Exams

Property taxes are also referred to as: A: ad valorem B: lis pendens C: lien pendens D: ad valium

A: Ad Valorem Explanation: Ad valorem means according to value. The higher the value the higher the amount of tax.

Which of the following situations is not a violation of fair housing laws? A: A private homeowner discriminating in the sale of his own home B: Discriminatory advertising by an individual C: Discrimination in the selection of tenants by a property manager D: A broker showing listed property to white people only, at the direction of his principal

A: a private homeowner discriminating in the sale of his own home Explanation: A private owner is allowed to discriminate as long as they don't advertise it and no broker is being used, and the discrimination is not based on race, which is still covered by the 1866 law.

The parents die and the three children want to purchase the home with the stipulation that the last child to survive will have 100% ownership of the house. How should they take title to facilitate this? A: Tenancy in common B: Joint tenancy C: Tenancy in entirety D: Severalty

B: Joint tenancy Explanation: Joint tenancy has the right of survivorship and as each child would die the remaining would increase their percentage ownership. Tenancy by entirety is only for married couples, tenancy in common has no right of survivorship and severalty is only one owner.

Blockbusting is an acceptable practice: A: only under the supervision of the real estate licensees B: only when approved by either HUD or the Justice Department C: under no circumstances D: only if the seller and buyer mutually agree

C: Under no circumstances Explanation: Blockbusting is an illegal and discriminatory practice whereby some person induces a property owner to enter into a real estate transaction from which the first person may benefit financially by claiming that an inevitable influx of minority families into the neighborhood will cause property values to decline.

From the legal point of view, real estate includes: A: The Earth's Surface B: Underlying Minerals C: Underground Water D: All of the Above

D: All of the Above Explanation: Real estate is land from the earths surface to the center of the earth and up into space, plus any natural attachments (example: trees, oil, minerals) or permanent man-made improvements (example: house, factory, fence, sewer) that are attached.

Any Right that goes with the land and cannot be separated from it is classified as: A: An Appurtenance B: A Leasehold Estate C: An Estate for Years D: A Life Estate

A: An Appurtenance Explanation: An appurtenance is defined as something that goes with or pertains to the land. An appurtenances is a term for what belongs to and goes with something else, with the appurtenance being less significant than what it belongs to.

Who does not have to display an Equal Opportunity Housing sign? A: An owner selling his own property B: A broker selling single-family dwellings C: A real estate office in a subdivision D: A manager of an apartment house

A: An owner selling his own property Explanation: As of May 1, 1972 the Equal Opportunity poster must be displayed by brokerage offices, model homes, mortgage lenders and so on. Equal opportunity housing laws do not apply to the sale of a business. Apartment buildings are also required to post Equal Opportunity signage.

In order to be valid, a deed must: A: be in writing B: be recorded C: be signed by all parties

A: Be in writing Explanation: Although it is recommended that a deed be recorded, in Colorado it is not required. The grantee protects his interest in the property by recording it - making the ownership transfer a matter of public record. Acknowledgement is also recommended, and usually required for it to be recorded. Required is: the signature of the grantor, words of conveyance (granting clause), that it be in writing, that the grantee is named, consideration (payment), a description of the ownership interests being conveyed, a legal desciption, delivery of the deed and acceptance by the grantee.

A utility company has an easement to service its equipment. This is an example of: A: easement in gross B: encroachment C: police power D: easement by prescription

A: Easement in gross Explanation: A utility company has an easement in gross to service its equipment. A government authority or private service provider may acquire a gross easement over private land by virtue of the public service it performs. For example, a local authority may have the responsibility of installing and maintaining the sewerage system in an urban area. Merely by the fact that it has that responsibility, usually enshrined in some statute or local laws, gives the authority the right, by virtue of a gross easement, to enter private property to carry out installation and maintenance. The location of the easement will not usually be described precisely, but its general position will be defined by the service route (i.e. the sewer pipes in this example). Power and water lines may also have gross easements linked to them, but drainage and stormwater systems are commonly precisely defined in location and recorded in the title documents for private land.

A note for earnest money: A: Must be indicated in the Contract to Buy and Sell B: Makes a Purchase Contract void C: A promissory note for Earnest Money is not allowable D: A promissory note for Earnest Money must be redeemed within 24 hours of contract acceptance

A: Must be indicated in the Contract to Buy and Sell Explanation: See Contract to Buy and Sell Real Estate

Two brothers, John and Bill, owned valuable property left to them by their father, as joint tenants. Both married later, and then Bill died intestate. His widow would acquire: A: no interest in the property B: half interest as joint tenant with John C: half interest as tenant in common D: one-quarter interest in the property

A: No interest in the property Explanation: The widow would have no interest in the property since the two brothers were joint tenants, the surviving brother would now own the property in severalty.

The illegal activity that occurs when competing brokers get together to set commission rates is called: A: price-fixing B: group boycotts C: redlining D: blockbusting

A: Price fixing Explanation: Price-fixing is the situation of competing brokers getting together to set commission rates, and is a violation under the Sherman Anti-Trust Act, which is enforced by the Federal Trade Commission.

Before the government can exercise the right of eminent domain, the use must be: A: public, and the property owner given just compensation B: practical, and the property owner given just compensation C: for some use of the government D: for the order, safety, health, morals, and general welfare of the government and governmental employees

A: Public, and the property owner given just compensation Explanation: The government may condemn private property for public use if the owner is given just compensation.

If a seller tells an agent that he only wants to sell his property to a particular race. The broker should: A: Refuse to take the listing B: Comply with the seller's wishes C: Say he/she must consult with his broker before making a decision D: Take the listing but ignore the seller's request

A: Refuse to take the listing Explanation: Anything else would be a violation of fair housing laws. Real estate agents are required to follow all Federal, State, and Local fair housing laws.

The rights of a landowner to use waters of an adjacent stream or river are known as: A: Riparian Rights B: Zoning Rights C: Littoral Rights D: Livery of Seisin

A: Riparian Rights Explanation: While both riparian and littoral rights have to do with water, remember that riparian rights have to do with FLOWING bodies of water, such as rivers, streams or creeks.

Real property may become personal property by: A: Severance B: Purchase C: Severance and Purchase D: Annexation

A: Severance Explanation: Severing property from the real estate, for example extracting minerals from the earth creates personalty or personal property. Another example would be cutting down a tree and turning it into firewood. As a tree it was real property but as firewood it would be personal property.

Smith and Jones are joint tenants. Smith sells her interest to Brown. What is the relationship between Jones and Brown? A: They are tenants in common B: They are joint tenants C: They each have ownership in severalty D: The are tenants in entirety

A: They are tenants in common Explanation: Once the joint tenancy has been broken by the sale of the property then it is tenancy in common.

A person seeking intervention, who believes that they have been subject to discriminatory housing practice, must: A: file a written complaint with HUD within 1 year B: file a complaint with the Real Estate Commission C: file a written complaint with HUD within 2 years D: file a written complaint with the State of Colorado

A: file a written complaint with HUD within 1 year Explanation: Person seeking intervention must file a written complaint with the Office of Fair Housing within 1 year or may file in federal court within 2 years of the alleged discrimination.

A lien is a monetary claim that if unpaid awards the lien holder the right of: A: foreclosure B: eviction C: ownership D: possession

A: foreclosure Explanation: A lien on a property gives the lienee (the lender) a right of foreclosure if the lien is not paid. Foreclosure is a specific legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan. Eviction is the removal of a tenant from rental property by the landlord or from premises that were foreclosed and then sold to the highest bidder.

An instrument, which requires recordation to be legally effective, is a(n): A: mechanic's lien B: agreement to sell real estate C: will

A: mechanic's lien Explanation: A mechanic's lien does not exist unless it is recorded. The mechanic's lien is one of the few documents that must be recorded to be legally effective. Deeds are almost always recorded to make it difficult for someone to contest that the transfer of ownership occurred and to make it easier to prove ownership. It's just that it is not legally required to record a deed. For a deed to be valid it must have the grantor's signature (the seller), consideration (payment), a description of the property, words of conveyance and the deed must be delivered within the lifespan of the grantor.

The government must meet all of the following requirements in order to exercise its right of eminent domain during condemnation except: A: obtain the consent of the property owner B: prove a public good C: pay a fair compensation D: follow proper legal procedures

A: obtain the consent of the property owner Explanation: Eminent domain refers to the power possessed by the state over all property within the state, specifically its power to appropriate property for a public use. In some jurisdictions, the state delegates eminent domain power to certain public and private companies, typically utilities, such that they can bring eminent domain actions to run telephone, power, water, or gas lines. In most countries, including the United States under the Fifth Amendment to the Constitution, the owner of any appropriated land is entitled to reasonable compensation, usually defined as the fair market value of the property. Proceedings to take land under eminent domain are typically referred to as "condemnation" proceedings.

Acknowledgment (another term for notarized) is required to: A: validate the signatures on a deed for recording B: execute a deed C: deliver a deed D: convey legal title

A: validate the signatures on a deed for recording Explanation: Acknowledgment, another term for having something notarized, is used to validate the signatures on a deed for recording to ensure they are the true signatures of the persons involved (the Grantor - required on a deed and the Grantee - not required on a deed but usually included) and that they were not signed under duress. Acknowledgment in itself does not validate the deed, only the signatures, but it is required by the Recording process.

One requirement for valid transfer of title to property by deed is: A: words of conveyance B: witnesses C: recordation D: signature of the grantee

A: words of conveyance Explanation:For a valid transfer of property you need words of conveyance, such as, "I hereby grant and convey- - - -". Although it is recommended that a deed be recorded, in Colorado it is not required. The grantee protects his interest in the property by recording it - making the ownership transfer a matter of public record. Acknowledgement is also recommended, and usually required for it to be recorded. Required is: the signature of the grantor, words of conveyance (granting clause), that it be in writing, that the grantee is named, consideration (payment), a description of the ownership interests being conveyed, a legal desciption, delivery of the deed and acceptance by the grantee.

Settlement statements are to be available for inspection by the buyer: A: one week prior to closing B: 24 hours prior to close C: one hour prior to closing D: prior to the commencement of the closing

B: 24 hours prior to close Explanation: Legally, settlement statements are supposed to be available for inspection 24 hours prior to closing. As a matter of practicability, many closings occur as soon as the closing documents are ready. (The parties waive the 24-hour period.)

When a lien against a parcel of real estate may result from a lawsuit currently before the courts, one examining the public records would look for: A: constructive notice B: a lis pendens notice C: the chain of title D: a suit to quiet title

B: A lis pendens notice Explanation: Lis pendens means "suit pending".

Rico and Bernice Wilcox have a home valued at $275,000 for tax purposes. This valuation is called a (an): A: tax rate B: assessed value C: board of review appraisal D: equalization factor

B: Assessed value Explanation: The assessed value is a percentage of the market value. The dollar value of an asset assigned by a public tax assessor for the purposes of taxation. Many jurisdictions impose tax on a value that is only a portion of market value. This assessed value is the market value times an assessment ratio. Assessment ratios are often set by local taxing jurisdictions. However, some states impose constraints on the assessment ratios used by taxing jurisdictions within the state. Some such restrictions vary by type or use of property, and may vary by jurisdiction within the state. Some states impose restrictions on the rate at which assessed value may increase.

Jeff's land has an easement to cross Bill's property. Jeff subdivides his property and sells to Charlie. Which statement is true? A: Land benefitting from an easement cannot be subdivided B: Both Jeff's and Charlie's land have easement rights C: Jeff's land retains the easement, but Charlie's does not D: The easement no longer exists

B: Both Jeff's and Charlie's land have easement rights Explanation: Subdividing does not change the easement rights, they are for the land not the individuals. An easement is a certain right to use the real property of another without possessing it. It is "best typified in the right of way which one landowner, A, may enjoy over the land of another, B." Easements are helpful for providing pathways across two or more pieces of property or allowing an individual to fish in a privately owned pond. An easement is considered a property right in itself by common law and is still treated as a type of property in most jurisdictions.

Bob Burnside has defaulted in payment of several debts, and a court has ordered his property sold to satisfy them. A report reveals several outstanding liens against the property. Which has first priority? A: The outstanding mortgage dated and recorded one year ago B: Current real estate taxes C: A mechanic's lien for work that was started two months before the date the mortgage was recorded D: A court judgment rendered and recorded last month

B: Current real estate taxes Explanation: Real estate taxes always have first priority.

The earth's surface extending downward to the center of the earth and upward into space, including all things permanently attached, but not the rights such as an easement, is known as: A: Real Property B: Real Estate C: Fixtures D: A Bundle of Legal Rights

B: Real Estate Explanation: The terms real property and land are often confused with the term "real estate." However, "land" is a more specific definition, since it includes the earth's surface and all things attached by nature; real estate includes the land and all things attached by nature and mankind, while "real property" includes all of real estate plus the rights including the "bundle of legal rights" that are obtained with ownership.

The rights of an owner with property abutting the bank of a stream, river, or creek, is/are called; A: Littoral Rights B: Riparian Rights C: Eminent Domain D: Dominant Tenements

B: Riparian Rights Explanation: Riparian rights are along a stream, river or creek; littoral rights are abutting a pond, lake, or ocean.

An undivided interest held by two or more parties, without the right of survivorship is: A: joint tenancy B: tenancy in common C: tenancy in severalty D: tenancy by the entirety

B: Tenancy in common Explanation: Explanation Tenancy in common is a form of concurrent estate in which each owner, referred to as a tenant in common, is regarded by the law as owning separate and distinct shares of the same property. By default, all co-owners own equal shares, but their interests may differ in size. TIC owners own percentages in an undivided property rather than particular units or apartments, and their deeds show only their ownership percentages. The right of a particular TIC owner to use a particular dwelling comes from a written contract signed by all co-owners (often called a "Tenancy In Common Agreement"), not from a deed, map or other document recorded in county records. This form of ownership is most common where the co-owners are not married or have contributed different amounts to the purchase of the property. The assets of a joint commercial partnership might be held as a tenancy in common. Tenants in common have no right of survivorship, meaning that if one tenant in common dies, that tenant's interest in the property will be part of his or her estate and pass by inheritance to that owner's devisees or heirs, either by will, or by intestate succession. Also, as each tenant in common has an interest in the property, they may, in the absence of any restriction agreed to between all the tenants in common, sell or otherwise deal with the interest in the property (e.g. mortgage it) during their lifetime, like any other property interest.

Smith owned a home subject to a bank loan. After living there a year his cesspool caved in and he contracted to have a new one dug and connected. About that time, he lost his job and couldn't pay his bill. The contractor filed a mechanic's lien. Then the bank foreclosed and sold the property for the amount the borrower owed them. Which of the following is true? A: The bank secured title subject to the mechanic's lien B: The contractor loses out, the bank's lien was recorded first C: The mechanic's lien has first priority from the proceeds of the sale D: A holder of a mechanic's liens can never recover from a foreclosure

B: The contractor loses out, the bank's lien was recorded first Explanation: The trust deed and note held by the bank has priority over the mechanic's lien because it was recorded first and there were no excess funds after foreclosing. In English - The bank loan was recorded first, so the bank gets paid first. Since the home sold for the value of the loan - after the bank got paid, there was nothing left for the contractor. Mechanic's Liens do have an unusual property that can push them up the priority list, but they do not get to go to the head of the line every time. The date on a Mechanic's Lien is the date work commenced or supplies were delivered to the jobsite. Since Smith owned the home for a year the bank lien would have been recorded as of when Smith originally got the loan. This is well before the work on the cesspool and thus would be higher in the priority list for who gets paid when the property was foreclosed. The only lien that always goes to the head of the list is Property Taxes. Please note that a lien for Income Taxes does not have a special priority, only property taxes.

When a life estate terminates a new person inherits whatever remains in a new estate. The name of the estate which remains is referred to as: A: the right of survivorship B: the remainder estate C: the reversionary right D: The reversionary interest

B: The remainder estate Explanation: That part of a remainder estate is that which is left from a life estate. Don't confuse this with reversionary interest, which is the future interest that reverts to a grantor or his heirs. An example of a reversionary interest is: a landowner gives land to a city for a park. In the deed there is a reversionary interest which says if the land should ever cease being a park, the ownership would revert to the estate of the original landowner.

Which of the following is true with regard to water rights? A: They are Personal Property Rights that may be Sold and Transferred by Bill of Sale B: They are Real Property Rights that may be Sold Separately From the Land with Their own Deed C: They are Real Property Rights that Automatically Transfer with the Land D: They are Personal Property Rights Permanently Affixed to the Land

B: They are Real Property Rights that may be Sold Separately From the Land with Their own Deed Explanation: Water rights are real property that may be sold separately and transferred by deed. They could be transferred on a water rights deed or a general warranty deed. They can be included in the sale of the property if expressly stated in the contract and both parties agree.

Company S has purchased an old warehouse they plan to convert into lofts. They should have 30 lofts when finished. This would be considered: A: common sub-community B: a subdivision C: a financial risk D: condominiums

B: a subdivision Explanation: A subdivision includes conversions of a pre-existing building into units of 20 or more. If these are to be residential lofts, the conversion must be registered with the CREC.

Unauthorized use of land may mature into an easement by prescription: A: after 8 years B: after 18 years C: after 19 years

B: after 18 years Explanation: In Colorado an easement by prescription can be exercised in 18 years. Easement by prescription can vary by state from a period of 7 years up to 21 years. The similarities between adverse possession and prescriptive easements far outweigh the differences. Both result from the operation of the statute of limitations for trespass. In addition, both require that the following elements are satisfied: open and notorious, adverse, continuous and uninterrupted, for the statutory period. The differences lie primarily in determining what is accomplished by satisfying those elements. With adverse possession, the goal is to acquire title to real property. For that reason, in addition to the elements above, an additional element is actual and exclusive possession of the property. If x has actual and exclusive possession which is open and notorious, adverse, continuous and uninterrupted for the statutory period, and the owner of the property does not take action to eject x within that time, then title to the property will vest in x. Acquiring an easement by prescription, however, is not directed towards the goal of acquiring title to property. Rather, it's directed towards acquiring an easement, even though the formalities usually required to create an easement (for example a writing signed by the grantor) are not present. So, if x uses (rather than possesses) the land of y, and the use is open and notorious, adverse, continuous and uninterrupted, for the statutory period, the x has acquired an easement and can continue to use that land in the same manner as his previous use.

Al Jones, Harold Murphy, and Josh Hagstrom are joint tenants owning a parcel of land. Hagstrom conveys his interest to his friend, Willy Phillips. After the conveyance, Jones and Murphy: A: become tenants in common B: remain joint tenants owning an undivided 2/3 interest in the land C: become joint tenants with Phillips D: continue to be joint tenants with Hagstrom

B: remain joint tenants owning an undivided 2/3 interest in the land Explanation: It is possible to be a joint tenant with one party, and a tenant in common with another party. In this case Jones and Murphy are tenants in common with Phillips. Jones and Murphy remain as joint tenants.

As agent for a principal, a real estate broker can: A: guarantee a prospective buyer that the principal will accept any offer that meets the terms of listing contract B: solicit an offer to purchase from a prospective buyer C: change the terms of the listing contract D: advise the prospective buyer of the best way to take title to the property

B: solicit an offer to purchase from a prospective buyer Explanation: A broker who acts in excess of his authority may be liable to his principal. All of the other answers are outide of the scope of an agent's duty.

Which of the following must apply when land is taken under the right of eminent domain? A: The statue of limitations must pass. B: The taking of the property must be for public purpose. C: The element of adverse possession must exist. D: The government must give constructive notice.

B: the taking of the property must be for public purpose Explanation: The most common uses of property taken by eminent domain are for public utilities, highways, and railroads, however it may also be taken for reasons of public safety, such as in the case of Centralia, Pennsylvania. Some jurisdictions require that the government body offer to purchase the property before resorting to the use of eminent domain.

Which of the following is not real property? A: Wall to Wall Carpeting B: Built in Dishwasher C: Drapes D: Sump Pump

C: Drapes Explanation: Drapes are personal property as are all other non-attached window coverings. They can be included in the sale of a property if expressly included in the contract to buy and sell for the property. All other items listed in the answers are attached to the property and therefore are considered real property.

Private property that is abandoned is taken by the local government. This is an example of: A: Police power B: Taxation C: Escheat D: Eminent Domain

C: Escheat Explanation: This is a classic example of property that government can take over through escheat, another example would be a person dying without a will and no living relatives. The term is often now applied to the transfer of the title to a person's property to the state when the person dies intestate without any other person capable of taking the property as heir. For example, a common-law jurisdiction's intestacy statute might provide that when someone dies without a will, and is not survived by a spouse, descendants, parents, grandparents, descendants of parents, children or grandchildren of grandparents, or great-grandchildren of grandparents, then the person's estate will escheat to the state.

Legal tests to determine whether a fixture (something which is attached) should stay or can be removed from a property by a Seller include all of the following EXCEPT: A: Intention of the Parties B: Method of Attachment C: How they were Purchased D: Existence of an Agreement

C: How they were Purchased Explanation: Legal tests of a fixture include intention of the parties (did they plan for it to stay or did they plan to take the object usually defined in the contract), method of attachment (is it screwed into the wall like a curtain rod or is it just hanging on a rod like a curtain), its type and adaptability to the real property, and the relationship of the parties which is usually set forth in an agreement or contract.

Ben and Dave are co-owners of a fee simple estate in a parcel of real estate. Ben dies intestate and leaves no estate to be distributed to his heirs. Dave is neither related to Ben, or a creditor of Ben. Which of the following explains how Dave acquired the interest of Ben? A: Adverse possession B: Reversionary right C: Joint tenancy D: Mortgage foreclosure

C: Joint Tenancy Explanation: In estate law, joint tenancy is a special form of ownership by two or more persons of the same property. The individuals, who are called joint tenants, share equal ownership of the property and have the equal, undivided right to keep or dispose of the property. Joint tenancy creates a Right of Survivorship. This right provides that if any one of the joint tenants dies, the remainder of the property is transferred to the survivors.

Joint tenancy and tenancy in common, are two ways to own property concurrently with someone else. How does joint tenancy differ from tenancy in common? A: Joint tenancy has the unity of possession, and tenancy in common does not B: Joint tenancy requires the signature of all owners at the closing, and tenancy in common does not C: Joint tenancy has the right of survivorship, and tenancy in common does not D: Unlike joint tenancy, tenancy in common has the unity of interest

C: Joint tenancy requires the signature of all owners at the closing, and tenancy in common does not. Explanation: Joint tenancy is a form of ownership by two or more individuals together. It differs from other types of co-ownership in that the surviving joint tenant immediately becomes the owner of the whole property upon the death of the other joint tenant. This is called a "right of survivorship." Joint ownership has rather rigid legal limitations and consequences that are sometimes not intended. A tenancy in common is another form of co-ownership. It is the ownership of an asset by two or more individuals together, but without the rights of survivorship that are found in a joint tenancy. Thus, on the death of one co-owner, his or her interest will not pass to the surviving owner or owners but will pass according to his or her will or, if there is no will, by the law determining heirs. More info on joint ownership - There are three types of concurrent ownership, or ownership of property by two or more persons: Tenancy by the Entirety, Joint Tenancy, and Tenancy in Common. A Tenancy by the Entirety can be created only by married persons. Anybody regardless of married status may choose to create a Joint Tenancy or a Tenancy in Common. First of all Tenancy by the Entirety is not used in Colorado we use Joint Tenancy for this purpose instead. Still, the term occasionally makes an appearance on the National side of the licensing exam as some state do use it. So, it is best to know it. Tenancy by the Entirety allows spouses to own property together as a single legal entity. Under a tenancy by the entirety, creditors of an individual spouse may not attach and sell the interest of a debtor spouse: only creditors of the couple may attach and sell the interest in the property owned by tenancy by the entirety. The most important difference between a tenancy by the entirety and a joint tenancy or tenancy in common is that a tenant by the entirety may not sell or give away his interest in the property without the consent of the other tenant. Upon the death of one of the spouses, the deceased spouse's interest in the property devolves to the surviving spouse, and not to other heirs of the deceased spouse. This is called the right of survivorship. Tenants in common do not have a right of survivorship. In a tenancy in common, persons may sell or give away their ownership interest. Joint tenants do have a right of survivorship, but a joint tenant may sell or give away her interest in the property. If a joint tenant sells her interest in a joint tenancy, the tenancy becomes a tenancy in common, and no tenant has a right of survivorship. A tenancy by the entirety cannot be reduced to a joint tenancy or tenancy in common by a conveyance of property. Generally, the couple must Divorce, obtain an Annulment, or agree to amend the title to the property to extinguish a tenancy by the entirety.

A seller mentions to her agent that the previous owners of the property may have dumped hazardous waste on the site. Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), who is liable for damages from the dumping prior to the sale of the property? A: Agent B: Buyer C: Seller D: The City

C: Seller Explanation: Superfund or Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) is a United States federal law designed to clean up sites contaminated with hazardous substances as well as broadly define "pollutants or contaminants." A potentially responsible party (PRP) is a possible polluter who may eventually be held liable under CERCLA for the contamination or misuse of a particular property orresource. Four classes of PRPs may be liable for contamination at a Superfund site: the current owner or operator of the site; the owner or operator of a site at the time that disposal of a hazardous substance, pollutant or contaminant occurred; a person who arranged for the disposal of a hazardous substance, pollutant or contaminant at a site;and a person who transported a hazardous substance, pollutant or contaminant to a site, who also has selected that site for the disposal of the hazardous substances, pollutants or contaminants

Certain items on the premise that are installed by the tenant and are related to the tenant's business are called: A: Fixtures B: Emblements C: Trade Fixtures D: Easements

C: Trade Fixtures Explanation: The tenant owns trade fixtures. They must be removed before midnight of the last day of the lease or they may become the property of the lessor.

If a debtor owns three pieces of real estate located in the same county, and a judgment is entered against him, it will be a lien against: A: the property first acquired B: the property last acquired C: all three properties D: homestead property only

C: all three properties Explanation: A judgment lien is general, involuntary lien, affecting all properties owned by a debtor in the county where the judgment was recorded, as well as any he acquires subsequent to the judgment

Mr. Jones has a property valued at $150,000. The 2003 taxes were 27.65 mills. In 2004 the mill levy was reduced to 25 mills but the assessed value increased 10%. Did the taxes: A: stay the same B: increase C: decrease D: none of the above

C: decrease

A part of Phil Wilson's building is on the Bower's land; this is called a(n): A: accretion B: estoppel C: encroachment D: easement

C: encroachment Explanation: Encroachment is trespass. After 18 years in Colorado it can mature into an easement by prescription or adverse possession. A building, part of a building, or any obstruction that physically intrudes upon, overlaps, or trespasses upon the property of another, and has been verified by a survey is encroachment.

Sole ownership by an individual is ownership: A: in common interest B: in gross C: in severalty D: in joint tenancy

C: in severalty Explanation: Severalty is the quality or condition of being separate and distinct. According to law it means a separate and individual right to possession or ownership that is not shared with any other person. Land, property, or an estate owned in severalty.

Probate means an action to: A: cure a defect by a quitclaim deed B: prove title by adverse possession C: process a will to establish its validity D: obtain access to a safe deposit box

C: process a will to establish its validity Explanation: Probate is the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person's property under the valid will. A surrogate court decides the validity of a testator's will. A probate interprets the instructions of the deceased, decides the executor as the personal representative of the estate, and adjudicates the interests of heirs and other parties who may have claims against the estate.

Every employing broker (AKA sponsoring broker) must provide: A: medical insurance B: a 401K plan C: supervision D: personal assistants

C: supervision Explanation Every employing broker must provide supervision. It is the law!

In transactions requiring the use of a licensee buyout addendum: A: the seller has a choice of whether or not to pay a commission B: the buyer has a choice of whether or not a commission shall be paid C: the seller pays no commission D: the seller pays a reduced commissionC: supervision Explanation Every employing broker must provide supervision. It is the law!

C: the seller pays no commission Explanation: The seller pays no sales commission pursuant to a licensee buyout addendum. The agent/buyer usually will have deducted their commission and anticipated costs to arrive at the price they offer to purchase the property for. More info: What Is a Licensee Buyout Addendum? by Maxwell Wallace, Demand Media A licensee buyout addendum is a form used in certain real estate and property transactions in the state of Colorado. The LBA is used only in the purchase and sale of properties between licensed real estate professionals and their own clients. History and Purpose The Licensee Buy-Out Addendum to Contract to Buy and Sell Real Estate is intended to prevent improprieties and conflicts of interest in licensee/client transactions, as well as to make sellers contractually aware of the potential differences in selling to a licensed real estate professional as opposed to conventional buyers. Situations Dictating Use Licensed real estate agents are required to use an LBA when they enter into contracts to purchase properties concurrently with the initial listing of that property, when it immediately hits the market. Licensees also are required to use the LBA form when they are purchasing a property to facilitate its owner's purchase of another property, as well as when they continue to market that property to other potential buyers. Deleted Provisions Under the provisions of the licensee buyout addendum, several conventional provisions of standard real estate listing contracts reached under Colorado state law are deleted. Deleted provisions include a property's appraisal condition, liquidated damages or pre-assessed damages to the property, provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms. Profit and Loss Stipulations Colorado's LBA also stands as contractual acknowledgment by a property seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the LBA protects the property seller by acknowledging that any fees related to closing, holding and reselling the property are all absorbed by the buyer and not the property seller as the original or prior landowner.

A property manager who enforces a "no pet" policy may do which of the following when processing an application from a handicapped person with a service animal: A: deny the application because of the animal B: accept the application but charge a pet deposit C: accept the application and charge a higher monthly rate D: accept the application

D: Accept the application Explanation: A property manager must just accept the application from the disabled person. They cannot require a larger security deposit, they cannot deny renting because it is a service animal, but they can collect for any damage at the end of the lease.

A refusal to make reasonable accommodations in rules, policies, practices, or services when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling is one definition of: A: Fair Housing B: Redlining C: Blockbusting D: Discrimination

D: Discrimination Explanation: Discrimination is the correct term in this case, the broad term to describe all types of discriminatory acts. Discrimination can occur if it's a violation of Federal, State, or Local Fair Housing Laws; or if a violation of ADA laws and statues.

Colorado water rights are based on the: A: Doctrine of Adjudication B: Principle of Beneficial Use C: Common Law D: Doctrine of Prior Appropriation

D: Doctrine of Prior Appropriation Explanation: Water rights in Colorado are based upon the doctrine of prior appropriation, unless sold the individual who had the first rights to that water retains those rights.

A black homebuyer inquires about a home in a predominantly white residential neighborhood. What should the broker say to the buyer? A: "You don't want to live there because the residents are trying to preserve their racial quotas." B: "I'll be happy to show you areas where black people are welcome." C: "The residents have expressed a desire to keep the neighborhood homogeneous with no minorities." D: "I'll show you any house in which you're interested."

D: I'll sow you any house in which you're interested. Explanation: A real estate broker may never discriminate under any circumstance, and cannot "steer" prospective buyers to a location. The broker should say I'll show you any home in which you are interested.

When a spouse owns a piece of land separately, s/he owns the property: A: Tenancy in common B: Joint tenancy C: Tenancy by entirety D: In Severalty

D: In severalty Explanation: Severalty is only being owned by one person. Severalty is an estate which the tenant holds in his own right, without being joined in interest with any other person - distinguished from joint tenancy, coparcenary, and tenancy in common.

Your neighbors use your driveway to reach their garage on their property. Your attorney explains that ownership of the neighbors' real estate includes an easement appurtenant giving them the driveway right. Your property is the: A: dominant tenement B: tenement C: leasehold D: servient tenement

D: Servient Tenement Explanation: 1. The "holder" of an easement right, or the party that is benefiting from the easement, is referred to as the "dominant tenant". Likewise, the property benefiting from an easement is referred to as the "dominant estate" or "dominant tenement". 2. The party "burdened" by the easement is referred to as the "servient tenant". Likewise, the property burdened by the easement is the "servient estate" or "servient tenement".

This illegal activity is a conspiracy to boycott a firm and drive it out of business. This is known as: A: price-fixing B: Redlining C: blockbusting D: group boycotts

D: group boycotts Explanation: Group boycotts happen when a group conspires to drive a company out of business by boycotting it. An example of group boycotting would be for someone to stand up at a company sales meeting and say all of our agents must use this title company or this mortgage company; that would be group boycotting because you are eliminating the competition.

The maximum amount of days that can be specified in the Holdover Period in the Listing Contract is: A: 30 days B: 60 days C: 90 days D: negotiable by Seller and Broker

D: negotiable by Seller and Broker Explanation: On the date a license expires, for the following 30 days it is placed into an "inactive" status and may be renewed by paying the regular renewal fee. After 30 days it is placed into an "expired" status. Renewing an expired license requires the payment of additional fees and satisfying additional educational requirements.

One important element of an estate held in joint tenancy is: A: the joint tenants must be husband and wife B: there is no right of survivorship C: there cannot be more than two people sharing ownership D: ownership has to be equal

D: ownership has to be equal Explanation: A joint tenancy or joint tenancy with right of survivorship (JTROS or JTWROS) is a type of concurrent estate in which co-owners have a right of survivorship, meaning that if one owner dies, that owner's interest in the property will pass to the surviving owner or owners by operation of law, and avoiding probate. The deceased owner's interest in the property simply evaporates and cannot be inherited by his or her heirs. Under this type of ownership, the last owner living owns all the property, and on his or her death the property will form part of their estate. Unlike a tenancy in common, where co-owners may have unequal interests in a property, joint co-owners have an equal share in the property. This form of ownership is common between husband and wife, and parent and child, and in any other situation where parties want ownership to pass immediately and automatically to the survivor. For bank and brokerage accounts held in this fashion, the acronym JTWROS is commonly appended to the account name as evidence of the owners' intent.

A home closes for $365,000, how much would you pay the county clerk and public trustee? A: $3,650 B: $36.50 C: $365 D: $3.65

B: $36.50 Explanation: This question relates to the documentary fee, which according to C.R.S. 39-13-102 (2b) authorizes county clerks to collect a fee on all real-estate related documents received for recording or filing. The fee is one penny per every $100. $.0001 x $365,000 = $36.50 39-13-102. Documentary fee imposed - amount - to whom payable. (1) There is imposed and shall be paid, by every person offering for recording in the office of the county clerk and recorder any deed or instrument in writing wherein or whereby title to real property situated in this state is granted or conveyed, a fee, referred to in this article as "documentary fee", measured by the consideration paid or to be paid for such grant or conveyance, which documentary fee shall be in addition to any other fee fixed by law for the recording of such deed or instrument in writing. (2) The amount of documentary fee payable in each case shall be as follows: (a) When there is no consideration or when the total consideration paid by the purchaser, inclusive of the amount of any lien or encumbrance against the real property granted or conveyed and all charges and expenses required to be paid for the making of such grant or conveyance is five hundred dollars or less, no documentary fee shall be payable. (b) When the total consideration paid by the purchaser, inclusive of the amount of any lien or encumbrance against the real property granted or conveyed and all charges and expenses required to be paid for the making of such grant or conveyance exceeds five hundred dollars, the documentary fee payable shall be computed at the rate of one cent for each one hundred dollars, or major fraction thereof, of such consideration. (3) All documentary fees shall be payable to and collected by the county clerk and recorder. (4) In those cases in which real property located in two or more counties is granted or conveyed in a single transaction, each county clerk and recorder shall collect a portion of the total documentary fee referred to in subsection (2) of this section in the same ratio that the consideration fairly attributable to the part of such property located in his county bears to the total consideration. The allocation of the total consideration between counties is to be made by the person offering such deed or instrument in writing for recording. (5) (a) For the purposes of determining the documentary fee in accordance with subsection (2) of the section, the amount of consideration paid for the grant or conveyance of residential real property, inclusive of liens, charges, and expenses, is the amount listed on the grant or conveyance document; except that, if there is no consideration amount listed on the grant or conveyance document or the amount listed is five hundred dollars or less, and there is a related declaration filed in accordance with section 39-14-102, then the amount of consideration paid is the total sales price listed on the declaration. (b) In determining the amount of consideration paid for the grant or conveyance of commercial or industrial real property, inclusive of liens, charges, and expenses, the total amount of the sales price to the purchaser shall be deemed to be paid for the grant or conveyance of real property unless evidence of the separate consideration paid for personal property is submitted as shown on the purchaser's use tax return as filed with the department of revenue or unless evidence of such separate consideration is shown on the declaration filed pursuant to the provisions of section 39-14-102. (c) Any such evidence submitted under paragraph (a) or (b) of this subsection (5) shall not be recorded or filed by the county clerk and recorder and shall not be subject to public inspection but shall be sent to the county assessor. Such evidence shall be used by the assessor as required by section 39-13-107 but shall be kept confidential and shall not be subject to public inspection. (d) Solely for the purpose of computing the documentary fee, the property conveyed by a deed or other instrument will be regarded as residential unless the deed or other instrument includes a conspicuous statement or notation that the property is not to be regarded as residential. This provision does not authorize the alteration of a deed or other instrument after it has been executed. 39-13-103. Evidence of payment of fee. Each county clerk and recorder shall evidence payment of the documentary fee imposed in this article in the recording annotation or by imprinting, typing, stamping, or writing in ink on the margin or other blank portion of every document to which such fee applies the words "State Documentary Fee", the amount of documentary fee paid, and the date upon which paid, which impression or notation shall be made on such document before it is recorded.

An escrow trust account: A: Is the account where the payroll taxes for withholding is placed B: Is a separate account established to hold money belonging to others C: Should have the words "Operating Account" in its account identification

B: Is a separate account established to hold money belonging to others Explanation: A trust account is established to hold earnest money or security deposits.

Which of the following charges increases the lender's yield on a real estate loan: A: Appraisal B: Origination Fee C: Credit report D: Title Insurance

B: Origination Fee Explanation: The others are paid to the ones providing the service.

The buyer's legal procedure to enforce a contract is: A: Lis pendens B: Specific performance C: An attachment D: An injunction

B: Specific performance Explanation: Specific performance is the buyer's legal remedy to enforce the terms of the contract

A purchaser obtains a fixed rate loan to finance a home. Which of the following characteristics is true of this loan? A: The loan cannot be sold in the secondary market B: The amount of interest to be paid is predetermined C: The monthly payment amount will fluctuate each month D: The loan's interest rate will change according to an index

B: The amount of interest to be paid is predetermined Explanation: A fixed loan has a predetermined interest rate.

The seller's property disclosure indicates the condition of all but which of the following? A: The appliances B: The title C: The heating and cooling system D: The electrical system

B: The title Explanation: The title to the property is addressed the the Exclusive Right to Buy Sell (Purchase Contract).

What can the Real Estate Commission do with a broker's license after one of his licensees has had his license revoked or suspended? A: The brokers license is automatically suspended until a hearing can be held B: There must first be a hearing to determine if the broker had knowledge, or did not properly supervise the associate broker prior to suspension or revocation of his license C: The broker's license is immediately revoked D: Nothing can be done to the employing broker

B: There must first be a hearing to determine if the broker had knowledge, or did not properly supervise the associate broker prior to suspension or revocation of his license Explanation: Should there be a question of improper supervision on the part of the employing broker then the real estate commission would have to hold a hearing before any disciplinary action could be taken.

Trust account records must be kept for: A: 2 years B: 3 years C: 4 years D: 5 years

C: 4 years

Colorado is a lien theory state. This means: A: seller is released from obligation by the lender B: liens recorded against a property are normally foreclosed through the courts C: Deed of Trusts are liens and do not give the lender title to the property D: all of the above

C: Deed of Trusts are liens and do not give the lender title to the property Explanation: Lien Theory secures the loan between the the buyer and the lender. In a lien theory state the lender does not get title they just get a lien established by a Deed of Trust. All liens on a property must be cleared prior to sale, this means the lender knows they will get paid if the property is ever sold. The seller is paid and out of the picture, that we are a lien theory state has nothing to do with them. In a lien theory state the lien is enforced by the Public Trustee and not the courts. More about this topic.... The National Exam always has questions that require you to have a solid understanding of the difference between Lien Theory and Title Theory. Oh boy, you say, what the heck is that and can you explain it in simpleze? Let's try... This is all about how a lender secures the loan on a property. It is not automatic that if, for example, an owner does not make payments on a property, the lender has the right to sell the property to pay the debt, but does not have the right to sell the car, the patio set, the baseball card collection or anything else the borrower owns. There has to be a legal mechanism that connects the money a borrower received with the property that the money purchased. That mechanism varies from state-to-state, but there are generally two choices - in a minority of states (I do not know how many) that legal mechanism is called "Title Theory," in most states including our beloved Colorado, home of the 2015 Superbowl Champs, your Denver Broncos, we belong in the "Lien Theory" camp. In a Title Theory state it is simple, the borrower borrows from the lender and the lender holds legal title to the property. If the borrower defaults, the lender goes to a judge and requests to take possession of the property THAT THEY ALREADY OWN. A key point here is that foreclosure in a Title Theory state requires a "judicial foreclosure" (key buzzwords). In a Lien Theory state, such as ours (repeating repeatedly is a good thing for a teacher) when someone borrows money to purchase a property, they put a voluntary lien on the property in a document called a "Trust Deed" (aka Deed of Trust). Since the borrower did it, s/he gets the "or" letters and becomes the "Trustor". So who becomes the corresponding "Trustee"? The "Trustee" has ultimate legal authority to decide if the "Trustor" (borrower) defaulted on the loan and the property sold to satisfy the lien. We say the "Trustee" has "naked title," which is a slightly salacious way of saying the Trustee has a teeny tiny bit of legal title, not enough to have any of the benefits of being an owner, but enough to sell off a property in the event of a default. I am certain when the job of Trustee was invented that all the lenders lined up to volunteer, but nobody thought that was a good idea. Instead, a neutral party, the Governor in Colorado, appoints a number of equally neutral officials throughout the state and we call them "Public Trustees". Sometimes they are also the County Treasurer. What about the Lenders? Since all of this is being done for the benefit of a lender named in a Trust Deed we call this lender the "Beneficiary." To add it all up - the Trustor (borrower) places a lien on her property giving the right to sell the property if she defaults to a neutral 3rd party called the "Public Trustee" for the benefit of the lender who we call the "beneficiary." BUZZWORDS ALERTS! Since the Public Trustee is not a judge or court, when s/he forecloses on a property we call this a "non-judicial foreclosure." And when the beneficiary (lender) sends notification to the trustee (Public Trustee) that the trustor (borrower) has defaulted, we call this document a "Notice of Election and Demand (aka Notice of Election.)

Which of the following gives best evidence of a buyer's intention to carry out the terms of a real estate sales contract? A: The signing of the buy and sell contract B: Agreement to seek mortgage financing C: The earnest money deposit D: The provision that "time is of the essence"

C: The earnest money deposit Explanation: The earnest money acts as a "good faith" deposit.

John Johnson owned a parcel of land around his copper mine. He sold the mine and property for $230,000 with the verbal understanding that copper already mined before the date of sale would not be included in the sale. The mined copper is considered by law as: A: realty B: a fixture C: personalty D: sub rosa

C: personalty Explanation: Any mineral that has been removed from below the surface is personalty.

The Word Improvement Refers to: A: Streets B: Sewage and Drainage Systems C: Sidewalks D: All of the Above

D: All of the Above Explanation: Streets, sidewalks, sewers, and drainage systems all are improvements to the land and increase its value.

In a legally binding contract consideration could be: A: A refrigerator B: Money C: A promise D: All of the above

D: All of the above Explanation: Consideration can be cash, something of value, or even as simple as a promise.

A power of sale clause is found in which of the following financing instruments? A: Promissory note B: Notice of default C: Mortgage note D: Deed of trust

D: Deed of trust Explanation: The power of sale clause, found in a trust deed, authorizes a trustee to sell the secured property at public auction in the event of default by the borrower (trustor).

In a transaction broker situation, what responsibility does the principal have to the agent? A: To present all offers in a timely manner B: To account for funds C: A fiduciary responsibility D: He may have to pay a commission

D: He may have to pay a commission Explanation: The buyer is required to pay a commission. The broker is required to present all offers in a timely manner, account for funds and be loyal.

What is definitely NOT a fixture: A: A tree B: A bush C: A pool D: Land

D: Land

Which title insurance guarantees against every threat: A: standard policy B: extended policy C: mortgagee's policy D: none

D: None Explanation: NO TITLE INSURANCE POLICY INSURES AGAINST EVERY THREAT!

A person who engages another to act in his/her behalf is called a/an: A: Testator B: Grantor C: Agent D: Principal

D: Principal Explanation: A principal is a person legal or natural-who authorizes an agent to act to create one or more legal relationships with a third party. This branch of law is called agency and relies on the common law proposition qui facit per alium, facit per se (Latin "he who acts through another, acts personally").

The primary survey line running north and south in the rectangular survey is a: A: township line B: base line C: range line D: principal meridian

D: Principal meridian Explanation: Ranges lines run north and south: the principal meridian is the primary north and south line. Remember, the question was not just asking about north and south, we wanted the PRIMARY line.

What license is required to deal in real estate options? A: Option license B: None needed C: Dealer's license D: Real estate broker's license

D: Real estate broker's license Explanation: A real estate license is required to sell, lease, list, or deal real estate options. There is no such thing as an option license.

A general power of attorney is terminated upon: A: the death of the agent B: the death of the principal C: the agent's express renunciation D: all of the above

D: all of the above Explanation: A general power of attorney creates an agency relationship, which can be terminated the same way as other agency relationships.

Professional appraiser Herman Franks has just been contracted to estimate the market value of a parcel of vacant land. In doing so, he will estimate or determine the: A: most probable price the land will bring B: the market value of the property C: highest and best use D: all of the above

D: all of the above Explanation: Appraisers determine market value by estimating the highest and best use.

An agreement of sale becomes enforceable when signed by: A: the buyer B: the seller C: the buyer and the listing broker D: both buyer and the seller

D: both buyer and the seller

Who can not prepare an addendum to the Contract to Buy and Sell Real Estate? A: buyer or seller B: employing broker's attorney C: attorney for buyer D: buyer''s broker

D: buyer''s broker Explanation: Associate Brokers may only use forms prepared by the Real Estate Commission.

Which of the following is not a fixture? A: sewer line B: tree C: swimming pool D: land

D: land

A broker received a commission for $20,940 for the sale of a $349,000 house. What was the commission rate? A: 0.06 B: 0.07 C: 0.08 D: 0.09

A: 0.06 Explanation: 44. IRV $20,940 / $349,000 = 6%

An apartment building has potential gross annual income of $50,000. The vacancy factor is 5%. The maintenance expenses are $1,000 per month. The property taxes are $3,500 per year. The insurance is $2,500 per year. The reserve account is built at a rate of $200 per month. The mortgage payments are $1,500 per month. If the value of the building is $338,750, what is the capitalization rate? A: 0.08 B: 0.09 C: 0.1 D: 0.11

A: 0.08 Explanation: Gross rents $50,000 - vacancy (5%) $50,000 x .05 - 2,500 = $47,500 (Maintenance $1,000/mo x 12 =) $12,000 + (Property taxes) $3,500 + (Insurance) $2,500 + (Reserve acct. $200/mo x 12 =) $2,400 = Total $20,400 $47,500 - $20,400 = $27,100 R = I / V R = $27,100 / $338,750 = .08 = 8% The mortgage payment is not applicable when determining the value of a property using the Capitalization Rate. The reason for this is - given two potential buyers for a property, one paying cash and the other getting a loan, the value of the property does not change because they are each using two different methods to pay for it. All the other expenses listed in the question are fixed expenses that both parties would need to pay regardless of whether they have a loan or not and therefore have an impact on the value. More on Cap Rate: Since Cap Rate uses income, it is only used for income producing properties, not for example, the home you are buying for yourself. First let's define cap rate AKA Capitalization Rate: Cap rate indicates how fast an investment will pay for itself. For example, a 10% Cap Rate means you will get 10% of your purchase price back each year. If a commercial apartment building is purchased for $5,000,000 and it generates $500,000 a year in net operating income (the dollars left over after operating costs are subtracted from your gross income), then: $500,000 / $5,000,000 = 10% cap rate This means 10% of the building's purchase price is paid each year by the proceeds. Another way of saying this - the property will pay for itself in 10 years. How do you use this tool? Way one; it allows investors a fairly easy and quick method of comparing investment properties. For example: take two properties as identical as the cute twins you flirted with in high school, with the same net operating income. One has a cap rate of 8% (same income, priced higher) and the other a cap rate of 15% (same income, priced lower). The 15% cap rate property MIGHT just be a heck of a deal or the 8% one overpriced. BUT you have to dig deeper, because it might be that the higher cap rate property is in a bad neighborhood and the owner has to discount the price to get it sold. Higher risk means you as a buyer get more bang for the buck with the 15% cap rate property, but you are going to have to work harder for it and your spouse is mad because you haven't been able to take a vacation in years because of that "dang" property you bought. The 8% cap rate property may be more expensive and have a longer payback period, but that is because there is less risk and more investors want to buy it. The rents just come in without grief and it could save your marriage. Way two: Cap Rate is also used in the Income Method of appraisals to value a property. Generally, investors could care less if a property is pretty; they want to know how much they are going to make off it. The Income Method allows an investor to value a property based on its income. If most like investment properties in an area have an average cap rate of 7%. You can divide the net operating income of the property your client is interested in (provided by the listing agent) by the average cap rate in the area (digging in sold comps of various MLS's) and it will give you the approximate market value of the property. For example: $225,000 net operating income / 7% = $3,214,285 market value. If the property is listed for $5,000,000 you might want to pass it by because it is overpriced for the neighborhood. If it is listed for $2,500,000 you call your client quick because you think you found a good deal. So, If you want to play with investors you will need to make cap rates your well understood best buddy.

Seller Brown has signed a listing with Broker Green. Brown agrees to pay a 6% commission. Green agrees to use diligence in finding a ready, willing and able buyer. This is an example of: A: express bilateral executory agreement B: express bilateral executed agreement C: express unilateral executor agreement D: implied bilateral agreement

A: express bilateral executory agreement

The holder of the earnest money must be clearly identified: A: in the Contract to Buy and Sell Real Estate B: in the Amend and Extend C: in the Exclusive Right to Sell Listing Contract D: in the Brokerage Relationship Disclosure

A: in the Contract to Buy and Sell Real Estate Explanation: Under paragraph 3 in the contract to buy and sell, purchase price and terms.

FHA has developed several loan programs designed to: A: insure housing loans B: provide funding for housing loans C: guarantee housing loans D: buy and sell housing loans

A: insure housing loans Explanation: The FHA insures loans, the VA guarantees loans.

In order for the appraiser to obtain access to the property, he or she must first obtain permission from the: A: listing agent B: Title Company C: buyer D: Selling agent

A: listing agent Explanation: The seller has control over the property and it would therefore be the listing broker's responsibility.

A transaction broker must: A: not act as an advocate for either party, but must exercise reasonable skill and care B: act as an advocate for either buyer or seller C: inform the buyer or seller that they could be legally responsible for the agent's actions D: not be neutral

A: not act as an advocate for either party, but must exercise reasonable skill and care Explanation: May not act as an advocate for either party but must exercise reasonable care.

The conditions of sale will affect the: A: price of the subject property B: cost of the subject property C: value of the subject property D: utility of the subject property

A: price of the subject property Explanation: Conditions of the sale, such as a forced sale, may affect the price paid for a property but would have no effect on its cost, value, or utility.

