CRS Transaction Management and Closing Process 2

Question 1

What is a HUD-1 Settlement Statement (or its TRID replacement, the Closing Disclosure) designed to show?

Accepted Answer

An itemized accounting of all funds received and disbursed in the transaction

Answer

The Closing Disclosure provides a complete line-by-line breakdown of every cost, credit, and payment in the transaction for both buyer and seller.

Question 2

When a transaction falls out of escrow, what are the potential consequences for the earnest money deposit?

Accepted Answer

Its disposition depends on who is at fault and the terms of the purchase contract

Answer

Contract terms and applicable state law govern earnest money disputes; if the buyer defaults without a valid contingency, the seller may keep it, but valid contingencies protect the buyer's deposit.

Question 3

What is a 'cloud on title' and why is it important in a real estate transaction?

Accepted Answer

Any claim, encumbrance, or defect that affects the marketability of the title

Answer

A cloud on title—such as an unresolved lien or disputed ownership—must be cleared before the property can be transferred with a clean, marketable title.

Question 4

What is the difference between a general warranty deed and a quitclaim deed in the US?

Accepted Answer

A general warranty deed provides full guarantees of title going back to the property's origin; a quitclaim deed transfers only whatever interest the grantor currently holds

Answer

A general warranty deed is the strongest form of conveyance, warranting title against any claims; a quitclaim deed transfers interest with no warranties whatsoever.

Question 5

What is a 'contingency removal' in California-style contracts and what does it signify?

Accepted Answer

The buyer actively releasing their right to exit the contract under a specific contingency

Answer

When a buyer removes a contingency, they waive their right to exit the deal under that contingency's protection, increasing their exposure if they later want to cancel.

CRS - Certified Residential Specialist Practice Test

CRS - Certified Residential Specialist Practice Test

CRS Transaction Management and Closing Process 2