Chapter 16—Title Closing and Escrow
MULTIPLE CHOICE
1. A seller received $81,000 at the close of escrow after paying $1,750 in closing costs and a 6%
brokerage fee. What was the sales price of the house?
a.
$82,750
b.
$87,480
c.
$89,230
d.
$88,032
2. For what price must a house sell if the seller is to net $30,000 after paying $1,500 in settlement and the
broker’s commission of 6% (rounded to the nearest dollar)?
a.
$30,000
b.
$32,011
c.
$32,300
d.
$33,511
3. A seller has agreed to pay 80% of the title insurance company’s fee on a sale. The company charges
$550 for the title policy, plus $95.50 for the title search and $50 for processing the papers. What is the
difference between what the seller has to pay and what the buyer has to pay?
a.
20%
b.
$139.10
c.
$417.30
d.
$556.40
4. A seller received a net amount of $29,817 after paying off a $53,000 loan balance, $1,213 in
miscellaneous costs, and a 7% brokerage fee. What was the sale price of the house? (round to nearest
dollar)
a.
$77,020
b.
$84,030
c.
$90,355
d.
$90,360
5. A buyer agreed to put down $5,000 as earnest money toward a house he was buying for $97,000. The
offer was based upon receipt of an 80% loan from a bank. The attorney’s fees were $2,000 and all
other buyer costs amounted to $1,500. How much money will the buyer need to pay at settlement?
a.
$14,400
b.
$17,900
c.
$17,700
d.
$22,900
6. Pat bought a home for $75,000. He put up $5,000 earnest money and secured an 80% loan. The bank
charged four points and a 2.5% loan fee. Pat received a $900 credit from the proration of taxes. How
much cash will he need to bring to close this transaction?
a.
$13,000
b.
$13,900
c.
$13,975
d.
$18,000
7. How many days are normally needed to close a residential sale that requires no financing?
a.
1 to 29
b.
30 to 60
c.
61 to 90
d.
over 90
8. A couple buys a house complete with furnishings. They assume and agree to pay the existing
mortgage. All of the following documents should be used in closing EXCEPT
a.
note and mortgage.
b.
assumption papers.
c.
bill of sale.
d.
closing instructions.
9. Of the following, the final action to be taken to complete a closing is
a.
acknowledgement of all instruments.
b.
recordation of appropriate instruments.
c.
signing of the deed.
d.
title search.
10. All of the following items are usually paid by the seller at the close of a residential sale escrow
EXCEPT
a.
title search.
b.
appraisal fee.
c.
commission.
d.
title insurance.
11. If an existing escrow is to be canceled, it must be done
a.
only by the buyer.
b.
by mutual rescission.
c.
by either party.
d.
only by the seller.
12. Escrow accounts are opened for the protection of the interests of the
a.
general public.
b.
seller.
c.
buyer and seller.
d.
buyer.
13. Deed delivery in an escrow is accomplished by
a.
the escrow holder accepting the deed on behalf of the grantee.
b.
delivery of the deed by the escrow holder to the grantor.
c.
a courier service.
d.
the title company.
14. A disinterested party representing both buyer and seller in a real estate sale is the
a.
broker.
b.
salesperson.
c.
escrow agent.
d.
attorney-in–fact.
15. A 9% amortized loan with a November 1 balance of $40,000 requires the payment of principal and
interest at the first of each month. If prorating is done as of the 20th of November, the
a.
buyer owes the seller $100.
b.
buyer owes the seller $200.
c.
seller owes the buyer $100.
d.
seller owes the buyer $200.
16. On the day of closing a real estate sale, existing property taxes and insurance are
a.
left as is.
b.
paid by the bank out of the reserves.
c.
prorated.
d.
paid in full by the seller.
17. The property tax year runs from January 1 through December 31. The taxes on a certain house are
$1,440 this year and have not yet been paid. If the house sells and the closing date is December 10th,
the
a.
buyer owes the seller $82.85.
b.
buyer owes the seller $1,357.15.
c.
seller owes the buyer $82.85.
d.
seller owes the buyer $1,357.15.
