NC Closing a Sales Transaction

Question 1

When should the buyer receive keys to the property, absent any special agreement?

A)
Not until the checks all clear
B)
All of these
C)
At closing
D)
The weekend before closing

Answer 1

C)
At closing

Explanation
The buyer should receive the keys at closing, not the settlement meeting, absent agreement to the contrary.

Reference: Closing a Sales Transaction

Question 2

The seller’s annual homeowner dues (covering the 12-month period of January through December) of $600 are paid in advance by the seller in January. What are the closing statement entries for an April 30 closing?

A)
Credit seller $400; debit buyer $400
B)
Debit seller $200; credit buyer $400
C)
Credit seller $600; debit buyer $600
D)
Debit seller $600; credit buyer $600

Answer 2

A)
Credit seller $400; debit buyer $400

Explanation
The calculation is: $600 ÷ 12 months = $50 per month × 4 months = $200 months = the seller’s share. The seller paid $600. The buyer owes $600 – $200 = $400.

Reference: Closing a Sales Transaction

Question 3

The sales price is $95,000. The buyer secured a new loan of 80%. The entry or entries

A)
are credit buyer $76,000 and debit seller $76,000.
B)
is debit buyer $76,000.
C)
is credit buyer $76,000.
D)
are credit buyer $76,000 and debit seller $19,000.

Answer 3

C)
is credit buyer $76,000.

Explanation
The new loan of $76,000 ($95,000 × 80%) is money coming in to the buyer. The seller has nothing to do with this entry.

Reference: Closing a Sales Transaction

Question 4

Who bears primary responsibility to ensure that the Closing Disclosure accurately reflects the Offer to Purchase and Contract (NCAR/NCBA)?

A)
The title insurance company
B)
The buyer’s lender
C)
The closing attorney representing the buyer
D)
The real estate brokers, no matter whom they represent

Answer 4

D)
The real estate brokers, no matter whom they represent

Explanation
The real estate brokers are responsible for verifying any information they should know from the contract. Certain lender costs would not be known to the brokers.

Reference: Closing a Sales Transaction

Question 5

There is a listing agent on a home. At closing, which form(s) should the listing agent request for her review and files?

A)
ALTA disbursement form, if used
B)
Any of these used in the closing
C)
HUD-1, if used
D)
Closing Disclosures, if used

Answer 5

B)
Any of these used in the closing

Explanation
The listing agent needs to ask for any of the disclosure and disbursement documents used in the settlement. While there have been some issues getting the Closing Disclosures, it is expected that over time these will be available to agents to check for accuracy and to keep in their transaction files. In all cases, the listing agent needs to ask for them and, if denied any, make a note to file.

Reference: Closing a Sales Transaction

Question 6

In a RESPA/TILA-related transaction, the form the buyer will receive from the lender, showing the cost of borrowing and the settlement costs to expect at closing is called

A)
Closing Disclosure
B)
ALTA Disbursement form.
C)
HUD-1.
D)
all of these.

Answer 6

A)
Closing Disclosure

Explanation
While is it possible for a borrower to see any of these, the Closing Disclosure comes from the lender, not the settlement agent. The HUD-1 or the ALTA Disbursement form may be used by the settlement agent.

Reference: Closing a Sales Transaction

Question 7

If the buyer or the seller in a transaction is required to bring money to the settlement meeting, per the Closing Disclosure, which of the following applies?

A)
The funds must be in the form of a bank check, certified check, money order, or wire transfer.
B)
The funds may be in a personal check from either the buyer or the seller.
C)
The funds may typically be a loan from the buyer’s agent to the buyer.
D)
The funds may typically be drawn on a credit card at the settlement meeting.

Answer 7

A)
The funds must be in the form of a bank check, certified check, money order, or wire transfer.

Explanation
The North Carolina Bar Association will not allow an attorney to accept anything other than immediately available funds from a consumer at closing.

Reference: Closing a Sales Transaction

Question 8

The MOST typical sequence of events for a residential transaction would be which of the following?

