TREC License Exam - National Flashcards
How many square feet are in an acre
43,560 square foot/acre
How many feet are in a mile?
5,280 feet/mile
A buyer who owns the property in equity has which type of contract?
a) Lease
b) Executory
c) Liquidated damages
d) Option
b) executory
During any point in the executory contract (time period between signed offer to title transfer), the buyer has equitable title (also called the owner in equity). An executory purchase contract can be liquidated damages or specific performance. In an option contract, only one party is bound and there is no equity of title.
A metes-and-bounds legal description
a) uses descriptions moving in a set direction
b) is not acceptable in court in most jurisdictions
c) can be made only in areas excluded from the rectangular survey system
d) is used to complete areas omitted from recorded subdivision plats
a) uses descriptions moving in a set direction
The answer is uses descriptions moving in a set direction. A metes-and-bounds description starts at a point of beginning (POB) and moves clockwise around the boundaries, always ending back at the POB so the described tract is completely enclosed. The metes and bounds, government survey, and lot and block are all accepted in courts. The method may be used in areas included in the rectangular survey system. The metes-and-bounds method is often used to survey large parcels of land before the parcels and broken into subdivision plats.
To secure a $100,000 loan, the buyer paid $3,000 in discount points, and the seller paid $2,000 in discount points. How many points were charged?
a) 4
b) 3
c) 2
d) 5
d) 5
Knowing each point is 1% of the loan amounts and with a total of $5,000 being paid, it is easy to see 5 points.
A sales associate for XYZ Realty listed and sold a $175,000 home. The seller paid a 6% commission, of which the sales associate received 2% for listing the property and 1.5% for selling the property. How much was the brokerage’s share of the commission?
a) $6,125
b) $ 5,250
c) $4,375
d) $ 10,500
c) $4,375
Total commission = $175,000 x 6% (0.06) = $10,500.
Sales associate’s share = 3.5% (2% + 1.5%)
$175,000 x 3.5% (.035) = $6,125.
$10,500 - $6,125 = $4,375 for the brokerage.
Or 6% - 3.5% = 2.5% for the brokerage times the sales price.
A broker discovers the previous owner of a home she has listed died of AIDS. The broker
a) must disclose the fact to prospective buyers
b) should consult an attorney to determine if the fact creates a stigmatized property
c) may disclose the fact if asked by a prospective buyer
d) may not disclose that the previous owner died of AIDS
d) may not disclose that the previous owner died of AIDS
A disclosure that a property owner or occupant died of AIDS is illegal discrimination against the handicapped under the federal Fair Housing Act
A bilateral contract
a) consideration is not an essential element
b) a restriction is placed in the contract
c) only one of the parties is bound to the contract
d) both parties to the contract have duties to be performed
d) both parties to the contract have duties to be performed
In a bilateral contract, both parties are obligated to perform what they have promised to do. Only one party is bound in a unilateral contract. Consideration is an essential element of all contracts.
A broker touring a house before taking a listing notices the floor is sagging in the living room. The seller has placed a large rug over the floor. What should the broker do in this situation?
a) Ask the seller about the sagging floor to discover if there is a structural problem with the house
b) Tell the seller that the buyer is responsible for discovering any defects in the home
c) Take the listing and rely on the seller disclosing any defect on the property disclosure form
d) Rely on the buyer’s property inspection to discover any defect
a) Ask the seller about the sagging floor to discover if there is a structural problem with the house
The broker is responsible for disclosing any material fact about the home to a buyer or a buyer’s agent. It is the broker’s duty to discover any material facts that may affect the property’s value.
A salesperson sells a $150,000 home listed with another brokerage. The listing commission is 6.5% of the selling price, with 35% going to the listing broker and 60% belonging to the cooperating broker. The salesperson and his broker agreed that she would receive 55% of any commission that she generated for the brokerage firm. For this transaction, the salesperson is entitled to receive
a) $3,217.50
b) $2,632.50
c) $3,412.50
d) $5,850
a) $3,217.50
$150,000 (sales price) x 6.5% (0.065) = $9,750 (listing commission)
$9,750 x 60% (0.60) = $5,850 (cooperating broker’s commission)
$5,850 x 55% (0.55) = $3,217.50 (the salesperson’s commission)
The provision in a listing contract that gives additional authority to the broker and obligates the broker to distribute the listing to other brokers is
a) an open listing clause
b) a multiple listing clause
c) a net listing clause
d) a joint listing clause
b) a multiple listing clause
Listing agreements usually include clauses that give authority to a broker to distribute the listing to other brokers. A multiple listing service is a marketing organization whose broker members make their own exclusive listings available through other brokers. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states. An open listing clause states that any number of brokers may work simultaneously to sell the property. With the commission going to the broker who secures a buyer able to purchase the property.
A broker is hired as a buyer’s agent. The buyer confides he filed for bankruptcy two years ago. The buyer would like to find a seller who is willing to carry the loan. In this situation, a correct statement about the broker’s responsibility regarding disclosure of the bankruptcy when presenting the offer to purchase is that the broker is
a) not required to disclose the bankruptcy because the broker has no agency relationship with the seller
b) required to disclose the bankruptcy under the Equal Credit Opportunity Act (ECOA)
c) required to disclose the bankruptcy because it is a material fact
d) not required to disclose the bankruptcy because the seller might reject the offer
c) required to disclose the bankruptcy because it is a material fact
A material fact is information important to the seller’s evaluation of the offer. The broker is obligated to disclose any material fact-something that might make a party to the transaction change their mind, regardless of the agency or nonagency relationship the broker has with the seller. The ECOA is a federal law prohibiting discrimination in the granting of credit and does not regulate disclosures required in a real estate transaction
To protect the buyer, many states require
a) a buyer’s independent property inspection
b) a property survey
c) a broker’s certification of property condition
d) a seller’s property condition disclosure
d) a seller’s property condition disclosure
Most states require that the seller truthfully complete a seller’s property condition disclosure statement. Some states use mandated disclosure forms. While states do not require property inspections, buyers should secure their own independent property inspection to ensure they know the actual condition of the property. A property survey determines the exact boundaries of a property but does not note the condition of the property
Many states permit mortgagors to redeem their property after default but before a foreclosure sale. This right is called
a) a mortgagee’s right of redemption
b) a statutory right of redemption
c) an equitable right of redemption
d) an owner’s right of redemption
c) an equitable right of redemption
If a borrower in default pays the lender the amount in default, plus costs, before the foreclosure sale, the debt will be reinstated in some states. This right is known as an equitable right of redemption. Certain states also have a period of time after a foreclosure sale in which the borrower in default may redeem the property if the borrower pays the court; the right to redeem the property within the period is called a statutory right of redemption
In a limited partnership
a) investors may participate with only a small amount of capital but with unlimited liability
b) the number of investors is limited to 10
c) each limited partner is liable but no more than their investment
d) all the partners participate in running the business
c) each limited partner is liable for no more than their investment
In a limited partnership, each limited partner can be held liable for losses only to the extent of their investment. There is no limitation on the number of investors in the partnership. The limited partners are not legally permitted to participate in the running of the business
A farmer bought acreage in a distant county but never went to see the acreage and did not use the land. After the purchase, a woman moved her mobile home onto the land, drilled a well, and lived on the property for 20 years. The woman may become the owner of the land if she has complied with the law regarding
a) prescriptive easements
b) quitclaim deeds
c) adverse possession
d) voluntary alienation
c) adverse possession
The woman may file an action in court to receive title to the property if she has complied with state laws. Her possession must have been open, notorious, continuous and uninterrupted, and hostile and adverse. Adverse possession is a form of involuntary alienation. A quitclaim deed is frequently used to correct an error in a deed or to release an interest in a property. Prescriptive easements, while similar to adverse possession, are used to gain permanent access tot he property, not title.
A purchaser cannot qualify for conventional financing and negotiates a contract for deed with a seller. The buyer in this arrangement
a) has possession and pays the property expenses and taxes
b) has a full legal interest in the property
c) receives a deed to the property at closing
d) must lease the property from the seller for the duration of the contract term
a) has possession and pays the property expenses and taxes
In a contract for deed arrangement, the buyer takes full possession of the property and gets equitable title to the property. The buyer agrees to pay real property taxes, insurance premiums, and for the upkeep of the property. The seller is not obligated to execute and deliver the deed for the property to the buyer until all the terms of the contract have been satisfied.
A school leased a small commercial shopping strip. When classes started, the other tenants started complaining to the landlord that the students of the school were taking up the majority of the parking spaces, and their customers had no place to park. The lease required that the students park in spaces away from the other businesses. The school asked the students to park in the assigned spaces, but most continued to park where it was convenient. The landlord evicted the school. Is this action legal?
a) No, because the school asked the students to park in the assigned spaces, they cannot be evicted
b) No, the landlord cannot evict the school because parking is available to the public
c) Yes, the landlord can evict the school, and it is called constructive eviction
d) Yes, the landlord can evict the school for breach of the lease terms
d) Yes, the landlord can evict the school for breach of the lease terms
If a tenant fails to fulfill any of the terms of the lease, they are in breach and may be evicted. A constructive eviction would take place if the landlord was at fault and the tenant could not use the property for the purposes defined in the lease.
An FHA-insured mortgage loan is obtained from
a) any FHA-approved lending institution
b) any FHA-approved insuring institution
c) the Federal Housing Administration
d) the Department of Housing and Urban Development (HUD)
a) any FHA-approved lending institution
The FHA operates under HUD. The FHA neither builds homes nor lends money itself. The FHA insures loans. Loans must be obtained from FHA-approved lending institutions.
