Buyer Representation and Counseling Flashcards

A first-time homebuyer asks about earnest money. Which statement is most accurate?

Answer: Earnest money is a good-faith deposit that may be forfeited if the buyer defaults without a valid contingency

Earnest money demonstrates the buyer's commitment; if the buyer backs out without a valid contingency, the seller may retain the deposit as liquidated damages.

When counseling a buyer about choosing a neighborhood, which factor is a CRS agent legally prohibited from steering buyers toward or away from?

Answer: Racial or ethnic composition of the neighborhood

Steering buyers based on the racial or ethnic composition of a neighborhood violates the Fair Housing Act.

What is the purpose of a home inspection contingency in a purchase agreement?

Answer: To allow the buyer to renegotiate or withdraw if significant defects are discovered

An inspection contingency protects the buyer by giving them the right to renegotiate terms or terminate the contract based on inspection findings.

Which type of buyer is most likely to benefit from a 203(k) FHA loan?

Answer: A buyer purchasing a fixer-upper that needs rehabilitation

The FHA 203(k) loan allows buyers to finance both the purchase price and rehabilitation costs of a property in a single mortgage.

A buyer is under contract but loses their job before closing. What should a CRS agent advise?

Answer: Immediately notify the lender and review contingency options with an attorney

A job loss can jeopardize loan approval, so the buyer must inform the lender immediately and explore contingency options to avoid legal and financial liability.

What does RESPA require lenders to provide buyers within three business days of a loan application?

Answer: A Loan Estimate detailing projected costs and terms

RESPA and the TRID rules require lenders to deliver a Loan Estimate within three business days, enabling buyers to compare loan offers.