Practice Test

Question 1

A licensee has entered into a dual agency agreement. In this situation, it is critical that all parties understand that it is impossible for the licensee to fully perform for either party the traditional common-law agency duty of

1. accounting.
2. care.
3. disclosure.
4. loyalty.

Answer 1

loyalty

Question 2

A contract for the sale of a home has been signed by both parties. This contract will remain executory until

1. acceptance of the buyer’s offer is delivered to the buyer.
2. the transaction has closed.
3. all contingencies have been met.
4. the buyer takes possession.

Answer 2

the transaction has closed.

Question 3

The sellers want to accept a purchase offer, but only if the price is raised by $5,000. What should they give the prospective buyer?

1. Counteroffer.
2. Novation.
3. New listing contract.
4. Contingency.

Answer 3

Counteroffer.

Question 4

An owner lists her home at a 7% commission rate and wants to net $45,000 after paying the mortgage balance of $68,000 and the broker’s commission. To the nearest dollar, what should the selling price be to net her $45,000?

1. $105,090
2. $110,753
3. $120,910
4. $121,505

Answer 4

$121,505

Question 5

While an agent is showing a listed property, the seller and the buyer enter into an oral agreement for the purchase of the home. If a dispute over the terms arises later, the agreement may be unenforceable because

1. the agreement does not comply with the Statute of Frauds.
2. oral agreements are never enforceable in court.
3. it is not assignable by novation between the parties.
4. the oral agreement does not include the agent.

Answer 5

the agreement does not comply with the Statute of Frauds.

Question 6

A real estate salesperson is representing only the buyer in a transaction. Which of the following actions would be a violation of the salesperson’s agency duties to the client?

1. disclosing the price the seller originally paid for the property
2. disclosing the highest price the buyer is willing to pay
3. preparing a competitive market analysis
4. identifying latent property defects

Answer 6

disclosing the highest price the buyer is willing to pay

Question 7

If conditions for property use are included in a deed and these conditions are violated, what is the most severe potential penalty?
1.
A court may issue an order enforcing compliance.
2.
The purchaser’s mortgage lender may accelerate the loan.
3.
The original owner may sue the purchaser for breach of contract.
4.
A court may order the return of the property to the original owner.

Answer 7

A court may order the return of the property to the original owner.

Question 8

A competitive market analysis is MOST often used for
1.  
estate tax purposes.
2.  
setting a listing price.
3.  
divorce proceedings.
4.  
property tax assessment.

Answer 8

setting a listing price.

Question 9

A broker did NOT have a written independent contractor agreement with his salesperson. While showing homes to a family, the salesperson was involved in a car accident in which a child in her car was injured. Could the broker be held liable in this situation, and why?
1.
Yes; the lack of an independent contractor agreement may classify the salesperson an employee and an employer may be held liable for the torts of an employee.
2.
No; the broker is not liable as all real estate agents are independent contractors and therefore responsible for their own actions.
3.
Yes; the broker may be held liable, however this should not present a problem as the errors and omissions policy will cover it.
4.
No; the broker may not be held liable for the torts of the salespersons under his supervision under any circumstances.

Answer 9

Yes; the lack of an independent contractor agreement may classify the salesperson an employee and an employer may be held liable for the torts of an employee.

Question 10

A broker represents a group of investors who purchase single family residences when they can be found at very low prices. Their offers are typically made with $500 deposits and cash closings within 7 days of acceptance of the offers. When the last property closed, the investors suggested the broker keep the deposit money to be used for their next purchase, as yet not identified. What must the broker do with these deposit funds?
1.
Return them to the purchasers.
2.
Deposit them in his escrow account.
3.
Deposit them in his rental trust account.
4.
Hold them in his personal account until needed.

Answer 10

Return them to the purchasers.

Question 11

Which of the following would generally be included in the Phase I assessment of a parcel where hazardous substances may have been disposed?
1.  
testing soil from the site
2.  
an on-site visual inspection
3.  
declaring the site uninhabitable
4.  
creating a plan for site clean up

Answer 11

an on-site visual inspection

Question 12

Refer to the scenario below.

