REAL ESTATE EXAM 2022 PASS

Question 1

A licensee was showing property in an eight-unit complex to a prospective tenant using a motorized wheelchair. The tenant wanted to rent a unit, install grab bars in the bathroom, and lower all the door handles. The landlord:

Answer 1

must allow the tenant to make the modifications at the tenant’s expense, but can require, by the terms of the lease, restoration of the property. The 1988 Amendments to the Federal Fair Housing Act require that a landlord allow a tenant to make changes to the property to accommodate a disability. These modifications are at the tenant’s expense, and the landlord can require the tenant make reasonable restoration to the property at the end of the lease.

Question 2

Which of the following is the best description of a fee simple estate?

Answer 2

the most complete ownership in property that one can obtain. A fee simple estate is the highest form of ownership one can hold. It is complete ownership in its least limited form. There can be limitations on the use of the land as imposed by the government or by deed restrictions, and there can be encumbrances against the land, such as easements or real estate taxes.

Question 3

3. A licensee plans to send out an e-mail offering his services. According to the CAN-SPAM Act, the licensee must :

Answer 3

tell recipients how to opt out of receiving future e-mail. The CAN-SPAM Act establishes rules for commercial e-mail and the requirements for commercial messages, gives recipients the right to have the e-mail stopped, and spells out penalties for violations. One of the main requirements is that recipients must be told how to opt out of the receipt of future e-mail.

Question 4

4. An owner’s mortgage includes a clause requiring a prepayment penalty. Three percent of any outstanding loan principal would be charged by the lender if the owner paid off the principal before the scheduled time. Payments were $296.88, due on the first of each month, and included both principal and interest in arrears at 8% per annum. After the owner’s July 1 payment, her loan balance was $8,946.23. On August 1, after handing her lender the check for her August 1 payment, the owner paid off the entire remaining loan balance. What is the approximate prepayment penalty?

Answer 4

$261.27. The monthly house payment, $296.88, includes both interest and principal. The prepayment penalty is charged only on the principal, not on interest. Therefore, one must determine how much the new principal loan balance will be after the August 1st house payment is made. The calculations are as follows:
The loan balance after the July 1 payment is $8,946.23 x 0.08 interest rate = $715.70 a year ÷ 12 months = $59.64 interest for July.
$296.88 monthly house payment - $59.64 interest = 237.24 principal payment on August 1 payment.$8946.23 loan balance - $237.24 principal paid in August leaves new principal balance of $8708.99 after August 1st payment.
This is the amount on which the prepayment penalty will be based:
$8708.99 x 0.03 penalty = $261.27

Question 5

The owner of an apartment building has just signed an agreement with a real estate firm. Has an agency been formed?

Answer 5

Yes, because an agency is formed whenever one-party delegates to another the right to act on his behalf in certain business transactions. An agency is formed whenever one party gives someone else the right to act on his or her behalf in certain matters. A licensee who is representing an owner by managing the owner’s property is also in an agency relationship.

Question 6

The most typical purpose of a deed restriction is to

Answer 6

control future uses of the property. Deed restrictions control how the property is used. Once they have been recorded, they run with the land. They bind current and future owners of a property.

Question 7

A managing broker requires his licensees to mention a particular lender to buyers. The broker has a financial interest in this particular mortgage lender. Which of the following should the licensee recommend to buyers?

Answer 7

Consider this lender, disclosing the broker’s interest, and other lenders. Licensees should generally avoid recommending only one lender, and if a financial interest is involved, it should be disclosed. Since rates can change, a licensee most likely would not know which lender has the best rates. Licensees may provide a list of lenders without having to display the lenders in any particular order.

Question 8

8. A brokerage firm offers to split the commission equally with any cooperating brokerage or any buyer’s brokerage firm. A licensee who works for the buyer’s broker has an agreement with his broker that the licensee will receive 60% of the firm’s share of commission on any property the licensee sells. Assuming a 6% listing commission fee to the listing firm, how much will the selling licensee receive for the sale of a property that was listed for $220,000 and sold for $215,000?

