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Florida Real Estate Broker Course II > Practice Exam > Flashcards

Practice Exam Flashcards

85 Questions

1
Q

Which of the following professionals involved in the real estate business are most concerned about managing real estate for clients?

a. Brokers and agents
b. Property managers
c. Corporate real estate managers
d. Appraisers

A

b. Property managers

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2
Q

Real estate can be defined as

a. land and all property contained therein.
b. unimproved land.
c. land and everything permanently attached to it.
d. air, surface, and subsurface rights.

A

c. land and everything permanently attached to it.

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3
Q

Which of the following is included in the bundle of rights inherent in ownership?

a. To tax
b. To encroach
c. To possess
d. To inherit

A

c. To possess

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4
Q

The overriding test of whether an item is a fixture or personal property is

a. whether the owner owns the property the item is affixed to.
b. how it is described in a sale or lease contract.
c. what the title records on the property indicate.
d. how the buyer defines the item.

A

b. how it is described in a sale or lease contract.

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5
Q

An owner of a lakefront property tells a fisherman that he cannot fish in a boat within fifty feet of the owner’s shoreline. The fisherman protests that the owner cannot prevent him. Which of the following is true?

a. The fisherman is correct because the water and the land underlying it are public property.
b. The owner’s prohibition is valid, since the underlying land belongs to abutting properties to the middle of the lake.
c. The owner can prevent the fisherman from fishing within ten feet, but not beyond.
d. The owner’s prohibition is valid if all lakefront property owners have agreed to it.

A

a. The fisherman is correct because the water and the land underlying it are public property.

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6
Q

he distinguishing feature of a defeasible fee simple estate is that

a. it only endures for the lifetime of the defeasee.
b. it has no restrictions or conditions on use.
c. it may revert to a grantor if the prescribed use changes.
d. it is of limited duration.

A

c. it may revert to a grantor if the prescribed use changes.

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7
Q

Dower can best be defined as

a. a grant of foreclosure immunity extended to a homestead claimant.
b. a wife’s life estate interest in her husband’s property.
c. a husband’s homestead exemption.
d. a grantor who endows property to heirs.

A

b. a wife’s life estate interest in her husband’s property.

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8
Q

A distinct feature of a joint tenancy is that joint tenants

a. may elect to have any percent of ownership in the property.
b. cannot will their interest to a party outside the tenancy.
c. own separate physical portions
d. cannot lease the property.

A

b. cannot will their interest to a party outside the tenancy.

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9
Q

Interests in a condominium differ from those in a cooperative, in that

a. a default by a condominium owner may cause a foreclosure on the entire property instead of just a single unit, as with a cooperative.
b. the condominium owner owns the common elements and the airspace, whereas the coop owner owns only the apartment.
c. the coop owner owns stock in the cooperative association, whereas the condominium owner simply owns real estate.
d. the cooperative owner must pay a pro rata share of the cooperative’s expenses as well as rent.

A

b. the condominium owner owns the common elements and the airspace, whereas the coop owner owns only the apartment.

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10
Q

There are two adjoining properties. An easement allows property A to use the access road that belongs to property B. In this situation, property B is said to be which of the following in relation to property A?

a. Dominant tenement
b. Subordinate tenant
c. Servient estate
d. Conditional life tenant

A

c. Servient estate

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11
Q

Title records of a property reveal several recorded liens: a one-year old judgment lien; a mechanic’s lien dating from two years ago; a special assessment tax lien recorded last month; and a first mortgage lien recorded five years ago. In case of a foreclosure, which of these liens will be paid first?

a. First mortgage lien
b. Special assessment tax lien
c. Mechanic’s lien
d. Judgment lien

A

b. Special assessment tax lien

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12
Q

A lender may terminate foreclosure proceedings if the defaulting borrower executes

a. a wraparound mortgage.
b. a lis pendens.
c. a waiver of redemption.
d. a deed in lieu of foreclosure.

A

d. a deed in lieu of foreclosure.

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13
Q

A person has occupied a property for seven years, and no one has ever attempted to evict her or co-occupy the parcel. In this case, the person might base a claim of legal ownership on

a. her prescriptive easement.
b. title records.
c. constructive notice of possession.
d. tenancy in severalty.

A

c. constructive notice of possession.

