Georgia Commission Info Flashcards
1
Q
According to Georgia Law, an individual is not required to have a real estate license if they are…?
A
- An owner of real estate, the spouse of an owner, a general partner of a limited partnership, a landlord or a prospective purchaser or their regular employees or spouses.
- An attorney in fact or an attorney at law.
- Any person acting as a receiver trustee in bankruptcy, administrator, executor or guardian.
- Any officer or employee of a government agency
- Any person employed full-time by a public or private utility.
- A manager of residential properties.
- Full-time employees of the property owner.
- Any person acting as a referral agent who is not involved in the actual negotiations.
- Any individual employed by a broker to assist in property management services on residential property.
2
Q
Innkeeper’s exemption
A
Any person who provides property management services on properties available for 90 days or less is exempt from license law.
3
Q
The Commission shall maintain investigative files under the following schedules:
A
- forty years for all investigative files in which the Commission imposes a disciplinary action or makes a payment from the Recovery Fund.
- fifteen years for all other investigative files.
4
Q
(d) Any licensee whose license is released by a broker shall not engage in the activities of a real estate broker until the licensee:
A
- Affiliates his or her license with a new broker and mails a Change Application to the Commission; or
- Receives from the Commission a wall certificate of licensure authorizing the licensee to serve as the broker of a sole proprietorship or the qualifying broker of a corporation, limited liability company, or partnership.
5
Q
Every licensee shall notify the Commission in writing of the final disposition of any administrative, civil, or criminal action filed in any court, within..?
A
10 days
6
Q
Change of address must be notified to the commission within…?
A
30 days
7
Q
In what case does the commission allows certain people to keep their wall licenses ..?
A
Anyone who has been active for 20+ years and retires or the deceased
8
Q
Brokerage Engagements must have these three items..
A
(a) Each exclusive brokerage agreement must fully set forth its terms and have a definite expiration date.
(b) At the time of securing a brokerage engagement, the licensee securing it must furnish each person signing it a true copy thereof.
(c) The Commission prohibits the acceptance by brokers of net brokerage engagements and hereby makes it obligatory upon the broker, when securing the brokerage engagement, to add the broker’s fee thereby notifying the client of the gross price of the property and the broker’s services.
9
Q
Fidelity Bond or Insurance Required for Community Association Management is mandatory when..?
A
The broker collects, maintains, controls, has access to, or disburses community association funds totaling more than $60,000.00;
10
Q
No licensee shall buy or lease, nor take an option to buy or lease, any interest in property listed with the licensee or the licensee’s firm unless?
A
The licensee shall clearly disclose the licensee’s position as a buyer to the seller or as a tenant to the landlord, as the case may be, and insert a clause to this effect in the contract.
11
Q
Neither shall any licensee sell or lease or otherwise convey any interest in property owned by the licensee to any person, unless the licensee shall clearly disclose..?
A
the licensee’s position as a seller to the buyer or as a landlord to the tenant, as the case may be, and insert a clause to this effect in the contract.
12
Q
During acting as an agent or dual agent, the licensee must disclose..?
A
A licensee shall make or cause to be made a written disclosure to both buyer and seller or to both lessor and lessee whom that licensee’s firm will receive any valuable consideration for its efforts as agent in the transaction.
13
Q
Whenever the qualifying broker of a partnership, limited liability company, or corporation dies, resigns, or is discharged unexpectedly, the partnership, limited liability company, or corporation must..?
A
Secure a new qualifying broker within 60 days or cease all real estate brokerage activity until it does secure a new qualifying broker.
14
Q
Any broker seeking to have a licensee affiliate with the broker’s firm shall enter into a written agreement specifying the terms under which the licensee..?
A
Will be compensated for work during the time of their affiliation and specifying how the licensee will be compensated for work begun but not completed prior to the termination of their affiliation.
15
Q
When a licensee requests that a release form be signed, the releasing broker shall ..?
A
Immediately sign the release and forward the wall certificate of licensure of the departing licensee to the Commission or notify the Commission in writing that the wall certificate of licensure has been forwarded to the new broker for whom the licensee will act. If a licensee assumes the responsibility of delivering the wall certificate to a new broker, then the wall certificate must be delivered as soon as practically possible after the licensee receives it from the releasing broker.
16
Q
Whenever a broker returns to the Commission a wall certificate of licensure of a licensee affiliated with the broker’s firm, the certificate shall be accompanied by..?
A
A release signed by both the broker or authorized associate broker and the licensee or by a signed statement that such a release has been signed by both parties. The licensee shall then transfer the license to another broker or apply to place the license on inactive status within one month of the Commission’s receipt of the licensee’s wall certificate of licensure
17
Q
Support personnel shall not perform:
A
- make cold calls by telephone
- host open houses, kiosks, home show booths, or fairs;
- prepare promotional materials or advertisements without the review and approval of an affiliated licensee and firm;
- show real estate;
- answer any questions on title, financing, or closings (other than the time and place);
- answer any questions regarding a listing except for information on price and amenities expressly authorized in writing by the licensee;
- discuss or explain a contract, listing, lease, agreement, or other real estate document with anyone outside the firm;
- negotiate or agree to any commission, commission split, management fee, or referral fee on behalf of a licensee;
- discuss the attributes or amenities of real estate, under any circumstances, with a prospective purchaser or lessee;
- discuss with the owner of real estate, the terms and conditions of the real estate offered for sale or lease;
- collect or hold deposit monies, rent, other monies or anything of value received from the owner of real estate or from a prospective purchaser or lessee; or
- provide owners of real estate or prospective purchasers or lessees with any advice, recommendations or suggestions as to the sale, purchase, exchange, or leasing of real estate that is listed, to be listed, or currently available for sale or lease.
