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Colorado Real Estate License Exam > Colorado Real Estate Closings > Flashcards

Colorado Real Estate Closings Flashcards

1
Q

Who is responsible for making sure documents are signed by all parties at closing?

A

The designated broker(s) & their EB(s).

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2
Q

Who is responsible for making sure all parties to the contact are given the settlement statement at the delivery of deed?

A

The designated broker(s) & their EB(s).

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3
Q

Who is responsible for the completeness & accuracy of the closing statement?

A

The designated broker(s) & their EB(s).

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4
Q

Who must keep a copy of the closing documents & produce the same for any CREC audit?

A

The designated broker(s) & their EB(s).

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5
Q

What is the purpose of RESPA?

A

Real Estate Settlement Procedures Act.
A federal law that requires Lender give homebuyers and sellers complete settlement cost disclosures. To eliminate abusive practices in the settlement process—to prohibit “kickbacks,” and limit the use of escrow accounts in a transaction.

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6
Q

Who enforces RESPA?

A

The Consumer Financial Protection Bureau (CFPB).

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7
Q

What is HUD?

A

The Department of Housing and Urban Development. HUD is active in many national housing programs such as urban renewal, public housing, and FHA subsidies.

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8
Q

What is FHA?

A

The Federal Housing Administration.

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9
Q

What is the “HUD 1”?

A

Outdated terminology for the settlement statement that was required prior to October 2015.

HUD used to administer RESPA & provided a standard government real estate form that was used by the settlement agent to itemize all charges imposed upon a borrower and seller for a real estate transaction.

It is typically no longer used except for reverse mortgages.

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10
Q

What is the Closing Disclosure?

A

A five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).

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11
Q

What are “kickbacks”?

A

Payments that aren’t reflected in the contract. Hidden referral fees, etc. These are often a violation of license law and/or RESPA.

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12
Q

Documents to be provided at Settlement

A
  • Purchase contact & and amendments or addenda
  • Warranty deed
  • Deed of trust
  • Any leases, if any
  • Loan information and payoff statements
  • Title insurance paperwork
  • Power of attorney, if any
  • Bill of Sale
  • Settlement Statement
  • Escrow letters & receipts (earnest money)
  • Disclosures, inspection report, any warranties.
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13
Q

Does the broker sign the settlement statement?

A

Yes.

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14
Q

Must the broker attend closing?

A

Yes. The brokers must attend closing or be “reasonably available” and review all the closing documents.

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15
Q

What should Broker / Firm ensure before disbursing any funds at closing?

A

Make certain the funds have been received and are
available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited.

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16
Q

Who signs the settlement documents?

A

Settlement documents are signed by the buyer, seller, and broker, and thus approved by all parties.

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17
Q

May the brokerage firm charge extra for the preparation of legal documents used at Closing?

A

NO. At no time may the brokerage charge for its preparation of legal documents.

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18
Q

If the buyer or seller hires an attorney to prepare closing documents, must broker pay the attorney fees?

A

NO. The brokerage is not responsible for legal fees charged for documents that are prepared by the buyer’s or seller’s attorney.

19
Q

Can parties to a real estate transaction be charged closing costs?

A

Yes. The broker can’t charge an additional fees above & beyond their sales commission for the preparation of legal documents, but all other closing costs can be charged to either or both the buyer or seller so long as a written agreement has been SIGNED stating those costs..

20
Q

RESPA applies to the following types of lenders…

A
  1. Any FDIC insured lender;
  2. A lender who wishes to sell a loan to FANNIE MAE; FREDDIE MAC; or GINNIE MAE; or
  3. A participant in any HUD program.
21
Q

What does RESPA require brokers provide at the time of LOAN APPLICATION?

A

A booklet explaining the costs involved.

A good faith estimate of the loan costs.

22
Q

RESPA: What information must the loan cost estimate include?

A

The estimate must include origination fees, points, and the maximum amount to be collected at closing.

23
Q

RESPA: What is the maximum Lenders are allowed to demand in escrow?

A

No more than 2 additional months can be escrowed for taxes and insurance.

24
Q

What replaced the HUD 1?

A

Closing Disclosure

25
Q

When is the Closing Disclosure due?

A

No later than 3 days prior to Closing.

This allows time for parties to compare the Closing Disclosure to the Loan Estimate and ask any questions.

26
Q

Does RESPA apply to refinances?

A

Yes.

27
Q

Requirements for RESPA to apply?

A

“federally related mortgages” which means

  1. loan is secured by a first or subordinate lien on real estate in the U.S.
  2. planned or existing structure 1-4 residential units
  3. lender is subject to RESPA (pretty much all banks & lending institutions. see card #20)
28
Q

When is the Loan Estimate due?

A

Within 3 business days of the completed application.

29
Q

If circumstances change, can the Lender alter the Loan Estimate?

A

Yes. A revised Loan Estimate must be provided no later than 7 business days before “consummation” i.e. before the consumer becomes contractually obligated.

30
Q

If the Lender issues a revised Loan Disclosure what happens?

A

There is a 3 day waiting period after a revised Loan Disclosure if:

  1. Lender seeks an increase to the APR of more than 1/8th of a point,
  2. The addition of a Prepayment Penalty, or
  3. The change of a loan product.
31
Q

What happens if the final loan cost changes after Closing?

A

If the final loan cost changes within 30 calendar days post-consummation, a revised Closing Form must be delivered within 30 days of the change.

32
Q

If the consumer is owed a refund from the Lender, when is it due?

A

Within 60 days of closing.

33
Q

What are the “Know Before You Owe” Mortgage Disclosures?

A

Construction loan disclosures. Closed-end consumer credit transactions secured by real property.
Regulation Z

34
Q

Know Before You Owe Mortgage tells Lenders how to…

A
  1. estimate and disclose the terms of a construction loan with multiple advances
  2. calculate the interest portion of the finance charge
35
Q

Are the construction loan and mortgage required to be a single transaction?

A

The construction phase & permanent phase may be treated as either 1 or 2 separate transactions. Lender’s choice.

36
Q

Who is primarily responsible for “truth in lending” disclosures?

A

The Lender bears the largest share of responsibility for the proper delivery and submission of the disclosure forms, but the Broker should assist and check everything.

37
Q

Why is it important to get your license number and contract information sent to the lender early in the process?

A

The Brokers’ license number and properly registered contact information is required to be on the TILA disclosures.

38
Q

What is FIRPTA?

A

Foreign Investment in Real Property Tax

39
Q

What type of tax does FIRPTA impose?

A

FIRPTA subjects nonresident aliens and foreign corporations to U.S. capital gains tax upon their profit from the disposition (sale) of real property in the U.S.

40
Q

Who can be obligated to withhold tax on a FIRPTA eligible sale?

A
  1. The Buyer
  2. The Buyer’s Agent
  3. The Settlement Agency (Closing Company)
41
Q

What is the FIRPTA tax rate?

A

15%

42
Q

When is withholding not required under FIRPTA?

A

If home will be used as a residence and the selling price is under $300,000.

43
Q

Does Colorado require any withholding of state tax on sales of real property?

A

Yes.
If the transaction involves
1. out of state sellers
2. sales price is more than $100,000

44
Q

What is the rate for Colorado’s withholding tax real estate transactions by out-of-state sellers?

A

The lesser of 2% of the sale price or the net proceeds from the sale.

Colorado Real Estate License Exam (3 decks)

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