability.(2) Basic provisions including the following: (A) Requires lender to provide prospective borrowers with a copy of the HUD booklet "Settlement Costs and You" and "good faith estimates" of loan closing costs within three (3) business days of the date a loan application is filed.(B) Lender must use HUD-1 form for all "federally related" mortgage loans.(C) Upon demand by borrower, lender must permit borrower to examine the closing statement at least one (1) business day prior to closing.(D) Prohibits lenders from paying "kickbacks" for referrals.(E) Regulates reserve (impound or escrow) accounts for payment of property taxes and insurance premiums.(F) Other financing considerations including the following: (i) Use of gift letters, pledged accounts, etc.Indiana Real Estate Commission; 876 IAC 2-12-8; filed Dec 1, 1989, 5:00 p.m.: 13 IR 662; readopted filed Jun 29, 2001, 9:56 a.m.: 24 IR 3824; readopted filed Jul 19, 2007, 12:57 p.m.: 20070808-IR-876070067RFA