You are the supervising broker of a real estate company. On August 1, one of your licensees listed a house owned by an investor client. On August 10, a full-price offer was received from the buyer?s agent, a licensee with a cooperating real estate company, and accepted by the seller. The buyer?s agent indicated that the buyer is a transferee. The sale is to close on September 10, but on September 5, the buyer?s agent informs the seller?s agent that his client is not going to close and wants the earnest money refunded. Your firm is holding the earnest money.

Which information is the most critical to be obtained?
1.
The amount of transactions the buyer’s agent has completed.
2.
The number of times the buyer’s agent met with the buyer before making the offer.
3.
The reason why the buyer is not closing.
4.
Verifying if there is a clause in the purchase agreement regarding the disbursement of earnest money following default.
5.
What the source of the earnest money is.
6.
If the buyer’s agent tried to sell the buyer something else.

Answer 12

Verifying if there is a clause in the purchase agreement regarding the disbursement of earnest money following default.

Question 13

An appraiser MUST be licensed or certified to handle Federally related work on residential property valued at more than
1.  
$100,000.
2.  
$250,000.
3.  
$500,000.
4.  
$1,000,000.

Answer 13

$250,000

Question 14

Which of the following real estate contracts is a service contract?
1.  
a purchase agreement
2.  
a listing agreement
3.  
an option contract
4.  
a mortgage

Answer 14

a listing agreement

Question 15

A distinguishing characteristic of owning property by land trust is that
1.
lower tax assessments usually result.
2.
corporate tax rates are applied to profits.
3.
the identity of the legal owner is kept confidential.
4.
building permits are more easily obtained.

Answer 15

the identity of the legal owner is kept confidential

Question 16

A competitive market analysis takes into consideration
1.  
square footage of the subject property.
2.  
neighborhood nuisances.
3.  
unemployment levels in the community.
4.  
age of the sellers.

Answer 16

square footage of the subject property.

Question 17

When a home is purchased using an ARM, the monthly loan payment on the mortgage will
1.
rise slightly in each adjustment period until the cap is reached.
2.
be adjusted automatically to ensure that negative amortization does not occur.
3.
be based on a very low interest rate to begin with, but will rise to the market rate at the first adjustment.
4.
vary over the life of the loan depending on fluctuations in the interest rate to which the loan is referenced.

Answer 17

vary over the life of the loan depending on fluctuations in the interest rate to which the loan is referenced.

Question 18

MOST closed real estate transactions should be reported to the IRS. REQUIRED information includes seller name(s) and social security number(s) and
1.  
buyer name(s) and social security number(s).
2.  
the property financing.
3.  
the mortgage lender's name and address.
4.  
the sale price.

Answer 18

the sale price.

Question 19

A realty firm has just entered into an agreement to represent a home builder in the sale of a new subdivision. The firm has located several potential buyers and five homes have been sold to purchasers that the firm's agents have contacted. The realty firm has an agency relationship with
1.  
the builder.
2.  
the buyers.
3.  
the builder and the buyers.
4.  
neither the builder nor the buyers.

Answer 19

the builder.

Question 20

A landlord may legally refuse to rent to a prospective tenant if the tenant
1.
has a history of serious mental illness.
2.
is unable to live alone without assistance.
3.
has ever been convicted of using illegal drugs.
4.
has ever been convicted of selling illegal drugs.

Answer 20

has ever been convicted of selling illegal drugs.

Question 21

Under the terms of their listing contract, the owners may sell their house themselves and pay no commission. If their agent sells it, a commission will be due. What kind of listing contract do the owners have?
1.  
Multiple listing.
2.  
Net listing.
3.  
Exclusive agency listing.
4.  
Exclusive right to sell listing.

Answer 21

Exclusive agency listing.

Question 22

A broker has signed a listing contract for the sale of a home. Which of the following could make this contract voidable?
1.
The seller cannot write and sign with an “X”.
2.
The listing contract specifies that no other broker may show the house.
3.
The seller is heavily under the influence of alcohol at the time of signing.
4.
The listing contract specifies that a commission will be paid only if the house is sold within 3 weeks.

Answer 22

The seller is heavily under the influence of alcohol at the time of signing.

