CompuCram Simulated Exam Questions Flashcards
What is true about the qualifying broker of a corporation in Georgia?
CORRECT ANSWER: The qualifying broker must be an officer of the corporation
If a brokerage firm is set up as a corporation, what does license law in Georgia require regarding any advertising done by the company?
CORRECT ANSWER: All ads must include the name in which the company’s real estate license was issued
A client who is relocating to Atlanta asks a broker to show her a home in a specific subdivision because the client knows that the homeowners in that neighborhood are nearly all African-American. You might advise the client against looking for homes in that area if:
CORRECT ANSWER: None of the homes in that subdivision fall within the client’s lender-approved price range
Which of the following statements is true concerning Georgia’s Real Estate Commissioner?
CORRECT ANSWER: The Commissioner is hired by the Real Estate Commission. If the Commissioner or any of the Commissioner’s staff holds a real estate license, it must be placed on inactive status. The Commissioner is not a member of the Real Estate Commission, but is hired by the Commission.
What does the term “homestead exemption” mean in Georgia?
CORRECT ANSWER: A deduction that a homeowner-occupant can take from the assessed value of the property before the property tax is calculated
Which is Not a requirement to become a licensee in the State of Georgia?
CORRECT ANSWER: Be a resident of the state of Georgia
Georgia real estate licensee would prepare a competitive market analysis for a client in order to:
CORRECT ANSWER: Assist the home seller in determining an appropriate listing price for the property. The CMA–competitive market analysis–is a research tool by which real estate agents might help a seller client determine a listing price for a home. Offering an opinion or estimation of value would be the job of a licensed appraiser, not a real estate licensee. A licensed appraiser would also be the individual to evaluate property value for a lender.
An individual has operated a service station in Georgia for years, in an area recently rezoned for residential use. After the gas station was virtually demolished by a severe storm, what would be true?
CORRECT ANSWER: The owner could only rebuild the gas station if the location was spot zoned for commercial use or if the owner was granted a variance. Under these circumstances, the owner had been operating the service station under non-conforming use; when the property was destroyed, it would have to be rebuilt to comply with current zoning laws, unless the location was spot zoned for commercial or the owner was granted a variance from the zoning board. The owner would not be entitled to compensation for the loss of the business.
With regard to errors and omissions insurance in Georgia:
Most brokers acquire this insurance as it does offer protection from liability caused by mistakes and errors of their licensees. It would not cover fraud and the coverage is not a legal requirement in Georgia.
Under what conditions might a licensed salesperson collect a commission from someone other than the employing broker?
CORRECT ANSWER: If the commission comes from a former employing broker involving compensation earned on a contract negotiated before the licensee transferred to the current broker and if this action is approved in writing by both the former and current brokers. A salesperson may receive compensation from someone other than the employing broker only if the compensation comes from a former employing broker and represents a commission earned on a contract completed before the change of employment. Also, both the current and former brokers must approve this transaction in writing.
If a home is being partially financed by a purchase money mortgage (PMM) in Georgia, all of the following would be true EXCEPT:
CORRECT ANSWER: (this is NOT true) The buyer would receive legal title to the property at closing.
Since the buyer is, in effect, giving the mortgage or security claim to the seller, the buyer would be the mortgagor, and the seller the mortgagee. Also, as the seller is giving a loan and the buyer is receiving the loan, the amount would be debited to the seller and credited to the buyer. The PMM is, by definition, owner financing. The buyer receives equitable, not legal, title to the property at this point.
Concerning a general warranty deed–the commonly used document to transfer real property title at a closing in Georgia–which of the following is NOT true?
CORRECT ANSWER: The general warranty deed provides marketable title evidence for the buyer. The general warranty deed, commonly used in Georgia to transfer real property, offers more warranties than any other deed. Among these warranties are quiet enjoyment, in which the seller promises to defend the buyer’s title against any future claims of superior title, as well as warranting against defects that may have occurred before the seller’s ownership. The general warranty deed does not, however, provide evidence of clear title to the buyer; this type of evidence would only be provided through the issuance of a title insurance policy.
Real estate closings in Georgia are conducted by an attorney who customarily represents whom?
CORRECT ANSWER: The mortgage lender. Typically, the amount of down payment will have to be verified from the applicant’s own financial resources. Credit history and income to debt ratio would all factor into the lender’s decision to approve a loan.