A)
Offer, appraisal and inspections, contract, insurances issued, settlement, closing, disbursement of funds
B)
Offer, contract, insurances issued, appraisal, due diligence, closing, disbursement of funds
C)
Offer, contract, appraisal and inspections, insurances issued, settlement, closing, disbursement of funds
D)
Offer, contract, due diligence inspections, appraisal and inspections, insurances issued, closing, settlement, and disbursement of funds

Answer 8

C)
Offer, contract, appraisal and inspections, insurances issued, settlement, closing, disbursement of funds

Explanation
The progression of events that begin with the offer and end with disbursement of funds follows the logical progression of offer then contract. A buyer would be ill-advised to spend funds on a house without a commitment from the seller. The settlement meeting is a prerequisite to closing.

Reference: Closing a Sales Transaction

Question 9

The main reason why real estate brokers should not conduct real estate closings is that

A)
it is illegal.
B)
there is a conflict of interest.
C)
real estate brokers can’t give needed legal advice.
D)
real estate brokers cannot do math very well.

Answer 9

C)
real estate brokers can’t give needed legal advice.

Explanation
Only an attorney can do that, and often arising during a closing are issues requiring legal advice or contract interpretation.

Reference: Closing a Sales Transaction

Question 10

The buyers owe $4,234 at closing. How should they pay at closing?

A)
Cashier’s check
B)
IOU
C)
Personal check
D)
Letter of credit

Answer 10

A)
Cashier’s check

Explanation
The Good Funds Settlement Act will not allow the closing attorney to disburse funds until all funds have cleared their account. Therefore, the Standard Offer to Purchase and Contract Form 2-T requires that funds brought to closing be either a bank or cashier’s check.

Reference: Closing a Sales Transaction

Question 11

The sales price is $85,000. The buyer made an earnest money deposit of $2,500. What will the earnest money deposit entry be on the closing statement?

A)
Credit seller $2,500
B)
Credit buyer $2,500
C)
Debit seller $2,500
D)
Debit buyer $2,500

Answer 11

B)
Credit buyer $2,500

Explanation
The earnest money deposit is money the buyer has already produced and will be applied to the buyer’s account.

Reference: Closing a Sales Transaction

Question 12

A family is selling their house for $105,000. They owe the real estate broker 7% commission and have a loan payoff of $56,000. The buyers are giving the family a $25,000 purchase money mortgage (PMM). Real property taxes ($1,800) and personal property taxes ($120) have been paid. The family will pay deed prep of $50 and excise tax. Using the 360-day bankers calendar, how much will the family net at closing on November 30?

A)
$66,540
B)
$16,540
C)
$16,240
D)
$16,390

Answer 12

B)
$16,540

Explanation
The sale price of $105,000 and tax proration of $150 are both credits to the seller. The broker’s commission, loan payoff, purchase money mortgage, deed preparation, and excise tax are all debits to the seller.

Reference: Closing a Sales Transaction

Question 13

Which of these transactions would MOST likely be subject to the CFPB’s regulations?

A)
Home in a subdivision used as primary residence and being financed
B)
Home in a subdivision cash sale
C)
Office building purchase
D)
Large land tract cash sale

Answer 13

A)
Home in a subdivision used as primary residence and being financed

Explanation
CFPB regulations deal with TILA/RESPA-related loans. These will be residential loans.

Reference: Closing a Sales Transaction

Question 14

What is the customary closing statement entry for the $450 closing attorney fee?

A)
Credit seller and debit buyer $450 each
B)
Credit buyer $450
C)
Debit buyer $450
D)
Debit seller and credit buyer $450 each

Answer 14

C)
Debit buyer $450

Explanation
A debit is a charge. The closing attorney is typically paid by the buyer, but it is negotiable in the contract, and each party could have an attorney that they would be responsible for paying.

Reference: Closing a Sales Transaction

Question 15

An attorney in North Carolina is typically responsible for which of the following as they relate to a residential real estate transaction?

