National Portion - Real Estate Exam

Question 1

Which of the following items could not be used by the owner of a hardware store as security for a loan, under the provisions of the Uniform Commercial Code?

A. A personal note endorsed by him

B. Accounts receivable

C. Stock for sale

D. Equipment and fixtures

Answer 1

C. Stock for Sale

• As the stock will be sold, it cannot be used to secure a loan.

Question 2

A valid escrow requires which of the following:

A. Escrow instructions with no conditions

B. A binding contract between the buyer and seller and the conditional delivery of transfer instruments to a third party

C. The services of a licensed real estate broker

D. None of the above

Answer 2

B. A binding contract between the buyer and seller and the conditional delivery of transfer instruments to a third party.

• The are required for a valid escrow

Question 3

If the loan-to-value ratio is low:

A. The equity in property is high

B. The equity is not affected

C. The equity in the property is low

D. None of the above

Answer 3

A. The equity in property is high

Loan to value ratio is the ratio of the loan to the appraised value. If a 90% loan to value ratio is given by a lender, that indicates a 10% down payment, and a beginning equity of 10%. If the loan to value ratio is only 60%, the down payment is 40% and the beginning equity is 40%. The lower the loan, the higher the equity.

Question 4

Sellers are usually reluctant to cancel an existing transferable fire insurance policy in the event of a cash sale, due to the fact that:

A. The buyer may not properly cover the property

B. The higher short term cancellation rate will apply

C. It could result in cancellation of other policies

D. The elimination of a cash return in the proration

Answer 4

B. The higher short term cancellation rate will apply

• A seller on a cash sale would be reluctant to cancel an existing transferable fire insurance policy because the seller would receive a short term cancellation rate. Therefore, the seller would prefer to transfer the existing policy to the buyer.

Question 5

A minority purchaser enters your office and states they are looking for, and interested in purchasing, a particular property in a minority neighborhood. You could legally assume that:

A. This person is testing you

B. They are interested in that particular property

C. They are interested in owning a home in an all minority neighborhood

D. They cannot qualify to own property in a higher-priced area

Answer 5

B. They are interested in that particular property

• Should any prospective purchaser enter your office requesting to see a particular property, you would assume they were interested in that particular property.