CH. 12 QUIZ

True/False An escrow is terminated by the death or incapacity of either party.

False

True/False Escrow agents must submit Form 1099-S to the IRS regardless of the property's sales price.

False

True/False If there is no provision in escrow instructions specifying a termination date, the escrow will terminate after 60 days.

False

True/False The Real Estate Settlement Procedures Act applies to the purchase and financing of residential dwellings of five units or less.

False

RESPA applies to all of the following except a: A. purchase money first loan made by a bank B. senior mortgage loan made by a mortgage banker to finance a condominium unit C. loan used to finance 50 acres for residential development D. VA loan used to finance a fourplex

C. loan used to finance 50 acres for residential development

The seller's loan balance at closing is $84,450. The loan's interest rate is 7-1/2%. If the sale is completed on the 19th of March, how much prorated interest will the seller be charged at closing? Base your prorations on a 365-day calendar year. The seller will be charged for the day of closing. A. $329.70 B. $334.28 C. $339.11 D. $344.42

A. $329.70 First, calculate the annual interest ($84,450 x 7.5% = $6,333.75). Divide the annual interest by 365 to calculate the per diem amount ($6,333.75 / 365 = $17.3527). The seller is charged interest for the 1st through the 19th, which is 19 days. Multiply $17.3527 by 19, for a result of $329.70.

The seller's annual hazard insurance policy is paid through December 31, in the amount of $296. The transaction closes on October 20. The seller is not responsible for the day of closing. If prorations are calculated on a 360-day basis, the hazard insurance will appear on the settlement statement as a: A. $58.38 credit to the seller B. $58.38 debit to the seller C. $237.62 credit to the seller D. $237.62 debit to the seller

A. $58.38 credit to the seller The per diem rate is $0.8222 ($296 / 360 = $0.82). This is multiplied by 71 days for a total of $58.38 ($0.8222 x 71 = $58.38). Since the seller has already paid for insurance through the end of the year, this amount is credited to the seller.

A survey was conducted to confirm the property's boundary. Where will the cost of the survey appear on the closing statement? A. Debit buyer B. Debit seller C. Credit buyer/debit seller D. Debit buyer/credit seller E. Credit buyer F. Credit seller

A. Debit buyer

Where does the lender's policy of title insurance show up on the settlement statement? A. Debit buyer B. Debit seller C. Credit buyer/debit seller D. Debit buyer/credit seller E. Credit buyer F. Credit seller

A. Debit buyer

Which of the following is designed to determine under what conditions and at what time the escrow agent will distribute the money and documents involved in a real estate transaction to the proper parties? A. Escrow instructions B. Settlement statement C. Purchase agreement D. Listing agreement

A. Escrow instructions

Under the Real Estate Settlement Procedures Act, how much can an escrow agent charge for preparation of the required disclosure forms? A. Nothing B. $25 C. 1/2 of 1% of the loan amount D. 1% of the loan amount

A. Nothing

A rental property is sold. The tenant paid the $900 monthly rent on the first of the month, and the transaction closed on the tenth of the month. Which of the following statements is true? A. Seller owes buyer $600 B. Buyer owes seller $600 C. Seller owes buyer $300 D. Buyer owes seller $300

A. Seller owes buyer $600

What is the primary purpose of the settlement statement? A. To provide a detailed accounting of each party's expenses and credits, and the amount each will receive or be required to pay at closing B. To disclose the true costs of financing to both buyer and seller C. To provide documentary evidence of closing costs for state and federal authorities D. To provide the necessary documentation for a proper conveyance of title

A. To provide a detailed accounting of each party's expenses and credits, and the amount each will receive or be required to pay at closing

Under the Real Estate Settlement Procedures Act, a closing agent must provide the borrower with: A. a closing disclosure form B. a property disclosure statement C. the loan's annual percentage rate D. certified copies of buyer and seller closing statements

A. a closing disclosure form

The property appraisal cost $250. In a typical real estate transaction, the expense would be listed as a: A. $125 debit for the buyer and $125 debit for the seller B. $250 debit for the buyer C. $250 debit for the seller D. $250 debit for the buyer and a $250 credit for the seller