18
Q
A licensed broker in this state is hereby permitted to divide or share a real estate commission with a licensed broker in another state. If a broker licensed in another licensing jurisdiction refers prospective clients or customers to a Georgia broker, the Georgia broker may..?
A
Pay a fee to such licensed broker
19
Q
Brokers may maintain how many trust accounts?
A
More than one designated trust or escrow account. Brokers shall notify the Commission of the name of the financial institution in which each account is maintained and each account’s name or number within one month of opening each account.
20
Q
A licensee shall place escrow..?
A
cash, checks, or other items of value received by the licensee in a brokerage capacity into the custody of the broker holding the licensee’s license as soon after receipt as is practicably possible.
21
Q
Unless otherwise agreed to in writing by the party or parties at interest, the broker holding such cash or checks shall..?
A
promptly deposit said funds in a federally insured account designated by the financial institution as a trust account and registered with the Commission and shall make appropriate arrangement for the safekeeping of any items of value received other than cash or checks.
22
Q
Can a broker deposit money into an interest-bearing account?
A
Yes, if the broker shall obtain the written agreement of the parties indicating to whom the broker shall pay any interest earned on trust funds deposited into that interest-bearing account prior to depositing those funds into such an account.
23
Q
A broker may maintain the broker’s own funds in a designated trust or escrow account only when they are clearly identified as the broker’s deposit and only for the following purposes:
A
- If the financial institution in which the account is maintained designates a specific minimum balance that must be maintained in order to keep the account open.
- If the financial institution in which the account is maintained requires a service charge be paid for the account, the broker may maintain in the account in the broker’s name a reasonable amount to cover that service charge.
- A broker may allow commissions due the broker that are being paid from funds of others held in the broker’s designated trust or escrow account to remain in the account provided that:
(i) the broker’s accounting system for trust or escrow accounts designates those commissions as the broker’s funds and properly accounts for them and
(ii) each month the broker removes from the account any of the broker’s funds that exceed the minimum necessary to comply with subparagraph (a) or (b) above. - Only checks made payable to the broker may be used to withdraw monies designated as the broker’s funds from the designated trust or escrow account.
24
Q
Every broker required to maintain a trust or escrow account shall maintain an accounting system in which each trust or escrow deposit is detailed in the following manner:
A
- Names of buyer and seller or tenant and landlord or member and community association or broker.
- Amount and date of deposit.
- Identification of property involved.
- The amount, payee and date of each check drawn on the escrow account in connection with that deposit.
25
A broker shall not disburse funds from a designated trust account as provided in paragraph (b) until the broker has reasonable assurance that the financial institution has credited the funds to the broker's trust account. When a broker makes a disbursal to which all parties to the contract do not expressly agree, the broker must immediately..?
notify all parties in writing of the disbursal.
26
Brokers who manage real property or community associations may maintain designated rental or assessment..?
Trust or escrow accounts separate from their other trust or escrow accounts.
a) In paying bills on behalf of an owner or an association from any designated rental or assessment escrow or trust account, there must be enough money credited and deposited to the owner's or the association's account to cover said bill.
(b) Security deposits, if kept in a designated rental trust or escrow account, must be clearly identified and credited to the tenant and there must always be a balance in the account equal to the total of said security deposits.
(c) A licensee who manages rental property which the licensee owns must maintain any security deposits collected in a designated trust account and may not post a bond in lieu of maintaining such security deposits in a designated trust account.
27
No licensee shall be permitted to list, sell, buy, exchange, rent, lease, or option or offer to list, sell, buy, exchange, rent, lease, or option real estate, either in individual or multiple parcels, in the licensee's own name without first..?
advising, in writing, the broker for whom the real estate licensee is acting.
28
Whenever a licensee offers to purchase a property as a condition to obtaining a brokerage engagement to sell, lease, or exchange or on which the licensee is extending the expiration date of an existing brokerage engagement, the licensee must..?
Enter into a written contract to purchase which expresses all the terms and conditions of the licensee's purchase prior to or at the time of entering into the proposed brokerage engagement or into the extension of the existing brokerage engagement.
29
When a licensee wishes to advertise real estate owned by the licensee and which is not under a brokerage engagement, the licensee may do so provided:
1. if the licensee's license is affiliated with a firm, the broker holding the licensee's license has been notified in writing of the specific real estate to be advertised;
2. if the licensee's license is affiliated with a firm, the broker gives written consent to advertising the specific real estate and approves the advertisement itself; and
3. regardless of whether the licensee's license is affiliated with a firm or on inactive status, any advertisement must include either (a) the legend "seller, buyer, landlord, tenant (select the appropriate name) holds a real estate license" or (b) the legend "Georgia Real Estate License # (insert licensee's six digit number; for example, 000001)." "Georgia Real Estate License" may be abbreviated to "GA R. E. Lic.."