Answer 8

$3,870. The commission is always based on the actual sale price of the property and not on its listed amount. The property sold for $215,000 and the brokerage fee was 6%. This makes the total commission to the listing firm $12,900. Half of that amount will be paid to the cooperating firm: $12,900 ÷ 2 = $6,450. The selling licensee is to receive 60% of that amount: $6,450 x 0.60 = $3,870.

Question 9

A couple leased a waterfront bungalow. The lease began on June 15, 2010, and continued through July 31, 2010. The couple had :

Answer 9

an estate for years. A lease that has a specific beginning and ending date is called an estate for years, even though it may not be a year in duration.

Question 10

A licensee anxious to make a sale violates his duties toward his principal if he volunteers which of the following pieces of information to a prospective buyer?

Answer 10

You should make an offer for less than the listing price because the owner is anxious to sell.”One of the duties of a licensee who is an agent for the principal is confidentiality. The licensee should not divulge personal information about the owner. Only material facts should be disclosed.

Question 11

An owner obtains a new mortgage on her house because the house has appreciated in value, and she wants money for an investment. The new mortgage rate is 1% lower than the old rate. What is this process called?

Answer 11

refinancing. Refinancing is the process of obtaining a new loan to pay off an old loan. If property has appreciated in value, this is frequently done to free up money for investment purposes.

Question 12

An enforceable purchase agreement is formed when:

Answer 12

the buyer knows of the seller’s written acceptance of the offer. The two components of a valid contract are offer and acceptance. Upon written acceptance by the offeree of all terms in an offer, a valid contract is created. Enforceable means that the parties may be forced to comply with the contract’s terms and conditions.

Question 13

Which of the following is generally income tax-deductible in-home ownership?

Answer 13

points paid to obtain the loan. Points paid by the buyer for a loan is income-tax deductible

Question 14

Which of the following is true concerning eminent domain?

Answer 14

The property is taken through the process of condemnation. Eminent domain is the power or right the government has to take private land for a public use or a use determined by a court to be in the public’s best interest. To do this, the land must first be condemned and appraised. Just compensation must be paid to the property owner. A property owner has the right to appeal the amount of the compensation but is bound by the decision of the court.

Question 15

When a borrower defaults on a mortgage, an acceleration clause allows the lender the option of

Answer 15

demanding immediate payment of the entire loan balance. An acceleration clause is a provision in a mortgage or trust deed that, upon the occurrence of a specified event, gives the lender the right to call the entire debt due and payable in advance of the fixed payment date. The event might be default on the installment payments, destruction of the premises, or sale of the property. This is stated in the original mortgage document and agreed to by the parties.

Question 16

A property has a fair market value of $95,000 and is assessed at 50% of value. The tax rate is $55.00 per $1,000 of assessed value. What is the real estate tax for this property?

Answer 16

$2,612.50. $95,000 × 0.50 = $47,500 assessed value
$47,500 ÷ 1,000 = 47.5 units (how many thousands in $47,500)
$55.0 × 47.5 = $2,612.50

Question 17

Which of the following is true about prepayment penalties on VA or FHA loans for single-family dwellings?

Answer 17

Neither the VA nor the FHA allows prepayment penalties. A prepayment penalty is a charge for paying a loan off before it matures. By paying it off ahead of schedule the lender may not make the amount of interest planned on at the time the loan was initiated. By law, neither the FHA nor VA loans can contain prepayment penalties.

Question 18

When managing property, which of the following actions is legal?

Answer 18

obtaining information from prospective tenants to determine if they are financially able to afford the rent. Qualifying prospective tenants financially is legal and an extremely important requirement in leasing real estate

Question 19

The owner of a lot is interested in selling. The lot is 99’ x 110’. If similar property sells for $36,000 per acre, what is the most likely selling price for this property?

Answer 19

$9,000. There are 43,560 sq. ft. in an acre. 99 × 110 = 10,890 sq. ft. 10,890 ÷ 43,560 = 0.25 or ¼ of an acre. The cost of an acre is $36,000; therefore, ¼ of an acre would be $9,000: $36,000 × 0.25 = $9,000.

