Unit 8: Escrow and Closing (Quiz)

Which of the following items would most likely appear as a credit in the seller's closing statement?

Prepaid taxes. A seller who prepays the taxes would expect to get the unused portion back, which would show up as a credit. In most transactions, sellers pay for title insurance and any delinquent assessment liens, which would show up as debits. The assumed loan is a debit to the seller and a credit to the buyer. [Escrow]

After a property is declared tax-defaulted for failure to pay property taxes, the occupant of the property:

may continue to reside on the property unhindered. While the property is in a tax-defaulted status, the owner does not actually lose title and keeps possession for five years. [Tax Issues in Transferring Real Property]

Which of the following is not covered by title insurance?

A zoning ordinance, regulation, or plan. Generally, title insurance does not cover legislative regulations like zoning laws. [Assuring Marketability of Title]

How would a loan for the purchase of a residence appear on the buyer's closing statement?

Credit to buyer. Whenever a buyer has a loan (new or assumed) it is shown as a credit on the settlement statement. [Escrow]

Which of the following is regarded as a recurring cost in a closing statement?

Impound accounts. An impound account is a trust account set up for funds set aside for future, recurring costs relating to a property. It is used as needed. [Escrow]

Which of the following statements concerning escrow is correct?

In order for the escrow to be able to close, the buyer may be required to pay more than the amount stated in the escrow instructions. Closing costs are generally not included in escrow instructions. They are calculated just prior to closing and are included in the closing statement. [Escrow]

Which of the following title insurance policies protects against all risks?

No policy insures against all risks. No form of title insurance will insure against changes in zoning regulations. [Assuring Marketability of Title]

County governments levy taxes through:

Property taxes. Special assessments. Transfer taxes. Real property is taxed at the local level through ad valorem property taxes, special assessments, and transfer taxes. [Tax Issues in Transferring Real Property]

Which system of land description employs meridians and baselines?

Public Land Survey system. The Public Land Survey System uses imaginary lines to form a grid to locate land. North-south longitude lines, called meridians, and east-west latitude lines called baselines, intersect to form a starting point from which distances are measured. [Land Descriptions]

If a buyer assumes an existing loan when purchasing a single-family residence, the settlement statement at close of escrow would show the assumption of the loan as:

a debit to the seller. Since the loan shifts from the seller to the buyer, the loan amount is debited against the seller and credited to the buyer. An assumed loan is shown as a credit to the buyer and a charge or debit to the seller. [Hint: ABC - Assumption by the Buyer is a Credit] If it were a NEW loan, only the buyer would be credited. [Escrow]

An escrow agent is authorized to:

call for funding of the buyer's loan. Escrow agents may not offer legal advice, and may only act on written instructions from the parties to the escrow. Escrow agents write lenders of record for payoff amounts and funding. They accept pest control and similar reports, but cannot authorize any work. [Escrow]

If an escrow holder receives pest control reports from two different companies, the escrow officer should:

contact the brokers to ask for instructions from the buyer and seller. The escrow officer does not give advice; he or she waits for proper instructions from both parties' broker(s). [Escrow]

The reason for using an escrow when a deed of trust is conveyed is to:

ensure that the conditions and instructions of the agreement are satisfied. Escrow is not required. However, escrow, acting as a neutral third party helps to guarantee that all terms and conditions of the agreement are met. [Escrow]

An example of an ad valorem tax would be:

property tax. Ad valorem means according to value. [Tax Issues in Transferring Real Property]

A buyer who wishes to insure title to real property when it is purchased should secure a(n):

title insurance policy. Title insurance insures and protects title to property. [Assuring Marketability of Title]

Which of the following best describes completed escrow?

All escrow instructions have been carried out. A perfect escrow is one for which all documents, funds, and instructions required to close escrow are completed and are in the hands of the escrow agent. A completed escrow is one in which all of the instructions have been satisfied. When an escrow is both perfect and complete, it is ready to close. Escrow is considered closed when the agent presents settlement statements to the buyer and seller, disburses escrow funds, and delivers all necessary documents. [Escrow]

How do special property tax assessments differ from annual property tax assessments?

Special assessments provide for local improvements. Special assessments are spent on specific local improvements such as streets, sewers, sidewalks, parks, and water supply and treatment. Only owners who are affected by the improvements pay the assessment. [Tax Issues in Transferring Real Property]

When buying a home, a purchaser was given a grant deed and a standard policy of title insurance. Which of the following is warranted by the seller but is not covered by the standard policy of title insurance?

The grantor has placed no undisclosed liens against the property. As we learned previously, a grant deed offers an implied warranty that there are no undisclosed liens made by the grantor. A standard title insurance policy does not protect against undisclosed liens, although an extended policy would. [Assuring Marketability of Title]

Which of the following statements regarding escrow procedures is correct?

When the escrow requirements have been met, the escrow agency changes from being agent of both parties to an agent of each party. During escrow, the escrow officer is a neutral third party who acts as an agent for both parties. At the close of escrow, the escrow officer becomes a single agent for each party. A broker may only act as an escrow in transactions in which he or she has an interest. The escrow officer delivers the deed to the buyer and the funds to the seller. [Escrow]

Escrow instructions must be:

executed. One of the meanings of the term execute is to sign. An escrow is officially open when both buyer and seller have signed the instructions and delivered them to escrow. [Escrow]