If the scale drawing for a lot is 3 inches by 4 inches and the actual lot is 90 feet x 120 feet, how many feet would be represented by 5 1/4 inches? A: 210.00 feet B: 157.50 feet C: 127.50 feet D: 180.00 feet

B: 157.50 feet Explanation: 90' / 3" or 120' / 4" = 30 ' per inch; 30' per inch X 5.25" = 157.5'

Mr. Thomas wanted to remodel his business, so he got a loan of $43,000 at a rate of 6% He paid the loan off in 8 months. How much did Mr. Thomas pay in interest. A: 211.5 B: 1720 C: 2580 D: 3580

B: 1720 Explanation: The loan amount $43,000 times the interest rate 6% = The annual interest $2,580 divide by twelve to give you the monthly cost of interest $215 times 8 = $1,720.

An office rents for $4500 a month and measures 12 feet by 20 feet. The advertised monthly rent per square foot for this space would be: A: 1.875 B: 18.75 C: 4.5 D: 22.5

B: 18.75 Explanation: 12 x 20 = 240 $4500 / 240 = $18.75

Katie's Construction Company has built a home in a new subdivision and it was sold 6 months after it was built, for $48,500. This amount reflected a depreciation amount of 3%. Knowing this, what was the original asking price on the home? A: 48500 B: 50000 C: 53000 D: 51500

B: 50000 Explanation: Take the sale price and divide it by 97% (100%-3% depreciation=97%). So, $48,500/97% = $50,000

How are court costs and legal fees handled if a dispute over the Residential Contract to Buy and Sell goes to court? A: They are split evenly between the parties. B: They are awarded to the winning party. C: They are awarded to the broker. D: They are awarded to the losing party.

B: They are awarded to the winning party. Explanation: The contract specifies that both parties will go to mediation before court. At mediation the expenses are split evenly. However, should the matter go to court the contract specifies that court costs and legal fees shall be awarded to the prevailing party. Only in a special case of a dispute over earnest money would fees be awarded to the broker.

Which of the following is true of brokers working for buyers under the Exclusive Right-to-Buy Contract? A: They may require listing brokers to adjust their offered split to match the buyer's broker's negotiated fee B: They may negotiate an hourly fee to be paid in addition to any other compensation agreed upon C: They may also seek a refundable retainer fee, which must be credited toward any fee earned D: They may also receive compensation from lenders and other service providers without disclosure to the buyer

B: They may negotiate an hourly fee to be paid in addition to any other compensation agreed upon Explanation: All compensation received by the buyer's broker must be disclosed. Hourly fees may be charged in addition to other compensation if that is what the parties have agreed upon.

The Colorado Statute of Frauds requires what in order for the contract regarding real estate to be enforceable? A: To be written by an attorney B: To be in writing C: To be signed by only the buyer D: That an agent cannot misrepresent the facts

B: To be in writing Explanation: The only exception is a lease for less than one year. Statute of frauds which, in its essence says, "some things — some agreements — to be legally enforceable must be written down and must be signed." So what contracts must be in writing? While it varies somewhat state-to-state, the following generally applies: • Contracts in consideration of marriage. • Contracts which cannot be performed within one year (such as leases of less than a year). • Contracts for the transfer of an interest in land. Contracts by the executor of a will to pay a debt of the estate with their own money. • Contracts for the sale of goods above a certain value. • Contracts in which one party acts as guarantor for another party's debt or other obligation.

Colorado Real Estate Commission Rule E-11 states that all agreements to provide services for which a license is required must have: A: a notary witness signature B: a definite date for termination C: an automatic six-month termination D: a commission approval signature

B: a definite date for termination Explanation: All contracts must have a termination date.

A managing broker can be held responsible for: A: any action by a salesperson/associate broker B: all real estate activities of salespersons/associate brokers C: is not responsible for the activities of independent contractors D: is responsible only for activities of which s/he has knowledge

B: all real estate activities of salespersons/associate brokers

Corporations that build structures on land they own may sell the land and building together, without licensing, provided that the sales are made by: A: agents for the seller B: corporate officers or regularly salaried employees C: transaction agents

B: corporate officers or regularly salaried employees Explanation: Corporate officers or regularly salaried employees are exempt from license law.

The Definitions of Working Relationships form has the effect of: A: Establishing an agency relationship B: disclosing the different types of relationships that are available C: complete disclosure of agency as required by Colorado statute D: disclosing only the types of relationships that the broker prefers to offer

B: disclosing the different types of relationships that are available Explanation: The definitions form does not establish a specific relationship with a buyer or seller - only discloses the type of relationships that are available.

The sealing off of disintegrating asbestos is one method of asbestos control. This is known as A: irradiation B: encapsulation C: capping D: removal of tanks

B: encapsulation Explanation: Encapsulation is one method of asbestos control that is usually preferable to removal.

The type of lease, which is for an indefinite amount of time and may be cancelled by the landlord or tenant at any time is known as: A: a life estate B: estate at will C: an estate from period to period D: a fee simple estate

B: estate at will Explanation: An estate at will is an interest in a leased property that continues indefinitely, and may be terminated by either party - it is governed by the interested parties' WILLS, or intentions

As a buyer agent under an Exclusive Right to Buy Agreement, the broker has what agency relationship to the purchaser? A: principal B: fiduciary C: transaction broker D: client

B: fiduciary

If a landlord fails to refund the security deposit within one month (up to 60 days if specified in the lease) of the tenant surrendering the property, the landlord: A: is liable for the entire deposit B: is liable for treble the amount wrongfully withheld C: may be liable for double damages D: may extend the deposit return period for an additional 10 days if good cause exists

B: is liable for treble the amount wrongfully withheld Reference: CRS 38-12-103 (3) (a)

If it is the broker's office policy to offer differing splits to various types of cooperating brokers, such as one amount to buyer agents and another to transaction brokers: A: no disclosure is required B: it must be clearly disclosed to a seller that such a policy could result in restricting market exposure or cooperation from other brokers C: this will have no effect on buyers or sellers D: it will always provide a higher price for the seller

B: it must be clearly disclosed to a seller that such a policy could result in restricting market exposure or cooperation from other brokers Explanation: It must be disclosed to the seller that such a policy could result in restricting market exposure or cooperation.

An estimate based on an analysis of comparable sales and other pertinent market data is known as: A: income approach B: market value C: market price D: cost approach

B: market value Explanation: Market value is the estimate based on the analysis of comparable sales.

In Colorado the broker must disclose: A: stigmatized properties B: material facts C: buyer's motivating factors D: how long they have been a licensed agent

B: material facts Explanation: A broker is not required to disclose stigmatized properties but they must disclose material facts.

There are real estate commission approved forms for all of the following transactions except: A: promissory notes B: new construction and business opportunities C: Real Property Transfer Declaration D: Exchange Addendum

B: new construction and business opportunities

Being an independent contractor, your earned commissions: A: reflect tax deductions B: reflect no deductions C: are paid once a month D: are held for 30 days

B: reflect no deductions Explanation: The commission reflects no deductions and is reported on a 1099 MISC.

Adaptations of property specification to suit tenant requirements are: A: building codes B: tenant improvements C: Blueprints D: all of the above

B: tenant improvements Explanation: Tenant improvements are done to meet the needs of the tenant.

The details of a sales transaction are always governed by: A: the seller's desires expressed orally B: the terms of the executed sales contract C: the buyer and the buyer's broker D: the title company and the seller's broker

B: the terms of the executed sales contract Explanation: The purchase and sale contract - Exclusive Right-to-Buy Contract - and any counterproposal or amendments dictate the details of a sales transaction, not oral instructions.

An oral lease for five years is generally: A: illegal B: unenforceable C: a long-term lease D: renewable only in writing

B: unenforceable Explanation: A lease for longer than one year should be in writing to be enforceable.

If a 17 year old signs a contract, the contract is: A: void B: voidable C: unenforceable D: invalid

B: voidable

A parcel of land, described as the "NW-1/4 and the SW-1/4 of Section 6, Township 3N, Range 3E, of the 3rd Principal Meridian," sold for $875 an acre. The listing broker will receive a 5% commission on the total sales price. How much will the broker receive? A: 1750 B: 5040 C: 14000 D: 15040

C: 14000 Explanation: The size of SW 1/4 of section 16 is 640 acres / 4 = 160 acres; The size of NW 1/4 of section 16 is 640 / 4= 160 acres Add the two together = 160 x 2 quarter sections = 320 acres; 320 acres x $875 per acre = $280,000 purchase price $280,000 x .05 commission = $14,000 commission

The potential gross income of a warehouse is $36,000 per year, and the vacancy rate is 2%. The taxes are $2,000 per year; monthly maintenance costs are $300. Quarterly reserves are $450, debt service is $13,500 annually and depreciation is $3,500 annually. If the capitalization rate is 12% what is the estimated value of the warehouse? A: 203167 B: 218167 C: 232333 D: 246500

C: 232333 Explanation: This question is about the Income Approach to valuing a property. This approach is used on investment properties to determine the market value of a property based on the income it generates. In simpleze, this is the process: Step 1) Determine the most amount of revenue this property could generate in a perfect world where every unit was rented at the highest possible market rate always. This is referred to as Potential Gross Income. Step 2) Since we do not live in a perfect world, deduct from the Potential Gross Income the amount of revenue you will likely lose each year due to units being vacant (Vacancy Rate) and credit losses. The result is called Effective Gross Income. Step 3) If life were really wonderful an owner could take the Effective Gross Income and go shopping, but life is not that cool because there are bills to pay. From the Effective Gross Income deduct hard expenses. The result is the owner's profit called Net Operating Income or N.O.I. Determining what is, or is not a hard expense to deduct is a place where students really stumble - so pay attention. A hard expense is something that any owner of a property would be stuck paying such as: property taxes, landscaping, maintenance, reserve for repairs, Murray the doorman...yada yada. Personal expenses such as debt service (AKA mortgage payment) and depreciation are not hard expenses and are not included as an expense. Real Estate is not like a gas pump - one price for cash and another for credit. If one person wants to buy a property paying cash and another wants to buy the same property paying with a loan - the market value of the property is not impacted. The same goes for depreciation, depreciating a property is used by the IRS to determine an individual's income tax, it has nothing to do with determining market value. Step 4) If all you needed to do is determine the profit of an investment you could stop here. However, we are trying to determine the market value of a property based on the profit it generates. For that you need to divide the NOI by a Capitalization Rate. A Capitalization Rate (AKA Cap Rate) is the percentage of the purchase price the owner will earn back each year. Cap Rates are pretty handy. Using the Cap Rate of properties sold nearby will result in the market value of the property. However, if your client is savvy and has a desired Cap Rate for any property s/he owns, then the result would be the value of the property to the savvy client. Great way to determine if the asking price of an investment property is reasonable. Let's apply this process to the question: Step 1) $36,000 Potential Gross Income is given by the question Step 2) $36,000 (Potential Gross Income) X .98 (100% - Vacancy Rate of 2%) = $35,280 (Effective Gross Income) Step 3) $35,280 (Effective Gross Income) - $2,000 (Taxes) - ($300 (monthly maintenance) X 12 = $3,600 (Annual Maintenance)) - ($450 (Quarterly Reserves) x 4 = $1,800 (Annual Reserves)) = $27,880 (NOI) Step 4) $27,880 (NOI) / 12% (Cap Rate) = $232,333 (Market Value of Property) Note that debt service and depreciation were not deducted as hard expenses as they are not applicable. More on Cap Rate: Since Cap Rate uses income, it is only used for income producing properties, not for example, the home you are buying for yourself. First let's define cap rate AKA Capitalization Rate: Cap rate indicates how fast an investment will pay for itself. For example, a 10% Cap Rate means you will get 10% of your purchase price back each year. If a commercial apartment building is purchased for $5,000,000 and it generates $500,000 a year in net operating income (the dollars left over after operating costs are subtracted from your gross income), then: $500,000 / $5,000,000 = 10% cap rate This means 10% of the building's purchase price is paid each year by the proceeds. Another way of saying this - the property will pay for itself in 10 years. How do you use this tool? Way one; it allows investors a fairly easy and quick method of comparing investment properties. For example: take two properties as identical as the cute twins you flirted with in high school, with the same net operating income. One has a cap rate of 8% (same income, priced higher) and the other a cap rate of 15% (same income, priced lower). The 15% cap rate property MIGHT just be a heck of a deal or the 8% one overpriced. BUT you have to dig deeper, because it might be that the higher cap rate property is in a bad neighborhood and the owner has to discount the price to get it sold. Higher risk means you as a buyer get more bang for the buck with the 15% cap rate property, but you are going to have to work harder for it and your spouse is mad because you haven't been able to take a vacation in years because of that "dang" property you bought. The 8% cap rate property may be more expensive and have a longer payback period, but that is because there is less risk and more investors want to buy it. The rents just come in without grief and it could save your marriage. Way two: Cap Rate is also used in the Income Method of appraisals to value a property. Generally, investors could care less if a property is pretty; they want to know how much they are going to make off it. The Income Method allows an investor to value a property based on its income. If most like investment properties in an area have an average cap rate of 7%. You can divide the net operating income of the property your client is interested in (provided by the listing agent) by the average cap rate in the area (digging in sold comps of various MLS's) and it will give you the approximate market value of the property. For example: $225,000 net operating income / 7% = $3,214,285 market value. If the property is listed for $5,000,000 you might want to pass it by because it is overpriced for the neighborhood. If it is listed for $2,500,000 you call your client quick because you think you found a good deal. So, If you want to play with investors you will need to make cap rates your well understood best buddy.

Which of the following provisions is not essential to the validity of a lease? A: Competent lessor and lessee B: Rent provision C: Judgment clause D: All of the above

C: Judgment clause Explanation: A judgement clause is usually found only in a commercial lease and is infrequently used.

Can a broker in Colorado give a finders fee to an out-of-state broker? A: Yes, if they have a Colorado trust account B: No C: Yes, if the out-of-state broker resides and maintains an office in the other state D: Yes, if they have a Colorado license in addition to their out-of-state license

C: Yes, if the out-of-state broker resides and maintains an office in the other state Explanation: Commission Rule E-23 states that a Colorado broker who cooperates with a broker who is licensed in another state or country may pay such out-of-state broker a finder's fee or share of the commission if: (1) such broker resides and maintains an office in the other state or county, (2) all advertising, negotiations, contracting, and conveyancing done in Colorado is performed in the name of the Colorado broker, and (3) all money collected prior to the closing is deposited in the name of the Colorado broker.

Listing agreements must include: A: an appraisal of the property B: a property inspection form C: a definite termination date D: a standard approved commission

C: a definite termination date

A buyer purchases a finished condominium as an investment. The document that evidences the buyer's ownership of the furniture is a: A: special warranty deed B: homewoner's insurance policy C: bill of sale D: trust deed

C: bill of sale

A seller who's selling her property on her own (FSBO) received a contract to purchase. She then returned the contract changing a few items. This contract: A: is valid B: is rejected C: is a counterproposal D: this is not allowed

C: is a counterproposal Explanation: Changing the contract by marking on it is legal. Bad form, but legal. However, it is no longer the contract the other party submitted, so they would have the option to accept, reject or counter. More info: The reason why marking up a contract is bad form although legal, is it becomes easy for the responding party to miss changes.

The sales contract should list: A: all of the buyer's relatives B: the lender who will be providing the loan C: items which are included in the contract price

C: items which are included in the contract price Explanation: All Inclusions and exclusions to the property should be included in the sales contract.

All of the following are examples of a specific lien, EXCEPT: A: Mortgage B: Mechanic's lien C:Judgment D: Property taxes

C: judgment Explanation: All of the rest apply to a specific property, while a judgment is against an individual and all of their property.

When a grantor does not wish to convey certain rights of ownership, he or she: A: must note the exceptions in a separate instrument B: may not do so, as a deed conveys the entire premises C: may note the exceptions on the deed D: must convey the entire premises and have the grantee reconvey the right to be retained by the grantor

C: may note the exceptions on the deed Explanation: A grantor may make specific reservations, restrictions, or exceptions in a deed and they are valid as long as they are not illegal.

The minimum amount of time you must give a seller to respond to your offer is: A: 24 hours B: 8 hours C: no minimum D: 24 hours when in town, 48 hours if out of town

C: no minimum Explanation: The time for a seller to respond to an offer is negotiable.

Pedestrian traffic counts are usually taken to determine: A: urban population B: size of shopping area C: rental value of a retail location D: average age group

C: rental value of a retail location Explanation: Major shopping centers can promise potential tenants a large number of patrons (pedestrian traffic) and, accordingly, can command higher rents for their facilities.

A security is a financial instrument backed by assets. They give the holder an interest or right in something else. Regulation under state or federal securities laws may apply to which of the following? A: speculative purchase of raw land by a doctor as part of a retirement plan B: condominium project that includes both residential and retail uses within one structure C: resort condominium project in which owners enter their units in a common rental pool to enhance their income

C: resort condominium project in which owners enter their units in a common rental pool to enhance their income Explanation: he common rental pool arrangement for increasing income may qualify this offering as a security.

A portion of a township under the rectangular survey system, which is a square with mile-long sides, is called a A: plat B: blocks C: section D: township

C: section Explanation: Both sections and townships are used in the rectangular survey system, a SECTION is the portion under the system that is a square with mile-long sides. A township is divided into 36 sections

The trustor in connection with a trust deed is the party who: A: lends the money B: receives the payments C: signs the note D: holds the deed of trust

C: signs the note Explanation: The trustor is the borrower under a deed of trust.

As to the preparation of legal documents at closing: A: the licensee bears the cost for the preparation of all legal documents including those prepared by the Sellers or Buyers attorney B: the licensee may charge the Seller or Buyer for the cost of preparation C: the licensee bears the cost for the preparation of legal documents except those prepared by the Seller's or Buyer's attorney D: the licensee does not pay for the preparation of legal documents

C: the licensee bears the cost for the preparation of legal documents except those prepared by the Seller's or Buyer's attorney

A house has a market value of $110,000. The assessed value is 30% of the market value. If the mill levy is 52 mills, what is the yearly tax on the house? A: $5720 B: $4004 C: $572 D: $1716

D: $1716 110,000 x 30%= $33,000 x .052 = $1716

Buyer Jones makes a full price offer to purchase to seller Smith, who rejects the offer outright. What recourse does Jones have? A: Sue Smith for damages B: Sue Smith for specific performance C: Sue for damages and specific performance D: Buyer Jones cannot sue

D: Buyer Jones cannot sue Explanation: Since Smith refused the offer, there was no contract created and Jones has no legal complaint. At this point Smith is not obligated to sell his property. However, if the property was listed with a broker, the latter could successfully sue for his full commission.

On a purchase contract (Contract to Buy and Sell Real Estate), which of the following are considered to be parties to the transaction? A: Buyer, seller, broker, title company, lender B: Buyer, seller, broker, title company C: Buyer, seller, broker D: Buyer, seller

D: Buyer, seller Explanation: Buyers and sellers are parties to a purchase and sale contract. Sellers and brokers are parties to a listing contract. Buyers and brokers are parties to an Exclusive Right-to-Buy contract.

Property taxes for the previous year have not been paid, this entry is shown on the settlement statement: A: Debit buyer, credit seller B: Debit broker, credit seller C: Debit seller, credit buyer D: Debit seller, credit broker

D: Debit seller, credit broker Explanation: The key phrase in this question is "Property taxes for the previous year have not been paid." This means the Seller owes back taxes. We take the money from the Seller with a "Debit Seller." But where does this money go? It gets deposited into the Escrow Account - which is "Credit Broker." A constant source of confusion is why is the "Broker" getting the "Credit"? Legally, the listing broker is responsible for conducting the closing, but in practice, the Listing Broker delegates this to a Closing Clerk. Although the Closing Clerk is the one who will put the money into Escrow and write a check out of Escrow to the County to pay the taxes, since they are doing it in the name of the Broker - the worksheet says "Credit Broker." It would be easier for everyone if instead it said "Credit Closing Clerk" or "Credit Escrow Account" but the State uses the term "Credit Broker."

A developer buys vacant land in the city and wants to put houses on it. How would the subdivision be identified? A: Rectangular survey B: Street and address C: Metes and bounds D: Lots and blocks

D: Lots and blocks Explanation: Plat maps identify subdivisions with lots and blocks.

If a refrigerator fails prior to closing and after a contract has been accepted, according to the Colorado Contract to Buy & Sell the Seller must? A: Do nothing for the Buyer is at risk during this period B: May do nothing and the Buyer can replace it after closing and charge the Seller C: Must replace it with a new a refrigerator D: May replace it or repair it with a similar used refrigerator

D: May replace it or repair it with a similar used refrigerator Explanation: It is not necessary to replace it with a new one, but it must have similar features and be of approximately same age and condition.

Lock boxes are used for: A: brochures and flyers placed at the home for sale B: buyer's security C: storing the seller's valuables during an open house D: broker's access into homes that are listed for sale

D: broker's access into homes that are listed for sale Explanation: Lock boxes are used for the seller's security and broker's access into homes that are listed for sale.

Home inspectors: A: must be licensed B: are not licensed unless they became inspectors after Jan 1, 2002 C: are required to have 60 hours of training D: can enter the business without qualifications or training

D: can enter the business without qualifications or training Explanation: Home inspectors are not required to be licensed; therefore they can enter the business without training or qualification.

An appraisal is always required by: A: law B: contract C: the buyer D: it is not required

D: it is not required Explanation: An appraisal is not required unless it is a stipulation of the Loan Company.

If the title deadline date is not met: A: it is not important B: the seller could be in default C: the buyer could be in default D: the buyer can terminate the contract

D: the buyer can terminate the contract Explanation: Buyer can terminate the contract.

"Steering," means to: A: steer broker to minority prospects B: steer prospects toward neighborhoods based on an ethnic profile C: steer minority prospects toward affordable property D: study unusual behavior among cattle

B: Steer prospects toward neighborhoods based on an ethnic profile Explanation: Steering refers to showing minority buyers only areas receptive to minority groups. It is illegal. By participating in steering the agent is participating in discriminatory practices by encouraging segregation.

All of the ownership rights that transfer with a fee simple estate are known as: A: leasehold estate B: the bundle of rights C: quiet enjoyment D: seisin

B: the bundle of rights Explanation: All of the ownership rights that transfer with a fee simple estate are the bundle of rights. These rights are: to control, use, possess, enjoy, and dispose of the real property. Remember the word C-U-P-E-D: control, use, possess, enjoy, dispose.

Building codes would most likely control: A: density B: type of materials used in buildings C: size of commercial buildings D: deed restrictions

B: type of materials used in buildings Explanation: Building codes would most likely control the types of materials used in buildings.

The state took Jim's property when he died intestate by: A: eminent domain B: adverse possession C: escheat D: police power

C: Escheat Explanation: Escheat is the process by which the state can take property in absence of being able to locate the heirs of the deceased.

Which one of the following deeds contains the most covenants? A: Special Warranty B: Quitclaim C: General Warranty D: Bargain & Sale

C: General warranty Explanation: In Colorado real estate, there are several types of deeds, depending on the type/amount of protection given and received from the seller and buyer. From the Colorado Real Estate Manual:

Which one of the following is not a police power? A: Building codes B: Zoning C: Liens D: Subdivision regulations

C: Liens Explanation: Liens are not laws or regulations of a government or quasi government agency. liens are related to debts. Some liens can be related to government regulations, such as a tax lien.

When a firm furnishes materials for the construction of a house and the firm is not paid, it may file a(n): A: deficiency judgment B: lis pendens C: mechanic's lien D: estoppel certificate

C: Mechanics Lien Explanation: A laborer or material man as well as a contractor may file a mechanic's lien. It is also called a materialman's lien or supplier's lien when referring to those supplying materials.

Which of the following is a lien that does not need to be recorded? A: Money judgments B: A tax deed C: Real estate taxes D: Voluntary lien

C: Real Estate Taxes Explanation: Real estate property tax liens automatically attach to the property as of January 1 of the current year. All other liens do not attach to the property automatically.

Which of the following is a lien on real estate? A: Encroachment B: Easement C: Mortgage D: License

C: mortgage Explanation: A mortgage loan is a loan secured by real property through the use of a mortgage note or promissory note which evidences the existence of the loan and the encumbrance of that real estate. A mortgage is a lien, an encroachment and an easement may be encumbrances.

Possession under a claim of adverse possession must be: A: open, notorious, and hostile B: open, hostile, and continuous C: notorious, hostile, and continuous D: open, hostile, notorious, and continuous

D: open, hostile, notorious, and continuous Explanation: The requirements of title by adverse possession are open, notorious use for the statutory period, hostile to the will of the owner. The adverse possession can be seven years if the adverse possessor pays the taxes during this period and is in possession of the property. The adverse party is called the disseisor, meaning one who dispossesses the true owner of the property. The disseisor must openly occupy the property exclusively, keeping out others, and use it as if it were his own. Generally, the openly hostile possession must be continual (although not necessarily continuous or constant) without challenge or permission from the lawful owner, for a fixed statutory period to acquire title.

Which of the following is a voluntary lien? A: Mortgage B: Estate tax C: Special assessment D: Ad valorem tax

A: mortgage Explanation: A mortgage is voluntary: taxes are assessed whether or not we want them.

You have listed a house for $197,800. If the house sells for the listed price, the seller will make a profit of 15%. What price did the seller pay for the house? A: 167900 B: 172000 C: 168130 D: 176500

B: 172000 Explanation: The selling price is 115% of what the seller paid for it. To find out what the seller paid for it divide $197,800 by 115% = $172,000 Let's use the IRV method we discuss in the classes. Since the property sold for the listing price, the income generated (the top number in the circle) was $197,800, since this represented 15% over the original purchase price of the property, the Rate (bottom left side of the circle) is 115%. This is because the Rate and Income Generated are always the same value, only one is expressed in dollars and the other as a percentage. Since the $197800 represents the original price + 15%, then that number as a percentage would be 115% of the original price. Divide the rate into the income generated and it will give you the unknown part of the circle Value (bottom right) or $172,000. Remembering these formulas can be tricky, so in the classes we teach the IRV method.

The illegal practice of inducing homeowners to sell their properties by making representations about the prospective entry of persons of a certain race/national origin into the neighborhood is also called: A: redlining B: blockbusting C: commingling D: steering

B: Blockbusting Explanation: Think of "blockbusting" as "busting up a block" by trying in induce or force people to move out of their neighborhood to allow others who are "different" to move in. Blockbusting is also known as Panic Peddling.

A person who has complete control over a parcel of real estate is said to own a: A: leasehold estate B: fee simple estate C: defeasible fee estate D: life estate

B: Fee simple estate Explanation: Fee Simple, also known as fee simple absolute is known as the highest degree of ownership. The other "estate" terms are all much more limited forms of ownership - a life estate expires over time, a leasehold estate has a definite term, and a defeasible estate is limited by a certain event happening.

The characteristic of being unique means that: A: Identical Buildings Placed on two Separate Parcels have the Same Value B: Geographically, all Parcels of Real Estate are Different C: Two Parcels of Land Next to Each Other are Sometimes Dissimilar D: All of the Above

B: Geographically, all Parcels of Real Estate are Different Explanation: No two parcels of land are exactly the same.

Which of the following would be considered community property? A: A gift of property to the wife during the marriage B: Income earned by a spouse during the marriage C: Property inherited by the husband during the marriage D: Income earned by the wife prior to the marriage

B: Income earned by a spouse during the marriage Explanation: In a community property jurisdiction, most property acquired during the marriage (except for gifts or inheritances) is owned jointly by both spouses and is divided upon divorce, annulment or death.

The tax on a given piece of real property is always determined by multiplying the mill levy by the: A: selling price B: assessed valuation of the property C: mortgage loan value D: book value

B: assessed valuation of the property Explanation: The assessed value of property is the County Assessor's determination of a percentage of the true and fair market value of the property.

A government official who evaluates property for tax purposes is a(n): A: assayer B: assessor C: robber D: surveyor

B: assessor Explanation: By state law, the county assessor is required to assess all taxable property within the county at a percentage of its true and fair market value. An assessor is a specialist who calculates the value of property. The value calculated by the assessor is then used as the basis for determining the amounts to be paid or assessed for tax or insurance purposes.

A lien that covers all real and personal property of the debtor within the county where recorded is a: A: mechanic's lien B: judgment lien C:writ of execution D: lis pendens

B: judgement lien Explanation: A judgment lien (a general lien) is a lien that covers all real and personal property of the debtor.

Mechanic's liens have a priority date of: A: the day the judgment was issued B: the day the work first began C: halfway through the work D: the day the judgment was recorded

B: the day the work first began Explanation: Mechanic's liens have priority as of the date material was delivered or work began, rather than the date recorded. Mechanic's Lien: The right of a craftsman, laborer, supplier, architect or other person who has worked upon improvements or delivered materials to a particular parcel of real estate (either as an employee of the owner or as a sub-contractor to a general contractor) to place a lien on that real property for the value of the services and/or materials if not paid. With certain exceptions, the Colorado Mechanic's Lien Act requires that a mechanic's lien be recorded within four months of the date that the contractor, subcontractor or supplier performed its last work or last supplied material or equipment. The priority date is as of the date material was delivered or work began, rather than the date recorded. Recording a mechanic's lien assists in securing the real property upon which improvements were made as collateral. The lien claimant has six months from the date that last work was performed or material supplied to file a lawsuit to foreclose its lien and to record notice of its lawsuit (this notice is called a "lis pendens") with the Clerk and Recorder of the County where the real property is located.

If the Title Company discovers a delinquent sewer assessment, the party that would normally be required to pay for the portion that is in arrears is: A: the buyer B: the seller C: both the buyer and seller D:to be settled by mutual agreement

B: the seller Explanation: Generally, it is the seller's responsibility to discharge all encumbrances against the property and deliver clear title to the purchaser, but either party could pay the assessment. If the owner of the property refuses to pay, the county could force the sale of the property to satisfy specific involuntary liens.

Which of the following would not be included in a deed restriction? A: Types of buildings that may be constructed B: Minimum size of buildings to be constructed C: Allowable racial or ethnic origins of purchasers D: Activities that are not allowed at the site

C: Allowable racial or ethnic origins of purchasers Explanation: This is an example of discrimination and it is illegal. Some older deeds may have this restriction in them, in those that do, the deed is valid, but the restriction is unenforceable.

Joint tenancy is created by: A: Marriage B: By deed only C: By deed or will D: By presumption if the method of ownership is not stipulated

C: By deed or will Explanation: Either of these can create a joint tenancy as long as the ownership is equal and that there is a right of survivorship

The current value of a property is $255,000, and it is assessed at 35% of its current market value. What is the amount of the real estate tax due on the property if the tax rate is $3.50 per $100 of assessed value? A: 2039.99 B: 2499 C: 1115.63 D: 3123.75

D: 3123.75 Explanation: 255,000 x .35 = 89,250.00, 89,250 x .035 = 3,123.75

Three of the four economic characteristics of real property are: A: Scarcity B: Permanence of Investment C: Improvements D: All of the Above

D: All of the Above Explanation: Scarcity (supply), permanence of investment, improvements, and area preference are all economic characteristics of real property.

Which of the following is not a requirement in order for a deed to be valid? A: Consideration B: Legal description C: Grantors' signatures D: Grantee's signature

D: Grantee's signature Explanation: Although it is recommended that a deed be recorded, in Colorado it is not required. The grantee protects his interest in the property by recording it - making the ownership transfer a matter of public record. Acknowledgment is also recommended, and usually required for it to be recorded. Required is: the signature of the grantor, words of conveyance (granting clause), that it be in writing, that the grantee is named, consideration (payment), a description of the ownership interests being conveyed, a legal desciption, delivery of the deed and acceptance by the grantee. More info on Deeds: In Colorado real estate, there are several types of deeds, depending on the type/amount of protection given and received from the seller and buyer. From the Colorado Real Estate Manual: Types Of Deeds There are four major classifications of deeds: (1) General warranty deed, (2) Special warranty deed, (3) Bargain and sale deed, (4) Quitclaim deed. The types of deeds differ solely in the degree of protection that the grantor (seller) promises or warrants to the grantee (buyer). No type of deed transfers any greater or lesser interest than another. For example, if a grantor conveys title in fee simple by a general warranty deed, the same fee simple ownership is conveyed as if he or she had used a quitclaim deed. However, the general warranty deed grantor promises to defend against any loss incurred due to any title defect, whereas transfer by quitclaim deed contains no such warrant. 1. General Warranty Deed. A deed in which the grantor warrants or guarantees title against defects that existed before the grantor acquired title or that arose during the grantor's ownership. It does not warrant against encumbrances or defects arising from the grantee's own acts. The usual covenants or warranties contained in a general warranty deed are: a. Covenant of seizin. Guarantees the grantor's ownership and that he or she has the right to convey it. The fact that the property is mortgaged or is subject to some restriction does not breach this covenant. b. Covenant against encumbrances. Guarantees that there are no encumbrances or claims against the property except those specifically excluded in the deed. c. Covenant of quiet enjoyment. Guarantees that the grantee will not be evicted or disturbed in possession of the property. Threats or claims by a third party do not breach this covenant. The grantee would have to actually be dispossessed before being entitled to seek recovery under this covenant against the grantor. d. Covenant of further assurance. Guarantees that the grantor will procure and deliver any other instruments that are subsequently necessary to make the title good. e. Covenant of warrant forever. Guarantees that the grantee shall have title and possession to the property. Sometimes considered part of "quiet enjoyment". The first two covenants relate to the past, and generally do not generally "run with the land" - meaning that only the current grantee may sue the grantor for a breach. The last three covenants protect against future defect and are said to run with the land - allowing any subsequent grantee to seek remedy for breach against any previous grantor. According to Colorado statute, "Covenants of seizin, peaceable possession, freedom from encumbrances, and warranty contained in any conveyance of real estate, or of any interest therein, shall run with the premises, and inure to the benefit of all subsequent purchasers and encumbrancers." (38-30-121 C.R.S.) 2. Special Warranty Deed. The grantor of a special warranty deed warrants the title only against defects arising after the grantor acquired the property and not against defects arising before that time. 3. Bargain and Sale Deed. Technically, any deed that recites a consideration and purports to convey the real estate is a bargain and sale deed. Thus, many quitclaim and warranty deeds are also deeds of bargain and sale. Bargain and sale deeds often contain a covenant against the grantor's acts, whereby the grantor warrants only that the grantor has done nothing to harm the title. This covenant would not run with the land. Examples of bargain and sale deeds with a covenant against the grantor's acts are an executor's deed, an administrator's deed, and a guardian's deed. 4. Quitclaim Deed. The grantor of a quitclaim deed warrants absolutely nothing. A quitclaim deed conveys the grantor's present interest in the land, if any. A quitclaim deed is frequently used to clear up a technical defect in the chain of title or to release lien claims against the property. Examples of such deeds are correction deeds, and deeds of release.

Condemnation of private property for public use is called the right of: A: lis pendens B: acquisition C: escheat D: eminent domain

D: Eminent domain Explanation: Eminent domain is an action of the state to seize a citizen's private property, expropriate property, or seize a citizen's rights in property with due monetary compensation, but without the owner's consent. The property is taken either for government use or by delegation to third parties who will devote it to public or civic use or, in some cases, economic development. The most common uses of property taken by eminent domain are for public utilities, highways, and railroads, however it may also be taken for reasons of public safety, such as in the case of Centralia, Pennsylvania. Some jurisdictions require that the government body offer to purchase the property before resorting to the use of eminent domain.

All of the following forms of discrimination are prohibited under the 1968 federal fair housing act except A: national origin B: race C: gender D: marital status

D: Marital status Explanation: The 1968 act expanded on previous acts and prohibited discrimination concerning the sale, rental, and financing of housing based on race, religion, national origin, gender; as of 1988, the act protects the disabled and families with children. It also provided protection for civil rights workers.

Real estate property taxes are: A: general - involuntary liens B: general - voluntary liens C: specific - voluntary liens D: specific - involuntary liens

D: Specific- involuntary liens Explanation: If the property tax is unpaid, the tax can be satisfied only from the sale of the specific property upon which the tax is levied. The only voluntary liens are mortgages and deed of trust.

The quarterly interest on a loan is $1,135 and the interest rate is 7.5%. What is the principal of the loan? A: 15000 B: 4540 C: 60533 D: 180000

C: 60533 Explanation: $1,135 X 4 = $4,540 (Annual Interest) / .075 = $60,533

What advice must you give your clients prior to closing? A: Practice writing your name at home B: Bring an extra $2,000 to closing C: Seek legal counsel prior to closing D: Bring your birth certificate to closing

C: Seek legal counsel prior to closing Explanation: You should advise legal counsel, it's even in the contract!

Angie sold her house for $84,000, which was 40% more than what she paid for it six years ago. How much did Angie originally pay for the house? A: 117600 B: 52500 C: 96000 D: 60000

D: 60000 Explanation: $84,000 / 140% ( the original price 100% plus the 40% increase) = $60,000

A buyer has deposited with the broker 10% of the sales price as earnest money. The bank has agreed to lend $51,000 (80% of the sales price). What did the buyer deposit as earnest money? A: 6120 B: 5500 C: 4080 D: 6375

D: 6375 Explanation: $51,000 / 80% = $63,750 x 10% = $6,375

The loan on a property is 80% of the appraised value, and the interest rate is 8% which amounts to $460 for the first month. Then what is the appraised value of the property? A: 95000 B: 68900 C: 72000 D: 86250

D: 86250 Explanation: First calculate the annual interest which is $460 X 12 = $5,520 then divide this by 8% = The loan amount of $69000 then divide this by 80% for the appraised value of the home $86,250

An agency contract can be terminated by: A: mutual agreement B: revocation by the principal C: death of either party D: any of the above

D: any of the above Explanation: An agency contract may be terminated, however the party that is terminating the contract may be held liable for doing so.

Real estate sales contracts written from scratch by Colorado licensees must: A: be on the Commission approved standard forms B: be signed by the seller or his representative C: include a description of the property D: are illegal in Colorado

D: are illegal in Colorado Explanation: Colorado licensees are not allowed to create contracts, we must use state-approved forms or contracts prepared by an attorney.

Traditional splits offered in a real estate office might include: A: start at 50/50% B: are always 70/30% C: never exceed 80/20% D: are negotiable

D: are negotiable Explanation: Depending on the broker and brokerage firm, there are many different commission splits available. Commissions are always negotiable.

The Civil Rights Act of 1866 prohibits discrimination in housing based on: A: race B: sex C: religion and race D: physical disability

A: Race Explanation: The Civil Rights Act of 1866 is based on the amendment that prohibits slavery. But all this covered was race.

As per the Mediation clause in the Contact to Buy/Sale Real Estate: "The mediation, unless otherwise agreed, will terminate in the event the entire dispute is not resolved within _________ days of the date written notice requesting mediation is delivered by one party to the other at the party's last known address. A: 30 B: 45 C: 60 D: 90

A: 30

The land description T3N, R4W 5th Principal Meridian refers to what method of property description? A: Rectangular Survey System B: Lot and Block C: Metes and Bounds D: Subdivision

A: Rectangular Survey System

A Transaction-broker may NOT do which of the following without ending his/her Transaction broker obligations: A: Sell a buyer his own personal residence B: List competing properties for sale C: Show properties in which the buyer is interested to other prospective buyers D: Serve as a single agent or transaction- broker for the same parties in other real estate transactions

A: Sell a buyer his own personal residence Explanation: A Transaction Broker by definition is a neutral party. You cannot be neutral when selling your own home or the home of a relative.

The party responsible for the closing fee as paid to the Title Company is determined by: A: agreement of the parties B: law C: broker D: title officer

A: agreement of the parties Explanation: The correct answer is by ageement of the parties. The purchase and sale contract - Contract to Buy and Sell Real Estate - addresses who will pay the fee to the Title Company for the closing.

Which monetary encumbrances should be listed by the seller when completing the Exclusive-Right-to-Sell Listing Contract? A: all encumbrances known to the seller B: all encumbrances the seller will not pay off C: only encumbrances of public record D: all encumbrances to be assumed by a buyer

A: all encumbrances known to the seller Explanation: The seller should list all encumbrances known at the time of the listing.

Which monetary encumbrances should be listed by the seller when completing the Exclusive-Right-to-Sell Listing Contract? A: all encumbrances known to the seller B: all encumbrances the seller will not pay off C: only encumbrances of public record D: all encumbrances to be assumed by a buyer

A: all encumbrances known to the seller Explanation: The seller should list all encumbrances known at the time of the listing. The status of these encumbrances after the property is sold would not be relevant (or known) at the time of the listing.

A non-disturbance clause is for the protection of the: A: Lessee B: Developer C: Lessor D: Mortgagee

A: Lessee Explanation: A non-disturbance clause protects the lessee.

If the interest for four months on a loan of $80,000 was $3,200, what was the annual rate of interest? A: 11% B: 12% C: 13% D: 14%

B: 12% 3200x3= 9600 9600/80,000= .12

If a tenant pays taxes, insurance, and their share of common area maintenance, as well as a monthly fixed rent, he has what type of lease? A: A net lease B: A gross lease C: A percentage lease D: A graduated lease

A: A net lease Explanation: This is the definition of a net lease.

If a tenant pays taxes, insurance, their share of common area maintenance, as well as a monthly fixed rent, he has what type of lease? A: A net lease B: A gross lease C: A percentage lease D: A graduated lease

A: A net lease Explanation: This is the definition of a net lease.

An installment land contract: A: A way for the vendor to help the vendee finance the property B: Is a contract on land C: Conveys title from the vendor to the vendee D: None of the above

A: A way for the vendor to help the vendee finance the property Explanation: The vendor retains title to the property - this is a bit of a misnomer, because an installment land contract is for all properties, not only land. It can be used to help the buyer purchase a property they usually could not qualify for. More info on Installment Land Contracts: Installment Land Contracts AKA "Land Contracts" is a purchase agreement in which the owner retains legal title to a property while the buyer, usually a tenant, makes payments. ONCE THE BUYERS COMPLETES THESE PAYMENTS, THE SELLER DEEDS THE PROPERTY TO THE BUYER. Two big points here: 1) Since the buyer does not take legal ownership until they complete payments, this means the buyer, who usually has possession of the property, has no legal rights to the property beyond that of a renter. THEY DO NOT OWN IT - THE SELLER DOES. 2) Because of the number of creeps who have used installment land contracts to defraud unknowing buyers, the real estate commission does not have an approved form for us as agents to use. These contracts are not illegal, if you have clients who want to enter into such an agreement, they (notice the "they" here - I for one would not touch a land contract transaction for all the tea in China) need to bring in an attorney to draw up the necessary paperwork. The real estate commission feels so strongly about this, they issued a position statement on it. Here it is: CP-39 Commission Position on Lease Options, Lease Purchase Agreements and Installment Land Contracts (4-5-2011) The Commission recognizes that in order to maintain the resilience of the real estate market during times when conventional lending requirements are rigorous, alternative funding practices are utilized to sustain the market conditions of supply and demand. The Commission has received and investigated numerous complaints pertaining to lease options, lease purchase agreements and installment land contracts. Although the Commission does not have the authority to prohibit the types of real estate transactions that real estate brokers participate in, the Commission strongly cautions real estate brokers to utilize the services of an attorney licensed to practice law within the State of Colorado. It has been the Commission's observation, based on complaints received, that lease option and lease purchase transactions are complex and generally contain provisions with significant financial risk posed to the prospective buyer and seller. Installment land contracts and the other transactions mentioned in this position statement afford buyers the opportunity to take possession of the real property and make installment payments to the seller. There is a significant potential for harm to the seller, buyer or assignee if the installment land contract is not properly drafted. In all of the above transactions, the seller retains legal title to the property while the buyer may acquire equitable title. The Commission does not have an approved contract form necessary to memorialize the terms and nuances related to these complex transactions, or any jurisdictional regulations that may be germane. Pursuant to Rule F, the appropriate provisions of the license law and the brokerage relationship act (§§12-61-113, 12-61-804, 805 and 807, C.R.S.), real estate brokers are prohibited from drafting a contract document that would reflect the terms of such a transaction as it would exceed their level of competency and is a matter requiring the expertise and advice of an attorney. Additionally, such behavior may be construed as the unauthorized practice of law by the real estate broker and subject to civil penalties. The contracts for these transactions should not be prepared by a real estate broker; rather, the documents should be drafted by a licensed Colorado attorney-at-law engaged for each particular transaction.

From whom does the licensee receive a commission? A: Employing Broker B: Seller C: Buyer D: Either 2 or 3 may pay a commission to the licensee

A: Employing Broker Explanation: § 12-61-117, C.R.S. Broker remuneration. It is unlawful for a real estate broker registered in the commission office as in the employ of another broker to accept a commission or valuable consideration for the performance of any of the acts specified in this part 1 from any person except the broker's employer, who shall be a licensed real estate broker. Reference § 12-61-117, C.R.S. Broker remuneration

A government sponsored loan that insures lenders against loss is a/an: A: FHA mortgage B: VA mortgage C: Conventional loan D: Adjustable rate mortgage

A: FHA mortgage Explanation: The FHA insures loans, the VA guarantees loans.

Capitalization is the process by which annual net operating income is used to: A: estimate value B: determine cost C: establish depreciation D: determine tax savings

A: Estimate value Explanation: Capitalization is the process by which annual net operating income is used to estimate values More on Cap Rate: Since Cap Rate uses income, it is only used for income producing properties, not for example, the home you are buying for yourself. First let's define cap rate AKA Capitalization Rate: Cap rate indicates how fast an investment will pay for itself. For example, a 10% Cap Rate means you will get 10% of your purchase price back each year. If a commercial apartment building is purchased for $5,000,000 and it generates $500,000 a year in net operating income (the dollars left over after operating costs are subtracted from your gross income), then: $500,000 / $5,000,000 = 10% cap rate This means 10% of the building's purchase price is paid each year by the proceeds. Another way of saying this - the property will pay for itself in 10 years. How do you use this tool? Way one; it allows investors a fairly easy and quick method of comparing investment properties. For example: take two properties as identical as the cute twins you flirted with in high school, with the same net operating income. One has a cap rate of 8% (same income, priced higher) and the other a cap rate of 15% (same income, priced lower). The 15% cap rate property MIGHT just be a heck of a deal or the 8% one overpriced. BUT you have to dig deeper, because it might be that the higher cap rate property is in a bad neighborhood and the owner has to discount the price to get it sold. Higher risk means you as a buyer get more bang for the buck with the 15% cap rate property, but you are going to have to work harder for it and your spouse is mad because you haven't been able to take a vacation in years because of that "dang" property you bought. The 8% cap rate property may be more expensive and have a longer payback period, but that is because there is less risk and more investors want to buy it. The rents just come in without grief and it could save your marriage. Way two: Cap Rate is also used in the Income Method of appraisals to value a property. Generally, investors could care less if a property is pretty; they want to know how much they are going to make off it. The Income Method allows an investor to value a property based on its income. If most like investment properties in an area have an average cap rate of 7%. You can divide the net operating income of the property your client is interested in (provided by the listing agent) by the average cap rate in the area (digging in sold comps of various MLS's) and it will give you the approximate market value of the property. For example: $225,000 net operating income / 7% = $3,214,285 market value. If the property is listed for $5,000,000 you might want to pass it by because it is overpriced for the neighborhood. If it is listed for $2,500,000 you call your client quick because you think you found a good deal. So, If you want to play with investors you will need to make cap rates your well understood best buddy.

The person who gets a real estate loan by signing a note and mortgage is the: A: Mortgagor B: Mortgagee C: Seller D: Broker

A: Mortgagor Explanation: The mortgagor gives the note and the mortgage to the lender (the mortgagee) Note: Remember, "or's" give and "ee's" receive.

What, if anything, must an associate broker include in his/her web site advertising? A: Name of the brokerage firm that holds the associate broker's license B: Names of all licensees in the broker's office which the associate broker works C: The brokerage firms home office that holds the associate's license D: There is no need for additional disclosures

A: Name of the brokerage firm that holds the associate broker's license Explanation: All advertising by an associate broker must include the identity of the brokerage firm that holds the associate's license.

A client wants to buy a commercial property. You tell her they are putting in an exit ramp off the highway, that is proposed but not set in stone, that would allow easy access to the business. The client buys and they end up putting the ramp elsewhere. Are you responsible as the broker? A: No, the agent was truthful B: No, this is puffing C: yes, this is puffing D: yes, this is a misrepresentation

A: No, the agent was truthful Explanation: The agent is blameless. Had the agent not indicated the exit ramp was a proposal, the agent may have been subject to a claim of misrepresentation. As per the Free Dictionary regarding "puffing" - Puffing is generally an expression or exaggeration made by a salesperson or found in an advertisement that concerns the quality of goods offered for sale. It presents opinions rather than facts and is usually not considered a legally binding promise. Such statements as "this car is in good shape" and "your wife will love this watch" constitute puffing.

Who is responsible for getting a copy of the contract to the lender? A: Selling agent B: Listing agent C: Seller D: Title Company

A: Selling agent Explanation: A selling agent may not disclose whom the buyer will make loan application with

Thompson is the owner of a store building that is leased to Floyd for a ten-year term. If Thompson dies at the end of the seventh year of the lease: A: Thompson's heirs and devisees continue as lessors B: A new lease must be signed C: Floyd must vacate the building D: Floyd continues as the lessor

A: Thompson's heirs and devisees continue as lessors Explanation: A lease is a legally binding document that has been signed by both parties and becomes part of their estates should either party die.

A deed that contains no warranties, but in which the grantor does give up his own rights or claims, is known as: A: a quitclaim deed B: words of conveyance C: a deed restriction D: the granting clause

A: a quitclaim deed Explanation: A quitclaim deed is one in which NO guarantees are offered about past claims to the property, with the exception of those held by the grantor.

According to the Contract to Buy and Sell Real Estate - all prorations are: A: final as of the closing date B: taxes are readjusted when the bill comes in at the end of the year C: final as of the date of possession D: final as the date of remission - 3 days after closing

A: final as of the closing date Explanation: All proations are final at the closing table. There is no recourse for adjustments after. There is no date of remission for real estate transactions in the Contract to Buy and Sell Real Estate.

The decrease in value because of outmoded function is known as: A: functional obsolescence B: deterioration C: economic obsolescence D: depreciation

A: functional obsolescence Explanation: Outmoded function or out of date design or materials are examples of functional obsolescence, such as a one-car garage.

Non-resident brokers conducting business in Colorado must: A: have an office in Colorado B: have a trust account in Colorado if they take Colorado earnest money C: have an office manager in Colorado D: plan to move to Colorado

A: have an office in Colorado

A legal easement can be created by any of the following EXCEPT A: merger of the titles B: the parties' behaving as though there was an agreement C: a written agreement between the parties D: definition within a deed

A: merger of the titles Explanation: When two titles are emerged it means that two properties have been merged into one. Any easements between the two are extinguished as no longer necessary.

Land description by measurement and direction is called description by: A: metes and bounds B: recorded plat C: government survey D: none of the above

A: metes and bounds Explanation: A metes and bounds description utilizes measurements, directions and monuments.

Mutual assent to a real estate contract is indicated by: A: offer and acceptance B: acknowledgment C: seals D: habendum clause

A: offer and acceptance Explanation: Mutual assent to a real estate contract is offer and acceptance.

Unless the lease states otherwise, how long does a property manager have to return a security deposit after a lease has expired? A: one month B: 60 days C: 45 days D: 6 months

A: one month Explanation: Colorado law mandates that a security deposit must be returned within one month with an accounting for all deductions unless the lease indicates a different time period. Under no circumstances can the period of time in the lease be greater than 60 days.

An abstract of title usually is accompanied by a(n): A: opinion B: copy of title insurance C: letter of assurance D: all of the above

A: opinion Explanation: An attorney is generally asked to render an opinion regarding the conclusion of title after reviewing the abstract.