Question 20

A licensee is representing prospective buyers. The licensee orally informed the buyers that the developer would be paving the streets in front of a house in a rural subdivision. The licensee had not verified this but assumed that it was true because the developer had done the paving in similar subdivisions. The buyers relied on the licensee’s statement in deciding to buy the house. If no contract exists spelling out paving responsibilities, who can be held accountable for damages?

Answer 20

the licensee because his unverified statement was misrepresentation. The licensee presented information as being factual but did not verify it. If it is incorrect and the buyers are damaged due to their reliance on that information, whether it is oral or in writing, the licensee can be held responsible for misrepresentation.

Question 21

Which of the following is a characteristic of a limited partner’s role in a limited partnership?

Answer 21

reduced personal liability and no management decision-making. Unlike a general partnership, limited partners are passive investors, share in profits, and have no say in the organization and direction of the operation. Each limited partner may lose only as much as he or she invests.

Question 22

For a real estate sales contract to be valid, it must

Answer 22

consideration. Consideration is an essential element for any contract. For a real estate contract to be valid, it must contain some form of consideration.

Question 23

A home equity line of credit is

Answer 23

a secured loan. A home equity line of credit is a mortgage loan that allows the borrower to obtain advances up to an amount that represents a specific percentage of the borrower’s equity in a property.

Question 24

Which of the following factors tends to increase the price of residential real estate in a given area?

Answer 24

a large manufacturing plant opening in the city. The price of residential property generally increases when there are more buyers, and, therefore, more demand for houses. If a large plant opens in a city, the employment opportunities increase and more employees would be buying houses, increasing demand.

Question 25

A buyer made an offer on a property and the seller accepted the offer. A week later, the seller asked the licensee to amend the contract’s provision for closing from 60 days to 90 days. The licensee completed the amendment, and all parties initialed the change. The buyer now asks if the seller would agree to split the cost of any needed repairs found during the home inspection. Which of the following should be prepared to include this provision?

Answer 25

an addendum. An addendum is an additional provision added to an existing contract without altering the content of the original. It is a new contract that references the original contract and should be dated, signed or initialed by all parties. The original sales contract should refer to the addendum as part of the agreement between the parties.

Question 26

Four people bought an investment property together, each having an equal ownership interest. They took title in such a manner that if one died, he could leave his one-fourth interest to his heirs. How did they take title to the real estate

Answer 26

tenants in common. In tenants in common ownership, the ownership interests do not have to be equal, but they can be. Each owner can sell or bequeath his or her property without the consent of the other co-tenants.

Question 27

A couple’s yearly income is $87,400. The couple’s bank currently allows residential loans for an amount equal to twice the annual income. Disregarding minimum percentage down payment requirements, what is the minimum cash down payment that the couple will need to have on a

Answer 27

$35,200.The couple would need to make up any difference between the loan amount and the purchase price of the property in the form of a down payment. Since their joint incomes equal $87,400, the bank will loan twice that amount or $174,800. The purchase price of the property is $210,000, minus the loan amount of $174,800, equals a required down payment in the amount of $35,200

Question 28

A seller agreed to list an older house for sale on an “as is” basis. He told the licensee that the roof leaked occasionally and that the plumbing and electrical systems were old and outdated. After signing the listing agreement, the seller had the house inspected for termites and rot damage. Both termite and rot damage were present, and the seller notified the licensee. If neither the seller nor the licensee told the buyer about the damage and the buyer personally inspected the property before closing, would the buyer be able to sue at a later date when the termite damage is found?

Answer 28

Yes, because the licensee did not alert the buyer once he discovered the damage. Even though the licensee is an agent of the seller, he is required by law to disclose any latent defect of which he has knowledge.

Question 29

A property sells for $85,000. The existing mortgage balance is $17,000 and the seller’s closing costs are $1,600. What will the seller net if the brokerage fee is 6.5%?

