Chapter 21 Flashcards
What is one of the key purposes of the Real Estate Settlement Procedures Act (RESPA)?
To protect consumers from unethical practices during the closing process
beneficiary
statement
statement provided by the
beneficiary of a trust deed or
mortgage loan, typically
requested by the borrower,
that outlines the current loan
balance, interest rate, and
payment history.
buyer’s
walk-through
A final inspection conducted
by the buyer before the
closing to ensure that the
property is in the agreed-
upon condition and any
requested repairs have been
completed
closing
The final step in a real estate
transaction where the
property is transferred from
the seller to the buyer, and all
financial transactions are
completed.
closing
costs
The fees and expenses paid
by both the buyer and seller
during the closing of a real
estate transaction, including
loan origination fees, title
insurance, and property
taxes.
credit
An amount credited to the
seller at closing, typically for
prepaid expenses or items
the buyer agreed to pay on
behalf of the seller, such as
property taxes or homeowner
association dues.
debit
An amount owed or deducted
from the seller’s proceeds at
closing, such as unpaid
property taxes or utility bills.
in
advance
When something is paid or
calculated before it is due or
before it has occurred.
in
arrears
When something is paid or
calculated after it is due or
after it has occurred
payoff
statement
A statement provided by a
lender detailing the amount
needed to fully pay off the
remaining balance on a loan,
including any accrued
interest and fees.
proration
Proration is the division or
allocation of expenses, such
as property taxes or
homeowners association
fees, between the buyer and
seller based on their
respective ownership periods
during a real estate
transaction
real
estate
broker
A licensed professional who
acts as an intermediary
between buyers and sellers
of real estate, assisting
clients with the purchase,
sale, or rental of properties in
exchange for a commission.
transfer
tax
A tax imposed by state or
local governments on the
transfer of real property from
one owner to another,
typically calculated as a
percentage of the property’s
sale price
A prorated expense on the settlement statement is
a debit to one party and a credit to the other
A sale contract stipulates that a buyer is to pay the seller’s title insurance expenses. This practice is not customary in the area. In this case,
the buyer must pay the expense
Which of the following items is paid in advance?
A special assessment for a sidewalk
A commission to a real estate broker
An insurance premium payment
Interest on a home equity loan
An insurance premium payment
A sale transaction closes on April 1, the ninety-first day of the tax year. The day of closing belongs to the seller. Real estate taxes for the year, not yet billed, are expected to be $3,150. According to the 365-day method, what is the seller’s share of the tax bill?
$785.34
In the context of a closing, proration refers to
apportioning an amount paid, received, or due according to the period of time that a party is responsible for the item
If a sale transaction is to occur in escrow,
an escrow agent holds funds and documents until all parties have satisfied the conditions necessary for closing
During the period between the signing of the sale contract and the closing date,
buyer and seller are expected to remove any contingencies that are stated in the contract
A buyer and a seller have employed an escrow agent to handle a closing. Which of the following statements is true?
Buyer and seller do not need to attend the closing
The Real Estate Settlement Procedures Act prescribes closing procedures that must be followed whenever
the loan is to be sold to the FNMA
A buyer and a seller have employed an escrow agent to handle a closing. Which of the following statements is true?
Buyer and seller do not need to attend the closing
The seller receives the earnest money deposit from the escrow agent as soon as the buyer delivers it
The buyer receives legal title as soon as the seller accepts the down payment
The escrow agent certifies the buyer’s earnest money check and provides the buyer with an opinion of abstract
Buyer and seller do not need to attend the closing
During the period between the signing of the sale contract and the closing date,
buyer and seller are expected to remove any contingencies that are stated in the contract
Which of the following items are paid in advance?
Taxes and insurance
Rents and interest
Insurance and interest
Rents and insurance
Rents and insurance
Documentary stamps are used to
document the payment of a transfer tax
Which of the following items are paid in arrears?
Taxes and insurance
Rents and interest
Taxes and interest
Rents and insurance
Taxes and interest
To avoid violating the Real Estate Settlement Procedures Act, parties who are providing services to the buyer or seller in a transaction must
disclose in writing any business relationships they have with other parties involved in the transaction
Assume a seller at closing must pay transfer taxes at the rate of $1.00 for every $500 of purchase price, or fraction thereof. If the sale price is $345,600, how much tax must the seller pay?
$692
A buyer will receive a water bill for an estimated $100 at the end of the month. At closing, the seller has used an estimated $43 in water. What should appear on the closing statement?
A debit to the seller and credit to the buyer for $43
The purpose of the closing event is to
exchange legal title for the sale price
