CA DRE SALESPERSON EXAM II LATEST VERSION A & B 2024/2025 ACTUAL EXAM COMPLETE QUESTIONS, Exams of Business Administration

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Colorado Real Estate Closings and Settlement Midterm

and Final Exam 2024/2025 Questions And 100% Correct

Verified Answers Graded A

You are the buyer's broker attending closing. You discover that your buyer was charged $225 for an appraisal for which the seller had agreed to pay. How should you handle this? A) Ignore it because all the paperwork has these numbers on it B) Stop the closing and demand all new settlement statements and good funds figures C) Suggest that, if your buyer agrees, the seller could give the buyer a personal check for this amount to settle this unfortunate oversight D) Demand that the listing broker pay this amount since the broker should have caught the error The answer is suggest that, if the buyer agrees, the seller could give the buyer a personal check for this amount to settle this unfortunate oversight. Small corrections in money are allowed at closing. If the deed or other documents were not correct, they would have to be corrected before proceeding. In the case of the overlooked appraisal fee, having the seller give the buyer a check is fine as long as all the parties agree to the solution. The tax reserve will show as a settlement entry for all of the following loans EXCEPT A) Veterans Affairs (VA) loans. B) new conventional loans. C) seller-carry second loans. D) Federal Housing Administration (FHA) loans.

A seller-carry second loan will not collect for tax reserves, as this is being collected in the first loan. All conventional, FHA, and VA loans will call for lender reserves to be collected. The broker's fee is normally shown on the settlement worksheet as A) debit seller, credit buyer. B) debit seller, credit broker. C) debit seller and buyer equally, credit the broker the full amount. D) debit seller, single entry because the broker will keep it. The answer is debit seller, credit broker. The broker's fee is usually paid by the seller, thus debit seller, credit broker. This would be true even in a new loan closing because the broker's fee is not part of the new loan. At closing, taxes for special assessments will be A) always prorated to the date of closing. B) charged to the seller if they are paid off at closing. C) charged to the seller if assumed by the buyer. D) charged to the seller. The answer is charged to the seller if they are paid off at closing. Special assessment taxes have a special rule: if it is paid at closing, debit seller, unless the buyer agrees to pay. If buyer assumes the payment, this means the buyer has taken over the payment agreement. The charge/assessment amount will not show up at closing, so it is not mentioned. Funds deposited in the broker's escrow account are represented by

A)

a broker credit. B) a lender debit. C) a broker debit. D) a lender credit. The answer is a broker debit. Deposit = Debit broker; Checks = Credit broker. The seller's subtotal of debits is $132,456.28 and subtotal of credits is $142,333.26. This means the seller A) needs $142,333.26 in cash to close. B) needs $132,456.28 in cash to close. C) is bringing $9,876.98 to closing. D) will receive $9,876.98 at closing. The answer is will receive $9,8786.98 at closing. Because the seller has more credits than debits, the seller receives the difference at closing; simply subtract. The broker's fee is normally shown on the settlement worksheet as A) debit seller, credit broker. B) debit seller, credit buyer. C) debit seller and buyer equally, credit the broker the full amount.

D)

debit seller, single entry because broker funds do not go into the trust account. The answer is debit seller, credit broker. The broker's fee is a traditional seller expense. The broker only earns this if the property closes. All money was in the trust account for this sale, so the broker writes a check to move the money to broker's operating account. All of the following would be considered good funds EXCEPT A) a check on the broker's escrow account. B) a wire transfer to the broker's bank. C) a cashier's check from a commercial bank. D) a teller's check from a credit union. The answer is a check on the broker's escrow account. Good funds are a cashier's check, teller's check, and wire transfer. Personal, business, and trust checks are not good funds. The amount and who pays the different costs at closing are determined by A) the Contract to Buy and Sell, as negotiated by the buyer and seller. B) the seller and buyer in the closing instructions. C) the lender because the lender is providing the funds. D) the brokers and the parties they represent through the closing instructions. The answer is the Contract to Buy and Sell, as negotiated by the buyer and seller. The Contract to Buy and Sell determines how and what the costs and fees for the closing will be.

