Deck 12: Closing the Real Estate Transaction

Question 1

The closing is a meeting in which the seller actually transfers the property via a deed and the buyer pays the seller the purchase price.

Answer 1

True

Question 2

Title problems show up in about 25% of all transactions.

Answer 2

True

Question 3

Under RESPA, escrow accounts for borrowers must be interest bearing.

Answer 3

False

Question 4

In determining the boundaries and encroachments on a piece of property, which document might be the most helpful?

A) The warranty deed
B) The deed of trust
C) The survey
D) The option

Question 5

A title that is reasonably free from risk of litigation over possible defects is called:

A) marketable title.
B) absolute title.
C) title abstract.
D) insurable title.

Question 6

In an owner's title policy, the premium(s) are due:

A) monthly.
B) yearly.
C) in one payment at the time of closing.
D) only on assumption.

Question 7

The owner's title policy is a contract between:

A) the buyer and seller.
B) the lender and the title company.
C) the buyer and the title company.
D) the seller and the title company.

Question 8

The federal law that regulates the activities of real estate professionals in the preparation and conduct of a closing is the:

A) Federal Truth in Lending Law.
B) Deceptive Trade Practices Act.
C) Statute of Frauds.
D) Real Estate Settlement Procedures Act.

Question 9

The deposit of money, documents, or other valuables with a neutral third party who is under instructions to hold the items until all terms of the agreement have been met and then to disburse them to the appropriate party is called:

A) RESPA.
B) giving a deed in lieu.
C) escrow.
D) earnest.

Question 10

Closing procedures:

A) are set by state law.
B) are set by federal law.
C) follow local customs and are not set by statute.
D) are prescribed by county ordinance.

Question 11

The closing agent may be:

A) an attorney.
B) a title company.
C) a lender.
D) all of the above.

Question 12

RESPA applies to:

A) commercial real estate.
B) first lien mortgages on one- to-four-unit residential property.
C) construction loans.
D) temporary financing.

Question 13

Under RESPA, which of the following acts would be considered illegal?

A) Closing agents giving brokers a percentage of the cost of the title policy
B) Closing agents giving attorneys referral fees
C) A broker taking a closing agent to Hawaii, all expenses paid
D) All of the above

Question 14

As part of RESPA, when must lenders make available a copy of the actual closing statement?

A) On the business day before closing
B) On the day of closing
C) Four hours before closing
D) As soon as the loan application process is completed

Question 15

The federal Truth in Lending Law applies to:

A) all consumer loans to individuals.
B) agricultural loans only.
C) all commercial loans.
D) all of the above.

Question 16

In title assurance, what is the main difference between an attorney's opinion of title and title insurance?

Question 17

What are "back-to-back" closings?

Question 18

What is the main difference between a closing and a closing in escrow?

Question 19

What does the mortgagee's title policy insure?

Question 20

What is the title report or title commitment?

Question 21

Describe the steps that the closing agent will carry out both at the closing and after the closing. (There are approximately five steps at closing and three post-closing.)

Question 22

The real property taxes on a particular piece of property are $6,000. The taxing period is from January 1 to December 31. The closing is to occur on June 5. Use both the calendar method (actual days in a year) and the banker method ( which assumes 360 days in a year and 30 days in each month) to calculate the amount of taxes that will be debited from the seller's side of the closing statement and credited to the buyer's side. Why is it important for the buyer to understand proration?