Ch. 14 Exam

Question 1

When a real estate transaction is closed in escrow, the escrow agent:

Answer 1

Acts only on the express written instructions signed by the buyer and seller.

Question 2

A proper escrow should be:

Answer 2

Not subject to the control of any one interested party to the transaction.

Question 3

If the escrow instructions differ from the purchase agreement, which of the following is correct?

Answer 3

Neither the sellers north of buyers instructions may contradict the terms of the real estate purchase and sale agreement and subsequent modifications to that agreement, unless both parties are in written agreement to do so.

Question 4

Escrow agents must:

Answer 4

Treat information as confidential, strictly comply with the escrow instructions, and remain neutral, acting as agent for both buyer and seller.

Question 5

Which of the following our duties performed by an escrow agent?

Answer 5

The disbursal of funds as authorized by the principles and the ordering of title insurance reports and policies.

And escrow agent may not draft legal documents even if authorized to do so.

Question 6

A debit on the buyers side of the settlement statement:

Answer 6

Is an item that must be paid by the buyer.

Not all debits appear on the settlement statement as a credit to the seller. Debits reflect items that must be paid by the buyer.

Question 7

On the settlement statement, the purchase price will be listed as:

Answer 7

A credit to the seller and a debit to the buyer.

Question 8

Which of the following charges will usually be a debit to the seller on the settlement statement?

Answer 8

Real estate sales commission.

The seller is generally responsible for the payment of real estate sales commission as agreed to in the listing agreement and once again in the purchase agreement.

Question 9

One of the essential requirements for a valid escrow is a binding contract. A binding contract may be:

Answer 9

An option agreement, an exchange agreement, and a lease agreement.

Question 10

In most cases, lien priority is established by:

Answer 10

The date of recording.

Question 11

Escrow terminates:

Answer 11

If the terms of the escrow instructions have not been fulfilled by the specified closing date, when the transaction closes, and if the buyer and seller mutually agree.

Question 12

If a seller has already pre-paid the property taxes, they will appear on the settlement statement as:

Answer 12

A credit to the seller and a debit to the buyer.

Question 13

When a property is sold, the form used to report the sellers name and Social Security number to the IRS is:

Answer 13

1099 – S.

All sales of real estate must be reported to the Internal Revenue Service by the escrow agent. The reporting is done on an IRS form 1099 – S, which sets forth the name and Social Security number of the seller, along with the gross proceeds of the sale.

Question 14

Escrow agents are required to determine whether the seller is a US citizen and, if not, withhold 10% of the net proceeds under the provisions of:

Answer 14

FIRPTA.

Foreign investment in real property tax act. The escrow agent must determine if the property seller is a US citizen and, if not, must withhold 10% of the net proceeds of the sale, which is then forwarded to the IRS within 10 days after the closing of the transaction if not subject to exemption from FIRPTA.

Question 15

The money and documents for a real estate transaction are held until closing by:

Answer 15

A neutral third-party known as the escrow holder or agent.

Question 16

To prorate means to:

Answer 16

Allocate the financial impact of a particular item on the parties as of a particular date.

Proration is the process of allocating a sum of money or expense proportionately according to time, interest, or benefit. Prorations are nothing more then dividing an expense between the seller and the buyer as of a specific date.

Question 17

A bill of sale is used to convey title to:

Answer 17

Personal property.

When personal property is sold a bill of sale must be given, which transfers title from the seller to the buyer.

Question 18

When a buyer assumes an existing mortgage, the mortgage balance will appear on the settlement statement as:

Answer 18

A credit to the buyer and a debit to the seller.

Question 19

The premium for a title insurance policy purchased by the seller would appear on the settlement statement as:

Answer 19

A debit to the seller.

A title insurance policy purchased by the seller will appear only as a debit to the seller.