Regarding property tax prorations, if a closing takes place on April 20 and the taxes come due for the entire calendar year on July 1, which of the following is true?
CORRECT ANSWER: The seller will owe prorated taxes for 110 days. Since property taxes for the calendar year are unpaid as of closing and since the buyer will have to pay them on July 1, at closing, the seller will be debited for his or her unpaid prorated amount covering 110 days (from January 1 through April 20) and the buyer will be credited for that amount.
If a buyer is getting a new loan for $92,000 at 8% interest with a closing on January 23, what would be the prepaid or interest adjustment for the buyer? Use the correct days of the month and a 360 day calendar.
CORRECT ANSWER: $184.00
$92,000 x 8% = $7,360 divided by 360 = $20.4444 x 9 (days) = $184.00.
When an agent represents both parties in the same transaction, and both parties give consent, it is called:
CORRECT ANSWER: Disclosed dual agency
Which of the following is not grounds for revocation or suspension of a license?
CORRECT ANSWER: Violation of an association’s Code of Ethics. Codes of Ethics sets of voluntary rules of conduct established by local associations. The Federal Fair Housing Act and the Civil Rights Act of 1866 are both federal statutes, and the Canons of Ethics list the ethics laws of individual states.
Three independent groups of large department stores want to research and plan a merger to become one large entity. They will have to plan the merger, re-evaluate stocks, and plan on shifting their assets to put the merger together. They will need the help of:
CORRECT ANSWER: Advice and guidance from investment banks. Broadly speaking, investment banks assist in large, complicated financial transactions. This may include advice as to how much a company is worth and how best to structure a deal if the investment banker’s client is considering an acquisition, merger or sale.
Fee simple absolute estates are all of the following except:
CORRECT ANSWER: Defeasible. If a condition exists in the deed, the estate is fee simple defeasible. Fee simple absolute implies there are no conditions in the deed.
Plants and trees cultivated for harvest best describe:
CORRECT ANSWER: Fructus industrales. Fructus industrales would be crops, forests or other plants intended to benefit the farmers of such plants. Emblements refers to tenant farmers’ crops.
A real estate investment business organized as a trust best describes a/an:
CORRECT ANSWER: REIT
Corporations, partnerships, and LLC ownership interest are not required to have a specified number of individuals. The REIT must have at least 100 investors.
Which of the following tests would NOT be applied to determining a fixture?
CORRECT ANSWER: The cost of the article
What event will create an involuntary life estate?
CORRECT ANSWER: Dower interest becoming choate. Inchoate means not active which is the status of dower when spouses are both alive and together. When a spouse dies or sells the property without dower release, dower becomes choate or active.
Of the following, which is not an encumbrance?
CORRECT ANSWER: License. Since a license is revocable, it cannot burden the property owner’s title. A license does not create an interest in another’s land.
In title theory states, what clause is unique to the mortgage?
CORRECT ANSWER: Defeasance. In title theory states, there must be language that cancels the mortgagee’s rights to the title to land on the payment on the debt.
A potential borrower lives in a title theory state. What type of instrument would the potential borrower give to the bank in order to obtain the loan?
CORRECT ANSWER: Deed of trust. A deed of trust is an instrument used in many states in place of a mortgage. Equitable title states use mortgages, which convey only a lien interest to the bank. Title theory states use deeds of trust, which actually convey equitable title to the lender who holds the equitable title while the loan is outstanding. A property is transferred to a trustee by the borrower in favor of the lender and is reconveyed upon payment in full. A deed of reconveyance is an instrument used to transfer title from a trustee to the equitable owner of real estate after the loan is paid.
Which of the following classes is protected under the Equal Credit Opportunity Act but is not protected under the Federal Fair Housing Act?
CORRECT ANSWER: Income from public assistance. While all these classes are protected under the Equal Credit Opportunity Act, the Federal Fair Housing Act does not protect against discrimination based upon income from public assistance. Only the Equal Credit Opportunity Act protects against marital status discrimination.
A new house is completed January 28, but landscaping, cement walks and some painting are not completed. To insure that all items will be completed by April 15th the following year, the buyer should insist on:
CORRECT ANSWER: Withholding money from the settlement to insure work will be done by April 15th.
The buyer should escrow funds to be held from the settlement to insure that the work will be done by April 15th. In most escrow agreements, if the work is not preformed, then the buyer keeps the money and hires his/her own contractors to complete the builders’ work.