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14
Q

A person wishes to convey any and all interests in a property to another with full assurances against encumbrances, liens, or any other title defects on the property. This party would most likely use which of the following types of deed?

a. A quitclaim deed
b. A general warranty deed
c. A deed in lieu of warrant
d. A guardian’s deed

A

b. A general warranty deed

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15
Q

The chain of title to a property refers to which of the following?

a. An abstract of the condition and marketability of title
b. The genealogy of successive heirs to a property
c. The list of all current encumbrances and clouds “chained” to title
d. A chronology of successive owners of record

A

d. A chronology of successive owners of record

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16
Q

A leased property is conveyed to a new owner. What happens to the lease?

a. It remains in effect.
b. It is cancelled.
c. It automatically renews at closing for its original term.
d. It moves with the owner to a new property, if purchased within one year.

A

a. It remains in effect.

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17
Q

The Uniform Residential Landlord and Tenant Act fundamentally attempts to

a. promote the rights of tenants, particularly in lease defaults.
b. standardize rental rates.
c. encourage fairness and simplicity in lease forms and provisions.
d. minimize rent escalations in economically depressed zones.

A

c. encourage fairness and simplicity in lease forms and provisions.

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18
Q

A primary objective of residential zoning is

a. regulate rates of appreciation and depreciation of residences.
b. promote the value and planned land use of a neighborhood.
c. eliminate nonconforming uses, variances, and special exceptions.
d. disperse intensity of usage.

A

b. promote the value and planned land use of a neighborhood.

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19
Q

A shop was originally built in a commercial zone. The zone has since been changed to a residential zone. Zoning authorities permit the use, most likely as

a. a variance.
b. a special exception.
c. an illegal nonconforming use.
d. a legal nonconforming use.

A

d. a legal nonconforming use.

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20
Q

Authorities conduct comprehensive land use planning in order to

a. balance public interests with individual property rights.
b. prevent the public from exercising police powers.
c. ensure positive market conditions for development projects.
d. limit growth.

A

a. balance public interests with individual property rights.

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21
Q

The purpose of a formal legal description of a property is to

a. eliminate encroachments.
b. locate and identify the property reliably.
c. eliminate the possibility of surveyor error.
d. qualify for title recordation.

A

b. locate and identify the property reliably.

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22
Q

A parcel is described as the SW 1/4 of the N 1/2 of the E 1/2 of Section 14. What is its acreage?

a. 160 acres b. 80 acres
c. 40 acres d. 20 acres

A

c. 40 acres

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23
Q

A suburb has a growing need for single-family housing, but the land available for new construction is running low. In this case, it is likely that the price of existing homes

a. will decline.
b. will increase.
c. will stabilize.
d. will not show any predictable movement.

A

b. will increase.

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24
Q

The demand for homes in a market is best expressed in terms of

a. square feet of housing required.
b. number of contracts signed with developers.
c. number of houses listed in the multiple listing service.
d. number of households seeking housing.

A

d. number of households seeking housing.

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25
Q

What is the significance of base employment in a real estate market?

a. It gives the basic number of people who will need housing.
b. It indicates the number of people at the low end of the buying power spectrum.
c. It drives total employment and population growth, which lead to demand for real estate.
d. It indicates the number of people who want to move into the market.

A

c. It drives total employment and population growth, which lead to demand for real estate.

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26
Q

The concept known as substitution states that

a. buyers will not substitute the quality of one home for the price of another.
b. the replacement cost of an item cannot be substituted for the item’s original value.
c. a new improvement will only increase market value to the extent of the cost of a similar improvement.
d. buyers will not pay more for a certain house than they would for another, similar house.

A

d. buyers will not pay more for a certain house than they would for another, similar house.

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27
Q

The “price that a willing, informed, and unpressured seller and buyer agree upon for a property, assuming a cash price and reasonable exposure of the property to the market” describes which of the following concepts of value?

a. Highest and best value
b. Substitution value
c. Desirability
d. Market value

A

d. Market value

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28
Q

A warehouse building lacks sufficient ceiling height for the operation of modern forklifts. This is an example of

a. non-conforming use.
b. functional obsolescence.
c. overimprovement.
d. economic obsolescence.

A

b. functional obsolescence.

