WA Broker's License Mock Exam #1 Flashcards
- A home inspection revealed that black mold is present in a home. What should the buyer’s agent tell the buyer?
To seek expert advice.
Explanation: A buyer’s agent typically does not have expertise in environmentlally hazards. The proper step, for matters in a transaction outside the agent’s expertiese is to advise the principal to seek expert advice. In this case, that would be a mold remediation specialist.
- A seller wants to net $60,000 from a transaction, but will have to pay off a mortgage and other fees, at a total cost of $181,800. The seller will also need to pay 7% commission. What will the property need to sell for?
$260,000
Explanation: Start by adding the desired net and the other costs, including the mortgage ($60,000 + $181,800 = $241,800). Subtract the commisssion percentage from 100% (100% - 7% = 93%), and then divide the total by the percentage ($241,800 / .093 = $260,000).
Since the agent bases her commission on the total selling price, you can’t simply add 7% of the costs and profit to the selling price or you won’t quite have her full commission. You need a price that the agent can take 7% of and still satisfy the seller’s goals. A fuller explanation is found in the section on the seller’s net problems in ch 18 of Fundamentals.
- A buyer asks the buyer’s agent to write an offer on terms that don’t match the listing agreement. The buyer’s agent refuses to write the offer and then, in writing, unilaterallly terminates the agency relationship with the buyer. Which is true?
Buyer’s agent is permitted to unilaterally terminate the agency relationship.
Explanation: An agent may unilaterally renounce an agency relationship. Termination of the agency may involve a breach of contract; if so, the agent could be liable to the princial for damages resulting from the breach. However, breach of contract, isn’t in itself grounds for disciplinaary action. Failure to present an offer is grounds for disciplinary action; but here, since the agent didn’t write the offer, no offer exists yet. (An agent is free to renounce rather than help the principal do someitng pointless or unwise.)
- Closing is set for August 1. The seller has already paid the property taxes for the year, totaling $6,000. How much of the amount is the buyer’s responsibility?
$2,500
Explanation: Since the buyer is taking title on August 1, she’s responsibe for the property taxes for the remaining five months of the year (August, September, October, November, and December). Divide the annual taxes by 12 to find the monthly amount: $6,000 / 12 = $500. Multiply the figure by 5 to determine the buyer’s share of the taxes: 5 x $500 = $2,500. (Generally, the state will tell you when to treat all months as equal, but here the even set of dollar amounts in the answers lets you know that.)
- The IRS issues rules that determine when a real estate agent is an employee and when he is an independent contractor. Which of teh following statements on that topic is FALSE?
The brokerage may require an independent contractor to have a cell phone.
Explanation: One of the key differences between employees and independendt contractors is the level of supervison; an independt contractor uses his judgement how to perform a task, while an employee receives spectific instructions on how to accomplish each task. An instruction to carry a cell phone or other equipment doesn’t particularly suggest an independent contractor relationship, making B the only possibly answer. As a practical point, virtually all agents carry cell phones now whether instructed to do so or not.
- A tenant has already paid his $1,200 rent for the month for a single-family property. The property’s owner sells it to a new buyer, with closing occuring on the 15th of June. The parties decide the seller is entitled to rent for the closing date. On the settlement statement, the prorated rent will appear as a:
$600 debit for the seller and a $600 credit for the buyer
Explanation: The rent has already been paid to the seller, so the seller will need to give some of that rent to the buyer. The buyer’s prorated share will be a debit for the seller and a credit for the buyer on the settlement statement. The seller’s share is for the 1st through the 15th (15 days), and the buyer’s share is for the 16th through the 30th (also 15 days), so that $1,200 can be divided in half. The settlement statement will show a $600 debit for the seller and a $600 credit for the buyer.
- Mineral rights associated with real property are always:
separable and divisiable
Explanation: Mineral rights may be sold separately from the land. However, they are appurtenant to the land and will be conveyed with the land unless there is an agreement otherwise.