Real estate is
CORRECT ANSWER: land and improvements
Patent defects are
CORRECT ANSWER: obvious. Patent means known, obvious. Latent means hidden from view. Latent defects could be material facts, and must be revealed if known to the licensee.
The owner-occupant of a four-unit apartment building decides not to rent one of his units to a woman with two children. Which law has the owner violated?
CORRECT ANSWER: No violation has occurred. Under the Federal Fair Housing Act, the owner-occupant of the 1-4 dwelling unit is an exemption, provided no discriminatory advertising is used and no real estate professional was used.
What term does the law use to describe the holdover tenant?
CORRECT ANSWER: Tenancy at sufferance. When a tenant is no longer entitled to possession of the estate, the landlord must use the eviction process.
A lease executed by a minor lessor is:
CORRECT ANSWER: Voidable by the landlord only. The minor is the landlord in this question; a lessor is the person who gives the lease. The lease is voidable by the minor landlord, who lacks contractual capacity. Void means the contract never existed. The voidable contract is enforceable only as long as the minor so chooses.
The promissory note will be accompanied by what document when a buyer is financing the purchase of a home in Georgia?
CORRECT ANSWER: Security deed
Georgia uses a security deed, not a mortgage or trust deed, as security for real property. A security agreement involves personal property as collateral for a loan.
On a closing settlement statement, if a loan assumption was involved, which of the following would most likely be under the debit column for the seller?
CORRECT ANSWER: Accrued interest. The appraisal cost, funds to establishment an escrow account for the lender, and a prepaid hazard insurance policy would typically be debited to the buyer on a settlement statement. Accrued interest would be owed by the seller on the existing home loan as of closing day and, therefore, would be a debit to the seller.
A buyer contracts to purchase a home in Georgia for $195,000. The buyer provides $40,000 in cash as a down payment and will assume the seller’s existing home loan of $155,000. What will be the transfer tax paid at closing for this transaction?
CORRECT ANSWER: $40
Any assumed loan will not incur a transfer tax at closing. So, in this transaction, the tax will be calculated as follows: $195,000 minus $155,000 = $40,000 divided by 100 = $400 x 0.10 = $40.
After a mortgage foreclosure sale in Georgia, how long does the defaulted borrower have to redeem the property?
CORRECT ANSWER: There is no redemption period in Georgia after the foreclosure sale. In Georgia, the period for redeeming a property in default, called equity of redemption, does not extend beyond the foreclosure sale, which, if allowed, is called statutory equity of redemption.
An offer to purchase:
CORRECT ANSWER: May be revoked at any time prior to its acceptance. An offer of purchase may be revoked at any time prior to it being accepted. An offer is just an offer. It does not become a contract until it is accepted. Thus, even if the offer said it would remain open for 72 hours, it is not binding upon either party.
An agent has a direct fiduciary duty to the:
CORRECT ANSWER: Managing/Sponsoring Broker. The sponsored agent always has a duty to his/her managing/sponsoring broker. The managing/sponsoring broker always has a duty to the client.
Negligence that causes harm is a:
CORRECT ANSWER: Tort. Breaching the duty of reasonable skill and care is considered to be tortuous behavior; both broker and agent can be held liable. It is not actual fraud, because there is no intent to cause harm.
Complaints based on Title VIII should be filed with:
CORRECT ANSWER: Office of Equal Opportunity. A complaint should be filed with the Office of Equal Opportunity with the Department of Housing and Urban Development.
The non-breaching party to a contract has a duty by law to:
CORRECT ANSWER: Mitigate their damages. The non-breaching party has a duty to do whatever is necessary to reduce the losses resulting from the breach.
Disintermediation refers to:
CORRECT ANSWER: The movement of money out of a savings account into a higher-yield investment, such as a corporate or government instrument. A deed of trust is an instrument used in many states in place of a mortgage. Dedication is the transfer of real property by a private owner to a public agency. Disintermediation is the movement of money out of a savings account into a higher-yield investment, such as corporate or government instruments.
A standard form of title insurance policy does not protect against loss resulting from:
CORRECT ANSWER: Encroachment on the property. Title insurance protects anything of public record. Anything not of public record is not covered. A forgery in the chain of title is protected, as the title insurance company is insuring that all previous documents are valid. An encroachment is the intrusion of a physical object onto the property, and would by disclosed by a survey, not a title search.