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29
Q

To derive value using the income capitalization approach, one must

a. divide the capitalization rate by net income.
b. multiply net income times the capitalization rate.
c. divide the capitalization rate into net income.
d. multiply cash flow by the capitalization rate.

A

c. divide the capitalization rate into net income.

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30
Q

An office building rents for $600,000, has expenses of $400,000, and a cash flow of $100,000. The prevailing gross rent multiplier is 8. Using the GRM, what is the value of the building?

a. $800,000 b. $1,600,000
c. $3,200,000 d. $4,800,000

A

d. $4,800,000

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31
Q

An owner obtains a loan and gives the mortgagee a mortgage on the property as collateral. The mortgagor/owner retains title to the property, and the mortgagee records a lien. This is an example of

a. intermediation.
b. contracting for deed.
c. subordination.
d. hypothecation.

A

d. hypothecation.

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32
Q

An important characteristic of a promissory note is that

a. it is assignable.
b. it must be secured by collateral.
c. it is not a negotiable instrument.
d. it must be recorded to be enforceable.

A

a. it is assignable.

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33
Q

Disclosure of estimated closing costs is required of a lender in order to comply with

a. the Equal Credit Opportunity Act.
b. Truth-in-Lending laws.
c. Federal Fair Housing Laws.
d. the Real Estate Settlement and Procedures Act.

A

d. the Real Estate Settlement and Procedures Act.

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34
Q

The secondary mortgage market organizations do all of the following EXCEPT

a. guarantee performance on mortgages.
b. buy pools of mortgages from primary lenders.
c. sell securities based on pooled mortgages.
d. directly originate loans.

A

d. directly originate loans.

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35
Q

Negative amortization of a loan occurs whenever

a. monthly payments are interest-only.
b. a payment does not pay the interest owed.
c. the principal loan balance is diminishing.
d. the interest rate increases on an adjustable rate loan.

A

b. a payment does not pay the interest owed.

36
Q

A borrower earns $3,000/month and makes credit card and car note payments of $500. A conventional lender requires a 27% income ratio. What monthly amount for housing expenses (principal, interest, taxes, insurance) will the lender allow this person to have in order to qualify for a conventional mortgage loan?

a. $810 b. $675
c. $972 d. $1,040

A

a. $810

37
Q

A $250,000 interest-only loan carries a 7% rate. Monthly payments are

a. $1,750.
b. $1,458.
c. $17,500.
d. Cannot be determined without loan term data.

A

b. $1,458.

38
Q

A lender is charging 2.75 points on a $240,000 loan. How much must the borrower pay for points?

a. $550. b. $5,500.
c. $6,600. d. $660.

A

c. $6,600

39
Q

Which of the following is generally true of a real estate investment?

a. The lower the price, the lower the liquidity
b. The greater the return, the greater the risk
c. The more management, the less return
d. The more liquidity, the greater the return

A

b. The greater the return, the greater the risk

40
Q

The capital gain on sale of an investment is computed as

a. beginning basis plus gain.
b. sale price minus beginning basis.
c. net sales proceeds minus beginning basis.
d. net sales proceeds minus adjusted basis.

A

d. net sales proceeds minus adjusted basis.

41
Q

The formula for return on equity is

a. cash flow divided by equity.
b. required yield times gross income.
c. net operating income divided by equity.
d. cash flow times the capitalization rate.

A

a. cash flow divided by equity.

42
Q

Mary Bright bought a home for $80,000, paying $10,000 down and taking a mortgage loan of $70,000. The following year she had a new roof put on, at a cost of $2,000. What is Mary’s adjusted basis in the house if she now sells the house for $100,000?

a. $12,000
b. $72,000
c. $18,000
d. $82,000

A

d. $82,000

43
Q

An office building has a potential income of $500,000 and vacancy of 10%. Its cash-paid bills total $300,000, and annual depreciation is $5,000. Payments on the loan total $100,000. What is the property’s pre-tax cash flow?

a. $45,000
b. $50,000
c. $150,000
d. $155,000

A

b. $50,000

44
Q 
A property is purchased for $200,000.
Improvements account for 75% of the value. Given a 39-year depreciation term, what is the annual depreciation expense?
a. $3,846 
b. $5,128
c. $6,410 
d. $8,294
A

a. $3,846

45
Q

An income property is bought for $500,000. Gross income is $100,000, and net operating income is $60,000. Cash flow is $10,000. What is the return on investment (ROI)?