A)
Drafting the Offer to Purchase and Contract (NCAR/NCBA) for the buyer and the seller to sign, handling the closing, and recordation of the deed
B)
Searching the public records to ensure that the title is clear and insurable for the buyer, issuing an ‘‘opinion of title,’’ obtaining title insurance, and explaining the loan documents
C)
Preparing the sales contract, the Closing disclosure, and recording the deed
D)
Approving the Offer to Purchase and Contract (NCAR/NCBA) for the buyer, explaining it to the seller and coordinating inspection negotiations, as well as the settlement meeting and closing

Answer 15

B)
Searching the public records to ensure that the title is clear and insurable for the buyer, issuing an ‘‘opinion of title,’’ obtaining title insurance, and explaining the loan documents

Explanation
An attorney is not typically involved in a contract of sale until retained by the buyer to explain the lender documents, the closing disclosure, and the title status. The attorney then completes the necessary steps to closing and recording the deed.

Reference: Closing a Sales Transaction

Question 16

The North Carolina Good Funds Settlement Act refers to which of the following?

A)
The seller must net enough funds from the proceeds of sale to clear all existing liens on the property.
B)
The buyer’s earnest money deposit and due diligence funds must clear before the contract is binding on either party.
C)
All of these.
D)
The seller’s proceeds are not disbursed, nor are any bills or fees in connection with the transaction paid, until the lender funds the buyer’s loan and all documents have been recorded.

Answer 16

D)
The seller’s proceeds are not disbursed, nor are any bills or fees in connection with the transaction paid, until the lender funds the buyer’s loan and all documents have been recorded.

Explanation
The North Carolina Good Funds Settlement Act prevents the closing attorney from disbursing any funds until the lender has agreed to fund the buyer’s loan after a final title search and all the documents have been properly recorded.

Reference: Closing a Sales Transaction

Question 17

Who may perform a closing in North Carolina?

A)
The seller
B)
An attorney
C)
The buyer
D)
A real estate broker

Answer 17

B)
An attorney

Explanation
However, a title company may also conduct closing.

Reference: Closing a Sales Transaction

Question 18

Annual real property taxes are $1,200 and have not been paid by the seller. The buyer will pay them later in the year. Closing is July 30. Using a 360-day bankers calendar, what are the closing statement entries?

A)
Credit seller $700; debit buyer $500
B)
Credit seller $500; debit buyer $500
C)
Debit seller $700; credit buyer $700
D)
Debit seller $700; credit buyer $500

Answer 18

C)
Debit seller $700; credit buyer $700

Explanation
The calculation is: $1,200 ÷ 12 months = $100 per month. The seller owes 7 months (January–July) = $100 × 7 = $700. The buyer will pay the entire $1,200 at the end of the year.

Reference: Closing a Sales Transaction

Question 19

A broker can take part of the commission out of the client’s trust account after contract and before closing,

A)
on the seller’s permission.
B)
only on written consent of the buyer and the seller.
C)
provided there are enough funds left to complete the closing.
D)
at any time after the deposit is placed in escrow.

Answer 19

B)
only on written consent of the buyer and the seller.

Explanation
The broker cannot touch the monies in the client trust account for a transaction unless both buyer and seller consent in writing to such a draw on the commission earned. This rule is designed to protect the parties in the event the transaction does not close or there is another dispute concerning monies held in trust.

Reference: Closing a Sales Transaction

Question 20

The buyer has a new mortgage loan of $105,000 at 7.75%. Closing is June 26. Payments will begin on August 1. Using the 360-day bankers calendar, the interim interest entry would be

A)
credit buyer $113.
B)
debit buyer $678.
C)
debit buyer $113.
D)
credit buyer $565.

Answer 20

C)
debit buyer $113.

Explanation
The calculation is: $105,000 × 7.75% ÷ 360 days = $22.60 per day interest. The buyer owes for five days in June (June 26– 30). 5 days × $22.60 = $113. Remember to include the day of closing for the buyer when calculating interim interest.

Reference: Closing a Sales Transaction

Question 21

The payoff on the seller’s existing loan is $79,315. What is(are) the entries on the closing statement or closing disclosure?