Answer 29

$60,875. The real estate commission is based on the actual sale price. $85,000 × 0.065 = $5,525 commission. Subtract all expenses, including the commission, from the sale price: $85,000 - $17,000 - $1,600 - $5,525 = $60,875 seller’s net.

Question 30

The closing date is approaching on the sale of a property to a buyer who is represented by a licensee. Although the sellers have both signed the sales contract, the licensee learns that a relative of the sellers may have a title claim to this property. In this situation, the licensee should

Answer 30

ask the listing licensee to advise the seller to contact an attorney to seek a quitclaim deed from the relative. The licensee should ask the seller’s agent to advise the seller to seek a quitclaim deed from the relative who may have a possible interest in the property. The existence of the relative cannot be ignored because the relative may have a legal interest in the property that he or she decides to assert at a later date. The closing of the transaction can occur as soon as the quitclaim deed has been obtained.

Question 31

The primary purpose of the Real Estate Settlement Procedures Act (RESPA) is to

Answer 31

inform the buyers and sellers of all settlement costs in real estate transactions. The primary purpose of the Real Estate Settlement Procedures Act (RESPA) is to inform the buyers and sellers of all settlement costs in a real estate transaction. It applies to any purchase of a one to four-family residence financed by a federally related mortgage loan. This would include loans made by savings and loan associations or other lenders whose deposits are insured by federal agencies, as well as insured or guaranteed loans through the VA or FHA

Question 32

A person bought three lots for $22,000 net each and divided them into four lots of equal frontage. The lots were then sold for $18,000 each. What was the approximate percentage of gross profit?

Answer 32

9%The initial investment was $66,000 (3 lots at $22,000 each). The developer divided them into four lots and sold them for $18,000 each. $18,000 × 4 = $72,000 in sales; $72,000 - $66,000 = $6,000 (dollar amount of profit). The percentage of profit is always based on the original investment. The dollar amount of profit divided by the original investment will equal the percentage of profit (Part ÷ whole = rate): $6,000 ÷ $66,000 = 0.09 (9% profit).

Question 33

Under which of the following circumstances may a seller keep the earnest money deposit of a defaulting buyer?

Answer 33

if the seller wants to declare the sales contract forfeited, and there is a forfeiture clause in the contract. If the buyer defaults on the terms of a real estate contract and there is a forfeiture clause in the contract, the seller would be able to retain the earnest money deposit. A typical forfeiture clause in a contract would be, “If the buyer does not perform on the terms of this contract within the stated time period, the buyer will forfeit all moneys paid as earnest money to the seller.”

Question 34

A deed restriction in a subdivision created a community playground that used a few square feet from the rear of every owner’s lot. An owner has begun making plans to convert the rear half of his lot to a garden. The plans would require the removal of park equipment. A neighbor objects to these plans. The neighbor should :

Answer 34

apply for a court injunction against the owner’s plans. Deed restrictions are enforced through a court. If a neighbor sees a violation of a deed restriction occurring, or about to occur, the neighbor could apply for a court injunction against the owner’s plans. This is usually done by the homeowners’ association (HOA), but an individual property owner has the right to do so as well. The playground is not community property. The property belongs to the individual owners, but the deed restrictions have created the playground and are enforceable.

Question 35

An appraisal prepared using the amount of rent generated by the property is an example of which of the following approaches to value?

Answer 35

Income. The income approach to value is determined by the amount of net income the property will produce over its remaining economic life. The following four steps are used:

1. Estimate the potential annual gross income.
2. Determine the effective gross income by deducting an allowance for vacancy and collection loss.
3. Determine the annual net operating income by deducting the annual expenses.
4. Apply the appropriate capitalization rate to the annual net income.

Question 36

A licensee with firm A had a listing from a seller with a commission rate of 8%. The licensee in firm A listed it in a listing service, offering a 4% commission to the selling company. Licensee B, with a different company, cooperated through firm A and sold the listing for $150,000. At closing how much will the seller owe firm A?

