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Real Estate > Session 18: Closing the Transaction > Flashcards

Session 18: Closing the Transaction Flashcards

1
Q

Closing

A

Consummation of the real estate transaction where the seller delivers the deed and the buyer accepts it.
All promises that have been made in the real estate contract are now fulfilled

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2
Q

When is escrow completed?

A

When the deed has been recorded at the clerk’s office

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3
Q

What happens at closing? 3 steps

A
  1. Seller will give the deed to the escrow officer with all other documents including evidence of marketable title
  2. Closing statement is prepared which shows final costs and all financial considerations
  3. Disbursement of all funds including payment to the seller
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4
Q

Double Escrow

A

Set of real estate transactions involving two contracts of sale for the same property, to two back to back buyers, at same or different prices, arranged to close on the same day

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5
Q

In AZ, do double escrows need to be disclosed?

A

Yes

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6
Q

IRS Reporting

A

1099-s, contains seller SSN, sales price, and any property tax credit to the seller

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7
Q

Foreign Investment in Real Property Tax Act

FIRPA

A

Requires a buyer withhold estimated taxes equal to 15% when the seller is a foreign national

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8
Q

Real Estate Settlement Procedures Act

RESPA

A

Ensures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protected from unnecessarily high settlement charges caused by certain abusive practices

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9
Q

When did RESPA go into effect?

A

1974

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10
Q

Prohibited by RESPA

Section 8

A

Prohibits kickbacks and other unearned fees

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11
Q

Prohibited by RESPA

Section 9

A

Prohibits home sellers from requiring home buyers to purchase title insurance from a particular company

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12
Q

Prohibited by RESPA

Section 10

A

Prohibits lenders from requiring excessive amounts of upfront fees for property taxes, insurance, and other charges relating to the property

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13
Q

HUD and section 9

A

HUD will NOT enforce section 9 against a seller who selects a title insurance company if the seller is paying the owner’s title insurance policy

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14
Q

Does HUD require the buyer to use the title insurance company for the lenders policy?

A

NO

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15
Q

Kickback

A

RESPA prohibits kickbacks and fee-splitting for referrals of settlement services, and unearned fees for services not actually performed

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16
Q

Is commission splitting or referral fees permitted?

A

Yes between licensed agents

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17
Q

Truth in Lending (TILA)

Regulation Z

A

A federal law that ensures borrowers in need of consumer credit be given a good faith estimate on the cost of credit

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18
Q

Annual percentage rate (APR)

A

The true cost of borrowing

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19
Q

TILA-RESPA Integrated Disclosure

TRID

A

Consolidated four existing disclosures into two forms

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20
Q

Who issued TRID

A

Consumer Financial Protection Bureau (CFPB)

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21
Q

When must the Loan Estimate Form be delivered?

A

No later than three business days after receiving the consumer’s loan application

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22
Q

When must the Closing Disclosure Form be delivered?

A

At least three business days prior to closing the loan

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23
Q

TILA Advertising

A

if advertising contains trigger terms then they have to have three specific disclosures listed as well

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24
Q

TILA Trigger terms

A
  1. amount of down payment is expressed as either a percentage or a dollar amount
  2. amount of any payment expressed either as a percentage or as a dollar amount
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25
Q

Required TILA Disclosures

A
  1. The amount or percentage of the down payment
  2. The terms of repayment
  3. APR
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26
Q

Does RESPA allow packaged services?

A

Yes as long as disclosure is made to the consumer regarding the business relationship amongst providers and that other service providers are available

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27
Q

Affidavit of title

A

Legal document stating certain facts regarding a property

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28
Q

Who offers the affidavit of the title?

A

Sellers

29
Q

Affidavit of Property Value (Legal Value)

A

AZ law requires all buyers, sellers, and agents to fill out

Used by Department of Revenue and County Assessors to develop tables and schedules for property taxes

30
Q

Affidavit of Disclosure

A

Legal access, physical access, flood areas, floodplains, washes, public utility services, police and fire, well/water use, septic system, percolation test, zoning

31
Q

When does a seller have to use an affidavit of disclosure?