A)
Credit seller $58,185
B)
Debit seller $79,315
C)
Debit seller $79,315; credit buyer $79,315
D)
Credit seller $79,315

Answer 21

B)
Debit seller $79,315

Explanation
The seller is paying the balance ($79,315) to the lender.

Reference: Closing a Sales Transaction

Question 22

There is a buyer’s agent on a land transaction. The buyer is paying cash. Which form(s) will the buyer NOT see at closing?

A)
HUD-1
B)
All of these
C)
Closing Disclosure
D)
ALTA Disbursement form

Answer 22

C)
Closing Disclosure

Explanation
The Closing Disclosure is for a borrower from a lender. Chances are the HUD-1 will be used, but the settlement agent can use any number of forms like the ALTA form.

Reference: Closing a Sales Transaction

Question 23

A buyer, during the due diligence period of contract, has just been advised that the home is uninsurable as a result of past claims. What are the buyer’s options?

A)
If the attorney is notified, the buyer may proceed to settlement.
B)
The buyer may terminate the contract.
C)
If the lender is notified, the buyer may proceed to settlement and closing.
D)
The buyer is locked in to the contract because there is no contingency for the insurability of the home.

Answer 23

B)
The buyer may terminate the contract.

Explanation
The answer is the buyer may terminate the contract. No lender will fund a loan on an uninsurable home. Because the buyer is still in due diligence, the contract may be terminated for any reason.

Reference: Closing a Sales Transaction

Question 24

A woman bought an $80,000 home. She is assuming the seller’s 10% interest rate loan of $62,000. All taxes have been paid by the seller. Real property taxes were $1,380, and personal property taxes were $85. The mortgage loan payments are due on the first of each month. The woman has a $2,000 earnest money deposit, and her closing costs are $500. Using the 360-day bankers calendar, how much cash will she need at the October 20 closing?

A)
$16,694
B)
$16,081
C)
$16,424
D)
$18,000

Answer 24

C)
$16,424

Explanation
$80,000 (cost) – $62,000 (loan) – $2,000 (earnest money deposit) + $500 (closing cost) + $268.33 (real estate tax – $1,380/360 × 70 days) – $344.44 (interest – $62,000 × 10%/360 × 20 days owed by seller) = $16,423.89, or $16,424 rounded off.

Reference: Closing a Sales Transaction

Question 25

When would a buyer typically visit the property to make sure it is in essentially the same or better condition that it was the day of the offer?

A)
Before the contract is accepted
B)
Weekly
C)
Per the Offer to Purchase and Contract, before the settlement meeting, the buyer is allowed to do a final walk-through to determine whether the property is in the same or better condition as it was on the date of the offer
D)
Before the end of the due diligence period

Answer 25

C)
Per the Offer to Purchase and Contract, before the settlement meeting, the buyer is allowed to do a final walk-through to determine whether the property is in the same or better condition as it was on the date of the offer

Explanation
The sellers are typically expected to have the house emptied and in at least broom-swept condition early enough before the settlement meeting that the buyers may inspect the property for damages.

Reference: Closing a Sales Transaction

Question 26

The following expenses were incurred at closing on a $150,000 sale. Assume customary practices. Loan amount was 80% LTV; deed prep, $150; appraisal, $375; title insurance, $145; origination fee, 1%; two discount points; excise tax; recording deed, $15; brokerage fee, 5%; survey, $150. What are the total debits and credits for the buyer and the seller for these expenses only?

A)
Debit seller $7,950; debit buyer $4,285
B)
Debit seller $7,950; credit buyer $7,950
C)
Credit seller $7,950; credit buyer $4,285
D)
None of these

Answer 26

A)
Debit seller $7,950; debit buyer $4,285

Explanation
$150,000 × 0.80 = $120,000 loan amount. Appraisal, title insurance, origination fee, discount points, recording of the deed, and survey costs are paid by the buyer. Deed prep, excise tax, and brokerage fee costs are paid by the seller.