Answer 36

√$12,000. The seller will owe firm A the entire commission amount agreed to in the listing contract: $150,000 × 0.08 = $12,000. The firm will then split the amount with licensee B’s firm as agreed to in the offer of cooperation.

Question 37

Which of the following best describes steering?

Answer 37

A licensee shows prospects of a particular race properties only in areas populated by families of the same race. Steering is the directing of prospective buyers toward or away from particular areas to avoid changing the neighborhood.

Question 38

When using the sales comparison approach, a licensee determines that a comparable property’s tile floor in the entry hall is worth $2,000. The subject property does not have tile floors at all. Which of the following adjustments should be made?

Answer 38

The comparable should be adjusted downward. In the sales comparison (market data) approach to appraisal, it is always the comparable that are adjusted, never the subject property. If the comparable is better than the subject property, the adjustment to it is downward. If the comparable is not as good as the subject property, the adjustment to it would be upward.

Question 39

An owner has accepted an offer. Another buyer approaches the licensee with an offer on the same property. The licensee should tell this second offeror that

Answer 39

this offer can be presented as a back-up offer only. Once an owner has accepted an offer, the owner has entered into a legal and binding contract. If a second offer comes in, the licensee should tell the second buyer that the offer can be presented only as a back-up offer, which means that if the first contract is terminated for any reason, the second offer could be accepted by the seller.

Question 40

A real estate licensee was hired by a property management company to lease and manage commercial properties. Each commercial lease was different based on the negotiations of the parties. Which of the following should the licensee do in this circumstance?

Answer 40

Seek legal counsel to write or review the leases. A lease is a legal and binding contract. Although preprinted lease agreements are often used in residential leases, commercial leases are more complex. Drafting a commercial lease may constitute the practice of law, and a real estate licensee cannot practice law unless also a licensed attorney

Question 41

On February 1, a licensee with ABC Realty takes a 3-month exclusive right-to-sell listing on a house. On March 1, the licensee moves out of state and inactivates his license. What happens to this listing?

Answer 41

It remains a valid exclusive right-to-sell listing contract with ABC Realty. The listing belongs to the brokerage firm; it does not belong to an individual licensee. The licensee takes the listing on behalf of the firm, and, if the licensee leaves or becomes unlicensed during the listing, the listing would remain in whatever form it was originally taken. The listing would still be in effect with the firm until it expires or is terminated.

Question 42

A person bought property from a seller and received a general warranty deed. Two years later, the seller’s brother came forth and claimed he had an ownership interest in the property. The brother stated he knew the court would uphold his interest. In a general warranty deed, the buyer is protected from this situation by the covenant

Answer 42

of seisin. Although all covenants in a general warranty deed work together to protect the buyer, the covenant of seisin specifically guarantees that the owner owned the real estate at the time of the sale and had the right to convey it.

Question 43

What do special, general, and universal types of agency have in common?

Answer 43

They originate with the principal. Agency is created when the principal delegates to his agent the right to act on his or her behalf in business. Special agency occurs when the principal authorizes an agent to perform a particular act without consideration of continuity of services. General agency occurs when the principal authorizes an agent to perform duties associated with the continued operation of a business, as in property management. A universal agent is also a general agent, one who acts on behalf of another.

Question 44

Which of the following could be deducted as expenses from annual income taxes on an investment property?

Answer 44

painting a structure. Repairs and recurring expenditures such as repairing a leaking roof or painting a structure are tax deductible expenses.

Question 45

A buyer has been pre-approved for a loan up to $300,000. The buyer plans to make a down payment of 20% on a property. The buyer will most likely apply for which of the following types of mortgage loans?

Answer 45

Conventional. Conventional loans are viewed as the most secure because their loan-to-value ratios are often the lowest. Traditionally, the borrower will make a down payment of at least 20%. Usually, with a 20% down payment, no additional insurance or guarantee is necessary.

Question 46

A listing licensee has which of the following obligations to a buyer?

Answer 46

Honesty. A licensee’s duties to a buyer or customer are fairness, honesty, and accuracy.

