Unit 14 Quiz Questions Flashcards
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Look t the sheet.
Which statement is TRUE of real estate closings in most states?
A. Closings are generally conducted by real estate professionals.
B. The buyer usually receives the rent for the day of closing.
C. The buyer must reimburse the seller for any title evidence provided by the seller.
D. The seller usually pays the expenses for the day of closing.
The seller usually pays the expenses for the day of closing.
The answer is the seller usually pays the expenses for the day of closing. Presumably, the sellers woke up in the house on the day of settlement; that day is theirs to enjoy and to pay for. Closings are rarely, if ever, conducted by real estate sales associates. Either the buyer or the seller—whichever orders title evidence—pays for the closing. In the sale of an income property, the seller typically receives the rents for the day of closing
All encumbrances and liens shown on the report of title, other than those waived or agreed to by the purchaser and listed in the contract, must be removed so that the title can be delivered free and clear. The removal of such encumbrances is typically the duty of
A. the buyer.
B. the seller.
C. the real estate professional.
D. the title company.
The Seller
The answer is the seller. Removal of encumbrance is the (financial) responsibility of the seller
Legal title ALWAYS passes from the seller to the buyer
A. on the date of execution of the deed.
B. when the closing statement has been signed.
C. when the deed is placed in escrow.
D. when the deed is delivered and accepted
When the deed is delivered and accepted.
The answer is when the deed is delivered and accepted. Although the buyer received equitable title upon contract, legal title does not pass until delivery and acceptance of the deed. If the buyer, or someone acting on the buyer’s behalf, records the deed, acceptance is presumed.
Which item would a lender generally require at the closing?
A. Title insurance commitment
B. Market value appraisal
C. Application
D.Credit report
Title insurance commitment
The answer is title insurance commitment. Credit report, application for the mortgage loan, and appraisal of the subject property are all required by a lender well before closing. The title insurance binder is due at closing.
A buyer purchases a home in an area where closings are traditionally conducted in escrow. Which item would a buyer deposit with the escrow agent before the closing date?
A. Deed to the property
B. Title evidence
C. Estoppel certificate
D.Cash needed to complete the purchase
Cash needed to complete the purchase.
The answer is cash needed to complete the purchase. The buyer is normally responsible for depositing the cash needed to complete the transaction.
The Closing Disclosure must be used to illustrate all settlement charges for
A. every real estate transaction.
B. transactions financed by VA and FHA loans only.
C. residential transactions financed by federally related mortgage loans.
D. all transactions involving commercial property.
Residential transactions financed by federally related mortgage loans.
The answer is residential transactions financed by federally related mortgage loans. Except for owner financing, very few loans for the purchase of residential properties are not—or will not sometime be— federally related, either directly or indirectly. For example, if they are not insured or guaranteed by FHA or VA, they may still be later traded on the secondary mortgage market by Fannie Mae, Freddie Mac, or other government-sponsored enterprises.
A mortgage reduction certificate is executed by
A. an abstract company.
B. an attorney.
C. a lending institution.
D. a grantor.
a lending institution
The answer is a lending institution. A mortgage reduction certificate, issued by the seller’s lender, confirms the balance remaining on a loan to be assumed as well as the interest rate and the date through which interest has been paid.
At closing, the principal amount of a purchaser’s new mortgage loan is
A. a credit to the seller.
B. a credit to the buyer.
C. a debit to the seller.
D. a debit to the buyer.
A credit to the buyer.
The answer is a credit to the buyer. The purchasers see to it that money is available in the form of a mortgage loan for the purchase of the property. They are given credit for getting this money to the table
At closing, the earnest money left on deposit with a real estate broker is
A. a credit to the seller.
B. a credit to the buyer.
C. a balancing factor.
D. a debit to the buyer.
A credit to the buyer.
The answer is a credit to the buyer. The purchaser’s earnest (deposit) money is usually shown in a contract of sale as credited toward closing expenses and, if there is enough, toward any down payment.
The annual real estate taxes on a property amount to $18,000. The seller has paid the taxes in advance for the calendar year. If the closing is set for June 15, which statement is TRUE?
A. Credit the seller $8,250; debit the buyer $9,750.
B. Credit the seller $18,000; debit the buyer $8,250.
C. Credit the buyer $9,750; debit the seller $9,750.
D. Credit the seller $9,750; debit the buyer $9,750.
Credit the seller $9750; debit the buyer $9750
The answer is credit the seller $9,750; debit the buyer $9,750. The sellers should get credit for the unused portion of their prepaid real estate taxes. When taxes are paid on a calendar-year basis, the sellers get credit for that portion of the year between closing and December 31. A property with an annual real estate tax of $18,000 is taxed $1,500 per month ($18,000 ÷ 12 months = $1,500). Between June 15 and December 31 there are 6½ months. So 6½ times the monthly taxes of $1,500 yields a proration of $9,750 to be credited to the seller and the same amount debited (charged) to the buyer at closing.
If a seller collected rent of $900 from the buyer, payable in advance, on August 1, which statement is TRUE at the closing on August 15, if the closing date is an expense to the seller? (Use a 30-day month)
A. The seller owes the buyer $900.
B. The buyer owes the seller $900.
C. The seller owes the buyer $450.
D. The buyer owes the seller $450.
The seller owes the buyer $450.
The answer is the seller owes the buyer $450. The sellers have housed the tenant for half a month and so have earned one-half of the $900 month’s rent they received. But they owe the rent for the second half of the month, $450, to the purchaser.
Security deposits should be listed on a closing statement as a credit to
A. the buyer.
B. the seller.
C. the lender.
D. the real estate professional.
The buyer.
The answer is the buyer. When investors buy an income property, rental security deposits held by the former owner are transferred to them. Buyers are credited for all existing security deposits at closing
A building was purchased for $850,000, with 10% down and a loan for the balance. If the lender charged the buyer two discount points, how much cash did the buyer need at closing if the buyer incurred no other costs?
A. $17,000
B. $85,000
C. $100,300
D. $102,000
$100,300
The answer is $100,300. A purchase for $850,000 with 10% down requires a mortgage loan of $765,000 ($850,000 – $85,000 = $765,000). A point is 1% of the loan amount, or $7,650 (1% × $765,000 = $7,650). The buyer must bring 2 points (2 × $7,650 = $15,300) plus the down payment ($85,000) to the closing ($15,300 + $ 85,000 = $100,300).
Which charge noted on the Closing Disclosure must be the same or less than the charge noted on the Loan Estimate form?
A. Cost of settlement services when the lender selects the provider
B. Lender charges for taking and underwriting the loan
C. Cost of settlement services when the borrower selects the provider from the list provided by the lender
D. Cost of homeowners insurance
Lender charges for taking and underwriting the loan.
The answer is lender charges for taking and underwriting the loan. Lender charges for taking and underwriting the loan stated on the Closing Disclosure must be the same or less than the charge noted on the Loan Estimate form.
