Test Prep

Question 1

*In the scenario provided, the sellers will convey fee simple title to the buyers. Which of the following statements about fee simple ownership is FALSE?

Answer 1

Fee simple is a statutory estate.

Question 2

What is the main difference between a license and an easement?

Answer 2

The issuer of a license can easily revoke the license.

Question 3

A legal description beginning at a point 200 feet due north of an old oak tree at the corner of Main St. and Broad St., then going on to measure distance and direction is most likely a description by:

Answer 3

Metes and bounds

Question 4

*John has waterfront property bordering a navigable lake. He has littoral rights. He has secured permission to construct a pier. What is true?

Answer 4

His property line extends to the edge of the lake.

Question 5

A buyer’s agent shows a property located in a residential neighborhood. At the showing it is noted that the sellers have a home business in operation on the property. Further investigation determines that the sellers have permission to run their business from the homeowner’s association. The buyers would like to continue to operate the same business with only a name change. What should the buyer agent do?

Answer 5

Tell the buyers that they will have to secure permission from the homeowner’s association to operate a business, as the current special use permission belongs to the sellers and is not a feature of the property.

Question 6

*property owner is facing foreclosure due to non-payment of his purchase mortgage. The property in question is also subject to an IRS lien recorded 2 years after the purchase. In addition, the property taxes for last year have not been paid. What will be the order of payment of these liens at the foreclosure sale?

Answer 6

Ad Valorem tax lien, mortgage, IRS lien.

Question 7

*Property has been listed for sale and a buyer has made an offer. The seller disclosed to the buyer that the seller did not have a variance for the back patio, but there have been no problems or complaints from neighbors about it. At closing, the title company and lender accepted the existing survey which did not have the patio on it. After the closing the buyers received notice from the city requiring the removal of the patio. The buyers went to the title company with the notice. They mentioned that the sellers had told them about the patio and that it did not have a variance but stated it should still be covered by their policy. How will the title company most likely handle this claim?

Answer 7

The title company will not be held responsible since this defect was known to the buyer prior to the policy being issued.

Question 8

Title insurance covers losses sustained as a result of defects in the title, other than those exceptions listed in the policy. One common exception is survey or boundary defects. If a buyer wants those exceptions to be covered, what can the buyer do?

Answer 8

The buyer can request extra coverage in the title policy and pay an additional fee

Question 9

*Which of the following statements about foreclosure notice is FALSE?
(a) The notice must be sent by the lender and received by the borrower 21 days before the foreclosure sale.

(b) The notice will be recorded as a Lis Pendens at the county courthouse.

(c) The notice must be posted at the door of the county courthouse.

(d) The notice must be sent by the lender 21 days before the foreclosure sale but there is no requirement that the borrower receive it.

Answer 9

The notice must be sent by the lender and received by the borrower 21 days before the foreclosure sale.

Question 10

*An apartment building has potential annual rents of $80,000. Expenses are $26,000. The current vacancy rate is 6%. The owner has a rate of return of 15%. What is the value of the building?

Answer 10

$328,000
Potential Gross - Vacancy Rate =actual gross (AG), AG-expenses=Net, Net/rate return = Value

80,000- (.06*80,000)=75,200, 75,200-26,000=49,200, 49,200/.15=328,000

Question 11

An appraiser has been hired to determine the value of a residential property. The property has 4 bedrooms and 3 baths. He has found two comparable properties in the neighborhood. The first is a 3 bedroom house with 3 baths. The second is a 4 bedroom house with 3-1/2 baths. The first sold for $347,500. The second sold for $355,500. The appraiser has determined that the extra bedroom is worth $5,000. The half bath is worth $3000. What is the value of the subject property?

Answer 11

$352,500

Question 12

An appraiser has been asked to determine the market value of a single-family home. It is an older cottage style home. All bedrooms are on the second floor. The single bathroom is on the first floor. This property is an example of:

Answer 12

Functional obsolescence

Question 13

*All of the following are true about a CMA and an appraisal EXCEPT:

Answer 13

In a court procedure for partition a CMA would be more useful and appropriate than an appraisal

Appraisal is always more useful for value.

Question 14

*When and by whom is a required form used for appraisal?

Answer 14

Lenders require the use of the Fannie Mae appraisal form if the purpose of the appraisal is to secure residential financing

Question 15

A buyer is interested in purchasing an investment property. He wants an appraisal done to help determine his offering price. The property is on the market for $1,250,000 with all business equipment included. As the buyer’s agent, who would you recommend to value the property?