A one-sided contract is known as a: A: unilateral contract B: bilateral contract C: involuntary lien D: voluntary lien

A: unilateral contract Explanation: Remember that a unilateral contract is ONE-sided while a bilateral contract involves TWO persons.

According to the Conway-Bogue decision, it is a required practice for Colorado brokers to: A: use standard and approved forms B: use a title company in closing of all transactions C: retain an attorney for all transactions D: charge a fee for the preparation of documents

A: use standard and approved forms

The buyer or purchaser under a land contract is also known as the: A: vendee B: vendor C: leasee D: leaser

A: vendee Explanation: A vendee is a buyer in a land contract; the vendor is the seller. Neither a leaser nor a leasee has anything to do with land contracts

What does not need to be placed into an escrow account? A: withholding taxes B: security deposits C: short-term rental deposits D: earnest money

A: withholding taxes Explanation: Withholding taxes are not under the jurisdiction of the Real Estate Commission. Applicable Commission Rules for escrowed deposits are are E-1 and Position Statement CP-5

The IRS requires which of the following documents to be completed by the seller at the time of closing? A: W-9 B: 1099-S C: W-4 D: 0001031-E

B: 1099-S Explanation: The title company reports the seller's proceeds of the sale on a 1099-S form.

A designated broker's responsibilities are delegated by: A: written statement by Managing Broker B: office manager C: legislative statute D: negotiated by buyer and seller

A: written statement by Managing Broker Explanation: designated broker: a licensee designated in writing by an employing broker to serve as a single agent or transaction-broker for a seller, landlord, buyer or tenant in a real estate transaction; does not include a real estate brokerage firm that consists of only one licensed natural person. More info: CP-22...A designated broker is permitted to share confidential information with a supervising broker without changing or extending the brokerage relationship beyond the designated broker. Brokers may want to consult legal counsel regarding the necessity of securing the authorization of the party to whom the information is confidential before the designated broker shares that confidential information with the supervising broker. Such advice could include modifications to the listing agreement or buyer agreement that create such authorization. More info: This is a Colorado twist on brokerage laws. Generally, everything you learned in the National side is consistent with Colorado. That all contracts are with the company not the licensee, that the Employing Broker is responsible for the actions of the licensees under him/her and so on. The twist is in how we deal with confidential information and how we resolve what in past years was considered a conflict of interest. All of this comes under the heading of "Designated Broker." Here is the problem as the real estate commission saw it; once upon a time, it was a conflict of interest if two agents from the same company were working opposite sides of the same transaction - even if it was a large company and the agents did not know each other. Fact is - earlier brokerage laws were written in a time when there were no large offices or super-sized brokerages. Most were ma and pa operations where everybody knew and talked to each other. Recognizing that times had changed, the real estate commission wanted two agents working for the same company on the same transaction, to be able to fully represent their clients in a Buyer or Seller Agency relationship and not be forced into some form of neutral relationship such as Transaction Broker or the predecessor to Transaction Brokerage, the now illegal and much hated Dual Agency relationship. The issue was - if everybody in a company reports to the Employing Broker then that person is a walking talking potential conflict-of-interest on any transaction that occurs in the office. So they declared that brokerage relationships only, would be confined to the licensee level and not rise to the Employing broker level. This way the Employing Broker does not have a conflict of interest with anybody. That left one more problem and this was "imputation of confidential information". In simpleze - it would be a bad thing if two agents working on opposite sides of a transaction, went to the same Employing Broker for advice and that Employing Broker blabbed confidential information between them. To avoid that - the real estate commission issued rules that said in the event of two agents working on the same transaction for the same company, the Employing Broker would "Designate" another supervising broker for one of the agents. Tah Dah! No conflict of interest and no chance of one Employing Broker spilling secrets from one side to the other. Then to tie everything into a bow - they exempted one-man band brokerages from having to appoint another supervisor because... there is only one person in the company. One agent companies mostly become Transaction Brokers when double-ending a deal.

A lender agrees to loan you 80% of the first $ 60,000 and 70% of the remainder of the purchase price of a home. The contract price of the house you want is $80,000. How much down payment do you need? A: 22000 B: 18000 C: 16000 D: 14000

B: 18000 Explanation: 1 - $60,000 x 80% = $48,000 Amount lender will lend in first 80% tier 2 - $80,000 - $60,000= $20,000 Calculate remainder of the purchase price 3 - $20,000 x 70% = $14,000 Amount lender will lend in 2nd 70% tier 4 - $48,000 + $14,000 = $62,000 Full amount lender will lend 5 - $80,000 (purchase price) - $62,000 (loan) = $18,000 Balance buyer needs to bring to closing AKA down payment

A lot that is 65 feet wide by 80 feet deep will be fenced on both sides and the rear. How many linear feet of fencing would be needed? A: 145 ft. B: 225 ft C: 290 ft D: 160 ft

B: 225 ft Explanation: To figure out the linear feet, you would need the sum of all the sides to be fenced. 65' + 80' + 80' = 225 feet

What is the maximum fine that the Real Estate Commission can impose for a violation of commission rules? A: $2,500 plus punitive damages B: 2500 C: No fine only license suspension or revocation D: $3,500 plus punitive damages

B: 2500 Explanation: The maximum administrative fine is $2,500

In Colorado a broker must retain records of real estate transactions for a minimum of how many years? A: 2 B: 3 C: 4 D: 8

C: 4 Explanation: The real estate commission requires all records to be kept for four years. (was seven)

With regard to a property in a Home Owners Association, the Contract To Buy & Sell Real Estate provides the Buyer the right to terminate the contract if Buyer does not receive the Association Documents by: A: Title Deadline B: Association Documents Deadline C: Association Documents Objection Deadline D: Buyer cannot terminate the contract for failure to receive the Association Documents

B: Association Documents Deadline Explanation: From the Contract to Buy and Sell: Please note that the numbering scheme may change from year even though the language remains esentially the same. Conditional on Buyer's Review. If the box in either § 7.3.2.1 or § 7.3.2.2 is checked, the provisions of this § 7.3.3 shall apply. Buyer shall have the Right to Terminate under § 25.1, on or before Association Documents Objection Deadline (§ 3), based on any unsatisfactory provision in any of the Association Documents, in Buyer's sole subjective discretion. Should Buyer receive the Association Documents after Association Documents Deadline (§ 3), Buyer, at Buyer's option, shall have the Right to Terminate under § 25.1 by Buyer's Notice to Terminate received by Seller on or before ten days after Buyer's receipt of the Association Documents. If Buyer does not receive the Association Documents, or if Buyer's Notice to Terminate would otherwise be required to be received by Seller after Closing Date (§ 3), Buyer's Notice to Terminate shall be received by Seller on or before three days prior to Closing Date (§ 3). If Seller does not receive Buyer's Notice to Terminate within such time, Buyer accepts the provisions of the Association Documents as satisfactory, and Buyer waives any Right to Terminate under this provision, notwithstanding the provisions of § 8.5. Homeowners' Association Documents. The term Association Documents consists of all owners' associations (Association) declarations, bylaws, operating agreements, rules and regulations, party wall agreements, minutes of most recent annual owners' meeting and minutes of any directors' or managers' meetings during the six-month period immediately preceding the date of this Contract, if any (Governing Documents), most recent financial documents consisting of (1) annual balance sheet, (2) annual income and expenditures statement, and (3) annual budget (Financial Documents), if any (collectively, Association Documents).

A mortgage broker usually offers which of the following services? A: Sells the mortgage-backed securities on the second market B: Brings borrower and lender together C: Provides easement for general use extending across the property D: Donuts for realtors, free credit reports, and lower interest rates

B: Brings borrower and lender together Explanation: A mortgage broker usually brings buyers and lenders together, typically on a commercial transaction.

Title insurance endorsements are provided by the: A: Seller for the protection of the lender B: Buyer for the protection of the lender C: Seller for the protection of the buyer D: Buyer for the protection of the seller

B: Buyer for the protection of the lender Explanation: Standard Title insurance is paid for by the seller. Title insurance endorsements are paid for by the buyer as protection for the lender. This is usually called mortgagee insurance, or the mortgagees policy.

Bob Burnside has defaulted in payment of several debts, and a court has ordered his property sold to satisfy them. A report reveals several outstanding liens against the property. Which has first priority? A: The outstanding mortgage dated and recorded one year ago B: Current real estate taxes C: A mechanic's lien for work that was started two months before the date the mortgage was recorded D: A court judgment rendered and recorded last month

B: Current real estate taxes Explanation: Real estate taxes always have first priority.

The Green's bought their house 3 years ago and put $20,000 down; over the three years they have paid $54,000 in mortgage payments of which $42,000 went to interest and $12,000 against the loan balance. The property has not changed value. What is the $32,000 they have invested in the property called? A: Redemption B: Equity C: Taxable income D: Profit

B: Equity Explanation: In real estate as opposed to the stock market, equity is the difference between the current market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage. Since the Green's made a $20,000 down payment and have paid off an additional $12,000 in their home, which is worth what they paid for it, they have $32,000 equity in the property.

When viewing the property, the buyer asks if the shelving in the basement is included. The broker is safe to say: A: yes, the shelving is included B: I don't know, but I will find out for you C: the MLS printout does not mention the shelving, so it must not be included D: I assume it is included because it looks as if is permanently attached

B: I don't know, but I will find out for you Explanation: Never assume anything, call the listor and find out the correct information for your buyer.

Broker Mary Andrews took a listing and later discovered that her client had previously been declared incompetent by a court of law. The listing now: A: Is binding, since the broker was acting as the owner's agent in good faith B: Is void C: Is the basis for the recovery of a commission if the broker produces a buyer D: Is voidable

B: Is void Explanation: Incompetent persons cannot enter into a contract.

All unpaid ad valorem taxes become delinquent on: A: February 28th B: June 16th C: May 1st D: September 1st

B: June 16th

Who is responsible for getting a copy of the contract to the Title Company? A: Selling agent B: Listing agent C: Seller D: Lender

B: Listing agent Explanation: The listing agent helps the seller determine which title company will issue the commitment.

When a house that is in poor condition is located within a neighborhood where all the other properties are well kept, on this property this is an example of: A: Principal of Regression B: Principal of Progression C: Principal of Conformity D: Principal of Succession

B: Principal of Progression Explanation: The value of the poor house in the nice neighborhood will benefit by its surrounding, thus progression. Only a few of the nice houses will suffer regression, not the whole neighborhood.

Publishing a foreclosure notice of sale in a newspaper is the duty of the: A: County Treasurer B: Public Trustee C: Lender D: County Assessor

B: Public Trustee Explanation: Sale date published for 5 consecutive weeks prior to sale More info: A residential foreclosure sale must be within 110 to 125 days of the recording of the Notice of Election and Demand. For agricultural properties the window is 215-230 days.

If a legal description is provided, a parcel of land can be located on the ground by means of a(n): A: abstract of title B: survey C: fence D: Torrens certificate

B: Survey Explanation: A survey is used to locate a specific parcel of property. Contracts require a legal description adequate enough for a surveyor to locate it.

Right of recession is party of: A: RESPA B: TILA C: Consumer Protection Act D: Fair Housing Act

B: TILA for refinancing or second mortgages, cannot waive the 3 day period

An associate broker terminates with a broker. The employing broker (AKA sponsoring broker) refuses to turn the license over to the Commission. Which of the following is true? A: Automatic fine for the Employing Broker B: The Employing Broker may be subject to disciplinary action C: Employing broker's license is immediately suspended D: Both associate and employing brokers may have their licenses canceled

B: The Employing Broker may be subject to disciplinary action Explanation: There is never automatic fines or suspensions; there is always a hearing first. A broker who refuses to return an agent's license to the commission may be subject to disciplinary action.

Regarding the broker/seller relationship under the terms of an Exclusive Right-to-Sell listing contract, which of the following statements are true? A: The broker may be the seller's agent and a transaction broker for the buyer B: The broker can take the listing without being an agent of the seller C: The listing must have at least a 60 day holdover period D: The listing has to be for at least thirty days

B: The broker can take the listing without being an agent of the seller Explanation" A broker may list a property as either a Seller's Agent or Transaction Broker. Only a Seller's Agent is considered to be an "agency relationship." Transaction Broker is considered to be a "working relationship." In an agency relationship you are an advocate for the client and owe the client your loyalty. In a working relationship you are a neutral party, advocating for neither the buyer or the seller but are instead just a facilitator for the transaction. Under NO CIRCUMSTANCES can you be an agent for one party and a transaction broker for the other in the same transaction. That would have the effect of you telling one party you are working for them (Buyer or Seller's Agency) and the other that you are a neutral party (Transaction Broker). That would be dishonest.

Which of the following is true if a buyer receives a property inspection report indicating several apparently serious problems on the day after the Inspection Objection Deadline? A: The buyer can compel the seller to correct these serious defects before closing. B: The buyer missed the opportunity to object based on inspection issues, and the contract is still in force. C: The buyer may still object because the report came after the deadline. D: The buyer is in default for missing the deadline, and the seller may terminate the contract.

B: The buyer missed the opportunity to object based on inspection issues, and the contract is still in force. Explanation: Obtaining the inspection and submitting any objections prior to the deadline is the responsibility of the buyer. Based on the inspection provision of the Residential Contract to Buy and Sell, the inspection contingency is waived if the buyer does not file an objection, regardless of the reason for not doing so.

When a seller wishes to counter an offer made by a purchaser, which of the following documents should be signed by the seller? A: The purchase and sale contract B: The counter offer C: The purchase and sale contract and the counter offer D: The purchase and sale contract after the appropriate changes have been stricken or changed and initialed

B: The counter offer Explanation: By signing the purchase and sale contract the seller is agreeing to those terms and is bound by the terms of the contract. The counter offer changes the terms so by signing that, the terms of the counter are changed but the rest of the contract remains the same. Changing and initialing is a poor practice.

When an associate broker makes a disclosure using the Square Footage Disclosure form. The broker is disclosing: A: That the measurement need not be independently checked B: The methodology and/or source of the measurements C: The exact square footage D: That the disclosure is for a loan

B: The methodology and/or source of the measurements Explanation: An associate broker is not required to measure a property. However the broker is required to disclose from where the square footage numbers came that he or she cited in advertisements, MLS and elsewhere.

When an associate broker makes a disclosure using the Square Footage Disclosure form. The broker is disclosing: A: That the measurement need not be independently checked B: The methodology, standard and manner of the measurements C: The exact square footage D: That the disclosure is for a loan

B: The methodology, standard and manner of the measurements Explanation: An associate broker is not required to measure a property. However the broker is required to disclose from where did the square footage numbers came that he or she cited in advertisements, MLS and elsewhere.

From whom may the buyer's sales agent receive payment for their services? A: Anyone B: Their broker only C: The listing agent's broker D: Their client

B: Their broker only Explanation: Anti-trust laws prohibit price fixing. There is no maximum. All commissions are negotiable.

The lot and block reference in a legal description refers to: A: the government survey system B: a recorded plat map C: a metes and bounds description D: a condominium development

B: a recorded plat map Explanation: Lot & block is a recorded plat map.

A 1031 Exchange is: A: changing a transaction broker relationship to a buyer broker relationship B: a tax deferred exchange of investment properties C: a tax deferred exchange of owner occupied residential properties D: a transaction where a promissory note will be exchanged for cash prior to closing

B: a tax deferred exchange of investment properties Explanation: A l031 Exchange is a transaction in which a taxpayer is allowed to exchange one investment property for another by deferring the tax consequence of a sale. The transaction is authorized by 1031 of the IRS Code. The IRS Code actually reads: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like kind, which is to be held either for productive use in a trade or business or for investment." Requirements for a 1031 Exchange Timelines for a 1031 Exchange The investor (or exchanger) must follow the strict 45- / 180-day guidelines for an exchange. Once the exchanger sells his/her property (relinquished property) he/she has 45 days to identify property(s) of equal or greater value. Once identified, the exchanger has 180 days from the day he/she sold their property to acquire the property(s) identified (or 135 days from the end of the 45-day period) Like-Kind Property in a 1031 Exchange The investor must acquire "like-kind" property. This means that it must be other qualifying forms of real estate. For example, the exchanger could sell a duplex and purchase a commercial property, or he/she could sell a piece of land and buy an apartment building. The property just needs to be "like-kind."

The term for something that grants the right to use another's land for a specific purpose, and is considered an incorporeal interest in land is: A: an encumbrance B: an easement C: an encroachment D: an equitable lien

B: an easement Explanation: An easement grants the right to use another's land for a specific purpose. Remember that an EASEMENT is one type of encumbrance, and liens are another type of encumbrance. An easement is a certain right to use the real property of another without possessing it. It is "best typified in the right of way which one landowner, A, may enjoy over the land of another, B."

A mineral that was once used as insulation, and is now considered harmful if disturbed or exposed, is: A: radon B: asbestos C: lead-based paint D: PCBs

B: asbestos Explanation: Asbestos insulation can create airborne contaminants that may result in respiratory diseases.

Recording a deed at time of closing: A: is all that is required to pass title to real estate B: gives constructive notice of ownership of real property C: ensures ownership of real property D: warrants the title of real property

B: gives constructive notice of ownership of real property Explanation: Recording a deed does not pass title - execution of the warranty deed conveys ownership. Recording gives constructive notice to the world that the document exists and establishes priority in the event of foreclosure.

A section: A: contains 680 acres B: is one square mile C: is two square miles D: contains 43,650 square feet

B: is one square mile Explanation: A section is one mile square. Remember: 1 mile square is a square one mile on each side, and has an area of 1 sq. 1 square mile is any shape that has an area of 1 square mile.

If a buyer will not sign any disclosure form, the licensee should: A: not show any properties to the buyer until he or she does so B: note this fact on the form, along with the date and licensee's signature C: address the issue when the buyer is ready to make an offer D: refuse to work with the buyer

B: note this fact on the form, along with the date and licensee's signature Explanation: If a buyer will not sign any disclosure form, the licensee should note this fact on the form, along with the date and licensee's signature.

A seller must provide a Seller's Property Disclosure form based on which of the following? A: seller's opinion of condition at the time of the contract B: seller's current actual knowledge C: results of a professional property inspection D: advice of the listing agent regarding the condition of the property

B: seller's current actual knowledge Explanation: The Property Disclosure of the Residential Contract to Buy and Sell specifies that the form should be completed by the seller (not the broker) and based on the seller's current actual knowledge.

If the buyer assigns her right to purchase a property pursuant to an Exclusive Right-to-Buy Contract to her brother-in-law: A: the broker is no longer entitled to a commission B: the broker shall still have the right to collect a commission C: the broker may only collect a commission if the brother-in-law signs an Exclusive Right-to-Buy Contract D: the broker may only collect a commission if the listing broker feels that the selling broker has earned it

B: the broker shall still have the right to collect a commission Explanation: The broker's right to collect a commission is specifically protected in the Exclusive Right-to-Buy Contract even if the buyer's right to purchase is assigned to another party.

An ad in the newspaper must appear under the name of: A: the branch office B: the brokerage firm C: the listing licensee D: none of the above

B: the brokerage firm Explanation: All advertising must contain the name of the brokerage firm.

Your offer to buy a property for $150,000 is accepted, but unfortunately there is a fire in the kitchen prior to closing. The insurance company estimates about $9,000 to repair and repaint. The repairs will be made in time to meet the closing date. A: the buyer has the option of terminating B: the buyer must proceed C: the contract automatically terminates D: the buyer and seller renegotiate the price of the property

B: the buyer must proceed Explanation: If the damage is repaired and the cost of the repairs are less than 10% of the cost of the property, then the buyer cannot terminate the contract. If the repairs exceed 10% then the buyer may terminate the contract

Time is of the essence means: A: performance will not be waived B: the period of performance or acceptance will be enforced strictly C: performance must be completed before a commission will be paid D: the parties cannot agree to any extension of the agreement

B: the period of performance or acceptance will be enforced strictly Explanation: If dates are not met in the contracts the parties are considered out of contract.

The authority to carry out eviction of a delinquent tenant from rented property is held by: A: a landlord B: the sheriff C: any of the above

B: the sheriff Explanation: The short version is this - a landlord may request an eviction - but only a sheriff has the authority to physically perform one. A fuller explanation of the procedure is: a landlord requests the courts to issue a judgment for an eviction by filing an "unlawful detainer action" in a court. An "unlawful detainer" is a legal way of saying the tenant refuses to give up possession - they are detaining the property from the landlord. If the judge agrees, s/he issues a "writ of execution" which is a court order to a sheriff to physically perform the eviction.

According to the Exclusive-Right-to-Sell Listing Contract, which of the following is true with regard to fixtures listed on the approved form? A: they are included unless they are crossed out on the form B: they are included if attached on the date of the listing unless specifically excluded by the seller C: they are included in every case D: they are included if they are on the property at the time of the listing

B: they are included if attached on the date of the listing unless specifically excluded by the seller Explanation: Unless excluded by the seller, all fixtures will be included. A fixture is any physical property that is permanently attached to real property. All other property which is not permanently attached is Personal Property.

At closing, the earnest money is credited as follows: A: to the seller B: to the buyer C: to the lender D: to the listing agent as commission

B: to the buyer Explanation: Earnest money is credited to the buyer at closing and debited to the broker.

Listing agreements must include: A: An appraisal of the property B: A property inspection form C: A definite termination date D: A standard approved commission

C: A definite termination date Explanation: Listing agreement must have a termination date

Who will not have a copy of the listing agreement? A: Seller B: Listing broker C: Buyer's agent D: Listing agent

C: Buyer's agent Explanation: Listing agreement is between seller and listing broker only.

Standard title insurance charges appear on a closing statement as a: A: Credit to the buyer B: Credit to the seller C: Credit to the broker D: Debit to the broker

C: Credit to the broker Explanation: Title Companies collect the title insurance premium at closing - a check is later sent to the title insurance premium company. It is usually a debit to the seller and a credit to the broker at time of closing.

The Torrens System is most commonly used in which part of Colorado? A: Northern B: Southern C: Eastern D: Western

C: Eastern Explanation: The Torrens System is used in the eastern part of Colorado. When a certificate of title is first applied for in the Torrens System, the title is searched or examined, a court hearing is held (as in a land court), and a decree confirming title and ordering registration (as with the registrar of deeds) is issued. A certificate of title is then given to the owner, after which the property may be conveyed by executing deeds, delivering the certificate of title to be cancelled, and issuing a new certificate to the new owner. The title registered in a Torrens system is usually guaranteed and marketable, making title insurance unnecessary and greatly reducing the time spent researching the state of the title during subsequent conveyances.

A developer has obtained a blanket loan in order to finance construction of a planned unit development. This loan has all the following requirements except. A: The money will be disbursed in installments. B: When construction is completed the loan must be converted to long term financing. C: Equal monthly payments D: It must have a partial reconveyance clause.

C: Equal monthly payments Explanation: This loan will have unequal monthly payments because the money is taken out as needed for the construction of the property. A blanket loan is often used to purchase more than one piece of real estate. They are popular with developers who buy large tracts of land, then subdivide them to create many individual parcels to be sold one at a time as they are developed.

When private property is abandoned, the state may acquire title to that property under the right of: A: Taxation B: Eminent domain C: Escheat D: Subrogation

C: Escheat Explanation: The state can take abandoned property through escheat.

Describing property by degrees, feet, and monuments is called: A: Maps and plats system B: Rectangular survey system C: Metes and bounds system D: Lot and Block system

C: Metes and bounds system Explanation: All of these are used in metes and bounds in describing the property.

Cindy is an associate broker who received a thank you letter and nice bonus check from the seller of a house several weeks after the closing. Cindy cashed the check because she felt she earned it. Which of the following is true in this situation? A: Cindy may accept the bonus check because she is licensed as an associate broker B: Cindy is allowed to accept the money if 30 days have elapsed since the closing C: It is a violation of commission regulations to accept the money D: Cindy may accept the money if her broker permits her to do so

C: It is a violation of commission regulations to accept the money Explanation: Cindy acted improperly by cashing the check. It is a violation of commission regulations to accept the money. She may only be paid by her employing broker.

Ben and Dave are co-owners of a fee simple estate in a parcel of real estate. Ben dies intestate and leaves no estate to be distributed to his heirs. Dave is neither related to Ben, or a creditor of Ben. Which of the following explains how Dave acquired the interest of Ben? A: Adverse possession B: Reversionary right C: Joint tenancy D: Mortgage foreclosure

C: Joint tenancy Explanation: In estate law, joint tenancy is a special form of ownership by two or more persons of the same property. The individuals, who are called joint tenants, share equal ownership of the property and have the equal, undivided right to keep or dispose of the property. Joint tenancy creates a Right of Survivorship. This right provides that if any one of the joint tenants dies, the remainder of the property is transferred to the survivors.

When advertising, which is the correct way? A: Joseph Magnum, Associate Broker B: Joseph Magnum, Associate Broker, Hot Properties Real Estate Team C: Joseph Magnum, ABC Realty Inc. D: Joseph Magnum, Associate Broker, (303) 999-5555

C: Joseph Magnum, ABC Realty Inc. Explanation: The minimum requirement for advertising is that the name of the brokerage firm is included in the ad. The law wants to make certain that the public knows which company for whom the broker represents. A Team is not a brokerage firm, but instead a group of agents working for a brokerage firm. For social media, the name of the brokerage firm must be included in the first post of an agent discussing a licensed type of activity in a chat type of communication. If the name is long and does not fit into one entry, the FIRST CLICK rule applies. This rule says that if the firm's name does not fit, a link must be placed within the post which when clicked goes immediately to a webpage containing the firm's nam .

In Colorado one half of the property tax was paid at the end of February, by what date must the balance be paid to avoid a penalty? A: March 31 B: March 1 C: June 15 D: April 30

C: June 15 Explanation: June 15 is the latest that the balance can be paid to avoid a penalty.

A price at which a willing and informed buyer would buy and a willing and informed seller would sell is called the: A: Assessed value B: Book value C: Market value D: Equity

C: Market value Explanation: The market value of a property is a price at which a buyer and seller agree upon a price.

General property taxes must be paid: A: January 1 each year in advance B: January 1 each year in arrears C: Not later than June 15 in arrears D: Monthly beginning the last day of February

C: Not later than June 15 in arrears Explanation: They must be paid totally by June 15, and property taxes are paid in arrears.

When a seller decides to counter an offer presented to him, which is true? A: Seller should sign the original offer as well as the counter offer B: Seller should not sign either the original offer or the counter offer C: Seller should sign only the counter offer D: Seller should sign the original offer only

C: Seller should sign only the counter offer Explanation: To counter: the seller initials the original offer by the box he/she checked indicating it is countered. The seller does not sign the original offer (that would constitute acceptance). The seller's agent then indicates the counter offer on a Counterproposal form. The sellers signs the Counterproposal form. The original offer and Counterproposal are returned to the buyer or buyer's agent.

An option is a contract that: A: Transfers title when signed B: Does not set the sale price C: Specifies a time limit in which to buy or lease a piece of property D: Is a bilateral executory agreement

C: Specifies a time limit in which to buy or lease a piece of property Explanation: An option gives a specific time for the buyer or seller to exercise a specific action.

The purpose of Commission Rule F is: A: To reduce the licensee's liability B: To have forms for all transactions C: To encourage compliance with Conway-Bogue D: To require disclosure

C: To encourage compliance with Conway-Bogue Explanation: Commission Rule F is to help Colorado real estate licensees comply with Conway-Bogue

All of these are requirements of a borrower under an FHA insured loan except: A: Not borrow any money for the down payment. B: Pay a monthly mortgage insurance premium. C: To pledge never to obtain a second loan. D: Certify that he will occupy the premises.

C: To pledge never to obtain a second loan. Explanation: A FHA buyer can obtain a second loan once he owns the property.

What principal Prime Meridian is located entirely in Colorado? A: UTE Principal Meridian B: New Mexico Principal Meridian C: 6th Principal Meridian D: Colorado Principal Meridian

C: UTE Principal Meridian Explanation: The Ute is located just east of Grand Junction.

According to the Exclusive Right to Sell listing contract, the broker must disclose to any possible buyer A: seller's motivation for selling B: all facts known about the transaction the broker knows C: all material facts about the property the broker knows D: all facts about the seller the broker knows

C: all material facts about the property the broker knows

The income approach would be best used in appraising a(n) A: single family residence. B: church. C: apartment building. D: school.

C: apartment building Explanation: An apartment is an income producing property

Each time-share estate is: A: encumbered separately but conveyed all at once B: conveyed and encumbered by one blanket policy C: encumbered and conveyed separately D: none of the above

C: encumbered and conveyed separately Explanation: Each time-share estate is encumbered and conveyed separately.

Funds brought to the closing table must be in the form of: A: a personal check verified by the bank B: title company check C: good funds D: personal check

C: good funds Explanation: The good funds rule requiring closing funds to be in the form of cash, wire transfers, money orders, cashier's checks, or other certified funds. A personal check is not verified funds.

When performing an appraisal of real estate, the appraiser is estimating the property's: A: selling price B: depreciable basis C: market value D: utility value

C: market value Explanation: An appraiser provides an estimate of market value.

In the sale of new construction, builders usually use contracts that are: A: approved by the Colorado Real Estate Commission only B: prepared by the attorney of the selling broker C: prepared by their own attorney D: prepared by the selling broker

C: prepared by their own attorney Explanation: Builders use their own contracts that are prepared by their own attorneys.

Subdivisions must be registered with the Real Estate Commission. In this sense the term "subdivision" does not include: A: a group of 20 or more time shares intended for residential use B: the conversion of an existing structure into a common interest community of at least 20 or more residences C: the selling of campground memberships D: a group of 20 proprietary leases in a cooperative housing corporation

C: the selling of campground memberships Explanation: In this question the key term is "20 or more." To be considered a subdivision which must be registered with the real estate commission, the division must be 20 or more units. The selling of campground memberships is excluded.

The term "subdivision" does not include: A: a group of 20 or more time shares intended for residential use B: the conversion of an existing structure into a common interest community of at least 20 or more residences C: the selling of campground memberships D: a group of 20 proprietary leases in a cooperative housing corporation

C: the selling of campground memberships Explanation: The key term is "20 or more" to be considered a subdivision; excluding the selling of campground memberships.

The seller under a land contract is also known as: A: the vendee B: leasee C: the vendor D: leaser

C: the vendor Explanation: A vendor is a seller under a land contract, while a vendee is a buyer. Neither a leaser nor a leasee has anything to do with land contracts.

Connie is buying a home using FHA financing, the purchase price is $108,000 the maximum LTV is 97.75%. What is the minimum down payment Connie can make? A: 2108 B: 1054 C: 1080 D: 2430

D: 2430 Explanation: First take the purchase price of $108,000 X 97.75 = $105,570. Then subtract $105,570 from $108,000 = the down payment $2,430.

In preparing a Contract to Buy/Sell, a broker can not put exculpatory language into: A: An addendum prepared by an attorney B: An addendum prepared by a party to the contract C: An addendum prepared by the employing broker D: Additional Provisions of a commission approved contract

D: Additional Provisions of a commission approved contract Explanation: Exculpatory language is language or a clause within an agreement that excuses a broker from certain actions or behavior relative to that agreement. The purchase contract is between the buyer and seller, and the broker is not a party to that contract. The broker cannot put language into the Additional Provisions part of the agreement getting them him/her off the hook for something.

When the license of the sole proprietor is suspended for two years, what is the effect on the affiliated associate brokers? A: Affiliates' licenses will also be suspended for a two-year period B: Affiliates' licenses will be revoked, subject to reinstatement after one year C: Suspension of the proprietor has no effect on the affiliates' licenses D: Affiliates licenses are inactive until they are hired by a new employing broker

D: Affiliates licenses are inactive until they are hired by a new employing broker Explanation: If the broker's license is suspended, the licenses of all associate brokers will be placed on inactive status until these persons are "hired" by a new broker.

Real property is closing on May 15. The buyer is assuming the seller's mortgage. As of closing the balance is $65,325. The annual interest rate is 8%. How should the interest on the loan be prorated based on a banker's year (360 days in a year, all months have 30 days) A: Debit the buyer $232.32 B: Debit the seller $232.32 C: Debit the buyer $203.23 D: Debit the seller $203.23

D: Debit the seller $203.23 Explanation: Debit the seller $203.23 $65,325 x 8% / 360 days = $14.5167 x 14 days = $203.23

Which items, are not considered physically attached to the property and are not included in the sale? A: Light fixtures B: Curtain rods C: Storage rods D: Draperies

D: Draperies Explanation: Personal property is not included in the sale of real estate. Draperies do not satisfy the tests of fixtures since they are not permanently attached. All other items in answers are permanently attached.

A broker's license may be suspended or revoked for which of the following causes? A: Over-charging sales commission B: Conviction of a motor vehicle violation C: Failure to pay a money judgement entered by a clerk of courts D: Failure to account for or remit funds belonging to others

D: Failure to account for or remit funds belonging to others Explanation: Failing to account for funds of others, conversions and commingling are grounds for disciplinary action.

Which of the following may be considered prima facie evidence (legally sufficient to establish a fact or a case unless disproved) of discrimination by a broker? A: Failure of a minority buyer to qualify for a loan arranged by the broker. B: Failure to show property in certain neighborhoods C: Failure to keep appointments with minority customers even though the broker was unaware of the minority status. D: Failure to display the equal housing opportunity poster at the broker's place of business

D: Failure to display the equal housing opportunity poster at the broker's place of business Explanation: According to the Fair Housing Act - A fair housing poster shall be posted and maintained at any place of business where the dwelling is offered for sale or rental

RESPA applies to: A: Construction loans B: Installment land contracts C: Loans secured to refinance a current home D: First loans where the proceeds are used to purchase a primary residence

D: First loans where the proceeds are used to purchase a primary residence Explanation: RESPA applies to most new loans where the proceeds are used to purchase land and a dwelling.

What is the relationship between an employing broker and the employed licensee? A: Employee, employer B: Sole proprietor C: Friendly D: Independent contractor and or employer, employee

D: Independent contractor and or employer, employee Explanation: To the IRS you are an independent contractor, to your broker you may be considered an employee and required to come to sales meetings.

The most likely source of information for what water rights exist for a property with a well would be: A: An attorney B: County Clerk and Recorder C: County Planning Department D: State Engineer - Colorado Department of Natural Resources

D: State Engineer - Colorado Department of Natural Resources Explanation: For more information see the optional "Listing Firms Well Checklist"

This illegal activity is a conspiracy to boycott a firm and drive it out of business. This is known as: A: price-fixing B: redlining C: blockbusting D: group boycotts

D: group boycotts Explanation: Group boycotts happen when a group conspires to drive a company out of business by boycotting it. An example of group boycotting would be for someone to stand up at a company sales meeting and say all of our agents must use this title company or this mortgage company; that would be group boycotting because you are eliminating the competition.

The amount of commission is determined by: A: local custom B: the MLS C: the Real Estate Commission D: negotiation

D: negotiation Explanation: There are no set commission rates; they are always negotiable.

All the following contracts fall under Commission Rule F except: A: open listing agreements B: exclusive tenant C: contract to buy and sell real estate D: new construction contracts

D: new construction contracts Explanation: The builders write their own new construction contracts.

Contract closing date is March 29. Buyer and seller want to close on the 27th. In order to do this, they must: A: amend the original contract B: sign a counterproposal C: this is not allowed unless a new contract is written up D: nothing, this is okay per the original contract

D: nothing, this is okay per the original contract Explanation: As long as both parties to the contract agree and the date is being moved up, there is no need to do an amend and extend to the contract. If they were pushing the date out past the 29th, an amend/extend would be needed to keep the contract viable.

Broker is allowed to facilitate safeguards for seller-assisted financing by adherence to the following EXCEPT to: A: advise buyers and sellers to consult legal and tax counsel for advice B: Cooperate with appraisers as they perform their due diligence in asking questions about sales C: advise seller as to the impact of any seller paid costs D: notify Real Estate Commission of true selling price of home

D: notify Real Estate Commission of true selling price of home Explanation: The real estate commission does not track sale prices of homes. CP-30 State of Colorado Real Estate Commission and Board of Real Estate Appraisers Joint Position Statement The Colorado Real Estate Commission and the Colorado Board of Real Estate Appraisers have issued this Joint Position Statement to address mutual concerns pertaining to practices of real estate brokers and real estate appraisers with regard to residential sales transactions involving seller assisted down payments, seller concessions, personal property transferred with real property and other items of value included in the sale of residential real property. A residential real estate transaction has a life well beyond closing and possession of the property. Accurate sales data is crucial for appraisals and comparative market analysis (CMA) work products. Both appraisers and real estate brokers can effectively work together to maintain the safeguards that accurate sold data affords. A real estate broker can facilitate these safeguards by adherence to the following: • Note the amount of any seller paid costs (including a seller assisted down payment or fee paid to a charitable organization on behalf of the buyer) or other seller concession in the proper transaction documents, including the Buy/Sell Contract, Closing Statements, and Real Property Transfer Declaration. • Utilize all available fields in the multiple listing service to report sold information including all transaction terms and seller concessions. Sold information should be entered promptly following closing and be specific and detailed particularly when the sold price includes a seller assisted down payment or concessions. • Advise buyers and sellers to consult legal and tax counsel for advice on tax consequences of seller contributions and inducements to purchase. • Cooperate with appraisers as they perform their due diligence in asking questions about sales.

Closing is February 10 and taxes for the prior year were not paid for $1,854, this is shown on the settlement sheet as: A: $1,854 debit to the seller, credit to the broker B: $1,854 debit to the seller, credit to the buyer C: $152.38 debit to the seller, credit to the buyer D: $152.38 debit to the seller, credit to the broker

A: $1,854 debit to the seller, credit to the broker Explanation: Taxes for the prior year would be a debit to the seller and a credit to the broker. The previous years taxes are the seller's problem. Debit the seller for $1854. The broker receives the funds as a Credit. (remember - the "broker" is a proxy for the title company closing agent who controls the escrow account). The broker (closing agent) will then write a check from the escrow account and send it to the governement to pay the past due tax bill.

If the closing is March 15, and last years taxes of $1127 were not paid; how is this shown on the settlement sheet? A: $1127 debit to the seller, credit to the broker B: $1127 debit to the seller, credit to the buyer C: $225 debit to the seller, credit to the broker D: $225 debit to the seller, credit to the buyer

A: $1127 debit to the seller, credit to the broker Explanation: It will be shown on the settlement sheet as a debit to the seller and a credit to the broker. Remember, the broker represents the escrow account. The credit goes to the escrow account as the person in charge of it, represented by the broker, needs to write a check to the County to pay the seller's delinquent tax bill.

If the closing is March 15, and last years taxes of $1127 were not paid; how is this shown on the settlement sheet? A: $1127 debit to the seller, credit to the broker B: $1127 debit to the seller, credit to the buyer C: $225 debit to the seller, credit to the broker D: $225 debit to the seller, credit to the buyer

A: $1127 debit to the seller, credit to the broker Explanation: It will be shown on the settlement sheet as a debit to the seller and a credit to the broker. Remember, the broker represents the escrow account. The credit goes to the escrow account as the person in charge of it, represented by the broker, needs to write a check to the County to pay the seller's delinquent tax bill.

A building sold for $180,000. The buyer put up 10% cash and obtained a loan for the balance. The lending institution charged a 1% loan origination fee. How much total cash did the buyer need to bring to the closing to cover these expenses? A: $19,620 B: $19,800 C: $1,620 D: $18,000

A: $19,620 Explanation: $180,000 (Purchase Price) X .90 (90% of Purchase Price) = $162,000 (Loan Amount) X .01 (1% of Loan Amount is Origination Fee) = $1,620 (Total Origination Fee) + $18,000 (10% of Purchase Price = Down Payment) = $19,620 Total Cash To Closing The loan origination fee is a lender charge for the purpose of securing a new loan

A lender is charging three discount points on an 80% loan for a $300,000 sale. The broker is instructed to charge two points to the seller. The settlement sheet entry would appear as: A: $4,800 debit seller, $2,400 debit buyer, $7,200 credit broker B: $4,800 debit seller, $4,800 credit broker C: $2,400 debit seller, $4,800 debit buyer, $7,200 credit broker D: $4,800 debit buyer, $4,800 credit broker

A: $4,800 debit seller, $2,400 debit buyer, $7,200 credit broker Explanation: $300,000 X 80% = $240,000 loan amount. The seller is paying 2% (2 discount points) of the loan amount so $240,000 x .02 = $4,800 debit seller. The buyer is paying 1% (1 discount point) of the loan amount, so $240,000 x .01 = $2,400 debit buyer. This money needs to be placed into the escrow account for the transaction, so $7,200 credit broker. More info: On the "Broker" column: The "broker" debit and credit columns in the six column worksheet for closings represents the escrow account for the closing. Although it is referred to as the "broker" columns, generally it is the closing agent who has control of the escrow account as the closing agent was hired by the broker to conduct the closing. Hiring a closing agent does not absolve the broker from legal responsibility for the escrow account, hence the name of those columns are "broker debit" and "broker credit". On 'Discount Points': Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

An income property has a gross annual income of $14,250 and monthly expenses of $300. It has been valued at $147,000. What is the capitalization rate? A: 0.072 B: 0.096 C: 0.061 D: 0.054

A: 0.072 Explanation: $14250 - ($300 X 12) $3600 = $10,650/1$147,000 = .072 or 7.2% More on Cap Rate: Since Cap Rate uses income, it is only used for income producing properties, not for example, the home you are buying for yourself. First let's define cap rate AKA Capitalization Rate: Cap rate indicates how fast an investment will pay for itself. For example, a 10% Cap Rate means you will get 10% of your purchase price back each year. If a commercial apartment building is purchased for $5,000,000 and it generates $500,000 a year in net operating income (the dollars left over after operating costs are subtracted from your gross income), then: $500,000 / $5,000,000 = 10% cap rate This means 10% of the building's purchase price is paid each year by the proceeds. Another way of saying this - the property will pay for itself in 10 years. How do you use this tool? Way one; it allows investors a fairly easy and quick method of comparing investment properties. For example: take two properties as identical as the cute twins you flirted with in high school, with the same net operating income. One has a cap rate of 8% (same income, priced higher) and the other a cap rate of 15% (same income, priced lower). The 15% cap rate property MIGHT just be a heck of a deal or the 8% one overpriced. BUT you have to dig deeper, because it might be that the higher cap rate property is in a bad neighborhood and the owner has to discount the price to get it sold. Higher risk means you as a buyer get more bang for the buck with the 15% cap rate property, but you are going to have to work harder for it and your spouse is mad because you haven't been able to take a vacation in years because of that "dang" property you bought. The 8% cap rate property may be more expensive and have a longer payback period, but that is because there is less risk and more investors want to buy it. The rents just come in without grief and it could save your marriage. Way two: Cap Rate is also used in the Income Method of appraisals to value a property. Generally, investors could care less if a property is pretty; they want to know how much they are going to make off it. The Income Method allows an investor to value a property based on its income. If most like investment properties in an area have an average cap rate of 7%. You can divide the net operating income of the property your client is interested in (provided by the listing agent) by the average cap rate in the area (digging in sold comps of various MLS's) and it will give you the approximate market value of the property. For example: $225,000 net operating income / 7% = $3,214,285 market value. If the property is listed for $5,000,000 you might want to pass it by because it is overpriced for the neighborhood. If it is listed for $2,500,000 you call your client quick because you think you found a good deal. So, If you want to play with investors you will need to make cap rates your well-understood best buddy.

If a property's annual net income is $24,000, and it is valued at $300,000, what is the capitalization rate? A: 0.08 B: 0.105 C: 0.125 D: 0.15

A: 0.08 Explanation: $24,000 (Net Income) / $300,000 (Value) = 8% (Rate)

If a property's annual net income is $24,000, and it is valued at $300,000, what is the capitalization rate? A: 0.08 B: 0.105 C: 0.125 D: 0.15

A: 0.08 Explanation: $24,000 (Net Income) / $300,000 (Value) = 8% (Rate) More on Cap Rate: Since Cap Rate uses income, it is only used for income producing properties, not for example, the home you are buying for yourself. First let's define cap rate AKA Capitalization Rate: Cap rate indicates how fast an investment will pay for itself. For example, a 10% Cap Rate means you will get 10% of your purchase price back each year. If a commercial apartment building is purchased for $5,000,000 and it generates $500,000 a year in net operating income (the dollars left over after operating costs are subtracted from your gross income), then: $500,000 / $5,000,000 = 10% cap rate This means 10% of the building's purchase price is paid each year by the proceeds. Another way of saying this - the property will pay for itself in 10 years. How do you use this tool? Way one; it allows investors a fairly easy and quick method of comparing investment properties. For example: take two properties as identical as the cute twins you flirted with in high school, with the same net operating income. One has a cap rate of 8% (same income, priced higher) and the other a cap rate of 15% (same income, priced lower). The 15% cap rate property MIGHT just be a heck of a deal or the 8% one overpriced. BUT you have to dig deeper, because it might be that the higher cap rate property is in a bad neighborhood and the owner has to discount the price to get it sold. Higher risk means you as a buyer get more bang for the buck with the 15% cap rate property, but you are going to have to work harder for it and your spouse is mad because you haven't been able to take a vacation in years because of that "dang" property you bought. The 8% cap rate property may be more expensive and have a longer payback period, but that is because there is less risk and more investors want to buy it. The rents just come in without grief and it could save your marriage. Way two: Cap Rate is also used in the Income Method of appraisals to value a property. Generally, investors could care less if a property is pretty; they want to know how much they are going to make off it. The Income Method allows an investor to value a property based on its income. If most like investment properties in an area have an average cap rate of 7%. You can divide the net operating income of the property your client is interested in (provided by the listing agent) by the average cap rate in the area (digging in sold comps of various MLS's) and it will give you the approximate market value of the property. For example: $225,000 net operating income / 7% = $3,214,285 market value. If the property is listed for $5,000,000 you might want to pass it by because it is overpriced for the neighborhood. If it is listed for $2,500,000 you call your client quick because you think you found a good deal. So, If you want to play with investors you will need to make cap rates your well understood best buddy.

A commercial warehouse produces an income of $ 2,200 per month. The maintenance contract costs $ 1,250 per quarter. The taxes are $ 1625 annually. If an investor wants a 15% rate of return, how much should he pay for the warehouse? A: 131833 B: 156833 C: 179233 D: 196833

A: 131833 Explanation: $2,200 X 12 = $26,400 - ($1,250 X 4 = $5,000 + $1,625 =$6,625; $26,400 - $6,625 = $19,775 / 15 % = $131,833.33 This question is about the Income Approach to valuing a property. This approach is used on investment properties to determine the market value of a property based on the income it generates. In simpleze, this is the process: Step 1) Determine the most amount of revenue this property could generate in a perfect world where every unit was rented at the highest possible market rate always. This is referred to as Potential Gross Income. Step 2) Since we do not live in a perfect world, deduct from the Potential Gross Income the amount of revenue you will likely lose each year due to units being vacant (Vacancy Rate) and credit losses. The result is called Effective Gross Income. Step 3) If life were really wonderful an owner could take the Effective Gross Income and go shopping, but life is not that cool because there are bills to pay. From the Effective Gross Income deduct hard expenses. The result is the owner's profit called Net Operating Income or N.O.I. Determining what is, or is not a hard expense to deduct is a place where students really stumble - so pay attention. A hard expense is something that any owner of a property would be stuck paying such as: property taxes, landscaping, maintenance, reserve for repairs, Murray the doorman...yada yada. Personal expenses such as debt service (AKA mortgage payment) and depreciation are not hard expenses and are not included as an expense. Real Estate is not like a gas pump - one price for cash and another for credit. If one person wants to buy a property paying cash and another wants to buy the same property paying with a loan - the market value of the property is not impacted. The same goes for depreciation, depreciating a property is used by the IRS to determine an individual's income tax, it has nothing to do with determining market value. Step 4) If all you needed to do is determine the profit of an investment you could stop here. However, we are trying to determine the market value of a property based on the profit it generates. For that you need to divide the NOI by a Capitalization Rate. A Capitalization Rate (AKA Cap Rate) is the percentage of the purchase price the owner will earn back each year. Cap Rates are pretty handy. Using the Cap Rate of properties sold nearby will result in the market value of the property. However, if your client is savvy and has a desired Cap Rate for any property s/he owns, then the result would be the value of the property to the savvy client. Great way to determine if the asking price of an investment property is reasonable. More on Cap Rate: Since Cap Rate uses income, it is only used for income producing properties, not for example, the home you are buying for yourself. First let's define cap rate AKA Capitalization Rate: Cap rate indicates how fast an investment will pay for itself. For example, a 10% Cap Rate means you will get 10% of your purchase price back each year. If a commercial apartment building is purchased for $5,000,000 and it generates $500,000 a year in net operating income (the dollars left over after operating costs are subtracted from your gross income), then: $500,000 / $5,000,000 = 10% cap rate This means 10% of the building's purchase price is paid each year by the proceeds. Another way of saying this - the property will pay for itself in 10 years. How do you use this tool? Way one; it allows investors a fairly easy and quick method of comparing investment properties. For example: take two properties as identical as the cute twins you flirted with in high school, with the same net operating income. One has a cap rate of 8% (same income, priced higher) and the other a cap rate of 15% (same income, priced lower). The 15% cap rate property MIGHT just be a heck of a deal or the 8% one overpriced. BUT you have to dig deeper, because it might be that the higher cap rate property is in a bad neighborhood and the owner has to discount the price to get it sold. Higher risk means you as a buyer get more bang for the buck with the 15% cap rate property, but you are going to have to work harder for it and your spouse is mad because you haven't been able to take a vacation in years because of that "dang" property you bought. The 8% cap rate property may be more expensive and have a longer payback period, but that is because there is less risk and more investors want to buy it. The rents just come in without grief and it could save your marriage. Way two: Cap Rate is also used in the Income Method of appraisals to value a property. Generally, investors could care less if a property is pretty; they want to know how much they are going to make off it. The Income Method allows an investor to value a property based on its income. If most like investment properties in an area have an average cap rate of 7%. You can divide the net operating income of the property your client is interested in (provided by the listing agent) by the average cap rate in the area (digging in sold comps of various MLS's) and it will give you the approximate market value of the property. For example: $225,000 net operating income / 7% = $3,214,285 market value. If the property is listed for $5,000,000 you might want to pass it by because it is overpriced for the neighborhood. If it is listed for $2,500,000 you call your client quick because you think you found a good deal. So, If you want to play with investors you will need to make cap rates your well understood best buddy.

A House sold at $138,240 which was at a loss of 4% . What was the original cost of the house? A: 144000 B: 129200 C: 153710 D: 143000

A: 144000 Explanation: $138,240/ .96 (100% - 4% = 96%) = $144,000

A House sold at $138,240 which was at a loss of 4%. What was the original cost of the house? A: 144000 B: 129200 C: 153710 D: 143000

A: 144000 Explanation: $138,240/ .96 (100% - 4% = 96%) = $144,000

A broker has listed 1.65 acres of land at $ .205 per square foot. What is the selling price? A: 14734.17 B: 15000 C: 14134.17 D: 21150

A: 14734.17 Explanation: 43560 (Feet in one acre) X 1.65 (acres of land) = 71874 (square feet), X .205 (cost per square foot) = $14,734.17 (selling price)

A broker has a 4 year contract to manage a property for an investor. The broker will receive 50% of the first month's rent and 5% of each remaining month. The rent is $600, how much will the broker receive over the term of the agreement. A: 1710 B: 2480 C: 2580 D: 3080

A: 1710 Explanation: The broker gets 50% or $300 for the first month and he will get 5 % or $30 for each additional month times 47 = $ 1,410 + $300 = $1,710.