The term of a loan is
a) the length of time the borrower has to repay the loan
b) the time required to underwrite the loan
c) the time period in which a borrower may cancel a loan contract
d) the years required to pay private mortgage insurance
a) the length of time the borrower has to repay the loan
For residential loans, a borrower generally negotiates with the lender a term of 15-30 years. A longer term to repay the loan results in a lower monthly payment. A shorter term results in a higher monthly payment
A purchaser is qualified to obtain an FHA loan for his new home. Which of the following would he apply to?
a) Fannie Mae
b) the FHA
c) Freddie Mac
d) An FHA lender
d) An FHA lender
The FHA does not negotiate loans. The FHA insures loans, which means the loan is backed by the government. Loans are made through an FHA-approved lending institutions. Fannie Mae does not lend money directly to homebuyers but purchases mortgages in the secondary market. Freddie Mac is a federally chartered corporation that purchases mortgages in the secondary market.
An apartment rule prohibits pets. A prospective tenant with a physical disability relies on a service animal to assist him. Which of the following is true?
a) The landlord can require proof of the tenant’s disability and require a nonrefundable pet deposit
b) The landlord can waive the enforcement of the rule only if there is a suitable unit in the complex for an animal
c) The landlord must allow the animal but can charge an extra pet deposit
d) The landlord may not refuse to rent to a person with a service animal
d) the landlord may not refuse to rent to a person with a service animal
Service animals are not pets and must be allowed as a reasonable accommodation for a disabled person under the Fair Housing Act. The landlord may not charge any pet deposit for the animal.
A couple refinances their home with a new lender under a new loan agreement. They currently have a separate line of credit under their original lender. The original lender granting the line of credit agrees to take a second lien position on the property, granting first position to the new lender. The lenders have made this arrangement through
a) a subordination agreement
b) a due-on-sale clause
c) an acceleration clause
d) a defeasance clause
a) a subordination agreement
The lenders sign a subordination agreement which places the line of credit in a junior position to the new loan created through the refinancing of the property. A defeasance clause requires a lender to execute a satisfaction (release or discharge) of a loan when the borrower fully pays off the loan. A due-on-sale clause provides that when the property is sold, the lender may declare the entire debt due or permit the buyer to assume the loan. The acceleration clause in a mortgage permits the lender to declare the entire debt due and payable immediately if the borrower defaults on payments
The seller’s net after paying a 6% commission was $355,000. The approximate sale price of the property was
a) $376,300
b) $379,850
c) $381,720
d) $377,660
d) $377,660
100% - 6% = 94%
$355,000 / 94% (.94) = $377,659.57
A real estate agent acting a single agent owes either fiduciary or statutory agency duties to any of the following except
a) a seller
b) a landlord
c) a customer
d) a buyer
c) a customer
In single agency, the agent represents only one party in any single transaction. The agent owes fiduciary or statutory agency duties exclusively to one principal, who may be a seller, buyer, landlord, or tenant. The customer is the other party not represented by the agent in the transaction
The CAN-SPAM Act established guidelines for sending
a) solicited facsimile messages
b) unsolicited email messages
c) unsolicited text messages
d) solicited email messages
b) unsolicited email messages
the CAN-SPAM Act established guidelines for unsolicited commercial email messages, including an option for the receiver to opt-out from receiving future emails. The federal Junk Fax Prevention Act of 2005 permits someone to send a fax based on a prior business relationship, with an opt-out process to prevent future unsolicited advertising faxes.
What is the two discount points fee on a $180,000 Veterans Affairs-guaranteed loan?
a) $3,600
b) $900
c) $2,700
d) $1,800
a) $3,600
$180,000 loan x 2% (.02) = $3,600 (discount point fee)
A point is equal to 1% of the total loan amount 1% (.01) x $180,000 x 2 (2 points) = $3,600
Defined as a loss in value from any cause, depreciation is generally divided into three categories. The loss of value due to the normal wear and tear on a property is called
a) external obsolescence
b) functional obsolescence
c) physical deterioration
d) economic obsolescence
c) physical deterioration
Physical deterioration is the loss of value based on the physical wear and tear on the property. It can be either curable or incurable deterioration. External and economic obsolescence are a reduction in a property’s value caused by factors of the property itself. Function obsolescence is a loss in value due to such factors as outmoded or unacceptable features of the property itself
a deed must be signed by
a) the grantor and grantee
b) the grantor
c) the grantee
d) the grantee and two witnesses
b) the grantor
A deed must be signed by all grantors named in the deed. The grantee must be named but does not sign the deed. Some states may require witnesses to sign a deed in order for it to be recorded, but the grantee does not sign
A common feature of an adjustable-rate mortgage (ARM) is
a) negative amortization if rates decrease
b) automatic conversion to a fixed-rate loan
c) a cap on the amount the rate may increase
d) that the interest rate is fixed for a maximum of five years
c) a cap on the amount the rate may increase
Rate caps limit the amount the interest rate may change. Most ARMs have two types of rate caps: Periodic and for the life of the loan. An ARM does not include an automatic conversion to a fixed-rate loan. A borrower who wants to convert to a fixed-rate loan will usually work with a lender to refinance the loan
A single man with two small children has been told by a real estate salesperson that homes for sale in condominium complex are available only to married couples with no children. Which statement is true?
a) restrictive covenants in a condominium take precedence over the fair housing laws
b) Condominium complexes are exempt from the fair housing laws and can therefore restrict children
c) Because a single-parent family can be disruptive if the parent provides little supervision of the children, the condominium is permitted to discriminate
d) the man may file a complaint alleging discrimination on the basis of familial status
d) the man may file a complain alleging discrimination on the basis of familial status
The salesperson, and by implication, the broker and the property owner/principals have violated the prohibition against familial status discrimination. Anyone in charge of one or more children under age 18 who is denied access because of the children is the victim of discrimination based on familial status. Restrictive covenants do not take precedence over fair housing laws.
Charging more interest than is legally allowed is
a) allowed at a federal level
b) escheat
c) usury
d) a deficiency
c) usury
Usury is charging more interest on a loan than permitted by law. Escheat is the reversion of property to a state or county in cases where a property owner dies intestate with no eligible heirs. A deficiency occurs when the foreclosure sale of a property produces less than the amount to pay for the foreclosure process and the outstanding debt on the property. Usury rates are set at the state, not federal, level.
An owner wants to receive a net of $82,000 after selling her home. She has an existing mortgage of $32,500 and will have selling expenses of $444. If the broker is to receive a 7% commission, what is the lowest offer that she can accept for the property?
a) $123,959.70
b) $123,595.70
c) $122,515.08
d) $122,990.08
b) $123,595.70
$82,000 + $32,500 + $444 = $114,944
100% - 7% = 93%
$114,944 / 93% (0.93) = $123,595.70
A principal broker authorizes one agent in her firm to represent the seller and another to represent the buyer in the same real estate transaction. Each agent is
a) a universal agent
b) a dual agent
c) a designated agent
d) a single agent
c) a designated agent
A designated agent or representative is a person authorized by a real estate brokerage to act as the agent of a specific principal. The designated agent has s fiduciary relationship toward the principal, and the brokerage is a dual agent in the transaction. In single agency, a brokerage represents only the buyer or the seller in a transaction. Universal agency empowers an agent to do anything the principal could do personally.
A lease that will terminate before one year of its inception
a) may be oral
b) must be in writing
c) is invalid
d) violates the provisions of the statutes of frauds
a) may be oral
According to the statute of frauds, in general, oral leases for one year or less are enforceable. Such oral leases are valid. It is always better practice to gave the landlord and tenant sign a written agreement to provide concrete evidence of the terms and conditions of the lease
A guest slips on an icy apartment building stair and is hospitalized. A claim against the building owner for medical expenses may be paid under which of the following policies held by the owner?
a) casualty
b) liability
c) fire and hazard
d) workers compensation
b) liability
Casualty insurance covers losses such as theft, burglary, and vandalism. Workers’ compensation covers injuries to worker on the job. Fire and hazard covers direct loss due to damage
Lot A measured 200’ x 300’ and sold for $30,000 per acre. Lot B, which is located down the street, measures 150’ x 200’. If Lot B sells for the same price per acre as Lot A, which is the price of Lot B?
a) $20,661
b) $51,229
c) $41,322
d) $21,780
a) 20,661
The price of Lot B is $30,000 per acre, the same as Lot A. An acre is 43,560 square feet. Lot B is 150’ x 200’ = 30,000 sq. ft. As 30,000 is less than the 43,540 square feet in an acre, divide 30,000 by 43,540: 30,000 / 43,560 = .6887 acres. The price is $30,000 x .6887 = $20,661
To be an independent contractor, the requirements for the salesperson and principal broker would include all of the following except
a) the salesperson has signed an independent contractor agreement with the principal broker
b) the majority of the salesperson’s income be based on sales production
c) the salesperson has a current real estate license
d) the principal broker withholding taxes from the salesperson’s compensation
d) the principal broker withholding taxes from the salesperson’s compensation
A broker does not withhold federal taxes or Social Security from an independent contractor’s commission. A principal broker is required to make those withholdings for all employees. An independent contractor situation must include the other three requirements to meet the conditions for independent contractor status established by the IRS
Due diligence is best defined as
a) a seller’s obligation to complete a property disclosure
b) the requirement to have an inspection on a property
c) all the acts required of all parties to a transaction
d) using a good-faith effort to carry out the terms of a contract
d) using a good-faith effort to carry out the terms of a contract
Buyers are expected to use due diligence to verify the property will meet their needs, is zoned property, and is in an acceptable condition. The seller is expected to use due diligence to make sure the title being passed is marketable
A buyer negotiated a $75,000 loan at 8% interest for 30 years, with the first payment due in arrears on April 1. If the closing takes place on February 24 with the seller having the day of closing, and using a 360-day year, how much interest must the buyer pay on the day of closing?