Answer 15

A licensed appraiser

Question 16

*A new subdivision has been completed and is sold out. A developer has acquired land adjacent to the subdivision and has approval to build an industrial park that will bring a high number of new jobs to the community. What impact will the industrial park have on home values in the new subdivision?

Answer 16

Values will decline due to the principle of conformity

Question 17

Which of the following is NOT an examples of economic obsolescence?

Answer 17

A builder using inferior materials to cut costs

Question 18

The IRS permits 1031 exchanges of investment property. The tax on the profit realized from these exchanges is:

Answer 18

Deferred

Question 19

In the scenario provided, what will Linda earn in commission?

Answer 19

$11,642.47

Question 20

*Which of the following statements regarding the Statute of Frauds is false?

Answer 20

All contracts must be in writing to be enforceable

Question 21

Two brothers inherit their parents’ property. The brothers are 16 years old and 19 years old. The 19 year old does not want the property. He deeds his share to his younger brother. The 16 year old sells the property. In order for the sales contract to be valid and enforceable when the 16 year old sells, who must sign the agreement?

Answer 21

The buyer, and a legally appointed guardian

Question 22

A buyer has found a property he would like to purchase. The buyer agent is preparing an offer to purchase on the sales contract form. Which of the following is not required on this form at this time?

Answer 22

Date of acceptance

Question 23

The sellers have received the buyers’ written offer. After making a few small changes, the sellers signed the offer and sent it back to the buyer. The sellers have:

Answer 23

Sent a rejection of the offer and presentation of a new offer to the buyers

Question 24

A buyer sent a written offer to a seller. The seller sent a written counter-offer to the buyer. The counteroffer expires at 5 pm on Friday. The seller has received another offer from a different buyer. It is Thursday. The seller would like to accept this new offer. What must the seller do?

Answer 24

The seller must withdraw his counter offer and then accept the new offer

Question 25

A seller’s property is for sale by owner. The seller has advertised that he will cooperate with any licensee who brings a written offer at a price and terms acceptable to the seller. What type of listing agreement does this situation most closely resemble?

Answer 25

An open listing

Question 26

A broker has the written permission of both the buyer and seller to be a dual agent in a transaction. The seller has told the broker that if he is unable to sell quickly he will lose the property in foreclosure. What should the broker do?

Answer 26

He should not tell the buyer about the seller’s problem as this is confidential information

Question 27

*In the Scenario provided, what is the agency relationship between Linda Grant’s broker and Mr. and Mrs. Smith?

Answer 27

The broker is a special agent to the Smiths

Question 28

*The residential listing agreement can be described as:

Answer 28

An employment contract

Question 29

*When does a listing agreement terminate?

Answer 29

On the agreement termination date

Question 30

*A broker is helping a buyer and seller to reach an agreement in a real estate transaction. He does not have a representation agreement with either party. His role is best defined as:

Answer 30

A transaction broker

Question 31

A listing broker is acting as a single agent in selling a seller’s property. In this relationship his fiduciary duty to the seller would prohibit him from:

Answer 31

Informing any prospective buyer that the seller will accept less than the list price

Question 32

Mary is a sales licensee sponsored by her broker Jim. She has 3 current unsold listings. Mary has decided to terminate her relationship with Jim and move to a new real estate company. When Mary leaves, what happens to her listings?

Answer 32

Jim retains the listings

Question 33

Which of the following would not be a duty of an agent?

Answer 33

Advising a buyer client on how to take title

Question 34

A broker may refuse to represent a party:

Answer 34

At will, as long as he is not in violation of Fair Housing

Question 35

A broker owner of a property has listed it for sale. Which of the following statements in true in this situation?

Answer 35

He must always disclose his dual role in this situation

Question 36

A property inspection has determined the presence of asbestos on the property. Which of the following statements about asbestos is not true?

Answer 36

A seller is required to remediate the presence of asbestos.

Question 37

*In the scenario provided, Linda was told by the sellers that the square footage of the property was 2800. Linda should:

Answer 37

Use local tax office records to find the square footage per appraisal district

Question 38

Mary lists a seller’s property. The sellers provide a seller’s disclosure, but do not disclose some structural defects in that disclosure. Mary views the property but does not detect any defects. The sellers insist the property is for sale “as is”. Mary holds an open house at the property. A buyer walks through at the open house and loves the property. The buyer makes an offer immediately. The seller is delighted and accepts the offer. The property sells and the closing goes through. After moving in, the buyers experience some problems with the property and a structural inspection detects the defects the seller withheld. The buyer sues the seller for fraud and the court overturns the sale. Does Mary have the right to keep her commission on this sale?

