Real Estate Closings Chapter 10 Flashcards

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Questions and Answers

The Real Estate Settlement Procedures Act (RESPA) applies to the activities of:

Licensed real estate brokers when selling commercial and office buildings

Licensed securities salespeople when selling limited partnership interests

Fannie Mae and Freddie Mac when purchasing residential mortgages

Lenders financing the purchase of a borrower's residence (correct)

At the closing, the real estate broker's commission generally appears as a:

Debit to the seller (correct)

Credit to the seller

Credit to the buyer

Debit to the buyer

The Real Estate Settlement Procedures Act (RESPA) provides that:

Real estate advertisements must include the annual percentage rate, including all charges

Real estate syndicates must comply with the disclosure of 'blue sky' laws

Sellers and buyers be informed of all settlement costs (correct)

The borrower must be given an estimate of the closing costs 2 weeks before the time of closing

The process by which expenses are handled at the settlement of a real estate transaction so that both the buyer and the seller pay their respective portions of the debt is called:

Proration Signup and view all the answers

The Real Estate Settlement Procedures Act requires:

That disclosure be made of all closing costs prior to closing Signup and view all the answers

An example of a kickback that is prohibited by RESPA is:

A fee paid by a surveyor to a broker for a lead on a property to be surveyed Signup and view all the answers

Nick agrees to purchase Greg's property for $285,500. Vera is instructed to record the deed in Nick's favor when Greg shows good title to the property. This transaction is called:

Escrow Signup and view all the answers

At the closing, Fred's attorney informed him that he would be giving credit to Teri, the buyer, for certain accrued items. These items represent:

Bills related to the real estate that have not been paid as of the time of the closing Signup and view all the answers

The details of a sales transaction are always governed by:

The terms of the properly executed purchase contract Signup and view all the answers

The condition of the seller's title is generally determined from a:

Title commitment or title insurance policy Signup and view all the answers

The accrued interest on an assumed mortgage loan is entered on the closing statement as a:

Debit to the seller and a credit to the buyer Signup and view all the answers

As provided in a valid purchase contract, the real estate transaction must be closed. This means all of the following EXCEPT that the:

Broker must attend the closing in order to receive any commission Signup and view all the answers

The principal balance on an assumed mortgage loan is entered on the closing statement as a:

Debit to the seller and a credit to the buyer Signup and view all the answers

The Real Estate Settlement Procedures Act (RESPA) is a regulation of the:

Department of Housing and Urban Development Signup and view all the answers

Which of the following items is NOT usually prorated between the buyer and seller at closing?

Recording charges Signup and view all the answers

The closing statement involves the debits and credits to the parties in the transaction. A debit is a(n):

Expense Signup and view all the answers

In a closing statement, an accrued item is a(n):

Item that is unpaid but is due Signup and view all the answers

All of the following are required by the Real Estate Settlement Procedures Act EXCEPT:

The borrower may cancel the loan transaction within 5 days after settlement Signup and view all the answers

Services offered by computerized loan origination (CLO) systems are permitted under RESPA as long as certain conditions are met. These conditions include all of the following EXCEPT:

The mortgage broker may pay a referral fee for the mortgage loan Signup and view all the answers

Real estate firms are often affiliated with title insurance companies or mortgage brokers. These business arrangements are permitted by RESPA as long as:

The companies make a written disclosure of their relationship with one another Signup and view all the answers

Which of the following best expresses the statutory method of proration?

Yearly charge / 360 days Signup and view all the answers

Study Notes

Real Estate Settlement Procedures Act (RESPA)

RESPA regulates activities involved in residential real estate transactions with new first mortgage loans.
Aims to inform buyers and sellers about all settlement costs to ensure transparency.
Lenders must disclose closing costs prior to closing and cannot engage in practices that inflate settlement costs, like kickbacks.

Closing Process and Transactions

Real estate broker's commission is marked as a debit to the seller, representing money owed at closing.
Accrued items in a closing statement refer to unpaid bills due at the time of closing, with credits being amounts favoring either party.
Closing statements outline debits (expenses owed) and credits (amounts payable) to ensure clarity of financial responsibilities.

Escrow and Financial Responsibilities

Escrow involves a neutral third-party holding funds and documents until conditions are met, ensuring secure transactions.
Prorations divide expenses like loan interest, taxes, and utility bills fairly between buyer and seller at closing.
Principal balance on an assumed mortgage is listed as a debit to the seller and a credit to the buyer in the closing statement.

Key Terms and Exceptions

A good faith estimate of closing costs must be provided, but borrowers cannot cancel transactions post-settlement.
Certain items, like recording charges, are typically not prorated between parties at closing.
RESPA allows computerized loan origination services under strict conditions, without referral fees being allowed.

Relationships and Disclosures

Strong regulations exist regarding relationships between real estate firms and title companies; written disclosures must be made.
The statutory method of proration for financial expenses typically uses a calculation of yearly charges divided by 360 days.

Additional Important Points

Title condition is primarily confirmed through a title commitment or insurance policy.
Real estate transactions must adhere to executed purchase contracts, defining the roles and responsibilities of buyers and sellers.
Closed transactions require sellers to clear title conditions, deliver deeds, and buyers to fulfill payment terms.

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Description

Test your knowledge on real estate closing procedures with these flashcards. Focus on key concepts such as the Real Estate Settlement Procedures Act (RESPA) and its applications. Perfect for students and professionals preparing for real estate transactions.