30
No licensee or agent or employee of a licensee shall represent, explicitly or implicitly, for the purpose of inducing or discouraging the purchase, sale, or rental of any real property or the listing for purchase, sale, or rental of any real property:
that a change has occurred or will or may occur in the composition of any block, neighborhood or area based upon race, color, religion, sex, handicap, familial status, or national origin;
(b) that the presence of persons of any particular race, color, religion, sex, handicap, familial status, or national origin in an area will or may result in the following:
1. a lowering of property values in the neighborhood;
2. a material change in the composition of the area based upon race, color, religion, sex, handicap, familial status, or national origin;
3. an increase in criminal or antisocial behavior in the area; or
4. a decline in the quality of the schools serving the area.
31
True or False?
Do you have to have a real estate license to auction farmland?
True
32
If a broker allows an affiliated licensee to handle personally owned rental properties outside the firm's normal business, the broker may allow the licensee to maintain ?
A trust account. However, the broker must register that account with the Commission and remains responsible for the transactions in that account.
33
Death of a broker in a sole proprietorship?
(a) All affiliated licensees must cease all brokerage activity until they transfer to a new broker. The administrator or executor of the broker's estate may not initiate new brokerage business for the firm but may conclude pending business.
34
There are two types of things of value that a broker may encounter:
(a) things which can be deposited ‑ cash, check, cashier's check, money order, bank draft, and postdated check (on the date specified); and
(b) things which cannot be deposited ‑ promissory note, personal property (such as rare coins, jewelry, or stamps) and services (such as repair work to be done on the property in lieu of paying earnest money, rent, or a security deposit).
35
When earnest money, security deposits, or rents are in some form other than tangible property, the contract needs?
careful wording. For example, if a tenant is renting property that he or she wishes to purchase, he or she may agree to do some repair work on the property instead of paying earnest money.
The contract should include a stipulation such as the following:
The parties agree that the buyer shall perform the following: (list the services or things to be done by the buyer) and such work shall be considered earnest money in the transaction at a value of .
36
In order to obtain a license, every broker must have a separate, federally insured..
bank checking account that the bank designates as a trust or escrow account.
37
A nonresident broker may maintain a trust account in a bank in the..?
nonresident's state of residence provided the broker authorizes the Commission to examine the trust account at such times as the Commission may elect.
38
Can brokers may maintain their required trust account in money market funds?
No
39
When an individual becomes a licensee, certain laws designed to protect the public regulate that individual's activity as a principal in real estate transactions. For example:
(a) sales associates must notify their broker in writing whenever they buy, sell, or lease real estate;
(b) licensees acting as principals in sales or lease transactions must disclose their licensed status in writing in sales contracts and leases; and
(c) licensees must deposit trust funds received by them when acting as principals in real estate transactions into designated trust accounts.
40
With approval, the licensee may place security deposits and earnest money deposits in a _______..?
designated trust account approved by the broker and registered with the Commission.
41
The law requires that every broker maintain a trust account journal to record every transaction that affects the trust account. The journal may consist of electronic records or paper records. Although the Commission does not require that the journal be in a particular form, the journal must include the following information about each deposit or disbursement:
(a) the names of the buyer and seller or tenant and landlord or broker;
(b) the amount and date of the deposit;
(c) identification of the property involved; and
(d) the amount, payee, and date of each check drawn on the account.
42
A broker may release funds in the following situations only...?
(a) UPON REJECTION OF AN OFFER - Upon the rejection of an offer to buy, sell, rent, lease, exchange, or option real estate, the broker should promptly return any trust funds collected to the person who made the offer.
(b) UPON WITHDRAWAL OF AN OFFER BEFORE ACCEPTANCE - When a buyer makes an offer to buy, sell, rent, lease, exchange, or option real estate, or gives the broker earnest money and then withdraws the offer before the seller accepts it, the broker should promptly return the earnest money to the buyer.
(c) AT THE CLOSING OF A TRANSACTION - In a real estate sales transaction, a broker must disburse funds from a designated trust account according to the terms of the closing documents. The closing documents may provide for a refund of the earnest money to the buyer, for crediting it toward closing costs or down payment, or for crediting it toward the broker's commission earned on the sale. If refunded to the buyer, the broker must write a check made payable to the buyer in the amount of the earnest money on deposit. If credited toward the closing costs, the broker must make the check payable as directed by the closing agent. If the earnest money is credited toward the broker's commission, the broker must make the check payable to the broker in the name in which the broker does business and which the broker has registered with the Commission. If a broker operates as a sole proprietorship under a trade name, the check must be made payable to the company's trade name. If the broker does business in his or her own name, then he or she may make the check payable to himself or herself. If the firm is a corporation, limited liability company, or partnership, the check must be made payable to the corporation, limited liability company, or partnership name. The broker must never make payable to "Cash" any check written on the trust account.
