REAL ESTATE EXAM 2022 PASS PT 2 Flashcards
A seller wants to allow a buyer to assume the existing mortgage. The sellers want to be sure that they will not be liable for the mortgage after it is assumed. Which of the following will best meet the seller’s needs?
Novation. Novation is substituting one party’s obligations for that of the other party. In assumptions, the novation clause would release the seller from liability on the loan and make the buyer liable.
Which of the following types of information should a licensee disclose to a seller at the time of listing?
Current Market Conditions. Only the current market conditions are relevant to the determination of the listing price of the property. In a seller agency relationship, the broker or his/her licensee, not the seller, would negotiate with buyers, and asbestos in a neighbor’s home does not affect the listing. Disclosing the racial composition of the neighborhood may violate fair housing laws.
To allow for more intensive use of subdivision land, a zoning variation is required to permit which of the following?
an increase in the number of building sites per acre. An increase in the number of building sites per acre allows more buildings to be built, which intensifies the use of subdivision land
A licensee was completing a listing with a seller as the seller’s agent. When they were walking through the property together, the licensee noticed that new paneling had been installed in the basement. When asked, the seller told the licensee that there had been a leak in the basement wall, but the crack had been patched and the paneling installed. Therefore, the seller said it need not be discussed with a buyer. In this case, which of the following is most appropriate?
Tell the buyer the basement had leaked and there had been some repair work done, but the buyer is entitled to an inspection of the basement. The licensee is acting as an agent of the seller and owes him agency duties. However, he must disclose to the buyer any material defects in the property of which he has knowledge. The licensee should not represent that the problem has been successfully repaired because he does not know this for a fact.
To qualify as a tax-deferred exchange, a property must be
held for productive use in trade or business. To defer the gain on the sale of an income-producing property, a tax-deferred exchange may be used.
A buyer wants to buy a larger house and open a beauty salon in her home. She tells the listing licensee her plans and looks at property with that licensee. They find a property she likes, and she makes an offer that is accepted. After closing and moving into the property, she finds out there are deed restrictions in the subdivision that prohibit a business operating out of one’s home. Which of the following is true?
Since the licensee knew of the buyer’s intended use, the licensee should have ascertained whether or not the property could be used for that purpose. Even though the licensee is legally representing the seller, the licensee still has an obligation to the buyer to be fair and honest and must exercise care and diligence in performing acts for that buyer. In this case, the licensee knew of the buyer’s intended use of the property, and had an obligation to either ascertain that information, or inform the buyer that she should do so herself, or through another licensee.
An unencumbered residence was sold. The closing expenses amounted to $526.40 plus a commission of 7%. The seller received a closing check in the amount of $37,231.60. What was the selling price?
$40,600.The seller netted $37,231.60. To arrive at the selling price, add the expenses to the net: $37,231.60 + $526.40 = $37,758. This amount equals 93% of the selling price since the seller paid the broker a 7% commission. 100% - 7% = 93%. To arrive at the sale price, divide the net plus expenses by 93%. $37,758 ÷ .93 = $40,600.
A listing licensee has an exclusive right to represent a new subdivision. She shows properties in the subdivision to prospective buyers who are not working with other licensees. She prepares the offers for those who decide to buy. Which of the following statements best describes this situation?
The buyers are not represented by a licensee. The licensee is representing the developer of the subdivision, and the buyers are not represented. Even though the licensee is not representing them, the licensee still owes the buyers due care and honesty in those tasks that she performs for them. The licensee owes obedience only to her client, the developer of the subdivision.
A licensee was showing a buyer an older home built in 1976. The buyer was concerned about the possibility of lead-based paint having been used on the house. The licensee should tell the buyer
that the Residential Lead-Based Paint Reduction Act requires disclosure by the seller on houses built before 1978, and the buyer could require an inspection. The Residential Lead-Based Paint Reduction Act does require seller disclosure on any lead-based paint of which he is aware if the house was built before 1978. However, the seller may not know; therefore, it is a good idea for the licensee to advise the buyer of his right to require an inspection.
A person wants to lease a small building to use as a coffee shop. The tenant and the landlord agree upon a lease where the tenant will pay all utilities and taxes, in addition to rent. The landlord will pay the insurance. This type of lease is best known as a :
net lease. In a net lease, the tenant pays some or all of the operating expenses, such as utilities and taxes.
- The real estate market in a property owner’s area is deflated. During a listing period of 6 months, the owner lowered the price of her property a total of $20,000 before finally selling. Upset at taking such a loss on the property, the owner tells the licensee that she is going to lower the percent of commission on the property. Does the owner have a legal basis for this action?
No, once a commission rate has been negotiated and agreed upon in the listing contract, it cannot be changed unless both parties agree. Once a commission rate has been agreed upon in a listing contract, it cannot change unless both the client and the licensee agree to the change. Since most commissions are a percentage of the sale price, if the property sells for less than the listed amount, the dollar amount of the commission would also be less.
An owner operated a gas station for 15 years. The city has decided to rezone the area from commercial to residential use. Which of the following is true regarding this situation?
The owner has a non-conforming use and can continue to operate the gas station. The gas station is a non-conforming use, which is a use that existed prior to the change of the zoning ordinance and is grandfathered in
An office building is valued at $800,000 when the annual net income is capitalized at a rate of 20%. If the operating expenses and vacancy and rent loss total 40% of the gross income, what is the approximate gross annual income?
$266,667The income approach to value is calculated as follows:
Annual net income divided by capitalization rate equals value. Therefore, net income ÷ 0.2 - $800,000.
The net income is $800,000 × 0.2 = $160,000.
The net income is 60% (100% - 40%) of the gross income.
The gross income is $160,000 ÷ 0.6 = $266,667.
A buyer’s licensee described the boundaries of a property to a client without disclosing that the boundaries described were not exact. After purchasing the property, the new owner extended a fence within the described boundaries. A neighbor then brought an injunction against the new owner because the fence extended beyond the actual property boundaries. Can the licensee be accountable for misrepresentation?
Yes, because the licensee knew the boundaries cited could be false. The licensee had a responsibility to tell the buyer that the boundaries cited were approximate and, if the buyer wanted exact boundaries, a survey should be requested. Since the licensee did not advise the buyer to request a survey, and the buyer was damaged by relying on the information given him by the licensee, the licensee could be held responsible for misrepresentation.
A farmer continuously plowed and planted an unused field that neighbored his property for the statutory period of time set by state law. He did not have the owner’s permission to do this. After the statutory time period, the farmer put in a claim of ownership. He may become the owner of the land through
Adverse Possession. Adverse possession is acquiring title to real estate owned by someone else. The use must have been continuous for the time period set by state law, and without the owner’s permission.
A church owns a retirement home and restricts the rental of the units to church members regardless of age, sex, race, color, or national origin. Is this policy a violation of federal fair housing laws?
No, because religious organizations may limit occupancy of dwelling units they own to persons of the same religion. Religious organizations are one of the exemptions under the federal Fair Housing Act as long as the organization is restricting its rental of units only to members of its religion and not making any restrictions based on race, sex, color, or national origin.
