Questions and Answers
The Real Estate Settlement Procedures Act (RESPA) applies to the activities of:
At the closing, the real estate broker's commission generally appears as a:
The Real Estate Settlement Procedures Act (RESPA) provides that:
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:
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The Real Estate Settlement Procedures Act requires:
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An example of a kickback that is prohibited by RESPA is:
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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:
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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:
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The details of a sales transaction are always governed by:
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The condition of the seller's title is generally determined from a:
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The accrued interest on an assumed mortgage loan is entered on the closing statement as a:
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As provided in a valid purchase contract, the real estate transaction must be closed. This means all of the following EXCEPT that the:
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The principal balance on an assumed mortgage loan is entered on the closing statement as a:
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The Real Estate Settlement Procedures Act (RESPA) is a regulation of the:
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Which of the following items is NOT usually prorated between the buyer and seller at closing?
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The closing statement involves the debits and credits to the parties in the transaction. A debit is a(n):
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In a closing statement, an accrued item is a(n):
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All of the following are required by the Real Estate Settlement Procedures Act EXCEPT:
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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:
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Real estate firms are often affiliated with title insurance companies or mortgage brokers. These business arrangements are permitted by RESPA as long as:
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Which of the following best expresses the statutory method of proration?
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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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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.