(Ch. 17) Real Estate Closing (Settlement) Procedures

Question 1

1. Which of the following would appear as a credit on the buyer’s statement?

(A) The first mortgage proceeds
(B) Prepaid taxes.
(C) Cost of deed preparation.
(D) Title insurance.

Answer 1

A

The other items are all debits

Question 2

2. Cash due from buyer at closing is:

(A) debit to seller.
(B) credit to buyer.
(C) credit to seller.
(D) debit to buyer.

Answer 2

B

Buyer gets credit for cash at closing.

Question 3

3. Balance due seller at closing is:

(A) credit to seller and debit to buyer.
(B) debit to seller.
(C) credit to seller.
(D) debit to buyer.

Answer 3

B

This is the sellers net proceeds.

Question 4

4. Which of the following would appear as a debit on seller’s statement?

(A) Rental income arrears.
(B) Purchase price.
(C) Mortgage payoff.
(D) Insurance assumed

Answer 4

C

It reduces seller’s cash at closing

Question 5

5. The realty transfer fee is:

(A) debit to seller.
(B) debit to buyer.
(C) credit to seller.
(D) credit to buyer.

Answer 5

A

It reduces seller’s cash but does not affect buyer’s cash.

Question 6

6. The following would appear as a debit to seller and credit to buyer:

(A) Prepaid realty taxes.
(B) Mortgage payoff.
(C) Interest on mortgage payoff.
(D) Unpaid realty taxes.

Answer 6

D

Because it will reduce the seller’s cash and increase the buyer’s cash.

Question 7

7. The following would appear as a debit to seller and credit to buyer:

(A) Points.
(B) Purchase money mortgage proceeds.
(C) Loan origination fee
(D) Interest advance.

Answer 7

B

It reduces seller’s cash and increases buyer’s cash

Question 8

8. The following would be a debit to buyer and a credit to seller:

(A) Purchase price.
(B) Unpaid realty taxes.
(C) Interest arrears.
(D) Purchase money mortgage.

Answer 8

A

It reduces buyer’s cash and increases seller’s cash.

Question 9

9. The tenant security deposit would appear as:

(A) only a debit to seller.
(B) only a credit to buyer.
(C) debit to seller and credit to buyer.
(D) debit to buyer and credit to seller.

Answer 9

C

Security deposits would decrease seller’s cash and increase buyer’s cash at closing.

Question 10

10. Which of the following statements is TRUE?

(A) The realty transfer fee is paid by the purchaser.
(B) If the buyer demands title insurance it is an additional cost for the seller.
(C) The proceeds of the first mortgage will appear as a debit to the buyer
(D) A purchase money mortgage will be shown as a debit to the seller and credit to the buyer.

Answer 10

D

A purchase money mortgage reduces the seller’s cash and increases the buyer’s cash.

Question 11

11. Which of the following statements is (are) TRUE?

(A) A mortgage given to a bank would appear on the closing statement as a credit to the buyer.
(B) A purchase money mortgage given to the seller would appear on the closing statement as a credit to the buyer and a debit to the seller.
(C) Both A and B.
(D) Neither A nor B.

Answer 11

C

Both statements are true.