Closings 3

Question 1

1. How would an outstanding special assessment of $3000 due by seller at closing be handled at a September 12 closing (assumption).
A. Debit seller, credit buyer
B. Debit seller, credit broker
C. Debit seller, single entry
D. Credit broker, single entry

Answer 1

B. Debit seller, credit broker

Question 2

2. At a new loan closing on October 21, the seller has pre-paid the homeowners association fees of $330 for October. The entries on the settlement statement will be:
A. Debit buyer, credit seller $117.10
B. Debit seller, credit buyer $117.10
C. Debit seller, credit broker $223.54
D. Debit buyer, credit broker $223.54

Answer 2

A. Debit buyer, credit seller $117.10

Question 3

3. How would the PMI premium be handled on a new loan closing scheduled to close on August 20 if the lender and tends to disperse the payment?
A. Debit seller, credit broker.
B. Debit buyer, credit broker.
C. Credit broker, single entry
D. Debit buyer, single entry

Answer 3

B. Debit buyer, credit broker.
D. Debit buyer, single entry
these two answers are correct on this question.

Question 4

4. Real estate closing fees are:
   A. Always shared equally by buyer and seller.
   B. Always paid by broker in terms of the Conway Bogue decision
   C. Handled by negotiation between the parties.
   D. Illegal.

Answer 4

C. Handled by negotiation between the parties.

Question 5

5. The closing involves a metered water account which has been averaging $92 a month. How does the broker normally handle this at closing scheduled for June 15?
   A. Collect the full amount from the buyer
   B. Collect the full amount from the seller.
   C. Collect the full amount from the seller in escrow and pay the amount due as metered, returning any difference to the seller.
   D. Collect the full amount from the buyer in escrow and pay the amount due as metered, returning any difference to the buyer.

Answer 5

C. Collect the full amount from the seller in escrow and pay the amount due as metered, returning any difference to the seller.

Question 6

6. In a new loan closing where the seller is caring back a $10,000 loan, how would you normally handled the $21 fee for recording the second deed of trust?
   A. Debit seller, credit buyer $21.
   B. Debit seller, credit buyer $10.50, credit broker $21.
   C. Debit buyer, credit broker $21.
   D. Debit buyer, credit seller $21.

Answer 6

C. Debit buyer, credit broker $21.

Question 7

7. Calculate the nonresident seller withholding tax in the following Colorado closing: purchase price 95,000. Closing date December 12. New loan amount 12,000. New proceeds 18,000. 
A. $950
B. $1900
C. $18,000
D. Zero dollars

Answer 7

D. Zero dollars
Rationale: date actual purchase price of a nonresident seller withholding tax should be 2% which should be $1900. However, sense the amount was under $100,000 it will be declared zero taxes.

Question 8

8. Calculate the entry on a new loan owner carry a $10,000 if the closing is on December 1. Interest is 9.25% and late annually and the first payment is due on January 1. Payments are in arrears.
A. $2.53
B. $78.55
C. Zero dollars
D. $925

Answer 8

C. Zero dollars

Rationale 0×77.0 8÷31 = 0

Question 9

9. Upon contracts actual agreement to equally share expenses, real estate closing fees of $150 not related to preparation of legal documents would, in an assumption, up here in the worksheet as follows:
   A. Debit seller, credit buyer $150
   B. Debit buyer, credit broker $150
   C. Debit buyer $75, debit seller $75, credit broker $150.
   D. Debit buyer, credit seller $150.

Answer 9

C. Debit buyer $75, debit seller $75, credit broker $150.

Question 10

10. Calculate the commission on the sale of $164,500 at 6.5% and indicate the correct entries on the worksheet.
    A. Debit buyer, credit seller $10,692.50
    B. Debit seller, credit broker $11,438
    C. Debit seller, credit broker $10,692.50
    D. Debit seller, credit buyer $10,692.50

Answer 10

C. Debit seller, credit broker $10,692.50

Question 11

11. In an assumption, the charge for a credit report and improvement location certificate are normally:
    A. Shown separately on the worksheet as debits to seller and credits to buyer.
    B. Added together and shown as a debit to buyer and credit to broker.
    C. Split between Byron seller and one half debit to each.
    D. Credit report debit buyer, improvement location certificate debit seller, credit broker for total.

Answer 11

B. Added together and shown as a debit to buyer and credit to broker.

Question 12

12. Calculate the nonresident seller withholding tax in the following Colorado closing purchase price $540,000. Closing date April 30. New loan amount 120,00o. net proceeds $8703.
A. Zero dollars
B. $10,800.
C. $10,700
D. $8703

Answer 12

D. $8703
Rationale: 2% of $540,000 is be 10,880. But for a nonresident withholding tax it is: The lesser of 2% of the purchase price or the net procedure whichever is less.

Question 13

13. If a buyer is buying an apartment for $50,000 has obtained a loan for 80percent. How  much would be shown on the worksheet as a debit to the buyer if the lender requires three points upfront.?
A. $1200
B. $1500
C. $2400
D. Three dollars

Answer 13

A. $1200

Rationale: each point is $400 times three equals $1200. 80% of 50,000 is 40,000. 1% for each point.

Question 14

14. Which of the following would most likely be charged to the seller at a closing?
    A. Credit report on the buyer for an owner carry.
    B. Loan origination fee on a new loan.
    C. Recording fee for the warranty deed.
    D. Owners title insurance.

Answer 14

D. Owners title insurance.
Rationale: a through C are all responsibilities of the buyer, title insurance is always the responsibility of the seller.

Question 15

15. Rent security deposit  held by a seller are handled as follows at the closing:
A. Debit buyer, credit broker.
B. Debit seller, credit buyer.
C. Debit seller, credit broker.
D. Debit seller, credit tenant.

Answer 15

B. Debit seller, credit buyer.

Rationale: there is never a tenant section on the worksheet.

Question 16

16. If no provisions are made for the payment of closing costs form preparation, who is responsible for the fee?
A. The buyer
B. The seller
C. The broker
D. The buyer and seller jointly

Answer 16

C. The broker

Rationale: if no preparation is done on the form then the broker always responsible.

Question 17

17. A seller holds a security deposit of $750 for each tenant in a six apartment building. If closing takes place on March 30, which of the following entries would be appropriate in the worksheet?
A. Debit buyer, credit seller $750
B. Debit buyer, credit seller $4500
C. Debit seller, credit buyer $4500
D. Debit seller, credit buyer $750

Answer 17

C. Debit seller, credit buyer $4500

Question 18

18. On a March 15 closing, with the first payment on a new loan due on April 1, the total prorated taxes which a lender can require as a reserve are:
A. None
B. One month
C. Two months
D. Three months

Answer 18

D. Three months

Rationale: you can never be charged more than three months of total prorated taxes as a reserve.

Question 19

19. In a Colorado closing involving a nonresident seller, the seller whose property was heavily mortgaged received net proceeds of $5320. The nonresident tax calculated at 2% of the sales price is $8800. The closing entity must withhold:
A. $5320
B. $14,120
C. $8800
D. 2% of the loan amount

Answer 19

A. $5320
Rationale: both C and D are actually the same. Remember the net proceeds if less then the 2% sales calculation, it will always be the lesser of the two.

Question 20

20. On a September 10 closing, with current property taxes of $2150, which of the following entries would be appropriate?
A. Seller owes buyer $1484.38
B. Seller owes the broker $1484.38
C. Buyer owes the sellers $655.62
D. Buyer owes the broker $665.62

Answer 20

A. Seller owes buyer $1484.38

Rationale: 252 days times $2150 divided by 365 days.