- John, Kevin, and Lyle own a property as tenants in common, but only Kevin and Lyle live on the property. John would like to sell the property for redevelopment, but Kevin and Lyle refuse. What is John’s best option?
Obtain court order to sell the property.
Explanation: When co-owners can’t agree on whether to sell or how to divide their property, one or more of them may file a partition aciton to terminate the coownership. If ther isn’t a feasible way to physically divide the property, the court will order that the property be sold and the sale proceeds be divided between the former co-owners.
- W, age 17, enters into an installment contract to purahcase a five-year-old car from S, an adult. From a legal point of view, the contract is:
voidable by W only
Explanation: The contract is voidable by the minor, but not by the other party.
- An investor wants to invest $250,000 in the development of a strip mall by taking out a loan secured by a residential property that he owns. Will the Truth in Lending Act apply to this transaction?
No, because this is a commercial transaction
Explanation: The Truth in Lending Act covers consumer loans–loans used for personal, family, or household purposes. Since this borrower is going to use the proceeds to develop a business property, TILA does not apply, even if the loan is secured by owner-occupied residential property. (By contrast, if the proceeds of a loan against real property are used to send a child to college, for example, then TILA would apply.)
- While preparing a competitive market analysis, an agent finds four comparables to choose from. Comparable 1 sold for $180,000 13 months ago under normal conditions. Comparable 2 sold for $190,000 14 months ago under normal conditions. Comparable 3 sold for $175,000 10 months ago as a foreclosure. Comparable 4 sold for $180,000 16 months ago as a foreclosure. The agent shoud use:
None, because they are all older than nine months
Explanation: Ideally, comparable sales should have occured within the past six months. A sale older than six months can be used if there’s no choice adjustments for inflation are made. Comparables must have sold under similar conditions, which rules out answers A, B, and C since those are include at least one foreclosure. This leaves D as the best answer The agent should try to cast a wider net for comparables, even if that means using houses that need more adjustments for features or are located farther away.
- An invetor rents a property to a tenant. For tax purposes, depreciation on the property is based on:
price, plus capial improvements, minus land value
Explanation: Adjusted basis is calculated by stating with intial basis (the cost of obtaining the property), adding capital expenditures, and then subtracting depreciation deductions. The value of the land must also be subtracted from what is depreciable; land does not wear out, so depreciation doesn’t apply.
- Property managment for residential property is different from commerical property, in that a manager would be more concerned about:
future space needs of a commercial tenant than of a residential tenant
Explanation: A commercial tenant may need to expand into remodeled adjacent units, if is operations grow, so a property manager will want to consider that possibiity when helping a commercial tenant find the right space. However, this is not usally a concern for residiential tenants. By contrast, a written lease, a security deposit, and a check of credit scores are all common in both commercial and residential leases.
- What part of the land is removed, but generally the boundaries of a proeprty stay the same, it is known as:
avulsion
Explanation: A commercial tenant may need to expand inot remodeled adjacent units, if its operations grow, so a property manager will want to consider that possibility when helping a commercial tenant find the right space. However, this is ot usually a concern for residiential tenants. By contrast, a written lease, a security deposit, and a check of credit scores are all common in both commercial and residential leases.
- An apartment buidling is right where a new city park is going to be built. The city condemns it. Can the city terminate the leases of the buiding’s tenants?
Yes, if notice is provided to the tenats, and they recieve relocation assistance.
Explanation: According to the Uniform Relocation Act, tenants whose leases terminate because of the condemnation of their residince are entitled to at least 90 days’s notice and assistance with relocatoin, including payment of moving expenses. (A residential tenant is not to have a compensable interest in the property. The tenant does not have an ownership interest, and from an apprisal perspective a residential leashehold interest is unlikely to have any financial value.)
- An offer is dated June 4. The offer is accepted on June 7. The buyers are approved for a loan and satisfy the financing contingency on June 9. The transaction closes on June 28. The date of the contract is:
June 7
Explanation: The date of which acceptance occurs is considered to be the date of the contract. In this case, that would be June 7.