(d) BY WRITTEN AGREEMENT - A broker may disburse trust funds upon securing a written disbursement agreement signed by all parties having an interest in the trust funds. The agreement must be separate from the contract that directs the broker to hold the funds.
(e) INTERPLEADER - A broker may file a legal action known as an interpleader in a court of competent jurisdiction, and tender the trust funds in question into the registry of the court.
(f) UPON COURT ORDER - A broker may disburse trust funds upon the order of a court of competent jurisdiction.
(g) REASONABLE INTERPRETATION OF CONTRACT - A broker may disburse trust funds upon a reasonable interpretation of the contract that directed the broker to deposit the funds. After consulting an attorney, the broker may take the following steps:
43
A broker may act as a dual agent only with
The written consent from all clients.
44
Active or inactive licensees must have in any advertisement done in their own names for property that they own the phrase?
is a licensed real estate agent
45
all licensees whether active or inactive must insert a ______ into any sales contract for his or her property disclosing their licensed status to the buyer.
clause
46
Because of negligent keeping and the burning of records, courthouse record usually are sufficient how many years back?
50 years.
47
A warranty deed (sometimes called a "general warranty deed") is a deed containing..?
Promises relating to the title
48
A limited warranty deed (known in some other states as a special warranty deed) is one that..?
limits the scope of the warranty by certain provisions in the deed. Theoretically, a limited warranty deed could contain any language limiting the promises of warranty offered by the grantor.
49
A quit claim deed conveys to the grantee whatever interest the grantor has in the property..?
without any warranties of title. If the grantor has fee simple title, the grantee will receive fee simple title. If the grantor has nothing, the grantee will receive nothing.
The quit claim deed has many uses in instances where the grantor does not wish to warrant the title. For example, grantors often use quit claim deeds when they are not certain of the quality of the title. This situation could occur in clearing up the estate of a deceased person or in settling a boundary dispute when the property line is not clear.
50
Every state, including Georgia, has its own Statute of Frauds requiring certain contractual agreements to be in...?
Written form.
51
To satisfy the Statute of Frauds, the memorandum of the contract must contain at least the following pieces of information:
the names of seller and buyer;
a sufficient description of the land;
the contract price;
the terms of sale, if other than cash; and
the signatures of the parties to the contract.
52
The usual method of discharge for a contract is the complete performance by ________ by both parties of the obligations that each incurred under the contractual agreement.
buyer and seller.
53
All contracts must contain some form of consideration. Since real property is part of the consideration in a real estate sales contract, the law requires a precise description. Each contract must contain a legal description of the property that provides an unambiguous statement of the dimensions and location of the property.
Chapter 27
54
A purchase money mortgage (PMM) is a?
a loan by the seller of the property to the buyer. A third party lender, such as a credit union, a commercial bank or another individual, typically is not part of the loan process if a PMM loan is the first mortgage loan. However, PMM's frequently are second loans that allow the buyer to obtain the additional funds to add to the down payment and the proceeds from the first loan so that he or she has the sum of money for the purchase price.
55
An assumption of an existing loan as part of the purchase of property means two things.
First, the buyer agrees to make the mortgage payments as prescribed in the original loan agreement between the seller and the lender. Second, the buyer accepts the legal responsibility for the repayment of the loan balance.
56
Why should you not advise a seller to market an assumable loan?
However, even given this legal responsibility for the debt accepted by the buyer, the original borrower [i.e., the seller] still remains liable for debt. However, the buyer does not accept legal responsibility for repayment of the loan balance. The original borrower (i.e., the seller) remains solely liable for the debt.
57
An earnest money deposit is not a legal requirement for a?
valid contract, the signed offer to purchase delivered to and accepted by the seller is sufficient to form a valid contract.
58
Before presenting an offer to the Seller, a licensee should prepare a..?
Sellers estimated worksheet
59
The license law requires that a licensee present all offers to the seller..?
Promptly
60
If another offer to purchase the property comes in, the licensee must present it to the seller even though a contract already exists. If the seller wishes to accept the new offer, it must contain a..?
clause making the contract contingent upon termination of the first contract.
61
If there is no contingency clause contained in the offer, the seller must ?
reject it and make a counteroffer including such a clause, otherwise the seller may end up obligated under two contracts. The second contract would be commonly referred to as a “back-up contract.”
62
If the seller wishes to enter into a back-up contract with a subsequent offeror, he or she may do so, and the licensee may..?
facilitate the same provided the original contract is not breached and the back-up contract is contingent upon a termination of the original contract.
63
An open listing agreement is a contract in which...?
the owner of property can retain one or more brokers and in which the owner retains the right to sell or rent the property without having to pay a commission to the broker(s).
64
A net listing agreement is a contract in which..?
the owner of property sets a specific dollar amount for which he or she will sell or rent the property. THEY ARE ILLEGAL.
