Chapter 14 Flashcards
What amount is the buyer debited for the real estate taxes?
a. $1,458.33
b. $1,467.10
c. $2,021.90
d. $2,033.00
a. $1,458.33
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a. $3,500 ÷ 12 months × 5 months = $1,458.33. The seller is credited for five months of prepaid taxes, August through December.
What amount is the seller debited for the broker’s commission?
a. $7,500
b. $16,500
c. $12,500
d. $25,000
b. $16,500
c. $12,500
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c. The seller is debited $12,500 for the broker’s commission: $250,000 × 5% = $12,500.
What amount of the escrow fee will the buyer pay?
a. $360
b. $434
c. $460
d. $468
b. $434
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b. The buyer’s escrow fee is $434: $868 ÷ 2 = $434.
What amount is the buyer debited for the water bill?
a. $100.00
b. $115.00
c. $117.50
d. $112.50
d. $112.50
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The buyer is debited $112.50: For July 31 through September 15 = 1.5 months prepaid by seller, $450 for 6 months = $75 for one month ($450 ÷ 6); 1.5 months × $75 per month = $112.50 (debit buyer).
A sale is closing on August 31. Real estate taxes have not been paid for the current year. The tax is estimated to be $1,800. What amount of proration will be credited to the buyer (use a statutory year)?
a. $1,100
b. $1,200
c. $1,485
d. $1,500
b. $1,200
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b. The buyer’s real estate tax proration is $1,200: $1,800 ÷ 12 months × 8 months = $1,200.
A seller would be responsible for providing all of these items EXCEPT
a. documents necessary to clear any clouds on the title.
b. affidavits of title.
c. the deed.
d. preparation of mortgage and note.
d. preparation of mortgage and note.
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d. Documentation for the new loan—preparation of note and mortgage—is the responsibility of the buyer. The seller is responsible for documents necessary to clear any clouds on the title, affidavits of title, and the deed.
What form must be provided to a loan applicant within three business days of application?
a. Closing Disclosure
b. Settlement Transfer
c. Loan Estimate
d. Mortgage Servicing
c. Loan Estimate
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c. TRID requires the Loan Estimate to be delivered to a loan applicant within three business days of loan application
If a fully occupied rental apartment building is sold, how will the tenants’ security deposits be reflected on the closing statement?
a. Credit seller, debit buyer
b. Debit both seller and buyer
c. Credit buyer, debit seller
d. None of these
c. Credit buyer, debit seller
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The seller must pay the security deposits to the buyer who will, as the new owner, be responsible for returning the money to each tenant at the end of the lease.
A single-family home is subject to an existing 30-year mortgage of $286,500 at a fixed rate of 4%. Under the terms of the contract for the sale of the home, the buyer will assume the seller’s mortgage at 4% interest and pay the federally insured lender’s assumption fee of $100. In addition, the seller will assist the buyer by taking back a purchase-money mortgage in the amount of $25,000 at 5% interest. Is this transaction subject to RESPA?
a. No, because this transaction involves a purchase money mortgage taken back by the seller.
b. No, because the terms of the assumed loan were not changed.
c. Yes, because the seller is taking back a purchase money mortgage at an interest rate higher than that charged for the assumed loan.
d. Yes, because the lender’s fee on the assumed loan is more than $50.
d. Yes, because the lender’s fee on the assumed loan is more than $50.
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d. The transaction would not have been subject to RESPA if the assumption fee had been $50 or less.
Since 2012, a real estate broker has had an understanding with two of the five mortgage lenders in town. The broker recommends only those two lenders to clients and does not tell clients about any other lenders. In return, the recommended lenders pay for the vacations the broker offers sales associates as rewards for high performance. Based on these facts, which of these statements is TRUE?
a. The broker is not doing anything illegal.
b. Because this arrangement has been in existence for more than five years, it is exempt from RESPA.
c. This is a permissible affiliated business arrangement under RESPA because the broker is not paid a fee for the recommendations.
d. The broker’s arrangement with the lenders is an illegal kickback under RESPA.
d. The broker’s arrangement with the lenders is an illegal kickback under RESPA.
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d. By not telling the firm’s clients about the other lenders in town, the broker is limiting their ability to get the best possible financing. That, added to the fact that the lender pays for sales associates’ vacations, makes the broker’s behavior look very suspicious.
All of these items are usually prorated at closing EXCEPT
a. prepaid general real estate taxes.
b. interest on an assumed loan.
c. appraisal fees.
d. rents collected in advance.
c. appraisal fees.
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c. Appraisal fees and credit report fees are paid outside of closing (POC) by the buyer; they are not prorated.
What are the prorated real estate taxes to be charged to the buyer?
a. $604.20
b. $611.78
c. $690.67
d. $728.30
b. $611.78
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b. The buyer’s prorated real estate taxes are $611.78: $2,900 ÷ 365 × 77 = $611.78. The seller pays taxes on the day of closing. There are 16 days left in October, 30 in November, and 31 in December, so the buyer owes the seller for 77 days.
What will be the amount of commission paid to the cooperating broker?
a. $8,750
b. $10,500
c. $17,500
d. $21,000
b. $10,500
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b. The cooperating broker’s commission is $10,500: $350,000 × 6% ÷ 2 = $10,500.
What amount will the seller receive at the closing?
a. $201,847.28
b. $205,572.33
c. $208,654.34
d. $217,749.28
a. $201,847.28
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a. Sales price $350,000 – commission $21,000 + credit for prepaid taxes $611.78 – half of the escrow fee $400 – assumed loan balance $127,042.42 – revenue stamps $126.30 – mortgage interest for first half of settlement month $195.78 = amount to seller $201,847.28.
The seller owes accrued interest on the loan for the 15 days the money was used: $127,042.42 × 3.75% ÷ 365 × 15 = $195.78.
How is earnest money treated if the buyer does not default and shows up for closing?
a. Credit seller
b. Debit buyer
c. Credit buyer
d. Debit seller
c. Credit buyer
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c. The earnest money is brought to closing and credited to the buyer.
