State Exam Prep 1

Question 1

The clause in a deed that contains the words “bargains and sells” or similar words is the

Answer 1

granting clause.

Question 2

Which statement concerning a consumer complaint is FALSE?

Answer 2

The person named in a complaint must be a real estate licensee.

Question 3

Freddie Mac is a

Answer 3

secondary market for SAs.

Freddie Mac provides a secondary market for loans originated by savings associations.

Question 4

When associated with real estate finance, the term leverage means

Answer 4

the use of borrowed funds to minimize the necessity for a borrower to use his own money.

Question 5

A buyer has made an earnest money deposit of $10,150 on a house selling for $94,500. A local lender has agreed to lend 85% of the selling price at 4½% interest for 30 years. If the buyer’s closing costs amount to $1,575, how much more cash must the buyer produce at closing?

Answer 5

$5,600

$94,500 × .15 = $14,175 down payment;

$14,175 + $1,575 closing costs = $15,750; $15,750 total buyer costs – $10,150 earnest money = $5,600 cash at closing

Question 6

The essential elements of a deed do NOT include

Answer 6

A) under seal.
B) consideration.
C) delivery.
D) witnessing.

A. under seal

Question 7

A type of contractual agreement having all essential elements of a contract plus a property description and a definite term of tenancy specified creates which type of interest in real property?

Answer 7

Leasehold

Question 8

What type of evidence unless refuted by evidence to the contrary will prove a case?

Answer 8

Prima facie

Question 9

A property owner defaulted on the mortgage. Prior to foreclosure, the owner paid the lender the missed mortgage payments, plus the expenses incurred by the lender as a result of the default. Which mortgage provision allows the borrower to make mortgage payments as specified in the promissory note?

Answer 9

Right to reinstate

(The right to reinstate is the mortgagor’s right to reinstate the original repayment terms in the note after the lender initiated the acceleration clause.)

Question 10

In a valid option contract to purchase real estate, the optionee

A) is limited to a refund of the option consideration if the option is exercised.
B) has no obligation to purchase the property.
C) is the prospective seller of the property.
D) must purchase the property within the option period.

Answer 10

B

Question 11

A commercial property leases for $200,000 per year. Miscellaneous income derived from the property totals $12,000 per year. The property recently sold for $1,395,000. What is the GIM?

Answer 11

$200,000 lease income + $12,000 other income = $212,000 total income;

$1,395,000 ÷ $212,000 = 6.58 or 6.6 GIM

Question 12

A range is numbered to the

Answer 12

east or west of a principal meridian.

Question 13

What number of years has the IRS established as the useful asset life for nonresidential income-producing property for calculating depreciation?

Answer 13

39

Question 14

A grandfather clause in a zoning ordinance probably would allow an owner to

A) convert a three-room structure into two large rooms.
B) enlarge a building that is a nonconforming use.
C) rebuild a structure 60% destroyed by fire that is a nonconforming use.
D) reshingle the roof of a structure that is a nonconforming use.

Answer 14

D

Question 15

If the Fed decides to sell securities through open-market bulk trading, the result will be

Answer 15

a decrease of money in circulation.

Question 16

The effect of positive leverage is to increase the

Answer 16

borrower’s return on equity.

Question 17

After contracting to sell and unless otherwise agreed, the seller is responsible for

Answer 17

existing liens.

Question 18

Special assessments are

Answer 18

used to help pay for some public improvement that benefits the property.

Question 19

A buyer applied for a 30-year, fixed-rate $105,000 mortgage. The lender will grant the loan if the buyer will pay interest at the rate of 4.5% plus three points and a 1% loan origination fee. What are the total loan charges if the buyer decides to take the loan offer?

Answer 19

$105,000 mortgage × .03 points = $3,150 cost of points;

$105,000 mortgage × .01 = $1,050 loan origination fee;

$3,150 + $1,050 = $4,200 total loan charges

Question 20

A broker of a large office hired a certified public accountant (CPA) and a full-time bookkeeper to manage the escrow account. Which statement is TRUE regarding this situation?

A) The broker is required to personally prepare the monthly escrow account reconciliation statement.
B) The broker is relieved of liability in the event there is an escrow violation because a certified CPA has been hired to manage the escrow account.
C) Both the CPA and the bookkeeper must also hold a real estate license if they are going to write checks on the escrow account.
D) The broker must be a signatory on the escrow account.

Answer 20

A. The broker must be a signatory on the escrow account.

Question 21

A sales associate has helped a buyer locate a home for which the buyer has made an offer to purchase. The buyer gives the sales associate an earnest money check of $2,500 payable to a title company. Which applies?

Answer 21

The sales associate must indicate the name, address, and telephone number of the title company on the purchase and sale agreement.

Question 22

A subdivision plat map

Answer 22

indicates the size and location of individual lots, streets, and utilities.

Question 23

Buyer and seller are discussing the type of deed that is to be conveyed. The buyers are requiring a guarantee that the seller owns the property and has a legal right to sell. This guarantee is part of which clause in the deed?

Answer 23

Seisin

Question 24

A first mortgage holder can agree to take a lower lien priority using which instrument?

Answer 24

Subordination agreement

Question 25

A broker wishes to be issued several broker licenses for business reasons. She may

Answer 25

request multiple licenses.

Question 26

Which violation is a third-degree felony?

A) False and misleading advertising
B) Reproduction or theft of a real estate license exam
C) Failure to account for and deliver escrow funds
D) Provide inaccurate and out-of-date rental information for compensation

Answer 26

B) Reproduction or theft of a real estate license exam

(Falsifying a license application and unlicensed practice of real estate are third-degree felonies. Theft or reproduction of a license exam are third-degree felonies.)

Question 27

Which characteristic might be classified as functional obsolescence?

A) Neighborhood is 60 years old.
B) Property fronts on a busy expressway.
C) Exterior needs repainting.
D) Property has a one-car garage.

Answer 27

D) Property has a one-car garage.

Question 28

Fannie Mae does NOT

A) buy FHA and VA loans.
B) sell mortgages to institutions.
C) purchase conventional loans.
D) originate federal loans.

Answer 28

D) originate federal loans.