Question 23

Why was the Jones vs. Mayer decision of 1968 important?
1.
By upholding the Civil Rights Act of 1866, the Supreme Court removed all exceptions to racial discrimination in housing.
2.
By upholding the Civil Rights Act of 1866, the Supreme Court held that individual homeowners are exempt from antidiscrimination laws.
3.
It added persons with disabilities to the list of classes who are protected by Fair Housing laws.
4.
It added discrimination based on gender to the list of prohibited types of discrimination covered by Fair Housing laws.

Answer 23

By upholding the Civil Rights Act of 1866, the Supreme Court removed all exceptions to racial discrimination in housing.

Question 24

Failure of a real estate agent to comply with Fair Housing practices is punishable by
1.  
license revocation only.
2.  
criminal prosecution only.
3.  
license revocation and criminal prosecution.
4.  
probation.

Answer 24

license revocation and criminal prosecution.

Question 25

A broker and the buyers he represents are anxiously awaiting the closing on their new home. The closing is scheduled in 4 days. The buyers inform the broker that they just received revised Loan Estimate and Closing Disclosure forms from the lender, indicating the Annual Percentage Rate on their loan has increased by 0.3%. Based on the TILA-RESPA Integrated Disclosure rule, what action should the broker take in this situation?

1. Assist the buyers in calculating the new loan payments and ask them if they want to proceed with the closing as scheduled.
2. Advise the buyers to file a legal action against the lender for violation of predatory lending practices under the Real Estate Settlement Procedures Act.
3. Call the lender and inform them that they are in violation of the seven-day waiting period and cannot change the terms of the loan this close to the closing.
4. Confirm with the seller’s broker, the lender and the closing entity that the closing must be delayed to allow for a new seven-day waiting period because of the interest rate revision.

Answer 25

Confirm with the seller’s broker, the lender and the closing entity that the closing must be delayed to allow for a new seven-day waiting period because of the interest rate revision.

Question 26

The day after a broker’s listing on a house expired, it was listed with another broker and offered in the MLS. Several days later, a third licensee called the first broker and asked for the key to show the home. The broker should inform the caller that
1.
he is no longer the listing agent.
2.
he will set up an appointment for showing the home.
3.
he will leave the key under the door mat.
4.
the house is currently off the market.

Answer 26

he is no longer the listing agent.

Question 27

An agency relationship between a property owner and a property manager is usually created by
1.  
a management agreement.
2.  
payment of a management fee.
3.  
an exclusive agency agreement.
4.  
an independent contractor agreement.

Answer 27

a management agreement.

Question 28

A property management plan may serve different purposes for different owners, and generally has to strike a balance between preservation of the property’s value and generation of income. Which of the following owners would MOST likely prefer a property manager who emphasizes cash flow or income over the maintenance of value?
1.
An individual entrepreneur who owns several apartment buildings.
2.
The Department of Housing and Urban Development.
3.
A bank acting as a trustee.
4.
A cooperative corporation.

Answer 28

An individual entrepreneur who owns several apartment buildings.

Question 29

A broker, acting as agent for the seller, presents an offer to buy from the broker’s former college roommate. The broker knows that the buyer will increase the amount of the offer if the seller turns down the offer. When presenting the offer, the broker should
1.
tell the seller that the buyer will pay more.
2.
not disclose that the buyer will pay more to ensure fair treatment of all parties.
3.
try to negotiate a fair compromise between what the seller is asking and what the buyer is offering.
4.
encourage the seller to delay accepting the offer.

Answer 29

tell the seller that the buyer will pay more.

Question 30

A gross lease can be best defined as one where the tenant pays, as a part of the rent,
1.
all property changes excluding utilities.
2.
no operating expenses of the leased space.
3.
outside maintenance and property taxes only.
4.
all property expenses except the interest on the owner’s mortgage.

Answer 30

no operating expenses of the leased space.

