Ky Real Estate Course Final Exam Questions and Deffinations

Question 1

D: Attachment

Answer 1

Is a legal process by which a court of law designates specific property owned by the debtor to be transferred to the creditor, or sold for the benefit of the creditor, at the creditor’s request. Attachments are considered liens against real property.

Question 2

An Attachment is?

A. A Judgement

B. A Lien

C. A Fixture

D. An assessment

Answer 2

B. A Lien

“Attachment” is a legal process by which a court of law designates specific property owned by the debtor to be transferred to the creditor, or sold for the benefit of the creditor, at the creditors request. Attachments are considered liens against real property.

Question 3

What is the maximum that the real estate education, research, and recovery fund will pay for combined payments to all claimants against any one licensee?

Answer 3

$50,000

If a license, acting in the capacity of a licensee, has been duly
found guilty of fraud in the violation of one
(1) or more of the provisions of KRS 324.160, and upon the conclusion of a final order entered by the commission, or by the courts, if appealed, the commission, may pay to the aggrieved person or persons an aggregate amount not to exceed twenty thousand dollars ($20,000) per claimant with combined payments to all claimants against any one licensee, not to exceed fifty thousand dollars ($50,000), if the licensee has refused to pay the claim within a period of twenty (20) days of entry of a final order and if the amount or amounts of money in question are certain and liquidated.

Question 4

Regarding a broker’s duties, which of the following is true?

A. The broker must have a separate trust account for each client.

B. The broker must maintain sufficient and proper records on each client’s deposits.

C. The broker must maintain a trust account.

D. The broker must have books audited annually.

Answer 4

B. The broker must maintain sufficient and proper records on each client’s deposits.

The broker does not have to have a separate account for each client’s funds, but would make a separate entry in the account ledger for each transaction of funds.

Question 5

When may the Kentucky Real Estate Commission reduce the two year experience requirement for applicants for a broker’s license to one year?

A. if the applicant has an associate degree or a baccalaureate degree from a Kentucky state university

B. Never

C. When the individual has made 20 transactions in one year

D. if the applicant has an associate degree in real estate or a bachelor’s degree with a major or minor in real estate

Answer 5

D. if the applicant has an associate degree in real estate or a bachelor’s degree with a major or minor in real estate

The commission may reduce the two (2) year experience requirement for applicants for a broker’s license to one (1) year, if the applicant has an associate degree in real estate or a bachelor’s degree with a major or minor in real estate.

Question 6

A seller states that the minimum proceeds from the sale must be $108,000 after paying 18% in selling fees and other charges. For a transaction to occur, the sales price (rounded to the nearest dollar) must be at least:

A. $131,707

B. $129,710

C. $124,707

D. $137,710

Answer 6

A. $131,707

The seller’s minimum represents 82% of the contract (the other 18% is selling fees and charges):
$108,000 divided by 0.82 is $131,707.32

Rounded to the nearest dollar, the answer is $131,707.

Question 7

In Kentucky, the licenses of all licensees shall be kept on file?

A. in the office of the Kentucky board of real estate.

B. in the office in which they are actively engaged and affiliated.

C. Licensees licenses are not kept on file, it is all online.

D. in the office of attorney for the real estate brokerage

Answer 7

B. in the office in which they are actively engaged and affiliated.

Question 8

Can a licensee engage in promotional activities in Kentucky, for property located outside of Kentucky?

A. Never.

B. No, unless it is rental.

C. Yes, but only with approval from the Kentucky commission.

D. Yes, it is the same as doing business in Kentucky as long as you follow the local laws.

Answer 8

C. Yes, but only with approval from the Kentucky commission.

Any licensee who engages in promotional activities in Kentucky, for property located outside of Kentucky, shall first apply to the commission for its approval.

They must also comply with administrative regulations, restrictions, and conditions imposed by the commission as well as those provisions set forth in this chapter.

Question 9

The duties of a property manager should be to?

A. Maintain property and upkeep.

B. Collect rents.

C. All of the other options are correct

D. Care for residents’ needs.

Answer 9

C. All of the other options are correct

Question 10

An agency relationship may be terminated by all of the following methods except:

A. Destruction of the subject matter with which the agency is concerned.

B. Mutual termination by both the agent and the principal.

C. Revocation by the principal if the agent has an interest in the agency.

D. Resignation of the agency by the real estate broker.

Answer 10

C. Revocation by the principal if the agent has an interest in the agency.

Question 11

A buyer makes a written offer on April 9, 2003 and gives the broker a $1500 check. The buyer instructs the broker to hold the check until April 10, 2003, regardless of when the offer is accepted. In this situation, the broker should:

A. Refuse to accept the offer and check under these terms

B. Deposit the check into escrow the next business day following acceptance of the offer.

C. Present the offer and inform the seller that the check is to be held until April 10, 2003.

D. Give the check to the seller if the offer is accepted regardless of the date.

Answer 11

C. Present the offer and inform the seller that the check is to be held until April 10, 2003.

Question 12

What is the formula for Cap Rate?