- A couple with children would like be buy a house that was built in 1950. The home wa recently remodeled, with completely new paint and plumbing. In this situation, what does the agent always have to do?
Make sure the buyers receive a pamphlet on lead-based paoin
Explanation: A seller of a house built before 1978 must always give buyers a copy of a pamphlet on lead-based paint prepared by the Environmenatl Propetection Agency. If (but only if) the property has been inspected for lead-based paint, the seller must also give a copy of the inspection report. The agent must make sure that the seller takes these steps.
- A buyers’ purchase and sale agreement contained a financing contingency. The buyers applied for a loan with a local lender, who verbally informed them that their loan applicaiton was denied. The buyer’s agent should:
tell the buyers about their right to recieve the denial in writing
Explanation: Under the Fair Creidt Reporting Act, when a lender takes an adverse action on the baisis of a credit report, the applicant or borrower must receive written notice of that action. The consumer should also be notified of which consumer reporting agency provided that information, so that the consume can verify and, if necesary, contest that information.
- A former mansion has been divided into three apartments. The best approach to finding the property’s value is:
income
Explanation: The income approach is appropriate for properties that are oreineted toward generating income for the property’s owner. That would be true even if the property originally was intended as a single-family residence.
- A residential property manager should inform prospective tenants about:
the planned removal fo a swimming pool
Explanation: A property manager should inform tenants about the property’s amenities; however, he shouldn’t misrepresent the amenities (for instance, if a pool were about to be removed, he would want to let a prospective tenant know that before the tenant signs the lease). Antidiscrimination laws would prohibit a manager from letting a prospective tenant know about an alcoholic resident (which would be descrimianaiton on the basis of disability) or the race of the other tenants, and while he could legally tell the prospective tenant about the property appraised value, that’s likely to be of little interest to a tenant.
- A rural lot runs 500 feet east/west along its northern boundary, and 600 feet east/west along its southern boundary. Its eastern boundary runs 200 feet due north/south, while its western boundary runs 224 feet in a diagonal northeast/southwest direction. The cost of the land is $6 per square foot. What is the cost of this lot?
$660,000
Explanation: It’s best to diagram this type of problem to solve it. Once you draw it, you would then break it down into a triangle at left and a rectangle at right. The rectangle at right is 500 feet in length and 200 feet in height (500 feeet x 200 square feet). The trianagle on the left side is 200 feet in height and 100 feet at its base (200 feet x 100 feet x 1/2 = 10,000 square feet). You can ignore the 224 foot diagonal side, which does not factor into your calculations (remember, the formula for a trianagle area is 1/2 X Base X Height; the hypotenuse or diagnoal is not part of teh equation.) Add the two components together (100,000 square feet + 10,000 square feet) and then multiply by the cost per square foot (110,000 square feet x $6 per square foot = $660,000) to find its price. (see diagram)
- What information does an appraiser need in order to calculate a capitalizaiton rate?
Value and net income
Explanation: In order to calculated a property’s value, an approasier using the income approach would need to know the property’s net income and capitaliaiton rate. So conversely, if the appriaser wanted to find the capitalization rate, he would need to know the property’s value and net income.
- To avoid tenant problems, a landlord is best off using a standardized lease form that includes:
specifice rules and regulations
Explanation: Including the rules that govern the tenancy in the lease itself helps prevent disputes between landlord and tenant.
- Rudiger purchase a home for $200,000 and recieves an 80% loan from his bank. He has to pay three discount points to recieve the loan. He is also responsible for a 1% origination fee and a $300 appraisal. The seller paid a 6% commission to the listing brokerage. What is the amount of the discount point that he paid?
$4,800
Explanation: To calculate the discount points, first find the loan amont ($200,000 x .8 = $160,000). Then multiply that by the percentage of the loan represented by discount points ($160,000 x .03 = $4,800). Since the question only specified discount points, you would not include the origination fee in your calculaitons (and you certianinly wouldn’t need to know the cost of the appraisal or the commission).
- A buyer purchases a rental home tha is fully furnished. The document used to transfer title to the furniture is a:
bill of sale
Explanation: Deeds transfer title to real estate; a bill of sale is generally needed to transfer title to personal property.