Question 31

A manufacturer under contract with a broker is seeking a 30,000-square-foot building to house his factory. The broker is showing him one that has only been used as a junk warehouse for the past fifty years. As they look around, near the ceiling they see old brown metal drums seemingly wired into the electrical system. How should the broker proceed?
1.
As the size of the building is exactly what the client was seeking, the broker should ask if he is ready to write an offer and proceed with the purchase of the property.
2.
The broker need not comment on the metal drums or their contents, as real estate professionals are not expected to be knowledgeable about evidence of potential hazards and pollutants.
3.
He should inform the client of the possibility that hazardous chemicals are present and recommend a baseline environmental assessment of the property as a contingency of the purchase.
4.
He should advise the buyer not to worry as his refitting of the building for his manufacturing operation will undoubtedly include removing the drums and any contaminating substance they may contain.

Answer 31

He should inform the client of the possibility that hazardous chemicals are present and recommend a baseline environmental assessment of the property as a contingency of the purchase.

Question 32

A real estate brokerage company has developed standardized policies regarding the inventory of properties to be shown to prospective buyers, the company’s standards for qualifying buyers, and documentation of all conversations and showings. These policies can help the firm defend itself in the event of an accusation of discrimination, but only if the policies

1. are posted conspicuously in the brokerage firm’s office.
2. appear in all contract forms the firm uses for listings and offers.
3. require every licensee in the firm to follow them consistently.
4. are approved in advance by the state fair housing agency.

Answer 32

require every licensee in the firm to follow them consistently.

Question 33

Prospective buyers made an offer on a property. The seller did NOT accept, but made a counteroffer. The prospective buyers signed the counteroffer and the real estate agent delivered their acceptance to the seller. In the interim, the same buyers had found another house that they liked better and made an offer on it, which was accepted. Which of the following is TRUE?

1. The contract on the first house is not enforceable.
2. Neither contract is enforceable.
3. Only the first contract is valid.
4. Both contracts are valid.

Answer 33

Both contracts are valid.

Question 34

In MOST states, foreclosed property is sold through
1.  
sealed bids.
2.  
public auction.
3.  
deficiency judgment.
4.  
right of redemption.

Answer 34

public auction.

Question 35

Which of the following statements best describes the risk taken by NOT recording a deed?
1.
Easements of record would become void.
2.
There is no risk as long as the deed has been notarized.
3.
The delivery of a deed to a grantee could be invalidated.
4.
A subsequent purchaser’s recorded deed could take precedence over any unrecorded instrument.

Answer 35

A subsequent purchaser’s recorded deed could take precedence over any unrecorded instrument.

Question 36

A mentally disabled person who has been declared incompetent by a judge wishes to enter into a contract. Under what conditions can such a person do so?

1. The person must obtain prior written approval by a licensed psychiatrist or psychologist.
2. The person must be capable of understanding the transaction.
3. The person appointed by the court to act for the disabled person must contract on his or her behalf.
4. The person may enter a contract under any conditions, because the law prohibits discrimination against persons with disabilities.

Answer 36

The person appointed by the court to act for the disabled person must contract on his or her behalf.

Question 37

A salesperson in a branch office is sued for damages by a buyer after the salesperson misrepresents a property. Who has the ultimate responsibility for the salesperson's actions?
1.  
the owner of the property
2.  
the supervising broker
3.  
the branch manager
4.  
the salesperson

Answer 37

the supervising broker

Question 38

A minority couple come to a salesperson looking for a house. The salesperson has some properties for which the couple qualify but avoids showing or mentioning these listings. Instead, the salesperson shows only properties in low-priced and integrated neighborhoods. This practice is known as
1.  
steering.
2.  
blockbusting.
3.  
redlining.
4.  
conciliation.

Answer 38

steering.

Question 39

If the terms of a contract indicate that Party A will be obliged to perform her part of the contract only if Party B chooses to take a certain action, then the contract is a
1.
unilateral contract in which only Party B has made a promise to perform.
2.
unilateral contract in which only Party A has made a promise to perform.
3.
bilateral contract which both parties are obliged to perform.
4.
void contract.

Answer 39

unilateral contract in which only Party A has made a promise to perform.

Question 40

Antitrust laws prohibit competing brokers from all of the following EXCEPT
1.
boycotting other brokers in the marketplace.
2.
dividing the market to restrict competition.
3.
agreeing to set sales commissions and management rates.
4.
receiving compensation from both the buyer and the seller.