B. $250 debit for the buyer

If the annual property taxes are $2,156, what would the per diem rate be for proration purposes if the calculations are based on a 360-day year? A. $5.91 B. $5.99 C. $6.01 D. $6.10

B. $5.99 Divide $2,156 by 360 days to calculate the per diem rate of $5.99 ($2,156 / 360 = $5.99).

The annual property taxes are $2,340. Based on a 360-day year, what are the per diem taxes? A. $6.41 B. $6.50 C. $6.75 D. $6.79

B. $6.50 ($2,340 / 360 = $6.50).

How will a prepayment penalty be treated at closing? A. Debit buyer B. Debit seller C. Credit buyer/debit seller D. Debit buyer/credit seller E. Credit buyer F. Credit seller

B. Debit seller

To help finance the purchase, the buyer is going to obtain a new 80% conventional loan. Where is the buyer's loan reflected on the settlement statement? A. Only as a debit for the buyer B. Only as a credit for the buyer C. As a credit for the buyer and a debit for the seller D. As a debit for the buyer and a credit for the seller

B. Only as a credit for the buyer

All of the following are exempt from the licensing requirements of California's Escrow Law except a: A. title company B. real estate broker handling escrow for another broker's transaction C. savings and loan D. real estate broker handling escrow for his own transaction

B. real estate broker handling escrow for another broker's transaction

A buyer obtains a new purchase money loan in the amount of $185,000, with an annual interest rate of 8%. If the sale closes on the 22nd of the month, how much prepaid interest will the buyer be charged at closing? Base your prorations on a 360-day year. A. $355.14 B. $364.93 C. $370.00 D. $373.00

C. $370.00 First, calculate the annual interest ($185,000 x 8% = $14,800). Divide the annual interest by 360 to find the per diem rate ($14,800 / 360 = $41.11). The buyer must pay prepaid interest for the period between the 22nd and the 30th (which is 9 days). Multiply $41.11 by 9, for a result of $370.00.

When the buyer is assuming the seller's existing loan, how would the loan balance appear on the settlement statement? A. As a credit for the buyer only B. As a debit for the buyer only C. As a credit for the buyer and a debit for the seller D. As a debit for the buyer and a credit for the seller

C. As a credit for the buyer and a debit for the seller

If a buyer is going to assume the seller's existing loan, how is this arrangement treated on the settlement statement? A. Debit buyer B. Debit seller C. Credit buyer/debit seller D. Debit buyer/credit seller E. Credit buyer F. Credit seller

C. Credit buyer/debit seller

Which of the following events would terminate an escrow? A. Death or incapacity of a party B. Revocation of the escrow instructions by the broker C. Mutual agreement of the parties D. Withdrawal from escrow by either party

C. Mutual agreement of the parties

Which of the following would not be prorated at closing in the sale of a rental property? A. Prepaid property taxes B. Interest on seller's existing loan C. Security deposit D. Interest on buyer's new loan

C. Security deposit

Which of the following is true about a settlement statement? A. The sum of one party's debits must equal the sum of the other party's credits B. The buyer's total debits and credits must match the seller's total debits and credits C. The buyer's total debits must equal the buyer's total credits D. The balance due to the seller is listed in the seller's credit column

C. The buyer's total debits must equal the buyer's total credits

A property is sold on a land contract. On the settlement statement, the amount of credit extended would be: A. only a debit for the buyer B. only a debit for the seller C. a credit for the buyer and a debit for the seller D. a debit for the buyer and a credit for the seller

C. a credit for the buyer and a debit for the seller

The buyer's good faith deposit appears on the settlement statement as a: A. debit for the buyer and a credit for the seller B. credit for the buyer and a debit for the seller C. credit for the buyer only D. debit for the buyer only

C. credit for the buyer only

The homeowners association dues are $44.50 a month, and they have been paid for the current month, which is January. If the transaction closes on the 14th of January, and the buyer is responsible for the day of closing, how much will be credited back to the seller at closing? Base your computations on a 365-day year. A. $24.40 B. $25.21 C. $26.70 D. $25.84

D. $25.84 To find the per diem rate, divide $44.50 by 31 (since there are 31 days in January) ($44.50 / 31 = $1.4354). Then calculate how many days the buyer is responsible for (the 14th through the 31st, which is 18 days). Multiply $1.4354 by 18, for a result of $25.84. Because the seller has already paid for the month, that amount will be refunded to the seller.

