Questions - Chapter 12 Flashcards by Dan Fuhrman

The cost of recording the deed would appear as a _____ on the closing statement?

A. debit to the buyer
B. debit to the seller
C. credit to the buyer
D. credit to the seller

12-1 A

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The amount of the earnest money deposit appears in:

A. buyer’s closing statement as a credit.
B. seller’s closing statement as a debit.
C. buyer’s closing statement as a debit.
D. seller’s closing statement as a credit.

12-2 A

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If property were listed for sale at $130,000 and sold for $128,500, a 6% broker’s fee would appear in the seller’s statement as a:

A. credit of $7,800.
B. debit of $7,710.
C. credit of $7,7l0.
D. debit of $7,800.

12-3 B

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The cost of preparing a deed appears as a:

A. debit in the buyer’s statement.
B. credit in the seller’s statement.
C. credit in the buyer’s statement.
D. debit in the seller’s statement.

12-4 D

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The day of closing is typically:

A. charged to the seller.
B. charged to the buyer.
C. split equally between the buyer and seller.
D. it depends on the type of loan.

12-5 A

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In a real estate transaction, the buyer obtained a loan in the amount of $160,000. The lending institution charged 1 discount point, which the buyer agreed to pay. The cost of this point appears as a:

A. credit to the buyer’s statement of $1,600.
B. debit to the seller’s statement of $1,600.
C. debit to the buyer’s statement of $1,600.
D. credit to the seller’s statement of$I,600.

12-6 C

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A buyer purchased a rental property and closed the transaction on July 20. The tenant had paid rent for the month of July in the amount of $600 on July 1. The rent
should be shown as:

A. $200 debit to buyer and credit to seller.
B. $400 debit to buyer and credit to seller.
C. $200 debit to seller and credit to buyer.
D. $400 debit to buyer and credit to seller.

12-7 C

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The cost of the due diligence fee appears as a:

A. credit to the seller and debit to the buyer.
B. debit to the buyer and a credit to the seller
C. credit to the buyer and a debit to the seller
D. debit to the seller.

12-8 C

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A property sold for $151,050. The excise tax
on the transaction will appear on the closing
worksheet as a:

A. $151.50 credit to the seller.
B. $152.00 debit to the seller.
C. $302.00 debit to the seller.
D. $303.00 debit to the seller.

12-9 D

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Provided nothing is written into the contract to the contrary, a wood-destroying insect report will appear on the closing statement as a:

A. debit to buyer, credit to seller.
B. credit to buyer, debit to seller.
C. credit to seller only.
D. debit to buyer only.

12-10 D

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In a residential federally backed mortgage loan for the purchase of a property transaction, RESPA requires all of the following EXCEPT:

A. use of the Closing Disclosure (CD).
B. a three-day right of rescission.
C. a good faith estimate.
D. the providing of the informational booklet Know Before You Owe.

12-11 B

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Which expenses are typically prorated between the buyer and the seller on the closing statement?

A. private mortgage insurance
B. interim interest
C. commission to agent
D. real property taxes

12-12 D

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Which item is ALWAYS a single-sided entry?

A. assumed mortgage
B. sales price
C. new first mortgage
D. rental income

12-13 C

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In North Carolina, the closing meeting is typically held at the:

A. listing agent’s office.
B. selling agent’s office.
C. attorney’s office.
D. courthouse.

12-14 C

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According to TRID, which of the following items would NOT be considered a required element of a loan application?

A. borrower’s monthly income
B. borrower’s Social Security number
C. purchase price
D. estimated value of the property

12-15 C

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It is a requirement of TRID that the Loan Estimate be given to the borrower no later than three business days of the:

A. date of loan application
B. date of loan acceptance
C. due diligence date
D. date of closing

12-16 A

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Rico is obtaining a mortgage of $243,250 at 5.25% interest rate with settlement to be conducted on June 26th. How will the resulting entry for the interim interest appear on a closing worksheet?

A. $141.88 debit - buyer
B. $177.37 debit - buyer
C. $886.75 credit - buyer
D. $922.22 credit - buyer

12-17 B

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A duplex is being rented for $600 per unit and is being sold to an investor with closing to be on the 22nd of September. How will the resulting entry appear on the closing worksheet?

A. $160 debit - seller, credit - buyer
B. $160 debit - buyer, credit - seller
C. $320 debit - seller, credit - buyer
D. $320 credit - seller, debit - buyer

12-18 C

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A property is being sold with settlement set for March 19. Property taxes for the year are estimated to be $864. How will the resulting entry appear on the settlement worksheet?