Reference: Closing a Sales Transaction

Question 27

The North Carolina law requiring that the closing agent not disburse funds until assured that all funds are good is called

A)
the North Carolina Real Estate Closing Act.
B)
the North Carolina Trust Account Act.
C)
the Closing Agent Funds Act.
D)
the Good Funds Settlement Act.

Answer 27

D)
the Good Funds Settlement Act.

Explanation
The other acts don’t exist.

Reference: Closing a Sales Transaction

Question 28

The sales price is $150,000. What is(are) the entries?

A)
Debit seller $150,000
B)
Credit seller $150,000
C)
Debit seller $150,000; credit buyer $150,000
D)
Credit seller $150,000; debit buyer $150,000

Answer 28

D)
Credit seller $150,000; debit buyer $150,000

Explanation
The sales price is money coming to the seller from the buyer.

Reference: Closing a Sales Transaction

Question 29

There is an error on the closing statement or closing disclosure. You are a provisional broker in North Carolina, and this is your closing. Whose responsibility is the accuracy of the closing document?

A)
Yours, because it’s your sale
B)
The title company’s
C)
The attorney’s
D)
The broker-in-charge

Answer 29

D)
The broker-in-charge

Explanation
The broker is responsible for the accuracy and delivery of the closing documents. If the settlement agent handles the delivery, then the broker is responsible for only the accuracy of the documents.

Reference: Closing a Sales Transaction

Question 30

A family bought a $90,000 house, received a loan at 8% interest, and planned to put 10% down. At closing they will pay a one-point origination fee and two discount points on their loan. Their first payment will be due August 1. Interim interest will be paid at closing. The attorney fee is $300; title insurance is $125; and recording fees for the deed are $37. The family made a $2,500 earnest money deposit. Real property taxes for the year are $1,200 and have not been paid, but the seller plans to pay the personal property taxes of $120 to the tax collector at closing. Using the 360-day bankers calendar, how much cash will the buyer need at closing on June 10?

A)
$11,537
B)
$9,237
C)
$859
D)
$8,171

Answer 30

B)
$9,237

Explanation
The loan amount of $81,000, earnest money deposit of $2,500, and prorated taxes of $533.30 (5 months + 10 days) are all credited to the buyer. The sales price of $90,000 origination fee of $810, discount points of $1,620, attorney fee, title insurance, recordation fee and interim interest ($81,000 × 0.08 = $6,480 ÷ 360 = $18 × 21 days) are all debits to the buyer.

Reference: Closing a Sales Transaction

Question 31

Rent is $1,200 and has not been collected by the seller. Closing is October 7. Using the 360-day bankers calendar, the entries would be

A)
credit seller $920 and debit buyer $920.
B)
credit seller $280 and debit buyer $280.
C)
debit seller $280 and credit buyer $920.
D)
debit seller $280 and credit buyer $280.

Answer 31

B)
credit seller $280 and debit buyer $280.

Explanation
The calculation is: $1,200 ÷ 30 days = $40 per day. The seller’s share = $40 × 7 days (October 1–7) = $280. The buyer will collect the entire $1,200 from the tenant after closing.

Reference: Closing a Sales Transaction

Question 32

If the trustee has the property sold at a foreclosure sale and it brings an amount inadequate to pay off the loan, what can the trustee do?

A)
Appeal to the Supreme Court

B)
Cancel the sale

C)
Attach all other properties owned by the debtor

D)
Sue the trustor for the deficiency

Answer 32

D)
Sue the trustor for the deficiency

Explanation
In North Carolina, if the foreclosure sale does not produce a sufficient sales price to pay off the loan, the lender is entitled to a deficiency judgment.

Reference: Closing a Sales Transaction

Question 33

The sales price is $125,000. The mortgage loan being assumed is $67,215. What are the entries for the loan assumption amount?

A)
Debit seller $57,785; credit buyer $57,785
B)
Credit seller $57,785; debit buyer $57,785
C)
Credit seller $67,215; debit buyer $67,215
D)
Debit seller $67,215; credit buyer $67,215

Answer 33

D)
Debit seller $67,215; credit buyer $67,215

Explanation
The seller is giving the buyer the use of the buyer’s loan. The assumption is treated as a credit to the buyer because it is money paid on the buyer’s behalf and a debit to the seller because it is money the seller owes as part of the seller’s loan obligation.