a. 2.00%
b. 12%
c. 10.00%
d. 60.00%

A

b. 12%

46
Q

Which of the following is the formula for deriving the tax base of a jurisdiction?

a. The total tax required divided by assessed values
b. The total of all assessed values minus exemptions
c. The annual budget times the tax rate
d. The annual budget divided by the millage rate

A

b. The total of all assessed values minus exemptions

47
Q

The purpose of a homestead tax exemption is

a. to exempt owners from ad valorem taxation.
b. to offer tax abatement on a principal residence.
c. to encourage owners to finance their principle residences.
d. to exempt owners of principal residences who rent their properties.

A

b. to offer tax abatement on a principal residence.

48
Q

A homeowner’s tax bill for a taxing district is derived by

a. dividing the tax base by the district’s needed revenues.
b. multiplying the tax rate times the assessed value of the property.
c. multiplying the tax rate times the taxable value of the property.
d. multiplying the millage rate times the equalization factor.

A

c. multiplying the tax rate times the taxable value of the property.

49
Q

The village of Parrish has an annual budget requirement of $20,000,000 to be funded by property taxes. Assessed valuations are $400,000,000, and exemptions total $25,000,000. What must the tax rate be to finance the budget?

a. 4.70%
b. 5.33%
c. 5.00%
d. 11.25%

A

b. 5.33%

50
Q

A canal dredging project is to cost $100,000. There are 40 properties along the canal, and 40 others across the street from the canal. The total canal footage to be dredged is 2,500 feet. How much will the assessment be for a 150-foot property on the canal?

a. $1,250
b. $2,500
c. $3,000
d. $6,000

A

d. $6,000

51
Q

A prospective homebuyer offers to buy a house if the seller agrees to pay financing points at closing. The seller gets the offer, signs it, and gives it to his agent to deliver. At this point the status of the offer is

a. a valid contract.
b. an invalid contract.
c. still an offer.
d. an invalid offer.

A

c. still an offer.

52
Q

One aim of the statute of frauds is to

a. set time limits for disputing contract provisions.
b. require certain conveyances to be in writing.
c. prevent fraudulent assignments of listing agreements.
d. make all oral agreements unenforceable.

A

b. require certain conveyances to be in writing.

53
Q

A buyer agrees to all terms of a seller’s offer and sends notice of acceptance back to the seller. The seller now tells the buyer the deal is off because he has learned that the home was underpriced. Which of the following is true?

a. The buyer must offer the new price to get the property.
b. The seller may counteroffer.
c. The contract is cancelled.
d. The buyer has a binding contract.

A

d. The buyer has a binding contract.

54
Q

A principal discloses to the listing agent that she must sell a property within two months to avoid a financial problem. Nearly seven weeks later, a buyer’s agent hears of the seller’s difficulty from the listing agent and advises his buyer to submit an offer for 80% of the listed price. The buyer complies, and the seller accepts the offer. Which of the following is true?

a. The buyer’s agent has violated fiduciary duties owed the customer.
b. The listing agent has violated fiduciary duties owed the customer.
c. The buyer’s agent has violated fiduciary duties owed the client.
d. The listing agent has violated fiduciary duties owed the client.

A

d. The listing agent has violated fiduciary duties owed the client.

55
Q

An owner’s agent is showing a buyer an apartment building. The buyer questions the agent as to whether some cracking paint contains lead. The agent’s best course of action is to

a. contract to re-paint the cracked area.
b. assure the buyer the paint is lead-free.
c. suggest the buyer make a lower-price offer to cover the possible problem.
d. inform the seller of the inquiry and test the paint.

A

d. inform the seller of the inquiry and test the paint.

56
Q

Agent Jerry, who works for Broker Lucy, obtains an owner listing to lease a building. Lucy’s other agent, Linda, a tenant representative, locates a tenant for Lucy’s listing. If there is no arrangement to the contrary, Broker Lucy in this instance is

a. an implied agent.
b. a transaction broker.
c. a single agent.
d. a cooperating agent.

A

b. a transaction broker.

57
Q

A transaction broker should disclose his or her agency relationship to the transaction principals

a. before receipt of any offer.
b. upon completion of the listing agreement.
c. upon change of status from a single agent.
d. upon initial contact of any kind with either principal.