Answer 40

receiving compensation from both the buyer and the seller.

Question 41

Several salespersons have asked a broker for his permission to use a personal web site for real estate advertising of specific properties for sale. Before giving permission the broker should first
1.
review the sites and all proposed advertising for compliance with state laws.
2.
request that brokerage information be included on the web sites.
3.
demand “back end” access to the web sites.
4.
review the web sites for possible Truth-in-Lending violations.

Answer 41

review the sites and all proposed advertising for compliance with state laws.

Question 42

To be valid, every deed must
1.  
contain a warranty.
2.  
include granting language.
3.  
be executed by the grantor.
4.  
be signed by the grantee if there are covenants.

Answer 42

be executed by the grantor.

Question 43

A lender will make an 80% loan-to-value loan on a property that is appraised for $72,250 and sells for $73,500. If the buyer has saved $14,450 for a down payment, how much more (if any) will he need in order to make the down payment required under the terms of this loan?
1.
He has $1,000 more than he needs for the down payment.
2.
He has exactly the amount needed for the down payment.
3.
He needs an additional $250 in order to make the down payment.
4.
He needs an additional $1,250 in order to make the down payment.

Answer 43

He needs an additional $1,250 in order to make the down payment.

Question 44

Refer to the scenario below.

You are hosting an open house. Mr. and Mrs. Charles Martin come into the house. You greet them and show them the house. The Martins tell you the house is exactly what they are looking for and they are very interested in purchasing it. You then give them information showing the various types of financing available with down payment options and projected payments. Mr. Martin tells you they have been working with Mary Hempstead of XX Realty, a competing real estate company. Before leaving, you thank them for coming and give them your business card.

The first thing on Monday morning, Mrs. Martin calls and indicates they have tried to reach Mary and cannot. They indicate they have a written buyer’s agent agreement with Mary’s broker. They are afraid someone else is going to buy the house. Which of the following should you do?

Select the best answer.
1.
Seek advice from your supervising broker.
2.
Tell them to come to your office.
3.
Ask them to bring the buyer’s agency agreement to you for your interpretation.
4.
Tell them to be patient and continue trying to reach Mary.
5.
Tell them to call Mary’s supervising broker or branch manager.
6.
Tell them you are really sorry, but there is nothing you can do.

Answer 44

Tell them to call Mary’s supervising broker or branch manager.

Question 45

For Federal income tax purposes, which of the following are costs of homeownership that may be deducted from gross income?
1.
Mortgage loan interest, local property taxes, mortgage loan origination fees.
2.
Mortgage loan interest, homeowner’s insurance premium, local property taxes.
3.
Cost of essential repairs, mortgage loan origination fees, local property taxes.
4.
Homeowner’s insurance premium, mortgage loan origination fees, mortgage loan interest.

Answer 45

Mortgage loan interest, local property taxes, mortgage loan origination fees.

Question 46

An owner lists his home and agrees to pay a 6% commission provided he nets $10,000 after paying the commission and the balance of his mortgage, which is $75,000. To the nearest dollar, what should the selling price be to net the owner his $10,000?
1.  
$79,787
2.  
$80,189
3.  
$90,100
4.  
$90,426

Answer 46

$90,426

Question 47

A couple are moving to a new city. They have decided to rent temporarily before buying a house to see which part of the city they would like to live in. What type of lease would BEST suit the couple's needs?
1.  
Lease option.
2.  
Rental lease.
3.  
Month-to-month lease.
4.  
Lease purchase.

Answer 47

Month-to-month lease.

Question 48

When a listing broker is preparing an Offer to Purchase for a buyer customer, contingencies involving inspections or approval by a third party should
1.  
have short deadlines.
2.  
be discouraged by the broker.
3.  
be stated as briefly as possible.
4.  
be limited to mortgage arrangements.

Answer 48

have short deadlines.

