Illinois Real Estate Practice Exam

What is the property term for a mortgage given to the buyer by the seller, in addition to assuming the seller's existing mortgage?

1. Purchase Money Mortgage

2. Functional Obsolescence

3. Tenancy In Common

4. External Obsolescence

The correct answer is: Purchase Money Mortgage

The correct term for a mortgage given to the buyer by the seller, in addition to the buyer assuming the seller's existing mortgage, is indeed a Purchase Money Mortgage. This type of mortgage is specifically created to facilitate the sale of a property where the seller allows the buyer to borrow money directly from them to cover part of the purchase price. In this scenario, the buyer not only takes over the existing loan on the property but also receives additional financing from the seller to complete the transaction. A Purchase Money Mortgage is beneficial in situations where buyers may have difficulties securing traditional financing or want to negotiate more favorable terms directly with the seller. It creates a secured interest in the property, ensuring that the seller has recourse should the buyer default on the payment. The other terms mentioned do not relate to the financing arrangements for a property: Functional Obsolescence refers to a decrease in the desirability or usefulness of a property due to design flaws or outdated features. Tenancy In Common describes a form of co-ownership of property, where multiple individuals have equal shares but without rights of survivorship. External Obsolescence involves a loss of property value due to external factors, such as changes in the neighborhood or economic downturns.