A broker has a 4-year contract to manage a property for an investor. The broker will receive 50% of the first month's rent and 5% of each remaining month. The rent is $600, how much will the broker receive over the term of the agreement. A: 1710 B: 2480 C: 2580 D: 3080

A: 1710 Explanation: The broker gets 50% or $300 for the first month and he will get 5% or $30 for each additional month times 47 = $1,410 + $300 = $1,710.

The following are samples of advertisements placed by a broker on some of his listings. Which would be subject to the provisions of the Truth In Lending Law? A: 2 bedrooms, large lot, nothing down B: 3 bedrooms, den, $80,000, E-Z terms C: 3 bedrooms, 1 bath, $75,000 excellent VA/FHA financing D: 4 bedrooms, family room, owner will carry financing

A: 2 bedrooms, large lot, nothing down Explanation: Since nothing is an exact amount and the down payment is one of the trigger items.

The potential gross income of a warehouse is $4,200 a month and the vacancy rate is 2 1/2%. The taxes are $3750, the monthly maintenance costs are $350, monthly reserves for replacement are $250, depreciation is $575 a month, management fees are $500 per month, debt service is $1200 per month and the quarterly landscaping fees are $600. If the cap rate is 12.5% what is the estimated value of the warehouse? A: 238320 B: 383120 C: 183120 D: 288320

A: 238320 Explanation: This question is about the Income Approach to valuing a property. This approach is used on investment properties to determine the market value of a property based on the income it generates. In simpleze, this is the process: Step 1) Determine the most amount of revenue this property could generate in a perfect world where every unit was rented at the highest possible market rate always. This is referred to as Potential Gross Income. Step 2) Since we do not live in a perfect world, deduct from the Potential Gross Income the amount of revenue you will likely lose each year due to units being vacant (Vacancy Rate) and credit losses. The result is called Effective Gross Income. Step 3) If life were really wonderful an owner could take the Effective Gross Income and go shopping, but life is not that cool because there are bills to pay. From the Effective Gross Income deduct hard expenses. The result is the owner's profit called Net Operating Income or N.O.I. Determining what is, or is not a hard expense to deduct is a place where students really stumble - so pay attention. A hard expense is something that any owner of a property would be stuck paying such as: property taxes, landscaping, maintenance, reserve for repairs, Murray the doorman...yada yada. Personal expenses such as debt service (AKA mortgage payment) and depreciation are not hard expenses and are not included as an expense. Real Estate is not like a gas pump - one price for cash and another for credit. If one person wants to buy a property paying cash and another wants to buy the same property paying with a loan - the market value of the property is not impacted. The same goes for depreciation, depreciating a property is used by the IRS to determine an individual's income tax, it has nothing to do with determining market value. Step 4) If all you needed to do is determine the profit of an investment you could stop here. However, we are trying to determine the market value of a property based on the profit it generates. For that you need to divide the NOI by a Capitalization Rate. A Capitalization Rate (AKA Cap Rate) is the percentage of the purchase price the owner will earn back each year. Cap Rates are pretty handy. Using the Cap Rate of properties sold nearby will result in the market value of the property. However, if your client is savvy and has a desired Cap Rate for any property s/he owns, then the result would be the value of the property to the savvy client. Great way to determine if the asking price of an investment property is reasonable. Let's use this process on this question: Step 1) $4,200 (Monthly Gross Income X 12 = $50,400 (Potential Gross Income) Step 2) $50,400 (Potential Gross Income) x 97.5% (100% - 2.5% Vacancy Rate) = $49,140 (Effective Gross Income) Step 3) $49,140 (Effective Gross Income) - ($350 X 12 = $4,200 (Annual Maintenance)) - $3,750 (Taxes) - ($250 X 12 = $3,000(Annual Reserves)) - ($500 X 12 = $6,000(Annual Mgmt Fees)) - ($600 X 4 = $2,400(Annual Landscaping) = $29,790 (NOI) Step 4) $29,790 (NOI) / .125 (Cap Rate) = $238,320 market value Note: Depreciation and Debt Service are not hard expenses and as such not applicable to this question. More on Cap Rate: Since Cap Rate uses income, it is only used for income producing properties, not for example, the home you are buying for yourself. First let's define cap rate AKA Capitalization Rate: Cap rate indicates how fast an investment will pay for itself. For example, a 10% Cap Rate means you will get 10% of your purchase price back each year. If a commercial apartment building is purchased for $5,000,000 and it generates $500,000 a year in net operating income (the dollars left over after operating costs are subtracted from your gross income), then: $500,000 / $5,000,000 = 10% cap rate This means 10% of the building's purchase price is paid each year by the proceeds. Another way of saying this - the property will pay for itself in 10 years. How do you use this tool? Way one; it allows investors a fairly easy and quick method of comparing investment properties. For example: take two properties as identical as the cute twins you flirted with in high school, with the same net operating income. One has a cap rate of 8% (same income, priced higher) and the other a cap rate of 15% (same income, priced lower). The 15% cap rate property MIGHT just be a heck of a deal or the 8% one overpriced. BUT you have to dig deeper, because it might be that the higher cap rate property is in a bad neighborhood and the owner has to discount the price to get it sold. Higher risk means you as a buyer get more bang for the buck with the 15% cap rate property, but you are going to have to work harder for it and your spouse is mad because you haven't been able to take a vacation in years because of that "dang" property you bought. The 8% cap rate property may be more expensive and have a longer payback period, but that is because there is less risk and more investors want to buy it. The rents just come in without grief and it could save your marriage. Way two: Cap Rate is also used in the Income Method of appraisals to value a property. Generally, investors could care less if a property is pretty; they want to know how much they are going to make off it. The Income Method allows an investor to value a property based on its income. If most like investment properties in an area have an average cap rate of 7%. You can divide the net operating income of the property your client is interested in (provided by the listing agent) by the average cap rate in the area (digging in sold comps of various MLS's) and it will give you the approximate market value of the property. For example: $225,000 net operating income / 7% = $3,214,285 market value. If the property is listed for $5,000,000 you might want to pass it by because it is overpriced for the neighborhood. If it is listed for $2,500,000 you call your client quick because you think you found a good deal. So, If you want to play with investors you will need to make cap rates your well understood best buddy.

A section is 1 mile by 1 mile. How wide is a four-acre (a hint: one acre contains 43,560 sq ft) easement that runs along the western edge of a section? A: 33 feet B: 38 feet C: 45 feet D: 28 feet

A: 33 feet Explanation: This is a hard one. A section is 1 mile by 1 mile. This means one edge of a section is 5280 feet (1 mile) long. Four acres (43,560 sq ft x 4 acres) contains a total of 174,240 sq. ft. 174,240 divided by 5280 equals 33. The dimension of this 4 acre easement is 5280 feet long by 33 feet wide.

A section is 1 mile by 1 mile. How wide is a four-acre (hint: one acre contains 43,560 sq ft) easement that runs along the western edge of a section? A: 33 feet B: 38 feet C: 45 feet D: 28 feet

A: 33 feet Explanation: This is a hard one. A section is 1 mile by 1 mile. This means one edge of a section is 5280 feet (1 mile) long. Four acres (43,560 sq ft x 4 acres) contains a total of 174,240 sq. ft. 174,240 divided by 5280 equals 33. The dimension of this 4 acre easement is 5280 feet long by 33 feet wide.

An apartment has an annual income of $53,500. If you must have a 14% rate of return, what is the maximum you can pay for the apartment building? A: 382143 B: 415674 C: 489542 D: 563821

A: 382143 Explanation: $53,500 / .14 = $382,143

A house is sold on June 15. The annual taxes in the amount of $850 for the year have not been paid. What does the seller owe the buyer at closing? A: 384.25 B: 465.75 C: 468.08 D: 381.92

A: 384.25 Explanation: Jan. 1 - June 14 = 165 days. $850 / 365 = $2.3288 per day tax liability.165 days x $2.3288 = $384.25

If an investment valued at $350,000 returns 12 percent annually, then what is the amount of income produced by this investment? A: 4200 B: 42000 C: 3920 D: 39200

A: 42000 Explanation: The value multiplied by the return to equal the income. $350,000 x 12% = $42,000

How far is it between the boundary lines of a township? A: 6 miles B: 60 miles C: 1 mile D: 2 miles

A: 6 miles Explanation: Townships measure 6 miles by 6 miles and contain 36 square miles.

A retail space was leased for $1,200 per month; The owner also pays the shopping center 8% of gross income which is $50,000 monthly. How much does the owner pay annually? A: 62400 B: 48000 C: 14400 D: 1200

A: 62400 Explanation: Multiply $50,000 by 8% = $4,000 X 12 = $48,000 + ($1,200 X 12 = $14,400) $14,400 = $62,400

Donna leases 12 apartments for a total monthly income of $4,500. This figure represents an 8 % annual return. What was the original cost of the property: A: 675000 B: 690000 C: 725000 D: 775000

A: 675000 Explanation: Multiply the monthly income $4,500 by 12 = $54,000 divide that by 8% = $675,000.

A seller wants to net $65,000 from the sale of his house after paying the broker's fee of 6% The seller's gross sales price will be? A: 69149 B: 69419 C: 69491 D: 69941

A: 69149 Explanation: Take $65,000 and divide by .94 = $69,149 the seller's gross selling price.

A buyer paid $7,000 in earnest money and acquired a mortgage of 65% of the $48,500 sales price. How much cash did the buyer have to bring to closing? A: 9975 B: 16975 C: 24525 D: 41500

A: 9975 Explanation: $48,500 X .65 (amount of loan) = $31,525.00. $48,500 - $31,525.00 (amount of loan) = $16,975 - $7,000.00 (earnest money) = $9,975.00

When reconciling a 6 column worksheet for a closing - after totaling up the debits and credits, the closing agent needed to add a $25,000 Credit to the Buyer Credit column to make it equal to the Buyer Debit column. What does this Buyer Credit represent? A: A $25,000 check the buyer must bring to the closing B: This credit represents money the buyer has already been accounted C: Money the Seller must pay to the Buyer

A: A $25,000 check the buyer must bring to the closing. Explanation: The amount of the check the Buyer must bring to the closing. This CREDIT represents money the Buyers OWES. More info: This is a common spot of confusion, so do not let it break your head. The situation occurs at the bottom of the 6 column worksheet when you are reconciling the columns. Let's assume for a moment you are looking at a Buyer's columns. You have applied all the debits and credits and all you have to do is reconcile the columns which have $100,000 in the Credit column (money the buyer has proven they have) and $125,000 in the Debit column (what the Buyer owes). Looks like this Buyer is a little short, but by how much? To determine this amount, you have to make both columns equal. This enables the Closing Agent to determine how much the Buyer is short; which is also how much of a check the Buyer needs to bring and be deposited into the escrow account. So you add $25,000 to the Buyer's Credit column to make both columns equal. Therefore this $25,000 CREDIT represents how much the Buyer is short, meaning this CREDIT does not represent how much they have, it represents how much they still OWE. This is how a CREDIT becomes something you OWE. We are not done reconciling yet. We have a $25,000 Credit, to balance it out we need a $25,000 Debit. That debit goes to the Broker account which represents the Escrow Account. Back to practical language - the Buyers needs to bring a $25,000 check to the closing so that they can make their Credit column (what they got) equal to the Debit column (what they owe) and the Broker (Closing Agent) needs to deposit it into the Escrow Account ($25,000 Debit). For extra points - the reverse is most common with the Seller. When a Sellers Debit column (what they owe) is lower than their Credit column (what they sold their property for), the amount added to the DEBIT column to make both columns equal represents money the Seller is receiving. The balancing CREDIT in the Broker column, reminds the Closing Agent to cut a check to the Seller out of the escrow account.

Who has the responsibility for prosecuting in court the practice of real estate without a license? A: A District Attorney B: The Colorado Real Estate Commission C: A Police Detective D: IRS

A: A District Attorney Explanation: Since the Real Estate Commission only has jurisdiction over people with licenses, someone performing a licensed activity without a license would be a criminal matter prosecuted by the district attorneys. The Real Estate Commission can work with District Attorneys in the preparation of cases. What the Real Estate Commission can do is: The Real Estate Commission has the power upon its own motion to investigate any licensee's real estate activities. If a written complaint is filed, the office is compelled to investigate. If the complaint against the licensee is of such a serious nature that it may result in disciplinary action against a licensee, a hearing will be held before an administrative law judge. The judge is appointed by the Department of Personnel and Administration. The administrative law judge will make an initial decision of revocation, suspension, censure, or dismissal. Education courses, probation, and fines can also be mandated. If written objections are not filed with the Commission within 30 days, the initial decision becomes final. If written objections are filed, the Commission may adopt the findings and initial decision of the administrative law judge, modify the disciplinary action, or refer the matter back for rehearing. The Commission can also issue letters of admonishment in instances where conduct does not warrant formal disciplinary proceedings. Reference Colorado Real Estate Manual Chapter 1. Section on Enforcement

Which of the following requires Errors and Omission insurance? A: A licensed brokerage with general liability insurance B: A Broker with an inactive license C: Partnership acting on its own to buy real estate D: Telephone company buying "rights of way"

A: A licensed brokerage with general liability insurance Reference: This is a tough one. All active licenses must have this Errors & Omissions Insurance. A broker with an inactive license does not need this insurance because he/she is not practicing real estate. Companies and individuals buying or selling real estate for themselves do not need to be licensed agents and thus are not required to have this insurance. This leaves a licensed brokerage with General Liability insurance. All licensed real estate firms are required to have E & O insurance. The reason is there is a difference between a General Liability and Errors and Omission insurance. They cover different risk areas. E & O Insurance will not protect a company when their office sign falls on someone's head, nor will a G L policy protect the company when an agent is sued for an error when creating a purchase contract - that is E & O coverage. General Liabilityi nsurance covers a company for lawsuits for bodily injury or property damage. Errors and Omissions insurance covers a company from lawsuits related to financial loss due to problems with services provided.

What kind of license must be held to sell options in real estate? A: An Associate Broker's license B: An Options License C: A Securities License

A: An Associate Broker's license Explanation: Under statute 12-61-101, the sale of options in real estate requires a real estate (Associate Broker) license. More about real estate options: A real estate purchase option is an agreement on a specific property that allows the buyer the exclusive right to purchase the property for a set period of time, without an obligation to buy. The buyer purchases the option from the seller for a fee. Regardless of whether the buyer purchases the property or allows the option to expire, the seller keeps the fee. The option usually includes a set purchase price and is valid for a short term, such as six months to a year.

In Colorado, a property subject to general ad valorem taxes is assessed on the first day of January of the current year, and the lien against the property for the taxes attaches A: At that time B: The following January 1st C: The following February 28th D: The following April 30th

A: At that time

The support staff in an office is available to do all of the following, except? A: Be your own personal assistant B: To set showings for properties listed by that office C: Direct calls to the brokers D: Input properties into the MLS

A: Be your own personal assistant Explanation: You need to hire your own personal assistant.

Which of the following is true in describing how a dispute about the Exclusive-Right-to-Sell Listing Contract between seller and broker would be resolved? A: Both must agree to mediation before proceeding to arbitration or litigation B: The matter must be resolved by a real estate commission hearing C: Both must agree to submit to arbitration with the local Realtor association D: Both must agree to submit the matter to binding mediation

A: Both must agree to mediation before proceeding to arbitration or litigation Explanation: The listing contract forms are specific in requiring mediation in good faith before submitting the matter to arbitration or litigation.

The holdover period in an exclusive right-to-sell listing is freely negotiable, so the seller and broker agreed upon a 60-day holdover period. Who is protected by this provision? A: Broker B: Seller C: Buyer D: Lender

A: Broker Explanation: The Holdover Period says that a listing broker may be entitled to a commission after the expiration of a listing contract for the period of time specified in the clause if: 1) the broker negotiated with the buyer during the listing period and 2) the broker submitted the name of this buyer in writing to the seller. Although the protection is for a negotiated time after the listing expires; it can terminate early if the property is re-listed by another agent and the "Will Not" box is checked, meaning the old listing agent "Will Not" be owed a commission if another brokerage firm has earned one. If neither the "Will" or "Will Not" be owned a commission" box is checked - the default is "Will Not". See "Holdover Period" in the "When Earned" clause of an Exclusive Right to Sell listing agreement.

Broker A is a sole proprietor. He quits business and goes to work under Broker B. Whose responsibility is it to keep Broker A's previous records? A: Broker A B: Broker B C: Real Estate Commission D: None of the above

A: Broker A Explanation: A real estate broker is required to keep records (for the Commission) for 4 years.

Who pays the Colorado Use Tax on the transfer of furniture, personal property, equipment: A: Buyer B: Seller C: Split equally between buyer and seller D: Seller's broker

A: Buyer Explanation: The Colorado Use Tax, (39-26-Part 2, C.R.S.) is a form of sales tax, payable on the transfer of furniture, equipment, etc. The buyer is obligated to pay this tax by statute. The broker has the duty to inform the buyer of this obligation.

Buyer Brown makes an offer on Seller Smith's house. Seller Smith counters Buyer Brown's offer at a higher price. Buyer Brown rejects Seller Smith's counter offer. Seller Smith then agrees to accept Buyer Brown's original offer. A: Buyer Brown has no obligation whatsoever to Seller Smith B: Buyer Brown must proceed with the purchase, due to Seller Smith's acceptance C: Seller Smith can sue Buyer Brown if Brown does not proceed with the contract D: Buyer Brown has three days to accept Seller Smith's acceptance of the offer

A: Buyer Brown has no obligation whatsoever to Seller Smith Explanation: A counter offer is a formal rejection of the original offer, thus relieving the purchaser of all obligations to perform under the original offer. More info on Counterproposals: Can you counter a counter? This is one of the eternal questions in real estate that has been asked by students and agents for years. To describe this in simpleez, what this question addresses is the situation whereby the Buyer sends the Seller an offer, the Seller is mostly but not entirely agreeable, so the Seller sends the Buyer a Counterproposal, most often asking for more money. Now here is the big moment! If the Buyer wants to bargain a bit, but not to the extent the Seller wants, should they send the Seller another Counterproposal or a brand new purchase contract? And why does this blow agents and students heads up for so many years? The reason is not a legal issue. It is perfectly legal to respond to a Counterproposal with another Counterproposal. However, it is considered a bad practice. Through the years the Real Estate Commission has swung from emphasizing this as such a bad idea many agents thought it was forbidden, to saying it is still a bad idea, but since it is legal and we despair of ever getting agents not to do this, we will not beat you up for it. Why is it a bad practice? Playing dueling Counterproposals makes it really easy to confuse the parties as to what exactly are the final terms of an agreed contract. For example, let's assume the original offer was for $200k closing January 31, Earnest Money of $1,000, Inspection Objection in 30 days. The Seller sends a Counter asking for $210k, closing January 1, Earnest Money of $5,000, Inspection in 10 days. The Buyer Counters the Counter with $205K and closing on January 15. The last Counter is accepted. What are the final terms of this agreement? What are the odds that someone is confused? That is why Countering a Counter is a bad idea. Much better to finish up with a clean contract containing the final agreed terms and conditions than hope everybody has the same understanding. BTW, What are the final terms and condition of our example? Whelp, the first Counterproposal constitutes a rejection of the original offer as it stands. The second Counterproposal constitutes a rejection of the first Counterproposal in its entirety, however the terms of the original offer as amended by the second Counterproposal still stands. The final terms and conditions look like this: Price is $205k, the Earnest Money is $1,000, Inspection is 30 days, the Closing is January 15. Are you confused? Countering a Counter is a bad idea.

Under the Contract To Buy & Sell Real Estate, if Buyer fails to notify Seller by the Loan Objection Deadline that Buyer wishes to terminate the contract because the terms of the loan are unsatisfactory: A: Buyer's earnest money becomes nonrefundable B: Buyer must pay cash for the property C: Buyer cannot terminate the contract for any reason D: Seller must notify Buyer in writing that Buyer has forfeited the earnest money

A: Buyer's earnest money becomes nonrefundable Explanation: From Contract to Buy and Sell Real Estate: Loan Conditions. If Buyer is to pay all or part of the Purchase Price with a New Loan, this Contract is conditional upon Buyer determining, in Buyer's sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions, and cost of such New Loan. This condition is for the benefit of Buyer. Buyer shall have the Right to Terminate under § 25.1, on or before Loan Conditions Deadline (§ 3), if the New Loan is not satisfactory to Buyer, in Buyer's sole subjective discretion. IF SELLER DOES NOT TIMELY RECEIVE WRITTEN NOTICE TO TERMINATE, BUYER'S EARNEST MONEY SHALL BE NONREFUNDABLE, except as otherwise provided in this Contract (e.g., Appraisal, Title, Survey).

If an FHA or VA appraisal comes in less than the purchase price of a home, a buyer: A: Can terminate the contract and get earnest money back B: Can terminate the contract, but will lose earnest money C: Must pay the difference D: Must get seller to reduce price or terminate the contract

A: Can terminate the contract and get earnest money back

Dual agency, which duty would be the easiest to carry out for both clients? A: Care B: Obedience C: Loyalty D: Disclosure

A: Care Explanation: Dual agency is illegal in Colorado, however in states that do have it, it acts as a form of Transaction Broker requiring the agent to be a neutral party. Care simply means the licensee performs duties in a compentent fashion. Disclosure is a close second in this question as it is also a duty of any broker, but the easiest would be care.

In dual agency, which duty would be the easiest to carry out for both clients? A: Care B: Obedience C: Loyalty D: Disclosure

A: Care Explanation: Dual agency is illegal in Colorado, however in states that do have it, it acts as a form of Transaction Broker requiring the agent to be a neutral party. Care simply means the licensee performs duties in a compentent fashion. Disclosure is a close second in this question as it is also a duty of any broker, but the easiest would be care.

The broker's obligation to use his or her skill and expertise on behalf of the principal arises under which of the common-law duties? A: Care B: Obedience C: Loyalty D: Disclosure

A: Care Explanation: In regards to COALD, C stands for Care, the broker's obligation to use his/her skill and expertise on behalf of the principal.

Which of the following is not relevant in appraising a home? A: Circumstances of sale B: Original cost to build 12 months previously C: Square footage of improvements D: Recent selling price of comparable properties

A: Circumstances of sale Explanation: Circumstances of the sale do not affect the value of the property, though they may very well affect the sales price. The original cost to build just a year ago will have some relevance since very little depreciation would have taken place in the ensuing 12 months.

An unlicensed secretary for a property manger can only do which of the following? A: Collect rents B: Publish a listing C: Take a listing D: Negotiate a lease

A: Collect rents Explanation: All of the rest require that the individual be a licensed broker. An unlicensed assistant can show a home. Their restrictions are simply to provide access to the property and confine real estate conversation to info on materials already published by the licensed agent. Which means they can answer a question on the price of the home (that is published on the MLS or in ads) but not answer a question related to "What do you think they will take?" (that answer is a licensed activity). In real life this is a very controversial topic as listing agents generally do not like the idea of unlicensed people taking strangers through their homes.

Usury is: A: Collecting more interest than allowed by law B: Building a structure that is totally on someone else's land C: Selling property for less than the asking price D: Building a structure that is partially on someone else's land

A: Collecting more interest than allowed by law Explanation: Usury: charging more than the legal rate of interest for the use of money. In Colorado the general maximum rate is 45%. Please remember that figure for the state licensing exam.

Usury is: A: Collecting more interest than allowed by law B: Building a structure that is totally on someone else's land C: selling property for less than the asking price D: Building a structure that is partially on someone else's land

A: Collecting more interest than allowed by law Explanation: Usury: charging more than the legal rate of interest for the use of money. In Colorado the general maximum rate is 45%. Please remember that figure for the state licensing exam.

A negative balance in a trust account is likely due to: A: Commingling having occurred B: The account being overdrawn C: The bank made an error D: A mathematical error having occurred

A: Commingling having occurred Explanation: It is not the agents money so it should never be negative. If it is, something bad has happened. Although a bank error is possible - it is unlikely and an account being overdrawn is the product of an action, not the cause. A mathematical error may result in a bad checkbook balance showing it falsely negative, but the actual trust account balance should not reflect this condition. The most likely culprit of a negative balance in a trust account is commingling. The term commingling is most often applied to funds or assets. When a fiduciary, a person entrusted with the management of funds other than his or her own in trust, mixes trust money with that of others, the fiduciary is commingling funds and thereby breaching his or her fiduciary duty. Commingling most often occurs due to bad bookkeeping. A trust account may be negative due to an error transferring money into another trust or operating account. If the act was intentional and trust account funds were transferred in particular into an agent's personal operating account, theft may have occcured, and this is also known as conversion as in - you converted the client's money into your own.

Proper recordation of documents affecting title and interest to real estate legally provides: A: Constructive notice B: Legal notice C: Actual notice D: Unilateral notice

A: Constructive notice Explanation: Constructive notice is recording documents in the public record.

The holder of the earnest money must be clearly identified in the: A: Contract to Buy and Sell Real Estate B: Amend and Extend C: Exclusive Right to Sell Listing Contract D: Brokerage Relationship Disclosure

A: Contract to Buy and Sell Real Estate Explanation: Under paragraph 3 in the contract to buy and sell, purchase price and terms.

The method of appraisal in which the appraiser estimates the replacement cost of the building, deducts depreciation, and adds the value of the site is: A: Cost Approach B: Income Approach C: Sales Comparison Approach D: Depreciation Approach

A: Cost Approach Explanation: Cost Approach is one of the three main methods of appraisal. It is based upon the concept that the price someone should pay for a piece of property should not exceed what someone would have to pay to build an equivalent building. It is often most accurate for properities which are new or so unique that they are difficult to find sales comparisons for such as a telephone substation.

An agency relationship may be involuntarily terminated for which of the following reasons? A: Death B: Mutual consent C: Full performance D: Renewal of broker's licensee

A: Death Explanation: The agency relationship can be terminated by the acts of the parties and by operation of law.

The purchaser has promised to pay for a one-year home warranty plan. How is it entered? A: Debit buyer, credit broker B: Debit buyer, credit seller C: Credit buyer, debit lender D: Credit buyer, debit broker

A: Debit buyer, credit broker Explanation: Charge the buyer, broker will pay out after receiving it in.

Lender required add-ons (called endorsements) to the Title insurance endorsements appear on a closing statement as a: A: Debit to the buyer B: Credit to the buyer C: Debit to the seller D: Credit to the seller

A: Debit to the buyer Explanation: Buyers pay for the extended policy (sometimes called mortgagee policy or title insurance endorsements) naming the lender as beneficiary. On the 6 column worksheet this is shown as Debit Buyer and Credit Broker (so that the closer gets a check written to the title company for providing the insurance) More info: For more inquiring minds: This answer to this question refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdrawals into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column. Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet slightly twists the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done accounting gods are happy as all debits and credits are in balance.

Charges for a property survey typically appear on a closing statement as a: A: Debit to the buyer B: Credit to the buyer C: Debit to the seller D: Credit to the seller

A: Debit to the buyer Explanation: Buyers typically pay for a survey that is ordered as a requirement of a new loan. Debit Buyer and if the lender has not paid the surveyor (sometimes they pay the surveyor before the closing) you would also need to Credit Broker to get a check written to the surveyor by the closer.

Mortgage insurance in conjunction with a loan appears on a closing statement as a: A: Debit to the buyer B: Debit to the seller C: Credit to the buyer D: Credit to the seller

A: Debit to the buyer Explanation: The buyer pays a mortgage insurance premium for a policy that insures the lender against the buyer's default. This is not credit life insurance that insures against the death of the borrower.

Loan discount points appear on a closing statement as a: A: Debit to the buyer or seller B: Credit to the buyer C: Debit to the broker D: Credit to the seller

A: Debit to the buyer or seller Explanation: Either the buyer or seller pays the loan discount points (it is negotiated in the contract.) Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

How is the broker's fee usually shown on the settlement statement? A: Debit to the seller, credit to the broker B: Debit to the seller, credit to the buyer C: Debit ½ to seller, debit ½ to buyer, credit to the broker D: Debit to the buyer, credit to the broker

A: Debit to the seller, credit to the broker Explanation: Debit seller, credit broker

Colorado Real Estate Commission Rule E-4 and E-5 give direction about retaining the needed contracts after closing a transaction. Which copies are exceptions to the rules? A: Deeds, notes, trust deeds, mortgages B: Listing contract by the listing broker only C: Settlement sheets D: Any document that requires the signatures of the parties

A: Deeds, notes, trust deeds, mortgages Explanation::= Deeds, notes, trust deeds and mortgages need not be retained. Listings, settlement sheets and documents that require the signatures of the parties, must be retained for four years.

Which form should not be used to disclose your brokerage relationship: A: Definitions of Working Relationships B: Brokerage Disclosure to Tenant C: Brokerage Disclosure to Seller (FSBO) D: Exclusive Right to Sell (All Types)

A: Definitions of Working Relationships Explanation: The optional Definitions of Working Relationships form soley provides the officially approved definitions of Seller Agency, Buyer Agency, Transaction Broker and Customer. There is no place in this form for a licensee to make a disclosure.

A commercial property built in 1963 is for sale that has some apartments on top. What will be suggested to do before renting apartments? A: Disclose if there is lead-based paint on the property B: Find out the types of material and floor plan for the property C: Paint the units to eliminate lead-based paint

A: Disclose if there is lead-based paint on the property Explanation: Lead-based paint disclosure laws focus specifically on residential housing. However, when commercial facilities are a part of residential housing the disclosure rule applies.

If a Broker measures a property, (s)he must: A: Disclose the method used to determine the measurement B: Have another broker verify the measurements C: Have a surveyer verify the measurement D: No disclosure is required

A: Disclose the method used to determine the measurement Explanation: E-43. Square footage disclosure (Effective 4/30/2009) This rule applies to transactions involving the sale and purchase of residences, new or existing. It requires the listing licensee to disclose the square footage of the floor space of the living area of the residence to the buyer and seller when a licensee disseminates such information, including submission to a multiple listing service. If the licensee personally measures or provides information from another source of measurement of the residence's square footage the licensee shall use the Commission approved form for such disclosure. The licensee listing the property is responsible for accurately representing any source of square footage. [Eff. 04/30/2009] Reference Rule E-43

A Buyer's agent approaches a for sale by owner on behalf of his client. What disclosure is required? A: Disclosure of the broker's relationship with the buyer B: None as long as the buyer lists the property prior to submitting the buyer's offer C: No disclosure since the seller has elected to be unrepresented D: Disclosure of the buyer's financial ability to purchase the property

A: Disclosure of the broker's relationship with the buyer Explanation: You need to disclose your brokerage relationship in writing before engaging in any activity which requires a brokerage license. Commission rule E-35 states that "brokerage activities" occur when a broker elicits or accepts confidential information from a party concerning specific real estate needs, motivations, or financial qualifications. Activities such as an open house, preliminary conversations, or small talk concerning price range, location, property styles, or responding to general factual questions about properties that have been advertised for sale or lease do not qualify as triggering brokerage activities.

According to Commission Position 42 on Apartment Building or Complex Management, a duty an unlicensed on-site manager may NOT perform without a license is: A: Draw up a lease B: Sign and execute a lease with a Power of Attorney from the owner C: Collect and deposit rents and security deposits D: Obtain information necessary to qualify perspective tenants for a lease

A: Draw up a lease Explanation: CP-42 on on Apartment Building or Complex Management Pursuant to §12-61-101(2)(b)(XII), C.R.S., a regularly salaried employee of the owner of an apartment building or complex is permitted to perform customary duties for his or her employer without a real estate broker's license. The unlicensed, on-site manager must either report directly to the owner or to the real estate broker, if a real estate broker is engaged to manage the property. The Commission views the following to be customary duties of an unlicensed, on-site manager: 1. Performance of clerical duties, including gathering information about competing projects. 2. Obtain information necessary to qualify perspective tenants for a lease. This includes obtaining and verifying information regarding employment history, credit information, references and personal information as necessary. 3. Provide access to a property available for lease and distribute preprinted, objective information prepared by a broker as long as no negotiating, offering or contracting is involved. 4. Distribute preprinted, objective information at an on-site leasing office that is prepared by an owner or broker, as long as no negotiating, offering or contracting is involved. 5. Quote the rental price established by the owner or the owner's licensed broker. 6. Act as a scrivener to the owner or the broker for purposes of completing predetermined lease terms on preprinted forms as negotiated by the owner or broker. 7. Deliver paperwork to other brokers. 8. Deliver paperwork to landlords and tenants, if such paperwork has already been reviewed by the owner, or a broker or has been prepared in accordance with the supervising broker's instructions. 9. Collect and deposit rents and security deposits in accordance with the owner's lease agreement or the brokerage firm's written office policy. 10. Schedule property maintenance in accordance with the brokerage firm's management agreement or the owner's lease agreement. If the owner has executed a Power of Attorney form or a written delegation of authority that authorizes the unlicensed, on-site manager to sign and execute leases on behalf of the owner, the unlicensed, on-site manager may execute those without possessing a real estate broker's license. Brokers supervising unlicensed, on-site managers with this authority are expected to review the executed documents to ensure compliance with lease terms, management agreements, local, state and federal laws, including the real estate brokerage practice act and Commission rules.

If seller does not relinquish possession as indicated and negotiated in the contract, what remedy does buyer have? A: Eviction and a predetermined daily payment until possession is delivered B: Eviction and court ordered payments C: Seller is under no time constraints to leave the premises D: Eviction and $100.00 per day until possession is relinquished

A: Eviction and a predetermined daily payment until possession is delivered Explanation: Always make this amount high so the sellers will leave the premises. Paragraph 16, contract to buy.

What legal duties does a seller's agent have to an unrepresented buyer? A: Fair and honest dealing and disclosure of material facts about the property B: Loyalty, fidelity, and disclosure of material facts about the property C: No specific duties, agency duties are to the principal D: Honest dealing and full disclosure of anything that the broker knows about the transaction

A: Fair and honest dealing and disclosure of material facts about the property Explanation: The agent has legal duties to the buyer; fair and honest dealing and disclosure about material facts related to the property and title to the property.

Depreciation caused by functional inadequacies or outmoded design is: A: Functional Obsolescence B: Physical Obsolescence C: External Obsolescence D: Outmoded Obsolescence

A: Functional Obsolescence Explanation: One of the three forms of obsolesence along with Physical and External. Functional Obsolesence is a loss of value due to inadequate or outmoded equipment, or as a result of a poor or outmoded design.

Depreciation caused by functional inadequacies or outmoded design is: A: Functional Obsolesence B: Physical Obsolesence C: External Obsolesence D: Outmoded Obsolesence

A: Functional Obsolesence Explanation: One of the three forms of obsolesence along with Physical and External. Functional Obsolesence is a loss of value due to inadequate or outmoded equipment, or as a result of a poor or outmoded design.

Which deed usually coveys residential property in Colorado? A: General Warranty Deed B: Special Warranty Deed C: Bargain & Sale Deed D: Quitclaim Deed

A: General Warranty Deed Explanation: In general usually the general warranty deed is used. More info on Deeds: In Colorado real estate, there are several types of deeds, depending on the type/amount of protection given and received from the seller and buyer. From the Colorado Real Estate Manual: Types Of Deeds There are four major classifications of deeds: (1) General warranty deed, (2) Special warranty deed, (3) Bargain and sale deed, (4) Quitclaim deed. The types of deeds differ solely in the degree of protection that the grantor (seller) promises or warrants to the grantee (buyer). No type of deed transfers any greater or lesser interest than another. For example, if a grantor conveys title in fee simple by a general warranty deed, the same fee simple ownership is conveyed as if he or she had used a quitclaim deed. However, the general warranty deed grantor promises to defend against any loss incurred due to any title defect, whereas transfer by quitclaim deed contains no such warrant. 1. General Warranty Deed. A deed in which the grantor warrants or guarantees title against defects that existed before the grantor acquired title or that arose during the grantor's ownership. It does not warrant against encumbrances or defects arising from the grantee's own acts. The usual covenants or warranties contained in a general warranty deed are: a. Covenant of seizin. Guarantees the grantor's ownership and that he or she has the right to convey it. The fact that the property is mortgaged or is subject to some restriction does not breach this covenant. b. Covenant against encumbrances. Guarantees that there are no encumbrances or claims against the property except those specifically excluded in the deed. c. Covenant of quiet enjoyment. Guarantees that the grantee will not be evicted or disturbed in possession of the property. Threats or claims by a third party do not breach this covenant. The grantee would have to actually be dispossessed before being entitled to seek recovery under this covenant against the grantor. d. Covenant of further assurance. Guarantees that the grantor will procure and deliver any other instruments that are subsequently necessary to make the title good. e. Covenant of warrant forever. Guarantees that the grantee shall have title and possession to the property. Sometimes considered part of "quiet enjoyment". The first two covenants relate to the past, and generally do not generally "run with the land" - meaning that only the current grantee may sue the grantor for a breach. The last three covenants protect against future defect and are said to run with the land - allowing any subsequent grantee to seek remedy for breach against any previous grantor. According to Colorado statute, "Covenants of seizin, peaceable possession, freedom from encumbrances, and warranty contained in any conveyance of real estate, or of any interest therein, shall run with the premises, and inure to the benefit of all subsequent purchasers and encumbrancers." (38-30-121 C.R.S.) 2. Special Warranty Deed. The grantor of a special warranty deed warrants the title only against defects arising after the grantor acquired the property and not against defects arising before that time. 3. Bargain and Sale Deed. Technically, any deed that recites a consideration and purports to convey the real estate is a bargain and sale deed. Thus, many quitclaim and warranty deeds are also deeds of bargain and sale. Bargain and sale deeds often contain a covenant against the grantor's acts, whereby the grantor warrants only that the grantor has done nothing to harm the title. This covenant would not run with the land. Examples of bargain and sale deeds with a covenant against the grantor's acts are an executor's deed, an administrator's deed, and a guardian's deed. 4. Quitclaim Deed. The grantor of a quitclaim deed warrants absolutely nothing. A quitclaim deed conveys the grantor's present interest in the land, if any. A quitclaim deed is frequently used to clear up a technical defect in the chain of title or to release lien claims against the property. Examples of such deeds are correction deeds, and deeds of release.

Ricardo privately owns a single 20-acre parcel of land and wishes to sell ten acres. Which of the following statements is correct regarding Ricardo's options? A: He is not required to register with the real estate commission but must meet local and state requirements for dividing his land B: Because he is the private owner, there are no restrictions or registration requirements C: Only a registered subdivider may divide land, thus Richard as a private owner may not sell part of a single parcel D: Richard must comply with federal land sales rules

A: He is not required to register with the real estate commission but must meet local and state requirements for dividing his land Explanation: Division of a single parcel into multiple parcels is a subdivision and must be done in compliance with local and state subdivision restrictions. They only have to be registered with the CREC if there are 20 or more residential lots being sold, leased, or transferred.

Stan is a real estate broker in Colorado. He has identified a property for a fast food outlet and has asked four friends to contribute money to the purchase and gain partial ownership. Stan will manage the property and negotiate the lease for the fast food franchise. Which of the following is correct with regard to Stan's role as a broker in this arrangement? A: He must comply with state and federal securities laws in arranging this investment group B: He will have no liability in the deal since he will not contribute money C: He is not entitled to any commission on the purchase because he will be an owner D: He can keep both the sales commission and the lease commission without specifically telling the others about the amounts involved

A: He must comply with state and federal securities laws in arranging this investment group Explanation: The arrangement must comply with securities regulations regardless of how it is organized. Stan is a partner and must disclose his interest and any gains to the other owners.

Stan is a real estate broker in Colorado. He has identified a property for a fast food outlet and has asked four friends to contribute money to the purchase and gain partial ownership. Stan will manage the property and negotiate the lease for the fast food franchise. Which of the following is correct with regard to Stan's role as a broker in this arrangement? A: He must comply with state and federal securities laws in arranging this investment group. B: He will have no liability in the deal since he will not contribute money. C: He is not entitled to any commission on the purchase because he will be an owner. D: He can keep both the sales commission and the lease commission without specifically telling the others about the amounts involved.

A: He must comply with state and federal securities laws in arranging this investment group. Explanation: The arrangement must comply with securities regulations regardless of how it is organized. Stan is a partner and must disclose his interest and any gains to the other owners.

What is the effect of a Loan Objection Deadline when specified in an approved Residential Contract to Buy and Sell? A: If the buyer cannot get a satisfactory written loan commitment by that date, the buyer may terminate the contract upon written notice to the seller B: The contract is contingent on actual funding of the new loan at closing C: If the buyer cannot get a satisfactory written loan commitment, the contract terminates on that date D: The buyer must provide the written commitment to the seller by that date or he will be in default

A: If the buyer cannot get a satisfactory written loan commitment by that date, the buyer may terminate the contract upon written notice to the seller Explanation: A buyer has until the Loan Objection Deadline to provide written notice s/he cannot get a commitment for a satisfactory loan and wants to terminate the contract. If s/he does provide such notice, the earnest money is refunded to the buyer. If the buyer does not provide such notice, the contract continues, but the buyer's earnest money becomes nonrefundable should s/he not receive a loan. From the Contract to Buy/Sell Real Estate: Loan Objection. If Buyer is to pay all or part of the Purchase Price with a New Loan, this Contract is conditional upon Buyer determining, in Buyer's sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions, and cost of such New Loan. This condition is for the sole benefit of Buyer. Buyer has the Right to Terminate on or before Loan Objection Deadline, if the New Loan is not satisfactory to Buyer, in Buyer's sole subjective discretion. IF SELLER IS NOT IN DEFAULT AND DOES NOT TIMELY RECEIVE BUYER'S WRITTEN NOTICE TO TERMINATE, BUYER'S EARNEST MONEY WILL BE NONREFUNDABLE, except as otherwise provided in this Contract (e.g., Appraisal, Title, Survey)

What is the effect of a Loan Objection Deadline when specified in an approved Residential Contract to Buy and Sell? A: If the buyer cannot get a satisfactory written loan commitment by that date, the buyer may terminate the contract upon written notice to the seller. B: The contract is contingent on actual funding of the new loan at closing. C: If the buyer cannot get a satisfactory written loan commitment, the contract terminates on that date. D: The buyer must provide the written commitment to the seller by that date or he will be in default.

A: If the buyer cannot get a satisfactory written loan commitment by that date, the buyer may terminate the contract upon written notice to the seller. Explanation: A buyer has until the Loan Objection Deadline to provide written notice s/he cannot get a commitment for a satisfactory loan and wants to terminate the contract. If s/he does provide such notice, the earnest money is refunded to the buyer. If the buyer does not provide such notice, the contract continues, but the buyer's earnest money becomes nonrefundable should s/he not receive a loan. From the Contract to Buy/Sell Real Estate: Loan Objection. If Buyer is to pay all or part of the Purchase Price with a New Loan, this Contract is conditional upon Buyer determining, in Buyer's sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions, and cost of such New Loan. This condition is for the sole benefit of Buyer. Buyer has the Right to Terminate on or before Loan Objection Deadline, if the New Loan is not satisfactory to Buyer, in Buyer's sole subjective discretion. IF SELLER IS NOT IN DEFAULT AND DOES NOT TIMELY RECEIVE BUYER'S WRITTEN NOTICE TO TERMINATE, BUYER'S EARNEST MONEY WILL BE NONREFUNDABLE, except as otherwise provided in this Contract (e.g., Appraisal, Title, Survey).

When changing from an active to an inactive or unlicensed agent, how much time does the Commission allow for ceasing any and all activity? A: Immediately B: 24 hours C: 12 hours D: 48 hours

A: Immediately Explanation: To have an active license the licensee must be in compliance with the licensing laws, otherwise any and all activity must stop immediately.

Fees that are due to a homeowner's association must be disclosed: A: In the Contract to Buy and Sell Real Estate B: It is the buyer's responsibility to investigate C: In a recorded document D: All of the above

A: In the Contract to Buy and Sell Real Estate Explanation: The homeowner's association fees must be disclosed in the MLS, in the contract, and to the lender.

Employing Broker Ann employs Realtor Laura to be an Associate Broker. Laura lists Seller Gayle's house. Which of the following is not true? A: In the event of Realtor Laura's death the listing is terminated B: In the event of Seller Gayle's death the listing is terminated C: Death of either party to the contract terminates the listing D: Death of either Seller Gayle or Employing Broker Ann will terminate the contract.

A: In the event of Realtor Laura's death the listing is terminated Explanation: Listing contacts are in the name of the company and the Seller. Therefore the death of the Associate Broker has no inpact on the contract. When the employing broker or the principal dies the contract is terminated

When creating the listing agreement, the sellers informs you that they will not be filling out a Seller's Property Disclosure form. What is your best response: A: Inform the sellers that most buyers want the form B: Inform the sellers that you will fill out the form for them C: Decline the listing D: Inform the sellers as the form is optional there are no repercussions to not filling it out

A: Inform the sellers that most buyers want the form Explanation: The listing agreement does not require the sellers to fill out the form, however the purchase contract requires one be filled out and the buyers expect to receive one. Once a purchase contract is received, the sellers will have to counter the offer. If the sellers are reluctant to fill out because they have no knowledge of the property (for example in an estate situation whereby they inherited the property) sometimes the best strategy is to fill out the form indicating they have no knowledge of the property.

A Buyers right to a specific performance remedy in the event of a Seller default in the Contract to Buy and Sell Real Estate: A: Is the default remedy and as such need not be selected B: Buyer default remedy is liquidated damages C: Not addressed in the contract D: Depends on which box is checked

A: Is the default remedy and as such need not be selected Explanation: Should the Seller default in the contract - the only remedy for the Buyer is Specific Performance. The Buyer may sue for damages and/or to enforce the contract. The Seller did not put up earnest money and thus cannot offer liquidated damages.

A Buyer's right to a Specific Performance remedy in the event of a SELLER default in the Contract to Buy and Sell Real Estate: A: Is the default remedy and as such need not be selected B: Buyer default remedy is liquidated damages C: Not addressed in the contract D: Depends on which box is checked

A: Is the default remedy and as such need not be selected Explanation: Should the Seller default in the contract the only remedy for the Buyer is Specific Performance. The Seller did not put up earnest money and thus cannot offer liquidated damages.

The Title Company charges a fee to effect the closing on behalf of the buyer and seller. Who bears the cost of this? A: It is agreed in the purchase contract who shall pay this cost B: The listing broker must pay since he usually chooses the Title Company C: It is illegal for the Title Company to charge this fee D: The seller always pays this fee

A: It is agreed in the purchase contract who shall pay this cost Explanation: Buyers and sellers can negotiate the cost of the Title Company's fee for closing. They may not be charged for the preparation of the legal documents.

Which of the following statements are true regarding a VA funding fee? A: It varies according to the veteran's eligibility B: The seller must pay it C: It is the same thing as the FHA origination fee D: It is a percentage of the purchase price

A: It varies according to the veteran's eligibility Explanation: VA home loans require an upfront, one-time payment called the VA funding fee. The fee is a percentage based on the loan amount. VA-eligible borrowers can wrap this cost into the loan, reducing out-of-pocket expenses on VA home loans to buy or refinance a home. VA fees vary according to the Veterans eligibilty ( 1.5% to 3 %) and the amount of the down payment.

What does the term "datum" refer to? A: Level surface from which elevations are measured B: Surveyor's tool C: Computer input D: Freehold estate

A: Level surface from which elevations are measured Explanation: Datum is the level surface from which elevations are measured.

Which class is protected under under Colorado Fair Housing and not the Federal Fair Housing? A: Marital Status B: Race C: Familial Status D: National Origin

A: Marital Status Explanation: Marital Status is not a protected class under Federal Fair Housing

The day before the Loan Objection Deadline the lender informed the buyers that the interest rate had risen ¼%. The buyers: A: May terminate the contract and receive their earnest money back B: Must continue with the contract C: May compel the sellers to extend the loan conditions deadline to shop for a more suitable loan D: Neither the seller nor the buyer may terminate the contract

A: May terminate the contract and receive their earnest money back Explanation: A buyer has until the Loan Objection Deadline to provide written notice s/he cannot get a commitment for a satisfactory loan and wants to terminate the contract. If s/he does provide such notice, the earnest money is refunded to the buyer. If the buyer does not provide such notice, the contract continues, but the buyer's earnest money becomes nonrefundable should s/he not receive a loan. From the Contract to Buy/Sell Real Estate: Loan Objection. If Buyer is to pay all or part of the Purchase Price with a New Loan, this Contract is conditional upon Buyer determining, in Buyer's sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions, and cost of such New Loan. This condition is for the sole benefit of Buyer. Buyer has the Right to Terminate on or before Loan Objection Deadline, if the New Loan is not satisfactory to Buyer, in Buyer's sole subjective discretion. IF SELLER IS NOT IN DEFAULT AND DOES NOT TIMELY RECEIVE BUYER'S WRITTEN NOTICE TO TERMINATE, BUYER'S EARNEST MONEY WILL BE NONREFUNDABLE, except as otherwise provided in this Contract (e.g., Appraisal, Title, Survey).

"MEC" in a contract means: A: Mutual Execution of Contract B: Must Exit Contract C: Mutual Element Contingency D: Multiple Easement Criteria

A: Mutual Execution of Contract Explanation: The abbreviation "MEC" (mutual execution of this Contract) means the date upon which both parties have signed a Contract. For example: A Contract to Buy/Sell Real Estate (Purchase Contract) involving a lender-owned property is submited to a bank for approval. These is uncertainty as to how long the bank will take to review and hopefully sign the offer. The buyer agent knows they want the Inspection Objection Date to be 10 days after contract acceptance. The agent can indicate this date, in the contract, without knowing the actual date, by entering "MEC + 10". This means the date will be 10 days after both parties have signed the contract.

A non-licensed owner wishes to sell his home without the use of a real estate broker. He has not sold any other real property in the last ten years. He wishes to limit certain races from buying in his neighborhood. May he discriminate under these circumstances? A: No, because this is prohibited under the 1866 Civil Rights Act B:No, because this is prohibited under local municipal law C: Yes, because discrimination under the fair housing laws applies only to real estate brokers D: Yes, because this is an exception under the 1968 Civil Rights Act

A: No, because this is prohibited under the 1866 Civil Rights Act Explanation: No, because this is prohibited under the 1866 Civil Rights Act which outlawed slavery.

As a licensee, are you required to become a member of the MLS? A: No, however the MLS is the most used marketing tool for listed properties B: No, but you must become a member of the Internet C: Yes, and you must also join one of the boards D: Yes, and you must advertise all your properties in the MLS

A: No, however the MLS is the most used marketing tool for listed properties Explanation: You are not required to become a member of the MLS or join any of the boards, however the MLS is the most used marketing tools for listed properties and probably the least expensive.

A client wants to buy a commercial property. You tell her they are putting in an exit ramp off the highway - proposed but not set in stone - that would allow easy access to the business. The client buys and they end up putting the ramp elsewhere. Are you responsible as the broker? A: No, the agent was truthful B: No, this is puffing C: Yes, this is puffing D: Yes, this is a misrepresentation

A: No, the agent was truthful Explanation: The agent is blameless. Had the agent NOT indicated the exit ramp was a proposal, the agent may have been subject to a claim of misrepresentation. As per the Free Dictionary regarding "puffing" - Puffing is generally an expression or exaggeration made by a salesperson or found in an advertisement that concerns the quality of goods offered for sale. It presents opinions rather than facts and is usually not considered a legally binding promise. Such statements as "this car is in good shape" and "your wife will love this watch" constitute puffing.