A. $674.40 debit - seller, credit - buyer
B. $674.40 debit - buyer, credit - seller
C. $189.60 debit - seller, credit - buyer
D. $189.60 debit - buyer, credit - seller

12-19 C

Fairley is selling her house to Marian with settlement to be conducted on October 21. The annual HOA assessment, based upon the calendar year, was levied on the property for $360 and was paid in January. How will the resulting entry appear on the closing worksheet?

A. $291.00 debit - buyer, credit - seller
B. $291.00 credit - buyer, debit - seller
C. $69.00 credit - buyer, debit - seller
D. $69.00 debit - buyer, credit - seller

12-20 D

Linda is selling her house to Heather with settlement scheduled for November 27th. Property taxes for the year are $ 594 and have not yet been paid. The lender is requiring the taxes to be paid at the settlement. How will the resulting entry appear of a settlement worksheet?

A. $539.55 debit - seller, credit - buyer
B. $54.45 debit - buyer, credit - seller
C. $539.55 debit - seller and $54.45 debit - buyer
D. $54.45 debit - seller, credit - buyer

12-21 C

Matt is obtaining a mortgage loan of $178,000 at 5.5% interest. Settlement is to occur on the 27th day of the month. How will the interim interest appear on the settlement worksheet?

A. $734.13 debit - buyer
B. $706.94 debit - buyer
C. $108.76 debit - buyer
D. $8l.57 debit - buyer

12-22 C

Gene has agreed to sell his property to Amy with settlement to be on December 11. Property taxes of $810 for the year have already been paid. How will the resulting entry appear on the settlement worksheet?

A. $767.25 debit - buyer, credit - seller
B. $24.75 debit - buyer, credit - seller
C. $24.75 credit - seller, debit - buyer
D. $42.75 debit - buyer, credit - seller

12-23 D

Ashley contracts to purchase August’s home for $250,000 with settlement set for October 21. The lender agrees to make her a 80% LTV mortgage at 5.5% interest with 1% loan origination fee and l.5 discount points. In addition, interim interest to the end of the month must be collected. Property taxes are $2,750 for the year and the lender requires these to be paid off at the settlement. At settlement the following items must be paid by the party who would traditionally pay them: attorney fees - $950; survey - $450; deed preparation - $90; title insurance - $500; termite report - $75; commission - 6%; revenue stamps - use state rate. The buyer has paid $475 for the appraisal and $75 for the credit report at the time of the loan application. In addition the buyer has paid $2,500 in earnest money deposit and $200 in the form of the due diligence fee. How much money will Ashley need to bring to the settlement in order to close? (Round all proration entries to the nearest whole dollar amount.)

A. $52,357
B. $55,108
C. $55,308
D. $56,358

12-24 B

Danette has agreed to sell her house to Thomas for $319,000 and settlement to be scheduled for April 23. Thomas paid earnest money of $3,000 and an additional $1,000 as a due diligence fee with the offer. The balance due at closing on Danette's mortgage is $191,415. Terms of the agreement are for the annual property taxes of $4,032 to be prorated along with the monthly homeowners association fees of $48 that have already been paid by the seller. In addition to the above items, the settlement attorney will collect deed preparation fees of $80, recording fees $40, revenue stamps using the state rate, and the sales commission of 5%. What will be the amount the seller will receive at the settlement? (Enter all proration entries to the nearest whole dollar amount.) A. $108,662 B. $109,938 C. $110,663 D. $111,194

12-25 A

The Know Before You Owe laws require the buyer to receive their Closing Disclosure: A. 3 calendar days before closing B. At the time of closing C. 3 business days before closing D. 5 business days before closing

T12-1 C Buyers must receive the Closing Disclosure 3 business days prior to closing. A "business day" under the federal statute defines a business day as Mon-Sat. Sundays and 10 federal holidays are not counted.

What is the Closing Disclosure entry for a loan on a purchase money mortgage? A. credit seller, debit buyer B. credit buyer, debit seller C. credit buyer only D. debit seller only

T12-2 B A purchase money loan is seller financing. It would be deducted from the amount the seller would receive and the buyer would get a credit for the loan in the same manner as the buyer would be credited for any loan they are obtaining.

Closing will take place on November 15th. Annual real estate property taxes are $1,260 and have been paid by the seller in advance. Which of the following would be the appropriate Closing Disclosure entries? A. $1,102.50 debit seller/credit buyer B. $157.50 credit seller/debit buyer C. $1,102.50 credit seller/debit buyer D. $157.50 debit seller/credit buyer

T12-3 B The taxes are $1,260. The daily amount of the taxes are $3.50 ($1,260 divided by 360). The seller has been in the property for 315 days. The amount they owe is 315 x $3.50 = $1,102.50. They have paid $1,260. $1,260-$1,102.50 = $157.50 credit. At closing, the buyer will be debited the $157.50 and the seller will be credited the $157.50.