A

Seller of 5 or fewer parcels of land, other than subdivided land in an unincorporated area of the county

32
Q

When does the seller have to give the buyer the disclosure?

A

7 days before the transfer of property

33
Q

How long does a buyer have to rescind after receiving the disclosure?

A

5 days after receipt

34
Q

Prorations for seller

A

Through the day of closing

35
Q

Prorations for buyer

A

Up to the day of closing

36
Q

Statutory Year

A

360 days, 30 days/month

37
Q

The Real Estate Settlement Procedures Act (RESPA) applies to which of the following transactions?

a. Agreement for sale contracts
b. Cash transactions
c. Land contracts
d. Federally insured loans

A

Federally insured loans

38
Q

Which law makes it mandatory that a buyer receive a “loan estimate” on all federally related loans?

A

The TILA-RESPA Integrated Disclosure Rule

39
Q

The annual property taxes are $3,800 and the closing in on August 14th. Prorate this for the buyer using a statutory year and the day of closing belongs to the buyer.

A

$2,353.89 credit to buyer
30+30+30+30+30+30+30+13=223
3800/360=10.55
10.55x223=2353.88888

40
Q

The required IRS form 1099-s is used to

A

Report the sales price

41
Q

The earnest money deposit on a closing statement is which of the following?

a. prorated evenly between the buyer and seller
b. a double-entry
c. credit to the buyer
d. debit to the seller

A

Credit to the buyer

42
Q

Which of the following would not be the responsibility of the seller?

a. Delivering the deed
b. Affidavit of title
c. Removing all liens and encumbrances
d. Preparing the promissory note

A

Preparing the promissory note

43
Q

The bank is demanding the buyers obtain title insurance from a specific Title Insurance Company. This is a violation of

A

RESPA

44
Q

The following functions are performed by the Title Insurance Company except:

a. Perform title searches
b. Represent the buyer or seller in the transaction
c. Collect all the documents needed for recording
d. Determine if the title is marketable

A

Represent the buyer or seller in the transaction

45
Q

What a buyer has to pay at closing is equal to:

a. The excess of the seller’s credits over the seller’s debit’s
b. the excess of the seller’s debit’s over the seller’s credit’s
c. the excess of the buyers debit’s over the buyer’s credits
d. the excess of the buyer’s credit’s over the buyer’s debit’s

A

The excess of the buyer’s debit’s over the buyer’s credits’

46
Q

The annual property taxes on a property is $4875 and the close of escrow is on May 23. Prorate this for the seller using a calendar leap year and the day of closing belongs to the seller.

A

$1918.03 debit to the seller
31+29+31+30+23=144
4875/366=13.32
13.32x144=1918.032

47
Q

The purpose of RESPA is to

A

Ensure that buyers know all settlement costs that will be charged to them

48
Q

The principle amount of the purchaser’s new mortgage loan is a

a. Debit to the seller
b. Debit to the buyer
c. Credit to the seller
d. Credit to the buyer

A

Credit to the buyer

49
Q

A prepaid item by the seller is

a. Debit to seller
b. Credit to seller
c. Evenly divided between buyer and seller
d. Credit to buyer

A

Credit to seller

50
Q

Mathew Devin is purchasing a duplex and it’s closing on September 14. The tenant on the second floor pays $1,725 per month rent and the tenant on the first floor pays $1,800 per month. All the rent has been collected on September 1 and was paid to the seller. Based on a calendar year and prorated through the day of closing, how much will be credited to Mathew Devin?

