national chap 14: closing real estate transaction instructor questions

b ( 1200 Yearly charge divided by 360 day year called banking/statutory year or 12 months of 30 days each closing is aug 31 will be given to buyer tax is 1800 4 months left in year (subtract from total amount) 1800 divided by 12 = 150 150 x 4 = 600 1800 - 600 = 1200 1200 Is amount for 8 months seller lived there, buyer pays 4 month (600) for when they will be living there)

A sale is closing on August 31. Real estate taxes have not been paid for the current year. The Modern Real Estate Practice Twentieth Edition tax is estimated to be $1,800. What amount of proration will be credited to the buyer (use a statutory year)? a. $1,100 b. $1,200 c. $1,485 d. $1,500

d (preparation of mortgage/note)

A seller would be responsible for providing all of these items EXCEPT a. documents necessary to clear any clouds on the title. b. affidavits of title. c. the deed. d. preparation of mortgage and note.

c (Credit buyer, the earnest money is brought to closing and credited to the buyer)

How is earnest money treated if the buyer does not default and shows up for closing? a. Credit seller b. Debit buyer c. Credit buyer d. Debit seller

c (credit to buyer, debit to seller)

If a fully occupied rental apartment building is sold, how will the tenants' security deposits be reflected on the closing statement? a. Credit seller, debit buyer b. Debit both seller and buyer c. Credit buyer, debit seller d. None of these

d (broker arrangement w lenders is illegal kickback under respa)

Since 2012, a real estate broker has had an understanding with two of the five mortgage lenders in town. The broker recommends only those two lenders to clients and does not tell clients about any other lenders. In return, the recommended lenders pay for the vacations the broker offers sales associates as rewards for high performance. Based on these facts, which of these statements is TRUE? a. The broker is not doing anything illegal. b. Because this arrangement has been in existence for more than five years, it is exempt from RESPA. c. This is a permissible affiliated business arrangement under RESPA because the broker is not paid a fee for the recommendations. d. The broker's arrangement with the lenders is an illegal kickback under RESPA.

b (434 escrow fee is to be split 50 50 between parties escrow fee: 868 divided by 2 = 434. buyer and seller both pay this same amount)

What amount of the escrow fee will the buyer pay? a. $360 b. $434 c. $460 d. $468 For questions 1 through 4, prorate using a 30- day month and a 360-day year, prorate the taxes as of the close of escrow, and split the escrow fee 50-50 between the parties. Closing is July 31. Use these relevant facts: ▪ Purchase price: $250,000 cash ▪ Earnest money: $10,000 ▪ Commission rate: 5%, split 50-50 ▪ Revenue stamps: $250 ▪ Real estate taxes: $3,500 (paid in full for current tax year of Jan. 1 through Dec. 31) ▪ Water bill: $450 (six months paid to Sept. 15) ▪ Title insurance: $953.51 ▪ Recording fee: $20 ▪ Escrow fee:$868 ▪ Loan balance: $94,500 (existing loan, including credit for the reserve account)

d (yes bc lender fee on assumed loan is more than 50. Buyer's assumption of seller's existing loan- if terms of assumed loan are modified or if lender charges more than 50 for assumption, transaction is subject to RESPA regs)

A single-family home is subject to an existing 30-year mortgage of $286,500 at a fixed rate of 4%. Under the terms of the contract for the sale of the home, the buyer will assume the seller's mortgage at 4% interest and pay the federally insured lender's assumption fee of $100. In addition, the seller will assist the buyer by taking back a purchase-money mortgage in the amount of $25,000 at 5% interest. Is this transaction subject to RESPA? a. No, because this transaction involves a purchase money mortgage taken back by the seller. b. No, because the terms of the assumed loan were not changed. c. Yes, because the seller is taking back a purchase money mortgage at an interest rate higher than that charged for the assumed loan. d. Yes, because the lender's fee on the assumed loan is more than $50.

c (appraisal fees)

All of these items are usually prorated at closing EXCEPT a. prepaid general real estate taxes. b. interest on an assumed loan. c. appraisal fees. d. rents collected in advance.

a (close July 31 real estate taxes 3500 divided by 12 = 291.66 per month 291.66 divided by 30 = 9.72 per day multiply figures by accrued period and add total to determine prorated real estate tax 291.66 x 5 = 1458.3 charged to buyer for rest of year)

What amount is the buyer debited for the real estate taxes? a. $1,458.33 b. $1,467.10 c. $2,021.90 d. $2,033.00 For questions 1 through 4, prorate using a 30- day month and a 360-day year, prorate the taxes as of the close of escrow, and split the escrow fee 50-50 between the parties. Closing is July 31. Use these relevant facts: ▪ Purchase price: $250,000 cash ▪ Earnest money: $10,000 ▪ Commission rate: 5%, split 50-50 ▪ Revenue stamps: $250 ▪ Real estate taxes: $3,500 (paid in full for current tax year of Jan. 1 through Dec. 31) ▪ Water bill: $450 (six months paid to Sept. 15) ▪ Title insurance: $953.51 ▪ Recording fee: $20 ▪ Escrow fee:$868 ▪ Loan balance: $94,500 (existing loan, including credit for the reserve account)

d ( 112.5 ▪ Water bill: $450 (six months paid to Sept. 15) 6 months billing is 450 for period ending sept 15 450 divided by 6 = 75 sale closes July 31 using 30 day basis prepaid period is 15 days of September and 30 days in august to find one day cost divide 75 by 30 = 2.5 a day 2.5 x 15 (daily cost) = 37.5 75 x 1 (monthly cost)= 75 112.5 = 45 day cost )

