CompuCram Simulated Exam Questions Flashcards
1
Q
What is true about the qualifying broker of a corporation in Georgia?
A
CORRECT ANSWER: The qualifying broker must be an officer of the corporation
2
Q
If a brokerage firm is set up as a corporation, what does license law in Georgia require regarding any advertising done by the company?
A
CORRECT ANSWER: All ads must include the name in which the company’s real estate license was issued
3
Q
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:
A
CORRECT ANSWER: None of the homes in that subdivision fall within the client’s lender-approved price range
4
Q
Which of the following statements is true concerning Georgia’s Real Estate Commissioner?
A
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.
5
Q
What does the term “homestead exemption” mean in Georgia?
A
CORRECT ANSWER: A deduction that a homeowner-occupant can take from the assessed value of the property before the property tax is calculated
6
Q
Which is Not a requirement to become a licensee in the State of Georgia?
A
CORRECT ANSWER: Be a resident of the state of Georgia
7
Q
Georgia real estate licensee would prepare a competitive market analysis for a client in order to:
A
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.
8
Q
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?
A
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.
9
Q
With regard to errors and omissions insurance in Georgia:
A
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.
10
Q
Under what conditions might a licensed salesperson collect a commission from someone other than the employing broker?
A
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.
11
Q
If a home is being partially financed by a purchase money mortgage (PMM) in Georgia, all of the following would be true EXCEPT:
A
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.
12
Q
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?
A
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.
13
Q
Real estate closings in Georgia are conducted by an attorney who customarily represents whom?
A
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.
14
Q
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?
A
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.
15
Q
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.
A
CORRECT ANSWER: $184.00
$92,000 x 8% = $7,360 divided by 360 = $20.4444 x 9 (days) = $184.00.
16
Q
When an agent represents both parties in the same transaction, and both parties give consent, it is called:
A
CORRECT ANSWER: Disclosed dual agency
17
Q
Which of the following is not grounds for revocation or suspension of a license?
A
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.
18
Q
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:
A
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.
19
Q
Fee simple absolute estates are all of the following except:
A
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.
20
Q
Plants and trees cultivated for harvest best describe:
A
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.
21
Q
A real estate investment business organized as a trust best describes a/an:
A
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.
22
Q
Which of the following tests would NOT be applied to determining a fixture?
A
CORRECT ANSWER: The cost of the article
23
Q
What event will create an involuntary life estate?
A
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.
24
Q
Of the following, which is not an encumbrance?
A
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.
25
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.
26
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.
27
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.
28
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.
29
Real estate is
CORRECT ANSWER: land and improvements
30
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.
31
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.
32
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.
33
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.
34
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.
35
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.
36
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.
37
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.
38
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.
39
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.
40
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.
41
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.
42
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.
43
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.
44
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.
45
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.
46
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.
47
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.
48
A property management account:
CORRECT ANSWER: Can earn interest, A property management trust account can earn interest that gets paid to the property owner.
49
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.
50
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.
51
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.
52
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.
53
When does BRRETA require that agency disclosure be made?
CORRECT ANSWER: When entering into a brokerage engagement.
54
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.
55
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.
56
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.
57
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.
58
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.
59
An agency agreement that allows a seller to procure the buyer himself/herself best describes a/an:
CORRECT ANSWER: Exclusive agency. When the seller has the ability to bring in the buyer, yet hires one broker to market the property, the listing agreement is an exclusive agency agreement.
60
Of the following, which is not an example of a freehold estate?
CORRECT ANSWER: Periodic tenancy. A periodic tenancy is a leasehold estate.
61
An instrument that conveys a grantor's interest (if any), is called a/an:
CORRECT ANSWER: Deed.
Title is the actual, lawful, ownership. The deed is the instrument.
62
What is the body of law that governs negotiable instruments?
CORRECT ANSWER: Uniform commercial code.
The UCC sets out certain requirements for negotiable instruments.
63
The note that calls for periodic payments of interest only, with a balloon payment at the end of the loan term is a/an:
CORRECT ANSWER: Straight note.
A straight note calls for interest-only payments with a balloon payment at the end of the loan term. In an amortized note, principal and interest are paid together. An adjustable rate note permits the lender to periodically adjust the rate of interest according to fluctuations in the cost of money (interest). An installment note calls for periodic payments of principal only, with a balloon payment at the end of the loan term.