18. The home was sold on July 18. The next payment date is August 1. The buyer agreed to assume the
seller’s 6% loan which has a balance of $36,800 as of July 1. Interest on this loan would be prorated
as
a.
debit buyer $77.16 and credit seller $106.84.
b.
debit seller $77.16 and credit buyer $106.84.
c.
credit seller $106.84 and charge buyer $106.84.
d.
credit buyer $106.84 and charge seller $106.84.
19. The proration of prepaid condominium association dues will result in a
a.
charge to the seller and credit to the buyer.
b.
charge to the buyer and credit to the seller.
c.
charge to the seller and credit to the association.
d.
charge to the association and credit to the buyer.
20. The property tax year runs from January 1 to December 31. The taxes on a certain house are $1,440
this year, none of which has been paid. If the house sells, not in a leap year, and the closing date is
June 12, the
a.
buyer owes the seller $796.93.
b.
buyer owes the seller $643.07.
c.
seller owes the buyer $796.93.
d.
seller owes the buyer $643.07.
21. In a closing statement, the amount of interest on an assumed loan is a
a.
charge to the seller only.
b.
charge to the buyer only.
c.
charge to the seller and credit to the buyer.
d.
charge to the buyer and credit to the seller.
22. The seller has just sold her home and received a closing statement and the balance due to her.
Presuming no agreement to the contrary, which of the following should have been charged to the
buyer?
a.
Proration of taxes with a debit to the seller for the tax year up to closing
b.
Recording fee for the deed prepared by the sellers’ attorney
c.
Sales commission
d.
Amount required to pay off the seller’s loan
23. A local federal savings and loan makes a home loan. RESPA requires that
a.
a good faith estimate of closing costs be given to the borrower.
b.
an HEW closing statement be used for the closing.
c.
a credit application be filed with escrow.
d.
a credit statement be given the borrower.
24. According to the Real Estate Settlement and Procedures Act, which of the following is illegal?
a.
Examination of the HUD settlement statement the day before closing
b.
Payment of kickbacks
c.
Delivery of the closing statement on the day of closing
d.
Disbursement of commission fees
25. Under the Real Estate Settlement and Procedures Act, all of the following are required of the lender
EXCEPT
a.
submission to the borrower of the booklet “Settlement Costs and You”.
b.
submission of a “good faith estimate” of loan closing costs.
c.
disclosure of the “Annual Percentage Rate”.
d.
use of the Uniform Settlement Statement for closing.
26. Details that must be handled between the time a purchase contract is signed and the closing typically
include
a.
title search.
b.
deed preparation.
c.
loan arrangements.
d.
all of the above.
27. A buyer’s walk-through is conducted for the purpose of
a.
appraising the property in order to get a loan on it.
b.
inspecting the property for major structural defects.
c.
meeting the seller and obtaining the keys to the property.
d.
making a final inspection just prior to closing.
28. A settlement meeting may take place in the offices of
a.
the real estate agent.
b.
an attorney.
c.
a title company.
d.
any of the above.
29. When a real estate settlement is held in escrow
a.
there is no closing meeting.
b.
the closing process may be conducted by mail.
c.
both a and b.
d.
neither a nor b.
30. Which of the following may serve as an escrow agent?
a.
A bank
b.
An independent escrow company
c.
A lender
d.
Any of the above
TRUE/FALSE
1. A buyer and a seller are likely to shake hands upon completion of a real estate transaction involving an
escrow closing.
2. The purpose of a settlement statement is to provide an accounting of all funds involved in a
transaction.
3. During a “dry closing” the deed is disbursed to the buyer.
4. During a “dry closing” the money is disbursed to the seller.
5. The escrow agent is always selected by the real estate broker.
6. In most states in which title transfers are handled in escrow, the agents must be bonded.
7. In an escrow closing, funds are disbursed when all escrow papers have been signed and the buyer
brings in the money.