65
Listing agreements end when any of the following conditions or situations occur:
1. THE SPECIFIC EXPIRATION DATE ARRIVES
2. THE BROKER PERFORMS CONTRACT OBLIGATIONS AND CLOSING OCCURS
3. THE SELLER UNILATERALLY TERMINATES THE AGREEMENT
4. THE BROKER AND THE SELLER MUTUALLY AGREE
5. THE BROKER UNILATERALLY CANCELS THE AGREEMENT
6. THE PROPERTY IS DESTROYED
7. THE BROKER DIES, CEASES BUSINESS, OR SUFFERS A LICENSE SUSPENSION OR REVOCATION - If the broker dies or goes out of business; or if the Commission suspends or revokes his or her license, all the broker's listings end if he or she operates as a sole proprietor. If the brokerage firm is a corporation or partnership and the qualifying broker dies or has his or her license suspended, the listings do not terminate. However, if the corporation or partnership dissolves, the listings will then terminate.
66
Legal descriptions in Georgia use the...?
County, District, and Land Lot, and then use the metes and bounds or the lot and block, also known as the plat map description.
67
The legal descriptions used in Georgia
the metes and bounds, and plat map also known as the lot and block system
68
The principal source of legal descriptions is the...?
seller's Warranty Deed.
69
When dealing with a lease the tenant and the landlord are advised to..?
Seek legal advice from an attorney.
70
Only the _______ can disburse security deposits, and he or she must follow the provisions of the lease contract and the rules of the Commission.
Broker
71
If the parties select the lease/purchase approach, they..?
enter into sales contract which incorporates by reference their lease agreement and which contains a special stipulation stating whether any rents paid by the tenant/buyer under the lease will be applied to the purchase price.
72
If the seller and buyer agree to a lease with an option to purchase, they..?
enter into a lease agreement containing a clause similar to the following which gives the tenant/buyer the option to purchase the Property.
73
If the seller and buyer agree for the buyer to move in before closing, both parties should sign a written..?
move in agreement.
74
Move in agreement signed by both parties must contain?
(a) a statement that the parties do not intend to create a landlord and tenant relationship;
(b) the amount and time of payment of compensation by the buyer to the seller;
(c) an agreement that the buyer will not alter or redecorate the property before closing without written consent of the seller; and
(d) if the sale does not close,
a date by which the buyer must vacate;
consequences for the buyer should he or she not vacate the premises according to the terms of the agreement; and
the disposition of the earnest money in the sales contract and the security deposit in the lease.
75
The most common form of securing a financing instrument for real estate loans in Georgia is the...?
Security deed
76
Lenders prefer security deeds over mortgages in Georgia because...?
a mortgage creates only a lien on the property, whereas the security deed is an outright transfer of title to the property to the lender to secure the debt.
77
The conveyance by the borrower splits the title to the property into two components:
the legal title held by the lender to secure payment of the debt, and the equitable title held by the owner. The owner also retains a right of redemption; that is, the right to pay off the debt and reacquire the legal title.
78
Hypothecation
the owner/borrower hypothecates, seeming to “own” the property, but limited by the lender’s rights.
79
During a security/warranty deed...? The grantor remains liable for...?
property taxes, lawsuits for personal injuries (such as an injury to a third party while that person is on the property), and all the other usual obligations of ownership.
80
A security deed requires an underlying debt for the deed to be valid....The evidence of a debt is usually a..?
Promissory note, a written instrument in which a borrower promises to pay a lender a sum of money under certain terms and conditions. Both the security deed and the promissory note are forms of contracts.
81
The promissory note contains provisions that spell out the..?
promise, the amount of the debt, the identity of the parties, the costs to the borrower, the terms of repayment, and the penalties for failure to fulfill those payment terms.
82
Georgia uses non-judicial foreclosure, which means..?
that the lender does not have to sue the borrower and obtain a court decree before foreclosing.
83
The equity of redemption period is the period between the..?
default and the foreclosure when the borrower can correct the default and stop the foreclosure process. He or she can redeem the property by paying off the loan and compensate the lender for all expenses incurred because of the default.
84
There are two non-judicial foreclosure procedures..?
There are two non-judicial foreclosure procedures. The first or "entry and possession" procedure gives the lender the right to inform the defaulted borrower that the lender will take possession on a given date. If the borrower does not peacefully give the property to the lender, the lender goes to court to have the borrower removed from the property. The second or "power of sale" procedure gives the lender the right to advertise the property and then hold an auction to sell the property. The latter is the non-judicial foreclosure procedure used in Georgia.
85
Broker and sales associates have a responsibility to seller clients to be able to explain to them the advantages and disadvantages of various...?
financing methods a prospective buyer might propose to use in buying a seller's property.
86
What is the intrest as an annual percentage of the loan amount such as 9% of $10,000.00.
900.00
10,000 x 9% =900.000
87
Any money paid toward reducing the original amount of the loan is..?
Principal amount
88
The loan to value ratio (LTV) is the relationship between the
Loan amount and the value of property that the borrower pledges as security for the loan. The actual calculation of the LTV very often uses the sales price of the property as the value of the property. If the buyer agrees to pay $100,000 for the property and he or she is able to borrow $90,000 from a lender, the loan to value ratio is 90%.
89
As credit tightens in the economy or as the lender perceives more risk involved in the loan, the lender insists on...?
more secuirty for the property and the loan to value retio declines.
90
Real estate loans tend to have long terms, often up to..?
30 years.