64
In a settlement statement required by RESPA, the sales price is shown as a/an:
CORRECT ANSWER: Credit to the seller.
The sales price is a credit to the seller, as this is what he/she is to receive in cash from the sale of his/her home. It is reduced by any debit (i.e. real estate commissions, back taxes etc).
65
Reproducing a structure best describes:
CORRECT ANSWER: Building an exact replica of the structure.
Building an exact replica means that the replica has the exact look and feel of the original structure. If a historical building was destroyed, the building would likely be reproduced.
66
A landowner needs water. His land contains no available water source. However, the landowner is given the right to cross over his next-door neighbor's property to run a pipeline from a river to his land. Which right grants this permission?
CORRECT ANSWER: Appropriative rights
Appropriative rights are permits granted by the government, allowing an individual to use water from land he/she does not own. Eminent domain is the right of the government to take private property for public use. Littoral and riparian refer to the rights of landowners to use either flowing or lake water on their own property for their own use.
67
Gross income best describes:
CORRECT ANSWER: Income before expenses or income before taxes taken out. All income generated from an investment property added together is gross income.
68
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.
With respect to real estate company advertising, license law only requires that the ad always include the name in which the real estate license was granted by the Commission.
69
Which of the following would constitute an unfair practice that could result in the suspension or revocation of a real estate license by the Georgia Real Estate Commission?
CORRECT ANSWER: Converting earnest money from a buyer client into a check drawn on the licensee's bank, which is then deposited into a trust account.
There are no unfair practices under Georgia license law that prohibit accepting subagency nor prohibit marketing an open listing that is not in writing. Exclusive agency is an acceptable type of agency agreement in Georgia; however, commingling of funds is a clear unfair practice that could result in a licensee losing his or her license.
70
Which of the following is not true about mechanics' liens in Georgia?
CORRECT ANSWER: These liens are filed specifically against individuals owing money to laborers.
Mechanics' liens are normally filed against property that has been improved by contractors or building suppliers who have yet to be paid for their work. Mechanics' liens are not filed against persons. These are statutory by nature. Recently, the state legislature in Georgia extended mechanics' lien rights to commercial real estate brokers as well.
71
The Georgia Real Estate Commission would have the power to act in all of the following situations EXCEPT:
CORRECT ANSWER: Settle a dispute between brokerage firms.
The Commission does not involve itself in broker disputes; it will discipline license law violation, investigate sworn, written complaints, and clarify positions by declaratory rulings.
72
When a husband dies intestate in Georgia, leaving a wife and two children over the age of 18, how might this husband's real property estate be customarily divided under the state's law of descent and distribution?
CORRECT ANSWER: One-third to the wife; two-thirds to the children.
When a husband dies intestate, leaving a wife and grown children, the wife would most likely receive one-third of the estate while the children would receive two-thirds.
73
Concurrent ownership of real property in Georgia may take what form?
CORRECT ANSWER: Join tenancy and tenancy in common.
Joint tenancy and tenancy in common are the only legally recognized forms of concurrent property ownership in Georgia.
74
seller reveals to her listing agent that the basement in the home accumulates an inch of water whenever an excessively heavy rain occurs. Since this conditions only happens occasionally, the seller suggests that the agent avoid mentioning this fact to prospective buyers. The listing agent should:
CORRECT ANSWER: Explain to the seller that this condition must be revealed as a material fact to any potential buyers.
Because the basement leak is a material fact it must be disclosed to all parties involved. Offering the home "as is" does not relieve the seller or listing agent from disclosing material facts about the property's condition.
75
If a broker's salesperson wants to buy an investment property listed by the broker, the salesperson/affiliate must:
CORRECT ANSWER: Inform the owner of the property, in writing, that the salesperson is a licensee, when making the offer.
The salesperson is required to inform the owner in writing that the salesperson holds a real estate license. The salesperson may use any lender, but may not use a straw buyer to purchase the property with the intent of concealing the salesperson's license status from the seller.
76
Which is true about usury laws in Georgia?
CORRECT ANSWER: Georgia code states that the legal maximum rate of 7% interest shall be used when a percentage rate is not established by written contract.
Section 7-4-18 of the Georgia Code contains a criminal usury statute which provides that no loan shall charge any rate of interest greater than five percent per month either directly or indirectly, by way of commission for advances, discount, exchange or by any contract, contrivance or devise whatsoever. However, the effect of that criminal usury statute has been somewhat blurred by §7-4-2(a)(1)(A) of the Georgia Code which states that the legal rate of interest of 7 percent applies where a rate percentage is not established by written contract.