Question 49

A couple bought a rental house for $195,000. Its assessed value was $180,000. If the tax rate is $1.50 per $100 of assessed value, what is the monthly contribution the lender will REQUIRE for taxes? Round to the nearest cent.
1.  
$225.00
2.  
$162.50
3.  
$150.00
4.  
$112.50

Answer 49

$225.00

Question 50

A buyer was negotiating the purchase of a house for himself. During a conversation with the seller, the seller agreed to include all kitchen appliances in the sale, and this fact was included in the sales contract. In this situation, if the seller takes the appliances with him, what recourse does the buyer have?
1.
The buyer has no recourse because he negotiated the sale himself.
2.
The buyer may declare the sales contract invalid.
3.
The buyer may sue the seller for partial performance.
4.
The buyer may sue the seller for specific performance.

Answer 50

The buyer may sue the seller for specific performance.

Question 51

A broker learns that one of the licensees under his supervision, and the owners of a listed property, have worked out a scheme to withdraw a property from the market whenever a showing is requested by any buyer who seems to be from a foreign country. What is the most important action for the broker to take in this situation?
1.
learn all the details of the scheme.
2.
identify potential buyers who were affected and show them the property.
3.
put the licensee on probation and require her to take a fair housing class.
4.
terminate the licensee’s association with the firm.
5.
terminate the listing agreement.
6.
develop stringent policies for the firm, establishing the criteria that may be used to determine which properties are shown to prospects.

Answer 51

terminate the listing agreement.

Question 52

In the property condition disclosure form under “Asbestos”, a broker reviewing an associated licensee’s listing sees that the property owner reported that the asbestos siding on his building was not removed but was professionally encapsulated ten years ago. Documentation of this professionally applied process is attached. The broker should
1.
be satisfied with this evidence that the asbestos problem, if any, has been handled.
2.
instruct the listing agent to request that the owner have the siding re-inspected.
3.
immediately call a licensed and bonded asbestos inspector to re-inspect the property.
4.
have the listing agent verify the license of the firm that performed the encapsulation process.
5.
research the issue to be sure that the process used for encapsulation would normally be expected to remain effective for 10 years or more.
6.
have the listing agent prepare the owner for the likelihood that there are other asbestos-containing materials in the house that may be noted by a buyer’s inspector.

Answer 52

have the listing agent verify the license of the firm that performed the encapsulation process.

Question 53

A buyer made an offer on an apartment building. The offer was not acceptable to the seller. When the buyer refused to accept the seller’s counteroffer, the seller agreed to accept the original offer. What MUST happen now?
1.
Nothing; by making a counteroffer the seller released the buyer from the original offer.
2.
The seller is obligated to pay the broker’s commission regardless of whether or not the transaction is completed.
3.
The buyer must complete the transaction because the original offer is still valid.
4.
The seller must draft a new counteroffer.

Answer 53

Nothing; by making a counteroffer the seller released the buyer from the original offer.

Question 54

When the sellers are lending part of the purchase price, they may secure the debt either with a deed of trust or a mortgage. For the seller, one benefit of the deed of trust is that
1.
it is usually less expensive to prepare.
2.
state law may require it.
3.
it avoids community property considerations.
4.
foreclosure is usually simpler and faster.

Answer 54

foreclosure is usually simpler and faster.

Question 55

Refer to the scenario below.

You are hosting an open house. Mr. and Mrs. Charles Martin come into the house. You greet them and show them the house. The Martins tell you the house is exactly what they are looking for and they are very interested in purchasing it. You then give them information showing the various types of financing available with down payment options and projected payments. Mr. Martin tells you they have been working with Mary Hempstead of XX Realty, a competing real estate company. Before leaving, you thank them for coming and give them your business card.

The Martins come to your office and explain that neither Mary nor her supervising broker are available. They insist you immediately write an offer for the house. How should you proceed?

Select the best answer.
1.
Write the offer after entering into a buyer’s broker agreement with them.
2.
Write the offer after explaining they may owe Mary’s broker a commission.
3.
Write the offer after trying to contact Mary’s broker yourself.
4.
Refuse to write an offer and explain that doing so would be unethical.
5.
Refuse to write an offer since it would be illegal.
6.
Refuse to write the offer and tell the Martins to contact another Salesperson in Mary’s office.

Answer 55

Write the offer after trying to contact Mary’s broker yourself.