An agent lists a property using the Colorado Exclusive Right-to-Sell Listing Contract and checked the "Will Not" box in the Holdover Clause. Just before the listing expired, a buyer views the property. Wanting to retain the rights to this buyer, the listing agent provides the buyer's name in writing to the seller. After the listing expires, the seller lists with another agent and the buyer's agent submits an offer on the property. If accepted, would the old listing agent receive a listing commission? A: No, the new listing broker earned the listing side commission B: Both the new and the old listing brokers are entitled to a listing commission C: Yes, because it is within the holdover period D: Yes, because he is the procuring cause of the sale

A: No, the new listing broker earned the listing side commission Explanation: The Holdover Period says that a listing broker may be entitled to a commission after the expiration of a listing contract for the period of time specified in the clause if: 1) the broker negotiated with the buyer during the listing period and 2) the broker submitted the name of this buyer in writing to the seller. Although the protection is for a negotiated time after the listing expires; it can terminate early if the property is re-listed by another agent and the "Will Not" box is checked, meaning the old listing agent "Will not" be owed a commission if another brokerage firm has earned one. If neither the "Will" or "Will Not" be owed a commission" box is checked - the default is "Will Not." See "Holdover Period" in the "When Earned" clause of an Exclusive Right-to-Sell listing agreement.

An agent lists a property using the Colorado Exclusive Right to Sell Listing Contract and checked the "Shall Not" box in the Holdover Clause. Just before the listing expired, a buyer views the property. Wanting to retain the rights to this buyer, the listing agent provides the buyer's name in writing to the seller. After the listing expires, the seller lists with another agent and the buyer's agent submits an offer on the property. If accepted, would the old listing agent receive a listing commission? A: No, the new listing broker earns the listing side commission B: Both the new and the old listing agent have earned a listing side commission C: Yes, because it is within the holdover period D: Yes, because he is the procuring cause of the sale.

A: No, the new listing broker earns the listing side commission Explanation: Only the current listing broker earns the commission. Checking the "shall not" box in the Holdover clause indicated that the provisions of the clause would no longer be in effect should the property be relisted with another agent. When the property was relisted - the old listing agent lost the right to a listing commission for the buyer. If the old listing broker had checked the "shall" box, he/she would have been entitled to a listing commission under the terms of the Holdover clause.

According to Rule F on Commission Approved Contracts what sections may be omitted from the Contract to Buy and Sell Real Estate: A: Non-applicable financing conditions B: Recommendation of legal and tax counsel C: Mediation D: Assignability and inurement E: Evidence of title

A: Non-applicable financing conditions Explanation: Rule F covers the do's and don'ts for commission approved contracts. such as listing contracts, sales contracts, exchange contracts, disclosure forms, settlement sheets, extension agreements, and counterproposals. At the time of this writing, Rule F does not cover forms for business opportunity listing or sales contracts, management agreements, leases, warranty deeds, etc. In these areas, the broker must use his or her best judgment. A broker may omit part or all of the following provisions of a Commission-approved "Contract to Buy and Sell Real Estate" (even if the provision is identified by a different Section number), or corresponding provisions in other Commission-approved forms, if such provisions do not apply to the transaction. In the event any provision is omitted, the provision's caption or heading must remain unaltered on the form followed by the words "OMITTED". 1. Section 2.5 Inclusions in its entirety or any of its subsections 2. Section 2.6 Exclusions 3. Section 4.4 Seller Concessions 4. Section 4.5 New Loan in its entirety or any of its subsections 5. Section 4.6 Assumption 6. Section 4.7 Seller or Private Financing 7. Section 5 Financing Conditions and Obligations in its entirety or any of its sections 8. Section 6 Appraisal Provisions in its entirety or any of its subsections 9. Section 7.3 Homeowners' Association Documents in its entirety or any of its subsections 10. Section 8.4 Special Taxing Districts 11. Section 8.5 Right of First Refusal or Contract Approval 12. Section 10.6 Due Diligence Documents 13. Section 10.7 Due Diligence Documents Conditions in its entirety or any of its subsections 14. Section 10.8 Due Diligence—Environmental, ADA (CBS2, CBS3, CBS4) 15 Section 10.7.3 Source of Potable Water (CBS4) 16. Section 10.9 Existing Leases; Modification of Existing Leases; New Leases (CBS3, CBS4) 17. [Deleted] 18. [Deleted] 19. [Deleted] 20. Section 10.15 Existing Leases; Modification of Existing Leases; New Leases (CBS2) 21. Section 11 Tenant Estoppel Statements in its entirety or any of its subsections (CBS2, CBS3, CBS4) 22. Section 15.3 Status and Transfer Letter Fees 23. Section 15.4 Local Transfer Tax 24. Section 15.6 Sales and Use Tax 25. Section 16.2 Rents 26. Section 16.3 Association Assessments

A deed of trust held by someone other than the public trustee is NOT: A: Notice that a legal action is pending that may effect ownership B: Exempt from loan recission rules C: Foreclosed through the courts D: A conditional transfer of ownership from the Trustor to the Beneficiary

A: Notice that a legal action is pending that may effect ownership Explanation: Regardless of who holds the Deed of Trust, the transfer of ownership is real and not a notice of pending legal action.

After closing, the purchaser's take possession of the property as stated in the contract. Upon closer examination, the linoleum has a new tear in it. Who is responsible for this repair according to Paragraph 18 of the Contract to Buy and Sell Real Estate? A: Purchaser B: Seller C: Purchaser's agent D: Seller's agent

A: Purchaser Explanation: Closing has already taken place, hard to determine whether tear occurred by seller moving out or buyer moving in. Ordinary wear and tear is excluded.

A defect or a cloud of title of a property is best cured by: A: Quitclaim deed B: A partition action C: Obtaining title insurance D: Repudiating adverse claims

A: Quitclaim deed Explanation: All parties who may have an interest (ownership) in the property can via a quit claim deed correct the cloud on title. "title" means an individual has ownership of a property. A cloud means there is a possible defect in the physical proof of ownership for example the deed has a wrong legal description or address.

A broker must keep which of these funds in his trust account? A: Rental monies received B: Fire insurance premium monies not part of a real estate transaction C: Commissions received D: Relocation referral fees

A: Rental monies received Explanation: A broker must keep all money belonging to others in an escrow (AKA trust) account. More info: The key to this question is understanding how the industry defines a "broker" vs a "landlord". You know what a broker is; a landlord is the owner of the property. When a broker/property manager collects rent s/he is acting on behalf of the owner of the property. The rent received does not belong to the broker, it belongs to the landlord. As such, the broker must put it in an escrow account pending payment to the landlord. When the broker pays the landlord, there are two transactions occurring, one is the check to the landlord, the other is a transfer to the broker's operating account of the agreed upon payment for services rendered. There are some property managers, typically some really small ones, who do not put rent into an escrow account. What they do is collect the check from the tenant and give it directly to the landlord for deposit into the landlord's account. Since the broker did not cash the check, they do not need an escrow account. The broker bills the landlord for services rendered. These brokers are referred to as a "conduit broker" as they just pass through the rent to the landlord. To be clear, a conduit-broker never deposits the money into a bank account, s/he just collects and forwards the physical check, or allows the renter to make a direct deposit into the landlords account.

The Licensee Buyout Addendum informs the Seller of all EXCEPT: A: Seller is responsible for marketing and closing expenses B: Seller acknowledges that in entering into the Contract, Buyer is exposed to possible losses and expenses. C: The Contract may be terminated at any time by Seller upon written notice to Buyer. D: Any termination of the Contract shall not affect the listing contract for the Property (Listing Contract).

A: Seller is responsible for marketing and closing expenses Explanation: A is the only verbiage listed NOT in the Licensee Buyout Addendum. More info: What Is a Licensee Buyout Addendum? by Maxwell Wallace, Demand Media A licensee buyout addendum is a form used in certain real estate and property transactions in the state of Colorado. The LBA is used only in the purchase and sale of properties between licensed real estate professionals and their own clients. History and Purpose Formally known as Form LB36-10-06, or the Licensee Buy-Out Addendum to Contract to Buy and Sell Real Estate, the form was adopted by the Colorado Real Estate Commission in January 2007. It is intended to prevent improprieties and conflicts of interest in licensee/client transactions, as well as to make sellers contractually aware of the potential differences in selling to a licensed real estate professional as opposed to conventional buyers. Situations Dictating Use Licensed real estate agents are required to use an LBA when they enter into contracts to purchase properties concurrently with the initial listing of that property, when it immediately hits the market. Licensees also are required to use the LBA form when they are purchasing a property to facilitate its owner's purchase of another property, as well as when they continue to market that property to other potential buyers. Deleted Provisions Under the provisions of the licensee buyout addendum, several conventional provisions of standard real estate listing contracts reached under Colorado state law are deleted. Deleted provisions include a property's appraisal condition, liquidated damages or pre-assessed damages to the property, provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms. Profit and Loss Stipulations Colorado's LBA also stands as contractual acknowledgment by a property seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the LBA protects the property seller by acknowledging that any fees related to closing, holding and reselling the property are all absorbed by the buyer and not the property seller as the original or prior landowner.

The Licensee Buyout Addendum informs the Seller of all EXCEPT: A: Seller is responsible for marketing and closing expenses B: Seller acknowledges that in entering into the Contract, Buyer is exposed to possible losses and expenses. C: The Contract may be terminated at any time by Seller upon written notice to Buyer. D: Any termination of the Contract shall not affect the listing contract for the Property (Listing Contract).

A: Seller is responsible for marketing and closing expenses Explanation: A is the only verbiage listed NOT in the Licensee Buyout Addendum.

Who is responsible for disclosing the lead paint disclosure to the buyer? A: Seller only B: Sellers Agent only C: Buyer's Agent only D: Seller and both agents

A: Seller only Explanation: For the answer to this let's turn to the source itself, the EPA: Federal law requires that before being obligated under a contract to buy housing built prior to 1978, buyers must receive the following from the seller: An EPA-approved information pamphlet on identifying and controlling lead-based paint hazards titled Protect Your Family From Lead In Your Home. Any known information concerning the presence of lead-based paint or lead-based paint hazards in the home or building. For multi-unit buildings, this requirement includes records and reports concerning common areas and other units when such information was obtained as a result of a building-wide evaluation. An attachment to the contract, or language inserted in the contract, that includes a "Lead Warning Statement" and confirms that the seller has complied with all notification requirements. And just to be sure the seller complies, this is the at the top of the disclosure: WARNING! LEAD FROM PAINT, DUST, AND SOIL CAN BE DANGEROUS IF NOT MANAGED PROPERLY Penalties for failure to comply with Federal Lead-Based Paint Disclosure Laws include treble (3 times) damages, attorney fees, costs, and a base penalty up to $11,000 (plus adjustment for inflation). The current penalty is up to $16,000 for each violation. The case could be made that it is the agent's responsibility to make sure that the seller discloses the information, and that is true, but it is the seller, not the agent, who is attesting to what they know. The agent is just saying to the buyer, "Here you go." Whereas the seller is the one actually filling out the form. So, if you see this on the exam, the correct answer is A) Seller Only.

Which party should create an amend/extend because buyer needs more time for an inspection? A: Selling agent B: Listing agent C: Lender D: Title company

A: Selling agent Explanation: If buyer needs more time, buyer's agent (also known as the selling agent) has to request it.

An out of state investor sells a property in Colorado. The closing entity must withhold up to 2 percent of the: A: Selling price as possible income tax liability B: Selling price as a state transfer tax C: Net proceeds of the sale as sales tax D: Net proceeds of the sale as possible income tax

A: Selling price as possible income tax liability Explanation: The law is that the closing entity must withhold 2% OR the entire net amount whichever is less at closing for possible income tax liability when the person selling has an out of state address.

Well permits are issued and tracked by: A: State Engineer's Office B: Well permits are not regulated C: Colorado Supreme Court D: Colorado Legislature

A: State Engineer's Office Explanation: The State Engineers Office maintains records of all permits issued in the State. The office also issues most permits except in designated ground water basins where well permits are issued by the Ground Water Commission.

The Colorado law requires real estate contracts to be in writing is called the: A: Statue of Frauds B: Statue of Estoppel C: Statue of Distribution D: Statue of Limitations

A: Statue of Frauds

Which of the following is true when a broker signs the Broker Acknowledgments at the end of the Residential Contract to Buy and Sell? A: The broker acknowledges receipt of the earnest money deposit B: The broker becomes a party to the contract and agrees to its terms C: The broker assures the right to a commission D: The broker confirms the commission split with cooperating brokers

A: The broker acknowledges receipt of the earnest money deposit Explanation: The brokers' signatures acknowledge receipt of the earnest money deposit and confirm their brokerage relationship to the party with whom they are working.

Which of the following is true when a broker signs the Broker Acknowledgments at the end of the Residential Contract to Buy and Sell? A: The broker acknowledges receipt of the earnest money deposit. B: The broker becomes a party to the contract and agrees to its terms. C: The broker assures the right to a commission. D: The broker confirms the commission split with cooperating brokers.

A: The broker acknowledges receipt of the earnest money deposit. Explanation: The brokers' signatures acknowledge receipt of the earnest money deposit and confirm their brokerage relationship to the party with whom they are working

If there is a dispute regarding earnest money: A: The broker has a choice to interplead the money or await written instructions from the parties B: The broker must turn the money over to the court while awaiting resolution of the dispute C: Seller and Buyer must sue the broker to resolve the impasse D: The broker may move the money to an operating account

A: The broker has a choice to interplead the money or await written instructions from the parties Explanation: The broker has two options - to interplead the money or await written instructions from the parties. If the money is in dispute, the only thing an agent cannot do is make a decision as to who gets the money. An agent is not a judge or arbiter. Interplead means the agent turns the money over to a court to determine the ownership rights of the rival claimants to the earnest money. More on the process of returning Earnest Money: The Colorado Contract to Buy and Sell Real Estate (AKA Purchase Contract) says the agent holding earnest money has 5 days to return earnest money to whomever is supposed to get it after receipt of written instructions to do do. This is covered in the Broker Acknowledgements sections of the purchase contact. The actual language reads like this - "Broker agrees that if Brokerage Firm is the Earnest Money Holder and, except as provided in § .., if the Earnest Money has not already been returned following receipt of a Notice to Terminate or other written notice of termination, Earnest Money Holder will release the Earnest Money as directed by the written mutual instructions. Such release of Earnest Money will be made within five days of Earnest Money Holder's receipt of the executed written mutual instructions, provided the Earnest Money check has cleared." BUT!!!!!! to make it even more fun for you, the Real Estate has issued Commission Position 6, whereby they say that if there is no controversy over who gets the earnest money, they want the money returned as quickly as possible and the agent does NOT have to get writen permission from all parties to do so. Most companies, as a prudent measure, have both parties sign that they agree who gets the earnest money before they release it. This just makes sense, woe to the agent who releases the earnest money and one of the parties throws a fit over it. Safer to get the parties to agree in writing first. However, sometimes the party that is giving up the earnest money and their agent makes this a pretty low priority on their things-to-do-list. Keep in mind, they are grumpy the deal is dead and even if they know they need to release the earnest money, they are not happy about it. In the meantime, the other party wants their money. Buyers in particular are anxious as they are back on the market looking for a property and can't make an offer until they get their earnest money returned. Therefore, the Commission has made is very clear, that they do not want slow paperwork to hold things up when there is no controversy. Does this occasionally put us in an awkward position? Yup. Smart agents who do not like to even get within sniffing distance of having to write out a personal check to cover a perceived, if not actual screw up (that be me, except my wife would probably dispute the "smart" assertion) will move heaven and earth to get quickly signed releases by both parties before releasing earnest money. If you find that one of your parties due to the stress of the failed deal ran instantly to consult with the yogi on the mountaintop and are not returning messages, you need to have a talk with your managing broker before doing something you may regret. It is always cooler to share the love and say "my managing broker said to do it and will make it good" then "how do I spell your name on my check".

In the Colorado Listing agreement the holdover period provision entitles the broker to a commission if the property sells to anyone: A: The broker negotiated with during the listing period unless the seller lists with another exclusive broker and the "Will" box has not been checked B: Within a stated period after listing expires C: The broker negotiated with during the listing period D: Within the listing period

A: The broker negotiated with during the listing period unless the seller lists with another exclusive broker and the "Will" box has not been checked Explanation: The Holdover Period says that a listing broker may be entitled to a commission after the expiration of a listing contract for the period of time specified in the clause if: 1) the broker negotiated with the buyer during the listing period and 2) the broker submitted the name of this buyer in writing to the seller. Although the protection is for a negotiated time after the listing expires; it can terminate early if the property is re-listed by another agent and the "Will Not" box is checked, meaning the old listing agent "will not" be owed a commission if another brokerage firm has earned one. If neither the "Will" or "Will Not" be owned a commission" box is checked - the default is "Will Not". See "Holdover Period" in the "When Earned" clause of an Exclusive Right to Sell listing agreement.

If a Seller is in default of the terms of the Contract to Buy & Sell: A: The buyer may cancel or sue for specific damages B: Buyer may sue to get the earnest money back C: Buyer may terminate by forfeiting the earnest money D: Buyer's remedy is determined by which box is checked

A: The buyer may cancel or sue for specific damages Explanation: If the Seller defaults the options are with the Buyer, they can cancel, sue for specific performance, or damages, or both.

What form signed by the buyer and seller instructs and authorizes the title company to prepare all of the closing documents? A: The closing instructions B: Contract to buy and sell real estate C: Title authorization form D: The amend/extend form

A: The closing instructions Explanation: The closing instructions are signed by the seller at the time the listing is taken and by the buyer when he makes an offer for the property.

Which of the following is true about an interest only term mortgage? A: The entire principal is due at the end of the term B: The entire debt is partially amortized over the term C: All interest is paid at the end of the term D: The term is limited by state regulation

A: The entire principal is due at the end of the term Explanation: In an interest only mortgage none of the principal is paid until the end of the term.

A licensee may accept compensation from: A: The licensee's employing broker only B: The seller or buyer C: Any licensed real estate broker D: Any service provider to the transaction

A: The licensee's employing broker only Explanation: A licensee can only accept compensation from his employing broker.

You have a listing with a couple who hold title in joint tenancy. A broker brings you an offer and the couple indicates that they will probably accept the offer, but they want to think it over for a few hours. During those few hours they are involved in a traffic accident and one of them is killed. What would be the status of the listing? A: The listing agreement is enforceable against the surviving spouse B: The listing agreement is cancelled. C: The offer to purchase is void. D: The offer to purchase is still valid.

A: The listing agreement is enforceable against the surviving spouse Explanation: If the listing agreement has been signed by both spouses and one spouse dies, the listing agreement is still enforceable against the surviving spouse. In joint tenancy the surviving member(s) immediately inherits the property upon the death of a member. Therefore the surviving member has full rights to sell the property and the listing contract is valid. If you chose either of the purchase contract answers please be careful to read the questions more closely. This question asked about the status of the listing contract. As the verbiage of this questions contained much info about the purchase contact it is easy to skim through and miss the real question.

If an offer is given that fulfills all the terms of a contact and the seller rejects that offer - what happens? A: The listing broker is entitled to a commission B: The listing broker receives no commission C: The listing broker can sue for specific performance D: The listing broker is entitled to a partial commission for services rendered

A: The listing broker is entitled to a commission Explanation: When we, as agents, enter an agreement to market someone's property, we are tasked to bring them a "ready, willing and able buyer". We do that - we get paid. If we do that and the seller gets cold feet, rejecting an offer which met all of the seller's stated requirements, nobody can force the seller to sell, but we did our job and the seller may be liable for a commission to the listing agent.

A buyer made an offer to purchase a property. The owner responded with a counteroffer. While the buyer was reviewing the counteroffer, the owner received a better offer. The owner can accept the second offer if: A: The owner withdraws the counteroffer before it is accepted B: The owner gives the first buyer notice that another offer was received and an opportunity to revise the bid C: The first buyer is informed, in writing, of the owner's intent to accept another offer D: It satisfies or exceeds all terms included in the counteroffer

A: The owner withdraws the counteroffer before it is accepted Explanation: A purchase offer or counteroffer (counterproposal) can be withdrawn at any time prior to acceptance.

An apartment owner wants to convert his twenty-one-unit complex into time shares. He must register the time-shares with: A: The real estate commission B: The Colorado time-share commission C: The subdivision committee

A: The real estate commission Explanation: Subdividing any residential property into 20 or more units for sale, transfer, lease or timeshares must be registered with the Colorado Real Estate Commission.

In the approved Contract to Buy and Sell, "Property" includes: A: The real property plus fixtures, improvements, and appurtenances B: The real property and all rights such as water rights C: The real property plus fixtures, improvements, appurtenances, plus inclusions, minus exclusions D: The real property and everything now attached

A: The real property plus fixtures, improvements, and appurtenances Explanation: Property as described in the Contract to Buy and Sell includes appurtenances, improvements, and fixtures. From the Contract to Buy and Sell: Property. The Property is the following legally described real estate in the County of Arapahoe, Colorado: Legal Description Here known as No. ,999 Maple Street Aurora Co 80999 together with the interests, easements, rights, benefits, improvements and attached fixtures appurtenant thereto, and all interest of Seller in vacated streets and alleys adjacent thereto, except as herein excluded (Property).

"Liquidated damages" refers to which of the following? A: The seller's sole remedy in case of default by purchaser is to keep earnest funds received from purchaser B: The seller's sole remedy in case of default by purchaser is to force him to continue with the sale C: The seller's remedy if the buyer defaults, and the seller can also sue the buyer for damages D: The seller's remedy if the buyer defaults and the seller can sue for specific performance

A: The seller's sole remedy in case of default by purchaser is to keep earnest funds received from purchaser Explanation: "Liquidated Damages" means that the seller's sole remedy is to only keep all things of value received, usually the earnest money.

The selling agent observes that the names are misspelled on the warranty deed. What needs to happen? A: The selling agent should require that the names be corrected B: The selling agent should not worry, as it is recorded in the county C: No one else noticed the error, so the closing should just carry on D: The selling agent should insist that the people change their names

A: The selling agent should require that the names be corrected Explanation: The brokers are to verify that the information on the closing documents is correct. This includes names.

Which statement is true? A: There is no obligation for a licensee to prepare any legal documents B: A licensee is not responsible for any documents prepared by their broker C: The broker is not responsible to provide accurate closing statements D: A licensee is responsible for fees charged for the preparation of legal documents when an attorney representing the purchaser or seller prepares them

A: There is no obligation for a licensee to prepare any legal documents Explanation: Commission approved forms must be used by the broker.

Smith and Jones are joint tenants. Smith sells her interest to Brown. What is the relationship between Jones and Brown? A: They are tenants in common B: They are joint tenants C: They each have ownership in severalty D: The are tenants in entirety

A: They are tenants in common Explanation: Once the joint tenancy has been broken by the sale of the property then it is tenancy in common.

What was the original purpose behind the formation of the Federal National Mortgage Association? A: To buy existing FHA-insured loans B: To provide a stimulus to the housing construction market, as well as to the mortgage market C: To make more funds available to purchasers buying homes D: All of the above

A: To buy existing FHA-insured loans Explanation: The Federal National Mortgage Association (Fannie Mae) is an active participant in the secondary mortgage market.

All of the following are required of a FHA borrower, except? A: To pledge never to obtain a second loan B: Certify the borrower will occupy the premises C: Pay an up-front premium for mortgage insurance D: Pay a monthly mortgage insurance premium

A: To pledge never to obtain a second loan Explanation: After closing the borrower may get a second loan.

True/False - According to Commission Position 1 on Homebuilders - Corporations that build structures on land they own may sell the land and building together without licensing. A: True B: False

A: True Explanation: CP-1 Commission Policy on Homebuilder's Exemption from Licensing Corporations that build structures on land they own may sell the land and building together without licensing, provided that the sales are made by corporate officers or regularly salaried employees. The land and building must be sold as a unit and the building must not have been previously occupied. This exemption is usually referred to as the homebuilder's exemption.

True/False - According to CP-14 Sale of Modular Homes, a licensee who sells land and a modular home to be affixed to the land, to the purchaser in concurrent or an arranged or pre-arranged or packaged transaction, is subject to the laws and rules of the Commission. A: True B: False

A: True Explanation: CP-11 The Commission is aware that many services rendered by licensees may or may not, in themselves, require licensing. Such services as collection of rents on real property, subdivision development services other than sales, or the general management of real property not involving renting or leasing may all be performed independently by an unlicensed person. When performed by a licensee, these services are all so integrated with real estate brokerage that all money received in connection therewith must be held or disbursed according to the law and rules of the Real Estate Commission. Therefore, it is the position of the Commission that a licensee who sells land and a modular home to be affixed to the land, to the purchaser in concurrent or an arranged or pre-arranged or packaged transaction, is subject to the laws and rules of the Commission. Consequently, all money received concerning the integrated transaction, including the modular home, should be processed through the broker or the employing broker pursuant to 12-61-117, C.R.S. and 12-61-113(l)(f), C.R.S. and Commission Rules E-l and E-5. It is also the position of the Commission that if a licensee sells to an owner of land, a modular home to be affixed to the land, and there has been no brokerage relationship between the owners of the land and the licensee, such licensee in such a sale will not be required to comply with the requirements of 12-61-117, C.R.S. or 12-61-113(l)(f), C.R.S. or Commission Rules E-l and E-5.

True/False - According to CP-20 on Personal Assistants, an unlicensed personal assistant may show homes. A: True B: False

A: True Explanation: CP-20... An unlicensed assistant may complete the following tasks: 1. Complete forms prepared for, and as directed by a broker. Unlicensed assistants cannot independently draft legal documents such as listing or sales contracts, and they cannot offer opinions, advice or interpretations of these documents. 2. Distribute preprinted, objective information prepared by the broker about a property listed for sale. 3. Perform clerical duties, including gathering information for a listing. 4. If authorized by the seller, provide access to property, conduct showings or open houses. 5. Deliver paperwork to other brokers, buyers or sellers. 6. Deliver paperwork that requires signatures in regard to financing documents that are prepared by lending institutions. 7. Prepare market analyses on behalf of the broker, if the analyses are approved and submitted by the broker to the client with a disclosure that the market analyses were prepared by the unlicensed assistant. The broker must ensure that market analyses comply with Commission Rule E-42. 8. Collect and receipt for earnest money deposits, security deposits or rents. 9. Schedule property repairs on behalf of the broker, if there is an existing agreement that authorizes the broker to make repairs to the property.

True/False - According to Commission Position 22 on Handling of Confidential Information, a designated broker is permitted to share confidential information with a supervising broker without changing or extending the brokerage relationship beyond the designated broker. A: True B: False

A: True Explanation: CP-22...A designated broker is permitted to share confidential information with a supervising broker without changing or extending the brokerage relationship beyond the designated broker. Brokers may want to consult legal counsel regarding the necessity of securing the authorization of the party to whom the information is confidential before the designated broker shares that confidential information with the supervising broker. Such advice could include modifications to the listing agreement or buyer agreement that create such authorization. More info: This is a Colorado twist on brokerage laws. Generally, everything you learned in the National side is consistent with Colorado. That all contracts are with the company not the licensee, that the Employing Broker is responsible for the actions of the licensees under him/her and so on. The twist is in how we deal with confidential information and how we resolve what in past years was considered a conflict of interest. All of this comes under the heading of "Designated Broker." Here is the problem as the real estate commission saw it; once upon a time, it was a conflict of interest if two agents from the same company were working opposite sides of the same transaction - even if it was a large company and the agents did not know each other. Fact is - earlier brokerage laws were written in a time when there were no large offices or super-sized brokerages. Most were ma and pa operations where everybody knew and talked to each other. Recognizing that times had changed, the real estate commission wanted two agents working for the same company on the same transaction, to be able to fully represent their clients in a Buyer or Seller Agency relationship and not be forced into some form of neutral relationship such as Transaction Broker or the predecessor to Transaction Brokerage, the now illegal and much hated Dual Agency relationship. The issue was - if everybody in a company reports to the Employing Broker then that person is a walking talking potential conflict-of-interest on any transaction that occurs in the office. So they declared that brokerage relationships only, would be confined to the licensee level and not rise to the Employing broker level. This way the Employing Broker does not have a conflict of interest with anybody. That left one more problem and this was "imputation of confidential information." In simpleze - it would be a bad thing if two agents working on opposite sides of a transaction, went to the same Employing Broker for advice and that Employing Broker blabbed confidential information between them. To avoid that - the real estate commission issued rules that said in the event of two agents working on the same transaction for the same company, the Employing Broker would "Designate" another supervising broker for one of the agents. Tah Dah! No conflict of interest and no chance of one Employing Broker spilling secrets from one side to the other. Then to tie everything into a bow - they exempted one-man band brokerages from having to appoint another supervisor because... there is only one person in the company. One agent companies mostly become Transaction Brokers when double-ending a deal.

True/False - According to Commission Position 24 on the Preparation of Market Analysis and Evaluation for Loans the following text must appear on every licensee's estimates of value. "NOTICE: The preparer of this appraisal is not registered, licensed or certified as a real estate appraiser by the State of Colorado". A: True B: False

A: True Explanation: CP-24...The broker preparing an estimate or evaluation must at all times comply with the statutory requirement in Sections 12-61-702 and 12-61-718, Colorado Revised Statutes, for a written notice that they are not an appraiser. The wording and use of the written notice are specified in Chapter 15 of the Rules of the Board of Real Estate Appraisers. The required wording is: "NOTICE: The preparer of this appraisal is not registered, licensed or certified as a real estate appraiser by the State of Colorado".

True/False - According to CP-38 Disclosure of Affiliated Business Arrangements, a licensee is required to disclose any affiliated business arrangement in which the licensee has a 1% or more interest when an offer to purchase real property is fully executed. A: True B: False

A: True Explanation: CP-38 Commission Position on Disclosure of Affiliated Business Arrangements and Conflicts of Interest (4-5-2011) This statement supplements Rule E-46 Affiliated Business Arrangements. §12-61-113.2, C.R.S. Affiliated Business Arrangements was enacted in Colorado to provide transparency, accountability, and consumer protection through disclosure and consistency concerning affiliated business arrangements. Affiliated business arrangements have also been regulated for many years by the Real Estate Settlement Procedures Act (RESPA). RESPA was precipitated by significant reforms identified by Congress as necessary to ensure that consumers did not pay disproportionately high settlement costs as the result of certain deleterious business practices by settlement service providers. RESPA is applicable to any residential mortgage transaction involving a federally related mortgage loan. However, Colorado law requires disclosure of affiliated business arrangements to consumers even if the transaction does not involve a federally related residential mortgage loan. Colorado law C.R.S. 12-61-113.2(1)(a) defines an "affiliated business arrangement" as an arrangement in which: "A provider of settlement services or an associate of a provider of settlement services has either an affiliate relationship with or a direct beneficial ownership interest of more than one percent in another provider of settlement services;" and the provider directly or indirectly refers business to the other provider or affirmatively influences the selection of another provider of settlement services. It is the Commission's position that real estate brokers must disclose affiliated business arrangements to consumers in all transactions intended to result in the transfer of title from one party to another. RESPA requires that affiliated business arrangements be disclosed before or at the time a referral is made to a provider of settlement services. Colorado law requires a licensee to disclose any affiliated business arrangement when an offer to purchase real property is fully executed. In Colorado, the disclosure is required to be in writing, must be given to both agents and transaction brokers, must comply with RESPA and Colorado law, and must be made using the Federal RESPA disclosure form. Colorado law requires real estate brokers to disclose their affiliated business arrangements to all parties to the real estate transaction and all parties are expected to sign the disclosure form. The Commission recommends that real estate brokers disclose their affiliated business arrangements to the party with whom they are working early in their relationship, i.e. at the time brokerage relationships are disclosed or when the listing contract or buyer broker agreement is negotiated. In those transactions where the broker does not deal with another party until the time of contracting written disclosure should be made to all parties at the time the purchase contract is fully executed. Additionally, real estate brokers are required to make certain disclosures to the Division of Real Estate regarding their affiliated business arrangements. Colorado law requires every licensee to disclose to the Commission when they enter into or change an affiliated business arrangement. All affiliated business arrangements to which the licensee is a party must be disclosed. Disclosure is required at the time of a new application for licensure or at the time of activation of an inactive license. The disclosure must include the physical location of the affiliated business. Employing brokers are required to disclose the names of all affiliated business arrangements to which the employing broker is a party on an annual basis, at the least. The disclosure must include the physical location of the affiliated businesses. The Commission has determined that these disclosures shall be made electronically through the Division of Real Estate's website at www.dora.state.co.us/pls/real/AFB_Web.Logon?p_div=REC. It is the Commission's position that Rule E-25 Continuing duty to disclose conflict of interest and license status, applies to all licensees including real estate brokers who perform licensed property management services and are affiliated with businesses or vendors that provide services applicable to lease transactions. For example, a real estate broker acting on behalf of a landlord is required to disclose to the landlord that the real estate broker has partial ownership of the maintenance company that the real estate broker utilizes for the landlord's property repairs. The Commission strongly recommends that this type of information be disclosed to the principal early in the business relationship, i.e. at the time brokerage relationships are disclosed or when the listing contract is negotiated. Additionally, this disclosure should be made in writing.

True/False - According to Commission Position 38 Disclosure of Affiliated Business Arrangements, a licensee is required to disclose any affiliated business arrangement in which the licensee has a 1% or more interest when an offer to purchase real property is fully executed. A: True B: False

A: True Explanation: CP-38 Commission Position on Disclosure of Affiliated Business Arrangements and Conflicts of Interest (4-5-2011) This statement supplements Rule E-46 Affiliated Business Arrangements. §12-61-113.2, C.R.S. Affiliated Business Arrangements was enacted in Colorado to provide transparency, accountability, and consumer protection through disclosure and consistency concerning affiliated business arrangements. Affiliated business arrangements have also been regulated for many years by the Real Estate Settlement Procedures Act (RESPA). RESPA was precipitated by significant reforms identified by Congress as necessary to ensure that consumers did not pay disproportionately high settlement costs as the result of certain deleterious business practices by settlement service providers. RESPA is applicable to any residential mortgage transaction involving a federally related mortgage loan. However, Colorado law requires disclosure of affiliated business arrangements to consumers even if the transaction does not involve a federally related residential mortgage loan. Colorado law C.R.S. 12-61-113.2(1)(a) defines an "affiliated business arrangement" as an arrangement in which: "A provider of settlement services or an associate of a provider of settlement services has either an affiliate relationship with or a direct beneficial ownership interest of more than one percent in another provider of settlement services;" and the provider directly or indirectly refers business to the other provider or affirmatively influences the selection of another provider of settlement services. It is the Commission's position that real estate brokers must disclose affiliated business arrangements to consumers in all transactions intended to result in the transfer of title from one party to another. RESPA requires that affiliated business arrangements be disclosed before or at the time a referral is made to a provider of settlement services. Colorado law requires a licensee to disclose any affiliated business arrangement when an offer to purchase real property is fully executed. In Colorado, the disclosure is required to be in writing, must be given to both agents and transaction brokers, must comply with RESPA and Colorado law, and must be made using the Federal RESPA disclosure form. Colorado law requires real estate brokers to disclose their affiliated business arrangements to all parties to the real estate transaction and all parties are expected to sign the disclosure form. The Commission recommends that real estate brokers disclose their affiliated business arrangements to the party with whom they are working early in their relationship, i.e. at the time brokerage relationships are disclosed or when the listing contract or buyer broker agreement is negotiated. In those transactions where the broker does not deal with another party until the time of contracting written disclosure should be made to all parties at the time the purchase contract is fully executed. Additionally, real estate brokers are required to make certain disclosures to the Division of Real Estate regarding their affiliated business arrangements. Colorado law requires every licensee to disclose to the Commission when they enter into or change an affiliated business arrangement. All affiliated business arrangements to which the licensee is a party must be disclosed. Disclosure is required at the time of a new application for licensure or at the time of activation of an inactive license. The disclosure must include the physical location of the affiliated business. Employing brokers are required to disclose the names of all affiliated business arrangements to which the employing broker is a party on an annual basis, at the least. The disclosure must include the physical location of the affiliated businesses. The Commission has determined that these disclosures shall be made electronically through the Division of Real Estate's website at www.dora.state.co.us/pls/real/AFB_Web.Logon?p_div=REC. It is the Commission's position that Rule E-25 Continuing duty to disclose conflict of interest and license status, applies to all licensees including real estate brokers who perform licensed property management services and are affiliated with businesses or vendors that provide services applicable to lease transactions. For example, a real estate broker acting on behalf of a landlord is required to disclose to the landlord that the real estate broker has partial ownership of the maintenance company that the real estate broker utilizes for the landlord's property repairs. The Commission strongly recommends that this type of information be disclosed to the principal early in the business relationship, i.e. at the time brokerage relationships are disclosed or when the listing contract is negotiated. Additionally, this disclosure should be made in writing.

True/False - According to Commission Position 40 on Teams, Real estate brokers that function as teams should not advertise teams using the terms "realty", "real estate", "company", "corporation", "corp.", "inc.", "LLC" or other similar language that would indicate a company other than the employing brokerage firm. A: True B: False

A: True Explanation: CP-40 Commission Position on Teams (4-5-2011) The Commission recognizes that there are benefits to both real estate brokers and consumers in the usage of real estate broker teams. Teams may be formed within a licensed brokerage firm with the approval of the employing broker. Real estate brokers operating as teams need to ensure that they are compliant with Commission rules regarding advertising, name usage and supervision. Advertising and name usage: While there is no prohibition of teams, real estate brokers need to ensure that they do not advertise in a manner that misleads the public as to the identity of the brokers' licensed brokerage. Real estate brokers that function as teams should not advertise teams using the terms "realty", "real estate", "company", "corporation", "corp.", "inc.", "LLC" or other similar language that would indicate a company other than the employing brokerage firm. Advertising includes, but is not limited to, websites, signage, property flyers, mailings, business cards, letterhead and contracts. The advertising of team names should never give the impression that the team is an entity separate from the licensed real estate brokerage. If the identity of the employing broker or the brokerage firm is difficult for the public or the Commission to ascertain, the team may be in violation of Rule E-8 Advertising. Supervision: In addition to the supervision requirements set forth in Rules E-31 and E-32, Rule E-30 Employing broker responsibilities requires that the broker designated to act as the broker for any partnership, limited liability company or corporation, i.e. the employing broker, fulfill the following duties: 1) Maintain all trust accounts and trust account records; 2) Maintain all transaction records; 3) Develop an office policy manual and periodically review office policies with all employees; 4) Provide for a high level of supervision for newly licensed persons pursuant to Rule-32; 5) Provide for a reasonable level of supervision for experienced licensees pursuant to Rule E-31; 6) Take reasonable steps to ensure that violations of statutes, rules and office policies do not occur or reoccur; 7) Provide for adequate supervision of all offices operated by the broker, whether managed by licensed or unlicensed persons. Pursuant to §12-61-118, C.R.S. and Rule E-29, employing brokers are also responsible for providing supervision over such activities with reference to the licensing statutes and Commission rules for all brokerage employees, including but not limited to administrative assistants, bookkeepers and personal assistants of licensed employees. Thus, employing brokers are responsible for the actions of unlicensed persons who perform functions within the real estate broker team. Employing brokers need to ensure that any unlicensed person acting within the team is not engaged in practices that require a real estate broker's license. Employing brokers also need to establish that the compensation paid to an unlicensed person for services provided is not in the form of a commission. Compensation paid to an unlicensed person is not required to to be paid solely by the employing broker. However, §12-61-117, C.R.S. requires that all licensee compensation or valuable consideration for the performance of any acts requiring a broker's license is paid solely by the employing broker.

True/False - According to CP-40 on Teams, Real estate brokers that function as teams should not advertise teams using the terms "realty", "real estate", "company", "corporation", "corp.", "inc.", "LLC" or other similar language that would indicate a company other than the employing brokerage firm. A: True B: False

A: True Explanation: CP-40 Commission Position on Teams (4-5-2011) The Commission recognizes that there are benefits to both real estate brokers and consumers in the usage of real estate broker teams. Teams may be formed within a licensed brokerage firm with the approval of the employing broker. Real estate brokers operating as teams need to ensure that they are compliant with Commission rules regarding advertising, name usage and supervision. Advertising and name usage: While there is no prohibition of teams, real estate brokers need to ensure that they do not advertise in a manner that misleads the public as to the identity of the brokers' licensed brokerage. Real estate brokers that function as teams should not advertise teams using the terms "realty", "real estate", "company", "corporation", "corp.", "inc.", "LLC" or other similar language that would indicate a company other than the employing brokerage firm. Advertising includes, but is not limited to, websites, signage, property flyers, mailings, business cards, letterhead and contracts. The advertising of team names should never give the impression that the team is an entity separate from the licensed real estate brokerage. If the identity of the employing broker or the brokerage firm is difficult for the public or the Commission to ascertain, the team may be in violation of Rule E-8 Advertising. Supervision: In addition to the supervision requirements set forth in Rules E-31 and E-32, Rule E-30 Employing broker responsibilities requires that the broker designated to act as the broker for any partnership, limited liability company or corporation, i.e. the employing broker, fulfill the following duties: 1) Maintain all trust accounts and trust account records; 2) Maintain all transaction records; 3) Develop an office policy manual and periodically review office policies with all employees; 4) Provide for a high level of supervision for newly licensed persons pursuant to Rule-32; 5) Provide for a reasonable level of supervision for experienced licensees pursuant to Rule E-31; 6) Take reasonable steps to ensure that violations of statutes, rules and office policies do not occur or reoccur; 7) Provide for adequate supervision of all offices operated by the broker, whether managed by licensed or unlicensed persons. Pursuant to §12-61-118, C.R.S. and Rule E-29, employing brokers are also responsible for providing supervision over such activities with reference to the licensing statutes and Commission rules for all brokerage employees, including but not limited to administrative assistants, bookkeepers and personal assistants of licensed employees. Thus, employing brokers are responsible for the actions of unlicensed persons who perform functions within the real estate broker team. Employing brokers need to ensure that any unlicensed person acting within the team is not engaged in practices that require a real estate broker's license. Employing brokers also need to establish that the compensation paid to an unlicensed person for services provided is not in the form of a commission. Compensation paid to an unlicensed person is not required to to be paid solely by the employing broker. However, §12-61-117, C.R.S. requires that all licensee compensation or valuable consideration for the performance of any acts requiring a broker's license is paid solely by the employing broker.

A Mechanics' Lien is used by a contractor to secure payment for work performed on a home. A: True B: False

A: True Explanation: Mechanic's Lien: The right of a craftsman, laborer, supplier, architect or other person who has worked upon improvements or delivered materials to a particular parcel of real estate (either as an employee of the owner or as a sub-contractor to a general contractor) to place a lien on that specific property for the value of the services and/or materials if not paid. With certain exceptions, the Colorado Mechanic's Lien Act requires that a mechanic's lien be recorded within four months of the date that the contractor, subcontractor or supplier performed its last work or last supplied material or equipment. The priority date is as of the date material was delivered or work began, rather than the date recorded. Recording a mechanic's lien assists in securing the real property upon which improvements were made as collateral. The lien claimant has six months from the date that last work was performed or material supplied to file a lawsuit to foreclose its lien and to record notice of its lawsuit (this notice is called a "lis pendens") with the Clerk and Recorder of the County where the real property is located. Mechanics' Liens are classified as an Involuntary lien because the owner has no choice. They are also classified as an Equitable lien because the lien holder does not have possession of the property the lien is against.

A Corporation, LLC, Partnership must have E&O insurance for entity and employing broker. A: True B: False, only the employing broker requires E&O insurance C: False, only the legal entity requires E & O insurance D: False, only the individual licensee''s require E&O insurance

A: True Explanation: Rule D-14 Errors and omissions (E&O) insurance Every active real estate licensee, including licensed real estate companies, shall have in effect a policy of errors and omissions insurance to cover all acts requiring a license.

True/False - According to CP-24 on the Preparation of Market Analysis and Evaluations for Loans, real estate brokers may perform valuations only for the purpose of determining the market value of a property for marketing purposes. A: True B: False

A: True Explanation: This is one of those gray areas where the reading assignment says one thing, but the way the State exam is written reflects another. Real estate brokers may never do appraisals. Only a licensed appraiser may do an appraisal. Real estate brokers may do "estimates of value" for their clients, but not for the purpose of securing financing. Despite the fact that CP-24 says a bank may use it for lending, that is not what the question on the state exam (or this one) wants to know. The real estate commission draws a very hard line for agents, and that is that agents are never allowed to do an appraisal, so all agents can do is a BPO for the purpose of marketing their client's home. So when you see the question on the state exam the answer is always reflective of the marketing only response. CP-24 Commission Position on Preparation of Market Analyses and Real Estate Evaluations Used for Loan Purposes: The Colorado Real Estate Appraiser Licensing Act contains special provisions which allow licensed real estate brokers to perform certain real estate valuation related activities without being registered, licensed or certified as real estate appraisers. These provisions are found in Sections 12-61-702 and 12-61-718, C.R.S. The first of these allows a broker to prepare an "estimate of value" which is not represented as an appraisal and is not used to obtain financing. The position of the Commission is that this provision allows a broker to prepare a market analysis for use in the real estate brokerage process and to offer their estimate as to the value or market price of real estate for court testimony or tax purposes.

How many single-family residences can a broker manage without having to open a trust account only for rents and deposits (separate from his sales trust accounts)? A: Up to seven B: Anytime he manages property he must open a separate trust account C: 10 or more D: Unlimited

A: Up to seven Explanation: Money belonging to others must always be placed in a trust account. If a broker manages less than 7 properties, he may use his sales escrow account to deposit property management funds. He does not have to open a special property management trust account until he manages more than 6 properties.

A broker may deposit her personal funds in her trust account in which of the following situations? A: When a minimum amount is required by the bank to maintain the account B: Whenever she wants to -- it is withdrawals that are not allowed C: If an earnest money check bounces to cover the check D: When she had to use the escrow to pay her rent and she is putting the money back

A: When a minimum amount is required by the bank to maintain the account Explanation: Brokers may only deposit enough money in a trust account to maintain the minimum required balance.

When a property located in Colorado is sold, it may be subject to state income tax withholding. Which of the following situations would require state tax to be withheld? A: When the last known address at the time of closing was outside of the state of Colorado B: When the property is the principal residence of the seller C: When the sales price is less than $100,000 D: When the seller is a bank foreclosing on a loan which is in default

A: When the last known address at the time of closing was outside of the state of Colorado Explanation: Only out-of-state sellers selling property in excess of $100,000 are subject to Colorado tax withholding at the time of closing. Title Companies are generally required to withhold the lesser of (1) two percent of the sales price, or (2) the entire net proceeds, to cover any POTENTIAL tax liability on the sale of Colorado property when the seller has moved or will move out of state. In Simple-eze - the State is worried that they will not get their cut if someone lives out of state or is moving out of state as they may not file a Colorado Tax Return. Soooo, the State withholds some money from the closing to motivate the seller to file a Colorado Tax Return and settle a tax, if any is owed.

When is OK to disclose seller/client confident information to your employer broker? A: When written permission is given by the client B: It is never ok to discuss confidential information with anybody C: With verbal permission of the client D: With verbal or written permission of the client

A: When written permission is given by the client Explanation: Permission to disclose confidential information to your employing broker must be written. This permission is included in the preprinted areas of the Exclusive Right to Sell (Listing Contract) and Exclusive Right to Buy (Buyer Agency Agreement)

On a new loan closing, the settlement worksheet entry for a Tax Reserve indicates that the new lender is: A: Withholding this amount from loan proceeds to start the escrow account for the next tax payment B: Collecting this tax amount from the seller C: Contributing this amount toward the buyer's taxes for this year D: There is no such thing as a Tax Reserve

A: Withholding this amount from loan proceeds to start the escrow account for the next tax payment Explanation: Lenders have the right to take sums of money from the buyer and place it into a Tax Reserve escrow account to ensure there is enough money availabe to make the next tax payment. Lenders are sensitive to this as unpaid taxes automatically become the most senior obligation should the buyer default on the loan.

On a new loan closing, the settlement worksheet entry for a tax reserve indicates that the new lender is A: Withholding this amount from loan proceeds to start the escrow account for the next tax payment B: Collecting this tax amount from the seller C: Contributing this amount toward the buyer's taxes for this year D: There is no such thing as a Tax Reserve

A: Withholding this amount from loan proceeds to start the escrow account for the next tax payment Explanation: Lenders have the right to take sums of money from the buyer and place it into a Tax Reserve escrow account to ensure there is enough money availabe to make the next tax payment. Lenders are sensitive to this as unpaid taxes automatically become the most senior obligation should the buyer default on the loan.

Does the Real Estate Commission provide office address and contact information for licensees to the public? A: Yes B: No

A: Yes

A primarily white neighborhood was starting to change over to more racially mixed demographic. An advertisement said "sell now before it's too late". Can the realtor be in trouble for this and if so, under what premise? A: Yes, this is blockbusting B: Yes, this is redlining C: No, as long as the properties she sells do not involve government loans D: No, as long as no explicit statements are made as to race or origin

A: Yes, this is blockbusting Explanation: Blockbusting: Blockbusting is the practice of inducing or attempting to induce a person to sell or rent a dwelling by representing that persons of a certain race, disability, etc., are or may be moving into a neighborhood. Courts have ruled that this covers not only explicit representations about race, but also statements by real estate agents such as "changing neighborhood," "falling property values," "bad schools," or "undesirable elements," if used to solicit listings and sales. In racially transitional neighborhoods, where residents tend to be aware of racial change even without its being mentioned, a racial representation may reasonably be inferred from unusually heavy solicitation of listings, even if no explicit statements are made relative to new residents of a particular race or national origin.

A major reason for buying and owning a condominium rather than a detached single-family home is that: A: a condominium tends to be more affordable B: a condominium requires no maintenance C: a condominium is easier to resell D: condominium ownership has more tax advantages

A: a condominium tends to be more affordable Explanation: Instructor's confession. I do not like this question as I think it is entirely subjective, BUT it appears on the National licensing exam so here it is. It is as true that condo's tends to be less expensive as it is that they require less maintenance, but the test wants the "more affordable" answer.

The most comprehensive type of ownership of land is: A: a fee simple estate B: a life estate C: a conditional fee estate D: a future estate

A: a fee simple estate Explanation: A fee simple (or fee simple absolute) is an estate in land, a form of freehold ownership. It is the most common way that real estate is owned in common law countries, and is ordinarily the most complete ownership interest that can be had in real property

A lawsuit for inverse condemnation may be brought by A: a homeowner B: the city C: the police D: the zoning board

A: a homeowner Explanation: Inverse condemnation is a lawsuit brought by a property owner seeking compensation for land taken for a public use by a government entity with eminent domain powers. Eminent domain is the taking of private land for public use with payment of compensation by a government entity. Inverse condemnation actions are usually brought when the government has limited use of private land to an extent that the value of that land is greatly reduced, or where the government has allowed the public to make use of private land. Inverse condemnation may be a direct, physical taking of or interference with real or personal property by a public entity. For example, inverse condemnation liability has been found due to flooding, escaping sewage, interference with land stability, impairment of access, or noise from overflying aircraft.

An encumbrance that affects the title, usually related to money, is known as: A: a lien B: an easement in gross C: an easement by necessity D: an easement by prescription

A: a lien Explanation: A lien is a charge against a property -- a financial encumbrance. The other easements listed here do not deal with finances, but are considered usage encumbrances and affect the way in which the land may be USED. Alternatively, they may be divided into those that affect title (ex: lien, legal or equitable charge) or those that affect the use or physical condition of the encumbered property (ex: restrictions, easements, encroachments).