77
home was purchased for $245,000. As part of the sales contract, the buyer was to assume an existing seller's home loan for $89,000. How much would the transfer tax cost in this transaction?
CORRECT ANSWER: $156
$245,000 minus $89,000 = $156,000 divided by 100 = $1,560 x 0.10 = $156.
**transfer tax is taken from the difference in the amounts
Divid by 100 & Multiply by .10
78
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?
TRANSFER TAX PROBLEM
CORRECT ANSWER: $40
$40,000 DP is irrelevent
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.
**transfer tax is taken from the difference in the amounts
Divid by 100 & Multiply by .10
79
The sale of a rental property in Georgia has a closing date of March 25. The monthly rent of $875 is collected in advance on the 15th day of the month. How much rent proration would the seller owe the buyer at closing?
CORRECT ANSWER: $169.38
There are 6 days of the month the seller doesn't own the rental, so the buyers gets 6 days of rent prorated. So, $875 divided by 31 days = $28.2258 x 6 days = $169.38. The trick was "collected in advance on the 15th day". This does not say rent is due on the 15th. I'm the seller and I own the property up until the 25th. I owe you money from 26-31st that I collected in advance in the 15th from that $875. Thats 6 days of rent I owe the buyer.
80
For a purchaser who is buying a home in Georgia with an LTV of 90%, escrow establishment charges for prepaid property taxes might be estimated by a lender as an amount equal to:
CORRECT ANSWER: The number of months reflected in the tax escrow chart determined by the estimated date of the first monthly payment for the loan.
The tax escrow chart in Georgia for determining how many months of property taxes a lender can require a borrower to prepay at closing is based on when the borrower's first monthly payment will be due.
81
When the Bakers sold their house, they owed a balance of $68,750 on their existing home loan, at 8% interest. If the closing took place on June 11, how would this calculation appear on the seller's closing cost form? Use the correct number of days in the month and a mortgage banker's calendar (360 days) for daily interest proration.
CORRECT ANSWER: An accrued interest charge of $168.05 was due from the Bakers at closing
If the closing date is after the 1st, the interest is accrued. Assume the interest has not been paid yet bc closing took place on June 11.
$68,750 x 8% = $5,500 divided by 360 = $15.2778 x 11 = $168.05.
82
The purchase price of a home in Georgia is $200,000. If the buyer received an 80% loan, at closing, what will be the cost of the intangible tax?
INTANGIBLE TAX PROBLEM
CORRECT ANSWER: $480
$200,000 x 80% = $160,000 divided by 500 = $320 x 1.50 = $480.
*Divid by 500 & Multiply by 1.50
83
Which of the following could a real estate agent NOT lawfully complete?
CORRECT ANSWER: General warranty deed
A real estate agent may complete, or fill in the blanks, of a real estate purchase contract, lease, or land contract but not a Deed.
84
The amount that parties to a contract agree in advance will serve as compensation in the event of a breach is known as:
CORRECT ANSWER: Liquidated damages
| Earnest money is an inducement. Compensatory damages would be awarded by a court ruling.
85
When a person has an interest in land that continues as long as she lives, she has:
CORRECT ANSWER: A life estate
Fee simple estate is outright ownership.
An estate for years is a leasehold.
Fee simple absolute has no set time limits.
A life estate has a life tenant who has title during their life.
86
What type of land use does not comply with the zoning restriction for where it is located but is permitted because it benefits the public?
CORRECT ANSWER: Conditional use
| Conditional uses like hospitals and schools usually do not comply with limitations.
87
Which type of description is inadequate for describing property in a deed?
CORRECT ANSWER: House number
An address is not part of a legal description. A legal description is one that would give a competent surveyor enough information to find the property and stake out its boundary lines.
88
A quit claim deed conveys only the interest of:
CORRECT ANSWER: The grantor
The grantor and the grantee are the parties to a deed. A quit claim deed transfers the interest of the grantor only. A grantee does not sign a deed. A vendee is the buyer in a land contract.
89
Which of the following would not be depreciated?
CORRECT ANSWER: Unimproved land leases for open storage
Only improvements are depreciated, not land.
90
What is it called when a landlord raises the rent after a tenant complains about code violations?