a) $56.68
b) $566.78
c) $66.67
d) $656.78
c) $66.67
The buyer will owe interest for the portion of the month she owns the home
Total amount due / total days x days owed
The buyer will own the home for 4 days in February (Feb 28 - 24 = 4)
$75,000 x 8% (.08) = $6,000 interest for the year
$6,000 / 360 x 4 = $66.67
An individual who obtains a real estate loan and signs a note and a mortgage is known as
a) the mortgagee
b) the optionor
c) the mortgagor
d) the optionee
c) the mortgagor
The borrower who receives a loan and in return gives a note and mortgage to the lender is the mortgagor. The lender is called the mortgagee. An optionor is an owner who gives an optionee-a prospective purchaser or leasee-the right to buy or lease the owner’s property at a fixed price within certain period of time
An agent and his spouse, though separated, still own a property. The listing agent brings an offer from his separated spouse to a seller, his client. The agent does not tell the seller that the buyer is his spouse, as she has retained her maiden name throughout the marriage. The agent’s action
a) terminates the agency contract with the seller
b) creates an express agency with the buyer
c) is legal and ethical, as the agent’s relationship to the buyer does not affect the seller
d) violates his duty of disclosing material facts to the seller
d) violates his duty of disclosing material facts to the seller
The agent has a fiduciary duty to keep the seller - his client - informed of all facts that could affect the transaction. The agent’s relationship with eh buyer and interest in the property may affect his ability to properly represent his seller’s interest and his eagerness to have the property sold. The agent does not have an express agency contract with the buyer at this point. He may accidentally create an implied agency by acting in the buyer’s interest. The action does not in itself terminate the contract with the seller
Hidden defects, which are not easily discovered during a property inspection, are called
a) material facts
b) latent defects
c) fraudulent defects
d) observable defects
b) latent defects
A latent defect is a hidden structural defect that is not easily discovered during a property inspection. A material fact is any fact relevant to a person making a decision to buy a property. An observable defect is one that can be seen. Fraudulent defects are those that are concealed or hidden by fraud or misrepresentation.
In a land contract, the buyer
a) is not responsible for the real estate taxes on the property
b) has possession during the term of the contract
c) does not pay interest and principal
d) obtains legal title at closing
b) has possession during the term of the contract
In a land (installment) contract, the buyer has possession of the property during the term of the contract. The buyer holds equitable title, while the seller holds legal title to the property. The buyer pays interest and principals on the loan, and in most cases, real estate taxes on the property during the term of the contract.
Unless some other written agreement has been made, the broker will usually receive his brokerage commission when
a) the transaction is closed
b) an offer, procured from a ready, willing, and able buyer, has been accepted by the seller
c) the seller lists the property with the broker
d) the purchaser takes possession of the property
a) the transaction is closed
Although a commission is usually earned when the buyer has been procured, it is usually payable when the sale is closed unless another arrangement for payment has been agreed to in writing
A legally enforceable contract in which two parties exchange promises to do something for each other is known as
a) an option contract
b) a bilateral contract
c) a void contract
d) a unilateral contract
b) a bilateral contract
A bilateral contract is one in which both parties make a promise to the other. A unilateral contract is a one-sided contract in which one party makes a promise to induce a second party to do something. A void contract lacks one or all of the essential elements of a contract. An option contract is a unilateral contract in which only one party makes a promise to perform - in this case, to hold open the right for a buyer to purchase a property in the future
A homeowner purchased her home for cash 30 years ago. Today she receives monthly checks from a mortgage lender that supplement her retirement income. The homeowner most likely has obtained
a) a shared-appreciation mortgage
b) a reverse mortgage
c) a package mortgage
d) an adjustable-rate mortgage
b) a reverse mortgage
A reverse mortgage allow people 62 and older to borrow money against the equity they have built in their homes. The equity diminishes as the loan amount increases. Reverse mortgages have a fixed rate of interest and are not adjustable. Ina shared-appreciation mortgage, the lender, in exchange for a favorable interest rate, participates in the profits the borrower receives upon selling the property. A package mortgage secures both real and personal property, typically used in a resort purchase where the unit is fully furnished.
The status of a contract that meets all the essential elements and is enforceable is called
a) a void contract
b) a voidable contract
c) an enforceable contract
d) a valid contract
d) a valid contract
When a contract meets all of the essential elements and is enforceable, it is a valid contract. Duress, fraud, misrepresentation, and minors always make contracts voidable. Void or unenforceable real estate contracts lack an essential element and do not exist in the eyes of the court for enforcement.
Which statement is true of a real estate broker acting as the agent of the seller?
a) the broker can agree to a change in price without the seller’s approval
b) the broker has a fiduciary obligation of loyalty to the seller
c) the broker can accept a commission from the buyer without the seller’s approval
d) the broker can disclose confidential information about the seller to a buyer if the buyer is also represented by the broker
b) the broker has a fiduciary obligation of loyalty to the seller
Loyalty to the client-seller requires confidentiality-not revealing confidential information; it involves obedience - not publishing a price different from the one set by the client; and it requires disclosure. Dual agents have duties of confidentiality to both of the parties they represent.
A person approaches an owner and says, “I’d like to buy your house.” The owner says, “Sure,” and they agree on a price and write it down on a piece of note paper and sign it. What kind of contract is this?
a) valid
b) enforceable
c) voidable
d) void
a) valid
Anytime a buyer and seller agree in writing with notice and acceptance, a valid contract is formed. If the offer is missing an essential element, it is void and unenforceable. Duress, fraud, misrepresentation, and minors always make contracts voidable
The purpose of a building code is to
a) make sure buildings are structurally safe
b) enforce zoning ordinances
c) ensure compliance with a deed’s restrictive covenant
d) maintain municipal control over the volume of new construction
a) make sure buildings are structurally safe
Building codes are used to make sure buildings are structurally sound and safe. A restrictive covenant is a restriction established by a private entity, not a public government. Building codes do not affect a deed’s restrictive covenant. Zoning ordinances regulate the types of new construction but are not enforced through building codes
A buyer defaults on a purchase agreement, and the seller goes to court to force the buyer to buy. The seller’s remedy is
a) specific performance
b) money damages
c) partial perforamnce
d) liquidated damages
a) specific performance
An action in court to have the defaulting party perform on the contract is called a suit for specific performance
A tenant’s lease has expired, but the tenant has not vacated the premises or negotiated a renewal lease. The landlord has declared that the tenant is not to remain in the building. This situation is an example of
a) an estate for years
b) tenancy at sufferance
c) tenancy at will
d) an estate from period to period
b) tenancy at sufferance
Tenancy (estate) at sufferance occurs when a tenant who lawfully possessed real property continues in possession of the premises without the landlord’s consent after the lease rights expire, typically from an estate for years. An estate from period to period automatically renews unless notice is given. A tenancy at will permits a tenant to possess property with the landlord’s consent for an unspecified term. An estate for years is a leasehold estate that continues for a definite period, whether that period is days, weeks, months, or years and has a definite expiration date.
While notarizing is NOT required to create a valid deed, the primary purpose of acknowledgement in this use is to:
a) verify that the deed was signed without duress
b) convey title to the grantee
c) ensure the identity of the grantee
d) guarantee a marketable title
a) verify that the deed was signed without duress
An acknowledgement is a formal declaration before notary public or another authorized public officer that the person who signs a deed does so voluntarily and that the signature is genuine. The primary purpose of acknowledgement is to verify that the document was executed without duress, which would make the deed voidable. The secondary purpose is to ensure the identity of the party signing the document, which is only the grantor.
A property owner contracted to have a swimming pool installed on her property. When the pool was completed, she refused to pay for the improvement, and the contractor filed a lien for nonpayment. This lien was MOST likely
a) a general lien
b) a special lien
c) a mechanic’s lien
d) a voluntary lien
c) a mechanic’s lien
A mechanic’s lien may be filed by a contractor when an owner refuses to pay for work on an improvement. The lien is a specific, involuntary lien on the property. A general lien applies to both person and real property.
An optionee has communicated to the optionor that the optionee will purchase the property. This option contract is now exercised and is BEST described as
a) an executory unilateral purchase contract
b) an executed bilateral purchase contract
c) an executory bilateral purchase contract
d) an executed unilateral purchase contract
c) an executory bilateral purchase contract
When the buyer informs the seller that he is going to purchase the property, the option is exercised, and an executory bilateral purchase contract exists.
To protect the owner against the mismanagement of monies that the property manager receives, the owner may require the manager to purchase
a) errors and omissions insurance
b) a license bond
c) a fidelity bond
d) workers’ compensation insurance
c) a fidelity bond
The owner may require the manager to purchase a fidelity bond, which covers theft or embezzlement, along with mismanagement. Errors and omissions covers items left out of or incorrect in contracts and lease documents. Workers’ compensation is used to cover injuries on the job. A license bond is used in a profession such as contracting to obtain a license.