If personal property taxes appear on a residential Closing Disclosure, these taxes are normally: A. prorated between seller and buyer B. single entry debit to seller if the tax bill has been received and not yet paid by seller C. a double entry item, debit seller/credit buyer, if taxes are to be paid later in the year by buyer. D. both B and C

T12-4 D Typically personal property taxes are not included on a HUD-1 Settlement Statement. If they have been paid by the seller there is no entry to make. If they have not been paid they will typically be a single entry debit to the seller. They are only prorated if they have not been paid by the seller and are to be paid later in the year by the buyer.

Assume annual real estate taxes amount to $1,800 and have been paid in advance by the seller. If settlement date is set for September 15, which of the following is true? A. credit seller $525; debit buyer $1,275 B. debit seller $525; credit buyer $525 C. credit buyer $525; debit seller $1,275 D. Credit seller $525; debit buyer $525

T12-5 D The annual taxes are $1,800. The daily amount is $5 ($1,800 divided by 360). The seller has been in the property 255 days. The seller owes 255 x $5 = $1,275. They paid $1,800-$1,275 = $525 credit. At closing, the seller will be credited the $525 and the buyer will be debited $525.

You are purchasing a four-unit apartment building and will close on November 14. Each apartment rents for $575 per month. On November 1, one apartment is vacant and the other tenants have paid the November rent. Compute the rent proration through the day of closing and indicate the proper entries on a Closing Disclosure. A. $805 credit seller/debit buyer B. $805 debit seller/credit buyer C. $920 credit seller/debit buyer D. $920 debit seller/credit buyer

T12-6 D 3 apartment rents of $575 have been collected for a total of $1,725. The daily amount of rent is $57.50 ($1,725 divided by 360). The tenants have been in the apartment for 14 days. $57.50 x 14 = $805 is the seller's share of the rent.. $1,725-$805 = $920. This is the amount which must be debited to the seller and credited to the buyer.

Anne buys a home from Kim. She agrees to assume Kim’s existing mortgage loan, which carries an interest rate of 8% and is paid in arrears. Closing is set for July 20. The principal balance of the loan on July 1 is $130,000. How will the prorated interest for July be entered on the Closing Disclosure? A. credit Kim and debit Anne for $288.90 B. debit Anne and credit Kim for $577.78 C. credit Anne and debit Kim for $577.78 D. credit Anne and debit Kim for $288.90

T12-7 C The loan is for $130,000. The annual interest is $10,400 ($130,000 x 8%). The daily interest is $28.8889 (10,400 divided by 360). The interest covering the July period will be paid in full by the buyer on August 1. The seller occupied the property for 20 days in July. $28.8889 x 20 = $577.778 (rounded up to $577.78). The buyer will be credited this amount and the seller will be debited this amount.

Determine the excise tax to be paid on a house that sells for $268,210 if the buyer makes a $25,000 down payment and the seller takes back a second mortgage for $50,000? A. $536.42 B. $537 C.$533 D. $538

T12-8 B Excise taxes are paid on the sales price. The amount of the tax is $1 for each $500 of value. Always round up the sales price to the nearest $500. The sales price is $268,210, rounded up to $268,500. $268,500 divided by $500 = $537. It will be debited to the seller.

How much did Michelle net from a sale of her home at $205,000? Her expenses were: - Commission at a rate of 4.6% - $51,000 loan payoff - Excise tax at the standard rate - Deed preparation $15 - Courier fee of $15 for her lender to overnight her payoff documentation. A. $144,130 B. $144,301 C. $144,311 D. $145,712

T12-9 A The commission paid was $9,430 ($205,000 x 4.6%). The loan payoff was $51,000. The excise taxes were $410 ($205,000 divided by $500). The deed preparation fee was $15. The courier fee was $15. $205,000-$9,430-$51,000-$410-$15-$15 = $144,130.

The buyer is going to assume the seller’s 7% loan with a loan balance of $82,000 as of the day of closing, which will be August 11. Of the following, which would be correct Closing Disclosure entries? A. $175.38 debit seller/credit buyer and $82,000 debit seller/credit buyer B. $175.38 credit seller/debit buyer and $82,000 debit seller/credit buyer C. $82,000 credit seller/debit buyer D. $82,000 debit seller/debit buyer and $175.38 credit seller/credit buyer

T12-10 A The amount of the loan is $82,000. The annual interest is $5,740 ($82,000 x .07). The daily interest is $15.9444 ($5,740 divided by 360). The seller has been in the home 11 days. $15.9444 x 11 = $175.38.