CORRECT ANSWER: Retaliatory eviction
Raising the rent or filing for an eviction after a tenant has complained is grounds for an unlawful eviction lawsuit.
91
Net income best describes:
CORRECT ANSWER: Income after expenses
Expenses such as trash removal, repairs, and maintenance subtracted from gross income equals net income.
92
The market value of a house is $500,000. The assessment rate is 30%. The Equalization Factor is 1.25. The tax rate is 70 mills. What are the annual ad valorem taxes?
AD VALOREM TAXES
CORRECT ANSWER: $13,125
$500,000 x .30 = $150,000 (assessed value) x 1.25 = $187,500 (equalized assessed value) x .07 (70 mills/1000 = .07) = $13,125 annual real estate taxes. Sometimes a tax rate is expressed as mills, an old English concept where 1 mill = 1/1000 = .001. Therefore, 70 mills/1000 = .07.
*Use mills
93
A buyer borrows $70,000 for 30 years at 5% interest. The monthly payment on this fully amortized loan is $375.78 principle and interest. How much is the balance on this mortgage after the first payment?
CORRECT ANSWER: $69,915.89
Find the principal $84.11 (always the smaller amount paid) and deduct it from the loan amount.
$70,000 x .05 = $3,500/12 = $291.67 interest in the first month.
Monthly Principal and Interest..P&I
$375.78 - $291.67 (I) = $84.11 (P).
$70,000 - $84.11 = $69,915.89.
94
A lot measures 1,000 ft x 3,000 ft in a market where land is valued at $25,000/acre. The commission to be paid is 10%. How much will the seller net after he pays the commission?
CORRECT ANSWER: $1,549,587
1,000 ft x 3,000 ft = 3,000,000 ft/43,560 sf/acre = 68.87 acres x $25,000/acre = $1,721,763 x .90 (broker gets 10%, therefore seller keeps 90%) = $1,549,587.
If the commission to be paid is 10%, the seller keeps 90%
$172,176 is the brokers commission (10%)
$1,549,587 is for the seller (90%)
95
The selling agent with ABC Realty was paid a commission of $10,000 for the sale of 123 Main Street, a brick and frame bungalow with a full, unfinished basement. The commission rate was 5%. The cooperative commission with XYZ Realty was 50%. The selling agent's split with their sponsoring broker was 60-40, with 60% going to the selling agent. Rounded to the nearest dollar, how much did the house sell for?
**Finding how much a house sells for using commission.
CORRECT ANSWER: $666,667
**Take the percentages and divide them into the known commission in no special order.
5% commission= .05
50% commission= .50
60% commission= .60
```
$10,000/.60 = $16,666.67
$16,666.67/.50 = $33,333.33
$33,333.33/.05 = $666,666.67, rounded to $666,667.
```
96
Which of the following would constitute an unfair practice that could result in the suspension or revocation of a real estate license by the Georgia Real Estate Commission?
CORRECT ANSWER: Converting earnest money from a buyer client into a check drawn on the licensee's bank, which is then deposited into a trust account.
There are no unfair practices under Georgia license law that prohibit accepting subagency nor prohibit marketing an open listing that is not in writing. Exclusive agency is an acceptable type of agency agreement in Georgia; however, commingling of funds is a clear unfair practice that could result in a licensee losing his or her license.
97
With regard to wood infestation reports (termite letters) as they relate to the standard real estate sales contract in Georgia, which of the following statements is NOT true?
CORRECT ANSWER: The seller is legally obligated to present this letter at closing.
Typically, the termite letters are a lender requirement and, while they are not a statutory requirement, the contract language customarily makes them a necessary obligation of the seller. If these reports are available at the time an offer is tendered, the report is usually attached to the offer.
98
If a purchaser breaches a valid and enforceable sales contract the seller at his option may:
CORRECT ANSWER: These all are seller's choices.
99
If a closing in Georgia involving rental property takes place on October 17 and the tenant pays rent on the first day of each month, at the closing:
CORRECT ANSWER: The seller will owe the buyer 14 days' rent.
The seller may keep the prorated rent from the 1st through and including closing day; the buyer is entitled to a prorated portion of the rent, beginning the day after closing to and including the last day of the monthly rental period. In this example, from the 18th of October until October 31, for a total of 14 days.
100
The purchase price of a home in Georgia is $200,000. If the buyer received an 80% loan, at closing, what will be the cost of the intangible tax?
CORRECT ANSWER: $480
$200,000 x 80% = $160,000 divided by 500 = $320 x 1.50 = $480.