The type of lien which takes priority over all other liens, and has the first claim against a property is called: A: a property tax lien B: a judgment lien C: a mechanic's lien D: a mortgage lien

A: a property tax lien Explanation: Tax liens for property taxes generally take priority over all other liens, whereas a tax lien for income taxes do not . The priority for income tax liens is as of the date they were recorded. A tax lien is a lien imposed by law upon a property to secure the payment of taxes. A tax lien may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes.

A Colorado broker may pay a part or all of his commission to any of the following except: A: a state licensed appraiser B: his own licensee C: another Colorado broker D: an out-of-state broker who is licensed in his own state

A: a state licensed appraiser Explanation: Brokers may pay their own agents or other principal Brokers in any state.

This type of lien is created by law. It is known as: A: a statutory lien B: a voluntary lien C: an equitable lien D: a specific lien

A: a statutory lien Explanation: An equitable lien comes from a court order. You could argue that courts are enforcing the laws. However, the reason for the judgement is to satisfy a civil matter and not directly a mandate by law. Statutory liens are mandates by law and as such do not require a court order to enforce. Here are some definitions that might help: equitable lien. a lien on property imposed by a court in order to achieve fairness, particularly when someone has possession of property which he/she holds for another. statutory lien: Involuntary lien created by the operation of law. Statutory liens (such as a tax lien) do not require the consent of any party or a court order to be enforceable. voluntary lien: A claim that one person has over the property of another as security for the payment of a debt. Liens are attached to the property and not to a person. A voluntary lien is contractual or consensual, meaning that the lien is created by an action taken by the debtor, such as a mortgage loan to buy real estate. specific lien: Charge that (unlike a general lien) does not cover all fixed and floating assets of a lienee but binds only a specific asset or property. Also called particular lien.

An action taken by a creditor in which the court simply retains custody of the property while a lawsuit is being decided is known as: A: a writ of attachment B: a writ of execution C: constructive eviction D: actual eviction

A: a writ of attachment Explanation: Here is a good definition of writ of attachment found on Wikipedia. BTW Wikipedia is a great resource for the national side of the test, not so much for the State side. Here ya go: "A writ of attachment is a court order to "attach" or seize an asset. It is issued by a court to a law enforcement officer or sheriff. The writ of attachment is issued in order to satisfy a judgment issued by the court. A prejudgment writ of attachment may be used to freeze assets of a defendant while a legal action is pending. Common grounds for obtaining a prejudgment writ of attachment are that a defendant has committed fraud or that a defendant is prepared to hide assets from a court." When a writ of attachement is issued to secure a proprerty prior to a judgement, the plaintiff obtaining the writ, must file a bond to protect the defendant against any loss caused by the attachment in the event the plaintiff loses the case.

An agency relationship may be established by: A: a written agreement B: an oral agreement C: approval of the employing broker D: written disclosure

A: a written agreement Explanation: Agency relationships must be in writing.

A buyer working with a broker has been unable to reach the broker for two days. Even though the broker gave word to his office that an emergency called him out of town, the buyer could construe this to be: A: abandonment B: irresponsible C: unforgivable D: unlawful

A: abandonment Explanation: Protect yourself and you clients, keep everyone informed and try and have someone take your call if you are needed out of town.

The three major evidences of title are: A: abstract and opinion, title insurance, Torrens certificate B: abstract and opinion, personal representatives, title insurance C: Torrens certificate, general warranty, title insurance D: general warranty, special warranty, abstract and opinion

A: abstract and opinion, title insurance, Torrens certificate Explanation: The three major evidences of title are an abstract and opinion, title insurance, and a Torrens certificate.

A condensed history of a title to a particular piece of real estate, including a summary of the original grant, and all subsequent conveyances and encumbrances affecting the property, is known as the: A: abstract of title B: evidence of title C: certificate of title

A: abstract of title Explanation: An abstract of title is the condensed history of title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate. The abstract of title furnishes the raw data for the preparation of a policy of title insurance for the parcel of land in question.

The information a broker must keep about a deposit into an escrow account does not include: A: address of affected parties B: address of affected property C: confirmation of electronic transfer D: amount of deposit

A: address of affected parties Explanation: The broker's deposit slip or wire transfer must individually identify the respective parties, properties, and amounts deposited, and the appropriate escrow records must be established.

A broker has a listing on a house that contains a provision that the house is to be sold in "as-is" condition. The broker learns of a major hidden defect in the property. When showing the property to a prospective purchaser, the broker should: A: advise the buyer of the defect B: point out that the house will be sold in "as-is" condition C: mention the defect to the buyer only if asked D: inform the buyer that the seller has told him of no defect

A: advise the buyer of the defect Explanation: Advise the buyer of the defect - this is a material fact.

A person who is authorized to represent another is the: A: agent B: client C: principal D: customer

A: agent Explanation: An agent is a person who represents another

The type of mortgage that shifts the risk or reward of changing interest rates from the lender to the borrower is called: A: an adjustable-rate mortgage B: straight loan C: fully amortized loan D: partially amortized loan

A: an adjustable-rate mortgage Explanation: An adjustable rate mortgage is one in which the risk or reward of changing interest rates is shifted from the lender to the borrower.

The broker's fiduciary obligation to his or her principal resembles that of: A: an attorney to his or her client B: a brother to his sister C: a mother to her son D: a store owner to his or her customer

A: an attorney to his or her client Explanation: The term fiduciary describes the faithful relationship owed by an attorney to a client or by a broker to a principal. A fiduciary relationship is created when a principal signs a listing or buyer's agency agreement with a Listing Agent or Buyers Agent. Note: a Transaction Broker as a neutral party is not a fiduciary relationship (the T Broker owes no loyalty, only Care, Obedience, Accounting and Disclosure of non-confidential items and material facts). In real estate transactions, only the Seller's or Buyer's agency relationships are fiduciary relationships. This relationship implies a position of trust or confidence, wherein one person is usually entrusted to hold or manage property or money for another. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who entrusts them.

A claim or liability attached to a property is called: A: an encumbrance B: an easement C: a buyer's claim

A: an encumbrance Explanation: Remember that an encumbrance is any claim against a property. Restrictions, liens, and buyer's claims (also known as a vendee's lien) are all FORMS of encumbrances

When the preliminary title report reveals an easement on the subject property, it indicates that the easement is: A: an encumbrance but not a lien B: a lien against the real estate but not an encumbrance C: both a lien and encumbrance against the parcel of real estate D: neither a lien nor an encumbrance

A: an encumbrance but not a lien Explanation: Liens are a financial interest in property. All liens are encumbrances, but all encumbrances are not liens. An easement is an encumbrance but not a lien.

If an owner takes property off the market for a definite period of time, for consideration, and grants the right to purchase the property within that period at a stated price, this is called: A: an option B: a contract of sales C: the right of first refusal D: none of the above

A: an option Explanation: An option is a contract to enter into a contract.

Plans have been announced for a multimillion-dollar shopping center to be built next door to a vacant lot you own. Property values in the area of the proposed site will tend to increase as a result of this announcement. This is an example of the principle of: A: anticipation B: highest and best use C: supply and demand D: substitution

A: anticipation Explanation: This would be an example of the principle of anticipation, which holds that value is created by the expectation of benefits to be derived in the future.

In Colorado, which of the following must be investigated by the real estate commission? A: any verified written complaint B: at least five percent of all brokers annually C: disputes between brokers regarding commission D: any licensee accused of a crime

A: any verified written complaint Explanation: The commission is required by law to investigate all written complaints that have been verified. They MAY investigate a licensee at any time, for any reason, or for no reason.

Commissions earned by a broker in a real estate sales transaction A: are determined by agreement of the broker and his or her principal B: may be shared with an unlicensed person, provided that such person aided the broker in bringing the buyer and seller together C: may be deducted from the earnest money deposit and claimed by the broker as soon as the buyer and seller execute the purchase and sales agreement D: are based on a schedule of commission rates set by the real estate commission

A: are determined by agreement of the broker and his or her principal Explanation: Commissions are determined by agreement of the broker and his or her principal.

Exclusive Right-to-Sell contracts list specific services the broker will offer. Those services: A: are not limited to those preprinted on the contract B: are limited to those specified C: include disclosing psychologically impacting information D: are to be added at a later date outside of the body of the contract

A: are not limited to those preprinted on the contract Explanation: Brokers may not disclose any psychologically impacting information; each listing contract must contain all services/requirements of each party to the contract. Other services may be added in the additional provisions section or by an amend & extend form.

The buyer agent of company P closed on a property on Tuesday. The buyer agent should bring the completed file and commission check to the broker: A: as soon as possible B: by Friday C: after dinner and a celebration cocktail D: before the property closes

A: as soon as possible Explanation: All contracts are with the company, not the agent. The company recieves payment from the client and then compensates the agent. An associate broker may only receive their commission from their broker.

The following are tasks that a property manager was told to perform. All of them may be carried out except: A: assessing the tax rates B: maintaining trust account records C: marketing the property D: collecting rent on time

A: assessing the tax rates Explanation: The county determines tax rates.

A Real Property Transfer Declaration (TD-1000) is used to: A: assist the county assessor to reach fair and uniform assessments for property tax purposes B: provide accurate sales prices and market data to the county clerk and recorder C: assist a taxpayer at establishing the value of personal property D: help a taxpayer prepare an income tax return

A: assist the county assessor to reach fair and uniform assessments for property tax purposes

The Real Estate Commission has the authority to audit or investigate a licensee and their files: A: at any time without advance notice B: at any time with advance notice C: only when a complaint has been filed

A: at any time without advance notice Explanation: § 12-61-113, C.R.S. Investigation - revocation - actions against licensee - repeal. (1) The commission, upon its own motion, may, and, upon the complaint in writing of any person, shall, investigate the activities of any licensee or any person who assumes to act in such capacity within the state...

When using a non approved form to buy and sell real estate who must prepare it A: attorney for parties B: attorney for broker C: broker for parties D: broker for seller

A: attorney for parties Explanation: Agents can only use approved forms. Buyers, Sellers and their attorneys can do whatever they want.

Since much of your real estate business is done when other people are not working, a real estate office should: A: be available to the public B: be open 24 hours a day C: be open at least three days a week D: be open only on weekends and evenings

A: be available to the public Explanation: A real estate office should be available to the public but does not need to be open 24 hours a day. C-2. Resident broker required to have office; exceptions. Every resident Colorado real estate broker shall maintain and supervise a brokerage practice available to the public, except those brokers registered in the Commission office as in the employ of another broker or those brokers registered as inactive. Editor Note: Please note that the above statute refers to "resident" brokers. Colorado brokers not resident in the State are not required to have a physical location in the State.

Earnest money abandoned from an unexecuted contract should: A: be transferred to the Colorado State Treasury Department after five years B: accrue interest for broker's benefit to offset advertising costs C: not accrue interest under any circumstances D: will never be missed

A: be transferred to the Colorado State Treasury Department after five years Explanation: Earnest money abandoned from an unexecuted contract should be transferred to the Colorado State Treasury Department after five years.

A broker writes checks from the trust account into his operating account. A: broker is commingling and could have his license revoked B: broker may be netting earned commission against earnest money deposits C: broker is taking a negative ledger short cut, which is okay, but not advised D: broker is commingling and will have his license revoked

A: broker is commingling and could have his license revoked Explanation: Commingling is mixing money from the trust account and the operating account; conversion is using some of the trust account money for your own use.

Items that should be addressed in the office policy manual include, but are not limited to: A: brokerage relationships offered B: marital status C: age dictates commission split D: hours you are required to work

A: brokerage relationships offered Explanation: Types of brokerage relationships offered by the broker will be in the office policy manual.

The fiduciary has specific responsibilities to the principal: A: care, obedience, accounting, loyalty, and disclosure B: concern, obedience, allocation, loyalty, dishonest C: fairness and honesty D: account for monies, use skill and care

A: care, obedience, accounting, loyalty, and disclosure Explanation: A fiduciary responsibility to the principal includes COALD. A fiduciary relationship is created when a principal signs a listing or buyer's agency agreement with a Listing Agent or Buyer's Agent. Note: a Transaction Broker as a neutral party is not a fiduciary relationship (the T Broker ownes no loyalty, only Care, Obedience, Accounting and Disclosure of non-confidential items and material facts). In real estate transactions, only the Seller's or Buyer's agency relationships are fiduciary relationships. This relationship implies a position of trust or confidence, wherein one person is usually entrusted to hold or manage property or money for another. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who places their trust in them.

The succession of conveyances whereby the present owner of record derives title is called the: A: chain of title B: certificate of title C: title insurance D: Torrens Certificate

A: chain of title Explanation: The chain of title is the record of ownership from the first patent (instrument used to convey ownership from the government to the first private owner) to its current owner.

A claim or interest revealed by a title search is called a: A: cloud on title B: lien C: judgment D: lis pendens

A: cloud on title Explanation: It's easy to remember a cloud on a title as something marring the clear title, like a cloud in the sky marring an otherwise clear sky.

An agency agreement requires all of the following except: A: consideration B: competency of the principal C: agreement of the agent D: agreement of the principal

A: consideration Explanation: A broker may be a gratuitous agent meaning the broker receives no compensation.

The process of changing a property's status from rental to condominium is known as: A: conversion B: anticipation C: competition D: contribution

A: conversion Explanation: Remember, conversion is "CONVERTING" a property's status from rental to condominium.

A developer would be required to register with the real estate commission for which of the following projects? A: conversion of an apartment complex into 25 residential condominiums B: condominium office park with 40 office warehouse units for sale C: mini-warehouse project with over 100 storage units D: subdivision of 100 acres into 10 sites for residential use

A: conversion of an apartment complex into 25 residential condominiums Explanation: In Colorado, the subdivision developer's registration law requires registration for any property "divided into twenty or more interests solely for residential use and offered for sale, lease, or transfer."

A term used to refer to any document that transfers title to real property is known as: A: conveyance B: conversion C: consideration D: counteroffer

A: conveyance Explanation: Conveyance describes any act of transferring. Don't confuse this with conversion, which is simply changing the status of a property; consideration, which is something of value given to induce a party into a contract; or counteroffer, which happens BEFORE the purchase agreement is completed

The grantor guarantee that he/she has the right to convey property is called: A: covenant of seisin B: covenant of further assurance C: covenant of quiet enjoyment D: covenant against encumbrances

A: covenant of seisin Explanation: General Warranty Deed A general warranty deed is one in which the grantor warrants or guarantees title against defects that existed before the grantor acquired title or that arose during the grantor's ownership. It does not warrant against encumbrances or defects arising from the grantee's own acts. The usual covenants or warranties contained in a general warranty deed are: 1. Covenant of seisin. Guarantees the grantor's ownership and that he or she has the right to convey it. The fact that the property is mortgaged or is subject to some restriction does not breach this covenant. 2. Covenant against encumbrances. Guarantees that there are no encumbrances or claims against the property except those specifically excluded in the deed. 3. Covenant of quiet enjoyment. Guarantees that the grantee will not be evicted or disturbed in possession of the property. Threats or claims by a third party do not breach this covenant. The grantee would have to actually be dispossessed before being entitled to seek recovery against the grantor under this covenant. 4. Covenant of further assurance. Guarantees that the grantor will procure and deliver any other instruments that are subsequently necessary to make the title good. 5. Covenant of warrant forever. Guarantees that the grantee shall have title to and possession of the property. Sometimes considered part of "quiet enjoyment."

The Real Estate Commission approved Colorado Power of Attorney form A: creates a limited agency agreement B: is required in foreclosure sales C: creates a universal agency agreement D: may be used in place of a buyer agency agreement

A: creates a limited agency agreement Explanation: The Colorado Real Estate Commission approved Power of Attorney form is designed to establish a limited agency agreement sufficient to designate someone to sign on behalf of another for a real estate transaction. It is not designed to establish broader legal authority to act outside this limited legal scope.

Recording Fee of Warranty Deed most typically would appear on the settlement statement as: A: debit buyer B: debit seller C: debit broker D: debit 1/2 seller and 1/2 buyer

A: debit buyer Explanation: Although everything is negotiable, the buyer is the primary beneficiary of recording the warranty deed since it will make the transfer into the buyer's name a matter of public record.

In a new loan closing, sometimes a lender may make some of the payouts, such as recording fees, survey and reserve taxes before the closing. When these amounts are taken out of the loan, the remaining balance is the amount sent to the closing table and is called the Net Loan Proceeds. The Net Loan Proceeds are entered on the settlement worksheet as a: A: debit to the broker, single entry B: credit to the broker, single entry C: debit to the buyer, credit to the broker D: credit to the buyer, debit to the broker

A: debit to the broker, single entry Explanation: Net Loan Proceeds: Debit broker single entry. Here is the play: most often seen with new loans (and always on the State Exam), Net Loan Proceeds is a situation where a lender is making a loan for x and part of that loan is covering expenses that the lender is owed. In short - the lender is lending money to the buyer to cover expenses that are going to be paid to the lender. The lender does not want to send the entire loan amount to the closing and wait for a check back to cover the money they are owed, they instead take their money out of the loan up front and send the remaining balance called Net Loan Proceeds to the closer. To show this on a settlement sheet, the closer enters a series of single entries; there is not always a debit/credit on every line. Instead there is one big credit all by itself on a line showing the total loan amount the buyer is getting and then two or more debits all by themselves on other lines adding up to the total loan amount. Example - a lender is making a loan for $100,000 and they are taking their 1% origination fee ($1,000) out of the loan. They send the net loan proceeds $99,000 (remember they are keeping their $1000) to the closing agent. First up let's handle the credit, enter the entire loan amount on the sheet (put a Credit Buyer $100,000 all by itself on the loan line.) Then you need to show the deposit of $99,000 into the escrow account (Single entry all by itself on line Net Loan Proceeds, Debit Broker $99,000.) Lastly, we need to account as a debit the $1,000 the lender held back (single entry all by itself on the Origination Fee line, Debit Buyer $1000.) Tah Dah! You have $100,000 of Debits and $100,000 of credits and everything is in balance.

How is the broker's fee usually shown on the settlement statement? A: debit to the seller, credit to the broker B: debit to the seller, credit to the buyer C: debit 1/2 to the seller, debit 1/2 to the buyer, credit to the broker D: debit to the buyer, credit to the broker

A: debit to the seller, credit to the broker

A statement in a mortgage or trust deed to the effect that when a debt has been paid the lien will be canceled is a(n): A: defeasance clause B: alienation clause C: liquidation provision D: habendum clause

A: defeasance clause Explanation: The defeasance clause states that, when paid in full, a mortgage or deed of trust lien will be canceled.

To be effective a lease must be: A: delivered B: recorded C: sealed D: defeated

A: delivered Explanation: A lease must be delivered to be effective.

Before showing buyers properties, a broker needs to: A: disclose the types of brokerage relationships B: have them sign an Exclusive Right-to-Buy Contract C: find out the buyer's race D: pull an O&E from the title company

A: disclose the types of brokerage relationships Explanation: Before showing buyers properties the broker needs to disclose the types of brokerage relationships.

When a buyer's agent approaches a for-sale-by-owner on behalf of the buyer client, what disclosure is required? A: disclosure of the broker's working relationship with the buyer B: no disclosure since the seller has elected to be unrepresented C: no disclosure as long as the broker seeks to list the property prior to submitting the buyer's offer D: disclosure of the buyer's financial capability to complete a purchase

A: disclosure of the broker's working relationship with the buyer Explanation: A broker's working relationship with one party must be disclosed to any other party to a transaction or potential transaction

When a buyer's agent approaches a for-sale-by-owner on behalf of the buyer client, what disclosure is required? A: disclosure of the broker's working relationship with the buyer B: no disclosure since the seller has elected to be unrepresented C: no disclosure as long as the broker seeks to list the property prior to submitting the buyer's offer D: disclosure of the buyer's financial capability to complete a purchase

A: disclosure of the broker's working relationship with the buyer Explanation: You need to disclose your brokerage relationship in writing before engaging in any activity which requires a brokerage license. Commission rule E-35 states that "brokerage activities" occur when a broker elicits or accepts confidential information from a party concerning specific real estate needs, motivations, or financial qualifications. Activities such as open house, preliminary conversations, or small talk concerning price range, location, property styles, or responding to general factual questions about properties that have been advertised for sale or lease do not qualify as triggering brokerage activities.

Which of the following would be permissible for an unlicensed personal assistant? A: distribute factual literature prepared by a licensed associate B: complete and present a comparative market analysis C: answer questions about the seller's motivations as long as the answers are factual D: drive potential buyers to a listing and discuss purchase options

A: distribute factual literature prepared by a licensed associate Explanation: An unlicensed assistant is allowed to distribute literature, they can chauffeur buyers to a property with the seller's permision as long as no licensed activity is performed and they may complete but not present market analysis.

If items listed in the Inclusions and Exclusions Section of of the Contract to Buy and Sell Real Estate are not a part of the property, the broker should: A: do nothing, if the listing item is not on the property as of the date of the contract it is not included nor is it necessary to cross it out B: cross out the items to show they are not included C: if not crossed out the seller could be obligated to install the item D: check the appropriate box

A: do nothing, if the listing item is not on the property as of the date of the contract it is not included nor is it necessary to cross it out Explanation: The Inclusions section lists a number of items which may or may not be a part of the property. Just being in this list does not mean the item is a part of the property. These items are included "if on the Property whether attached or not on the date of this Contract." This means a listed item is only included if it was a part of the property on the date of the purchase agreement. From the Contract to Buy and Sell Real Estate: Please note that the paragraph numbers in the below clause may be different in the current contract. Although the numbers change periodically, the language essentially remains the same. Inclusions. The Purchase Price includes the following items (Inclusions): 32 2.5.1. Fixtures. If attached to the Property on the date of this Contract: lighting, heating, plumbing, ventilating and air conditioning fixtures, TV antennas, inside telephone, network and coaxial (cable) wiring and connecting blocks/jacks, plants, mirrors, floor coverings, intercom systems, built-in kitchen appliances, sprinkler systems and controls, built-in vacuum systems (including accessories), garage door openers including Other Fixtures: remote controls. If any fixtures are attached to the Property after the date of this Contract, such additional fixtures are also included in the Purchase Price. 41 2.5.2. Personal Property. If on the Property whether attached or not on the date of this Contract: storm windows, storm doors, window and porch shades, awnings, blinds, screens, window coverings, curtain rods, drapery rods, fireplace inserts, fireplace screens, fireplace grates, heating stoves, storage sheds, and all keys. If checked, the following are included: Water Softeners Smoke/Fire Detectors Security Systems Satellite Systems (including satellite dishes).

If items listed in the Inclusions and Exclusions Section of the Contract to Buy and Sell Real Estate are not a part of the property, the broker should: A: do nothing, if the listing item is not on the property as of the date of the contract, it is not included nor necessary to cross it out B: cross out the items to show they are not included C: if not crossed out the seller could be obligated to install the item D: check the appropriate box

A: do nothing, if the listing item is not on the property as of the date of the contract, it is not included nor necessary to cross it out Explanation: The Inclusions section lists a number of items which may or may not be a part of the property. Just being in this list does not mean the item is a part of the property. These items are included "if on the Property whether attached or not on the date of this Contract." This means a listed item is only included if it was a part of the property on the date of the purchase agreement. From the Contract to Buy and Sell Real Estate: Please note that the paragraph numbers in the below clause may be different in the current contract. Although the numbers change periodically, the language essentially remains the same. Inclusions. The Purchase Price includes the following items (Inclusions): 32 2.5.1. Fixtures. If attached to the Property on the date of this Contract: lighting, heating, plumbing, ventilating and air conditioning fixtures, TV antennas, inside telephone, network and coaxial (cable) wiring and connecting blocks/jacks, plants, mirrors, floor coverings, intercom systems, built-in kitchen appliances, sprinkler systems and controls, built-in vacuum systems (including accessories), garage door openers including Other Fixtures: remote controls. If any fixtures are attached to the Property after the date of this Contract, such additional fixtures are also included in the Purchase Price. 41 2.5.2. Personal Property. If on the Property whether attached or not on the date of this Contract: storm windows, storm doors, window and porch shades, awnings, blinds, screens, window coverings, curtain rods, drapery rods, fireplace inserts, fireplace screens, fireplace grates, heating stoves, storage sheds, and all keys. If checked, the following are included: Water Softeners Smoke/Fire Detectors Security Systems Satellite Systems (including satellite dishes). Other Personal Property:

Payment of the broker's commission: A: does not establish agency B: establishes an agency relationship C: determines loyalty D: implies vicarious liability

A: does not establish agency Explanation: 19. A contract establishes an agency, not a commission.

A broker who enters into an agency relationship with a seller owes a fiduciary obligation to the seller. To the purchaser he owes: A: duty of fairness and good faith B: nothing, as the seller is the principal and the one paying the commission C: an obligation to provide only answers to questions asked by the purchaser D: an obligation to provide only answers to questions directly relevant to the sales price and the physical condition of the property

A: duty of fairness and good faith Explanation: To the purchaser, a broker owes a duty of fairness and good faith, an obligation to answer questions honestly and to disclose hidden defects known to the broker. Note: A fiduciary relationship is created when a principal signs a listing or buyer's agency agreement with a Listing Agent or Buyer's Agent. Note: a Transaction Broker as a neutral party is not a fiduciary relationship (the T broker owes no loyalty, only Care, Obedience, Accounting and Disclosure of non-confidential items and material facts). In real estate transactions, only the Seller's or Buyer's agency relationships are fiduciary relationships. This relationship implies a position of trust or confidence, wherein one person is usually entrusted to hold or manage property or money for another. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.

The easement that is not created for the benefit of the land owned by the owner of the easement, but that attaches personally to the easement owner is known as an: A: easement in gross B: easement by condemnation C: easement by necessity D: easement by prescription

A: easement in gross Explanation: An easement in gross is not created for the benefit of the land owned by the owner of the easement, but that attaches personally to the easement owner. An easement in gross benefits an individual or a legal entity, rather than a dominant estate. The easement can be for a personal use (for example, an easement to use a boat ramp) or a commercial use (for example, an easement to a railroad company to build and maintain a rail line across property). Historically, an easement in gross was neither assignable nor inheritable, but today commercial easements are freely transferable

In determining the value of a 20-unit apartment property, the appraiser has established the gross income from rents. After deducting the loss for vacancies and collection losses from this gross income, he would have established the: A: effective gross income B: gross income C: net income D: spendable income

A: effective gross income Explanation: Effective gross income is the term used to designate the income remaining after deducting the bad debt/vacancy factor from the potential gross income. From effective gross income, you subtract the building's operating expenses to arrive at net earnings.

In order to establish in court that you, an agent, are entitled to a commission, which of the following could you exclude? A: establishment of agency B: procurement of a ready, willing and able buyer C: existence of an Exclusive Right to Sell Listing contract D: either consummation of the sale or defeat of the sale by refusal or neglect of the seller

A: establishment of agency Explanation: Establishment of agency does not entitle you to a commission.

The direct market comparison approach is most important in determining the value of a(n): A: existing residence B: new residence C: apartment building D: store building

A: existing residence Explanation: Most residential property (with exception of new construction) is evaluated with the market data approach.

The broker's commission for certain disclosed buyers is protected by the "holdover clause" in the approved Right-to-Sell Listing Contract. Which of the following correctly describes the length of protection afforded by this clause? A: for a negotiated time unless the seller lists the property with another broker after expiration and the "Will Not" box is checked B: only during the term of the listing and any extensions C: for a negotiated time even if the seller lists the property with another broker after expiration and the "Will Not" box is checked D: for up to six months after the listing expires

A: for a negotiated time unless the seller lists the property with another broker after expiration and the "Will Not" box is checked Explanation: The Holdover Period says that a listing broker may be entitled to a commission after the expiration of a listing contract for the period of time specified in the clause if: 1) the broker negotiated with the buyer during the listing period and 2) the broker submitted the name of this buyer in writing to the seller. Although the protection is for a negotiated time after the listing expires; it can terminate early if the property is re-listed by another agent and the "Will Not" box is checked, meaning the old listing agent "will not" be owed a commission if another brokerage firm has earned one. If neither the "Will" or "Will Not" be owed a commission box is checked - the default is "Will Not." See "Holdover Period" in the "When Earned" clause of an Exclusive Right-to-Sell listing agreement.

The legal procedure in which property that is pledged as security is sold to satisfy the debt is known as: A: foreclosure B: actual eviction C: constructive eviction D: deficiency judgment

A: foreclosure Explanation: Foreclosure brings the rights of the parties and all junior lien holders to an end.

When a seller is in default in a transaction, pursuant to a Licensee Buyout Addendum, the buyer's remedy is to: A: have the earnest money returned B: sue the seller for specific performance C: sue the seller for specific performance if the specific performance box has been checked D: sue the seller for actual damages only

A: have the earnest money returned Explanation: The licensee is entitled to have their earnest money returned if there was any (usually there is none) and continue performing per the other terms of the contract. More info: What Is a Licensee Buyout Addendum? by Maxwell Wallace, Demand Media A Licensee Buyout Addendum is a form used in certain real estate and property transactions in the state of Colorado. The LBA is used only in the purchase and sale of properties between licensed real estate professionals and their own clients. History and Purpose The Licensee Buy Out Addendum to Contract to Buy and Sell Real Estate is intended to prevent improprieties and conflicts of interest in licensee/client transactions, as well as to make sellers contractually aware of the potential differences in selling to a licensed real estate professional as opposed to conventional buyers. Situations Dictating Use Licensed real estate agents are required to use an LBA when they enter into contracts to purchase properties concurrently with the initial listing of that property, when it immediately hits the market. Licensees also are required to use the LBA form when they are purchasing a property to facilitate its owner's purchase of another property, as well as when they continue to market that property to other potential buyers. Deleted Provisions Under the provisions of the Licensee Buyout Addendum, several conventional provisions of standard real estate listing contracts reached under Colorado state law are deleted. Deleted provisions include a property's appraisal condition, liquidated damages or pre-assessed damages to the property, provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms. Profit and Loss Stipulations Colorado's LBA also stands as contractual acknowledgment by a property seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the LBA protects the property seller by acknowledging that any fees related to closing, holding and reselling the property are all absorbed by the buyer and not the property seller as the original or prior landowner.

The initials P.M.I. in financing circles apply to: A: high loan-to-value conventional loans. B: construction loans C: FHA loans D: VA loans

A: high loan-to-value conventional loans. Explanation: PMI refers to Private Mortgage Insurance; it is used in connection with, 80% or greater, conventional loans.

From whom may a Colorado real estate associate broker lawfully collect compensation? A: his or her employing broker only B: any party to the transaction or the party's designated representative C: a licensed real estate broker only D: either a buyer or a seller

A: his or her employing broker only Explanation: All contracts are with the company, not the agent. The company recieves payment from the client and then compensates the agent. An associate broker may only receive their commission from their broker.

Licensee Buyout Addendum are to be used when a real estate broker is purchasing: A: his or her own listing B: a listing of any broker in the office C: a property listed by any broker D: all of the above

A: his or her own listing Explanation: The Licensee Buyout Addendum need only be used if the agent is purchasing their own listing.

In compliance with the ADA, all architectural barriers in existing facilities must be removed: A: if removal is "readily achievable" B: even if at great expense C: only if someone complains D: when you hire disabled persons

A: if removal is "readily achievable" Explanation: "Readily achievable" means, able to be carried out without much expense

The inspection provision of the Residential Contract to Buy and Sell allows the buyer to terminate the contract in which of the following situations? A: if the property is unsatisfactory in the buyer's subjective opinion B: if the seller refuses to correct certain defects in which case the buyer may do so immediately C: only if a licensed inspector determines that there are significant problems with the property D: only after submitting unsatisfactory conditions to the Seller may the buyer terminate

A: if the property is unsatisfactory in the buyer's subjective opinion Explanation: The Buyer solely determines if the condition of a property is satisfactory or not. Although the Buyers normally will list items they wish the Seller to address; they are not required to do so. The Buyer can simply terminate the contract should they so desire. Should the Buyer submit items to correct to the Seller, the Seller has until a resolution deadline to come to a negotiated agreement regarding the items with the Buyer. If a satisfactory agreement is not reached, the contract will terminate automatically on the deadline unless the Buyer withdraws the objections.

A material fact must be disclosed: A: in all cases B: only if it would benefit the client C: only if it will not hurt the sale D: never

A: in all cases Explanation: Material facts must be disclosed even if it kills a deal. A material fact in real estate is defined as a fact that, if known, might have caused a buyer or seller of real estate to make a different decision with regards to remaining in a contract or to the price paid or received. The question is - when is a fact a material fact that must be disclosed? The seller's broker must disclose to the buyer any adverse material facts known by the broker. This requirement does not include facts that should have been known by the broker, as is the law in some other states. In other words, while a broker in some states should, arguably, check on why there's a water stain on the hardwood floor (perhaps a sign of leakage?) a broker in Colorado might not need to investigate any further. "Adverse material facts" may include facts pertaining to the property's title, physical condition, and material defects, and any environmental hazards affecting the property. Psychological impacts to the property are not, however, considered material defects. (C.R.S. § 12-61-804.) Examples of psychological impacts might include crimes committed on the property or a rumor that the property is haunted. Neither Seller or Buyer's Agents may disclose psychological impacts which may stigmatize a property. In any State, the Buyer or Seller's agent's opinion as to whether a neighborhood is "good" or "bad" because of crime is not considered to be a material fact which should be disclosed. In fact, it is illegal for an agent to make such a disclosure as that would be considered "steering".

Complete this Clause: Inspection Objection: Unless otherwise provided in the Contract, Buyer acknowledges that Seller is conveying the Property to Buyer... A: in an "as is" condition, "where is" and "with all faults" B: in an "as is" condition subject to the agreed adjustments as per the Inspection Resolution C: in an "as is" condition D: in an "as is" and "with all faults" condition

A: in an "as is" condition, "where is" and "with all faults" Explanation: Inspection Objection. Unless otherwise provided in this Contract, Buyer acknowledges that Seller is conveying the Property to Buyer in an "as is" condition, "where is" and "with all faults." Colorado law requires that Seller disclose to Buyer any latent defects actually known by Seller. Disclosure of latent defects must be in writing. Buyer, acting in good faith, has the right to have inspections (by one or more third parties, personally or both) of the Property and Inclusions (Inspection), at Buyer's expense. If (1) the physical condition of the Property, including, but not limited to, the roof, walls, structural integrity of the Property, the electrical, plumbing, HVAC and other mechanical systems of the Property, (2) the physical condition of the Inclusions, (3) service to the Property (including utilities and communication services), systems and components of the Property (e.g. heating and plumbing), (4) any proposed or existing transportation project, road, street or highway, or (5) any other activity, odor or noise (whether on or off the Property) and its effect or expected effect on the Property or its occupants is unsatisfactory, in Buyer's sole subjective discretion, Buyer may, on or before Inspection Objection Deadline (§ 3):

Complete this Clause from the Inspection Objection: Unless otherwise provided in the Contract, Buyer acknowledges that Seller is conveying the Property to Buyer... A: in an "as is" condition, "where is" and "with all faults" B: in an "as is" condition subject to the agreed adjustments as per the Inspection Resolution C: in an "as is" condition D: in an "as is" and "with all faults" condition

A: in an "as is" condition, "where is" and "with all faults" Explanation: Inspection Objection. Unless otherwise provided in this Contract, Buyer acknowledges that Seller is conveying the Property to Buyer in an "as is" condition, "where is" and "with all faults." Colorado law requires that Seller disclose to Buyer any latent defects actually known by Seller. Disclosure of latent defects must be in writing. Buyer, acting in good faith, has the right to have inspections (by one or more third parties, personally or both) of the Property and Inclusions (Inspection), at Buyer's expense. If (1) the physical condition of the Property, including, but not limited to, the roof, walls, structural integrity of the Property, the electrical, plumbing, HVAC and other mechanical systems of the Property, (2) the physical condition of the Inclusions, (3) service to the Property (including utilities and communication services), systems and components of the Property (e.g. heating and plumbing), (4) any proposed or existing transportation project, road, street or highway, or (5) any other activity, odor or noise (whether on or off the Property) and its effect or expected effect on the Property or its occupants is unsatisfactory, in Buyer's sole subjective discretion, Buyer may, on or before Inspection Objection Deadline (§ 3):

Complete this Clause from the Inspection Objection: Unless otherwise provided in the Contract, Buyer acknowledges that Seller is conveying the Property to Buyer: A: in an "as is" condition, "where is" and "with all faults" B: in an "as is" condition subject to the agreed adjustments as per the Inspection Resolution C: in an "as is" condition D: in an "as is" and "with all faults" condition

A: in an "as is" condition, "where is" and "with all faults" Explanation: Inspection Objection: Unless otherwise provided in this Contract, Buyer acknowledges that Seller is conveying the Property to Buyer in an "as is" condition, "where is" and "with all faults." Colorado law requires that Seller disclose to Buyer any latent defects actually known by Seller. Disclosure of latent defects must be in writing. Buyer, acting in good faith, has the right to have inspections (by one or more third parties, personally or both) of the Property and Inclusions (Inspection), at Buyer's expense. If (1) the physical condition of the Property, including, but not limited to, the roof, walls, structural integrity of the Property, the electrical, plumbing, HVAC and other mechanical systems of the Property, (2) the physical condition of the Inclusions, (3) service to the Property (including utilities and communication services), systems and components of the Property (e.g. heating and plumbing), (4) any proposed or existing transportation project, road, street or highway, or (5) any other activity, odor or noise (whether on or off the Property) and its effect or expected effect on the Property or its occupants is unsatisfactory, in Buyer's sole subjective discretion, Buyer may, on or before Inspection Objection Deadline (§ 3):

A housing development located across the street from an oil refinery illustrates: A: incurable economic obsolescence B: curable economic obsolescence C: curable functional obsolescence D: incurable functional obsolescence

A: incurable economic obsolescence

A broker answered a call. A prospective buyer wants to see the home he drove by over the weekend. Feeling uncomfortable; for safety reasons the broker should: A: insist they meet at the office before going out and showing the property B: do not show them the house C: show the property and not worry about it - crimes of violence are uncommon in real estate D: call the police and have the police meet the broker at the property

A: insist they meet at the office before going out and showing the property Explanation: The good news is that violence towards real estate agents is, although not unknown, uncommon. Still prudence is always in order. If someone makes you uncomfortable, invite them to the office to discuss their exact needs and for security purposes get a copy of their license. Bad guys will not show or go along with this requirement - good guys understand the reasons. Other ideas: bringing someone along - agents have accompanied fellow agents on a number of occasions, a well-behaved but imposing dog works for some agents as does scheduling showings during daylight hours and always make certain someone knows where you are going. Many offices have a yellow file/green file/ red file system. Calling up the office and saying "bring me the yellow file" means "I am uncomfortable - stay on the line", "red file" means call the police now, "green file" means all is ok.

According to the provisions in the Contract to Buy and Sell Real Estate, if a broker has an interest-bearing trust account, the: A: interest may accrue to a nonprofit affordable housing fund B: interest earned belongs to the broker C: broker must transfer the interest to the seller D: interest earned may be applied to closing

A: interest may accrue to a nonprofit affordable housing fund Explanation: The contract clearly states who gets the interest. "Earnest Money. The Earnest Money set forth in this section, in the form of a ______________________, will be payable to and held by ________________________________________ (Earnest Money Holder), in its trust account, on behalf of both Seller and Buyer. The Earnest Money deposit must be tendered, by Buyer, with this Contract unless the parties mutually agree to an Alternative Earnest Money Deadline for its payment. The parties authorize delivery of the Earnest Money deposit to the company conducting the Closing (Closing Company), if any, at or before Closing. In the event Earnest Money Holder has agreed to have interest on Earnest Money deposits transferred to a fund established for the purpose of providing affordable housing to Colorado residents, Seller and Buyer acknowledge and agree that any interest accruing on the Earnest Money deposited with the Earnest Money Holder in this transaction will be transferred to such fund." Commission Position 4 allows for the interest to be given to either the buyer, seller, or housing fund, however the negotiated contract between buyer and seller supersedes the statute.

A lien placed on the property without the consent of the owner is known as a(n): A: involuntary lien B: deed of trust lien C: voluntary lien D: mortgage lien

A: involuntary lien Explanation: An involuntary lien is created by law without any action on the owner's part. A voluntary lien, just the opposite, is created by the owner -- this includes a mortgage lien or deed of trust lien. involuntary lien—a lien arising without the lienor's consent. voluntary lien—a lien created with the lienor's consent. An involuntary lien is a claim made against property to which the property owner did not consent or agree. Due to some action or inaction by the property owner, a third party places a lien on the property to secure money owed to the third party by the property owner. Common types of involuntary liens include local, state, and federal government tax liens, and contractor's or mechanic's liens for improvements made on the real estate. In each of these types of involuntary liens, the property owner did not consent to having the lien placed on the property; however, the third party was able to place a lien on the property due to the property owner's failure to pay tax bills, or pay for services or materials provided by a builder or contractor. An involuntary lien is the opposite of a voluntary lien, such as a mortgage lien; in the case of a voluntary lien, the property owner takes some affirmative action to have a lien placed on the property.

A due on sale clause: A: is an alienation provision requiring that the loan be paid off immediately if the property is sold B: allows that the payment responsibilities can be assumed by a third party C: is contained in all FHA and VA loans D: is synonymous with an acceleration clause

A: is an alienation provision requiring that the loan be paid off immediately if the property is sold Explanation: FHA and VA loans do not have a strict due on sale clause.

George is a buyer's agent filling out a Contract to Buy and Sell for young married buyers. When he asks how they wish to take title they are unsure. What should George do? A: leave the choice blank and advise the couple to seek legal counsel and let George know their choice later B: explain the differences of the various ways to take title and suggest the one Gene knows is correct C: leave the choice blank since the title company will know what to do D: advise them to take title as joint tenants since that is appropriate for a married couple

A: leave the choice blank and advise the couple to seek legal counsel and let George know their choice later Explanation: If George were to advise the couple how to make this decision, it would constitute the authorized practice of law. It is temporarily acceptable to leave the choice blank, but they should seek counsel and make a decision before closing.

George is a buyer's agent filling out a Contract to Buy and Sell for young married buyers. When he asks how they wish to take title they are unsure. What should George do? A: leave the choice blank and advise the couple to seek legal counsel and let George know their choice later B: explain the differences of the various ways to take title and suggest the one Gene knows is correct C: leave the choice blank since the title company will know what to do D: advise them to take title as joint tenants since that is appropriate for a married couple

A: leave the choice blank and advise the couple to seek legal counsel and let George know their choice later Explanation: If George were to advise the couple how to make this decision, it would constitute the authorized practice of law. It is temporarily acceptable to leave the choice blank, but they should seek counsel and make a decision before closing.

This document that defines the relationship between the real estate firm and the seller is the: A: listing agreement B: exclusive agency contract C: purchase contract D: disclosure statement

A: listing agreement Explanation: The listing agreement is what clearly defines the relationships and agreements between the broker and principal.

The closing instruction form must be used in conjunction with an approved: A: listing contract at the time a listing is signed B: property disclosure C: promissory note D: buyer-agency agreement

A: listing contract at the time a listing is signed Explanation: The commission's position is that this form is initiated with the buyer or seller at the time the listing is taken.

A broker who does not have any employed licensees must: A: maintain an office policy on brokerage relationships B: work out of an office, not his or her home C: keep records for 7 years D: offer all brokerage relationships

A: maintain an office policy on brokerage relationships Explanation: Every office must maintain an office policy that is available for review.

A broker is showing a property in which a heinous crime was committed. The broker is aware of the circumstances surrounding the crime as a result of media attention. As a transaction broker working with a buyer, he is obligated to: A: make no disclosure regarding psychologically impacted properties B: disclose every fact he knows about the property C: disclose the information only if the suspect has not been apprehended D: make a written request to the seller asking for permission to disclose

A: make no disclosure regarding psychologically impacted properties Explanation: In Colorado psychologically impacting events may not be disclosed and brokers are protected from any liability for non disclosure.

A purchaser of real estate is generally entitled to receive from a seller the kind of title the courts describe as: A: marketable B: clouded C: saleable D: quiet

A: marketable Explanation: Marketable title is such that there are no defects preventing transfer.

Pursuant to an Exclusive Right-to-Buy Contract, a broker: A: may always show the same property to another buyer B: may not show the same property to more than one buyer C: may show the same property to another buyer only if a buyer-agency relationship has been established D: may show the same property to another buyer only if a transaction broker relationship has been established

A: may always show the same property to another buyer Explanation: The Exclusive Right-to-Buy Contract contains a clause authorizing the broker to show properties to more than one buyer.

Listing information: A: may be added outside the body of a contract as an attachment B: can never be added outside the body of a contract C: may be obtained after the listing agreement has been signed by the buyer and the broker D: none of the above

A: may be added outside the body of a contract as an attachment Explanation: Listing information, i.e., MLS info, title info, etc., may be added outside of the body of the listing contract by an Amend & Extend With Broker or addendum, and is usually obtained after the contract has been signed.

The type of description that uses the boundaries and measurements of the land in question is known as what type of system? A: metes-and-bounds B: government survey C: lot-and-block system D: substitution

A: metes-and-bounds Explanation: Metes-and-bounds descriptions describe BOUNDARIES and measurements of the land.

How long must transaction records be maintained by an independent broker? A: minimum of four years B: until the transaction is closed C: Independent brokers who work alone are not required to retain records. D: Independent brokers submit records to the real estate commission for safekeeping.

A: minimum of four years Explanation: Independent brokers and employing brokers must retain transaction records from their brokerage activities for four years.

Money belonging to others best describes: A: money a broker would keep in a trust or escrow account B: future commissions to be earned C: buyer's source of funds for down payment C: the profits to come from a real estate transaction

A: money a broker would keep in a trust or escrow account Explanation: The definition of a trust or escrow account is that it is money belonging to others.

In order to avoid blind advertising, you need to: A: name the employing broker in the advertisement B: hang your license under an employing broker C: be supervised by another broker D: write all of your ads yourself

A: name the employing broker in the advertisement Explanation: Rule E-7 states that a broker in the employ of an employing broker must name the broker employer in a clear manner in the advertisement.

In a real estate transaction, a broker should advise the buyer of the: A: need for a title search B: legal effect of the evidence of title C: legal effect of the deed D: best method of taking title

A: need for a title search Explanation: All other answers would be constituted as giving legal advice.

Single party listings: A: no holdover provision B: no disclosure is necessary C: no contract to perform is necessary D: not applicable to the Statute of Frauds

A: no holdover provision Explanation: As per commission Position 13 on Single Party Listings, the termination date shall not be extended by the "Holdover Period" of this listing contract. More info CP-13 Commission Policy on Single-Party Listings Brokers often secure single-party listings because they have what they believe to be a good prospect for purchase. These listings are usually only for a few days, but occasionally the broker wishes to be protected for a longer period while the broker is negotiating with a particular prospective purchaser. A single-party listing, when placed on a Commission approved form for an Exclusive Right to Sell or Exclusive Agency, results in greater protection to the broker than the broker needs to have and the owner is placed in a position which is unfair. The owner may not realize that if the owner signs a listing contract with another broker, the owner may become liable for the payment of two commissions even though the owner has excepted a sale to the person mentioned in a single-party listing contract. In any and all contracting, the intent of the parties is paramount in its importance, in a listing contract, a broker is dealing with those less informed than the broker, and the broker has a duty to disclose the true meaning of the listing contract. The Commission does not wish to limit any owner of the freedom to contract. However, the broker should fully disclose to the owner the effect of the exclusive right to sell listing contract or the exclusive agency contract. Usually, when an owner signs an exclusive right to sell or exclusive agency agreement concerning a single party, the owner wishes to limit the rights of the broker under the listing contract. Therefore, in the space provided for additional provisions, one, two, or all of the following limitations should be inserted in this space: provided for additional provisions, one, two, or all of the following limitations should be inserted in this space: 1. The provisions of this listing contract shall apply only in the event a sale is made to ___________________________________. 2. The termination date shall not be extended by the "Holdover Period" of this listing contract. 3. In the event a sale is made by the owner or their broker to any other party than the above names, this listing contract is void. If an owner is misled to their disadvantage, the broker may be found guilty of endangering the public.

Under the Real Estate Commission rules, when a listing broker receives an earnest money deposit on a residential sales contract, he must deposit the earnest money in his trust account: A: no later than the third business day after he is notified of the acceptance of the contract B: no later than the first working day after receipt of the deposit C: no later than 48 hours after the receipt of the deposit D: when he is instructed to do so by the seller

A: no later than the third business day after he is notified of the acceptance of the contract Explanation: A real estate broker must account to the buyer and seller for all earnest money. It must be deposited in a trust account no later than three business days after acceptance of the contract, unless the buyer and seller instruct the broker in writing to do something different.

If a purchaser asks questions regarding a brokerage relationship that a broker does not offer, the broker is: A: obligated to provide a written definition of all types of relationships B: obligated to offer that type of relationship to this particular buyer C: obligated to explain why he has chosen not to offer that type of relationship D: none of the above

A: obligated to provide a written definition of all types of relationships Explanation: A broker is obligated to provide information regarding all types of relationships. A broker is not required to offer all types of relationships.

A broker must offer: A: only the relationships he or she chooses to offer B: all relationships approved by the Real Estate Commission C: transaction broker D: buyer's and seller's agency

A: only the relationships he or she chooses to offer Explanation: A broker must offer only the relationships he or she chooses to offer.

A Colorado broker with residence out of state accepts an earnest money deposit on a property located in Colorado. He needs to: A: open an escrow account in a Colorado bank B: have a Colorado office open to the public C: open an escrow account in his state of residence D: have an active license in his home state

A: open an escrow account in a Colorado bank Explanation: A non-resident broker is required to open a trust account in a recognized Colorado depository when taking money belonging to others that pertain to properties in Colorado.

A listing contract in which the broker's commission is contingent upon the broker's producing a buyer before the property is sold by the owner or another broker is a(n): A: open listing B: net listing C: option listing D: exclusive right-to-sell listing

A: open listing Explanation: Only an open listing can be given to more than one broker.

A listing contract in which the broker's commission is contingent upon the broker's producing a buyer, before the property is sold by the owner or another broker is a(n): A: open listing B: net listing C: option listing D: exclusive right-to-sell listing

A: open listing Explanation: Only an open listing can be given to more than one broker.

Earnest money checks received by a broker in connection with a real estate purchase contract must be: A: placed in brokers escrow account within 3 business days of acceptance of the contract. B: identified as a check in the purchase contract C: payable to the listing broker D: placed in the brokers operating account then transferred to the escrow account when the contract is accepted.

A: placed in brokers escrow account within 3 business days of acceptance of the contract.

Typically, the least important factor influencing the value of an owner-occupied home would be: A: potential rental income B: demand C: quality of construction D: functional plan of the home

A: potential rental income Explanation: Income would only be important in commercial property,ie for apartments.

If the buyer has no earnest money: A: prepare a promissory note to submit with the offer B: that is okay, if the seller doesn't mind C: they can write a postdated check, and the other broker can hold it D: they cannot write an offer

A: prepare a promissory note to submit with the offer Explanation: In lieu of earnest money the agent should have the buyer sign a promissory note to the listing company or closing agent. The earnest money shows good faith to the seller. The note should not be for more than 10 or 20 days. Just long enough for the buyer to come up with some funds.

The Interstate Land Sales Full Disclosure Act regulates the interstate sale of unimproved lots. It is designed to: A: prevent fraudulent marketing schemes when land is sold prior to being seen B: prevent the buyers from seeing the true value of the land C: increase the sales relationships between states D: protect HUD from irate buyers who should have known better

A: prevent fraudulent marketing schemes when land is sold prior to being seen Explanation: The act is administered by the Secretary of Housing and Urban Development, through the office of Interstate Land Sales registration. It is designed to prevent fraudulent marketing schemes, when land is being sold without being seen.