Where will the unused portion of the seller's impound account appear on the settlement statement? A. Debit buyer B. Debit seller C. Credit buyer/debit seller D. Debit buyer/credit seller E. Credit buyer F. Credit seller

F. Credit seller

The seller has paid her annual taxes of $4,212 through December 31 of the previous year. If the sale closes on the 20th of March, how will the taxes appear on the settlement statements? Base your prorations on a 360-day year. The buyer is responsible for the taxes on the day of closing. A. $912.60 debit for the buyer, $924.30 credit for the seller B. $924.30 credit for the buyer, $912.60 debit for the seller C. $912.60 credit for the seller, $912.60 debit for the buyer D. $924.30 debit for the seller, $924.30 credit for the buyer

D. $924.30 debit for the seller, $924.30 credit for the buyer First, calculate the per diem tax rate ($4,212 / 360 = $11.70). The seller has only paid taxes through the end of December, so she still owes the taxes for January through March 19 (the day before the March 20 closing date). On a 360-day calendar, there are 79 days between January 1 and March 19. Multiply $11.70 by 79, for a result of $924.30. This figure would be a debit for the seller and also a credit for the buyer.

The seller has paid the property taxes for the entire year, but the transaction closes in August. How is this situation treated at closing? A. Debit buyer B. Debit seller C. Credit buyer/debit seller D. Debit buyer/credit seller E. Credit buyer F. Credit seller

D. Debit buyer/credit seller

The transaction is seller-financed, with the seller carrying back a deed of trust as security for the balance of the purchase price. Where does the financed portion of the purchase price appear on the settlement statement? A. Debit buyer B. Debit seller C. Credit buyer/debit seller D. Debit buyer/credit seller E. Credit buyer F. Credit seller

D. Debit buyer/credit seller

Where does the purchase price appear on the settlement statement? A. Debit buyer B. Debit seller C. Credit buyer/debit seller D. Debit buyer/credit seller E. Credit buyer F. Credit seller

D. Debit buyer/credit seller

Which of the following would normally be a debit for the buyer? A. Commission B. Unpaid property taxes C. Standard policy of title insurance D. Loan origination fee

D. Loan origination fee

Where is prepaid interest noted on the settlement statement? A. Only as a credit for the seller B. Only as a credit for the buyer C. Only as a debit for the seller D. Only as a debit for the buyer

D. Only as a debit for the buyer

A refund for prepaid fire insurance would be listed on the settlement statement as a: A. debit for the buyer B. debit for the seller C. credit for the buyer D. credit for the seller

D. credit for the seller

Where does the buyer's new loan appear on the settlement statement? A. Debit buyer B. Debit seller C. Credit buyer/debit seller D. Debit buyer/credit seller E. Credit buyer F. Credit seller

E. Credit buyer

True/False A buyer assumes an existing mortgage loan without the lender's approval. In this transaction, the lender is exempt from the RESPA requirements.

True

True/False A real estate broker can provide escrow services for a fee without being a licensed escrow agent, as long as the services are related to a transaction in which the broker is also providing the brokerage services.

True

True/False A real estate broker represents a buyer in the purchase of a home. He will also provide escrow services for the transaction. In his role as escrow agent the broker is classified as a dual agent, representing both the buyer and the seller.

True

True/False A residential broker refers all clients to a particular title insurance company. The broker receives $10 for each referral. This practice is illegal.

True

True/False As a general rule, escrow can be terminated before closing only if the buyer and seller mutually consent to its termination.

True

True/False At the beginning of the escrow process, the buyer and the seller sign written escrow instructions, appointing the escrow agent to act as their dual agent.

True

True/False If the seller in a transaction is a nonresident alien, 15% of the amount realized from the sale must be withheld and forwarded to the IRS within 20 days after the closing date.

True