91
Amortization refers to..?
reducing a loan amount by making periodic principal payments. In the most common method of fixed rate loan amortization, the fully amortizing loan, the borrower pays the same amount each month and pays off all principal by the last loan payment.
92
Negative amortization occurs when..?
the size of the payment is less than the interest payment that is due. The unpaid interest is added to the loan balance causing it to increase.
93
The most prevalent loan exhibiting negative amortization is the..?
graduated payment loan, a fixed rate loan in which the initial monthly payments are less than the interest due.
94
The standard fixed rate real estate loan includes a repayment method with a....?
positive loan amortization schedule
95
A discount point, also called a "point," is ______ percent of the loan amount
1%
96
Therefore, if a lender charges three discount points on a $50,000.00 loan, the amount of the discount on the loan is?
1,500.
97
When a lender makes a loan and charges discount points, the lender receives the discount at..?
The time of closing.
98
Either the buyer or seller pays the entire discount or...?
They each pay a proportion of the discount.
99
There are two ways to make this payment of the discount to the lender...?
First, the parties to the contract can give the lender cash at the closing, and the lender then gives the seller of the property the amount of the loan in exchange for a note and a security deed from the borrower. Second, the lender can give the seller the amount of the loan less the amount of the discount (the net disbursement) in exchange for a note and a security deed from the borrower.
100
When the seller pays a loan discount, he or she may have a..?
possible tax advantage and should consult legal counsel or a CPA to determine what the tax consequences may be.
101
This law creates a disclosure device only, and does not establish any..?
set maximum or minimum interest rates or require any charges for credit.
102
Demand and supply for loanable funds are the basic determinants of the ______
interest rate.
103
At the same time, the Legislature imposed six limitations on loans..?
(a) Written contracts with no rate of interest specified have an imputed rate of seven (7) percent per annum simple interest.
(b) Written contracts where the principal amount is $3,000.00 or less cannot exceed sixteen (16) percent per annum simple interest.
(c) In written contracts where the principal exceeds $3,000.00, the parties may decide the rate; and they must express it as simple interest. The law allows the computation and collection of interest at a variable rate, in negative amortization or equity participation, and on an appreciation basis.
(d) Amounts paid or contracted to be paid as either an origination fee or discount points, or both, on any loan secured by real estate are not defined as interest and are not considered in the calculation of interest and are not subject to rebate. Note: this provision does not affect the tax deductibility of origination fees or discount points.
(e) Unless agreed to in the contract, there can be no prepayment penalty.
(f) Any rate of interest advertised must be in terms of simple interest, or a rate stated in terms that would comply with the federal Truth-in-Lending Simplification and Reform Act.
104
A conventional residential loan is a loan made by..?
a private sector financial institution or an individual to a borrower. The lender makes the loan decision based upon information about the borrower's ability to repay and likelihood of repaying based upon his or her credit history as well as upon the value of the property.
105
Lenders require mortgage default insurance when the loan to value ratio exceeds..?
80%
106
Terms of conventional loans are negotiable between the borrower and the lender. For residential loans, ____-year and ___-year terms are the most prevalent.
30 & 15 year
107
f the seller agrees to finance part of the seller's downpayment, this mortgage is called a..?
Purchase money mortgage. Lending practices vary on second mortgages. Most lenders do not permit secondary financing unless the purchaser pays at least 10% down and the second mortgage does not exceed the amount of cash invested by the purchaser. The lending institution making the new first loan must approve secondary financing for the purchaser.
108
These three concepts establish or determine the conventional loan applicant's financial capability to carry the loan payment and to repay the loan according to the loan agreement.
"stable monthly income,"
"housing expenses,"
"total recurring financial obligations."
109
In 1965 the FHA became a part of the...?
Department of Housing and Urban Development (HUD).
110
FHA's threefold purpose is to assist in the...?
stabilization of the mortgage market, to provide an adequate home financing system through its mortgage loan insurance program, and to promote improved housing standards.
111
HUD no longer sets ____ intrest rates...?
FHA; Instead, negotiations between lenders and borrowers establish FHA interest rates; and the seller or borrower may agree to pay any discount points charged, as is the case in conventional loans.
112
FHA does not make mortgage loans or provide housing. It only...?
It only INSURES the mortgage loans made by private lenders, provided such loans meet FHA's guidelines and obtain approval. Through the fees collected from FHA Mortgage Insurance Premiums (MIP), FHA is a self-supporting government agency.
113
The 2011 basic loan maximum for a single family residential unit is..?
$271,050
114
Every borrower under the FHA 203(b) loan program must carry...?
insurance to protect the lender against financial loss. This insurance premium provides the financial base that the FHA uses to insure the lender against the possibility of the borrower's default on the loan payments.
115
The up - front mortgage insurance premium (UFMIP), which applies to all FHA loans, is paid in either of two ways..?
In cash at loan closing or financed over the term of the loan. The annual insurance premium relates to the loan-to-value ratio and the term of the loan. The annual premiums are for the term of the loan.
