PRINCIPLES AND PRACTICES CHP 19

Question 1

Buyer Mike’s agent shows him a single-family home that is for sale by owner. Mike makes an offer contingent on obtaining financing. He applied for a loan at ABC Bank and is waiting to hear if he’s approved. Does RESPA apply to this transaction?

A. No, RESPA does not apply to FSBO sales.

B. No, RESPA does not apply to seller financing.

C. Yes, because it’s a single-family home.

D. Yes, because a real estate agent is involved.

Answer 1

C. Yes, because it’s a single-family home.

Question 2

Buyers Abe and Betty are purchasing seller Carl’s house. At closing, who executes the deed?

A. Abe and Betty

B. Carl

C. Abe, Betty, and Carl

D. Carl and the escrow agent

Answer 2

B. Carl

Question 3

The lender must provide the Closing Disclosure to borrowers at least prior to closing.

A. 1 business day

B. 3 business days

C. 3 calendar days

D. 5 business days

Answer 3

B. 3 business days

Question 3

Which is LEAST LIKELY to be an example of an illegal kickback under RESPA?

A. ABC Brokerage allows XYZ Title to use its downtown offices to conduct closings as a convenience to downtown clients.

B. Every month, B&B Title Company pays for a full- page ad in the local newspaper for the real estate brokerage that sends them the most referrals.

C. Home inspector Harry promises broker Kyle tickets to a football game if he will send some business his way this year.

D. M&M Mortgage puts a link to R&R Realty’s website on its website in exchange for R&R sending buyer clients their way.

Answer 3

A. ABC Brokerage allows XYZ Title to use its downtown offices to conduct closings as a convenience to downtown clients.

Question 4

Each of these costs is typically paid by the buyer EXCEPT

A. discount points.

B. escrow reserves.

C. existing lien payoff.

D. mortgage insurance premiums.

Answer 4

C. existing lien payoff.

Question 5

The amount of cash that a buyer must bring to closing will appear on the settlement statement as

A. the total of charges/debits to the buyer.

B. the seller’s credits minus the seller’s charges.

C. the buyer’s charges/debits minus the buyer’s credits.

D. the purchase price minus the earnest money.

Answer 5

C. the buyer’s charges/debits minus the buyer’s credits.

Question 6

Which of these expenses would LEAST LIKELY be prorated between buyer and seller at closing?

A. property taxes

B. recording fees

C. special assessments

D. utility bills

Answer 6

B. recording fees

Question 7

If the subtotals on a seller’s settlement statement show more charges/debits than credits, this means the

A. buyer gets a refund.

B. buyer has to make up the difference to close.

C. seller gets a refund.

D. seller has to pay money at settlement.

Answer 7

D. seller has to pay money at settlement.

Question 8

Ralph is selling his home in Happy Acres. Last year, the city imposed a special assessment for new streetlights in the subdivision. Ralph’s share of the assessment is $1,000. When he sold his house to the Foleys, Ralph had already made the first required payment of $250. As per the purchase agreement, the Foleys will not assume the special assessment. At closing, how will the $750 balance appear on the settlement statement?

A. credit to the buyers

B. credit to the seller and debit (charge) to the buyers

C. debit (charge) to the seller

D. debit (charge) to the seller and credit to the buyers

Answer 8

C. debit (charge) to the seller

Question 9

On the settlement statement, the sales commission is generally shown as a

A. credit to the buyer.

B. credit to the seller.

C. debit (charge) to the buyer.

D. debit (charge) to the seller.

Answer 9

D. debit (charge) to the seller.

Question 10

When a rental property is sold, how are security deposits handled on the settlement statement?

A. the entire amount as a debit (charge) to the seller and credit to the buyer

B. only as a debit (charge to the seller)

C. prorated as a debit (charge) to the buyer and credit to the seller

D. prorated as a debit (charge) to the seller and credit to the buyer

Answer 10

A. the entire amount as a debit (charge) to the seller and credit to the buyer

Question 11

On the settlement statement, a new mortgage loan is generally shown as a

A. credit to the buyer.

B. credit to the seller.

C. debit (charge) to the buyer.

D. debit (charge) to the seller.

Answer 11

A. credit to the buyer.

Question 12

Settlement for the sale of a condominium is March 31. The owner is required to pay condo fees on the first day of every month. How will this fee appear on the settlement statement?

A. a three-month credit to the buyer

B. a three-month debit (charge) to the buyer

C. a nine-month debit (charge) to the buyer

D. It will not appear on the settlement statement

Answer 12

D. It will not appear on the settlement statement

Question 13

When the purchase agreement was signed, the broker turned over the buyer’s $10,000 earnest money check to the escrow agent for deposit. How will that $10,000 be accounted for on the settlement statement?

A. credit to the buyer

B. credit to the seller

C. debit (charge) to the buyer

D. debit (charge) to the seller

Answer 13

A. credit to the buyer

Question 14

A buyer is assuming a seller’s loan and getting a new loan for the balance of the sales price. How will the unpaid interest on the assumed loan appear on the settlement statement?

A. credit to the buyer / debit (charge) to the seller

B. credit to the seller / debit (charge) to the buyer

C. debit (charge) to the buyer only

D. credit to the seller only

Answer 14

C. debit (charge) to the buyer only

Question 15

A house sells for $185,900. In that state, the transfer tax is 55 cents for every $1,000 or fraction thereof. What is the transfer tax on this transaction?

A. $33.80

B. $102.25

C. $102.30

D. $338.00

Answer 15

C. $102.30

Question 16

Ivan is buying Martha’s property for $200,000. At settlement, she pays a 6% commission on the sale in addition to $2,500 in other settlement costs. She owes $93,000 on the existing mortgage, which is paid from the proceeds of the sale. How much will Martha receive at settlement, assuming there are no other credits or debits?

A. $92,500

B. $95,000

C. $104,500

D. $185,500

Answer 16

A. $92,500

Question 17

A buyer contracts to purchase a $75,000 parcel of land. The commission is 5%, paid by the seller. The buyer gets a $260 credit for property taxes paid in arrears. The buyer obtains an 80% loan and pays three points in loan origination fees. Assuming no other credits or debits, what amount should the buyer bring to closing?

A. $15,040

B. $15,800

C. $16,540

D. $19,913

Answer 17

C. $16,540

Question 18

The sale of a property will close on April 30. Ad valorem property taxes are $3,390 per year and are paid in arrears. Calculate the tax proration using a calendar year (365 days). Assume the seller owns the day of closing.

A. $1,114.51 debit (charge) seller / $2,275.49 credit buyer

B. $1,114.51 debit (charge) seller / $1,114.51 credit buyer

C. $2,275.49 credit seller / $1,114.51 credit buyer

D. $2,275.49 debit (charge) seller / $2,275.49 credit buyer

Answer 18

B. $1,114.51 debit (charge) seller / $1,114.51 credit buyer

Question 19

The sale of a property in a subdivision closes on August 31. The seller paid the annual association fee of $780 at the beginning of the year. On the settlement statement, how will this fee be handled (assuming a statutory year)?

A. $259.99 credit buyer / $519,98 debit (charge) seller

B. $259.99 credit seller / $259.99 debit (charge) buyer

C. $519.98 credit seller / $519,98 debit (charge) buyer

D. $259.99 debit (charge) seller / $519.98 credit buyer

Answer 19

B. $259.99 credit seller / $259.99 debit (charge) buyer