Answer 38

Yes because Mary procured a ready, willing and able buyer at a price and terms acceptable to the seller and Mary was unaware of any fraud or misconduct.

Question 39

A property owner has been forced to leave his property by the city. The city has paid the owner fair market value for the property. This is an example of:

Answer 39

Condemnation

Question 40

Which of the following statements about lead is FALSE?

Answer 40

A seller must remediate the presence of lead

Question 41

*The most undesirable neighborhood property for a prospective buyer would be:

Answer 41

Brownfields

Question 42

*A horse ranch has been listed for sale. The sale includes the 3200 square foot homestead, 3 out buildings, a portable round pen, an underground storage tank (UST) for gasoline, private septic system and well, and a small pecan grove all on 250 acres. As a buyer’s agent, what information should you provide to your buyer about the UST?

Answer 42

You should tell the buyer that a UST could cause groundwater contamination, recommend inspections and tell the buyer he would have to pay for any fuel in the tank at closing

Question 43

*A licensee showing property to a buyer notices a condition that he would consider a “red flag”. What should he do?

Answer 43

He must inquire about the issue and mention it to the seller and any prospective buyers.

Question 44

*In the scenario provided, Linda advertised the property as, “in a friendly neighborhood with young families and children, located in an exemplary school district.” Given your knowledge of the Federal Fair Housing Act, which statement is FALSE?

Answer 44

Linda only used information given to her by the sellers, therefore, she cannot be held accountable for her advertisement

Question 45

In order to advertise your client’s property on social media, you need:

Answer 45

Written permission from the owner.

Question 46

*Which of the following advertisements would violate the Civil Rights Act of 1968 (as amended)?

Answer 46

Apartment for rent - no alcoholics

Question 47

*A sales person in your office has been farming a neighborhood and counseling sellers to sell now. He is mentioning the relocation to this are of a large number of immigrants. He is suggesting that property values may begin to fall. He is practicing:

Answer 47

Blockbusting

Question 48

A broker has leased space in a one-story office building to house his new real estate company. He has modified the interior of the leased space to accommodate the handicapped. There is currently no ramp outside the building for wheelchair access. What is true?

Answer 48

Both the landlord and the tenant can be fined for the failure to install a ramp

Question 49

*A senior apartment complex has more than 80% of the units occupied by someone 55 years old or older. There is a vacant apartment. Can they refuse to lease to a single mother with a child?

Answer 49

Yes

Question 50

*Two brokers are discussing commission rates at a social function. The purpose of their discussion is to try to control the rate in their market. A third broker overhears what the two are discussing. The third broker should:

Answer 50

Walk away

Question 51

*Your buyers want to purchase a property priced at $209,000. They have a 20% down payment and are eligible for a 30-year loan at 6%. The loan factor will be $6.00. The tax and insurance cost is $500 per month. If lenders are qualifying at 28%, what monthly income do your buyers need to be able to purchase this property?

Answer 51

$5,369

Get mortgage payment divide by monthly income percentage cap.
209,000.2=41,800, 209,000-41,800=167,200, int rate 6%/12=.5% or .005
PMT = P * [r(1 + r)^n] / [(1 + r)^n - 1]
167,200[.005(1+.005)^360]/[(1+.005)^3601-1=1003.32, 1003.32+500=1503.32, 1503.32/.28=5,369

Question 52

Four years ago, John purchased a property for $200,000 with an 80% LTV. He has repaid $32000 on the loan and today he sold the property for $229,000. How much equity did John have at closing?

Answer 52

$101,000

200,000*.8=X, X-32000=Y 229,000-Y=Final Answer

Question 53

You are working with some buyers who have some temporary problems with their credit score. The problems should be cleared up in six months time and they will be able to secure financing for a home then. However, they have found the home they want now. What kind of agreement could they enter into with the seller to protect their interest in this property and allow them to take possession now?

Answer 53

Lease with an option to purchase

Question 54

*What is another name for Contract for Deed?

Answer 54

Installment contract

Question 55

*John wants to buy Mark’s property. He plans to assume the existing loan balance. The title company notifies John that there is a clause in the loan prohibiting the assumption, however, the lender has agreed to permit the assumption at an increased interest rate. What clause did the lender use to overcome the alienation clause?

Answer 55

Escalation clause

Question 56

*What is the difference between PMI and MIP?