A 
$1,880.00
1725+1800=3525
3525/30=117.50
117.50x14=1645
3525-1645=1880
51
Q

The title company will typically prorate all of the following except

a. Appraisal fee
b. Rents
c. Insurance
d. Property tax

A

Appraisal fee

52
Q

The broker and seller have entered into an exclusive right-to-sell listing. Once the home sells and escrow is opened, the commissions will show as

a. debit to the buyer and credit to the seller
b. debit to the seller and credit to the buyer
c. debit to the seller
d. debit to the buyer

A

Debit to the seller

53
Q

TRID consolidated four existing disclosures required under TILA and RESPA into two forms. What are the names of these forms?

A

Loan Estimate Form & Closing Disclosure Form

54
Q

On a closing statement the unpaid principle balance that is assumed by the buyer will show as:

a. Credit to the seller and a debit to the buyer
b. Credit to the buyer and a debit to the seller
c. Prorated equally between the buyer and seller
d. Determined at close of escrow

A

Credit to the buyer and a debit to the seller

“principal remaining on loan assumed by the buyer

55
Q

What is recorded at close of escrow?

A

Deed of trust

56
Q

What legal purpose does recording the deed fulfill?

A

Gives constructive notice to 3rd parties about title

57
Q

To be in compliance with Regulation Z (Truth in Lending Act), which of the following statements in advertising would require full disclosure?

a. FHA financing available
b. 10% down payment
c. Low monthly payment
d. Small down payment

A

10% down payment (trigger)

58
Q

The title company has been employed to receive payments. The title company is the:

a. trustor
b. trustee
c. Service agent
d. beneficiary

A

Service agent

59
Q

Charles has just made the final payment on his home mortgage to the mortgagee. There will still be a lien on the property until the mortgagee records a

A

Satisfaction certificate because its a mortgage

60
Q

Who administers the RESPA

A

Consumer Financial Protection Bureau

61
Q

A document that protects against hidden risks such as forgeries and loss due to defects in the title, subject to specific exceptions, is called

a. Title insurance policy
b. Certificate of title
c. Abstract of title
d. Chain of title

A

Title insurance policy

62
Q

If the grantor delivers a deed to the grantee in which the name of the grantee has been left out inadvertently, the deed is

A

Void

63
Q

Disclosure of cost in a credit transaction is required by

A

Truth in Lending Act (Regulation Z)

64
Q

Title to real estate passes when the valid deed is

A

Delivered and accepted

65
Q

Prorate the following for both buyer and seller if the insurance premium is $2,150 annually and the closing is July 15 based on a statutory year and the day of closing belongs to the buyer

A

$991.39 - credit to seller and debit to buyer
16+30+30+30+30+30=166
2150/360=5.97
5.97x166=991.388

66
Q

The market value on a home is $375,000. The home is assessed at 40% of market value. The annual tax rate is $3.75 per $100 of assessed value and the closing is on October 14. What is the prorated tax amount based on a statutory year and the day of closing belongs to the buyer

A 
$4,421.88 debit to seller and credit to buyer
375000x.4=150000
150000/100=1500
1500x3.75=5625
30+30+30+30+30+30+30+30+30+13=283
5625/360=15.625
15.625x283=4421.875
67
Q

Brian and Stacy are purchasing an apartment building in Gilbert, which contains 40 units that each rent for $875/mo. The closing is August 18 and all the rent has been collected on the first of the monty. Prorate the rent for buyer and seller using a statutory year and day of closing belongs to buyer.

A 
$15,166.67 debit to seller and credit to buyer
40x875=35000
35000/30=1166.66/day
1166.66x17=19833.33
35000-19833.33=15166.67
68
Q

When would the Affidavit of Disclosure apply?

a. Unincorporated area of the county with 5 or fewer parcels of land other than subdivided land
b. Unincorporated area of the county with 6 or fewer parcels of land other than subdivided land
c. All residential transactions
d. All commercial transactions

A

Unincorporated area of the county with 5 or fewer parcels of land other than subdivided land

69
Q

The affidavit of legal value must be signed by

A

Buyer and seller or their agents

Real Estate (20 decks)

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