8. In an escrow closing, the escrow agent serves as agent for the buyer.
9. One advantage of the escrow closing method is that it can eliminate personal confrontation between
buyer and seller.
10. Escrow closings cannot be used when refinancing a property.
11. RESPA prohibits the seller from requiring that the buyer purchase title insurance from a particular title
company.
12. When a home is sold and a new loan by an institutional lender is required, the typical time between
purchase contract signing and settlement will most likely be from 1 to 29 days.
13. Among the items to be prorated at a settlement or escrow closing taxes and rents.
14. Prorations of items in a real estate closing are made usually as of the date of the signing of the
contract.
15. In a typical closing, insurance prorations will usually be a credit to the seller and an expense to the
buyer.
16. Under the provisions of RESPA payments outside closing are prohibited.
17. The division of ongoing expenses and income items between the buyer and seller is called prorating.
18. An accounting of funds to the buyer and the seller at the completion of a real estate transaction is
called a settlement statement.
19. In prorating rents, the dollar amount is a credit to the seller and a debit to the buyer.
20. Outside of the closing means a party to the closing has paid someone directly and not through the
closing.
COMPLETION
1. The person placed in charge of an escrow is called an escrow ____________________.
2. The final inspection of the property just prior to the settlement date is called a
_________________________.
3. A ____________________ statement is a statement of the unpaid balance on a note secured by a trust
deed.
4. A settlement statement, also called a ____________________ statement, is given to the buyer and
seller to summarize the financial aspects of their transaction.
5. In a situation where all the documents are not yet available but it would be difficult to reschedule the
closing meeting, the parties may agree to a ____________________ closing.
6. In some states, the use of a ____________________ month may be used instead of the actual days of
the month.
7. RESPA prohibits ____________________ and fees for services not performed during the closing
process.
8. The HUD Settlement Statement required of all federally related real estate lenders is known as the
____________________.
9. The deposit of documents and funds with a ____________________ third party plus instructions as to
how to conduct the closing is called an escrow closing.
10. A(n) ____________________ statement is a statement by an owner or lienholder as to the balance due
on an existing lien against the property.
MATCHING
Choose the one most appropriate answer for each.
a.
30-day month
k.
HUD settlement statement (HUD-1)
b.
beneficiary statement
l.
loan escrow
c.
CC&Rs
m.
offset statement
d.
closing date
n.
outside of the closing
e.
closing meeting
o.
prorate
f.
deed delivery
p.
RESPA
g.
dry closing
q.
settlement meeting
h.
escrow agent
r.
settlement statement
i.
escrow closing
s.
title closing
j.
good faith estimate
t.
walk-through
1. when seller and buyer meet in person to close a real estate transaction
2. statement by an owner or lienholder as to the balance due on an existing lien against the property
3. conditions, covenants, and restrictions of a condominium, cooperative, or a planned unit development
4. a custom in some states of using a 30-day month to simplify proration calculations
5. an accounting of funds to the buyer and seller at the completion of a real estate transaction
6. deposit of documents and funds with a neutral third party plus instructions as to how to conduct the
closing
7. the moment at which title passes from the seller to the buyer
8. to divide the ongoing income and expenses of a property between the buyer and the seller
9. a federal law that deals with procedures to be followed in certain types of real estate closings
10. the person or firm in charge of an escrow
11. an escrow for the purpose of financing a property not in connection with a sale
12. refers to closing costs paid by the buyer or seller that did not go through the closing agent
13. a list of anticipated closing costs given to the borrower by the lender as required by RESPA
14. federally related lenders are required to use this particular closing statement format
15. the day on which the closing is finalized. Also called the settlement date
16. a meeting at which the buyer pays for the property and receives a deed for it; also called a settlement
meeting
17. a final inspection of the property just prior to the settlement date
18. the process of completing a real estate transaction
19. shows the unpaid balance on a loan and is provided by the lender
20. a method to avoid rescheduling a closing meeting when a document, known to be on its way, has not
yet arrived