Ch 11.4

Question 1

A sale is closing May 1. The seller has already paid for property taxes through the end of the tax year, which is June 30. The annual property tax bill was $803. The buyer is responsible for the day of closing. The seller will be returned $133.83.

Answer 1

False
First, calculate the per diem rate ($803 / 365 = $2.20 per day). Then, calculate the number of days that will be refunded to the seller (31 days in May + 30 days in June = 61 days). Multiply the two figures to determine the seller’s refund ($2.20 X 61 = $134.20).

Question 2

T/F: Interest on a real estate loan is almost always paid in advance.

Answer 2

False

Mortgage interest is typically paid in arrears.

Question 3

• T/F: The fees for the appraisal and credit report will typically be paid by the buyer.

Answer 3

TRUE
The buyer’s lender will typically require an appraisal and a credit report. Therefore, the buyer usually pays these costs.

Question 4

T/F: The lender’s title insurance policy is typically a closing cost for the buyer.

Answer 4

True

The lender will require the buyer to purchase an extended title insurance policy to protect the lender’s interest.

Question 5

T/F: The buyer is responsible for paying the documentary transfer tax on the purchase of the property.

Answer 5

False

The seller will pay the documentary transfer tax, also sometimes known as an excise tax. The current tax rate is 55 cents per $500 of selling price, or fraction thereof.