Question 1

A buyer client has been approved for a loan of $325,000 on his purchase of a new home. The lender has verified his income and his credit score. Over the weekend he tells the broker he has just purchased a new car because his old one is failing. What is the likely impact on his real estate transaction?

A - he is legally required to inform the lender of this material change in his financial position. Depending on his financial qualifications, the lender may permit the transaction to go forward but the lender also has the right to alter the terms of the loan or cancel the loan altogether.

B - he should be all right since the financing on the car will probably not show up right away on his credit report and once the loan is close he can deal with the extra monthly payments.

C - The new car is only costing $100 more per month and the dealer has agreed to hold the financing until after the real estate closing. He should keep quiet and this will be all fine.

D - The buyers broker should have warned the client not to incur new debt at this time, and may become liable for damages if the transaction falls through.

Question 2

A couple is interested in selling their investment property and buying a new one. They can defer paying any capital gains taxes on the sale by

A - claiming their $500,000 capital gains tax inclusion for the current 2-year period.

B - Using a 1031 like-kind exchange to obtain a more expensive investment property.

C - selling to the buyer under installment terms.

D - claiming the once in a lifetime $125,000 exemption offered to those over 55