- Ben recies a life estate in a property, with his nephew Will designated as the remainederman. When Ben dies, what kind of interest does Will receive?
Fee simple estate
Explanation: The interest that passes to a disignated person upon the death of the life tenant (or other measuring life) is fee simple estate. Will has remainder interst only up until the moment Ben dies. Once Ben is dead, Will’s interest immediately becomes a fee simple interest.
- A movie theater was built ten years ago. If the neighborhood is now zoned entirely residential, the movie theater:
will be allowed to continue since it was built before the new zoning law went into effect
Explanation: The movie theater is an example of noncorming use, a use that was legal before a new zoning law went into effect but doesn’t comply with the new requirements. Nonconforming uses are generally allowed to continue.
- In a bilateral contract:
two parites have exchanged promises, and both parites are obligated to perform
Explanation: In a bilateral contract, two parties have exchanged promises and both parties are obligated to perform.
- Gerald engages a licensee to list his property and find a buyer for it. In this context, the licensee is acting as a:
special agent
Explanation: When a licensee represents a seller in a specifice transaction, and is authorized to perform typical duties associated with listing a property, she acts as a special agent.
- A licensee locates what seems like a ready, willing and able buyer. However, the deal falls through at closing because the buyer can’t obtain necessary financing. At the same time, though, the seller turns out to be unable to provide marketable title. Does the seller still owe a commission to the listing agent in this case?
No, because there was not ready, willing, and able buyer
Explanation: The most important rule in determining whether a seller is obligated to pay a commission is whether a ready, willing and able buyer was found during the listing period. That would take precedence over the seller’s failure to provide marketable title. A buyer who does not have he financial ability to complete the purchase does not qualify as “able”.
- A mortgage often includes a clause requiring the lender’s consent before another borrower may assume the mortgage. the cluase is called a/an:
alienation clause (due-on-sale clause)
Explantion: An alienation clause (or due-on-sale clause) prevents assumption without the lender’s consent by stipulating that the loan balance is due and payable in full if the property is sold.
- A small house is situated on a large lot in the mixed-use neighbohorhood. The city decides that the area will, in the future, be zoned commercial. What will most likely happen to the property’s value?
It will increase, in anticpation of the changing uses
Explanation: Under the principle of anticipation, a property’s value is based on expectations of what will happn to the property in the futre. Generally commercial land is worth more than residential land. A small house on a large lot would be viewed as a tear down.
- The Real Estate Settlement Procedures Act (RESPA) applies to:
residential first mortgages
Explanation: RESPA applies to mortgages secured by dwelling with up to four units. It does not apply to commercial transactions or seller financing. (A contract for deed, which is the same thing as a land contract, can only be used in a seller-financed transaction.)
- A homeowner bought his home for $150,000. Ten years later, he refinanced his mortgage and borrowerd $100,000. Which of the folowing is true for this type of property?
Interest on loans such as this one for the purchase or refinance of principal residence is deductible.
Explanation: For a principal residence, intereset on a purchase or refinance loan of only $100,000 would be fully deductible. Which tax bracket the borrower is in would not impact that deductibility.
- Under Title VIII of the Civil Rights Act of 1968, certain transactions are exempt. Which one of the situations below would be exempted and not a violation of the act?
An unlisted home that is for sale by owner, where the only advertising is a sign in front of the property that reads simply “For Sale” and the owner owns only one other home.
Explanation: The federal Fair Housing act (Title VIII of the Civil Rights Act of 1968) does not apply to the sale or renatl of a single-family home by its owner, provided that the owner doesn’t own more than three such homes, no real estaet agent is used, and no discriminatory adveritsing is used.
- Price fixing (including setting commission rates in a community) is prohibited by the:
Sherman Antitrust Act and state anitrust laws
Explanation: The Sherman Antiturst Act and sate antitrust laws prohibit price fixing, group boycotts, market allocatoin, and tie-in arrangements.