The purpose of the alienation clause in a mortgage is to: A: prevent the loan from being assumed B: prevent the loan from being sold C: allow for interest rate changes to be made D: allow negative amortization to accrue

A: prevent the loan from being assumed Explanation: A clause closely associated in meaning with Due-On-Sale Clause and Acceleration Clause. An alienation clause in a mortgage can give the lender the option to call the loan (declare the entire balance due) when the property owner transfers ownership, title or interest without the lender's consent. An Acceleration Clause is a contract provision that allows a lender to require a borrower to repay all or part of an outstanding loan if certain requirements are not met. An acceleration clause outlines the reasons that the lender can demand loan repayment.

The illegal activity that occurs when competing brokers get together to set commission rates is called: A: price-fixing B: group boycotts C: redlining D: blockbusting

A: price-fixing Explanation: Price-fixing is the situation of competing brokers getting together to set commission rates, and is a violation under the Sherman Anti-Trust Act, which is enforced by the Federal Trade Commission.

Taxes for the current year are usually: A: prorated and charged to the seller and credited to the buyer at closing B: a bill is sent to the seller when they are due, and they may forward it to the buyer to pay their share C: paid by the Title Company as part of the title insurance D: split 50/50 by buyer and seller since that is the easiest and most equitable way to do it

A: prorated and charged to the seller and credited to the buyer at closing Explanation: Since taxes are paid in arrears the seller pays are prorated for the period of time the seller has lived in the property, and is shown on the settlement statement as a debit to the seller and a credit to the buyer since the buyer will be paying the taxes at the end of the year.

Taxes for the current year are usually: A: prorated and charged to the seller and credited to the buyer at closing B: sent to the seller when they are due, and forwarded to the buyer to pay their share C: paid by the Title Company as part of the title insurance D: split 50/50 by buyer and seller since that is the easiest and most equitable way to do it

A: prorated and charged to the seller and credited to the buyer at closing Explanation: Since taxes are paid in arrears the taxes the seller pays are prorated for the period of time the seller lived in the property, and is shown on the settlement statement as a debit to the seller and a credit to the buyer since the buyer will be paying the taxes at the end of the year.

A broker is showing a house to a prospective buyer and points out the "rustic charm" of the sagging front porch and refers to a weed-stricken backyard as a "delightful garden." The broker is engaging in: A: puffing D: fraud C: negligent misrepresentation D: blockbusting

A: puffing Explanation: Exaggerated comments or opinions not made as representations of fact.

A package mortgage is one used to finance: A: real and personal property with one security instrument B: more than one property with one security instrument C: lease-back agreements D: none of the above

A: real and personal property with one security instrument Explanation: A method of financing in which the loan that finances the purchase of a home also finances the purchase of personal items such as a washer, dryer, refrigerator, air conditioner and other specified appliances.

Antitrust laws prohibit competing brokers from all of the following EXCEPT A: receiving compensation from both the buyer and the seller B: boycotting other brokers in the marketplace C: dividing the market to restrict competition D: agreeing to set sales commissions and management rates

A: receiving compensation from both the buyer and the seller Explanation: Antitrust laws prohibit agents from joining together to perform monopolistic practices. They have nothing to do with collecting a commission.

An appraiser in the appraisal of a single-family residential home would use: A: recent sales prices B: exchange prices C: offering prices D: listing prices

A: recent sales prices Explanation: Residential homes are most often valued using the market data approach, sometimes referred to as the sales comparison approach. This approach values real estate by comparing the subject property against recent sales of similar properties. They usually define a recent sale as one that occurred within the previous six months.

If a purchase agreement says to release earnest money after the inspection date, then the seller demands the money be release prior to the inspection date. What should the broker do? A: refuse to release the earnest money B: tell the buyer the situation C: release the earnest money D: pocket it

A: refuse to release the earnest money

If a purchase agreement says to release earnest money after the inspection date, but then the seller demands the money be released prior to the inspection date, what should the broker do? A: refuse to release the earnest money B: tell the buyer of the situation C: release the earnest money

A: refuse to release the earnest money Explanation: The broker must act according to the terms and conditions of the purchase contract. Absent the buyer's and seller's written approval to release the earnest money early, the broker has two options: to release nothing or to "Interplead." To interplead is to turn the earnest money over to the courts and let them decide.

Freddie Mac, Fannie Mae, and Ginnie Mae have in common the purpose of: A: replenishing funds of mortgage originators by purchasing their existing mortgage loans B: originating residential mortgage loans C: Freddie Mac and Fannie Mae replenish funds while Ginnie Mae originates loans D: they are all government agencies

A: replenishing funds of mortgage originators by purchasing their existing mortgage loans. Explanation: Freddie Mac, Fannie Mae and Ginnie Mae all purchase loans on the secondary market from lenders and package them into mortgage-backed securities sold in the bond markets. By providing a market for the sale of mortgage loans by lenders, they provide a source of funds to lenders to enable them to continue to make loans. None of these agencies make loans directly to the consumer. Ginnie Mae is a government agency. The status of FNMA and Freddie Mac has been a moving target during the past upheaval in the mortgage industry. Originally they were government agencies. The government spun them off as private stock issuing companies in the late 80's. The ticker for Fannie Mae is FNMA and for Freddie Mac it is FMCC. When the mortgage industry collapsed, the government bailed out both of the companies and in exchange received majority ownership of their stock. Same situation as happened with General Motors. The companies are still publically traded and the government is reducing their share of ownership

Under an Exclusive Right-To-Sell Contract with a Brokerage Addendum, the seller: A: reserves the right to sell the property themselves and pay no commission B: reserves the right to pay no commission C: reserves the right not to sell the property D: must pay a commission if the property sells

A: reserves the right to sell the property themselves and pay no commission Explanation: Under an Exclusive Right-To-Sell Contract with a Brokerage Addendum, if the seller sells the property himself, the listing broker earns no commission.

A three-day right of rescission applies to: A: second mortgages B: FHA loans C: VA loans D: conventional loans

A: second mortgages Explanation: Residential mortgages are exempt from rescission if the mortgage is created to finance the acquisition or initial construction of the consumer's principal dwelling.

The possession of land by one who claims to own at least an estate for life is known as: A: seisin B: statutory lien C: special use permit D: covenant against encumbrances

A: seisin Explanation: Seisin is also known as the covenant of seisin, in which the grantor warrants that he is the owner of a property and has the right to convey it.

If the purchase is not completed due to a default by the seller and the earnest money deposit is returned to the buyer, the seller's broker may seek compensation, if any, from: A: seller B: buyer C: seller and buyer D: no one--he is not entitled to compensation

A: seller Explanation: If any commission were to be paid, the seller would be responsible for payment.

A competitive market analysis (CMA) is MOST often used for: A: setting a listing price B: estate tax purposes C: property tax assessment D: divorce proceedings

A: setting a listing price Explanation: The competitive market analysis, also called a comparative market analysis or "CMA" is used to help evaluate how a home will fare against the competition, and is an examination of the prices at which similar properties in the same area recently sold. Real estate agents perform a comparative market analysis for their clients to help them determine a price to list when selling a home or a price to offer when buying a home. Since no two properties are identical, agents make adjustments for the differences between the sold properties and the one that is about to be purchased or listed to determine a fair offer or sale price. Essentially, a comparative market analysis is a less-sophisticated version of a formal, professional appraisal. From Investopedia

If a licensee's license has been canceled because her employing broker's license was canceled: A: she may have her license transferred without charge to another employing broker B: she should complete all unfinished transactions before transferring her license to another broker C: her license is not impacted since it was the broker whose license is cancelled D: she must pass the state exam and then join another employing broker

A: she may have her license transferred without charge to another employing broker Explanation: Canceled is not the same thing as terminated; when a licensee has had his license canceled because his brokers license has been canceled, no business may be transacted until the license is active again.

The law that requires real estate contracts to be in writing to be enforceable is the A: statute of frauds. B: statute of limitations. C: law of descent and distribution. D: parole evidence rule.

A: statute of frauds. Explanation: Under the Statute of Frauds, contracts for sale of real property must be in writing to be enforceable -- this is to prevent FRAUD from occurring

The type of plan for a loan calls for payments of interest only, with the principal to be paid in full at the end of the loan term is called a(n): A: straight loan B: adjustable rate mortgage C: fully amortized loan D: partially amortized loan

A: straight loan Explanation: A straight loan contains a STRAIGHT payment plan.

Assume that Mr. and Mrs. Davis did not sign the lease agreement, but upon taking possession of the apartment on August 1 were handed a signed copy by landlord Smith. On August 20, Mr. and Mrs. Davis move out claiming that since they had not signed the agreement, it was a mere tenancy at will. Smith could: A: sue Davis immediately for the unpaid portion of the lease B: lease the apartment and upon expiration of the lease, sue Davis for the difference between what he received and what Davis should have paid C: keep only the security deposit

A: sue Davis immediately for the unpaid portion of the lease Explanation: By taking possession, Mr. and Mrs. Davis impliedly accepted the agreement and would be liable for the unpaid portion. Only the lessor needs to sign the lease. More info on Leasehold Tenancies: Leasehold Tenancy also known as Nonfreehold Estates A nonfreehold estate is an interest in real property that is less than a freehold estate. Nonfreehold estates are not inheritable and are said to exist without seisin. Seisin denotes ownership: an individual who is "seised" of an estate is the owner of the estate. Also known as a leasehold estate, a nonfreehold estate is created through a lease or rental agreement that can be either written or oral. The holder of a nonfreehold estate (the tenant or lessee) holds no ownership interest in the real property, and only has the right to use the property as established in the terms of the lease or rental agreement. Ownership remains with the landlord (lessor). Types of Nonfreehold Estates Because nonfreehold estates involve tenants, they are often referred to as "tenancies." There are four types of tenancies: Tenancy for Years This is, also called an estate for years or tenancy for a definite term, is an estate that is created by a lease. A lease is a contractual agreement where a tenant takes a leasehold interest in a real property for a specified duration. The defining characteristic of a tenancy for years is that the term must have a definite beginning and end; that is, a beginning date and either a specific time period (such as one year or one month) and an end date must be declared. As long as a lease is for a definite term, it is identified as a tenancy for years. These leases terminate automatically at the specified end date without the need for notice by either party. Tenancy from Period to Period A tenancy from period to period is an estate that exists when the tenancy is for a definite initial time, but is automatically renewable unless terminated by the lessor or lessee with prior notice that the tenancy is to be ended. These estates, which are also called periodic tenancies, are of indefinite duration since they can be renewed indefinitely. A tenancy from period to period may be from year to year, month to month, week to week or even day to day, and renews for a like period of time. For example, a month to month periodic tenancy is renewable in one-month periods until it is terminated at the end of a month through proper notice by either party. Tenancy at Will A tenancy at will, or an estate at will, exists at the pleasure of both the lessor and the lessee. This type of tenancy can be terminated at any time "at the will" of either the owner or the tenant. A tenancy at will lease agreement might contain language that expresses that the lease may be terminated instantly when notice is given. In practice, a tenant is generally entitled to a reasonable amount of time in which to vacate the property. Landlords may prefer a tenancy at will when a property is for sale and any tenants would have to vacate quickly. Tenants may favor a tenancy at will if they plan on renting only for a short period of time; for example, prior to moving or while waiting to move into a new home. Tenancy at Sufferance A tenancy at sufferance is the lowest form of estate known to law. Also called an estate at sufferance, it exists indirectly as the result of circumstance, and is never deliberately created. This type of tenancy arises when a person goes into possession of land in a lawful manner, but remains on the property without any right to do so, and without the owner's consent. The only difference between a tenant at sufferance and a trespasser is that the tenant at sufferance had at one time a right to be on the property, but has stayed beyond the terms of the previous agreement. For example, a tenant who remains after a one-year lease has terminated, without consent or recognition from the owner, becomes a tenant at sufferance. The tenant can be evicted at any time without notice.

Assume that Mr.and Mrs. Davis did not sign the lease agreement, but upon taking possession of the apartment on August 1 were handed a signed copy by landlord Smith. On August 20, Mr. and Mrs. Davis move out claiming that since they had not signed the agreement, it was a mere tenancy at will. Smith could: A: sue Davis immediately for the unpaid portion of the lease B: lease the apartment and upon expiration of the lease, sue Davis for the difference between what he received and what Davis should have paid C: keep only the security deposit

A: sue Davis immediately for the unpaid portion of the lease Explanation: By taking possession, Mr. and Mrs. Davis impliedly accepted the agreement and would be liable for the unpaid portion. Only the lessor needs to sign the lease. More info on Leasehold Tenancies: Leasehold Tenancy also known as Nonfreehold Estates A nonfreehold estate is an interest in real property that is less than a freehold estate. Nonfreehold estates are not inheritable and are said to exist without seisin. Seisin denotes ownership: an individual who is "seised" of an estate is the owner of the estate. Also known as a leasehold estate, a nonfreehold estate is created through a lease or rental agreement that can be either written or oral. The holder of a nonfreehold estate (the tenant or lessee) holds no ownership interest in the real property, and only has the right to use the property as established in the terms of the lease or rental agreement. Ownership remains with the landlord (lessor). (To learn more, see Becoming A Landlord: More Trouble Than It's Worth?) Types of Nonfreehold Estates Because nonfreehold estates involve tenants, they are often referred to as "tenancies." There are four types of tenancies: Tenancy for Years This is, also called an estate for years or tenancy for a definite term, is an estate that is created by a lease. A lease is a contractual agreement where a tenant takes a leasehold interest in a real property for a specified duration. The defining characteristic of a tenancy for years is that the term must have a definite beginning and end; that is, a beginning date and either a specific time period (such as one year or one month) and an end date must be declared. As long as a lease is for a definite term, it is identified as a tenancy for years. These leases terminate automatically at the specified end date without the need for notice by either party. Tenancy from Period to Period A tenancy from period to period is an estate that exists when the tenancy is for a definite initial time, but is automatically renewable unless terminated by the lessor or lessee with prior notice that the tenancy is to be ended. These estates, which are also called periodic tenancies, are of indefinite duration since they can be renewed indefinitely. A tenancy from period to period may be from year to year, month to month, week to week or even day to day, and renews for a like period of time. For example, a month to month periodic tenancy is renewable in one-month periods until it is terminated at the end of a month through proper notice by either party. (See also, 11 Mistakes Inexperienced Landlords Make.) Tenancy at Will A tenancy at will, or an estate at will, exists at the pleasure of both the lessor and the lessee. This type of tenancy can be terminated at any time "at the will" of either the owner or the tenant. A tenancy at will lease agreement might contain language that expresses that the lease may be terminated instantly when notice is given. In practice, a tenant is generally entitled to a reasonable amount of time in which to vacate the property. Landlords may prefer a tenancy at will when a property is for sale and any tenants would have to vacate quickly. Tenants may favor a tenancy at will if they plan on renting only for a short period of time; for example, prior to moving or while waiting to move into a new home. Tenancy at Sufferance A tenancy at sufferance is the lowest form of estate known to law. Also called an estate at sufferance, it exists indirectly as the result of circumstance, and is never deliberately created. This type of tenancy arises when a person goes into possession of land in a lawful manner, but remains on the property without any right to do so, and without the owner's consent. The only difference between a tenant at sufferance and a trespasser is that the tenant at sufferance had at one time a right to be on the property, but has stayed beyond the terms of the previous agreement. For example, a tenant who remains after a one-year lease has terminated, without consent or recognition from the owner, becomes a tenant at sufferance. The tenant can be evicted at any time without notice.

A breach of contract is a refusal or failure to comply with the terms of the agreement. In Colorado if the seller breaches the contract, the buyer may: A: sue the seller for specific performance B: rescind and split the earnest money with the broker C: sue the seller for liquidated damages D: all of the above

A: sue the seller for specific performance Explanation: The buyer may always sue the seller for specific performance or damages, or both, regardless of the type of contract used. The buyer is entitled to terminate the contract and have his earnest money returned if he chooses not to sue.

The buyer wants to make the purchase offer contingent on a complex mortgage arrangement. The buyer's agent who is drawing up the contract should: A: suggest the buyer ask a lawyer to furnish the wording B: include the provision for the mortgage as the buyer request C: consult the supervising broker for advice D: refer the matter to the seller's agent

A: suggest the buyer ask a lawyer to furnish the wording Explanation: It is important for a licensed agent to know when something has exceeded his/her expertise or are involved in an activity not permitted through a real estate license.

The buyer wants to make the purchase offer contingent on a complex mortgage arrangement. The buyer's agent who is drawing up the contract should: A: suggest the buyer ask a lawyer to furnish the wording B: include the provision for the mortgage as the buyer request C: consult the supervising broker for advice D: refer the matter to the seller's agent

A: suggest the buyer ask a lawyer to furnish the wording Explanation: It is important for a licensed agent to know when something has exceeded his/her expertise or are involved in an activity not permitted through a real estate license.

The seller was dissatisfied with her broker and contacted another broker. She found there were five days left on the listing. The second broker may: A: take the listing now, to become effective upon the expiration of the current listing and verification of the expiration B: take an Exclusive Right-to-Sell listing without any possible consequences to the seller C: immediately take an exclusive agency listing and change it to an Exclusive Right-to-Sell listing when the old listing expires D: Take an oral listing for five days until the old listing expires, then get a written listing

A: take the listing now, to become effective upon the expiration of the current listing and verification of the expiration Explanation: To take a listing that started prior to the expiration of the old one would be placing the seller in a position that they might have to pay two commissions.

In order to establish net operating income approach to valuation, which of the following would be deducted from effective gross income? A: taxes B: mortgage interest C: building depreciation D: capital improvements

A: taxes

Tenant may remove trade fixtures before the lease expires provided: A: tenant owns the fixture and can remove without substantial damage B: the tenant cannot remove trade fixtures C: trade fixtures are removed 30 days after expiration of lease D: fixtures are removed three days after expiration of license

A: tenant owns the fixture and can remove without substantial damage Explanation: Trade fixtures may be removed by tenant before the lease expires provided that the tenant owns the fixture and can remove it without substantial damage. Installation often requires approval in the lease.

Which of the following is true when an employing broker changes the primary business address? A: the broker must notify the commission in a manner acceptable to the commission or the license will become inactive B: each employed licensee must notify the commission of the change C: the change may be noted at the next license renewal cycle D: all licenses of employees must be sent to the commission for reissue

A: the broker must notify the commission in a manner acceptable to the commission or the license will become inactive Explanation: The employing broker must notify the commission of the address change in writing or all licenses will be inactive until the change is made. One notification will suffice for the broker and all associated licensees. Any licensee who does not notify the Commission of an address change will have their license inactivated. When the licensee is also the mama or poppa bear of the office (the employing broker) the penalty goes up. Since an employing broker with an inactive license cannot have licensees reporting to him/her AND a licensee who is not independent cannot have an active licensee without reporting to an employing broker - the effect is catastrophic. Everybody's license in the office is inactive. Here are the applicable statues: From chapter in real estate manual on License Law § 12-61-109, C.R.S. Change of license status - inactive - cancellation. (1) Immediate notice shall be given in a manner acceptable to the commission by each licensee of any change of business location or employment. A change of business address or employment without notification to the commission shall automatically inactivate the licensee's license. § 12-61-110, C.R.S (5) The suspension, expiration, or revocation of a real estate broker's license shall automatically inactivate every real estate broker's license where the holder of such license is shown in the commission records to be in the employ of the broker whose license has expired or has been suspended or revoked pending notification to the commission by the employed licensee of a change of employment.

If an employing broker leaves a real estate brokerage, what happens to the transaction records? A: the brokerage retains the records as the company is responsible for maintenance of records B: the departing broker is personally responsible for delivering all such records to to his/her new brokerage C: all funds in escrow must be returned to the rightful parties before being re-deposited with the new brokerage D: the real estate brokerage can dispose of all records acquired while the former employing broker worked for the company

A: the brokerage retains the records as the company is responsible for maintenance of records Explanation: Employing brokers are often salaried employees, they are not always the owner of a brokerage. Just like any company, if an employee leaves a brokerage s/he does not get to take records. The brokerage has legal repsonsibility for all transaction records and must keep them for at least 4 years. The only time an employing broker would be responsible for record retention would be if the company is shutting down.

The purchase contract called for a homeowner's warranty. There are no charges reflecting the homeowner's warranty on the settlement statement, and buyer and selling agent have not said anything about it. A: the brokers involved in the transaction are responsible to verify that it is being provided at the time of closing B: the listing broker should not mention it, as it will save the seller money C: it is the title company's responsibility D: it is the lender's responsibility

A: the brokers involved in the transaction are responsible to verify that it is being provided at the time of closing Explanation: The broker's are to verify the terms of the contract with the closing documents.

According to the rules and regulations of the Colorado Real Estate Commission, a broker is required to recommend that: A: the buyer have title reviewed by legal counsel B: the buyer have an appraisal by a licensed appraiser C: the buyer have an inspection by a certified house inspector D: all of the above

A: the buyer have title reviewed by legal counsel Explanation: All are great ideas and good ideas, but of those listed, only the recommendation of title examination by legal counsel is required by Real Estate Commission rules. This occurs at the end of the Title Advisory section of the Contract to Buy and Sell Real Estate wherein the contract advises the use of Legal Counsel to review title. The others appear in the purchase contract, but do not get an actual recommendation. See Below: "Title Advisory. The Title Documents affect the title, ownership and use of the Property and should be reviewed carefully. Additionally, other matters not reflected in the Title Documents may affect the title, ownership and use of the Property, including, without limitation, boundary lines and encroachments, area, zoning, unrecorded easements and claims of easements, leases and other unrecorded agreements, and various laws and governmental regulations concerning land use, development and environmental matters. The surface estate may be owned separately from the underlying mineral estate, and transfer of the surface estate does not necessarily include transfer of the mineral rights or water rights. Third parties may hold interests in oil, gas, other minerals, geothermal energy or water on or under the Property, which interests may give them rights to enter and use the Property. Such matters may be excluded from or not covered by the title insurance policy. Buyer is advised to timely consult legal counsel with respect to all such matters as there are strict time limits provided in this Contract"

If the purchase price exceeds the property's appraisal: A: the buyer shall have the sole option and election to terminate the contract B: the buyer can receive damages C: the buyer can sue for specific performance D: the seller can terminate the contract

A: the buyer shall have the sole option and election to terminate the contract Explanation: If the appraised valuation exceeds the purchase price, there is no provision allowing the seller to increase the price.

"MEC" in the Contract to Buy/Sell Real Estate means: A: the date upon which both parties have signed the contract B: the date mediation commences C: the date the deed was entered into the public record D: Mutual Execution Condition deadline

A: the date upon which both parties have signed the contract Explanation: Applicability of Terms. Any box checked in this Contract means the corresponding provision applies. Any box, blank or line in this Contract left blank or completed with the abbreviation "N/A", or the word "Deleted" means such provision, including any deadline, is not applicable and the corresponding provision of this Contract to which reference is made is deleted. The abbreviation "MEC" (mutual execution of this Contract) means the date upon which both parties have signed this Contract.

A mortgage clause which states that, should the borrower sell the property, the entire balance of her mortgage would be due immediately, is known as: A: the due-on-sale clause B: the acceleration clause C: the satisfaction clause D: estoppel certificate

A: the due-on-sale clause Explanation: The due-on-sale clause is also known as an alienation clause or resale clause, and says that the balance must be paid in full if the property is sold.

A standard title insurance policy offers protection to: A: the grantee B: the grantor C: the lender D: heirs of the grantor

A: the grantee Explanation: The correct answer is "Grantee," better know as the "Buyer." The Seller purchases the insurance to protect the beneficiary, the Buyer, from lawsuits against the title. The Buyer is known as the "Grantee" because the Seller as the "Grantor" transfers ownership by granting the property using a deed to the "Grantee" who is the Buyer.

If a licensee fails to complete the continuing education requirements by the renewal date: A: the license is placed on inactive status B: the license is canceled C: the license is renewed for one 30-day grace period D: the Commission will review each case individually

A: the license is placed on inactive status. Explanation: A real estate license will not be renewed if continuing education requirements are not met; the license would be placed on inactive status.

A licensee may accept compensation from: A: the licensee's employing broker only B: the buyer or the seller C: any licensed real estate broker D: any service provider to the transaction

A: the licensee's employing broker only

To comply with the dates in the contract to purchase: A: the listing agent should order the title commitment as soon as all the parties accept the contract B: the title commitment should not be ordered until the date in the contract C: the title commitment can be ordered any time, so long as the purchaser receives it before closing D: the title commitment should be made after the buyer's loan commitment date.

A: the listing agent should order the title commitment as soon as all the parties accept the contract Explanation: Dates are very important. Title commitments must be ordered in a timely fashion, in order to meet the required contract dates.

Closing instructions are to be generated by: A: the listing broker B: the selling broker C: the title company D: the lender

A: the listing broker Explanation: Closing instructions are to be generated by the listing broker when the property is listed, so that they are ready for the buyer's signature as soon as a purchase contract is offered. Although not an absolute rule, the Real Estate Commission prefers the closing instructions are signed by both parties at the same time a purchase contract is signed by both parties. In this way, the closing instructions are signed prior to earnest money being turned over to the closing company. Note: closing instructions appoint the closing agent (title company) and give them authority to do their job.

The Licensee Buy-Out Addendum to a Contract To Buy and Sell Real Estate becomes a binding contract with the listing company when: A: the listing company supervising broker signs B: the seller & the licensee sign C: the seller signs D: the buyer, and the broker sign

A: the listing company supervising broker signs Explanation: It is PERSONALLY binding on the seller and the agent (buyer) when they sign the contract. Although there is a place at the bottom for the supervising broker's signature, that signature is not mandatory. If the supervising broker does not sign, this agreement is NOT BINDING on the listing company. In the addendum it says "NOTICE TO SELLER: THIS CONTRACT IS BINDING ONLY UPON THE BUYER (LICENSEE) WHO PERSONALLY SIGNS ABOVE, UNLESS THE SUPERVISING BROKER OF THE BROKERAGE FIRM WORKING WITH SELLER SIGNS HERE:" More info: Why is this contract different from all the others which are binding on the company? Understand this addendum addresses a specific legal situation that has been rife with abuse, but is one that the Real Estate Commission has limited jurisdiction over, due to a little document called the United States Constitution. Typically the scenario is some variation of an agent promising to buy a property they have listed, from a not-too-sophisticated seller. The seller accepts a low ball price from the agent and when the closing is done, the agent immediately lists the property for a much higher price thereby pocketing a pretty penny. This is often referred to as "equity skimming". Problem is "equity skimming" is not illegal between a willing seller and buyer. If a seller wants to sell her Aspen mansion for a glass of Mom's lemonade to some guy who greeted her at a Walmart - she can do it. That is the Constitutional aspect of this scenario. Fact is, neither the Real Estate Commission or a Listing Brokerage can tell a willing buyer or seller what an acceptable deal is or is not. Having said that - since one of the parties (the buyer) is a licensee the Commission can make it harder and force the licensee to make certain the seller is fully informed. That is the Licensee Buyout Addendum. First up, they established under what circumstances must a licensee use the addendum: when a licensee enters into a contract to purchase a property, if one of the following fits, the agent must use the addendum: (1) concurrent with the listing of such property; (2) as an inducement or to facilitate the property owner's purchase of another property; or (3) continues to market that property on behalf of the owner under an existing listing contract . . . Notice that the addendum does not have to be used every time an agent buys a client's property. Only if one of the above exists. Agents who are buying fix and flips, rentals, or for a personal residence are off the hook. If it does apply, the addendum deletes certain provisions in the real estate listing contract including: property's appraisal condition (i.e. buyer cannot get out of deal if it does not appraise), liquidated damages (i.e. buyer gets cold feet and wants to back out the seller can sue), provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms (ouch! - no sales commission for the agent. Now do you want the property?). Pretty strong stuff. There are also disclosures to the seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the addendum protects the seller by acknowledging that fees related to closing, holding and reselling the property are all the responsibility of the licensee/buyer and not the seller. Toss in the earlier mention that the contract is not binding on the listing brokerage company unless the supervising broker signs, and the seller really has been fully informed of the potential consequences of this type of transaction.

A buyer made an offer to purchase a property. The owner responded with a counteroffer. While the buyer was reviewing the counteroffer, the owner received a better one. The owner can accept the second offer if: A: the owner withdraws the counteroffer before it is accepted B: the owner gives the first buyer that another was received and an opportunity to revise the bid C: the first buyer is informed, in writing, of the owner's intent to accept another offer D: it satisfies or exceeds all terms included in the counteroffer

A: the owner withdraws the counteroffer before it is accepted

The Certificate of Taxes Due is used to calculate: A: the proration of taxes for the final tax agreement B: the amount of taxes due pursuant to the Real Property Transfer Declaration C: the amount of the transfer tax to be collected at closing D: whether or not the sale will be subject to Colorado income tax withholding

A: the proration of taxes for the final tax agreement Explanation: The tax certificate is a breakdown of the current property tax liability for the property.

With an FHA loan and a VA loan, if the appraisal is lower than the contract price: A: the purchaser has the right to back out of the contract without repercussion B: the purchaser has the right to proceed with the purchase and obtain a loan for more than the amount of the appraisal C: the purchaser must still buy the property if the seller will loan the difference between the appraised value and the purchase price D: the purchaser is immediately eliminated from purchasing the property

A: the purchaser has the right to back out of the contract without repercussion Explanation: While the purchaser can still proceed, the loan amount can never be more than the appraisal. This is particularly important with 100% VA financing.

In closing a real estate transaction, the costs of standard title insurance will usually fall to: A: the seller B: the buyer C: the broker D: the seller and the buyer equally

A: the seller Explanation: The standard title insurance policy is paid for by the seller and names the buyer as a beneficiary. The mortgagee's title policy is paid for by the buyer and names the lender as a beneficiary.

If the sale of a property is secured by a land contract: A: the vendor has legal title B: the vendee has legal title C: the trustee has legal title D: the beneficiary has legal title

A: the vendor has legal title Explanation: The vendor (seller) retains title until a portion or all of the debt is satisfied. The vendee (buyer) retains equitable title because as payments build, the vendee is gradually acquiring title.

Ms. Nation, an eligible veteran, made an offer of $95,000 to purchase a condo she will finance with a VA-guaranteed loan. Four weeks after the offer was accepted, a certificate of reasonable value (CRV) for $92,000 was issued for the property. In this case: A: the veteran may withdraw from the transaction without penalty or negotiate with the seller to reduce the price to $92,000 B: the seller can finance a second mortgage for the remaining balance C: the veteran can purchase the property, provided she can get an additional loan for a $3,000 down payment D: the veteran can wrap the $3,000 into the financed loan costs

A: the veteran may withdraw from the transaction without penalty or negotiate with the seller to reduce the price to $92,000 Explanation: The seller would need to come down on the purchase price, the buyer can put the $3,000 down, or the veteran may withdraw from the transaction. Definition of Certificate of Reasonable Value (CRV) A document issued by the Department of Veterans Affairs as a prerequisite for a VA loan; it is based on an approved appraisal. It establishes the maximum value of the property for VA purposes and as a result the maximum size of the VA loan.

As a licensee you desire to sell your home yourself: A: this will be addressed in the office policy manual B: you may do so as long as you do not disclose you are a licensee C: you reserve the right to pay yourself a commission because you are licensed D: you may not advertise this property in the MLS

A: this will be addressed in the office policy manual Explanation: It is recommended that the office policy manual address the purchase and sale of a licensee's property.

The purpose of Commission Rule F is: A: to help brokers conform to the Conway-Bogue Realty vs. the Colorado Bar Association decision B: to conform to UCC regulations C: to conform to RESPA D: to standardize forms for attorneys who perform closings

A: to help brokers conform to the Conway-Bogue Realty vs. the Colorado Bar Association decision Explanation: The Conway-Bogue court decision ruled that real estate agents are practicing law without a license but are permitted to do so as long as agents use commission forms and comply with commission Rule F. Through the adoption and promulgation of Commission Rule F, it became compulsory for all real estate brokers licensed by the State of Colorado to use Commission approved forms in most of their contracting. 12-61-803(4) C.R.S. grants the Colorado Real Estate Commission statutory authority to promulgate standard forms for use by licensees. One of the major purposes of the rule is to help to insure broker compliance with the Colorado Supreme Court Conway-Bogue decision. A second purpose is to help promote uniformity in contracting to the end that the public is better protected. The privileges granted should not be abused by the real estate broker.

Money belonging to others is kept separate from other accounts: A: to prevent commingling with your own funds B: to make it easy for the IRS to audit your accounts C: to make it easier to withdraw the funds at any time D: so the money can be withdrawn by the buyer if they need the cash

A: to prevent commingling with your own funds Explanation: Commingling is illegal and occurs when other people's money is mixed with the broker's operating or personal account.

The Colorado Contract to Buy & Sell allows the Buyer who cannot get a written loan commitment by the Loan Objection Deadline: A: to terminate the contract by written notice and receive earnest money back B: to automatically extend the closing date C: to automatically extend the Loan Objection Deadline to no later than that of the closing date D: to terminate the contract and limit the default penalty to liquidated damages

A: to terminate the contract by written notice and receive earnest money back Explanation: A buyer has until the Loan Objection Deadline to provide written notice s/he cannot get a commitment for a satisfactory loan and wants to terminate the contract. If s/he does provide such notice, the earnest money is refunded to the buyer. If the buyer does not provide such notice, the contract continues, but the buyer's earnest money becomes nonrefundable should s/he not receive a loan. From the Contract to Buy/Sell Real Estate: Loan Objection. If Buyer is to pay all or part of the Purchase Price with a New Loan, this Contract is conditional upon Buyer determining, in Buyer's sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions, and cost of such New Loan. This condition is for the sole benefit of Buyer. Buyer has the Right to Terminate on or before Loan Objection Deadline, if the New Loan is not satisfactory to Buyer, in Buyer's sole subjective discretion. IF SELLER IS NOT IN DEFAULT AND DOES NOT TIMELY RECEIVE BUYER'S WRITTEN NOTICE TO TERMINATE, BUYER'S EARNEST MONEY WILL BE NONREFUNDABLE, except as otherwise provided in this Contract (e.g., Appraisal, Title, Survey).

A rectangular survey must include which of the following? A: township lines B: metes and bounds measurements C: street addresses D: lot and block numbers

A: township lines

Which one of the following lists an unacceptable combination of relationships for a single broker on a particular transaction? A: transaction broker for the buyer and agent for the seller B: agent for the seller and the buyer is a customer without an agent C: transaction broker for the buyer and seller D: agent for the buyer and seller is a customer without an agent

A: transaction broker for the buyer and agent for the seller

The primary purpose of a deed is to: A: Transfer title B: Proof of ownership C: Recordation D: Legal evidence

A: transfer title Explanation: The primary purpose of a deed is to give validation to the transfer of title. The deed allows the transfer of ownership.

An apartment owner signed an agency agreement with a broker to collect the rents on his apartments. All rents were due on the first of the month. On July 1, the broker had collected all of the rents, except from one tenant. On July 2, the owner died. The broker called the remaining tenant on July 3, but the tenant refused to pay the rent to the broker, saying that the death of the owner had revoked the broker's right to collect. The tenant: A: was right B: could not refuse as the broker's authority continued until the appointment of an executor or administrator C: could not refuse, because rent was due on July 1 D: has to pay the rent until notified by the owner or his representative not to

A: was right Explanation: The death of either the agent or the principal cancels any agency agreement. Since the owner died on July 2, the agency between the owner and the broker ceased, and the broker is no longer permitted to act on the behalf of the deceased. This does not mean that the rent is not due to the heirs of the deceased, it means the broker cannot collect it on behalf of the estate.

The purchase and sale contract stipulates how many discount points a loan will incur and who will pay them. The Title Company uses this information to determine: A: whether to debit the seller B: how much the loan balance will be C:the annual percentage rate

A: whether to debit the seller Explanation: Discount points are a charge. Most often they are an incentive offered by the Seller to buy down (lower) the Buyer's interest rate. 1 discount point is 1% of the loan amount. The IRS considers discounts points to be "prepaid interest" and thus tax deductable for the person paying them - in this case the Seller. The only place in the purchase contract where this is addressed is in Seller Concessions. Debit Seller. Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

The purchase and sale contract stipulates how many discount points a loan will incur and who will pay them. The Title Company uses this information to determine: A: whether to debit the seller B: how much the loan balnce will be C: the annual percentage rate

A: whether to debit the seller Explanation: Discount points are a charge. Most often they are an incentive offered by the Seller to buy down (lower) the Buyer's interest rate. 1 discount point is 1% of the loan amount. The IRS considers discounts points to be "prepaid interest" and thus tax deductable for the person paying them - in this case the Seller. The only place in the purchase contract where this is addressed is in Seller Concessions. Debit Seller. Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

An exercise of police power by a municipality to regulate and control the character and use of the property is called a(n): A: zoning ordinance B: littoral rights C: riparian rights D: Subrogation

A: zoning ordinance Explanation: A zoning ordinance is an exercise of police power. Building codes can be another form of police power.

If two lots each 75 feet wide by 100 feet long, cost $300,000 in total, what is the their approximate cost per square foot? A: $10 per square foot B: $20 per square foot C: $30 per square foot D: $40 per square foot

B: $20 per square foot Explanation: 100 X 75 = 7,500 sq ft X 2 = 15,000 sq ft; $300,000 / 15,000 = $20 per square foot.

What is the maximum fine that the Real Estate Commission can impose for a violation of commission rules? A: $2,500 plus punitive damages B: $2500 C: No fine only license suspension or revocation D: $3,500 plus punitive damages

B: $2500 Explanation: The maximum administrative fine is $2,500. This can only be assessed after a hearing by an appointed administrative law judge.

A man earns $20,000 per year and can qualify for a monthly PITI (Principal, Interest, Taxes, Insurance) payment equal to 25% of his monthly salary. If the annual tax and insurance is $678.24, what loan amount will he qualify for given a monthly PI (Principal Interest) payment factor is $10.29 per $1000 of loan amount? To be clear, a payment factor Is the amount of money a borrower will pay for each $1,000 of loan amount. A: $40,200 B: $35,000 C: $46,000 D: $52,500

B: $35,000 Explanation: The man can qualify for a loan, but only one that the monthly payment including PITI (Principal, Taxes, Interest, Insurance) is not more than 25% of his monthly salary. Generally a payment factor comes from a Mortgage Factor Table also called an Amortization Table. It gives you the amount of monthly payment for each $1,000 of the loan amount for a given interest and term. 1)First, we better figure out how big a monthly payment he can afford. He makes $20,000 a year. $20,000/12 months = $1,666.67 a month. $1,666.67 x 25% = $416.67 monthly payment he can afford 2) Next, let's subtract the taxes and insurance to see how much will be left for the loan. $678.24 (annual Taxes and Insurance / 12 months = $56.52. $416.67 - $56.52 = $360.15 left over to pay Principal and Interest each month. 3) Last up - how many thousands worth of loan can he get for $360.15 a month? The PI (Principal Interest) payment factor is $10.29 per $10000 of loan (comes from a chart). In English this means each $1000 of loan amount will cost him $10.29 per month. So......$360.15 (money he has available to pay principal and interest each month) / $10.29 = 35 thousands or $35,000.

A new loan for $165,000 is taken out at 6 1/2 % by the buyer the closing is May 16. How will the interest be shown on the settlement sheet? A: $440.75 debit to the buyer, credit to the broker B: $470.13 debit to the buyer, credit to the broker C: $3966.78 debit to the buyer, credit to the broker D: $3966.16 debit to the buyer, credit to the broker

B: $470.13 debit to the buyer, credit to the broker

A new loan for $165,000 is taken out at 6 1/2 % by the buyer, the closing is May 16. How will the interest be shown on the settlement sheet? A: $440.75 debit to the buyer, credit to the broker B: $470.14 debit to the buyer, credit to the broker C: $3966.78 debit to the buyer, credit to the broker D: $3996.16 debit to the buyer, credit to the broker

B: $470.14 debit to the buyer, credit to the broker Explanation: $165,000 (loan amount) x .065 (Interest Rate) = $10,725 (annual interest) / 365 (days in year) =$29.38356 (interest per day) x 16 (days owned by buyer in May -May 16-31) = $470.14 Debit to the buyer (because they owe the interest) credit to the broker (because the money is being paid into the escrow account controlled by the broker/closing agent so that they can cut a check for the interest to the lender.)

Out of state seller sold a property for $489,000. The property was highly leveraged resulting in cash proceeds to the seller of $5,500. How much should be withheld subject to the Colorado Department of Revenue Income Tax? A: $9780 B: $5500 C: $110 D: $978

B: $5500 Explanation: This question relates to the rules on Colorado withholding taxes. The rule is if the seller has an out-of-state address, the State directs at close a withholding of 2% of the purchase price or the entire net proceeds, whichever is less. This is to cover any potential State income tax liability for sellers. Since they live out-of-state, they likely do not file Colorado tax returns. Taking the money gives them a good incentive to file. Keep in mind this is not an actual tax, just a withholding. If the seller files and does not owe taxes, they get the withheld money back. Two percent of the selling price of $489,000 is $9780. Since $9780 is higher than the proceeds of $5,500, the lessor amount of $5,500 will be withheld as the potential tax liability. Also note that this withholding does NOT apply to Colorado residents.

An out-of-state seller sold a property for $489,000. The property was highly leveraged resulting in cash proceeds to the seller of $5,500. How much should be withheld subject to the Colorado Department of Revenue Income Tax? A: $9780 B: $5500 C: $110 D: $978

B: $5500 Explanation: This question relates to the rules on Colorado withholding taxes.The rule is if the seller has an out-of-state address, the State directs at close a withholding of 2% of the purchase price or the entire net proceeds, whichever is less. This is to cover any potential State income tax liability for sellers. Since they live out of state, they likely do not file Colorado tax returns; taking the money gives them a good incentive to file. Keep in mind this is not an actual tax, just a withholding. If the seller files and does not owe taxes, they get the withheld money back. Two percent of the selling price of $489,000 is $9780. Since $9780 is higher than the proceeds of $5,500, the lessor amount of $5,500 will be withheld as the potential tax liability. Also note that this withholding does NOT apply to Colorado residents.

Susan Seller gave her agent a 60 days listing to sell her home for $200,000. The seller specified in the Exclusions section of the listing agreement that her prized Iris plants would be removed prior to close and the iris bed repaired to eliminate the damage of plant removal. Public records indicates the home is 2,400 square feet, has 3 bedrooms, 2 bathrooms, a 90% finished basement and a two car garage. Last year's taxes were $1,832 and have been paid. An offer was made and accepted with a sales price of $190,000. The buyers submitted earnest money of $3,000 under liquidated damages. The inspection objections must be made by March 27. The survey must be completed by April 10. Review of title must be completed by April 10. The Sellers indicated in the seller's property disclosure that the water heater had leaked. The water heater was replaced and all water damage repaired. The sellers further disclosed that the concrete basement floor had lifted due to expansive soils creating a crack in the concrete floor. Although closing was set for May 1st, a delay in the lender processing of the buyer's loan forced a change in close to May 10th. This change was accepted by both parties. The cost of the survey was $450. The closing fee charged by the closing company is $150 to be split by both parties. What is debit entry on the settlement sheet for the seller's prorated share of property taxes. The buyer is responsible for the day of closing. Use a 365 day year: A: $342.90 B: $647.47 C: $782.18 D: $1,782.34

B: $647.47 Explanation: $1,832 last years taxes/365 days in year * 129 days seller owned the property prior to close = $647.47 taxes owed by seller. Here is some insight on the the easier-than-you-think-when-you-approach-it-right scenarios: For the uninitiated, when you take the National side of the State licensing exam, there are two lengthy scenarios each describing a different real estate transaction. You are then asked 5 questions about each of the scenarios. The length of the scenarios chews up a fair amount of time answering the questions. Since they come first, anxiety levels of test takers increase as they watch the clock run down and they are still on these first dang ten questions. Some rush through the remainder of the test missing questions that they should nail, others run out of time prior to completion. We have been hearing of these problems from a number of test-takers since the scenarios were added to the test earlier this year. Do not panic. We have a plan to keep you from becoming a victim. Disregard this advice at your own peril. First up is strategy, some suggestions we have reported before, some are new. Secondly, I will discuss how to approach the types of questions the scenarios pose. As to strategy, I suggest you mark the scenario questions for later completion and then address them last. This will enable you to spend quality time (and pile up correct answers while you are fresh) on 70 of the 80 questions on the test and the balance on the remaining 10. This will automatically right size the time you spend on the scenarios and give you zen knowing that you've got 70 under your belt. Worst case, you can fake your way through the last ten knowing that you are likely to get at least a few right. When you do get to them, THIS IS VERY IMPORTANT, read the questions first, then the scenarios, This way you can read through the scenarios once, picking out pertinent information as you go. The good news is most of the questions require just general real estate knowledge to answer. A quick read of the scenario and after that quicker scans for key words from the question will do. These are actually very easy questions. Here is an example of how to use this approach; the buyer's agent asks the listing agent if there are any defects of which the buyers should be aware. Now we all know that agents cannot lie and we need to disclose material facts of which we have knowledge. This alone means you can choose the answer indicating full disclosure by the listing agent. To verify this, a quick scan of the scenario indicates the seller mentioned a defect to the agent that was not mentioned on the sellers property disclosure. Easy answer, verified quickly. Another example; a buyer is upset that the seller removed some prized plants. A quick scan for a key word such as "plants" tells you all you need to know. The seller told the listing broker that they were going to pull them, and included this info in the Exclusions section of the listing contract. No mention is made whether this exclusion worked its way into the purchase contract, but given the buyer's reaction a good assumption is that didn't happen. Who is right, who is wrong and who is on the hook? The buyer did nothing wrong, their expectations were justly set by the purchase contract agreed to by them and the seller. The seller has a problem. She is legally bound by the purchase contract she signed. Not reading it carefully is a poor defense. Her agent really screwed up. The agent is supposed to be the professional guiding the listing client and did not exhibit the level of diligence which would have ensured the exclusion negotiated its way from the listing contract into the purchase contract. With this information - who do you think is going to get financially stuck with the bill for a fix? Another easy answer. We also are aware of a straight tax pro-ration that everyone who has taken our course should be more than familiar with how to handle. Knowing that a buyer can blow off without penalty a transaction based on something that came up during an inspection or cannot walk away from from a transaction without just cause without losing their earnest money are also general real estate knowledge topics that only require a glance at the scenario to make certain there is not an unexpected wiggle.

The sellers have agreed to give the buyers an allowance to recarpet the living room. They will allow $22.95 per square yard for carpet plus $6.00 per square yard for pad and installation. If the living room is 21 feet x 12 feet, how much will it cost the sellers? A: $642.60 B: $810.60 C: $1,927.80 D: None of the above

B: $810.60 Explanation: 21 feet x 12 feet = 252 square feet. 252 square feet divided by 9 = 28 square yards. The carpet is $22.95 x 28 = $642.60. The pad and instalation is $6.00 x 28 = $168. $642.60 + $168 = $810.50 total cost. Converting square yards to square feet: 3 feet = 1 yard

A building valued at $245,000 contains four apartments that each rent for $370 per month. The owner estimates that net operating income is 65% of gross rentals. What is the capitalization rate? A: 0.035 B: 0.047 C: 0.051 D: 0.113

B: 0.047 Explanation: $370 rent x 4 units = $1480 per month income $1480 x 12 months = $17,760 gross income $17,760 x .65 = $11,540 net operating income (I) divided by (V) = rate $11,540 / $245000 = 4.7 %

An investor earned $27,500 on a $375,000 investment. What is the rate of return? A: 0.115 B: 0.073 C: 0.136 D: 0.094

B: 0.073 Explanation: $27,500 / $375,000 = 7.3%

If the interest for four months on a loan of $80,000 was $3,200, what was the annual rate of interest? A: 0.11 B: 0.12 C: 0.13 D: 0.14

B: 0.12 Explanation: $3,200 X 3 = $9,600 (annual interest) / $80,000 = 12% Income Generated / Value = Rate

One discount point is equal to: A: 1% of the sales price B: 1% of the loan amount C: 1% of the down payment D: 1/8 of the loan amount

B: 1% of the loan amount Explanation: Each discount point is 1% of the loan amount, not the purchase price.

Three-fifths (3/5) the value of a property is $85,000. What is 75% of the value of the property? A: 51000 B: 106250 C: 141667 D: 63750

B: 106250 Explanation: FIrst convert 3/5 into a percentage: 3 divided by 5 = .60, then $85,000/.60 = $141,666 (total value of property) X .75 = $106,250. $85,000 and 60% are the same value. It's just that one is expressed as dollars and the other as a percentage. Dividing the percentage into its equivalent dollar amount gives the 100% value of which they are a part.

The IRS requires which of the following documents to be completed by the seller at the time of closing? A: W-9 B: 1099-S C: W-4 D: 1031-E

B: 1099-S Explanation: The title company reports the seller's proceeds of the sale on a 1099-S form.

An FHA loan for $80,000 at 10.5% requires discount points paid at closing in the amount of 3%. Find the cash value of the discount points. A: 2520 B: 2400 C: 3000 D: 3150

B: 2400 Explanation: 80,000 x 3 % = 2,400 Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

Davis owns a property with a market value of $144,000. The county assessment for the property is 40% of its appraised value. What will a 4.3 mill special assessment tax levy cost Davis annually? A: 268.8 B: 247.68 C: 619.2 D: 113.2

B: 247.68 Explanation: $144,000 market value X 40% assessment ratio = $57,600 assessed value X .0043 mill levy = $247.68 Remember, the mill levy is the "tax rate" that is applied to the assessed value of a property. Onemill is one dollar per $1,000 dollars of assessed value. It consists of a local portion which is used to fund area services and a statewide portion which is used to fund public schools.

What is the maximum fine that the Real Estate Commission can impose for a violation of commission rules? A: $2,500 plus punitive damages B: 2500 C: No fine only license suspension or revocation D: $3,500 plus punitive damages

B: 2500 Explanation: The maximum administrative fine is $2,500. This can only be assessed after a hearing by an appointed administrative law judge.

A house is closed on July 16. The taxes of $546 for the current year have been paid, what is the prorated portion that the buyer owes the seller A: 251.31 B: 252.81 C: 293.19 D: 294.69

B: 252.81 Explanation: Divide the total taxes $546 by 365 (number of days in the year = $1.4959 per day time the number of days from July 16 through Dec 31 remember that the day of closing goes to the buyer, therefore times 169 = $252.81

A house is closed on July 16. The taxes of $546 for the current year have been paid, what is the prorated portion that the buyer owes the seller: A: 251.31 B: 252.81 C: 293.19 D: 294.69

B: 252.81 Explanation: Divide the total taxes $546 by 365 (number of days in the year = $1.4959 per day time the number of days from July 16 through Dec 31 remember that the day of closing goes to the buyer, therefore times 169 = $252.81

A house is closed on April 15. The property taxes are $960 for the year; they have not been paid. How much does the buyer receive from the seller at closing? A: 360 B: 274 C: 280 D: 680

B: 274 Explanation: $960 / 365 days = $2.6301 per day the seller owned the property and owes the Buyer for 104 days. $2.6301 x 104 = $273.53

The new owner of a house needs hazard coverage for $98,000. The annual premium is $0.44 per $100.00 of the amount insured. The insurance company agreed to make the cost of the policy 2 ½ times the annual rate for a 3 year policy. How much would the monthly insurance payments be to pay for this policy? A: 16.46 B: 29.94 C: 13.16 D: 11.28

B: 29.94 $98,000 / 100 = 980 X $.44 = $431.20 X 2.5 =$1,078 / 36 = $29.94

As per the Contract to Buy/Sell Real Estate Mediation shall terminate in the event the entire dispute is not resolved within how many days of written notice requesting mediation delivered by one party to the other at the party's last known address? A: 10 B: 30 C: 45 D: 60

B: 30 Explanation: MEDIATION. If a dispute arises relating to this Contract, prior to or after Closing, and is not resolved, the parties must first proceed in good faith to submit the matter to mediation. Mediation is a process in which the parties meet with an impartial person who helps to resolve the dispute informally and confidentially. Mediators cannot impose binding decisions. The parties to the 650 dispute must agree, in writing, before any settlement is binding. The parties will jointly appoint an acceptable mediator and will share equally in the cost of such mediation. The mediation, unless otherwise agreed, will terminate in the event the entire dispute is not resolved within thirty days of the date written notice requesting mediation is delivered by one party to the other at the party's last known address. This section will not alter any date in this Contract, unless otherwise agreed.