116
The minimum cash investment (similar to the downpayment) for an FHA 203(b) loan is typically _____ than the downpayment for a conventional loan.
lower
117
In simple terms the FHA's minimum cash investment is ____ % while the typical conventional loan carries a downpayment of between ___ & _____%
3.5% while conventional loans are between 5-20%
118
In other words, the FHA loan-to-value ratio is approximately _____ while the loan-to-value ratio for a conventional loan is between ____ & _____
96.5% and conventional is between 80 and 95%
119
True or False
The borrower has the full right of prepayment of the FHA 203(b) loan. He or she can pay it in full at any time, and the lender cannot impose a prepayment penalty for early repayment of the loan.
True
120
The FHA 203(b) loan is fully _____?
Assumable.
121
An FHA borrower has two options for paying UFMIP...?
He or she can pay the entire MIP at closing or finance the entire amount.
122
The FHA qualifying standards rely on the estimates of...?
"effective income," "housing expenses," and "fixed payments."
123
If the FHA issues the Conditional Commitment after the date of the sales contract and the appraisal value is less than the sales price in the contract, the purchaser has four options available.
1. He or she may request a return of his or her earnest money since an FHA sales contract must be contingent upon the appraised value's being at least as much as the sales price.
2. The purchaser may pay the difference in cash.
3. He or she may renegotiate with the seller.
4. The parties may ask for reconsideration of the Conditional Commitment.
124
VA program enables veterans to obtain loans through lending institutions with ________ or ___ down payment..?
little or no
125
True of False?
Although the VA has no established limit on the amount of the loan, it does guarantee only a fixed percentage of the entire amount.
True
126
In the event of after a foreclosure, the VA may elect...?
1) to have the lender sell the property and then pay the lender any resulting loss, up to the limits of liability.
(2) to pay the lender and market the property itself. If it chooses the second alternative, the VA will then typically work with local brokers and offer attractive financing for potential purchasers.
127
Closing costs for Veterans?
Closing costs
Those payable by the veteran are limited by regulation to a specific list of items plus a one percent flat charge by the lender.
128
The VA uses two methods for processing its loans:
Prior approval processing and automatic processing.
129
In the prior approval loan processing method, the...?
the lender takes the loan application, requests VA to appraise the property, and verifies the loan applicant's income and credit history. The lender sends a loan package containing this information to the VA for review. If the VA approves the loan package, it sends the lender a commitment to guarantee the loan. The lender closes the loan and sends a report of the closing to the VA. If the final loan arrangement complies with VA requirements, the VA issues a certificate of guaranty to the lender.
130
In the automatic processing method for VA Loan....?
the lender orders a property appraisal from the VA, but has the authority to make the credit decision without the VA's prior approval. Under either method, the applicant must prove that he or she is eligible for the VA program by securing and completing a "Request for Determination of Eligibility and Available Loan Guarantee Entitlement" form. This form is available from the VA or most lenders. The lender sends the completed form to the VA along with the veteran's separation papers from the military. The VA then issues a certificate of eligibility.
131
The loan underwriting standards for a VA loan are generally....?
less restrictive than the standards for both a conventional loan and the FHA section 203(b) loan (The VA standards make it easier for all veterans, especially those with low to moderate incomes, to qualify for a loan to buy a home.
132
Because of the legal relationships involved and the potential liability involved for licensees, the ______ is a vital part of every alternative financing transaction.
Attorney
133
The adjustable rate mortgage (ARM), has a very important basic feature,
a rate of interest that changes periodically with market conditions.
134
A buydown loan is a _____ -rate loan agreement with an additional feature incorporated into the plan. Withdrawals from the front-end funds supplement the _________ payments each month so that the lender receives the full amount of the required monthly payment as in the fixed-rate conventional loan.
fixed; lower
135
There are two forms of the buydown loan:
permanent buydown- a front-end payment in discount points reduce the contract interest rate on the loan.
temporary buydown- A level payment temporary buydown might be a solution to a problem in which a buyer can qualify for a loan based on creditworthiness, but cannot qualify for the size of loan needed to purchase the home at market interest rates.
136
When the parties have accepted and signed an offer to purchase, the licensee's first obligation is to...?
deliver a complete signed copy of the purchase agreement to the buyer, the seller, and the broker(s).
137
True or False
Contracts with no financing contingency or owner financing (purchase money mortgage) contracts may also contain an appraisal contingency since the buyer may want an independent opinion that he or she is not paying more than market value for the property.
True
138
True or false?
If the buyer decides that despite the appraiser's opinion, the property is worth the contract price, he or she can pay the amount over the appraised value in cash. Otherwise, the licensee can assist the parties if they wish to renegotiate the contract.
True
139
There are at least two things the closing attorney will expect the buyer to bring to the closing...?
funds to meet the buyer's cash obligation and a hazard insurance policy if the purchase involves financing.
140
True or False?
Some insurance companies require several days to deliver an original policy and may be able to issue only a binder unless someone gives sufficient notice of closing. Sometimes closing attorneys will accept binders, but often they will not, and a delay of the closing results. Therefore, the buyer should be aware of the need to arrange for the policy in time to have an original to bring to closing.
True
141
True or False?
By law, attorneys must handle real estate closings in Georgia.
True
142
Depending upon the circumstances and the sales contract, the closing attorney may represent the _____, ______ or _______ and there may be other attorneys present at the closing representing the other parties.