Reference: Closing a Sales Transaction

Question 34

How is the due diligence fee reflected at the settlement meeting?

A)
It is a credit to the buyer only.
B)
It is a credit to the buyer and a debit to the seller.
C)
It is a debit to the seller only.
D)
It is a debit to the buyer and a credit to the seller.

Answer 34

B)
It is a credit to the buyer and a debit to the seller.

Explanation
The due diligence fee is paid directly to the seller at contract formation and is credited toward the purchase price if the buyer proceeds with the transaction; thus, it is a credit to the buyer and a debit to the seller at settlement.

Reference: Closing a Sales Transaction

Question 35

The buyer is assuming the seller’s existing mortgage loan of $65,000 at 8%. Payments are due on the first of each month. Closing is August 10. Using a 360-day bankers calendar, entries for the interest on this assumed loan to the nearest dollar are

A)
debit seller $289 and credit buyer $289.
B)
credit seller $289 and debit buyer $289.
C)
debit seller $144 and credit buyer $144.
D)
credit seller $144 and debit buyer $144.

Answer 35

C)
debit seller $144 and credit buyer $144.

Explanation
The calculation is: $65,000 × 8% ÷ 360 days = $14.44 per day interest. The seller’s share is August 1–10 = 10 days × $14.44 = $144.40. Remember that the buyer will pay August interest on September 1.

Reference: Closing a Sales Transaction

Question 36

A typical North Carolina settlement meeting would be attended by which of the following parties?

A)
The buyer, the seller, and an attorney
B)
The agents and the paralegal
C)
The buyer, the seller, the title company representative, and the paralegal
D)
The buyer, the seller, the listing agent, the selling agent, and the settlement agent/attorney

Answer 36

D)
The buyer, the seller, the listing agent, the selling agent, and the settlement agent/attorney

Explanation
Typically, the principals, their agents, and the attorney are present at the settlement meeting, although there is no requirement for the principals to attend, as long as the documentation is obtained by the settlement agent/attorney. A representative from the lender or the title company may attend.

Reference: Closing a Sales Transaction

Question 37

How is the earnest money deposit handled at settlement?

A)
It is a debit to the seller only.
B)
It is a credit to the buyer only.
C)
It is a debit to the buyer and a credit to the seller.
D)
It is a credit to the buyer and a debit to the seller.

Answer 37

B)
It is a credit to the buyer only.

Explanation
The earnest money deposit is not paid to the seller, but to the escrow agent to be held for the buyer until closing. If the buyer completes the purchase, the earnest money is credited to the buyer and becomes part of the sales price.

Reference: Closing a Sales Transaction

Question 38

The borrower’s right to reestablish ownership after default is known as

A)
reestablishment.
B)
acceleration.
C)
redemption.
D)
subordination.

Answer 38

C)
redemption.

Explanation
In North Carolina, during the statutory redemption period, a borrower can try to raise the necessary funds to redeem the property. In the 10 days after the foreclosure sale, the borrower, or others, can submit an upset bid to purchase the property for an amount that exceeds the foreclosure sale price by a specific margin. Equitable redemption occurs during the course of foreclosure but before the foreclosure sale. If the borrower pays the total amount past due, plus costs, the debt is reinstated, and the borrower will be required to repay the accelerated loan in full.

Reference: Closing a Sales Transaction

Question 39

Who is responsible for the accuracy and delivery of the closing statement?

A)
All of these
B)
The closing attorney
C)
The title company conducting the closing
D)
The real estate broker

Answer 39

A)
All of these

Explanation
However, the North Carolina Real Estate Commission requires the broker to insure that the parties are receiving a copy of the closing statement, and the broker is responsible for checking the entries the broker has knowledge of.

Reference: Closing a Sales Transaction

Question 40

To help the buyer purchase the home, the seller is giving the buyer a $25,000 purchase money mortgage loan. What is(are) the entries for this loan?