Why is the Civil Rights Act of 1866 unique?
a) it contains “choose your neighbor” provisions
b) it provides no exceptions that would permit racial discrimination
c) it has been broadened to protect seniors
d) it adds recipient of public assistance as a protected class
b) it provides no exceptions that would permit racial discrimination
Unlike other exemptions permitted under the federal Fair Housing Act of 1968, the Civil Rights Act of 1866 allows no exceptions due to race. Recipients of public assistance are not protected classes under any fair housing law but are protected under the Equal Credit Opportunity Act. Senior housing protections are in the Fair Housing Act of 1866. No fair housing laws contain a “choose your neighbor” provision.
The market value of a parcel of real estate is
a) an estimate of its future benefits
b) its value without improvements
c) the amount of money paid for the property
d) the most probable price it should bring
d) the most probable price it should bring
An appraisal estimates the market value - the price a property would most probably bring. The amount of money actually paid for a property is the market price, which may or may not equal the market value. An estimate of a property’s future benefits may be used by an appraiser as part of the income approach to value. The value of a property without improvements consists of the value of the land itself.
The term reconciliation refers to which of the following?
a) loss of value due to any cause
b) analyzing/weighing the findings obtained by the different approaches to value to arrive at a final estimate of value
c) separating the value of the land from the total value of the property to compute depreciation
d) the process by which an appraiser determines the highest and best use for a parcel of land
b) analyzing/weighing the findings obtained by the different approaches to value to arrive at a final estimate of value
The three approaches to value typically produce three different values. An in-depth analysis of these values is required to determine the most valid, logical, and reliable approach to be used to provide the final value estimate. Determining depreciation-a loss of value due to any cause - is part of the process of the cost approach. The highest and best use of a property is the single most profitable use for that property. Determining highest and best use is only one of the factors considered is an appraisal prior to choosing an approach to value and reconciliation.
An appraiser is responsible for
a) finding value
b) estimating value
c) computing value
d) determining value
b) estimating value
The appraiser does not make or determine value. After the appraiser completes the analysis and considers all the data, an estimate of value will be provided. An appraisal is an official estimate of value.
What is the intent of seller disclosures regarding property conditions?
a) assists the seller in determining a fair asking price
b) shifts the burden onto the buyer to discover what is wrong with the property
c) encourages the broker to share in liability issues
d) helps the buyer determine what price to offer
d) helps the buyer determine what price to offer
After consulting the property disclosure to learn about potential problems, the age of appliances, and systems, the buyer is in a better position to make an offer based on the condition of the property.
The landlord’s lease prohibits tenants from altering the property in any way. A young woman who uses a wheelchair cannot maneuver over the doorstep into the apartment by herself. In addition, she cannot access the bathroom facilities in her wheelchair. Which of the following is true?
a) the tenant is entitled to make the necessary alterations
b) the landlord is responsible for making all apartments accessible to people with disabilities
c) the landlord should not have rented this apartment to the tenant
d) the tenant cannot remedy these conditions because of the terms of the lease
a) the tenant is entitled to make the necessary alterations
The Fair Housing Amendments Act of 1998 provides that people with disabilities must be permitted to make reasonable modifications to the premises at their own expense. The Act does not require the landlord to make all apartments accessible to people with disabilities.
Buyers seeking a mortgage on a single-family residence would be LEAST likely to obtain the mortgage from
a) a life insurance company
b) a credit union
c) a commercial bank
d) a mutual savings bank
a) a life insurance company
Life insurance companies make mortgage loans on large projects but rarely, if ever, on individual home purchases. Mutual savings banks, credit unions, and commercial banks are all sources of mortgages for individual residences.
A homeowner received estimates that ranged between $20,000 and $25,000 for repairing damage caused by water leaking into the basement. The owner couldn’t afford the repairs, so he constructed a false floor over the entire basement and installed carpet over the floor to conceal the damage. When he listed the house, he did not disclose the leak or the damage to the basement on the property disclosure form. The basement damage is an example of
a) a patent defect, and the brokerage firm is not liable for not discovering the false floor and the damage
b) a latent defect, and the listing brokerage firm is not liable for not discovering the false floor over the damage
c) a patent defect, and the brokerage firm may be liable for not discovering the false floor and the damage
d) a latent defect, and the listing brokerage firm may be liable for not discovering the false floor over the damage
b) a latent defect, and the listing brokerage firm is not liable for not discovering the false floor over the damage
The basement damage is a hidden structural defect known to the seller but not known to the brokerage firm or those working for the firm or to a purchaser. Real estate professionals are not liable for discovery and disclosure of latent defects not disclosed by the purchaser. Patent defects are property defects that are easily visible when inspecting a property.
Discount points on a mortgage are computed as a percentage of
a) the down payment
b) the closing costs
c) the amount borrowed
d) the selling price
c) the amount borrowed
A discount point is 1% of the loan amount and is charged to the borrower at closing. Discount points are nto based on the selling price or downpayment
A buyer who owns the property in equity has which type of contract?
a) executory
b) liquidated damages
c) option
d) lease
a) executory
During an point in the executory contract (time period between signed offer to title transfer), the buyer has equitable title (also called the owner in equity). An executory purchase contract can be liquidated damages or specific performance. In an option contract, only one party is bound and there is no equity of title.
A landowner sells one acre of his two-acre property to a friend. He reserves for himself an appurtenant easement over the friend’s land for ingress and egress. The landowner’s property is
a) cleared of the easement when the landowner sells the remaining acre to a third party
b) the servient tenement
c) subject to an easement in gross
d) the dominant tenement
d) the dominant tenement
The landowner’s parcel benefits from the easement and is the dominant tenement. The neighbor’s tract, over which the easement runs, is the servient tenement. The landowner’s easement remains with the property when it is sold. An easement in gross is a company’s right to use another’s property, such as an easement for a utility company to run power lines over another’s property.
The broker receives an earnest money deposit with a written offer to purchase that includes a 10-day acceptance clause. On the fifth day, before the offer is accepted, the buyer notifies the broker that she is withdrawing the offer and requests the return of her earnest money deposit. In this situation
a) the buyer may revoke the offer but will not have the earnest money returned since the buyer failed to give the seller the full acceptance time
b) the buyer cannot withdraw the offer because it must be held open for the full 10 days
c) the buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money
d) the seller and broker have the right to each retain half of the deposit
c) the buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money The offeror (the buyer) may revoke the offer at any time before the offer is accepted, even if the person making the offer agreed to keep the offer open for a set period of time. At that point, the earnest money deposit should be refunded to the buyer.
A sales contract or land contract should give the buyer
a) a cloud on the title
b) a legal title
c) a quiet title
d) an equitable title
d) an equitable title
The sales contract, land contract, or trust deed would give the buyer an equitable title. Legal title is transferred from the seller to the buyer via deed at closing of a sales contract and upon last payment to the seller from the buyer in a land contract.
A lender offers to take over the title of a property that is in foreclosure without going through the foreclosure process. This is called
a) an assumption
b) a reconveyance deed
c) a deed in lieu of foreclosure
d) a subordination agreement
c) a deed in lieu of foreclosure
A deed in lieu of foreclosure is an alternative to foreclosure and is carried out by mutual agreement between the lender and the borrower rather than by a lawsuit. A reconveyance deed is used by a trustee under a deed of trust to return title to the trustor. In an assumption, a buyer purchases a property by assuming the seller’s debt and becoming personally obligated for the payment of the entire debt. A subordination agreement agreement moves a first mortgage lien to a secondary position by mutual agreement of the two lenders.
In computing the square footage of a single-family home, an appraiser measure the external dimensions of the gross living area, which includes all of the following except
a) a patio
b) an extra bedroom
c) a finished basement
d) a laundry room
a) a patio
To compute the square footage of a single-family home, the external dimensions of the building are measured. A garage, porch, patio, or unfinished areas are not used when computing the square footage of a property. Unfinished areas are included in another section of an appraisal report.
Because of her 20 years of experience in real estate, the managing broker of ABC Realty is often consulted by the office’s sales associates. She is frequently asked to assist in advising buyers of how they should take title to their new homes. This practice is
a) an example of the benefit of using a full-service brokerage
b) prohibited by the federal government
c) permissible because it is at the request of a client of customer
d) the unauthorized practice of law
d) the unauthorized practice of law
Advising buyers on how they should take title to property is not part of the duties of a real estate agent; buyers should be advised to consult their attorney on such matters. State law, rather than federal law, defines the responsibilities of a real estate agent.
If a lender agrees to make a loan based on an 80% loan to value ratio (LTV), what is the amount of the loan if the property appraises for $114,500 and the sales price is $116,900?
a) $83,200
b) $92,900
c) $91,600
d) $91,300
c) $91,600
The LTV will be based on the relationship of the loan to either the appraisal or the purchase price, whichever is less. In this case, the appraisal is less. Therefore, the loan will be 80% of $114,500, which equals $91,600
$114,500 x 80% (0.80) = $91,600
The buyer and seller have entered into a binding contract for sale. However, before closing, the law changes and the buyer’s intended use of the property becomes illegal. Which is TRUE?
a) The contract is terminated due to fraud by the seller
b) the contract is valid, but the price must be renegotiated
c) the contract is void due to impossibility of perforamnce
d) the contract is valid and enforceable under the rules of risk
c) the contract is void due to impossibility of performance
An essential element of a contract is the lawful objective or purpose; if this is no longer part of the contract, then the contract is void. In this case, the seller did not commit fraud and no contract requires the price to to be renegotiated if it becomes void.