How will the amount of a loan balance assumed show on the closing statement(s)? A) Buyer only B) Seller only C) Buyer as a credit and seller as a debit D) Buyer as a debit and broker as a credit The answer is buyer as a credit and seller as a debit. A loan being assumed will be a credit on the buyer's closing statement and a debit on the seller's closing statement. Remember, all loans are always a buyer credit. The release of deed of trust will show on the settlement worksheet entry as A) debit buyer. B) debit seller. C) debit seller, credit broker. D) debit seller, credit buyer. The answer is debit seller. In a new loan, the seller pays off (releases) the deed of trust for the current loan. This is a single-entry debit to the seller, who must pay off the deed trust to give the buyer clear title. Who is responsible for verifying the seller's closing statement? A) The buyer's brokerage firm

B)

The title company closer C) The designated buyer's broker D) The designated listing broker The answer is the designated listing broker. The broker who has been designated to represent a buyer or seller is responsible for the broker-represented party's closing statement. In this case, it is the listing broker who works with the seller. Who traditionally pays loan costs like discount points on a new loan? A) The seller B) The lender C) The broker D) The buyer The answer is the buyer. Loan costs and other loan fees are traditionally paid by the borrower but can be negotiated to be a seller concession. The Contract to Buy and Sell determines who will pay and how much. The entry for purchase price on a seller-carry purchase is A) debit seller, credit buyer. B) credit seller, debit buyer. C) debit seller, credit broker.

D)

credit seller, debit broker. The answer is credit seller, debit buyer. The purchase price is the same in all sales: the buyer pays (debit buyer) and the seller gets paid (credit seller). A nonresident seller of an income property for more than $100,000 would be charged what percent for withholding taxes? A) 2 percent B) 3 percent C) 10 percent D) 4 percent The answer is 2 percent. The Colorado nonresident withholding tax is 2 percent of the sales price. The Colorado documentary fee is A) $1 per $100,000. B) $.01 per $1,000. C) $1 per $1,000. D) $.01 per $100. The answer is $.01 per $100. The documentary fee is based on the sales price and is $.01 per $100. In a new loan closing, how is the loan entered on the settlement worksheet? A)

Credit the buyer, debit the broker. B) Credit the buyer, single entry. C) It is not entered because the net loan proceeds will show up from the lender at closing. D) Credit the buyer, debit the seller. The answer is credit the buyer, single entry. Loans are always credit buyer, and because this is a new loan, it is a single entry. How is a seller-carry loan entered on the settlement worksheet? A) Debit buyer, credit broker B) Debit seller, credit buyer C) Debit seller, credit broker D) Debit buyer, credit seller The answer is debit seller, credit buyer. Because the seller is loaning money to the buyer at closing, this amount must be deducted (debited) from the seller and the buyer must be credited for the loan. A seller who will reside outside of Colorado after the sale may be subject to a 2 percent withholding for state income tax if A) the sale price is more than $100,000. B) the profit on the sale is more than $100,000. C) the sale price is more than $1,000,000.

D)

there is any profit on the sale. The answer is the sale price is more than $100,000. Properties below this amount are excluded from withholding. Also, remember that the closing entity is required to collect this money (up to 2 percent of the sales price) or the seller's entire net proceeds, whichever is less. If a Colorado property sells for $263,900, what documentary fee will be paid when the warranty deed is recorded? A) $260. B) $26. C) $26. D) $263. The answer is $26.39. The way to express the documentary fee is $0.01 per $100. The easiest way to calculate it is just to move the decimal four digits to the left. For this question, $26.39 or $263,900 × 0.0001 = $26.39. If a mortgagee's title policy for $225 is required, how will the settlement worksheet reflect these items? A) $225 debit buyer, credit lender B) $225 debit seller only C) $225 debit seller, $225 credit broker D) $225 debit buyer only

