Real Estate Closing Transactions Quiz - Chapter 12
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Questions and Answers

In a closing statement, what occurs when certain conditions are satisfied?

  • Due diligence transfer tax
  • Unpaid property taxes
  • Interest on an assumed loan
  • Purchase price (correct)

When an escrow agent is handling a closing statement for a buyer, she is acting as an:

  • Employee
  • Independent contractor
  • Agent (correct)
  • Advocate

Which of the following is not prohibited by the term 'beneficiary statement'?

  • Escrow instructions written after a party dies
  • An assignment of a purchase contract
  • A loan request from the holder of a life estate (correct)
  • Documentation related to a deceased borrower

What is the primary role of a buyer's escrow agent during a closing transaction?

<p>To advocate for the buyer's interests (B)</p> Signup and view all the answers

Under the TRID rule, when must a lender provide the borrower with a closing disclosure form?

<p>Three days before closing (B)</p> Signup and view all the answers

What is the primary reason for using an escrow in a real property sale?

<p>Ensure the sale's conditions and terms are met before the transaction is closed (D)</p> Signup and view all the answers

What is the primary purpose of RESPA?

<p>To ensure transparency in settlement services (A)</p> Signup and view all the answers

Under RESPA, who is permitted to pay the broker their referral fee?

<p>As long as the broker discloses this fact to both buyer and seller (B)</p> Signup and view all the answers

In real estate transactions, what do the terms 'impounds' refer to?

<p>Funds set aside for specific expenses (C)</p> Signup and view all the answers

How must the lender provide the borrower with the balance due at closing?

<p>In a written disclosure that may vary (A)</p> Signup and view all the answers

Which of these options represents an unearned fee in real estate transactions?

<p>Referral payments between agents (A)</p> Signup and view all the answers

Which of the following is true regarding the closing statement?

<p>It must reflect both buyer and seller balances (C)</p> Signup and view all the answers

What does it mean when a closing is 'delayed'?

<p>There are unresolved conditions of the sale agreement (A)</p> Signup and view all the answers

What is the role of a third party in a real estate transaction closing?

<p>To hold funds and documents until all conditions are met (A)</p> Signup and view all the answers

Flashcards

Closing Costs: Buyer vs Seller

The buyer's closing costs and the seller's closing costs must be the same in a real estate transaction.

What is an Escrow Account?

An escrow account is a neutral third party who holds funds and documents during a real estate transaction, ensuring a smooth closing.

When is a Purchase Offer Accepted?

A purchase offer is accepted when both buyer and seller agree to the terms, including price and closing date. This is a legally-binding agreement.

What are Buyer Closing Costs?

A buyer's closing costs can include things like loan origination fees, title insurance, and property taxes.

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What are Seller Closing Costs?

A seller's closing costs may include real estate commission fees, title insurance, and transfer taxes.

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Unearned Fee

A fee that is charged to a borrower but is not actually earned by the lender until the loan is closed.

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Who designates the title insurance company?

The title insurance company is designated by the seller, not the buyer. This protects the buyer from title defects.

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When must a lender provide the Closing Disclosure?

The TRID rule requires lenders to provide the Closing Disclosure at least three business days before the closing date. This allows the borrower to review all the final loan terms and costs before closing.

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What needs to be met before a closing is complete?

A closing is only considered complete when all the essential conditions are met. This includes the required documents, funds, and approvals.

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What is a seller credit?

A seller of real estate can offer a credit to the buyer to help offset closing costs. The buyer doesn't have to pay these closing costs.

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What kind of security interest does a lender have in a property with a loan?

When a buyer purchases a property with a loan, the buyer's loan is secured by a deed of trust. This allows the lender to foreclose on the property if the buyer defaults on the loan.

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Why are interest rates on short-term loans higher?

The interest rate on a short-term loan is often higher than a long-term loan. This is because the lender needs to make their money back quickly.

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What is the role of the escrow holder?

The escrow holder acts as a neutral party, protecting the interests of both the buyer and seller by ensuring all terms of the agreement are fulfilled. This includes verifying documents, disbursing funds, and handling the transfer of ownership.

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What is a closing statement?

The closing statement summarizes all financial aspects of the real estate transaction, including the purchase price, closing costs, and any adjustments made to the final amount. It serves as a transparent and definitive accounting of the transaction.

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What are closing costs?

Closing costs represent the expenses incurred by both the buyer and seller during the real estate transaction. These costs cover various aspects of the sale, such as title insurance, taxes, and legal fees.

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What are settlement services?

A settlement service is a service provided during the closing process that helps facilitate the transfer of ownership and financial aspects of the real estate transaction. These services can include title searches, escrow, and loan processing.

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When does a real estate transaction 'close'?

A real estate transaction is considered to be 'closed' when all required documents are signed, funds are transferred, and ownership of the property is officially shifted to the buyer. This marks the completion of the sale.

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When is a purchase offer considered 'accepted'?

A purchase offer is considered 'accepted' once both the buyer and seller agree to the terms of the agreement, including the purchase price, closing date, and any other conditions. This signifies a legally binding contract.

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Study Notes

Chapter 12 Quiz - Closing Real Estate Transactions

  • Settlement Statement: Buyer and seller totals might be different.
  • Third Party Holding: A deed, note, bond, or money held by a third party until conditions are met is called escrow.
  • Closing Statement Debits (for Buyer): Items like interest on an assumed loan, prorated taxes, prorated HOA dues, and FHA discount points are least likely to be a buyer's debit.
  • RESPA and Prohibitions: RESPA prohibits kickbacks, unearned fees, and seller designation of the title company. Buyers can designate their lender
  • RESPA and Lender Fees: Lenders cannot charge for loan documents, required disclosures, credit reports, or appraisals.
  • Impound Accounts: VA and FHA loans require impound accounts.
  • Buyer's Closing Statement Debits: Interest owed on an assumed loan, unpaid property taxes, and documentary transfer tax are buyer debits.
  • Escrow Agent Roles: An escrow agent acting as both parties (buyer and seller) is an independent contractor.
  • Beneficiary Statement: This refers to loan request information from the life estate holder.
  • TRID Rule and Closing Disclosures: The lender must provide the closing disclosure at least three days prior to closing.
  • Purpose of Escrow: Escrow ensures that the sale conditions and terms are met before closing a transaction.
  • Broker Referrals: Referrals are permitted if the broker discloses it to both buyer and seller.
  • RESPA Primary Purpose: RESPA standardizes settlement procedures and gives buyers a chance to shop for settlement services during purchases.
  • Licensed Escrow Agents: If a real estate broker isn't a licensed escrow agent, they cannot act as an escrow agent for a transaction they handle as a broker.
  • Impounds (Reserves): Impound accounts/reserves are funds collected and used to pay ongoing expenses like taxes and insurance.

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Test your knowledge on the intricacies of closing real estate transactions with this Chapter 12 quiz. Explore topics such as the settlement statement, RESPA regulations, closing statement debits for buyers, and the role of escrow agents. Perfect for real estate students and professionals alike!

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