Question 47

A builder is obtaining a construction loan of $95,000 for a single-family residence. Under the Truth-in-Lending Act, disclosure of a prepayment penalty by the lender is

Answer 47

not required for a business loan. The Truth-in-Lending Act is applicable to individual home owners, but it does not apply to a construction loan for a builder because the loan is for a business purpose.

Question 48

Which of the following is a unilateral contract?

Answer 48

an option. A unilateral contract is one in which one party makes an obligation to perform without receiving in return any express promise of performance from the other party. An option is a unilateral contract because the seller agrees to sell for a certain period of time at set terms, provided the buyer performs by paying the specified option price.

Question 49

Which of the following is a purpose of a staked survey?

Answer 49

locating property boundaries
A staked survey is a method of identifying boundaries of a parcel of land by placing stakes in the ground. Although it shows the corners of the property, it does not provide complete dimensions.

Question 50

A licensee was taking an upper bracket listing from a seller. The seller told her that they had lived in the neighborhood a long time, had many friends there, and wanted to be selective about who bought their house. The licensee was to tell them the race and nationality of anyone making an offer. How should the licensee respond to this requirement?

Answer 50

She should refuse to do so and explain that the seller’s instruction could be a violation of federal law. Any discrimination based on race or national origin is a violation of the Civil Rights Act of 1866. There are no exceptions. A licensee representing a seller has an agency duty to follow the seller’s lawful instructions, but this instruction is not lawful.

Question 51

A licensee is typically authorized to do which of the following on behalf of his principal?

Answer 51

Submit all written offers to purchase. As part of agency duties, a licensee must present all offers to his principal (client).

Question 52

A metes and bounds description must contain which of the following?

Answer 52

a point from which the description begins and at which it ends. A metes and bounds description must contain a beginning point and end at the same point, thus enclosing the parcel of land being described. A metes and bounds description must be based on landmarks or monuments.

Question 53

A prospective buyer says he only has $1,000 for earnest money, but he anticipates receiving $4,000 as a gift from his aunt. The licensee accepts the $1,000 and a promissory note for the remaining $4,000 as a deposit. Must the promissory note be tied to the buyer’s mortgage?

Answer 53

No, the note is a personal promise to repay a debt and is a complete contract alone. A promissory note executed by a borrower is a contract complete in itself and need not be tied to a mortgage or a deed of trust. It is the borrower’s personal promise to repay a debt according to agreed-upon terms.

Question 54

A buyer wants a high initial equity investment in a house. Which of the following should the buyer seek as part of the mortgage terms on the house?

Answer 54

Largest down payment. A large down payment gives the buyer a high initial equity investment in a house. An equity investment refers to the amount of monetary interest an owner has in the property over and above any mortgage indebtedness.

Question 55

In the appraisal process, the relationship between basic and non-basic employment patterns as a means of predicting population and income is known as

Answer 55

Economic-base analysis. Economic-base analysis is an appraisal term describing a means of measuring the economic activity of a community that enables it to attract income from outside its borders.

Question 56

Replacing the furnace filters at a rental property on a regular basis is what type of maintenance?

Answer 56

Preventive. Preventive maintenance refers to those things done on a regular basis to prevent problems occurring in the future.

Question 57

During property inspection, there are indications that a methamphetamine laboratory had been in the house. This may constitute

Answer 57

An environmental hazard. According to the EPA, the production of methamphetamines causes fumes that can contaminate a structure’s walls, flooring, built-in appliances, surrounding land, and groundwater. Whether the drug is smoked in a home or made in a home laboratory, methamphetamine production is an environmental hazard that should be disclosed and cleaned up.

Question 58

A minor lease an apartment. Immediately upon reaching the age of majority, the lessee notified the lessor that the lease was being terminated. Which of the following is true in this situation?

Answer 58

The termination is possible because the rescission was made within a reasonable amount of time after the lessee reached the age of majority. Most contracts entered into by a minor are generally voidable at his or her option. However, if a minor does not disaffirm a contract within a reasonable time after attaining majority, the contract becomes fully enforceable against him.