Test Questions 2 (longer questions)

Question 1

The seller and the buyer agreed to a purchase price of $270,000 with the closing to occur on June 15. The seller’s loan balance after the June 1 payment was $170,000. with an interest rate of 6%.The monthly payment was $1,800 principal and interest. What was the loan balance the day of closing, and how much interest did the seller owe the bank?

Loan balance $171,800; interest due $850
B
Loan balance $170,000; interest due $2,550
C
Loan balance $270,000; interest due $862.50
D
Loan balance $170,000; interest due $425

Answer 1

D
Loan balance $170,000; interest due $425

Although many types of loans can become more complex in their calculations of remaining principal and interest at a particular point in time, in this case the interest portion of the payment is calculated simply by multiplying $170,000 by 6% and dividing by twelve. That results in monthly interest of $850, with half that amount, or $425 added to the principal payment at closing.

Question 2

Which of the following would be used to clear a defect from the title records?

A lis pendens
B
An estoppel certificate
C   
A suit to quiet title
D
A writ of attachment

Answer 2

C
A suit to quiet title

A owner might bring a “quiet title” action to correct a minor mistake in the property description or to remove an easement that’s been unused for years. Additionally, they are used when a third party tries to asset some right to the property through a dubious claim. The suit “quiets the mouth” of that person and establishes a clear title.

Question 3

Restrictive covenants that run with the land

A
are no longer effective when the title is transferred.
B
apply only until the developer has conveyed the title.
C
can be removed by a court of competent jurisdiction.
D
apply to and bind all successive owners of the property.

Answer 3

D
apply to and bind all successive owners of the property.

Often put in place to maintain the consistency and desirability of a neighborhood, restrictive covenants have withstood court tests and prohibit all future owners from certain actions or modifications of their property, such as adding out-buildings or creating additions above a certain height, putting up lights to illuminate a sports court, changing the architectural style of a home and so forth.

Question 4

In general, the Foreign Investment in Real Property Tax Act (FIRPTA) requires a buyer to withhold estimated taxes equal to ____ of the sale price in any sale or exchange of property owned by a foreigner (not a US citizen).

A
3%
B
5%
C   
15%
D   
20%

Answer 4

C
15%

Congress passed the Foreign Investment in Real Property Tax Act (FIRPTA) to eliminate the problem of collecting delinquent taxes from foreigners who owned and sold property in the US and left the country without paying the taxes due on the sale. The IRS currently keeps this 15% to ensure that any capital gains on the sale are paid.