UNIT 21

Question 1

A North Carolina buyer is typically responsible at settlement for paying

a. title insurance.
b. deed preparation fee.
c. excise tax.
d. brokerage fees.

Answer 1

a. title insurance.

Question 2

The settlement attorney informed the seller that the buyer would receive credit for certain
accrued items. These items represent
a. bills related to the real estate that have already been paid by the seller.
b. bills related to the real estate that are unpaid as of the time of settlement.
c. all of the seller’s outstanding bills.
d. all of the buyer’s outstanding bills.

Answer 2

b. bills related to the real estate that are unpaid as of the time of settlement.

Question 3

The Real Estate Settlement Procedures Act (RESPA) applies to the activities of

a. licensed real estate brokers when selling commercial and office buildings.
b. general partnerships when selling limited partnership interests.
c. lenders financing the purchase of a borrower’s residence.
d. Fannie Mae and Freddie Mac when purchasing residential mortgages.

Answer 3

c. lenders financing the purchase of a borrower’s residence.

Question 4

The details of a sales transaction are typically determined by the

a. wishes of the seller as expressed orally.
b. wishes of the buyer as expressed orally.
c. instructions of the designated agents.
d. terms of a properly executed purchase contract.

Answer 4

d. terms of a properly executed purchase contract.

Question 5

At the settlement, the real estate brokerage commission generally appears as a

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

Answer 5

b. debit to the seller.

Question 6

The condition of the seller’s title is generally determined from a

a. title search.
b. physical inspection of the property by the buyer.
c. settlement statement prepared by an escrow agent.
d. RESPA report prepared by the settlement attorney.

Answer 6

a. title search.

Question 7

The Real Estate Settlement Procedures Act (RESPA) provides that
a. purchasers must review settlement statements two days prior to closing.
b. realty ads must include all financing information if a trigger term is advertised.
c. the borrower must be given an estimate of the settlement costs within three
business days of loan application.
d. no referral fees are allowed to be paid in connection with the transaction, and real
estate agents are no exception to this restriction.

Answer 7

c. the borrower must be given an estimate of the settlement costs within three
business days of loan application.

Question 8

The seller’s principal balance and accrued interest on an assumed mortgage loan is
entered on the settlement statement as a
a. credit to the seller and a debit to the buyer.
b. debit to the seller and a credit to the buyer.
c. credit to both the seller and the buyer.
d. debit to both the seller and the buyer.

Answer 8

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

Question 9

As provided in a valid purchase contract, the closing of the real estate transaction
includes all of the following EXCEPT
a. the seller providing clear title to the property.
b. the purchaser paying the balance of the purchase price to the seller.
c. the broker’s attendance at the settlement.
d. the seller delivering the deed to the purchaser.

Answer 9

c. the broker’s attendance at the settlement.

Question 10

The process at the settlement of a real estate transaction where both the buyer and the
seller pay their respective portions of the shared expenses is called
a. assessment.
b. proration.
c. balancing.
d. reconciliation.

Answer 10

b. proration.

Question 11

At an April 30 settlement in North Carolina, the current year tax bill will appear on the
settlement statement as a
a. credit to the seller and a debit to the buyer.
b. debit to the seller and a credit to the buyer.
c. debit to the seller.
d. debit to both the seller and the buyer.

Answer 11

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

Question 12

At a November 30 settlement in North Carolina, the unpaid current year tax bill will
appear on the settlement statement as a
a. credit to the seller and a debit to the buyer.
b. debit to the seller and a credit to the buyer.
c. debit to the seller.
d. debit to both the seller and the buyer.

Answer 12

d. debit to both the seller and the buyer

Question 13

In a North Carolina closing,
a. the seller is traditionally responsible for the day of closing.
b. the buyer pays for the day of closing when calculating tax prorations.
c. the buyer can bring to the settlement meeting the balance of funds due in the form
of a bank check, a personal check, or cash.
d. the buyer is entitled to possession of the property as soon as the deed is signed at
the settlement meeting.

Answer 13

a. the seller is traditionally responsible for the day of closing.

Question 14

Which of the following items is NOT usually prorated between the buyer and the seller at
settlement?
a. Recording charges
b. Real estate taxes
c. Rents
d. Home owner association dues

Answer 14

a. Recording charges

Question 15

The settlement statement involves the debits and credits to the parties in the transaction.
A debit is:
a. a refund.
b. an expense.
c. an adjustment for an expense paid outside of settlement.
d. a proration.

Answer 15

b. an expense.

Question 16

In a settlement statement, an accrued item is

a. an item paid in advance.
b. an item that is due but not yet paid.
c. a prepaid expense.
d. a double credit entry item.

Answer 16

b. an item that is due but not yet paid.