The answer is $225 debit buyer only. In a new loan, the buyer is responsible for paying for the mortgagee's policy. The bill will be paid from the gross loan, so the entry is a debit only for the buyer. Who normally is charged for the recording fee? A) The broker having it recorded B) The lender to protect her interest C) The party benefiting from the document D) The party signing the document The answer is the party benefiting from the document. Recording fees are paid by the party benefiting from the recording. The buyer will pay to record the deed, and the seller will pay to release the deed of trust. A $97 water bill was paid in advance for the period from March 1 to June 1. For a closing on May 8, how will the settlement worksheet reflect this bill? A) $71.70 debit seller, credit buyer B) $71.70 debit buyer, credit seller C) $25.30 debit buyer, credit seller D) $25.30 debit seller, credit buyer The answer is $25.30 debit buyer, credit seller. Three months' water bill proration; bill paid in advance for March 1 to June 1 = $97 (92 days). (see water bill formula in desktop)

A $300 charge for an appraisal is shown on the new loan statement. The contract states that the buyer and seller have agreed to share this cost. The settlement worksheet entry is A) $150 debit seller, $150 debit buyer, $300 credit broker. B) $150 debit seller, $150 debit buyer. C) $150 credit seller, $150 credit buyer. D) $300 debit buyer, $150 credit seller, $150 credit broker. The answer is $150 debit seller, $150 debit buyer. Because the appraisal bill is being split between the seller and the buyer, each would obviously owe half. Because it's on a new loan, these are single-entry debits to each party (with no matching credit). The closing entity is most likely NOT A) the listing broker. B) the attorney. C) the Colorado Department of Revenue. D) the title insurance company. The answer is the Colorado Department of Revenue. Whoever closes (the closing entity) is required to collect this money. That could be a broker, attorney, or title company. The money is sent to the Department of Revenue. A small money error is found at closing. The best option is to A)

stop the closing and demand all new settlement statements and good funds figures. B) ignore it because it is not that much money. C) demand that the listing broker pay this amount since she made the error. D) suggest that because it is a small amount and a personal check will satisfy both parties, a check outside the closing be used. The answer is suggest that because it is a small amount and a personal check will satisfy both parties, a check outside the closing be used. While state law requires good funds be brought to closing, if a small mistake is discovered, it is permitted to correct this with cash or personal checks. All of the following could be considered a closing entity EXCEPT A) the attorney doing the closing. B) the Colorado Department of Revenue. C) the listing broker. D) the title insurance company. The answer is the Colorado Department of Revenue. A closing entity can be the title company, the broker, or an attorney. This tax is then sent to the Colorado Department of Revenue. At closing, who is responsible for confirming the figures on the buyer's closing statement? A) The designated buyer's broker B) The listing brokerage C)

The designated listing broker D) Both designated brokers The answer is the designated buyer's broker. The designated broker for each party is responsible for the closing statement for the party he represents. So while the listing brokerage and listing broker are responsible for the overall closing and the seller's closing statement, the designated buyer's broker is responsible for the buyer's closing statement. If the new loan amount is $70,330 and the total lender payouts are $35,326, the net loan proceeds are A) $35,004. B) $35,326. C) unknown. D) $105,650. The answer is $35,004. The gross loan is $70,330. The lender is paying fees and disbursements related to closing and clearing the title. Those fees and disbursements, also known as lender payouts, total $35,326, which is subtracted from the $70,330. The remainder of the money after the lender payouts is the net loan proceeds (debit broker, single entry). How would a seller-carry loan be entered on the six-column settlement worksheet? A) Debit seller, credit broker B) Debit buyer, credit broker C) Debit seller, credit buyer

D)

Debit buyer, credit seller The answer is debit seller, credit buyer. In a seller-carry loan, the seller is literally loaning her equity to the buyer. This is money the buyer does not bring and the seller does not receive at the closing table. At closing, it will appear as a seller debit and buyer credit. Remember, all loans are always a buyer credit. If the real estate taxes for last year were $4,567, what is the prorated tax entry for this year's taxes for a September 11 closing? A) $3,165.62 debit seller, credit buyer B) $3,165.62 debit seller only C) $1,404.38 debit buyer, credit seller D) $1,404.38 debit buyer only The answer is $3,165.62 debit seller, credit buyer. Current year's tax proration: last year's general taxes = $4,567. (prorated tax formula desktop) The seller collected rent (in full) of $1,000 at the first of the month. The property is closing on June 7. How will the rent be entered on the settlement worksheet? A) $800 debit buyer, $800 credit seller B) $200 debit seller, $200 credit buyer C) $800 debit seller, $800 credit buyer D) $200 debit buyer, $200 credit seller

