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Are Prepaid Items Considered Closing Costs?

Have you noticed that the NWMLS changed the Financing Addendum and took out the words "including prepaids" from the Loan Costs Provision paragraph? The question is whether or not the seller intended for the credit to be applied to the buyers prepaid items. The addendum says the credit "shall be applied to buyers loan and settlement costs".

Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items". Non-recurring closing costs are any items which are paid just once when buying property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes, homeowners insurance and interest.

I have worked with lenders who have excluded prepaids from the loan processing unless the addendum specifically specifies that the credit can be applied to pre-paid items.

Agents: You can solve the issue by adding the words "credit includes prepaids" in your addendum.

Summertime is finally here!

Who doesn't love a melody to go with it? Here is Janis Joplin signing Summertime in Stockholm from 1969. Enjoy!

Private Transfer Fees

At the American Escrow Association Conference I attended last month, Justin Ailes (Director of Government Affairs with the American Land Title Association) discussed something new in our industry: Private Transfer Fee Covenants.

These covenants require that a "tax" be paid everytime there is a sale of property within the project and runs from .5% to 1.75% of the gross sales price.

I have not yet seen this covenant in any escrows on my desk, but I hear that they are becoming popular. I found this additional information from the Association of Realtors.

Be sure to review any covenants on the property's title report for these additional fees.

Julie Booth

Do you have an escrow question that you would like to chat about?

Consider me another one of your resources - feel free to call and lets discuss it.

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