The owner of a two-family residence lists the property with New Age Realty. Two weeks later, an offer comes in from a financially qualified woman with two children. Living in one of the units, the owner decides to reject her offer. Which law has been violated?
CORRECT ANSWER: The Federal Fair Housing Act. Under the Federal Fair Housing Act, no transaction involving a real estate professional is exempt.
When can a property manager use a self-help eviction[6]?
CORRECT ANSWER: Only in non-residential tenancies. A landlord can only use a utility shut off or lockout in a non-residential tenancy.
The rate refers to:
CORRECT ANSWER: The rate of return used by investors. The investor can calculate the present value of future income. The formula known as IRV can take two out of three factors and figure the sum of the third.
A property management account:
CORRECT ANSWER: Can earn interest, A property management trust account can earn interest that gets paid to the property owner.
The ad valorem taxes are $8,000. The tax rate is $8/100. The equalization factor is 1.00. The assessment rate is 30%. What is the market value?
CORRECT ANSWER: $333,333
Working backwards, $8,000/.08 = $100,000/1.00 = $100,000/.30 = $333,333. Working from market value to tax we multiply; therefore working in reverse we divide.
Barb Buyer is closing on her house May 5. Sam Seller is concerned about the prorated expenses on the closing disclosure. The ad valorem taxes for the year are $2,400, and are paid in arrears. What should the closing disclosure read if the Statutory Month Method is used to prorate this expense?
CORRECT ANSWER: $833.35 SD/BC
$2,400/12 = $200/month/30 = $6.67/day. $200/month x 4 full months = $800. 5 days x $6.67/day = $33.35. Therefore, $833.35 SD/BC.
A 3-story apartment building has a cost of $500,000. The actual age is 20 years. The effective age is 10 years. The economic life is 50 years. The capitalization rate is 10%. The value of the land is $125,000. What is the value of the property via the Cost Approach to Value?
CORRECT ANSWER: $525,000
$500,000 x (10/50) = $100,000 depreciation. $500,000 - $100,000 = $400,000 (value of the building) + $125,000 (value of the land) = $525,000.
A community association manager in Georgia might be involved with all of the following communities EXCEPT:
CORRECT ANSWER: 200 apartment/home community.
A community association manager in Georgia could work for various types of homeowners associations, including town homes, cluster homes, and cooperatives. Managing apartments, though, would be the job of a property manager who works for the property owner; a community association manager, in effect, works for all of the homeowners in the community.
When does BRRETA require that agency disclosure be made?
CORRECT ANSWER: When entering into a brokerage engagement.
A salesperson is working with a buyer who wants to see property listed by another real estate firm. Under these circumstances, which of the following would NOT be true?
CORRECT ANSWER: The salesperson could have verbally established an agency relationship with the buyer. BRRETA requires that agency contracts cannot be created verbally–they must be in writing. The salesperson may have a customer, not a client relationship with the buyer, and if the seller agrees and the listing broker offers subagency, the salesperson might work as a subagent.
For the purposes of a legal description, a real estate sales contract or deed in Georgia might indicate:
CORRECT ANSWER: Reference to a recorded subdivision plat.
Townships and baselines are part of a government survey/meridian base line legal description not used in Georgia; a street address is not an adequate legal description; the recorded plat along with the metes and bounds description are the two acceptable legal descriptions in Georgia.
Georgia lender may consider all of the following factors in qualifying an applicant for a home loan EXCEPT:
CORRECT ANSWER: If the applicant had a source from which the down payment might be borrowed.
Typically, the amount of down payment will have to be verified from the applicant’s own financial resources. Credit history and income to debt ratio would all factor into the lender’s decision to approve a loan.
If the sales price of a home in Georgia is $185,000 and the buyer is getting a new loan to finance the home purchase, what amount would show as the transfer tax on the settlement statement at closing?
CORRECT ANSWER: $185
$185,000 divided by 100 = $1,850 x 0.10 = $185; new loan is irrelevant as transfer tax is based on sales price.
All of the following would appear as a debit on the seller’s closing statement EXCEPT:
CORRECT ANSWER: Prepaid property taxes for the calendar year in which the closing takes place.
The seller would be debited at closing any mortgage interest accrued on an existing home loan since the last payment was made. The seller would need to pay any additional existing liens on the property at closing, as well as paying the buyer for the share of unpaid property taxes that had accrued since the beginning of the tax year. If the seller has already paid the property taxes for the year, it would show up as a credit or prepaid property taxes on the seller’s closing statement.
