1. Which of the following is an example of a patent defect?
A. visible fire damage to the roof Correct
B. elevated levels of radon gas
C. an encroachment
D. urea-formaldehyde foam insulation that is completely hidden behind drywall
Explanation
Patent defects are those that are observable upon reasonable inspection. Visible fire damage is easily seen, while hidden insulation (D), radon gas (B), and encroachments (C) are typically latent defects requiring specialized discovery.
2. A client whispers that the documents they're being asked to sign don't match the Closing Disclosure—suddenly, there are thousands of dollars of new fees. Is this a red flag for predatory lending? Why or why not?
A. Yes. No client should be paying fees at closing. Those should always be pre-paid to the lender at least three days in advance.
B. No. It's normal for lenders to have significant last-minute changes to their fees.
C. Yes. The fees should match what was on the Closing Disclosure, otherwise, that's a major red flag. Correct
D. No. As long as the title company has no objections, it doesn't matter if the Closing Disclosure and the real closing documents match.
Explanation
The Closing Disclosure is a federally mandated form designed to provide transparency. Last-minute fee changes that don't match this document are a serious red flag for bait-and-switch tactics, a hallmark of predatory lending.
3. All of the following is true about earnest money EXCEPT:
A. It should always be held in a special trust or escrow account.
B. It is a required part of any offer. Correct
C. It can only be deposited once the offer has been accepted and notification has been given.
D. It is funds paid to confirm or commit to a contract.
Explanation
Earnest money demonstrates good faith but is not a legal requirement for every offer. Options A, C, and D accurately describe standard practices: it must be held in escrow, deposited after acceptance, and serves to confirm the contract.
4. Which of these situations illustrates the government right of escheat?
A. Gina's home is in a subdivision with an HOA, and she must pay the HOA dues every month.
B. Georgia, a property owner, passed away with no will or heirs, so her property went to the state. Correct
C. Goni is a builder. Before she starts a new building, she submit plans for approval to the city.
D. Geoff's farm was on a piece of land the township needed for a power station, so they took it and compensated him fairly.
Explanation
Escheat is the government's right to acquire property when an owner dies intestate (without a will) and with no legal heirs. This is distinct from eminent domain (D), which involves taking property for public use with compensation, or regulatory approval (C).
5. Mindy experienced a foreclosure process that included being named as a defendant in a lawsuit by her lender and seeing her home sold in a foreclosure sale. From that information, what can you guess about the category of foreclosure used and who holds the title to the property?
A. A judicial foreclosure was necessary because Mindy holds the title. Correct
B. A nonjudicial foreclosure was necessary because a trustee holds the title.
C. A judicial foreclosure was necessary because the lender holds the title.
D. A nonjudicial foreclosure was necessary because Mindy holds the title.
Explanation
Being named in a lawsuit indicates a judicial foreclosure, which is required when the lender must go to court to enforce the lien. In a lien-theory state like Pennsylvania, the borrower (Mindy) holds the title, and the lender has a lien on the property.