A township contains
a) 36 sections
b) 6 square miles
c) 23,040 square feet
d) 640 acres
Each section is 1 square mile. Each township is 6 square miles and contains 36 square miles, so a township contains 36 sections. Each section is 1 square mile, or 640 acres. The 36 square miles of a township are 23,040 acres
The relationship of agents to their principal is that of
a) an attorney-in-fact
b) a fiduciary
c) a trustee
d) a subagent
b) a fiduciary
The principal is the party to whom the agent gives advice and counsel. The agent’s fiduciary relationship of trust and confidence with the principal means the broker owes the principal certain specific duties. A trustee holds property for another as a fiduciary, but an agent does not hold the principal’s property. A subagent, though working in the principal’s interest, is an agent of the brokerage firm/principal broker who is already acting as agent for the principal. An attorney-in-fact is a competent third party authorized by the principal’s place through a written and recorded power of attorney
A couple applying for a residential mortgage loan has a combined monthly gross income of $8,000. Their total housing expense with a new loan would be $1,770, including principal, interest, taxes and insurance (PITI). Their total debt expense, including housing expenses, would be $2,80. Under these conditions, would the couple qualify for a conforming loan under Fannie Mae guidelines?
a) No, because their debt to income ratio exceeds the limits set by Fannie Mae
b) Yes, because their debt to income ratios are within criteria set by Fannie Mae
c) No, because their total housing expense i smore than 50% of their total debt expense
d) Yes, because their total housing expense is less than 60% of their total debt expense
b) Yes, because their debt to income ratios are within criteria set by Fannie Mae
A conforming loan is one that qualifies under the debt to income ratios set by Fannie Mae. The borrower’s total housing expense must be no more than 28% of gross monthly income, and the borrower’s total debt expense including housing must be no more than 36% of gross monthly income. To find the total housing expense ratio, divide the total housing expense ($1,770) by the monthly gross income ($8,000)
1,700 / 8,000 = 22%
To find the debt expense, divide that expense ($2,800) by the monthly gross income ($8,000)
2,800 / 8,000 = 35%
In this situation, if their credit score and history are considered good by the lender, the couple would qualify for a conforming conventional loan.
The final decision on a property’s listing price should be made by
a) the seller’s attorney
b) the listing broker
c) the seller
d) the appraiser
c) the seller
The seller must determine the listing price of the seller’s property. It is the responsibility of the broker to advise and assist the seller in making that decision. A broker or salesperson may use a competitive market analysis to help the seller determine a reasonable listing price.
When neither party can sue the other to force performance, the real estate contract is said to be
a) voidable
b) unenforceable
c) valid
d) void
b) enforceable
When neither party can sue the other to force performance, the contract is said to be unenforceable. When a contract meets all of the essential elements and is enforceable, it is a valid contract. Duress, fraud, misrepresentation, and minors always make contracts voidable. Void real estate contracts lack an essential elements and are unenforceable.
An offer was made for 90% of the $120,900 list price of a property. The offer was accepted, and the lender agreed to negotiate an 80% loan at 8% interest for 30 years. The buyer had a $5,000 earnest money deposit, paid $350 for title expenses, 250 for attorney fees, and had other expenses of $749. How much money does the buyer need to close on the property?
$18,111
$120,900 x 90% (0.90) = $108,810 purchase price
$108,810 x 80% (0.80) LTV = $87,048 loan amount
( debits)108,810 + 350 (title expense) - (credits) $87,048 (mortgage) - $5,000 (earnest money) - $250 (attorney’s fees) - $749 (other expenses) = $18,111
The type of real estate ownership that is MOST inclusive is
a) a reversionary interest
b) a qualified fee estate
c) a fee simple absolute estate
d) a life estate
c) a fee simple absolute estate
A fee simple absolute estate is the highest interest in real estate recognized by law. Fee simple ownership is absolute ownership in which the holder is entitled to all rights to the property. A life estate is a freehold estate that lasts as long s the life tenant. A qualified fee estate is limited by specific conditions created by agreement or by law. A reversionary interest is that interest in property that exists when ownership of a life estate reverts back to the original owner at the end of the life estate.
A law of agency is a common-law concept. As common-law, it
a) is part of a body of law established by tradition and court decisions
b) may not be superseded by statutory law
c) is enacted by legislatures and other governing bodies
d) is a legal doctrine that is formed from common sense and usual practices
a) is part of a body of law established by tradition and court decisions
The law of agency is law from judgments and decrees, as opposed to law established by legislatures or other governing bodies. In many states, statutes have been enacted to further define agency representation with laws and regulations that set forth the responsibilities of real estate licensees to clients and customers.
Rents have gone up in the area. The principle that BEST describes this increase is
a) contribution
b) supply and demand
c) subsitution
d) conformity
b) supply and demand
Under the concept of supply and demand, if demand increases and supply remains the same, the supply becomes more valuable. Fewer rental properties will produce higher rents. The principle of substitution says the maximum value of a property ends to be how much it would cost to purchase an equally desirable substitute property. The principle of contribution is used to determine improvements will increase or decrease the value of the real property. Conformity is the appraisal principle that holds that the greater the similarly among properties in an area, the better the properties will hold their value.
The difference between a term loan and partially amortized loan is
a) the term loan will have a smaller monthly payment with a larger balloon
b) the partially amortized loan will have a lower payment and balloon
c) the term loan will have a larger payment and a smaller balloon
d) the partially amortized loan payment will pay the loan in full with the final payment
a) the term loan will have a smaller monthly payment with a larger balloon
Term loan payments are interest-only, so they will be smaller than a partially amortized loan in which the payment pays both interest and principals.
A divorce attorney hires a broker to determine the value of the property the couple owns. The broker will MOST likely prepare
a) a sales comparison approach
b) a real estate appraisal
c) a broker’s price opinion
d) a cost approach to value
c) a broker’s price opinion (BPO)
A BPO is a broker’s opinion of the value of a particular property, often in the form of a competitive market analysis. The BPO may not be labeled an appraisal, which may only be conducted by a state-licensed or certified appraiser. the sales comparison approach is used in both the BPO an an appraisal. The cost approach is used when conducting an appraisal.
A commercial tract of land is 1.25 acres. The lot is 150 feet deep. What is the selling price of the lot at $26,500 per front foot?
a) $9,619,500
1.25 acres x 43,560 (square feet per acre) = 54,450 (total square feet)
54,450 / 150 ft (the depth of the lot) = 363 front feed x $26,500 per front foot = $9,619,500 (the selling price).
The term front foot refers to a unit on frontage of a lot, usually the street frontage or water frontage. When two dimensions are given for a tract and not labeled, the first dimension is the frontage. Each front foot extends the depth of the lot.
A home is purchased using a fixed-rate, fully amortized mortgage loan. With this loan
a) a balloon payment will be made at the end of the loan
b) each mortgage payment amount is the same
c) each mortgage payment reduces the principal by the same amount
d) the principal amount in each payment is greater than the interest amount
b) each mortgage payment amount is the same
In a fully amortized loan, there will be no balloon payment because the periodic payments fully repay the loan by the end of the term period. Each mortgage payment reduces the principal by a slightly different (increasing) amount, but each mortgage payment (principal and interest) is the same.
An agent is managing a 15-unit apartment building and is paid 9% of the gross income. She leases five apartments for $500, five for $550, and five for $600. There is a 3% vacancy rate and additional income of $450 per month. The monthly operating expenses are $1,749, and the owner is generating an 8% return on the investment. What is the effective gross income on the building?
$101,430 5 x $500 x 12 (months) = $30,000 5 x $550 x 12 (months) = $33,000 5 x $600 x 12 (months) = $36,000 30,000 + 33,000 + 36,000 = $99,000 PGI 99,000 x 3% (vacancy = $2,970 (expected loss due to vacancy) 99,000 -02,970 = $96,030 $450 (additional income) x 12 (months) = $5,400 $96,030 + $5,400 = $101,430
The defeasance clause in a mortgage requires the mortgagee to execute
a) a subordination agreement
b) an assignment of mortgage
c) a satisfaction of mortgage
d) a partial release agreement
c) a satisfaction of mortgage
A defeasance clause requires the lender to execute a satisfaction, also known as a release or discharge, when the note has been fully paid. Satisfaction of the mortgage returns to the borrower all interest in the real estate originally conveyed to the lender. A mortgagee may assign a note to a third party, such as investor or another mortgage company (the assignee). hen the debt is paid in full, the assignee is required to execute the satisfaction of the mortgage.
A federal Equal Credit Opportunity Act (ECOA) allows lenders to discriminate against potential borrowers on the basis of
a) age
b) amount of income
c) dependence on public assistance
d) race
b) amount of income
Lenders may reject applicants who have insufficient income for the loans they are requesting or for their lack of ability to repay the loans. Lenders may not discriminate against potential borrowers on the basis of race, color, religion, national origin, sex, marital status, age, or dependence on public assistance.
When a loan requires payments that do not fully pay off the loan balance by the final payment, which term BEST describes the final payment?
a) balloon
b) adjustment
c) variable
d) acceleration
a) balloon
When the term of the loan is over and the payments made have not paid off the debt, the last payment is a balloon payment. The loan is called a balloon loan. Acceleration occurs when a lender calls for full payment of a loan before its term has ended. The adjustment in an adjustable-rate mortgage establishes how often the rate may be changed. A variable payment is one that may change over time depending on the mortgage payment.