101
Upon arrival, the listing agent representing an elderly lady realizes that she would be happy receiving an offer for much less than market value. The agent decides to make a cash offer for the low list price. The agent then sells the property for market value. What duty has the agent breached?
CORRECT ANSWER: Disclosure
An agent has a duty to disclose the property's true value. The agent's behavior is regarded as self dealing.
102
When the principal terminates the agency relationship before it expires, it is called:
CORRECT ANSWER: Revocation
Revocation occurs when the principal ends the relationship; the agent is no longer authorized to act on behalf of the client. The broker may still be entitled to a commission, however.
103
During a phone call, the agent discusses showing a property to a prospect. Three days later the agent shows the property; at that time, the customer reveals his financial abilities and motivation. Three days after that the agent prepares the offer and asks the buyer to sign an agency disclosure statement stating he represents the seller. When should the agent have disclosed this fact?
CORRECT ANSWER: Before showing the house
An agent's duty is to be fair and honest. The agent should have disclosed his affiliation with the seller before the buyer had a chance to disclose information that the listing agent must now use against the buyer in negotiations.
104
The seller lists her house with New Age Realty. The next day, the seller goes to work and mentions listing her house. A co-worker expresses interest in the listing. If the broker will still be entitled to a commission when the co-worker makes an acceptable offer, what kind of listing did the agent take?
CORRECT ANSWER: Exclusive right to sell
Only the exclusive right to sell listing agreement entitles a broker to a commission no matter who brings the buyer.
105
When does a seller's agent have a fiduciary duty to the buyer?
CORRECT ANSWER: When the agent (with consent) acts as a dual agent
With the consent of both clients, an agent can act as a dual agent in most states. Only then would the buyer be owed a fiduciary duty.
106
In a contract for Deed which is true regarding the "Power of Sale" clause?
CORRECT ANSWER: With a "Power of Sale" clause a lender can foreclose without court oversight
A power of sale provision is a clause in the deed of trust or mortgage in which the borrower pre-authorizes the sale of property by way of a nonjudicial foreclosure to pay off the balance of the loan in the event of a default. With a power of sale foreclosure, the lender can foreclose without court oversight.
107
In a real estate sales transaction, title to real property passes from the seller to the buyer by:
CORRECT ANSWER: Execution of a deed by the seller and delivery to the buyer
A title (ownership) passes from seller to buyer when the deed is delivered to and accepted by the buyer. A deed need not be recorded to effect transfer of title.
108
The period of time in which a building produces income attributable to the structure itself is its:
CORRECT ANSWER: Economic life
Economic obsolescence is a form of incurable depreciation. When a property no longer returns an income attributable to the structure itself, it has exceeded its economic life.
109
Which type of description is inadequate for describing property in a deed?
CORRECT ANSWER: House number
An address is not part of a legal description. A legal description is one that would give a competent surveyor enough information to find the property and stake out its boundary lines.
110
Tim is a licensee with ABC Realty. Georgina approaches Tim and states "Your listing at 123 Main St is BEAUTIFUL! I have to buy it. When can I fill out an offer?" Tim discloses that he now has an agency relationship with Georgina, and receives informed, written consent from Georgina and Tim's seller for a dual agency relationship. Tim tells the seller how much Georgina loves the house. Is this a violation?
CORRECT ANSWER: Yes, because buyer motivation is a material fact and must not be disclosed if deemed confidential.
A material fact is a fact that, if known, could affect the decision-making process. Buyer (or seller) motivation can be a material fact. Since this is a dual agency, Tim should not reveal such motivations which would hurt one client while helping the other.
111
Effective gross income best describes:
CORRECT ANSWER: Gross income minus a figure for vacancy and collection losses
Effective gross income is generated by a property, plus miscellaneous income, minus a figure for vacancy and collection losses.
112
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.
113
Licenses are required for all of the following professions in Georgia EXCEPT:
CORRECT ANSWER: Property home inspectors
No license is needed for home inspectors in Georgia; however, licenses are needed for offering services as a community association manager, real estate appraiser, and prelicense instructor.
114
All of the following are true concerning the minimum balance required by law to be maintained in the Real Estate Education, Research, and Recovery Fund EXCEPT:
CORRECT ANSWER: The maximum amount that can be awarded out of the Recovery Fund is $25,000.
