Real estate closings have a language of their own. If you are buying or selling a home in Oklahoma, you may hear several unfamiliar terms before the transaction is complete. This guide explains some of the most common words in plain language. The exact meaning and effect of any document will depend on your contract, loan, property and circumstances.
Purchase contract
A purchase contract, sometimes called a purchase agreement, records the terms accepted by the buyer and seller. Those terms may address the property, purchase price, earnest money, financing, inspections, repairs, title evidence, closing date and available remedies. Because it is a legal document, read the complete contract carefully before signing and ask an appropriate licensed professional or attorney about anything you do not understand.
Earnest money
Earnest money is a deposit a buyer delivers as required by the purchase contract. The contract identifies the person or company responsible for holding it. If the transaction closes, the deposit may be credited toward the purchase price or closing costs. If the transaction does not close, what happens to the money depends on the contract and the circumstances. Buyers and sellers should not assume that it is automatically refunded or forfeited.
Appraisal
An appraisal is a professional opinion of a property's value. A licensed or certified appraiser may consider the property's features, condition and comparable local sales. Comparable properties are selected for their relevance, not according to one universal mileage rule. An appraisal also does not guarantee that a property will sell for a particular price.
Title company
A title company may coordinate title research, title commitments, title insurance and settlement or closing services. Its specific responsibilities can vary by transaction and jurisdiction. Title insurance protects the insured party against certain covered title problems. An owner's policy and a lender's policy protect different interests, so buyers should review what coverage is being offered.
Abstract of title
In Oklahoma, an abstract of title is a chronological compilation of recorded documents affecting a property's title. These records may include deeds, judgments, liens, easements and other instruments in the property's chain of title. An abstract is not limited to documents recorded since Oklahoma statehood. Depending on the property, the chain may reach into territorial records.
Title examination
A title examination reviews the abstract and related records to determine ownership and identify recorded liens, encumbrances, defects or other title requirements. For an Oklahoma title-insurance policy, state law requires a licensed Oklahoma attorney to examine a duly certified abstract. The attorney's title opinion and the title company's insurance commitment serve different functions.
Survey and mortgage inspection report
A boundary survey helps determine property boundaries and may show improvements, easements and other relevant features. A mortgage inspection report is not a boundary survey. It should not be used to establish fence, building or improvement lines, and survey markers are not set during a mortgage inspection. Ask a licensed land surveyor which service is appropriate for your needs.
Settlement statements
A settlement statement itemizes charges, credits and other financial details associated with a closing. An ALTA Settlement Statement, HUD-1 and Closing Disclosure are related closing documents, but they are not interchangeable names for the same form. ALTA provides several model settlement statements. A HUD-1 continues to appear in certain transactions, including some reverse mortgages and other loans that do not use the standard Closing Disclosure.
Closing Disclosure
For most covered consumer mortgages, the Closing Disclosure is a five-page form showing the loan's final terms and closing costs. It commonly includes the loan amount, interest rate, monthly payment, closing costs and transaction summaries. The consumer must receive the initial Closing Disclosure at least three business days before the scheduled closing or loan consummation. Certain loan types, including reverse mortgages and home-equity lines of credit, use different disclosures. Review the Closing Disclosure against the most recent Loan Estimate and promptly ask the lender or settlement professional about errors or unexpected changes.
Every transaction is different. Ask your lender, title or settlement professional, real estate professional, appraiser, licensed land surveyor or attorney the questions appropriate to their role.