Answer 56

PMI insures a portion of the lender’s risk and MIP insures the whole loan amount

Question 57

Buyers have secured home financing at 3.5% for 30 years. At closing the buyers are told that the 3.5% rate is no longer available to them and that they will have to pay 5.5%. The buyers are being pressured to accept this change in terms and proceed with the closing. This example of predatory lending practices violates:

Answer 57

Regulation Z

Question 58

A young couple with a high credit score and an excellent credit history have applied for a loan to purchase a home. The property is adjacent to a park with some known environmental problems. The lender is refusing to lend in this neighborhood. The lender is:

Answer 58

Justified in refusing to extend financing secured by this property

Question 59

*John, a builder, has secured a construction loan to build a single family home on a lot that he owns. Which of the following best describes this loan?

Answer 59

A straight loan

Question 60

A new broker licensee secured a three-year lease in a prime location to operate his brokerage business. His company has been doing very well for six months in this location. Two months ago, he was notified that his landlord had died and the family had inherited the property. The heirs have now sold the property and the new owner has delivered a notice to vacate to the tenants. The broker does not want to move his business at this time. What is true?

Answer 60

The broker does not have to leave because his lease survives both the death of the landlord and the sale of the property

Question 61

If the parties to a lease agree to cancel, this is called:

Answer 61

Mutual rescission

Question 62

A newly licensed sales person, with no additional education in finance or economics, should not agree to represent a client who wishes to purchase:

Answer 62

A commercial investment property

Question 63

*An additional and primary concern for the property manager of industrial property would be:

Answer 63

The environment and environmental hazards

Question 64

*What can the Uniform Electronic Transactions Act guarantee in a court of law?

Answer 64

Electronic signatures are the legal equivalent to paper writings and manual signatures if all parties to the transaction have agreed to this

Question 65

A broker has been hired to manage an office building. The first step of the property manager is to:

Answer 65

Sign the management agreement

Question 66

A property manager has signed a management agreement. His commission is set at 8% of monthly rents. Potential gross rents for the property total $15400. Last month there were two vacancies resulting in a loss of $1850 in rent. Monthly expenses for the property were $4750. What did the property manager earn last month?

Answer 66

$1,084.00

Total Monthly Income = Potential Gross Rents - Vacancy Loss, TMI .08
15,400 - $1,850=$13,550, 13550.08=$1084

Question 67

Bob is working under a sponsoring broker as an independent contract. IRS guidelines for independent contractor status state:

Answer 67

Independent contractor status must be established by written agreement between the parties.

Question 68

Constructive eviction is a result of:

Answer 68

actions of the landlord

Question 69

*A developer has 30 acres of land. Three fourths of it can be sold as residential lots. His total asking sales price for these lots is $960,000. What price per square foot is he asking?

Answer 69

$0.98

43,560 sq.ft. in an acre. 30.75=22.5 acres, 22.543560=978,300
total asking sales price/land for sale (in sq.ft). 960,000/978300=.982

Question 70

A new licensee has entered into a sponsorship agreement with a broker. He will be earning income on a pure commission basis. His sponsoring broker in this situation will most likely pay for:

Answer 70

office space rent

Question 71

*Why is commingling illegal?

Answer 71

to protect clients funds from claims by creditors of the broker.

Question 72

A business organization in which a member or manager is not generally held liable for debts, obligations or liabilities of the company is called:

Answer 72

an LLC

Question 73

Which of the following is NOT required for Independent contractor status?

Answer 73

the broker must pay taxes for the salesperson.

Question 74

A licensee has procured a new listing and has determined that the neighborhood consists mostly of Russian speaking residents. He has decided to advertise the property on two Russian websites. He is not advertising the property anywhere else. This is a violation of:

Answer 74

Fair Housing

Question 75

*A licensee sponsored by a broker is:

Answer 75

a general agent for the broker.

Question 76

*A broker has placed his own funds with client funds in his trust account. He has then used those funds to pay his office rent. The broker is guilty of:

Answer 76

conversion

Question 77

A buyer has had inspections on property and is not please with some of the information. He has terminated his contract to buy. His right to do so suggests that his contract had:

Answer 77

a due diligence clause

Question 78

Two buyers have told their agent that they are purchasing a a house together. One buyer is paying 60% of the price and the other is paying 40 % of the price. They want to know how to take title to the property. The agent should tell them:

Answer 78

they should talk to an attorney

Question 79

A buyer’s agent is working with a couple who have decided on a particular property. They are concerned about the boundaries as it appears the fence from a neighboring property encroaches. The buyer’s agent should:

Answer 79

recommend that the buyers get a survey.

Question 80

A listing agent will always:

Answer 80

treat both parties with honesty and fairness.