The fund must have a minimum of $1 million at all times. The money is raised from fees charged to real estate licensees. The maximum one person may ever obtain is $15,000.00. The aggregate maximum amount that can be paid on behalf of a single licensee is $45,000.00.
115
If an investigation by the Real Estate Commission finds that a licensee has committed an unfair practice, before disciplining that individual the Commission must:
CORRECT ANSWER: Provide a hearing for the licensee
When license suspension or revocation occurs, the holder is always entitled to a hearing and can appeal for judicial review if not satisfied.
116
All of the following are true concerning the Property Disclosure Form in Georgia EXCEPT:
CORRECT ANSWER: Without this form, a sales contract would be invalid
Although the seller's disclosure form is customary and recommended, it is not a requirement for a valid real estate contract for sale. The seller would normally fill out and sign the form prior to the listing, and the buyer would sign the document to indicate receipt; once a part of the contract for sale, the seller might indeed be held liable for false statements.
117
Georgia agency law requires all of the following employment contracts to be in writing EXCEPT a(n):
CORRECT ANSWER: Open listing
All exclusive agency contracts must be in writing; a lease for more than one year must be in writing; along with a lease for a year or less, the open listing is the other real estate contract that is valid and enforceable orally.
118
Interest rate usury laws in Georgia offer what guidelines regarding 1st mortgage home loans for real estate?
CORRECT ANSWER: There are no usury laws regarding 1st mortgage home loan interest rates in Georgia
Exp: 1st Mortgage loans in Georgia no longer have a usury ceiling for interest rates.
119
In Georgia, for the purpose of prorating sums that have been prepaid or will be owed between buyer and seller, the day of closing is assumed to belong to which party?
CORRECT ANSWER: The seller
| For prorating sums between the buyer and seller in Georgia, closing day belongs to the seller.
120
An implied contract is:
CORRECT ANSWER: An agreement that is not put into words, either written or verbal
An example of an implied contract would be when one goes to a restaurant. It is understood that payment of the bill is expected even if the matter is not discussed before the meal is consumed.
121
When a contract is terminated without undoing anything that has been done so far the action is called:
CORRECT ANSWER: Cancellation
Cancellation is most likely to occur when a purchase agreement is terminated.
122
As defined in local zoning ordinances, the distances between lot lines and improvements are known as:
CORRECT ANSWER: Set back
Frontage is the distance along a lot's boundary with the road. A buffer zone is a piece of property situated between two differently zoned properties (i.e. a vacant lot between commercial land and residential land).
123
What is it called when personal property is transformed into real property?
CORRECT ANSWER: Fixture
Annexation occurs when property is so closely related to real property the law treats it as a fixture, even though it is not physically attached. The fixture is the item that was transformed.Attachment is the physical process of attaching personal property to the real estate, thus annexing it.
124
The note that calls for periodic payments of interest only, with a balloon payment at the end of the loan term is a/an:
CORRECT ANSWER: Straight note
A straight note calls for interest-only payments with a balloon payment at the end of the loan term. In an amortized note, principal and interest are paid together. An adjustable rate note permits the lender to periodically adjust the rate of interest according to fluctuations in the cost of money (interest). An installment note calls for periodic payments of principal only, with a balloon payment at the end of the loan term.
125
For the income approach to appraisal,
| value is
CORRECT ANSWER: related to anticipated income
Net income divided by the rate will yield the value, the worth of the investment.
126
Replacement of a building best describes:
CORRECT ANSWER: Building the functional equivalent of the original structure
Replacing a building with a functional equivalent of the original structure may not look exactly the same but will serve the same purpose.
127
What is market price?
CORRECT ANSWER: The price the property actually sold for
Market value is what the property is likely to bring in an arm's length transaction; insurance value deals with the cost of replacement.
128
To avoid potential liability for the unfair practices of an affiliated salesperson, a broker must provide which of the following evidence to the Real Estate Commission?
CORRECT ANSWER: All of the answers
The Real Estate Commission might excuse the broker from disciplinary action if the broker could show that the broker neither participated in nor ratified the violation of the salesperson, the broker provides ongoing company training and education for the affiliate salespeople, and Broker/management support is continuously available to oversee activities of salespeople.