A

c. upon change of status from a single agent.

58
Q 
An agent obtains a listing which ensures
compensation for procuring a customer, provided the agent is the procuring cause. This agent has entered into a(n)
a. exclusive right-to sell agreement.
b. exclusive agency agreement.
c. open listing.
d. net listing.
A

c. open listing.

59
Q

A landlord promises to compensate a broker for procuring a tenant, provided the landlord’s brother decides not to rent the property within a month. This would be an example of a(n)

a. exclusive right-to-lease agreement.
b. exclusive agency agreement.
c. open listing.
d. net listing.

A

b. exclusive agency agreement.

60
Q

The amount of a real estate brokerage commission is determined by

a. state license law guidelines.
b. negotiation with the client.
c. the Board of Realtors.
d. agreement among competing brokers.

A

b. negotiation with the client.

61
Q

Real estate sales agents are legally authorized to

a. represent buyers on their broker’s behalf.
b. enter into approved listing agreements.
c. execute lease contracts for less than one year.
d. transfer listings to other MLS agents.

A

a. represent buyers on their broker’s behalf.

62
Q

In eliciting an offer from a buyer, an owner’s agent must be careful to

a. avoid an overpriced offer that will cause buyer’s remorse or lawsuits.
b. complete any offer the buyer might decide to make.
c. disclose what price the owner will accept.
d. avoid completing an offer that contains contingencies.

A

b. complete any offer the buyer might decide to make.

63
Q

An example of conversion is

a. depositing escrow funds in a business operating account.
b. spending a customer deposit on a surety bond for the agency.
c. spending operating income from an apartment on roof repairs.
d. depositing a commission into an escrow account.

A

b. spending a customer deposit on a surety bond for the agency.

64
Q

Three leading agencies charge identical commission rates for brokering office properties in Phoenix. Which of the following is true?

a. This is a perfectly legitimate business practice.
b. The brokers have engaged in legal collusion.
c. The brokers have allocated the Phoenix market.
d. The brokers have illegally fixed prices.

A

a. This is a perfectly legitimate business practice.

65
Q

A business owner insists on a price for his enterprise that exceeds the value of the tangible assets, claiming that it is a well-known family business with a loyal clientele. The excess value is known as

a. the buyer’s premium.
b. goodwill.
c. the risk factor.
d. the profit margin.

A

b. goodwill.

66
Q

An agent informs owners in an area that a decline in property values over the past five years is due to an influx of minority families. He suggests that the trend will continue, and advises them to sell before it is too late. This agent is probably guilty of

a. blockbusting.
b. redlining.
c. discriminatory misrepresentation.
d. negligent misrepresentation.

A

a. blockbusting.

67
Q

An agent spends two hours with a minority buyer, then shows the buyer five available properties all over town. Later, a similarly qualified minority couple enter the office. The agent spends twenty minutes with the couple, and encourages them to drive by the listings they see on the internet. If they like anything, they should come back the next day to discuss terms. This agent could be liable for

a. misrepresentation.
b. steering.
c. providing unequal services.
d. nothing.

A

c. providing unequal services.

68
Q

An owner suddenly pulls a property off the market after hearing from the agent that a minority party has made a full-price offer. The agent then goes back to the minority party and reports that the seller has decided to wait until next year to sell the home. Who, if anyone, has violated fair housing laws?

a. Both owner and agent.
b. The owner.
c. The agent.
d. No one.

A

a. Both owner and agent.

69
Q

An owner completes a contract to sell her property. Before closing, she runs into financial trouble and assigns the contract to her mortgagor. Which of the following is true?

a. The owner has defaulted.
b. The buyer can sue to nullify the mortgage.
c. The assignment can take effect only after the closing.
d. The sale contract remains valid.

A

d. The sale contract remains valid.

70
Q

Buyers and sellers rely on escrow accounts in order to

a. allow a third party fiduciary to handle the funds.
b. have access to the funds without interference from the broker.
c. prevent the broker from receiving a commission until after closing.
d. earn equal interest on their funds.

A

a. allow a third party fiduciary to handle the funds.

