Ch. 16 Title Closing and Escrow

8. A couple buys a house complete with furnishings. They assume and agree to pay the existing mortgage. All of the following documents should be used in closing EXCEPT

A. note and mortgage.

13. Deed delivery in an escrow is accomplished by

A. the escrow holder accepting the deed on behalf of the grantee.

22. The seller has just sold her home and received a closing statement and the balance due to her. Presuming no agreement to the contrary, which of the following should have been charged to the buyer?

B. recording fee for the deed prepared by the sellers' attorney.

16. On the day of closing a real estate sale, existing property taxes and insurance are

C. prorated

2. For what price must a house sell if the seller is to net $30,000 after paying $1,500 in settlement and the broker's commission of 6% (rounded to the nearest dollar)?

D. $33,511 After paying a 6% commission the seller had 30,000 + 1,500 left. So 31,500 (30,000 + 1,500) is 94% of the sales price. So 31,500/.94 = 33,511 (rounded).

1. A seller received $81,000 at the close of escrow after paying $1,750 in closing costs and a 6% brokerage fee. What was the sales price of the house?

D. $88,032 After paying a 6% commission the seller had 81,000 + 1,750 left. So 82,750 (81,000 + 1,750) is 94% of the sales price. So 82,750/.94 = 88,032 (rounded).

18. The home was sold on July 18. The next payment date is August 1. The buyer agreed to assume the seller's 6% loan which has a balance of $36,800 as of July 1. Interest on this loan would be prorated as

D. credit buyer $106.84 and charge seller $106.84 Interest is paid in arrears so the seller owes the buyer. The daily rate calculation is: 36,800 × .06 / 12 / 31 = 5.9355 times number of days (18) = 106.84.

27. A buyer's walk-through is conducted for the purpose of

D. making a final inspection just prior to closing

17. The property tax year runs from January 1 through December 31. The taxes on a certain house are $1,440 this year and have not yet been paid. If the house sells and the closing date is December 10th, the

D. seller owes the buyer $1,357.15 Since taxes are paid in arrears, the seller owes the buyer. The number of days through December 10 is 344. The daily rate (1,440 / 365) × number of days (344) = 1,357.15.

15. A 9% amortized loan with a November 1 balance of $40,000 requires the payment of principal and interest at the first of each month. If prorating is done as of the 20th of November, the

D. seller owes the buyer $200. The monthly interest is 40,000 × .09 / 12 = 300 or 300 / 30 =10 per day. So the seller would owe the buyer 20 × 10 = 200 since the buyer will have to pay for the whole month of November on December

20. The property tax year runs from January 1 to December 31. The taxes on a certain house are $1,440 this year, none of which has been paid. If the house sells, not in a leap year, and the closing date is June 12, the

D. seller owes the buyer $643.07 Since the taxes are paid in arrears, the seller owes the buyer. The number of days from January 1 through June 12 is 163. The daily rate is 1,440 / 365 = 3.9452 × 163 (no. of days) = 643.07.

6. Pat bought a home for $75,000. He put up $5,000 earnest money and secured an 80% loan. The bank charged four points and a 2.5% loan fee. Pat received a $900 credit from the proration of taxes. How much cash will he need to bring to close this transaction?

A. $13,000 Pat has agreed to pay $75,000 but the lender will supply 80% or $60,000; so the down payment is 75,000 - 60,000 = 15,000. Add to that 60,000 × .025 or 1,500 in loan fees and 60,000 × .04 or 2,400 as points and subtract 900 (tax credit) and subtract $5,000 because he has already deposited that much as earnest money; 15,000 + 1,500 + 2,400 - 900 - 5,000 = 13,000.

7. How many days are normally needed to close a residential sale that requires no financing?

A. 1 to 29

30. Which of the following may serve as an escrow agent?

A. a bank B. an independent escrow company C. a lender D. any of the above

23. A local federal savings and loan makes a home loan. RESPA requires that

A. a good faith estimate of closing costs be given to the borrower

28. A settlement meeting may take place in the offices of

A. the real estate agent B. an attorney C. a title company D. any of the above

29. When a real estate settlement is held in escrow

A. there is no closing meeting B. the closing process may be conducted by mail C. both a and b

26. Details that must be handled between the time a purchase contract is signed and the closing typically include

A. title search B. deed preparation C. loan arrangements D. all of the above.

5. A buyer agreed to put down $5,000 as earnest money toward a house he was buying for $97,000. The offer was based upon receipt of an 80% loan from a bank. The attorney's fees were $2,000 and all other buyer costs amounted to $1,500. How much money will the buyer need to pay at settlement?

B. $17,900 The buyer has agreed to pay $97,000 but the lender will supply 80% or $77,600; so the down payment is 97,000 - 77,600 = 19,400. Add to that $2,000 and $1,500 in expenses but subtract $5,000 because he has already deposited that much as earnest money; 19,400 + 2,000 + 1,500 - 5,000 = 17,900.

10. All of the following items are usually paid by the seller at the close of a residential sale escrow EXCEPT

B. appraisal fee.

11. If an existing escrow is to be canceled, it must be done

B. by mutual rescission

19. The proration of prepaid condominium association dues will result in a

B. charge to the buyer and credit to the seller.

24. According to the Real Estate Settlement and Procedures Act, which of the following is illegal?

B. payment of kickbacks

9. Of the following, the final action to be taken to complete a closing is

B. recordation of appropriate instruments.

3. A seller has agreed to pay 80% of the title insurance company's fee on a sale. The company charges $550 for the title policy, plus $95.50 for the title search and $50 for processing the papers. What is the difference between what the seller has to pay and what the buyer has to pay?

C. $417.30 Seller has to pay: 550 + 95.50 + 50 = 695.50 × .80 = 556.40. Buyer has to pay 695.50 - 556.40 = 139.10. The difference is 417.30.

4. A seller received a net amount of $29,817 after paying off a $53,000 loan balance, $1,213 in miscellaneous costs, and a 7% brokerage fee. What was the sale price of the house? (round to nearest dollar)

C. $90,355 The seller received 29,817 + 53,000 + 1,213 (84,030). This was 93% of the sales price. So 84,030/.93 = 90,355 (rounded).

12. Escrow accounts are opened for the protection of the interests of the

C. buyer and seller.

21. In a closing statement, the amount of interest on an assumed loan is a

C. charge to the seller and credit to the buyer.

25. Under the Real Estate Settlement and Procedures Act, all of the following are required of the lender EXCEPT

C. disclosure of the "Annual Percentage Rate"

14. A disinterested party representing both buyer and seller in a real estate sale is the

C. escrow agent