- A metes and bounds description reads as follows: “Start at the intersection fo Route 120 and Wells Lane. Proceed due south 1,815 feet, then due east 1,200 feet. Proceed due north 1,815 feet, then return west to point of beginning.” How many acres is this property?
50
Explanation: It may help to sketch the property being described; once you do, you will notice that is is rectuangular, and you can simply use the Area = Length X Width formula. Mulitply the length and width to find that is is 2,178,000 square feet (1,815 fb x 2,178,000 sq ft) Convert this amount to acreage by dividing by 43,560 (2,178,000 / 43,650 = 50 acres). (43,560 is the number of square feet in an acre.)
- Erin entered into a lease that begins on February 1 and is set to end on January 31 three years later. The leasehold is a/an:
estate for years
Explanation: An estate for years begins on a certain date and ends on a certain date
- Which of teh following is true about surveys?
They reveal encourachments not of public record
Explanation: To determine whether there are encroachments against a property, it may be necesary to identify the precise location of the property’s boundaries, and that’s done through a survey. That’s why a title insurance company may have survey performed as part of the process of issusing an extended converage title insurance policy. While there are arguments for other answers to this question, this course and the state exam basically concern buying and selling homes; form that perpective, the most common reason for a survey is to check for encoachments.
- Allen begins providing construction services on May 2 and records a construction lien on May 5. Bart begins providing servics on May 3 and records a construction lien on May 4. On May 10, a judgment lien against the property is recorded. The property’s owner also receives notice on May 10 that he is in arrears on his property tax payments. Which lien has lien priority?
tax lien
Explanation: Property tax liens priority over other liens, including construction liens. The priority of the construction liens would be based on the date that each claimant first supplied labor or materials for the project; but the tax lien priority over both constructoin liens. Note that property tax liens attach automatically when the taxes are levied.
- Which of the following is true about a bulding designated a historical landmark?
It may not be willfully destroyed without a permit
Explanation: Historical preservation ordiances may proptect existing buildings of historical vlaue, and prohibit their destruction or modification without approval from an appropriate local authority.
- A real estaet agent shows a lsiting to two different buyers. One buyer decides in teh early mornign to make an offer on the proety for less than the listed price. The agent wirtes up the offer and plans to meet with the seller later in the day. The other buyer then contacts the agent and says that she’d lie to me a full price offer. What should the agent do?
Present both offers to the selelr at teh same time.
- To be valid, a listing agreement may be signed by:
an attorney in fact
Explanation: A listing agreement needs to be signed both by the listing agent, on the listing firm’s behalf, and by the seller. An attorney in fact, someone the seller has appointed in a power of attorney and granted the authority to convey the property, may sign the listing agreement on the seller’s behalf.
- An apartment building was built in 1960. An apartment is being rented to a couple with no children. Which of the following is true?
The teneants should sign the lead-based paint disclosure and receive a pamphlet on lead-based paint.
Explanation: A landlord must disclose the location of any known lead-based pain, provide a copy of any report concerning lead-base pain if the property has been inspected, and give tenants a copy of the lead-based pain pamphlet. Tenants do not receive the ten-day period in which to have the home tested for lead based paint that buyers do.
- A buyer’s agent has repeatedly seen sales collapse at teh last mintue becuase the buyers wern’t able to obtain financing. How could he best limit this in the future?
Require prospects to be approved first
Explanation: Getting preapproved for a loan before beginning the house hunting process is now standard procedure; this way, the buyer knows in advance the maximum amount he can count on from the bank.
- A federal law requies lenders to give booklet about shopping or a home loan to all prospective borrowers within three business days of laon application. What law is this?
RESPA
Explanation: The TILA-RESPA Integrated Disclosures Rule requires among other things, that lenders give prospective borrowers a copy of a booklet about closing costs and the home buying process entitled “THe Home Loan Toolkit”
- A property manager of a ten-unit building shows an apartment to a woman uses a wheelchair. The woman says tha she would need to make some modificiations, such as adding grab bars in teh shower and removing some carpeting in the bedroom. The landlord:
must allow the tenant to make the modificiations at her own expense, but can requires her to resore the property at the end of the lease.