A)
Both of these
B)
None of these
C)
Credit buyer $25,000
D)
Debit seller $25,000

Answer 40

A)
Both of these

Explanation
The seller is giving the buyer $25,000 (think of the seller as a lender). The buyer is giving the seller a mortgage in return for the cash.

Reference: Closing a Sales Transaction

Question 41

Annual real property taxes are $1,800 and have been paid by the seller. Closing is November 15. Using a 360-day calendar, what are the closing statement entries?

A)
Credit seller $225; debit buyer $225
B)
Debit seller $225; credit buyer $1,575
C)
Credit seller $1,800; debit buyer $225
D)
Debit seller $1,575; credit buyer $1,575

Answer 41

A)
Credit seller $225; debit buyer $225

Explanation
The calculation is: $1,800 ÷ 12 months = $150 per month. $150 ÷ 30 days = $5 per day (or $1,800 ÷ 360 days = $5 per day). The seller’s share = 10 months + 15 days = 315 days. 315 days × $5 per day = $1,575 = seller’s share. The seller paid $1,800. $1,800 – $1,575 = $225 owed to seller by buyer.

Reference: Closing a Sales Transaction

Question 42

A buyer is getting a residential mortgage loan from a bank, which is subject to the CFPB closing disclosures. When should the buyer see the closing disclosures so the buyer can plan for closing?

A)
Whatever the parties agree to
B)
At the closing table
C)
One hour before closing
D)
At least three business days before closing

Answer 42

D)
At least three business days before closing

Explanation
In a TILA/RESPA-related loan, subject to the CFPB’s requirements, the borrower must receive the closing disclosures at least three business days before closing.

Reference: Closing a Sales Transaction

Question 43

Rent is $570 per month and has been collected by the seller. Closing is February 10. Using the 360-day bankers calendar, the entries would be

A)
credit seller $380 and debit buyer $380.
B)
credit seller $190 and debit buyer $190.
C)
debit seller $190 and credit buyer $190.
D)
debit seller $380 and credit buyer $380.

Answer 43

D)
debit seller $380 and credit buyer $380.

Explanation
The calculation is: $570 ÷ 30 days = $19 per day rent. The seller’s share = 10 days × $19 = $190, but the seller collected $570. The seller owes the buyer $570 – $190 = $380.

Reference: Closing a Sales Transaction

Question 44

Annual real estate taxes are $2,220, and the seller has agreed to pay his share through the month of closing. Taxes have not been paid but buyer will pay them later in the year. Closing is June 30. Using a 360-day calendar, closing statement entries would be

A)
debit seller $1,110 and credit buyer $1,110.
B)
debit seller $2,220 and credit buyer $2,220.
C)
credit seller $1,110 and debit buyer $1,110.
D)
debit seller $1,048 and credit buyer $1,048.

Answer 44

A)
debit seller $1,110 and credit buyer $1,110.

Explanation
The seller has agreed to pay through June (6 months, or half the year). The calculation is: $2,220 ÷ 2 = $1,110 (or $2,220 ÷ 12 months = $185 per month × 6 months = $1,110). The buyer will pay the entire $2,220 when due.

Reference: Closing a Sales Transaction

Question 45

A woman is selling her home on June 15 for $175,000 and is allowing the buyer to assume her $101,000, 8% mortgage loan. She will owe her broker 6%. Real property taxes are $1,440; personal property taxes are $120; these taxes have not been paid. The woman has agreed to pay the one-point assumption fee. The next mortgage payment is due on July 1, and the woman is responsible for paying accrued interest at closing. Closing costs include revenue stamps and a $45 deed prep. Using the 360-day bankers calendar, what will the woman net at closing?

A)
$61,098
B)
$161,978
C)
$60,978
D)
$61,315

Answer 45

C)
$60,978

Explanation
The sales price of $175,000 is a credit to the seller. In this case, everything else is a debit to the seller (165 days of real property taxes and 15 days of accrued interest).

Reference: Closing a Sales Transaction