The area of a rectangle that is 50 feet by 170 feet is
d) 8,500 square feet.
length x width
50 x 170
The clause in the deed that conveys the rights and privileges of ownership is called
a) the seisin clause
b) the exception clause
c) the acknowedlgement
d) the granting clause
d) the granting clause
The granting clause states the grantor’s intention to convey the property at the present time. An exception and reservations, or limitations affecting the title. The covenant of seisin is the grantor’s promise of ownership and ability to convey title in a general warranty deed. The acknowledgement is a formal declaration under oath that the person signing the deed does so voluntarily and that the signature is genuine. The signature is not required to make a deed valid but is often required to record the deed.
A corporation takes title to real property
a) in severalty
b) as a trust
c) as a joint tenancy
d) in a partnership agreement
a) in severalty
A corporation is legally treated as a single person and may own property in severalty. A corporation, though not human, is an artificial person in the eyes of the law. A corporation is not a partnership or a trust. It does not own property with the right of survivorship established through a joint tenancy.
A buyer under an executory contract has found numerous inspection issues the seller is unwilling to repair. The seller and the buyer agree to terminate the contract with all things of value returned to each party. This is known as
a) mutual performance
b) liquidated damages
c) specific performance
d) mutual rescission
d) mutual rescission
When both parties to a contract are returned to their original position, it is known as mutual rescission. Liquidated damages and specific performance are types of purchase contracts chosen as a remedy for default by one of the parties. Mutual performance is when both parties complete the contract.
A broker helps a buyer and a seller with paperwork but does not have fiduciary obligations to either party. The broker’s activity in this situation is that of of
a) a single broker
b) a designated agent
c) a transaction broker
d) a dual agent
c) a transaction broker
In some states, a broke may be an agent of neither party to a transaction , but help both the buyer and the seller with necessary paperwork and formalities in a transaction. The broker acts as a transaction broker or facilitator but not as an agent of either party.
A real estate professional has all the following obligations to consumes EXCEPT
a) fair and honest business dealings
b) full disclosure of all material facts
c) keep all information received confidential
d) accounting of all funds received
c) keep all information received confidential
Real estate professionals owe consumers disclosure, accounting, and honest. Confidentially is owed to parties the agent or facilitator represents.
Which of the following best describes fee simple absolute estate?
a) it will have the maximum rights unless there are deed condition limitations
b) it is the maximum estate in land and lasts forever
c) it is the maximum estate in land but lasts only for the duration of the property ownership
d) the duration is dependent up the language of the deed
b) it is the maximum estate in land and lasts forever
Fee simple absolute estates, which have the larges (maximum) bundle of rights, are typically transferred from one owner to another when title is passed so they continue on forever. A deed condition would create a fee simple defeasible or qualified estate
The freehold estates of fee simple absolute, fee simple defeasible, and a life estate have all of the same attributes EXCEPT
a) ownership of the estate is passed by a deed
b) owners have the right of possession, which can be conveyed to a tenant via a lease
c) all owners are obligated to pay the property expenses and taxes
d) all owners may convey title via a will to their heirs.
d) all owners may convey title via a will to their heirs
The owner of a life estate may not transfer his ownership after death since his ownership is limited to a lifetime. All freehold estates are created in the deed, and since the holder then owns the property, he is obligated to pay the expenses and taxes. All owners may lease the property; a life tenant’s lease would last only as long s the life estate lasts.
Ever deed must be signed by
a) the grantee
b) the grantor
c) the devisee
d) the grantor and grantee
b) the grantor
Either the grantor, or someone acting under the grantor’s authority, must execute (sign) every deed, and the grantor must have the legal capacity to do so. The grantee is not required to sign the deed. A devisee is the recipient of real property under a will and is not required to sign a deed.
Institutions in the secondary mortgage market
a) purchase a number of mortgage loans already funded and assemble them into packages to form marketable securities for investors
b) make direct loans to purchasers for second mortgages
c) provide loans to lenders in the primary mortgage market to raise capital for new loans
d) set the interest rates required for loans made in the primary mortgage market
a) purchase a number of mortgage loans already funded and assemble them into packages to form marketable securities for investors.
In the secondary mortgage market, loans are brought and sold only after they have been funded by lenders in the primary mortgage market. The secondary market activity enables lenders to sell mortgage loans to raise capital for new loans.
under an existing zoning ordinance, no signs that extend more than three feet above the highest point of a roof may be placed on any building. An owner wants to erect a nine-foot-high revolving sign on the roof of his store. In order to do this legally, the owner must get
a) a nonconforming-use permit
b) a variance
c) a special-use permit
d) a deed to the air rights
b) a variance
A variance permits a landowner to use the property in a manner that is strictly prohibited by the existing zoning. A nonconforming-use permit would only apply to a use that existed prior to the zoning ordinances. A variance does not require ownership of air rights. Special-use permits are tied to how the property is used, such as a school or daycare.
An owner who is interested in selling his house is usually concerned about how much money he can get when it sells. A competitive market analysis (CMA) may help the seller determine a realistic listing price. Which of the following statements is TRUE?
a) a broker, but not a salesperson, is permitted to prepare a CMA
b) a CMA is what is prepared by a certified real estate appraiser
c) a CMA contains a compilation of facts about similar properties that have recently sold
d) a CMA is the same as an appraisal
c) a CMA contains a compilation of facts about similar properties that have recently sold
A CMA is a comparison of the prices of properties recently sold, properties currently on the market, and properties that did not sell. It is an analysis of the market activity among comparable properties designed to arrive at a fair market value for the subject property. Any real estate broker or salesperson may prepare a CMA. The CMA is not an appraisal, which may only be prepared by a state-licensed or certified real estate appraisal.
Which of the following would be classified as external depreciation?
a) a poorly designed floor plan that could be modified
b) Poorly maintained properties in the neighborhood
c) Convenient access to schools and recreational facilities
d) a leaking roof that needs to be completely replaced
b) Poorly maintained properties in the neighborhood
External depreciation is caused by factors not on the subject property, such as poorly maintained properties in the neighborhood. A leaky roof is an example of physical deterioration. A poorly designed floor plan is an example of functional obsolescence. Convenient access to schools and recreationally facilities are examples of good features that may add to the desirability of a neighborhood.
The rent collected in a 9-unit building is as follows: three apartments, $550; three apartments, $600; and three apartments, $650. There is a vacancy rate of 4%, additional annual income of $2,400, and annual expenses of $5,000. With a cap rate of 9%, how much should the buyer pay for this property?
a) $661,244
$550 x 12 x 3 = $$19,800; $600 x 12 x 3 = $21,600; $650 x 12 x 3 = $23,400; Total annual income from units = $64,800
$64,800 + 2,400 = $67,200 potential gross income
$64,800 x 0.04 = $2,688 (Vacancy)
$67,200 - $2,688 = $64,512
$64,512 - $5000 = $59,512 (Net operating income)
$59,512 / 0.09 (cap rate) = $661,244
Which of the following is NOT considered by an appraiser using the income approach to value?
a) capitalization rate
b) annual net operating income
c) annual gross income
d) depreciation
d) depreciation
Depreciation is one of the calculations used in the cost approach and not in the income approach. The capitalization rate and the annual net operating income (NOI) are factors used in the income approach to determine a property’s value (NOI / Rate = Value). Estimating the annual gross income of a property is the first step in the income approach to value.
A homeowner listed her property for sale at $100,000. If her original cost for the property was 80% of the listing price, what will her profit be when her real estate is sold for the listing price?
$20,000
$100,000 (listing price) x .80 (cost) = $80,000
$100,000 -0$80,000 = $20,000 (profit)
A tenant enters into a commercial lease that requires a monthly rent of a minimum fixed amount, plus an additional amount determined by the tenant’s gross receipts exceeding $5,000. This type of lease is called
a) a net lease
b) a percentage lease
c) a index lease
d) a fixed lease
b) a percentage lease
When a business tenant pays rent that varies with the tenant’s gross business receipts, the arrangement is called a percentage lease. In such a situation, the landlord shares in the tenant’s business risk because of the possibility of receiving no more than the minimum fixed amount. In a fixed lease, the tenant pays a fixed monthly amount, and the landlord pays the expenses of ownership. Index leases increase or decrease the rent amount paid based upon a pre-agreed-to-index-typically, the lease is tied to the consumer price index. With a net lease, the tenant pays a base rent plus certain costs in the operation of the property, such as utilities, property taxes, and assessments. The landlord ma pay some property expenses.
A building is 250 feet wide, 350 feet long, and six stories high (each story 12 feet in height). How much does the building cost at $0.98 per cubic foot?
$6,174,000
width x length x heigh: 250 x 350 x 12 = $1,050,000.
$1,050,000 x $0.98 = $1,029,000 x 6 = $6,174,000
Housing that qualifies for exemption from familial status under federal fair housing provisions
a) is permitted for owner-occupied buildings with four or more units
b) is allowed if 55% of the occupants are over 80 years old
c) includes a restriction that 80% of the units be occupied by people 55 or older
d) includes housing intended for people age 50 or older
c) includes a restriction that 80% of the units be occupied by people 55 or older
The Fair Housing Act allows for two exemptions to familial status protection in housing for seniors. One permissible exemption is if 80% of the units are occupied by people age 55 or older. The other exemption is for housing intended for persons over the age of 62. Owner-occupied buildings with four or more units are subject to the federal Fair Housing Act. All senior housing must be HUD certified.