Explanation: The Fair Housing Act says that a disabled tenant may make reasonable modifications toa leased property at her own expense. The tenant can be required to restore the premises at teh end of the tenancy.
- A warehouse is listed at 60 feet long by 90 feet wide, with 15-foot ceilings. The building rents for the five cents per cubic food per month. What is the amount of the monthly rental payment?
$4,050
Explanation: First, calculate the buidling’s volume (60 x 90 x 15 = 81,000 cubic feet). Multiply that by the monthy rent rate to find the amount of the monthly payment (81,000 x $0.05 = $4,050).
- Chin, a home seller, is talking to his real estate agent. He mentions that he rents the backup generator; it doesn’t belong to him. The generator would be considered:
personal property
Explanation: The generator is personal property of the company that owns it. While it might remain on the property after possession of the property changes hands, it still belongs to the rental company and they could reclaim it according to the terms of their contract.
- Carl is housebound and never goes outside. Neighbor Salvador plants a vegetable garden on a corner of Carl’s property that is not visible from the main house. After the required period of time, Salvador claims a perspecriptive easement over the portion fo Carl’s land. The easment is:
valid, because the use was open, and Carl’s knowledge, of the use isn’t considered
Explanation: A presciptive easement requires a use that is open and notorious, which means that it must be obvious enough to put the landowner on notice that someone else is using his land. Someone establishing an easement by prescription is not expected to find out whether the true owner is living on the property, what his limitiation are, or whether he is acually aware of the prescriptive use. The rule only requires actions that would be enough to put the typical owner on notice that his property interest is threatened.
- To be enforeceable, a contract for the sale of real estate must be in writing an signed by the parties. This is true beause of which law?
Statute of Frauds
Explanation: The statute of frauds requries certain contracts, including nearly all real estate contracts, to be in writing.
- Buyer Boy and Seller Sam decide to wait until Sam’s listing agreement with XYZ Real Estate Agency has expired, to avoid paying a commission. Does the firm (and, by extension, the individual listing agent) have any legal recourse?
No, the listing agent has no further recourse
Explanation: If a listing agreement does not include an extender clause (a safety clause), the listing agent has not recourse against a buyer and seller who avoid paing a commission by waiting to close until after the lsiting has expired. For this reason, most listing agreement forms have an extender clause. (Note: this question doesn’t involve the license law, so it’s a national question and not about Washington law or practice. While the question might be considered tricky, if you face a question like this on the state exam you should assume there is no extender cluase since the question doesn’t mention one.)
- A mortgage that uses both real and personal property to secure teh borrower’s debt is a:
package mortgage
Explanation: A package mortgage includes both real and personal property as collateral.
- When a borrower makes payments of a fully amortized loan, her debt service payments will cover:
both principal and interest on the loan
Explanation: A fully amortized loan is repaid through regular payments that include both a portion of the principal and interest. The final payment will pay off the principal balance, leaving no need for a balloon payment. (Most home purchase loans and budget mortgages, which include taxes and insurance in each payment, but the is not a characteristic of all fully amortized loans. Note also that the question refers to debt service payments only.)
- An appraiser is trying to estimate depreciation when valuing an older residential rental property, but is finding it difficult because no comparables have sold recently. However, the appraiser can find sufficient data on renatl rates in the same market, and a capitalization rate can be supported. Which approach to value should the appraiser use?
Income
Explanation: If comparable sales aren’t available and the accrued depreciation is difficult to estimate (which is generally true for older properties), but the data necessary to use the income approach are availalble, then it’s appropriate to use the income approach.
- The protected class of familial status” in the federal Fair Housing Act refers to the presence of:
children’s under the age of 18 living on the property
Explanation: Discrimination base on familial status refers to discriminaiton against somoen because a child (a person under 18 years old) is or will be living on the property. In addition to parents, this rule protects legal guarians, pregnant women, and people in the process of obtaining custody of a child.