Answer 12

NOI / Price of Property

Question 13

How to calculate Net Operating Income

Answer 13

Rent - Property Taxes - insurance-all other expenses = Net Operating Income (NOI)

Question 14

An investor has purchased and assembled three lots so she can develop a subdivision. Her loan contains a partial release clause. She most likely has a what type of loan?

Answer 14

A blanket loan

Question 15

In preparation for listing presentation a residential home. An agent completed a comparative market analysis. This process is similar to which appraisal method?

Answer 15

Sales Comparison Approach

Question 16

The Lead-Based Paint Hazard Reduction Act requires that borrowers of property built before 1978.

A. 5 days to conduct an inspection they may waive.

B. 5 days to conduct an inspection they may NOT waive.

C. 10 days to conduct an inspection they waive.

D. 10 days to conduct an inspection they may NOT waive.

Answer 16

C. 10 days to conduct an inspection they waive.

Question 17

Which of the following methods of appraising would be used to determining the value of a single-family home?

A. Cost Approach

B. Sales Comparison

C. Capitalization approach

D. Substitution Approach.

Answer 17

B. Sales Comparison

Question 18

A lender in the 1st lien position agreed to move to the 2nd lien position. The written document that both lenders would sign to fulfill this action is a?

A. Subrogation agreement

B. Subordination Agreement

C. Statutory Agreement

D. Subletting Agreement

Answer 18

B. Subordination Agreement

Question 19

A lender in the 1st lien position agreed to move to the 2nd lien position. The written document that both lenders would sign to fulfill this action is a?

A. Subrogation agreement

B. Subordination Agreement

C. Statutory Agreement

D. Subletting Agreement

Answer 19

B. Subordination Agreement

Question 20

The gross income of an investment property is $102,000. If the monthly expenses are $1000 and the cap rate is 7%. What is the value?

A. $1,118,751.20

B. $1,285,714.20

C. $1,457,142.80

D. $1,923,649.70

Answer 20

B.$1,285,714.20

$102,000 - ($1000*12) = $90,000

$90,000 / 7% = $1,285,714.20

Question 21

The 1968 Supreme Court case which upheld the Civil Rights Act of 1866, was?

Answer 21

Scott Vs. Sandford

Question 22

A borrower made their final payment to the lender. Which of the following documents could NOT be sued by the lender to release their interest in the property?

A. Satisfaction

B. Mortgage Release

C. Mortgage Discharge

D. Deed in Trust

Answer 22

D. Deed in Trust

Question 23

A borrower negotiates a 30 year fixed mortgage with 6% interest. She paid 10% down. If the interest payment on the 1st payment is $526.50 how much did she pay for the property?

Answer 23

I (Interest) = 6%

Price of property = Price

10% down payment meaning Loan amount is 90% of the property value.

1st month interest = $526.50

Interest per year = %526.50 * 12 = $6,318

0. 9Price*.06 = $6,318
1. 9Price = $6318 / .06 = $105,300

Price = $105,300 / .9 = $117,000

Question 24

When estimating the value with Mkt data approach to appraising, the appraiser will?

A. Average the different sale prices of the adjacent properties

B. Consider what the current owner paid for the property.

C. Make adjustments for the accused depreciation.

D. Make adjustments for amenities in the comparable properties.

Answer 24

D. Make adjustments for amenities in the comparable properties.

Question 25

Abandoned commercial industrials sites are known as?

Answer 25

Brownfields

Question 26

The defaulted borrowers right to redeem the property before the date of the foreclosure sale is called?

Answer 26

Right of Redemption

Question 27

The defaulted borrowers right to redeem the property before the date of the foreclosure sale is called?

Answer 27

Right of Redemption

Question 28

A new contract has been substituted in place of the original contract. the intent of this action was to discharge the obligation and to release the liability of the of the parties in the original contract. The word that defines this scenario is?

Answer 28

Substitution

Question 29

A section is a measurement in the government survey that is equal to what?

Answer 29

One square mile

2.6 square kilometers

640 acres

260 hectares

Question 30

How big is an acre?

Answer 30

43,560 square feet

4046.86 Square Meters

4840 square yards

1/640th of a square mile

Question 31

One mile is equal to

Answer 31

5280 feet

Question 32

All of the following terms would be part of a sale-lease back except for?

A. Seller is the grantor / lessee

B. Buyer is the grantor / lessor

C. Seller has the advantage of using the property while freeing capital for other purposes

D. Buyer will be able to subtract the lease payment as a business expense

Answer 32

D. Buyer will be able to subtract the lease payment as a business expense.

Question 33

All of the following terms would be part of a sale-lease back except for?

A. Seller is the grantor / lessee

B. Buyer is the grantor / lessor

C. Seller has the advantage of using the property while freeing capital for other purposes

D. Buyer will be able to subtract the lease payment as a business expense

Answer 33

D. Buyer will be able to subtract the lease payment as a business expense.

Question 34

Amanda sold a farm to D with the condition that the land must always be utilized as a farm, it could never be sold and developed into a subdivision. This control of land is classified as?