The answer is $800 debit seller, $800 credit buyer. Rent is collected in advance from the tenant; therefore, rent is always seller owes buyer (SOB) for the period the buyer will own the property. Because the seller only owned the property the first six days of the month, the buyer will be credited the rent for the remainder of the month. $1,000 ÷ 30 × 24 = $800 owed the buyer. The rent to be prorated is $1,000 ÷ 30 × 24 days = $800 (SOB) ( see rent formula desktop) On the Colorado side of the test, who owns the property on the day of closing? A) The seller B) The buyer C) Split at noon D) No one The answer is the buyer. In Colorado closings, the buyer owns the property on the day of closing. A water bill is due in advance, and it has been paid for the month in the amount of $60. For a closing on April 21, how will the worksheet reflect this bill? A) $20 debit buyer, credit seller B) $20 debit seller, credit buyer C) $40 debit buyer, credit seller D) $40 debit seller, credit buyer The answer is $20 debit buyer, credit seller. Water paid in advance is buyer owes seller (BOS). Because the closing is at the end of the month, the buyer will owe little side $20. $60 ÷ 30 × (30 - 20) 10 = $

Water paid in advance for April = $60 (30 days) (water bill formula 2 desktop) There is a $1 notary fee for the warranty deed in a closing conducted by the broker. The settlement worksheet entry is A) $1 debit seller, $1 credit buyer. B) $1 debit seller. C) $1 debit seller, $1 credit broker. D) $1 debit buyer. The answer is $1 debit seller, $1 credit broker. Notary questions are easy when considering who signs the document. This is regarding the deed. Because the seller signed the deed to transfer title to the buyer, the seller must pay this witness, who notices the signature and verifies the seller's identification. Credit the broker, who will pay this bill. An investor buyer is acquiring a four-unit property. Each unit has a $400 security deposit held by the seller. How are these deposits handled on the settlement worksheet? A) No entry. Return deposits to tenants and new owner collects new deposits B) $1,600 debit seller, credit buyer C) $1,600 debit seller, credit broker D) $1,600 debit buyer, credit seller

The answer is $1,600 debit seller, credit buyer. Security deposits are considered the tenant's money. The seller, who is currently holding the security deposit, must transfer it completely to the buyer (new landlord) and, per the contract, notify the tenant of the transfer and the buyer's name and address. Debit entries in the broker column represent A) charges the broker owes. B) charges the seller owes. C) charges the buyer owes. D) deposits to the trust account. The answer is deposits to the trust account. Debit = Deposit; Checks = Credits. The rule for special assessments is A) always charged to the seller. B) prorated to the date of closing. C) charged to the seller if assumed by the buyer. D) charged to the seller if paid off at closing. The answer is charged to the seller if paid off at closing. Special taxes are not always charged to the seller. The buyer can agree to assume the amount owed, in which case, the amount will not show at closing. If the assessment is paid at closing, it will be paid by the seller—debit seller the full amount. Who normally is charged for a mortgagee's title insurance policy? A)

The lender B) The buyer C) The seller D) The broker The answer is the buyer. The lender makes the buyer purchase a title policy to protect the lender and to add the buyer to the coverage on the title, which is the mortgagee's policy; therefore, the mortgagee's policy is paid by the buyer. A water bill charged in advance that has not been paid will show on the settlement worksheet as A) debit seller and credit buyer full amount of the bill. B) debit seller and credit buyer the prorated amount. C) debit buyer and credit seller the prorated amount. D) debit buyer prorated amount and debit seller the remaining amount of the bill. The answer is debit buyer prorated amount and debit seller the remaining amount of the bill. At closing, this bill is past due, so this lien must be paid off. Because the bill overlaps both owners, each party is required to pay their portion