If a mortgage lender discriminates against a loan applicant on the basis of age, it violates what law?
a) US Department of Veterans Affairs (VA)
b) Federal Housing Administration (FHA)
c) Equal Credit Opportunity Act (ECOA)
d) Americans with Disabilities Act (ADA)
c) Equal Credit Opportunity Act (ECOA)
Age is a protected category only under the ECOA. ADA, FHA, and VA do not have laws in regard tot he age of applicants since the issue is covered under ECOA and applies to FHA and VA loans.
In MOST market areas, rents are determined by
a) supply and demand factors
b) the local apartment owners association
c) Housing and Urban Development (HUD)
d) a tenants union
a) supply and demand factors
The number of properties and vacancies determine rent values. If the supply is low and demand is high, rents go up. If the supply is high and demand is low, rents go down. HUD, tenants unions, and apartment owners associations do not play a major factor in determining rents.
An apartment lease includes a clause that prohibits a tenant from owning a pet. A tenant buys a cat and keeps it in her apartment. She does not remove the cat even after the landlord gives her a written reminder of the lease agreement and insists that she remove the pet from the apartment. The tenant refuses, saying that the cat is very small and will cause no damage to the apartment. The landlord decides to remove the tenant due to the breach of the lease agreement. The legal process to remove the tenant is known as
a) eminent domain
b) partial eviction
c) constructive eviction
d) actual eviction
d) actual eviction
A tenant’s breach of a lease can result in a court action known as actual or judicial eviction. Constructive eviction occurs when a tenant abandons a property because the landlord has breached the lease. Eminent domain is the government’s power to take land for public use. Partial eviction refers to an eviction where a landlord deprives a tenant from the use of a portion of the leased premises.
The purpose for calculating the rate of return is to
a) analyze the vacancy rate for the month
b) project future income
c) measure the profitability of the property
d) determine the absorption rate within the building
c) measure the profitability of the property
The rate of return is calculated to measure the profitability of the property and is the capitalization rate. The vacancy rate would be used as part of this formula. Absorption rate and future income would not.
A salesperson signs a listing agreement with her broker to sell her home. The agreement states that the broker will receive a 7% commission. The home sells for $220,000. What is the net amount the seller will receive from the sale?
$204,600
$220,000 x .07 (brokerage rate) = $15,400 9Commission)
$220,000 - $15,400 = $204,600
A real estate salesperson states, “I hear they’re moving in. There goes the neighborhood! Better put your house on the market before values drop!” This statement is an example of what illegal practice?
a) steering
b) fraudulent advertising
c) blockbusting
d) redlining
c) blockbusting
Such statements, made by a person in real estate brokerage, constitute blockbusting and usually are attempts to get listings by frightening owners into selling. Blockbusting is a violation of the federal Fair Housing Act. Steering is the channeling of homebuyers to a particular neighborhood to maintain or change the character of the neighborhood. Redlining is the illegal practice of refusing to make a mortgage loan or restricting the number of loan sin a particular area. Fraudulent advertising involves providing untrue statements promises in the advertising of a property
In general, when the supply of a certain commodity increases,
a) price tends to drop
b) demand for it tends to rise
c) demand for it tends to drop
d) price tends to rise
a) price tends to drop
According to the principle of supply and demand, if demand is constant and supply increases, sellers of the commodity compete with each other by lowering prices. Prices tend to rise if the demand for the commodity increases while the supply remains the same.
A mortgage broker generally
a) brings the borrower and the lender together
b) grants real estate loans using investor funds
c) handles the escrow procedures
d) provides credit qualification and evaluation reports
a) brings the borrower and the lender together
A mortgage broker is an intermediary who brings borrowers and lenders together. A mortgage broker locates potential borrowers, processes preliminary loan applications, and submits the applications to lenders for final approval. Mortgage brokers do not provide loans, handle escrow funds, or check borrowers’ creditworthiness for loans
A real estate agent may be guilty of negligent nondisclosure by failing to exercise adequate care to discover
a) a defect in the property
b) a material defect and disclose it to the seller
c) a material defect
d) a material defect and disclose it to the buyer
d) a material defect and disclose it to the buyer
A real estate agent may be guilty of negligent nondisclosure by failing to exercise adequate care to discover a material defect and disclose it to the buyer
What action returns a contract’s parties to their positions before the contract, including return of any deposit?
a) rescission
b) subordination
c) cancellation
d) substitution
a) rescission
A rescission occurs when one party cancels or terminates the contract as if it had never been made. Cancellation terminate the contract without a return to the original position. Substitution is an appraisal principle of value. Subordination is used as a placeholder and indicates a mortgage or other interest will not move in front of a newer recording.
The type of listing contract that provides for payment of a commission to the broker even though the owner makes the sale without the broker’s aid is called
a) an exclusive right-to-sell listing
b) an exclusive agency listing
c) an option listing
d) an open listing
a) an exclusive right-to-sell listing
In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An open listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property. An exclusive agency listing provides that the brokerage firm or a co-op broker will receive a commission if the property sells, but the owner reserves the right to sell the property without owing a commission if the owner sells the property on his own. An option listing permits the broker to retain an option to purchase the property for the broker’s own account.
A seller has received an offer. The seller crossed out a number of items, wrote in the changes the seller wanted, initialed them, and returned the document to the buyer. The original offer the offeror gave the seller is considered to be
a) binding only on the original offeror
b) terminated and countered
c) a partial acceptance of the original offer
d) a partial termination with conditional acceptance of the offer
b) terminated and countered
The counteroffer effectively terminates the original offer and creates a new offer. Therefore, the original offer is not valid, accepted, or binding.
A broker lists a property for sale at $100,000 with a 5% commission. He later obtains an oral offer from a prospective buyer to purchase the property. The seller indicates to the broker that the offer would be acceptable if it were submitted in writing. Before it can be put in writing, the buyer backs out and revokes the oral offer. In this situation, the broker would be entitled to
a) a commission of $5,000
b) the standard rate of commission for the area
c) no commission
d) only a partial commission
c) no commission
The broker only earns a commission with the procuring of a ready, willing, and able buyer who purchases the property on the seller’s terms. There is no standard rate of commission for a locality, as commission rates are determined by individual agreements between a broker and client.
An owner purchased an interest in a house in a resort beach community. The owner is entitled to the right of possession only between July 10 and August 4 of each year. Which type of ownership MOST likely has been purchased?
a) time-share
b) cooperative
c) condominium
d) trust
a) time-share
The owner holds an interest in property for a stated time each year, sharing the property according to a specified time plan. The owner’s interest is a time-share. The owner of a condominium or a cooperative has a right of possession for as long as the ownership is not transferred. An individual does not own property through a trust, as a trust holds title to the real estate.
A property manager hired a contractor to build a wheelchair ramp, install Braille markings on the elevators, and make the restrooms in the lobby accessible to people with wheelchairs. The property manager is ensuring that the owner is in compliance with which law?
a) Federal Fair Housing Act (FFHA)
b) Federal Housing Administration (FHA)
c) Americans with Disabilities Act (ADA)
d) Equal Credit Opportunity Act (ECOA)
c) ADA
When is a certificate of occupancy issued?
a) after applying for a conditional-use permit
b) after applying for a variance
c) after a newly constructed building has been inspected and found satisfactory by the municipal inspector
d when applying for a building permit
c) after a newly constructed building has been inspected and found satisfactory by the municipal inspector. The certificate of occupancy, granted by an inspector from the jurisdiction, is necessary before a newly constructed building can be used. The certificate can only be issued after construction has been completed. The certificate is not used in determining a variance or a conditional-use permit.
A high-rise apartment building burns to the ground. What type of insurance covers the landlord against the resulting loss of rent?
a) consequential loss, use, and occupancy
b) fire and hazard
c) liability
d) casualty
a) consequential loss, use, and occupancy
Casualty insurance covers losses such as theft, burglary, and vandalism. Liability covers medical expenses for someone injured on the premises. Fire and hazard covers direct loss due to damage.
A borrower has just made the final payment to her lender for her home’s mortgage. A lien on her property will remain until the lender records
a) a satisfaction of mortgage
b) a reconveyance of mortgage
c) a reversion of mortgage
d) an alienation of mortgage
a) a satisfaction of mortgage
A satisfaction of mortgage, also known as a release or discharge, is executed by the lender when a note has been fully paid. This document returns to the borrower all ownership interest in the real estate originally conveyed to the lender. This release must be recorded in the public record to show that the debt has been removed from the property.
The N½ of the SW¼ of the NE¼ sold for $2,500 per acre. What was the selling price?
$50,000
640 / 4 / 4 / 2 = 20 acres
20 x $2,500 = $50,000
How many acres is 1 section?
640
The physical characteristic of real estate that means that every parcel of land is different is known as
a) uniqueness
b) indestructibility
c) immobility
d) scarcity
a) uniqueness
Uniqueness is the concept that no two parcels of property are exactly the same or in the same location. An individual parcel has no substitute because each is unique. Immobility means the geographic location of a parcel of land can never be changed. Indestructibility means that land is durable and cannot be destroyed. Scarcity is an economic characteristic of land, meaning that when the supply of land is limited, the price of the land increases.