Answer 34

A private restriction

Question 35

The principal of appraising that is considered the foundation for the mkt data approach is the principal of?

A. Highest & Best use

B. Supply & Demand

C. Substitution

D. Competition

Answer 35

A. Highest & Best Use

Question 36

The Hud-1 indicates that Shawn paid for title policy. The policy will decrease as each principal & interest payment is made on the loan. Shawn paid for?

A. Owner’s Title Policy

B. Mortgagee’s Title Policy

C. Agent’s title policy

D. Broker’s title policy

Answer 36

B. Mortgagee’s Title Policy

Question 37

In a sublease who’s labile to the Lessor?

Answer 37

The Sub lessor

Question 38

In a sublease who’s labile to the Lessor?

Answer 38

The Sub lessor

Question 39

Under the superfund guidelines retroactive liability means?

Answer 39

Retroactive liability means that individuals can be held responsible for past actions, even if those actions were legal at the time.

Question 40

The KREC is to be notified of a change of residence address within?

Answer 40

10 days

Question 41

With a property having an annual net income of $60,000. What is the difference between a cap rate of 5% and 6%?

Answer 41

1. Figure out what the property value is at 5%.
   60,000/5%= 1,200,000
2. Figure out what the property value is at 6%.
   60,000/6% = 1,000,000
3. 1,200,000 - 1,000,000 = 200,000

Question 42

Amy buys a property and closes on Aug,1st. The seller pre-paid the annual real estate taxes of $5000 in advance. How much will Amy owe the seller in real estate taxes at closing?

Answer 42

1. What is the monthly amount?
   5000 / 12 = $416.67 a month
2. 416.67 * 5 months = $2083.33

Question 43

How many acres are in a tract identified as N1/2 of the SE 1/4 of the SW 1/4 of N1/2?

Answer 43

This type of question is always talking about a section. 1 section is equal to 640 acres.

640 / 2 / 4 / 4 / 2 = 10 acres

Question 44

A property measures 420 feet along the highway and contains 12 acres. What is the depth of the tract?

Answer 44

1. B * 420 = (12 * 43,560)
2. B * 420 = 522,720 sqft

• How many sqft is in a acre?
  43,560 Sqft

3. B = 522,720 / 420 = 1,244.57 ft

Question 45

A property was valued at $400,000 using a 6% cap rate. The owner wanted to use a 8% cap rate how much should he pay for the property?

Answer 45

*What is a cap rate: It is the rate of return on a real estate investment based on the income the property produces.

Cap Rate = Annual Net Operating Income / Cost & Sales price of the property

1. Figure out how much the property makes.
   $400,000 * 6% = $24,000
2. $24,000 / 8% = $300,000

Question 46

Suppose a $30,000 commission is earned on the sale of a house. The listing broker and the buyer’s broker agree to split the commission evenly. The listing salesperson receives 40% of the listing side. How much will the listing salesperson receive?

A: $15,000
B: $10,000
C: $6,000
D: $3,000

Answer 46

1. $30,000 *50% = $15,000

2. $15,000 * 40% = $6,000

Question 47

A house sold for $950,000 with a sales commission rate of 7.5%. The listing broker received 50% of the total commission and the broker representing the buyer received 50%. How much would the salesperson representing the buyer receive if their broker kept 60% and gave 40% to the salesperson?

A: $35,600
B: $14,250
C: $71,250
D: $21,700

Answer 47

1. $950,000 * 7.5% = $71,250
2. $71,250 * 50% = $35,625
3. $35,625 * 40% = $14,250

Question 48

What is the selling price of a property if Arthur paid $350 for taxes due, has a $12,500 mortgage, paid a 6% broker commission, and netted $7,000 on the sale?

A: $22,546.77
B: $21,117.02
C: $22,117.02
D: $22,647.06

Answer 48

1. add the outstanding mortgage, taxes due, and net profit:

$12,500 + $350 + $7,000 = $19,850

2. $19,850 is 94% of the selling price, with the broker’s 6% commission equalling the rest. To find the selling price, simply divide the known quantity by it’s percentage relative to the selling price:

$19,850 ÷ .94 = $21,117.02

Question 49

A property is listed for $212,000, but due to a bidding war, it sells for $219,000. The commission is set at 6% and split evenly between the buyer’s and seller’s broker. The selling agent has an agreement with his broker to receive 75% of the split paid to the broker. What is the amount the seller’s agent receives after closing?

A: $4,927.50
B $4,770.25
C: $9,855.75
D: $9,540.00

Answer 49

1. We start solving this problem by finding out what 6% of $219,000 is:

$219,000 x .06 = $13,140

2. The problem mentions that the commission is split evenly between the two brokers. Each side gets 50%:

$13,140 x .50 = $6,570

3. And finally, we need to figure out the agent’s split, which is 75% of $6,570:

$6,570 x .75 = $4,927.50