California Real Estate Practice Exam

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In seller financing of a home purchase, which of the following is correct?

  1. The buyer is the mortgagee; the seller is the mortgagor

  2. The seller is the mortgagor; the buyer is the mortgagee

  3. The seller is the mortgagee; the buyer is the mortgagor

  4. Both the buyer and seller are mortgagors

The correct answer is: The seller is the mortgagee; the buyer is the mortgagor

In seller financing, the seller acts as the lender and the buyer acts as the borrower. Therefore, the seller is the mortgagee, as they hold the mortgage on the property. The buyer is the mortgagor, as they are the party who owes the debt and has pledged the property as collateral. Option A is incorrect because it has the buyer and seller roles reversed. Option B and D are incorrect because they incorrectly state that the seller is the mortgagor, when in fact it is the buyer.

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