Buyer, Seller or Lender.
143
The attorney handling the closing will need a ______ of the contract.
True copy
144
To eliminate possible surprises at closing, the licensee should discuss with both buyer and seller with.....?
What papers they will be required to sign; inform the seller as to the estimated cash due him or her at closing; and help the buyer to find out the amount and type of funds he or she will need to close the transaction.
145
The HUD-1 Settlement Statement contains...?
It must itemize every charge imposed and paid out of the closing proceeds. Items paid for before the closing must be noted as POC (“paid outside closing”) items
146
RESPA requires lenders to keep the HUD statements for ___ years. The Georgia real estate license law requires brokers to keep these and all other sale documents for ___ years.
lenders- two
| brokers- three
147
RESPA prohibits the payment of kickbacks or unearned fees. This includes anything of value given by...?
one provider of settlement services to another in exchange for referrals or business.
148
True or False?
The broker cannot under Georgia law oversee any of these functions, nor may a broker prepare legal documents, such as warranty deeds, security deeds, or affidavits. An attorney must prepare these and any other legal documents used in the closing. However, the broker should still have a representative at the closing to represent the broker and to complete its duties as agent for the client.
True
149
Whoever attends the closing as agent of the real estate firm should verify that all the parties receive copies of the __________?
Settlement statement.
150
If the broker is holding an earnest money deposit in the transaction, he or she must arrange with the closing attorney the....?
Method of disbursing it
151
True or False?
In a typical residential closing in Georgia, an attorney representing the lender will conduct the settlement. The attorney will have prepared all the necessary documents and will explain each document to the buyer and seller as it comes their turn to sign it. This attorney does not represent the seller or the buyer. He or she represents the lender. While the attorney may explain the contents of documents, he or she cannot give the seller or the buyer legal advice. The parties are free to bring their own attorneys to the closing if they choose, but most do not. A knowledgeable attorney knows that for most people, buying a home is the single most significant financial step of a lifetime; consequently, the attorney will usually carefully explain each step of the process so that the parties will understand what they are signing.
True
152
The owner's affidavit is a...?
document that the seller signs in which he or she swears there are no unpaid or unsatisfied liens, assessments, or encumbrances against the property other than those identified by the title search
153
True or False?
The security deed sets forth the fact that the transfer of title to the lender only secures the loan. The buyer/borrower retains the right to use the property, and also retains the burdens of ownership, such as paying the property taxes.
True
154
The buyer's affidavit assures the lender....?
That the lender's loan has first priority and that there are no other claims on the borrower that might take precedence.
155
The seller will have an interest proration expense when the buyer assumes the....?
Seller's loan
156
The seller will have an interest proration expense when the buyer assumes the....?
Seller's loan. Since interest is paid in arrears, the buyer's first payment on the new loan will include interest for that part of the previous month in which the seller owned the property. That interest proration will be a debit for the seller and a credit for the buyer. The buyer will usually have an interest proration expense when he or she obtains a new loan to purchase the property.
157
In addition to having a fully paid hazard insurance policy, lenders require that borrowers pay the equivalent of _________ months premiums at closing to establish that portion of the impound account.
Two months
158
A buyer borrows $140,000 at the contract interest rate of 8.25%.
What is the borrower’s total interest payment in the first year?
$140,000 x 8.25% = $11,550
159
A lender receives a $9,654.12 interest payment in the first year on a 6% loan that he made to the borrower. What is the loan amount?
Loan Amount = $9,654.12 / 6%
| Loan Amount = $160,902
160
In a city that has a millage rate of 60 what is the property tax on a house with the current market value of $155,000?
$155,000 x 60/1000 = $930
161
Property tax payments are due on December 31 for the fiscal year. Property taxes are $4,800 per year. The property is sold on April 30. What is the proration?
The seller owns the property for 120 days (Jan = 31; Feb= 28, March = 31; April = 30) while the buyer owns the property for the rest of the year, which is 245 days.. The seller needs to compensate the buyer, as he will pay the entire year’s tax bill on December 31.
$4,800/365 = $13.15 tax per day
$13.15 x 120 days = $1,578 seller to buyer proration
162
For example, consider a property sale at $200,000 with no loan assumption. What is the transfer tax payment?
$200,000 / 1000 = $200
DIVIDE BY 1000
163
Intangible tax is multipled by the purchase price or loan amount?
LOAN AMOUNT
164
For example, if the security deed and the accompanying note are for a $200,000 loan, the formula for the intangible tax is:
($ Loan/500) times $1.50 = tax
($200,000/500) = $400 x $1.50 = $600
ROUND up if the $400 is a decimal.
165
A sole proprietorship needs two broker licenses:
one for the qualifying broker and one for the sole proprietorship.
166
A home sold for $175,000. The buyers assumed a $60,000 mortgage. What will the transfer tax be on this sale?
$175,000 - $60,000 = $115,000/1000= $115
167
Jim Hall has had his license suspended. By law, Jim’s name will be published on the Georgia Real Estate Commission website after how long?
60 days
168
Who takes the day of closing for tax pro-rations?
Seller has the day of closing.