Linda is buying a home for $125,000 with a 10% down payment and borrowing the balance at 7% for 30 years. Closing is August 22, and the lender requires Linda to pay interim interest. Which of the following is true? A. Linda will be given a credit of $196.88 B. Linda will be given a debit of $196.88 C. Linda will be given a debit of $175.00 D. Linda will be given a credit of $175.00

T12-11 B The loan amount is $112,500 ($125,000 x 90%). The annual interest is $7,875 ($112,500 x 7%). The daily interest is $21.875 ($7,875 divided by 360). Linda will pay interest from the day of closing (8/22) to the end of the month, which is 9 days. $21.875 x 9 days = $196.875 (rounded up to $196.88).

The Know Before You Owe provisions of the Dodd Frank Act are enforced by the Consumer Financial Protection Bureau (CFPB). These laws require: A. that the closing of a transaction be held within 90 days of the date of the sales contract B. that disclosure be made of all settlement costs prior to the settlement date C. that the buyer and seller be given disclosures 5 days prior to the closing date D. that lenders follow certain advertising procedures when advertising credit

T12-12 B There are two such disclosures required. One is the loan estimate issued by the lender within 3 business days of loan application. The other is the Closing Disclosure which must be delivered to the buyer 3 business days prior to closing, and the other is the final HUD-1 Settlement Statement provided at closing.

Who is legally permitted to sign documents and execute binding closing documents on behalf of someone else? A. an attorney at law B. a real estate licensee C. a spouse D. an attorney in fact

T12-13 D An attorney in fact is not a lawyer. An attorney-in-fact is a person who holds a power of attorney. Only an attorney-in-fact may sign documents on behalf of someone else.

All of the following are true about the borrower's Loan Estimate EXCEPT: A. It is subject to permissible variations in relationship to the Closing Disclosure B. A licensee is required to review the Loan Estimate of their borrower for its accuracy and completeness C. It is provided with an accompanying booklet "Know Before You Owe" D. It must be provided to the borrower within 3 business days of loan application

T12-14 B A licensee is required to review the Closing Disclosure for its accuracy and completeness, not the Loan Estimate

All of the following borrowers should receive a Loan Estimate, EXCEPT: A. a borrower who is purchasing a vacation rental B. the buyer of a condominium or townhome C. the borrower who is purchasing a home from a FSBO D. the purchaser of a vacant lot

T12-15 D The loan estimate is required on purchases involving 1-4 unit residential properties. A vacant lot is not subject to the provisions of RESPA or the Dodd Frank "Know Before You Owe" laws

A licensee is acting as a dual agent representing both the seller and the buyer of a residential property. In regard to the Closing Disclosure statements which of the following statements is true? A. The licensee should keep the disclosure statements separate and confidential B. Because the licensee represents both parties they are required to provide both the Sellers Disclosure and the Buyers Disclosure to both of the parties C. The licensee should encourage the parties to give written consent to share their Closing Disclosures D. The licensee must refrain from reviewing either of the Disclosures because it will provide them with the confidential information of the other party

T12-16 A One of the primary aspects of the Dodd Frank Act is to maintain the separate and confidential financial information of the parties

A broker is permitted to transfer funds they are holding as an escrow agent to the closing attorney for the purposes of settlement: A. Anytime prior to 10 days before closing B. No sooner than 10 days prior to closing C. On the 10th day prior to closing D. Only between the time of closing the transaction and recordation

T12-17 B The Good Funds Act requires that the money be transferred from the escrow agent to the settlement or closing agent no sooner than 10 days prior to closing.

The TRID disclosures required at the settlement of a real estate transaction combine the disclosures that are required under which two federal laws? A. FCRA & ECOA B. ECOA & Reg Z C. RESPA & TILA D. The Good Funds Act & RESPA

T12-18 C The acronym TRID stands for Tila and Respa Integrated Disclosures. The Disclosures combine the provisions of the Real Estate Settlement Procedures Act and the Truth in Lending Act.

Which of the following would be exempt from the providing of a mandatory Disclosure Statement three business days prior to settlement or closing? A. a buyer who can demonstrate an undue hardship caused by the delay B. a transaction where the buyer and seller both mutually agree to waive the disclosure timeline C. a seller who is financing an impending foreclosure D. a buyer who is purchasing a lot and has a separate agreement with a contractor to build a custom home.

T12-19 D The disclosures must be provided in the settlement of 1-4 unit residential transaction when the borrower is obtaining a mortgage. They do not apply to cash transactions or the sale of land.

All of the following changes will require the issuance of a new Closing Disclosure and the providing of a new 3 day review period, EXCEPT: A. an increase in the APR B. a change in the loan product C. the addition of a prepayment penalty D. the addition of a home inspection fee

T12-20 D A new disclosure and mandatory review period is required only for increases in the APR, changes in the loan product or the addition of a prepayment penalty. The statute regulates and controls the charges and fees from the lender.