Closing the Real Estate Transaction

Question 1

the point at which ownership of a property is transferred in exchange for the selling price.

Answer 1

Closing (settlement and transfer)

Question 2

a disinterested third party authorized to coordinate the closing activities.

Answer 2

escrow holder (escrow agent)

Question 3

a federal law enacted to protect consumers in the settlement process by requiring accurate and timely information about the actual costs of a transaction, eliminating kickbacks and other referral fees, prohibiting the seller from requiring the buyer to buy title insurance from a particular company, and prohibiting lenders from requiring excessive escrow account deposits.

Answer 3

Real Estate Settlement Procedures Act (RESPA)

Question 4

does not apply to a transaction financed solely by a purchase-money mortgage taken back by a seller, installment contracts (contract for deed), or a buyer’s assumption of a seller’s existing loan.

Answer 4

RESPA

Question 5

must be provided to the borrower no later than three business days after receiving a loan application

Answer 5

Loan estimate form

Question 6

given to the borrower and the seller itemizes all charges to be paid in connection with closing.

Answer 6

Closing disclosures

Question 7

must be given by the lender to the borrower if the lender intends to sell or assign the servicing rights to the borrower’s loan.

Answer 7

mortgage servicing transfer statement

Question 8

involves an accounting of the amounts paid by or received by the parties.

Answer 8

closing statement

Question 9

a charge that must be paid by the buyer or the seller at closing

Answer 9

debit (give)

Question 10

amount entered in favor of the buyer or the seller. In most instances, a debit to one party is a credit to the other party.

Answer 10

credit (receive)

Question 11

MOST closings involve the division of financial responsibility between the buyer and the seller for such items as taxes, rents, and other items.

Answer 11

Prorations

Question 12

The details of a closing are ALWAYS governed by

Answer 12

the terms of the properly executed purchase contract.

Question 13

A lender is required to give the borrower the Loan Estimate

Answer 13

within three days after loan application.

Question 14

The Real Estate Settlement Procedures Act (RESPA) applies to the activities of

Answer 14

lenders financing the purchase of residential properties.

Question 15

If a buyer and a seller were to close on August 17, which of the following items would the title company prorate?

Answer 15

rents

Question 16

A mortgage servicing transfer statement is executed by

Answer 16

a lending institution

Question 17

TRID requires that all charges normally paid by a borrower and a seller in connection with a real estate closing be

Answer 17

itemized in the Closing Disclosure.

Question 18

Under the TILA-RESPA Integrated Disclosure Rule (TRID), a lender must extend the closing how many days if the annual percentage rate (APR) has changed more than 0.125% before closing?

Answer 18

Three business days

Question 19

The Real Estate Settlement Procedures Act (RESPA) permits an affiliated business arrangement (ABA)

Answer 19

as long as a consumer is clearly informed of the relationship among the service providers.

Question 20

What information is included in the Loan Estimate form?

Answer 20

Monthly payment amount
Interest rate
Total closing costs

Question 21

A mortgage reduction certificate is executed by

Answer 21

a lending institution.

Question 22

At closing, the new loan proceeds would be

Answer 22

a credit to the buyer.

Question 23

The title insurance company may be able to sue the sellers on the basis of any false or incorrect statements provided by the seller in

Answer 23

the affidavit of title.

Question 24

The process by which expenses are divided at settlement of a real estate transaction so that both the buyer and the seller pay their respective portions of property charges is called

Answer 24

proration

Question 25

In some parts of the country, the closing process involves the parties in the transaction sitting around a table and exchanging copies of documents, a process called

Answer 25

passing papers

Question 26

To verify property boundaries and location of improvements before real estate is sold,

Answer 26

a current survey should be made to confirm that no encroachments have arisen since the last transfer of title.

Question 27

In some parts of the country, closing is called

Answer 27

settlement and transfer.

Question 28

The purpose of an affidavit of title is to

Answer 28

give the title insurance company a basis on which to sue the seller should the statements in the affidavit be incorrect.

Question 29

A buyer purchases a home in an area where closings are traditionally conducted in escrow. Which item would a buyer deposit with the escrow agent before the closing date?

Answer 29

Cash needed to complete the purchase

Question 30

Expenses to be prorated (such as lawn care services) that have been paid by the seller but not fully used up are called

Answer 30

prepaid items.

Question 31

A security deposit made by a tenant to cover the last month's rent of the lease or the cost of repairing damage caused by the tenant is generally

Answer 31

transferred by the seller to the buyer.

Question 32

Expenses to be prorated (such as water bills and unpaid property taxes) that are owed by the seller but will be paid late by the buyer are called

Answer 32

accrued items.

Question 33

In a face-to-face closing, who may be present?

Answer 33

buyer seller title insurance company rep Lending rep

Question 34

In some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called

Answer 34

Closing escrow