What amount is the buyer debited for the water bill? a. $100.00 b. $115.00 c. $117.50 d. $112.50 For questions 1 through 4, prorate using a 30- day month and a 360-day year, prorate the taxes as of the close of escrow, and split the escrow fee 50-50 between the parties. Closing is July 31. Use these relevant facts: ▪ Purchase price: $250,000 cash ▪ Earnest money: $10,000 ▪ Commission rate: 5%, split 50-50 ▪ Revenue stamps: $250 ▪ Real estate taxes: $3,500 (paid in full for current tax year of Jan. 1 through Dec. 31) ▪ Water bill: $450 (six months paid to Sept. 15) ▪ Title insurance: $953.51 ▪ Recording fee: $20 ▪ Escrow fee:$868 ▪ Loan balance: $94,500 (existing loan, including credit for the reserve account)

c (12500- commission rate: 5% split 50-50. .05 x 250,000 = 12500) how much does seller owe for broker commission. seller usually normally responsible for paying commission if broker reps seller)

What amount is the seller debited for the broker's commission? a. $7,500 b. $16,500 c. $12,500 d. $25,000 For questions 1 through 4, prorate using a 30- day month and a 360-day year, prorate the taxes as of the close of escrow, and split the escrow fee 50-50 between the parties. Closing is July 31. Use these relevant facts: ▪ Purchase price: $250,000 cash ▪ Earnest money: $10,000 ▪ Commission rate: 5%, split 50-50 ▪ Revenue stamps: $250 ▪ Real estate taxes: $3,500 (paid in full for current tax year of Jan. 1 through Dec. 31) ▪ Water bill: $450 (six months paid to Sept. 15) ▪ Title insurance: $953.51 ▪ Recording fee: $20 ▪ Escrow fee:$868 ▪ Loan balance: $94,500 (existing loan, including credit for the reserve account)

a. (201,847.28)

What amount will the seller receive at the closing? a. $201,847.28 b. $205,572.33 c. $208,654.34 d. $217,749.28 For questions 12 through 14, prorate using the actual number of days in the month and year. Split the escrow fee 50-50. The seller will pay the revenue stamps, and the buyer will pay title insurance and the recording fee. The buyer assumes the existing mortgage balance of $127,042.42, the buyer will pay in cash at closing the difference between the purchase price and the loan balance, and the present monthly payment on the loan is $1,001.40. Closing is October 15. Use these relevant facts: ▪ Purchase price: $350,000 ▪ Earnest money: $3500 ▪ Commission rate: 6% split 50-50 ▪ Real estate taxes: $2,900 (paid in full for the current year Jan. 1 through Dec. 31) ▪ Escrow fee: $800 ▪ Title insurance: $1,150 ▪ Insurance policy: $758 (annual premium) -revenue stamps 126.3 -recording fee: 30 -interest rate: 3.75% (paid in arrears, with the next payment due Nov. 1)

b (611.78 jan 1-oct 15 is 288 days tax number is 2900 paid in full for year jan 1-dec 31 2900 divided by 365 = 7.945 7.945 x 288 days = 2288.22 subtract 2900 - 2288.22 = 611.78)

What are the prorated real estate taxes to be charged to the buyer? a. $604.20 b. $611.78 c. $690.67 d. $728.30 For questions 12 through 14, prorate using the actual number of days in the month and year. Split the escrow fee 50-50. The seller will pay the revenue stamps, and the buyer will pay title insurance and the recording fee. The buyer assumes the existing mortgage balance of $127,042.42, the buyer will pay in cash at closing the difference between the purchase price and the loan balance, and the present monthly payment on the loan is $1,001.40. Closing is October 15. Use these relevant facts: ▪ Purchase price: $350,000 ▪ Earnest money: $3500 ▪ Commission rate: 6% split 50-50 ▪ Real estate taxes: $2,900 (paid in full for the current year Jan. 1 through Dec. 31) ▪ Escrow fee: $800 ▪ Title insurance: $1,150 ▪ Insurance policy: $758 (annual premium) -revenue stamps 126.3 -recording fee: 30 -interest rate: 3.75% (paid in arrears, with the next payment due Nov. 1)

c (loan estimate)

What form must be provided to a loan applicant within three business days of application? a. Closing Disclosure b. Settlement Transfer c. Loan Estimate d. Mortgage Servicing

b (commission split : 6% 50/50 purchase price= 350,000 x .06 = 21,000 divided by 2 is 10,500)

What will be the amount of commission paid to the cooperating broker? a. $8,750 b. $10,500 c. $17,500 d. $21,000 For questions 12 through 14, prorate using the actual number of days in the month and year. Split the escrow fee 50-50. The seller will pay the revenue stamps, and the buyer will pay title insurance and the recording fee. The buyer assumes the existing mortgage balance of $127,042.42, the buyer will pay in cash at closing the difference between the purchase price and the loan balance, and the present monthly payment on the loan is $1,001.40. Closing is October 15. Use these relevant facts: ▪ Purchase price: $350,000 ▪ Earnest money: $3500 ▪ Commission rate: 6% split 50-50 ▪ Real estate taxes: $2,900 (paid in full for the current year Jan. 1 through Dec. 31) ▪ Escrow fee: $800 ▪ Title insurance: $1,150 ▪ Insurance policy: $758 (annual premium) -revenue stamps 126.3 -recording fee: 30 -interest rate: 3.75% (paid in arrears, with the next payment due Nov. 1)