129
If a Kentucky resident who holds a broker's license in that state has a client who would like to buy a home in Georgia, all of the following actions by the broker would be acceptable EXCEPT:
CORRECT ANSWER: Apply for a temporary license from the Georgia Real Estate Commission
The Kentucky broker may receive a referral fee from a Georgia broker; the Kentucky broker might also, for this specific transaction, work under the authority of a Georgia broker through a written agreement; the Kentucky broker might also serve the client directly if the broker also held a non-resident Georgia license. There is no such thing as a temporary real estate license in Georgia.
130
When does BRRETA require that agency disclosure be made?
CORRECT ANSWER: When entering into a brokerage engagement
Georgia agency law requires that agency disclosure be made when first entering into a brokerage engagement.
131
After listing a property that the agent believes is overpriced, the agent returns to the office and vents his frustration with a fellow licensee at the brokerage. Which duty has the agent breached?
CORRECT ANSWER: Loyalty
If an agent decides to take the listing at the price indicated by the seller, the agent must be loyal to the seller and not imply that the list price is unreasonable.
132
Complaints based on Title VIII should be filed with:
CORRECT ANSWER: Office of Equal Opportunity
Title VIII is The Civil Rights Act that was Amended in 1968
A complaint should be filed with the Office of Equal Opportunity with the Department of Housing and Urban Development.
133
Of the following, which is not an example of a freehold estate?
CORRECT ANSWER: Periodic tenancy
A periodic tenancy is a leasehold estate.
134
What law creates an automatic lien on a commercial property, subject to the listing agreement?
CORRECT ANSWER: Broker lien law
In some states, when a broker takes a commercial listing, an automatic lien attaches to the property to secure the payment of the broker's commission.
135
Which of the following is not part of the secondary market?
CORRECT ANSWER: Federal universal mortgage association... is not a real association.
136
In the state where B lives, someone who receives a loan from a lender literally must transfer his property to a holding company of the bank while the loan is outstanding. The document that B would use to accomplish this is a/an:
CORRECT ANSWER: Deed of trust
A mortgage does not transfer title to a lender; rather, it allows a lien to be posted against the property by a lender. With a deed of trust, the homeowner actually transfers his property interest to a third party trustee, who holds title to the property while the loan is outstanding. An encroachment is a physical trespass on property by a building or structure, and title insurance is a method of assurance of ownership for a buyer.
137
What is a holder in due course?
CORRECT ANSWER: One who acquires a negotiable instrument in good faith and for consideration
Secondary market investors will only buy negotiable instruments to be a holder in due course.
138
Which party is in the weakest position against a claim of title made by a stranger?
CORRECT ANSWER: A non-occupant holder of an unrecorded quit claim deed
There are two ways to prove a claim of interest in property. The first is to record the deed, and the second is to take possession of the property. Either occupying the property or recording the deed would put the world on constructive notice of a claim of interest on the property. Thus, a person who has neither taken possession of the property nor recorded the deed would be in the weakest position, as there would be no public proof of his interest in the property.
139
Syndicate Banking is:
CORRECT ANSWER: A group of investment banks acting together when lending large amounts of money to a specific company
Investment banks join to lend large amounts of money to a specific borrower.
140
In the seller's affidavit of title:
CORRECT ANSWER: The seller states that there are no unrecorded claims against the land.
A title search and title insurance would disclose recorded claims against the land. To satisfy a buyer that there are no unrecorded liens, the seller executes a seller's affidavit of title.
141
The owner of a small strip mall refuses to lease to a tenant of Greek ancestry. Which law has been violated?
CORRECT ANSWER: The Civil Rights Act of 1866
GREEK is a RACE
Under the Civil Rights Act of 1866, all properties real and personal are protected if the discrimination was based on race or color. Nationality is not a protected class under The Housing and Community Development Act of 1974 or The Fair Housing Amendments Act of 1988.
142
A person who has been discriminated against under the Civil Rights Act of 1866 must file the lawsuit in which court?
CORRECT ANSWER: Federal District Court
The Federal District Court is the only court with jurisdiction concerning the Civil Rights Act of 1866.
A lawsuit based on the Federal Fair Housing Act can be filed within 2 years. A complaint would be filed with the HUD Office of Equal Opportunity within 1 year.
143
What is assessed value?
CORRECT ANSWER: The value the property taxes are based on
144
How many days do buyers have to inspect for lead?
CORRECT ANSWER: 10
145
Effective gross income best describes:
CORRECT ANSWER: Gross income minus a figure for vacancy and collection losses
Effective gross income is generated by a property, plus miscellaneous income, minus a figure for vacancy and collection losses.
