PURCHASE OF REAL ESTATE
CHECKLIST
PURCHASE OF REAL ESTATE
A. Pre-Contract
1. Prepare an Agreement for Purchase and Sale of Real
Estate (Form No. 601, 602, or 603). This is usually
done by the Buyer, but it may be done by either party.
2. Prepare an Affidavit and Memorandum of Agreement for
Purchase and Sale (Form No. 607), if desired, for
recording in the public records of the county where
the property is located. This document should be used
if the Buyer has some concern about the property being
transferred by the Seller prior to closing.
3. Prepare an Earnest Money Escrow Agreement (Form No.
608), if necessary.
4. The documents prepared in accordance with paragraphs 1,
2, and 3 above should be executed by the Buyer and the
Seller and the Earnest Money Escrow Agreement should
also be executed by the Escrow Agent. All documents
should be carefully reviewed by both the Buyer and the
Seller with particular attention directed to the costs
and expenses to be paid by the respective parties so
that there will be no misunderstandings at closing.
B. Post-Contract
l. The Buyer should examine any leases currently in effect
on the real property since title to property is usually
taken subject to all existing lease agreements.
2. The Seller usually orders a Title Certificate and
Commitment for Title Insurance or an Abstract and
Opinion of Title, both of which will evidence current
title information; however, the Buyer must make sure
this has been done.
3. Order an appraisal of the property, if necessary or
desired.
4. Order a survey of the property, a termite inspection
and an inspection of the building.
5. Obtain Estoppel Affidavits from all mortgage holders
(Form No. 628) and request, in writing, their
permission to assume the obligations of the Seller
under their mortgage along with conditions and
instructions for assumption.
6. Call the zoning office of the county in which the
property is located to check current zoning on the
property to be sure it is compatible with your
intended use.
7. Check with the city and the county real property tax
collector to be sure the taxes and all other
assessments have been paid and ask for the amount of
taxes due for the most recent tax year, because this
figure will be used to prorate taxes on the closing
date.
8. Call the Recording Department for the county in which
the property is located to determine their fees for
recording all documents and any other fees which must
be paid at the time of recording, such as documentary
stamps and intangible tax, in order to prepare the
closing statement.
C. Closing
l. The following documents are usually prepared or
provided by the Buyer; however, be sure that you are
familiar with the documents required to be prepared or
provided by the Seller, per the Seller's Checklist -
Sale of Real Property.
a. Prepare a Closing Statement (Form No. 611). Most
of the figures required for the closing statement
are self-explanatory. However, some discussion
is necessary with reference to the prorations for
taxes and interest on mortgages:
(l) Taxes - Real property taxes are usually due
near the end of the year to which they apply
and are prorated to the date of closing, with
a credit given to the Buyer for the number
of days the Seller has owned the property
based on the taxes on the property for the
prior year. The new owner, i.e., the Buyer,
will then be responsible for paying the
entire tax bill for the year in which he
obtained title to the property.
(2) Interest - Interest on most mortgages is paid
in arrears, i.e. a mortgage payment which is
due on November lst will cover interest due
on the mortgage from October lst through
October 3lst. Therefore, if closing is to
take place on the l5th day of October, the
interest for the month of October should be
prorated to the date of closing, with the
Buyer receiving a credit for the number of
days the Seller owned the property during
the month of October. The Buyer will then
be responsible for paying the entire
principal and interest payment due on
November lst.
b. Prepare a Mortgage and Security Agreement (Forms
No. 622, 623, 624) and a Promissory Note (Form No.
621) covering any new financing for the Buyer.
c. Prepare an Assignment of Rents and Leases (Form
No. 626), if required by any new mortgage holder.
2. The Buyer must have cash or a certified or cashier's
check for the amount needed for closing, as indicated
by the closing statement, and must bring an insurance
policy covering the property listing any mortgage
holders as "loss-payees".
3. All closing documents should be properly executed and
all monies should be paid out in accordance with the
closing statement.
D. Post-Closing
1. Record the Warranty Deed, all Satisfactions of
Mortgage, Termination Statements under the Uniform
Commercial Code, new Mortgages, and Assignments of
Rents and Leases, if applicable. The Buyer is
generally only responsible for recording the Warranty
Deed and any Assignments of Rents and Leases required
by any new Mortgage holder, together with the payment
of recording fees, documentary stamps and intangible
tax as required under the Agreement for Sale and
Purchase; however, the Buyer should confirm that the
Seller has recorded all Satisfactions of Mortgage and
Termination Statements under the Uniform Commercial
Code.
2. Once all documents are recorded, request that the
Owner's Policy of Title Insurance be issued or the
Abstract and Certified Opinion of Title be brought
current to the date of recording.
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