71
Q

An option-to-purchase expires. The landlord agrees to extend it in exchange for a higher price. The optionee claims he can exercise the option within the redemption period. Which is true?

a. The landlord must honor the option and sell immediately.
b. The landlord can extend the option term, but cannot raise the price.
c. The landlord must extend the option but is allowed to raise the price.
d. The landlord is under no obligation, since options do not have a redemption period.

A

d. The landlord is under no obligation, since options do not have a redemption period.

72
Q

RESPA requires specific closing procedures whenever

a. the loan is to be guaranteed.
b. the loan is to be sold to the FNMA.
c. the commercial property is to be bought by FHLMC.
d. a borrower does not fully understand closing costs.

A

b. the loan is to be sold to the FNMA

73
Q

When an item is prorated between buyer and seller on a settlement statement, the closing officer must

a. debit the buyer and seller.
b. credit the buyer and seller.
c. debit and credit both buyer and seller.
d. debit one party and credit the other.

A

d. debit one party and credit the other.

74
Q

Which of the following items are paid in arrears?

a. Taxes and insurance
b. Rents and interest
c. Taxes and interest
d. Rents and insurance

A

a. Taxes and insurance

75
Q

A sale transaction on rental property closes on December 16. The landlord received the December rent of $713 on December 1. Assuming the closing day is the seller’s, and that the 365-day method is used for prorating, which of the following entries would appear on the settlement statement?

a. Debit seller $345.00
b. Credit seller $713.00
c. Debit buyer $345.00
d. Credit buyer $368.00

A

a. Debit seller $345.00

76
Q

The most common form of risk transference in brokerage firms is

a. continuing education.
b. errors & omissions insurance.
c. company rules and regulations.
d. self control.

A

b. errors & omissions insurance.

77
Q
  1. Which of the following is a major risk in the fulfilling of listing agreements?
    a. Exceeding the limits of the authority granted by the agreement
    b. Disclosing a material defect without the seller’s permission
    c. Failing to receive proper compensation
    d. Putting the client’s interests above those of the customer
A

a. Exceeding the limits of the authority granted by the agreement

78
Q

In the contracting process, a licensee must be careful to avoid

a. giving the principal any advice about the transaction.
b. describing the normal requirements of a contract to a client.
c. drafting a contract illegally.
d. pointing out to the principals the importance of meeting contingency deadlines.

A

c. drafting a contract illegally.

79
Q

If a licensee is found guilty of obtaining a real estate license under false pretenses, the most likely penalty will be

a. paying a punitive fee.
b. civil suit for damages.
c. extra continuing education.
d. license revocation.

A

d. license revocation.

80
Q

A broker responsible for handling a trust account is violating the law by

a. depositing an earnest money check in a personal account.
b. following the seller’s instructions to hold an earnest money check uncashed.
c. removing an earned commission from a trust account without permission of the depository institution.
d. opening an account that names the licensee as the trustee of the account.

A

a. depositing an earnest money check in a personal account.

81
Q

In order to set rents and to estimate the expected return on a managed property, a property manager needs to prepare a(n)

a. cash reserve statement.
b. operating budget.
c. expense report.
d. rent roll.

A

b. operating budget.

82
Q

Why is it important for a property manager to maintain good relations with tenants?

a. If tenants like the manager they will like the owner.
b. Happy tenants are easier to work with.
c. The manager owes the landlord the fiduciary duty of pleasing the tenants.
d. Unhappy tenants lead to expensive tenant turnover.

A

d. Unhappy tenants lead to expensive tenant turnover.

83
Q

While physical maintenance of the property is a primary function of the property manager, the level of maintenance performed must be balanced with

a. the cost of services and the time available.
b. the manager’s monetary incentives.
c. owner objectives and tenant demands.
d. the manager’s skills and the condition of the property.

A

c. owner objectives and tenant demands.

84
Q

What kind of insurance would provide coverage for loss of income when a rental property is damaged so badly that it cannot be used?

a. Casualty
b. Consequential loss
c. Fire and hazard
d. Liability

A

b. Consequential loss

85
Q

Property managers are usually considered to be

a. general agents empowered to perform a wide range of duties for the landlord.
b. special agents empowered to perform a specific task for the landlord.
c. dual agents serving both the landlord and the tenants.
d. employees who have no agency relationship with their employer.

A

a. general agents empowered to perform a wide range of duties for the landlord.

Florida Real Estate Broker Course II (25 decks)

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