Question

Through a broker, a buyer offers to buy property for use as a residence. The offer is contingent upon the buyer obtaining an FHA-insured first mortgage loan. The property contains a single-family house and 4 acres of land. The buyer's offer is accepted. Will this transaction be subject to the provisions of the federal Real Estate Settlement Procedures Act (RESPA)?

A. No, because the loan for this acreage would be FHA-insured.
B. Yes, but only because the offer was made through a real estate broker.
C. No, because the loan involved would be a first mortgage loan.
D. Yes, because the loan involved would be used for a single-family residence.

Answer 1

The transaction will fall under the federal Real Estate Settlement Procedures Act (RESPA) as it involves an FHA-insured first mortgage loan for a single-family residence.

Step-by-step explanation:

The transaction in question will be subject to the provisions of the federal Real Estate Settlement Procedures Act (RESPA). The main criterion for RESPA to apply is whether the loan is federally related and is used to finance a one-to-four family residential property.

Since the buyer's offer is contingent on obtaining an FHA-insured first mortgage loan for a single-family residence, the transaction meets the requirements for RESPA coverage, regardless of the property's acreage or the involvement of a real estate broker. Hence, the correct answer is D. Yes, because the loan involved would be used for a single-family residence.