Two women own a property together. One dies and the other now owns the property with the co-owner’s heirs. The two women owned the property as
a) tenants in common
b) shareholders in their own corporation
c) joint tenants
d) tenants by the entirety
a) tenants in common
Under tenancy in common, when a co-tenant dies, the tenant’s undivided interest passes according to the will. In this case, either the deceased owner died intestate and the state law of decent gave her interest to her heirs, or she willed her undivided interest in the property to her heirs. In a joint tenancy, if one of the women died, the other would enjoy the right of survivorship and own the property in severalty. If the two original owners had formed a corporation to own the property, the death of one would not affect title to the property, which would belong to the corporation. Only married couples are allowed to own property as tenants by the entirety, and the question did not state the woman were married.
In the cost approach, an appraiser uses which of the following?
a) the property’s assessed value as used for tax purposes
b) the owner’s original cost of construction
c) an estimate of the building’s replacement cost
d) sales prices of similar properties
c) an estimate of the building’s replacement cost
The building’s replacement cost is an essential component of the cost approach, along with depreciation and land value. The owner’s original cost of construction is not considered in the cost approach. The sales prices of similar properties are considered in the sales comparison approach. The property’s assessed value is not used to determine its fair market value.
If a property sold at a mortgage foreclosure does NOT bring an amount sufficient to satisfy the outstanding mortgage debt, the mortgagor may be responsible for
a) punitive damages
b) liquidated damages
c) a default judgment
d) a deficiency judgment
d) a deficiency judgment
A deficiency judgment entitles the mortgagee to a personal judgment against the borrower for the unpaid balance when a foreclosure sale does not produce enough cash to pay the loan balance in full after deducting expenses and accrued unpaid interest. It may also be obtained against any endorsers or guarantors of the note and against any owners of the mortgaged property who assumed the debt by written agreement. The mortgagee is not entitled to any damages. A default judgment is a judgment in favor of a plaintiff when a defendant does not appear in court.
A property manager showed a prospective tenant with three children under five a two-bedroom apartment. All of the following could be a consideration in qualifying the potential tenant EXCEPT
a) credit history and criminal background
b) past lease performance as reported by previous landlords
c) the number of children
d) personal references
c) the number of children
Three children under five in a two-bedroom apartment would not be considered unless local zoning ordinances state differently. Typically under fair housing law, children less than two years of age are not counted as occupants. Standard leasing practice is to fully check the tenant’s background, past lease history, and work and personal references.
A mechanic’s lien would be properly classified as
a) a general lien
b) a voluntary lien
c) a specific lien
d) an equitable lien
c) a specific lien
A mechanic’s lien is a specific lien, as it affects a specific property and only that particular property. It is an involuntary lien placed on a property without the owner’s consent. A general lien is the right of a creditor to have all of an owner’s property—real and personal—sold to satisfy a debt. An equitable lien arises out of a written contract that shows the intention of the parties to charge a particular property as a security for a debt or obligation.
A real estate loan payable in periodic installments that are sufficient to pay the principal in full during the term of the loan is
a) a fully amortized loan
b) an interest-only loan
c) a straight loan
d) a partially amortized loan
a) a fully amortized loan
The payment in an amortized loan partially pays off both principal and interest. The mortgagor pays a constant amount, usually monthly. At the end of the term, the full amount of the principal and interest due is reduced to zero. In a straight loan and interest-only loans, the borrower makes periodic payments of interest only, followed by a lump sum balloon payment of full principal balance at the end of the loan term. In a partially amortized loan, the periodic payments are not enough to pay the principal balance, so a final payment (a balloon payment) is larger than the other payments to satisfy the debt.
A listing taken by a real estate salesperson is technically an employment contract between the seller and
a) the salesperson
b) the brokerage firm
c) the salesperson and principal broker together
d) the local multiple listing service
b) the brokerage firm
Only a principal or employing broker for the brokerage firm may enter into brokerage agreements. The broker’s salespeople have authority only to assist in negotiating the agreements. The salesperson is merely the subagent of the broker, but only the broker is the agent of the client and a party to the representation agreement. The salesperson is not a party to it.
A woman tells her neighbor, a real estate broker, that she is thinking about selling her home. The broker contacts several prospective buyers to whom she has shown her firm’s listings in the past month. One of the buyers makes an attractive offer on the woman’s home without even seeing the property. The broker goes to the woman’s house and presents the offer, which the homeowner accepts. What is the agency relationship between the homeowner and the broker?
a) general agency
b) universal agency
c) implied agency
d) express agency
c) implied agency
The homeowner and the broker did not have an oral or written agency contract, but the broker’s actions implied to prospective buyers that the broker was acting as the homeowner’s agent. Express agency occurs when two parties enter into an oral or written formal agency agreement. Universal agency empowers the agent to do anything the principal could do personally, such as authorized by a power of attorney. General agency allows the agent to act for the principal in a wide range of matters, as authorized, for example, in a property management contract
All of the following would be considered when developing a marketing plan by the property manager EXCEPT
a) availability of employees
b) location of the property and its amenities
c) local economic conditions
d) current rent trends in the property market
a) availability of employees.
The marketing plan does not consider the hiring or availability of employees
An option
a) gives the optionee an easement on the property
b) binds the optionor for a specified time
c) makes the seller liable for a commission
d) requires the optionee to complete the purchase
b) binds the optionor for a specified time
An option obligates an owner (the optionor) to sell at a fixed price within a certain period of time but does not obligate the optionee (the proposed buyer) to exercise the option. The option gives the optionee no rights to the property and does not require the optionee to complete the purchase. The seller is only liable for a commission to a broker when the option is exercised—that is, when the buyer actually purchases the property from the seller.
A listing contract in which payment of the commission is contingent on the broker’s being able to produce a buyer before the property is sold by the owner or another broker is called
a) an exclusive right-to-sell listing
b) a net listing
c) an open listing
d) an exclusive agency listing
c) an open listing
In an open listing, the seller retains the right to employ any number of brokers to sell the property. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged, but illegal in many states. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An exclusive agency listing provides that the brokerage firm and co-op broker will be paid unless the seller sells the property on her own.
A property owner conveys the ownership of his house to his mother and stipulates that on her death ownership will return to him. The interest the owner has in the property is
a) a homestead estate
b) a reversionary interst
c) a remainder interest
d) a qualified fee estate
b) a reversionary interest
Until the mother dies, the son holds a reversionary interest. Upon death of the life tenant—the mother—the holder of the reversionary interest will return to having a fee simple absolute estate. A qualified fee estate is held as long as the owner maintains the deed condition. A homestead is protection for a primary property against certain creditors. A remainder interest belongs to a person named as a remainderman, the person—other than the creator of the estate—to whom the life estate will pass when the estate ends.
A seller tells a listing broker his home is serviced by a city water system for both water and sewer services and indicates city water service on the property disclosure form. The broker suspects there is no city water to the home because it is in a rural area, but she relies on the seller’s statement and says nothing concerning the water system to a buyer. The buyer discovers after the purchase that the home has no city water service. In this case, the broker
a) may file a complaint against the seller with the state real estate commission
b) may be liable for misrepresentation since she should have known about the lack of city water services
c) is not liable for misrepresentation since the seller did not disclose the lack of city water services
d) may file suite against the seller for not disclosing the lack of city water services
b) may be liable for misrepresentation since she should have known about the lack of city water services
The listing broker may be liable since she should have confirmed whether or not the house had city water service. Real estate professionals may, for the most part, rely on the statements of buyers and sellers unless they have reason to believe the statements are not truthful. A real estate commission only investigates complaints against real estate licensees. A court may find the seller liable for misrepresentation.
A property was purchased for $175,000. If the loan was $131,250, what was the loan-to-value ratio?
d) 75%
$131,250 / $175,000 = 75% (0.75)
A salesperson who has a seller complete a property disclosure form and who provides the form to a buyer in a timely manner is protecting the liability of
a) the lender
b) the home inspector
c) the brokerage
d) the buyer
c) the brokerage
The principal broker and the salesperson are responsible for properly disclosing any defects in the property to the buyer. By providing the disclosure form in a timely manner, the salesperson is protecting the liability of his broker.
Upon purchasing a small apartment complex, the owner had the in-ground swimming pool filled in with concrete. This action is an example of
a) managing the risk
b) controlling the risk
c) avoiding the risk
d) transferring the risk
c) avoiding the risk
Filling in a swimming pool is an example of avoiding the risk. Managing or controlling the risk would be hiring lifeguards or increasing the property’s liabilities insurance. Transferring the risk would happen if the owner could transfer all risk and liability to another party.
A seller tells a listing broker his home is serviced by a city water system for both water and sewer services and indicates city water service on the property disclosure form. The broker suspects there is no city water to the home because it is in a rural area, but she relies on the seller’s statement and says nothing concerning the water system to a buyer. The buyer discovers after the purchase that the home has no city water service. In this case, the broker
a) may file a complaint against the seller with the state real estate commission
b) may be liable for misrepresentation since she should have known about the lack of city water services
c) is not liable for misrepresentation since the seller did not disclose the lack of city water services
d) may file suit against the seller for not disclosing the lack of city water services
b) may be liable for misrepresentation since she should have known about the lack of city water services
The listing broker may be liable since she should have confirmed whether or not the house had city water service. Real estate professionals may, for the most part, rely on the statements of buyers and sellers unless they have reason to believe the statements are not truthful. A real estate commission only investigates complaints against real estate licensees. A court may find the seller liable for misrepresentation.
A property was purchased for $175,000. If the loan was $131,250, what was the loan-to-value ratio?
75%
$131,250 / $175,000 = .075 (75%)