As per the Contract to Buy/Sell Real Estate, Mediation shall terminate in the event the entire dispute is not resolved within how many days of written notice requesting mediation delivered by one party to the other at the party's last known address? A: 10 B: 30 C: 45 D: 60

B: 30 Explanation: MEDIATION. If a dispute arises relating to this Contract, prior to or after Closing, and is not resolved, the parties must first proceed in good faith to submit the matter to mediation. Mediation is a process in which the parties meet with an impartial person who helps to resolve the dispute informally and confidentially. Mediators cannot impose binding decisions. The parties to the dispute must agree, in writing, before any settlement is binding. The parties will jointly appoint an acceptable mediator and will share equally in the cost of such mediation. The mediation, unless otherwise agreed, will terminate in the event the entire dispute is not resolved within thirty days of the date written notice requesting mediation is delivered by one party to the other at the party's last known address. This section will not alter any date in this Contract, unless otherwise agreed.

On a sale of a $50,000 property the commission rate is 7 3/4 %. What is the amount of the commission? A: 787 B: 3875 C: 387 D: 873

B: 3875 Explanation: Multiply $50,000 X 7.75 % = $3,875

Colorado was surveyed using the 6th P.M. What is used as a starting point? A: New Mexico parallel B: 40 degrees latitude north C: Ute P.M. D: New Mexico P.M.

B: 40 degrees latitude north Explanation: It is measured off of the 40 degree latitude north.

A house is closed on October 15. The annual insurance payment is $578 for the fiscal year of July 1 to June 30. The buyers will assume the seller's policy. Since the policy has been paid, how much does the buyer owe the seller at closing? A: 167.86 B: 410.14 C: 408.56 D: 169.44

B: 410.14 Explanation: $578 / 365 = $1.5836 per day. Seller paid for 259 days; he didn't own the policy (Oct. 15 through June 30) 259 x $1.5836 = $410.14

A $40,000 house appreciates in value at the rate of 2.5 percent each succeeding year. With this information, what is the value of the house at the end of the second year? A: 41000 B: 42025 C: 43075 D: 45000

B: 42025 Explanation: First take $40,000 x 2.5% = $1,000 to give the appreciation for the first year. Add this to $40,000, for a total of $41,000. Next, take $41,000 x 2.5% = $1,025 to get the appreciation for the second year. Lastly, take $1,025 + $41,000 = $42,025, which is the value after the second year

A mall earns $850,000 per year, and expenses are 35% of that amount. If the property is capitalized at 12% what is the approximate value? A: 6545722 B: 4604167 C: 4506789 D: 5243167

B: 4604167 Explanation: First calculate the total expense by multiplying $850,000 X 35% = $297,500. Next calculate the net operating income $850,000 - $297,500 = $552,500. Then take the net income of $552,500 and divide by 12% = $4,604,167.

A 6 foot wide sidewalk is to be poured on the inside of a corner lot that measures 50 feet by 100 feet. If the cost of the sidewalk is $0.68 per sq. ft., how much will the sidewalk cost? A: 612 B: 587.52 C: 728.42 D: 660.96

B: 587.52 Explanation: 50 X 6 = 300 + (94 X 6 =564) = 864 sq ft X $.68 = $587.52

The maximum amount of time a landlord can specify in a lease that they will hold a security deposit after lease termination is: A: 30 days B: 60 days C: 7 days D: 15 days

B: 60 days Explanation: The maximum amount of time a landlord can specify in a lease that they will hold a security deposit after lease termination is 60 days. If no time was specified in the lease, the default maximum is one month

Mr. Davis was assessed 6 cents per square foot of his property as a special assessment by the city; his property measured 80 X 135. What did the special assessment cost him? A: 64.8 B: 648 C: 6480 D: 592.75

B: 648 Explanation: Take the length 135 times the width 80 to get the total square footage = 10800 X .06 = $648

Mr. Davis was assessed by the city 6 cents per square foot of his property as a special assessment, his property measured 80 X 135. What did the special assessment cost him? A: 64.8 B: 648 C: 6480 D: 592.75

B: 648 Explanation: Take the length 135 times the width 80 to get the total square footage = 10800 X .06 = $648

If Jon's property has a net income of $54,800, and returns 8 percent annually on the investment, then what is the property's value? A: 680000 B: 685000 C: 700000 D: 725000

B: 685000 Explanation: Divide the income by the interest rate to equal property value,. $54,800/.08 = $685,000

How many 50-foot by 110-foot lots could be obtained from an acre of land? A: 6 B: 7 C: 8 D: 9

B: 7 Explanation: This question involves calculating square footage. Whenever you do math questions like this you need to get all the factors converted to a common measure. You've got two measures here - one is "50-foot by 110-foot" and the other is "acre". In order to calculate how many of one (the lots) can be carved out of the other (the acre), you need to convert them to the common measure of square feet. Multiply 50 x 110 to get the square footage of one lot or 5500 square feet. The acre is a little trickier; you have to just know the total square feet (for us and the state test). It is 43560. Divide 5500 into 43560 and you get 7.920 lots. The question wants to know how many 50 x 100 foot lots you can get of an acre - the answer is 7. The .920 is not a full lot.

In order to acquire title by adverse possession in Colorado the claim would require 18 years of possession, unless the claimant has color of title and pays taxes on the property, then the period of possession required is: A: 15 years B: 7 years C: 18 years D: 9 years

B: 7 years Explanation: The correct answer is 7 years. The key is "color of title," without it, a claim of adverse possession requires 18 years. Color of title means you have some written proof that you have title but it is legally defective. An example would be a deed transferring ownership to a property from a father to a child that was found in a drawer after the death of the father. Legally, the deed should have been delivered to the child while the father was still alive, so it is not valid. However, it certainly shows the father's intent. So, the child claims color of title, pays taxes, possesses the property and after 7 years if no one challenges it in court can claim the property under the law of adverse possession.

To net the owner $90,000 after a 6% commission is paid; the list price would have to be: A: 95400 B: 95745 C: 95906 D: 96000

B: 95745 Explanation: $90,000 / 94% = $95,745; $95,745 x 6% = $5,745

Jean owes $80,000 at 12% interest on her home. How much interest will she pay in one year? A: 8000 B: 9600 C: 10600 D: 15000

B: 9600 Explanation: $80,000 x .12 = $9,600

A parcel of vacant land 80 feet wide and 200 feet deep was sold for $2000 per front foot. How much money would a broker receive for her 60% share in the 10% commission? A: 6400 B: 9600 C: 16000 D: 24000

B: 9600 Explanation: 80 x $2000 = $160,000 x 10% = $16,000 x 60% = $9600

When reconciling a 6 column worksheet for a closing - after totaling up the debits and credits, the closing agent needed to add a $30,000 Debit to the Seller Debit column to make it equal to the Seller Credit column. What does this Seller Debit represent? A: A $30,000 check the Seller must bring to the closing B: A $30,000 check the Seller will receive from this closing

B: A $30,000 check the Seller will receive from this closing Explanation: This DEBIT represents the Seller's proceeds from the sale (what they are getting). More info: This is a common spot of confusion, so do not let it break your head. The situation occurs at the bottom of the 6 column worksheet when you are reconciling the columns. Let's assume for a moment you are looking at a Buyer's columns. You have applied all the debits and credits and all you have to do is reconcile the columns which have $100,000 in the Credit column (money the buyer has proven they have) and $125,000 in the Debit column (what the Buyer owes). Looks like this Buyer is a little short, but by how much? To determine this amount, you have to make both columns equal. This enables the Closing Agent to determine how much the Buyer is short; which is also how much of a check the Buyer needs to bring and be deposited into the escrow account. So you add $25,000 to the Buyer's Credit column to make both columns equal. Therefore this $25,000 CREDIT represents how much the Buyer is short, meaning this CREDIT does not represent how much they have, it represents how much they still OWE. This is how a CREDIT becomes something you OWE. We are not done reconciling yet. We have a $25,000 Credit, to balance it out we need a $25,000 Debit. That debit goes to the Broker account which represents the Escrow Account. Back to practical language - the Buyers needs to bring a $25,000 check to the closing so that they can make their Credit column (what they got) equal to the Debit column (what they owe) and the Broker (Closing Agent) needs to deposit it into the Escrow Account ($25,000 Debit). For extra points - the reverse is most common with the Seller. When a Sellers Debit column (what they owe) is lower than their Credit column (what they sold their property for), the amount added to the DEBIT column to make both columns equal represents money the Seller is receiving. The balancing CREDIT in the Broker column, reminds the Closing Agent to cut a check to the Seller out of the escrow account.

When starting out as a new broker, you may want to consider which of the following when choosing a broker to work under? A: Finding the broker with the lowest office fee B: A broker that will provide training and support C: A broker that doesn't require your attendance at sales meetings D: A broker that conducts most transactions in Colorado

B: A broker that will provide training and support Explanation: When you are first starting out you'll want guidance and support; supervision from the broker is a must.

All of the following are "good funds" except: A: A wire transfer to the closing agent's bank B: A check on the broker's escrow account C: A cashier's check from a commercial bank D: A teller's check from a savings and loan

B: A check on the broker's escrow account Explanation: This would be considered third party funds which are not considered good funds. From the Contract to Buy and Sell (Purchase Contract) Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, shall be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds). This is also covered in Real Estate Commission Rule E-36: E-36. Good funds at closing Pursuant to 38-35-125, a real estate licensee who provides closing services shall not disburse funds or instruct an agent to disburse funds until those funds have been received and are either: (1) available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited or (2) available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Such agreement with a financial institution must be for the benefit of the licensee providing the closing service. If the agreement contains contingencies or reservations no disbursements can be made until these are satisfied.

An Open Listing, an Exclusive Brokerage listing and an Exclusive Right-To-Sell listing all require: A: A lockbox to be used B: A definite termination date C: The property to be entered into an MLS D: The broker to offer compensation

B: A definite termination date Explanation: Money, lockboxes and use of MLS are optional. The use of a definite termination date for the agreement is not. Real Estate Commission rule E-11 does not allow open-ended contracts with Brokerage firms Reference Commission Rule E-11

Which of the following rules would a court consider in resolving a contractual ambiguity? A: A contract should be interpreted in favor of the party drafting the instrument B: A later document takes precedence over an earlier document C: Numerals take precedence over written words D: A printed clause would take precedence over a handwritten portion of an agreement

B: A later document takes precedence over an earlier document Explanation: An amend/extend to a purchase and sale contract would be an example of the rule.

In a condominium, what must the declaration allocate to each unit? A: Air space equivalent to the ownership interest in the community B: A percentage of the undivided interests in the common elements C: A percentage of the undivided interests in the income of the association D: A position on the board of directors

B: A percentage of the undivided interests in the common elements Explanation: A condominium is an estate in real property consisting of an individual interior in an apartment or commercial unit and an undivided common interest in the common areas in the condo project.

In a condominium, what must the declaration allocate to each unit? A: Air space equivalent to the ownership interest in the community B: A percentage of the undivided interests in the common elements C: A percentage of the undivided interests in the income of the association D: A position on the board of directors

B: A percentage of the undivided interests in the common elements Explanation: A condominium is an estate in real property consisting of an individual interior in an apartment or commercial unit and an undivided common interest in the common areas in the condo project.

RESPA stipulates that: A: Interest rates cannot exceed the current maximum allowable rate B: A seller cannot require the buyer to use a particular title company C: A lender can chose to fulfill RESPA requirements only and disregard Colorado statutes D: A seller cannot choose a title company to provide title insurance

B: A seller cannot require the buyer to use a particular title company Explanation: The Real Estate Settlements Procedure Act (RESPA) prohibits the seller from requiring the use of a particular title company. It does not address interest rates.

When a home is added to the Assessment Role in an Special Improvement District, what must brokers disclose to all potential buyers? A: General taxes are going up substantially B: A special assessment tax or levy has or will be applied C: No disclosure is necessary D: Disclosure is not necessary until the tax has been levied.

B: A special assessment tax or levy has or will be applied Explanation: Generally, an Assessment Role is a list of all properties in a specific area and their assessed valuation for tax purposes. It makes it possible for property owners to compared the value of their properties against others to see if they have been over assessed. In a Special Improvement District, when a property is added to the Assessment Role it means that the property has been deemed to benefit from an improvement and thus is going to be hit by a special tax or levy to pay for it. This must be disclosed to all potential buyers. Since the tax or levy is only going to be applied to specific properties it is not a general tax levy which is applied to an entire community.

Which of the following is considered economic obsolescence? A: A leaky roof B: Abandoned buildings in the area C: Outmoded plumbing fixtures D: A cracked foundation

B: Abandoned buildings in the area Explanation: Abandoned buildings in the area are economic obsolescence because they are external to the subject property. Economic obsolescence also referred to as "external obsolescence" is always considered to be incurable. It basically refers to is the loss in value resulting from influences external to the property itself. External conditions causing this may be international, national, industry-based, or local in origin. Various external factors affect potential economic returns, thus having a direct impact on the market value of an asset or property.

Which of the following is correct concerning a broker's establishment of an account to hold money belonging to others? A: An individual account is required for each transaction B: All checks, deposit slips and bank statements must include the word "escrow" or "trust" as part of the account name C: The names of all authorized signers must be on the checks D: The account cannot be in the same bank as the broker's personal checking account

B: All checks, deposit slips and bank statements must include the word "escrow" or "trust" as part of the account name Explanation: The escrow account must be identified as such and the checks, deposit slips, and statements must have the name of the account and the name of the brokerage entity.

All of the following are true in the Colorado Right-to-Buy Contract except: A: That the broker may be compensated by the seller B: Allows for the broker to be an agent for the sellers as well as the buyers C: May provide that the broker be paid an hourly rate D: Must have definite termination date

B: Allows for the broker to be an agent for the sellers as well as the buyers Explanation: The broker cannot represent both parties in the same transaction as an agent, but may help or assist both as a transaction broker.

With regard to Colorado real estate licensees: A: If an associate broker uses her home as her office, her license should be in her home B: An associate broker's license should be in his/her broker's office C: It must be in the county in which they live D: Cannot sell property unless they have a county real estate license

B: An associate broker's license should be in his/her broker's office Explanation: An associate broker's license must always be in his/her broker's office.

If an owner wants to make a single full payment for property taxes, what is the latest date by which this payment can be made? A: March 1 B: April 30 C: May 1 D: June 16

B: April 30 Explanation: Real property taxes may be paid as follows: if the owners wants to make payments, one-half is due on or before the last day of February and the remaining one-half on or before June 15. If the owner wants to make one full payment, the entire tax may be paid on or before the last day of April

Tina Thomas has looked at a house that fits her needs, except that it is located in a busy downtown area where she does not want to live. Her concern about location is called: A: A Physical Characteristic B: Area Preference C: Permanence of Investment D: Immobility

B: Area Preference Explanation: Area preference is the most important consideration when selecting a property. There is a saying in real estate: "the three most important things in real estate are, location, location and location."

Broker Bill Butter is working with Buyer Brian Bread and has found a property on which the Buyer wants to place an offer. The property that he likes is owned by Seller Sammy Samuel and listed by Broker Cherry Cleary. The property is located at 2443 E Westgate Ave in Durango, CO. The asking price is $315,000. Buyer Bread offers $299,000 on April 10th and wants all appliances including the washer and dryer included in the sale price, the appliances were excluded in the listing as was the Hot Tub on the patio. The offer is countered by Seller Samuel on the recommendation of his agent Broker Cherry Cleary on April 11th at $309,000 and will include all appliances except the washer and dryer. Buyer Bread accepts this counter offer on April 12th and the closing is scheduled for May 25. An inspection is held on April 16th and Buyer Bread wants some roof shingles repaired and the carpet in the master bedroom to be replaced. Seller Samuel agrees to the shingles being repaired, but will only give a $750 credit at closing to the Buyer Bread to replace the carpet; Buyer Bread accepts. Prior to closing, Buyer Bread requests that the seller allow them to start a kitchen remodel prior to closing. Seller Samuel will not allow this and Buyer Bread gets angry and wants out of the contract How would the credit for $750 for carpet replacement be shown on the settlement statement? A: As a $750 debit to the broker and a $750 credit to the buyer. B: As a $750 debit to the seller and a $750 credit to the buyer C: As a $750 debit to the seller and a $750 credit to the broker D: As a $750 debit to the buyer and a $750 credit to the seller

B: As a $750 debit to the seller and a $750 credit to the buyer Explanation: B. Since the seller has money going out a closing it would be a debit and since the buyer has money coming in a closing it would be a credit to the buyer

What would need to be specifically excluded for the owner to keep in a sales contract? A: Drapes B: Award-winning roses C: Annual vegetable garden plants D: non-built-in microwave, stove, refrigerator

B: Award-winning roses Explanation: The only items that is a requirement for the owner to exclude in a sales contract should she want to retain ownership are fixtures. A fixture is an item which is permanently attached to the land such that it has become real property (such as trees, bushes, a deck, lighting). Ownership of fixtures pass with the property even if they are not mentioned in the deed. All other items are considered Personal Property. Personal Property is a moveable item (such as potted plants and patio furniture) and ownership is passed using a Bill of Sale only if it is specifically mentioned in a sales contract. Of the items in the question only the "award-winning roses" would be considered a fixture and need to be excluded. "Drapes", "annual vegetable garden plants" and "non-built-in appliances" would be considered Personal Property.

Tom and Wendy agree that Tom will buy Wendy's farm for $400,000 cash, with the sale to take place in three months. This an example of what type of a contract? A: Bilateral, express, executed B: Bilateral, express, executory C: Unilateral, express, executory D: Unilateral, implied, executed

B: Bilateral, express, executory Explanation: The contract is "bilateral" because the promise goes both ways, i.e., Tom will get the farm and Wendy will get the money, "express" because it is agreed to by both parties and not implied by one, and "executory" because it is in the process of being executed and not complete.

What do you use to transfer personal property when you buy a furnished residential property A: Deed of Trust B: Bill of Sale C: inventory items on bottom of closing statement

B: Bill of Sale Explanation: Deeds transfer real estate. Whether you are buying a fridge at Best Buy, lumber from Home Depot or the furniture from a furnished home the rules involving the transfer of ownership of personal property are in charge and you use a Bill of Sale to transfer ownership.

What do you use to transfer personal property when you buy a furnished residential property? A: Deed of Trust B: Bill of Sale C: Inventory items on bottom of closing statement

B: Bill of Sale Explanation: Deeds transfer real estate. Whether you are buying a fridge at Best Buy, lumber from Home Depot or the furniture from a furnished home the rules involving the transfer of ownership of personal property are in charge and you use a Bill of Sale to transfer ownership.

The furnace breaks down before closing, but after the buyer has taken possession. Who is responsible for the cost of replacement? A: Seller B: Buyer C: depends on how the appropriate box is checked in the Contract to Buy and Sell D: not addressed by the Contract to Buy and Sell

B: Buyer Explanation: The buyer is responsible for such costs after possession, even if possession is before closing. BTW it is really common for students with contract questions to hunt throughout the courses for an answer. Whereas the answer is as far away as looking at the contract itself. Also, it is always a bad idea to let a buyer move into a property prior to close. Savvy agents avoid this at all costs. Nothing good ever happens when this situation occurs. First up, there is a really good chance the buyer will notice something about the house they do not like, which can throw a monkey wrench into the closing process. Lastly, what happens if the buyer moves in and then does not qualify for a loan? You could have an eviction proceeding on your hands. From the Contract to Buy and Sell Real Estate: Damage, Inclusions and Services. Should any Inclusion or service (including utilities and communication services), system, component or fixture of the Property (collectively Service), e.g., heating or plumbing, fail or be damaged between the date of this Contract and Closing or possession, whichever is earlier, then Seller is liable for the repair or replacement of such Inclusion or Service with a unit of similar size, age and quality, or an equivalent credit, but only to the extent that the maintenance or replacement of such Inclusion or Service is not the responsibility of the Association, if any, less any insurance proceeds received by Buyer covering such repair or replacement. If the failed or damaged Inclusion or Service is not repaired or replaced on or before Closing or possession, whichever is earlier, Buyer has the Right to Terminate under § on or before Closing Date (§) , or, at the option of Buyer, Buyer is entitled to a credit at Closing for the repair or replacement of such Inclusion or Service. Such credit must not exceed the Purchase Price. If Buyer receives such a credit, Seller's right for any claim against the Association, if any, will survive Closing. Seller and Buyer are aware of the existence of pre-owned home warranty programs that may be purchased and may cover the repair or replacement of such Inclusions.

Just before the close, the buyer noticed a broken window and a man-door hanging by one hinge in the detached garage, her inspector had missed these as he considered outbuildings as outside the scope of the inspection. What is the buyer's recourse? A: Seller must fix window B: Buyer's responsibility because she had missed the inspection deadline. C: The Inspector is at fault D: Buyer may terminate the agreement or negotiate a settlement with the Seller

B: Buyer's responsibility because she had missed the inspection deadline. Explanation: The buyer has no recourse. After the inspection deadline passes, the buyer has no recourse to object to a pre-existing defect. Should a defect occur after the inspection deadline, the seller would have responsibility for the repair as per the terms of the purchase agreement.

Who should attend the inspection? A: Buyer, seller and listing agent B: Buyer, selling agent, and inspector C: Inspector D: Selling agent and inspector

B: Buyer, selling agent, and inspector Explanation: Agents are the only person given lock box information and are ultimately responsible for buyer and inspector.

The rate of return an investor wants on an investment in the property is often called:. A: Rate of Investment B: Capitalization Rate C: Yield D: Reasonable Return Rate

B: Capitalization Rate Explanation: The capitalization rate is the rate of return on a property based on the income that the property is anticipated to generate. Also called "Cap Rate" this rate is used to determine the value of commercial properties using the income approach to value. That formula is Net Income / Cap Rate = Value.

As per the Assignability and Inurement clause in the Contract to Buy/Sell Real Estate: A: Checking the "Is Not" box means the contract is not assignable B: Checking the "Is Not" box means the contract is not assignable without the seller's prior written consent

B: Checking the "Is Not" box means the contract is not assignable without the seller's prior written consent Explanation: Assignability and Inurement. This Contract ___ Is ___ Is Not assignable by Buyer without Seller's prior written consent.

As per the Assignability and Inurement clause in the Contract to Buy/Sell Real Estate: A: Checking the "Is" box means the contract is assignable with the seller's prior written consent B: Checking the "Is" box means the contract is assignable without the seller's prior written consent

B: Checking the "Is" box means the contract is assignable without the seller's prior written consent Explanation: Assignability and Inurement. This Contract ___ Is ___ Is Not assignable by Buyer without Seller's prior written consent.

When the employing broker of a corporate brokerage is suddenly unable to continue in that position, to whom may the commission issue a temporary "hardship" license? A: person with sufficient ownership interest in the corporation B: Colorado licensee approved by the corporate board of directors C: member of the board of directors D: officer or director with a broker's license from another state

B: Colorado licensee approved by the corporate board of directors member of the board of directors Explanation: A temporary hardship license for a corporate brokerage can only be issued to a broker or salesperson licensed in Colorado. The requirements for ownership and director status are waived.

The Real Estate Commission may issue a temporary "hardship" license when the employing broker of a corporate brokerage is unable to continue in that role. This "hardship" license may be issued to: A: member of the board of directors. B: Colorado licensee approved by the corporate board of directors. C: officer or director with a broker's license from another state. D: person who has a sufficient ownership interest in the corporation.

B: Colorado licensee approved by the corporate board of directors. Explanation: Every company must have an employing broker at all times. If something should happen to an employing broker, such as leaving the company, the real estate commission can issue a "hardship" license to someone else to act as the interim employing broker while the company settles on a permanent employing broker. The only rule for the "hardship" employing broker is that he/she must have an active Colorado license.

What type of map is MOST useful for describing the terrain of a very hilly lot? A: Assessor's map B: Contour map C: Recorded map or plat D: Seismic projection map

B: Contour map Explanation: From Dictionary.com - A topographic map on which the shape of the land surface is shown by contour lines, the relative spacing of the lines indicating the relative slope of the surface.

An appropriate duty for an agent but not a transaction broker would be: A: Presenting all offers in a timely manner B: Counseling as to material benefits and risks C: Exercising reasonable skill and care D: Accounting in a timely manner for money and property

B: Counseling as to material benefits and risks Explanation: All of the others are an obligation of a transaction broker

An appropriate duty for an agent, but not a transaction broker would be: A: Presenting all offers in a timely manner B: Counseling as to material benefits and risks C: Exercising reasonable skill and care D: Accounting in a timely manner for money and property

B: Counseling as to material benefits and risks Explanation: All of the others are an obligation of both an agent and a transaction broker. With an agency relationship comes a fiduciary responsibility to put your client's (principal) needs above all others.

Broker Bill Butter is working with Buyer Brian Bread and has found a property on which the Buyer wants to place an offer. The property that he likes is owned by Seller Sammy Samuel and listed by Broker Cherry Cleary. The property is located at 2443 E Westgate Ave in Durango, CO. The asking price is $315,000. Buyer Bread offers $299,000 on April 10th and wants all appliances including the washer and dryer included in the sale price, the appliances were excluded in the listing as was the Hot Tub on the patio. The offer is countered by Seller Samuel on the recommendation of his agent Broker Cherry Cleary on April 11th at $309,000 and will include all appliances except the washer and dryer. Buyer Bread accepts this counter offer on April 12th and the closing is scheduled for May 25. An inspection is held on April 16th and Buyer Bread wants some roof shingles repaired and the carpet in the master bedroom to be replaced. Seller Samuel agrees to the shingles being repaired, but will only give a $750 credit at closing to the Buyer Bread to replace the carpet; Buyer Bread accepts. Prior to closing, Buyer Bread requests that the seller allow them to start a kitchen remodel prior to closing. Seller Samuel will not allow this and Buyer Bread gets angry and wants out of the contract. When Seller Samuel responded to the initial offer from Buyer Bread which of the following forms should have been used? A: Agreement to Amend & Extend Contract B: Counterproposal C: Counter Offer D: Agreement to Amend & Extend Contract with Broker

B: Counterproposal Explanation: B. The Counterproposal is the correct answer. The "Agreement to Amend and Extend Contract with Broker" is used to amend a contract between a client and their broker such as a listing agreement. The "Agreement to Amend and Extend Contract" is used to amend a contract between the Buyer and Seller such as the purchase contract. There is no approved real estate form that is called a counter offer. Here is some insight on the the easier-than-you-think-when-you-approach-it-right scenarios: For the uninitiated, when you take the National side of the State licensing exam, there are two lengthy scenarios each describing a different real estate transaction. You are then asked 5 questions about each of the scenarios. The length of the scenarios chews up a fair amount of time answering the questions. Since they come first, anxiety levels of test takers increase as they watch the clock run down and they are still on these first dang ten questions. Some rush through the remainder of the test missing questions that they should nail, others run out of time prior to completion. We have been hearing of these problems from a number of test-takers since the scenarios were added to the test earlier this year. Do not panic. We have a plan to keep you from becoming a victim. Disregard this advice at your own peril. First up is strategy, some suggestions we have reported before, some are new. Secondly, I will discuss how to approach the types of questions the scenarios pose. As to strategy, I suggest you mark the scenario questions for later completion and then address them last. This will enable you to spend quality time (and pile up correct answers while you are fresh) on 70 of the 80 questions on the test and the balance on the remaining 10. This will automatically right size the time you spend on the scenarios and give you zen knowing that you've got 70 under your belt. Worst case, you can fake your way through the last ten knowing that you are likely to get at least a few right. When you do get to them, THIS IS VERY IMPORTANT, read the questions first, then the scenarios, This way you can read through the scenarios once, picking out pertinent information as you go. The good news is most of the questions require just general real estate knowledge to answer. A quick read of the scenario and after that quicker scans for key words from the question will do. These are actually very easy questions. Here is an example of how to use this approach; the buyer's agent asks the listing agent if there are any defects of which the buyers should be aware. Now we all know that agents cannot lie and we need to disclose material facts of which we have knowledge. This alone means you can choose the answer indicating full disclosure by the listing agent. To verify this, a quick scan of the scenario indicates the seller mentioned a defect to the agent that was not mentioned on the sellers property disclosure. Easy answer, verified quickly. Another example; a buyer is upset that the seller removed some prized plants. A quick scan for a key word such as "plants" tells you all you need to know. The seller told the listing broker that they were going to pull them, and included this info in the Exclusions section of the listing contract. No mention is made whether this exclusion worked its way into the purchase contract, but given the buyer's reaction a good assumption is that didn't happen. Who is right, who is wrong and who is on the hook? The buyer did nothing wrong, their expectations were justly set by the purchase contract agreed to by them and the seller. The seller has a problem. She is legally bound by the purchase contract she signed. Not reading it carefully is a poor defense. Her agent really screwed up. The agent is supposed to be the professional guiding the listing client and did not exhibit the level of diligence which would have ensured the exclusion negotiated its way from the listing contract into the purchase contract. With this information - who do you think is going to get financially stuck with the bill for a fix? Another easy answer. We also are aware of a straight tax pro-ration that everyone who has taken our course should be more than familiar with how to handle. Knowing that a buyer can blow off without penalty a transaction based on something that came up during an inspection or cannot walk away from from a transaction without just cause without losing their earnest money are also general real estate knowledge topics that only require a glance at the scenario to make certain there is not an unexpected wiggle.

What would terminate a contract? A: Novation B: Counterproposal C: Assignment

B: Counterproposal Explanation: Novation and Assignment are methods to transfer someone's interest in a contract to another without terminating the contract. A Counterproposal legally voids an original proposed contract by changing the terms and conditions in some way, such as substituting a new price, thereby resulting in what is legally considered to be a new contract. More info: Novation and Assignment are very similar. They both take an existing contract and transfer the legal obligations to another to some extent while retaining the original contract. Retaining the original contract and not terminating it is an important bit. Here is an example - you and I sign a purchase contract for me to buy your home. Part of the way through the deal my boss transfers me out-of-town. I no longer want the property, but my buddy does. Only I got a good price and my buddy wants to take over the deal without allowing the seller to end the contract and thereby accept another offer or renegotiate. With your ok we "assign" the contract to my buddy. The terms remain the same , the contract was never terminated, we just put his name on the contract so he can complete the original contract and become the owner. Novation does the exact same thing with one big difference. If my buddy decides not to go through with the deal, if we did assignment I am still on the hook for the contract. If we did novation, I am not on the hook. Assignment transfers legal obligations for the original agreement to a new person, without releasing the original person. Novation transfers legal obligations for the original agreement and releases the original person. To the point of this question - neither assignment or novation terminates the original contract, in fact their entire intent is to not terminate the original contract. Now as to counterproposal. This is a case where the legal language used to describe it in the industry, is not consistent and I am well aware that it can be confusing to students. As you are well aware, a counterproposal amends the terms of an existing offer. However what is legally happening is the original offer as it stands is being terminated and a new offer is taking its place. The new offer consists of the terms and conditions of the original offer combined with the changes outlined in the counterproposal. The reason we consider the original offer terminated is that once the counterproposal is offered, if the counterproposal is rejected neither party can automatically go back to the original offer as it is dead. For example - I send you an offer to buy your house for $1,000. You counter with $1,500. I reject that counter. You, knowing that the original offer gave you two more days to consider it decide to accept it rather than lose the buyer. You cannot do that - the original agreement terminated when the counter was offered. You cannot go back and accept a terminated agreement. You can call me up and ask me to resubmit it, but have the choice to do so or not. It is a whole new ballgame.

The amount due to the seller appears on a closing statement as a: A: Debit to the broker B: Credit to the broker C: Credit to the seller D: Credit to the buyer

B: Credit to the broker Explanation: This answer pertains to the bottom of the settlement sheet when the columns are reconciled. Once you have applied all credits and debits, you total up all columns to the bottom. Obviously they are not going to be the same. Looking at the Seller's debit and credit columns, after you add them up if the Seller's debit column is less than the Seller's Credit column, it means the Seller is getting money back - s/he owes less than s/he is getting. To determine how much, you add whatever you need to the Debit column to make it equal to the Credit column. If for example, the debit column totals $60,000 and the Credit column totals $100,000; you would add $40,000 to the Debit column making both columns equal to $100.000. Unfortunately, you are not done yet. You have added $40,000 to the Seller's Debit column. For every Debit there must be a Credit. Where does this corresponding Credit go? To the Broker Credit column. Remember, the Broker columns represent the Escrow account. The Debit column represents money being deposited into the account. The Credit column represent checks (or wire transfers) that need to be written from the account. In this case; the $40,000 Broker credit is a check that needs to be written to the Seller. This is how the Closing Agents know that s/he needs to write a check. Therefore the amount due to the Seller appears as a Credit Broker.

Earnest money appears on a settlement statement as a: A: Debit to the buyer B: Credit to the buyer C: Debit to the seller D: Credit to the seller

B: Credit to the buyer Explanation: Earnest money is applied to the buyer's purchase price.

The sales price of a property appears on a closing statement as a: A: Credit to the buyer B: Credit to the seller C: Credit to the broker D: Debit to the broker

B: Credit to the seller Explanation: The seller gets a credit for the purchase price of the property.

For a VA loan - how will the Buyer's Loan Processing Fee be shown on a settlement sheet: A: Debit Buyer B: Debit Seller C: Debit Broker D: Not indicated on settlement sheet

B: Debit Seller Explanation: The VA assigns this expense to the Seller. According to VA loan regulations the Buyer can not pay it.

For a VA loan - how will the Buyer's Loan Processing Fee be shown on a settlement sheet A: Debit Buyer B: Debit Seller C: Debit Broker D: Not indicated on settlement sheet

B: Debit Seller Explanation: The VA assigns this expense to the Seller. The Buyer can not pay it. Fees Not Allowed to be Charged to the Veteran Some fees are not allowed to be charged, per VA loan guidelines. Attorney Fee If for anything besides title work. Escrow Fee/Settlement Fee/Closing Fee The VA does not allow the veteran to pay an escrow fee. The escrow fee varies greatly and can be quite expensive, so this is a great benefit to the VA loan. Although the veteran does not pay for the escrow fee, it's good to know what the escrow company does. The escrow company is responsible for collecting and distributing all monies involved in the transaction. Escrow will receive the earnest money, any wired amounts from banks, down payments from the buyer, closing cost assistance from the seller, etc. The escrow company then divvies out the money to the appropriate parties — real estate agent commission checks, a wire paying off the existing loan on the house, a wire to the seller for any proceeds from the sale, etc. In addition, the escrow company makes sure all parties sign all the final loan documents and sale documents. When it's all said and done, escrow records the sale with the appropriate jurisdiction, such as the county government. Closing Protection Letter (CPL) The CPL fee is often included in the escrow fee but sometimes charged separately. It is a letter that makes the title company responsible if escrow does not appropriate loan proceeds correctly. Document Preparation Fee Fee charged by escrow for preparing final loan documents. Underwriting Fee/Processing Fee Fees charged by the lender for processing and underwriting the loan.

The Seller holds security deposits in the amount of $1,000 from each of six tenants. On the settlement sheet: A: Credit Seller & Debit Broker $6,000 B: Debit Seller & Credit Buyer $6,000 C: Credit Seller & Debit Buyer $6,000. D: Prorate the deposits between the Buyer and Seller based on the closing date

B: Debit Seller & Credit Buyer $6,000 Explanation: Security deposits are a surity against damage to a property. It belongs to the tenants and not the owner. When the property is sold - they must be transferred in whole to the new owner. Debit Seller Credit Buyer.

Interest on a new loan appears on a closing statement as a: A: Credit to the buyer B: Debit to the buyer C: Credit to the seller D: Debit to the seller

B: Debit to the buyer Explanation: The broker (Title Company) is charged interest (loan balance times the interest rate divided by 365 days to find daily rate) from the day of closing until the last day of the month.

What is recorded after the sale of a property? A: Bill of sale B: Deed of trust C: Contract to buy and sell real estate D: Earnest money promissory note

B: Deed of trust Explanation: Contract and earnest money are already executed. Deed of Trust is recorded after the sale.

In the absence of language to the contrary in the Property Management Agreement a property manager must: A: Deliver security deposits to owner B: Deposit security deposit into escrow account C: Deposit security deposit into operating account D: Refuse to accept security deposit from tenant

B: Deposit security deposit into escrow account Explanation: Short version: put it into the escrow account first, even if you are going to immediately transfer it to the owner. However, before the owner transfers it you need to provide appropriate written notification to the tenant as to who is holding the deposit and the holder's contact info. CP-5 Commission Position on Advance Rentals and Security Deposits Pursuant to C.R.S. 12-61-113 (l)(g.5) and Commission Rule E-l and E-16, all money belonging to others which is received by a broker must be placed in an escrow or trust account. This applies to tenant security deposits and advance rental deposits, including credit card receipts, held by a broker. A broker may not deliver a security deposit to an owner unless notice is given to the tenant in the lease, rental agreement, or in a separate written notice that the security deposit will be held by the owner. Such notice must be given in a manner so that the tenant will know who is holding the security deposit, and shall include either the true' name and current mailing address of the owner or the true name and current mailing address of a person authorized to receive legal notices on behalf of such owner, along with specific requirements for how the tenant is to request return of the deposit. If, after receipt by the broker, the security deposit is to be transferred to the owner or used for the owner's benefit, the broker, in addition to properly notifying the tenant, must secure the consent of the owner to assume full financial responsibility for the return of any deposit which may be refundable to the tenant. The broker shall not withhold the identity of the owner from the tenant if demand for the return of the deposit is properly.

All of these are examples of a common area of a condominium EXCEPT: A: Laundromat B: Designated parking place C: Swimming pool D: The land

B: Designated parking place Explanation: A designated parking place is not common area since it is defined as a right of one condominium owner.

Approved contracts and forms are regulated by the Colorado Real Estate Commission Rule F. It: A: Establishes fines for the use of non-approved forms B: Enables brokers to comply with the conditions of Conway-Bogue C: Mandates that attorneys prepare closing documents D: Establishes pricing for the purchase of approved contracts and forms

B: Enables brokers to comply with the conditions of Conway-Bogue Explanation: Through the adoption and promulgation of Commission Rule F, it became compulsory for all real estate brokers licensed by the State of Colorado to use Commission-approved forms in most of their contracting. Section 12-61-803(4), C.R.S., grants the Colorado Real Estate Commission statutory authority to promulgate standard forms for use by licensees. One of the major purposes of the rule is to help to ensure broker compliance with the Colorado Supreme Court Conway-Bogue decision. A second purpose is to help promote uniformity in contracting to better protect the public. The privileges granted should not be abused by the real estate broker.

Colorado licenses must be renewed: A: Every year at the anniversary of licensing B: Every three years at anniversary of licensing C: Every year on December 31 D: Every three years on December 31

B: Every three years at anniversary of licensing Explanation: Colorado licenses renew every three years on the anniversary of original licensing.

The only listing where the broker does not have to show that he is the procuring cause is: A: Exclusive agency B: Exclusive right to sell C: Exclusive agency - net listing D: Open listing

B: Exclusive right to sell Explanation: In an Exclusive right to sell the broker will get a commission no matter who sells the property.

True/False - According to Commission Position 42 on Apartment Building or Complex Management, an on-site manager performing customary duties is required to have a real estate license. A: True B: False

B: False Explanation: * CP-42 Commission Position on Apartment Building or Complex Management The Commission recognizes that owners of apartment buildings or complexes will engage the services of real estate brokerages or unlicensed, on-site managers, or both. An "owner" includes either a person or an entity recognized under Colorado law. The owner must have a controlling interest in the entity formed by the owner to manage the apartment building or complex. In the instance of an entity, the "owner" may form a separate entity to manage the apartment building or complex. The ownership entity and the entity formed by the owner to manage the apartment building or complex must be under the control of the same person or persons. Pursuant to §12-61-101(2)(b)(XII), C.R.S., a regularly salaried employee of the owner of an apartment building or complex is permitted to perform customary duties for his or her employer without a real estate broker's license. The unlicensed, on-site manager must either report directly to the owner or to the real estate broker, if a real estate broker is engaged to manage the property. The Commission views the following to be customary duties of an unlicensed, on-site manager: 1. Performance of clerical duties, including gathering information about competing projects. 2. Obtain information necessary to qualify perspective tenants for a lease. This includes obtaining and verifying information regarding employment history, credit information, references and personal information as necessary. 3. Provide access to a property available for lease and distribute preprinted, objective information prepared by a broker as long as no negotiating, offering or contracting is involved. 4. Distribute preprinted, objective information at an on-site leasing office that is prepared by an owner or broker, as long as no negotiating, offering or contracting is involved. 5. Quote the rental price established by the owner or the owner's licensed broker. 6. Act as a scrivener to the owner or the broker for purposes of completing predetermined lease terms on preprinted forms as negotiated by the owner or broker. 7. Deliver paperwork to other brokers. 8. Deliver paperwork to landlords and tenants, if such paperwork has already been reviewed by the owner, or a broker or has been prepared in accordance with the supervising broker's instructions. 9. Collect and deposit rents and security deposits in accordance with the owner's lease agreement or the brokerage firm's written office policy. 10. Schedule property maintenance in accordance with the brokerage firm's management agreement or the owner's lease agreement. If the owner has executed a Power of Attorney form or a written delegation of authority that authorizes the unlicensed, on-site manager to sign and execute leases on behalf of the owner, the unlicensed, on-site manager may execute those without possessing a real estate broker's license. Brokers supervising unlicensed, on-site managers with this authority are expected to review the executed documents to ensure compliance with lease terms, management agreements, local, state and federal laws, including the real estate brokerage practice act and Commission rules. Employing brokers need to be especially aware of their supervisory duties under the license law. Supervisory duties apply whether the on-site manager is an employee or independent contractor of the broker or brokerage firm, or if the on-site manager is a regularly salaried employee of the apartment building or complex owner. The employing broker should have a written office policy explaining the duties, responsibilities and limitation on the use of on-site managers. This policy should be periodically reviewed with all employees.

According to Commission Position 25 on Recording Contracts should a listing broker get into a dispute with a seller over a commission, the broker may pursue a civil action and file a lis pendens. A: True B: False

B: False Explanation: CP-24 ... File a lis pendens (notice of pending lawsuit)? ANS: No. A lis pendens relates to a title or ownership dispute involving the land itself. The broker has no legal interest in the real estate.

True/False - The name of the Brokerage Firm with whom the team is associated does NOT have to appear on all team advertising as long as all licensed brokers on the team have their licenses registered under the Brokerage Firms name. A: True B: False

B: False Explanation: CP-40 Commission Position on Teams (4-5-2011) The Commission recognizes that there are benefits to both real estate brokers and consumers in the usage of real estate broker teams. Teams may be formed within a licensed brokerage firm with the approval of the employing broker. Real estate brokers operating as teams need to ensure that they are compliant with Commission rules regarding advertising, name usage and supervision. Advertising and name usage: While there is no prohibition of teams, real estate brokers need to ensure that they do not advertise in a manner that misleads the public as to the identity of the brokers' licensed brokerage. Real estate brokers that function as teams should not advertise teams using the terms "realty", "real estate", "company", "corporation", "corp.", "inc.", "LLC" or other similar language that would indicate a company other than the employing brokerage firm. Advertising includes, but is not limited to, websites, signage, property flyers, mailings, business cards, letterhead and contracts. The advertising of team names should never give the impression that the team is an entity separate from the licensed real estate brokerage. If the identity of the employing broker or the brokerage firm is difficult for the public or the Commission to ascertain, the team may be in violation of Rule E-8 Advertising. Supervision: In addition to the supervision requirements set forth in Rules E-31 and E-32, Rule E-30 Employing broker responsibilities requires that the broker designated to act as the broker for any partnership, limited liability company or corporation, i.e. the employing broker, fulfill the following duties: 1) Maintain all trust accounts and trust account records; 2) Maintain all transaction records; 3) Develop an office policy manual and periodically review office policies with all employees; 4) Provide for a high level of supervision for newly licensed persons pursuant to Rule-32; 5) Provide for a reasonable level of supervision for experienced licensees pursuant to Rule E-31; 6) Take reasonable steps to ensure that violations of statutes, rules and office policies do not occur or reoccur; 7) Provide for adequate supervision of all offices operated by the broker, whether managed by licensed or unlicensed persons. Pursuant to §12-61-118, C.R.S. and Rule E-29, employing brokers are also responsible for providing supervision over such activities with reference to the licensing statutes and Commission rules for all brokerage employees, including but not limited to administrative assistants, bookkeepers and personal assistants of licensed employees. Thus, employing brokers are responsible for the actions of unlicensed persons who perform functions within the real estate broker team. Employing brokers need to ensure that any unlicensed person acting within the team is not engaged in practices that require a real estate broker's license. Employing brokers also need to establish that the compensation paid to an unlicensed person for services provided is not in the form of a commission. Compensation paid to an unlicensed person is not required to to be paid solely by the employing broker. However, §12-61-117, C.R.S. requires that all licensee compensation or valuable consideration for the performance of any acts requiring a broker's license is paid solely by the employing broker.

True/False - According to CP-11 on Compensation between an Employed and Employing Broker, in the event of a commission dispute the Colorado Real Estate Commission will schedule a hearing and render a judgement. A: True B: False

B: False Explanation: The Real Estate Commission... "Has no legal authority to render a monetary judgment in a money dispute nor will it arbitrate such a matter" A dispute over a commission between the employed and employing broker must be settled between the parties or by a civil action in a court.

Under an Exclusive Buyer Agency Agreement, the broker has what agency relationship to the purchaser? A: Principal B: Fiduciary C: Transaction Broker D: Client

B: Fiduciary Explanation: Files need to be kept in the office unless removed for signatures or closing, then they must be returned ASAP.

A broker has overbooked his Saturday for showing buyers some homes. The broker may suggest all of the following except: A: getting together on Sunday instead of Saturday B: Have his unlicensed assistant show and sell the buyer a home C: give a referral to another agent in his office for taking the buyers to see the properties D: reschedule for the following weekend or next available time for the buyers

B: Have his unlicensed assistant show and sell the buyer a home Explanation: Before showing buyers properties the broker needs to disclose the types of brokerage relationships.

According to CP-39 on Lease Options, Lease Purchase Agreements and Installment Land Contracts a licensee may create the aforementioned agreements by: A: Using the appropriate commission approved form B: Having a lawyer draw them up C: Creating an addendum to the lease or purchase contract and having it signed by the parties involved D: Adding the necessary language to the Additional Provisions section of an Exclusive Right to Buy/Sale

B: Having a lawyer draw them up Explanation: Installment Land Contracts AKA "Land Contracts" is a purchase agreement in which the owner retains legal title to a property while the buyer, usually a tenant, makes payments. ONCE THE BUYERS COMPLETES THESE PAYMENTS, THE SELLER DEEDS THE PROPERTY TO THE BUYER. Two big points here: 1) Since the buyer does not take legal ownership until they complete payments, this means the buyer, who usually has possession of the property, has no legal rights to the property beyond that of a renter. THEY DO NOT OWN IT - THE SELLER DOES. 2) Because of the number of creeps who have used installment land contracts to defraud unknowing buyers, the real estate commission does not have an approved form for us as agents to use. These contracts are not illegal, if you have clients who want to enter into such an agreement, they (notice the "they" here - I for one would not touch a land contract transaction for all the tea in China) need to bring in an attorney to draw up the necessary paperwork. The real estate commission feels so strongly about this, they issued a position statement on it. Here it is: CP-39 Commission Position on Lease Options, Lease Purchase Agreements and Installment Land Contracts (4-5-2011) The Commission recognizes that in order to maintain the resilience of the real estate market during times when conventional lending requirements are rigorous, alternative funding practices are utilized to sustain the market conditions of supply and demand. The Commission has received and investigated numerous complaints pertaining to lease options, lease purchase agreements and installment land contracts. Although the Commission does not have the authority to prohibit the types of real estate transactions that real estate brokers participate in, the Commission strongly cautions real estate brokers to utilize the services of an attorney licensed to practice law within the State of Colorado. It has been the Commission's observation, based on complaints received, that lease option and lease purchase transactions are complex and generally contain provisions with significant financial risk posed to the prospective buyer and seller. Installment land contracts and the other transactions mentioned in this position statement afford buyers the opportunity to take possession of the real property and make installment payments to the seller. There is a significant potential for harm to the seller, buyer or assignee if the installment land contract is not properly drafted. In all of the above transactions, the seller retains legal title to the property while the buyer may acquire equitable title. The Commission does not have an approved contract form necessary to memorialize the terms and nuances related to these complex transactions, or any jurisdictional regulations that may be germane. Pursuant to Rule F, the appropriate provisions of the license law and the brokerage relationship act (§§12-61-113, 12-61-804, 805 and 807, C.R.S.), real estate brokers are prohibited from drafting a contract document that would reflect the terms of such a transaction as it would exceed their level of competency and is a matter requiring the expertise and advice of an attorney. Additionally, such behavior may be construed as the unauthorized practice of law by the real estate broker and subject to civil penalties. The contracts for these transactions should not be prepared by a real estate broker; rather, the documents should be drafted by a licensed Colorado attorney-at-law engaged for each particular transaction.

If an employing broker (AKA sponsoring broker) moves his place of business without advising the Real Estate Commission: A: His license is inactivated but not licensees working for him B: His license and all associate brokers working for him are inactivated C: The licenses of all associate brokers under him are inactivated

B: His license and all associate brokers working for him are inactivated Explanation: We have various questions floating around related to what happens when a broker fails to notify the real estate commission of a business address change. Any licensee who does not notify the Commission of an address change will have their license inactivated. When the licensee is also the mama or poppa bear of the office (the employing or sponsoring broker) the penalty goes up. Since an employing broker with an inactive license cannot have licensees reporting to him/her AND a licensee who is not independent cannot have an active licensee without reporting to an employing broker - the effect is catastrophic. Everybody's license in the office is inactive. Here are the applicable statues: From chapter in real estate manual on License Law § 12-61-109, C.R.S. Change of license status - inactive - cancellation. (1) Immediate notice shall be given in a manner acceptable to the commission by each licensee of any change of business location or employment. A change of business address or employment without notification to the commission shall automatically inactivate the licensee's license. § 12-61-110, C.R.S (5) The suspension, expiration, or revocation of a real estate broker's license shall automatically inactivate every real estate broker's license where the holder of such license is shown in the commission records to be in the employ of the broker whose license has expired or has been suspended or revoked pending notification to the commission by the employed licensee of a change of employment.

Regarding delivery of Earnest Money: A: It must be delivered at the time of tender of this contract B: If other than at the time of tender of this contract it must be delivered no later than the Alternative Earnest Money Deadline C: If other than at the time of tender of this contract it must be delivered no later than the Earnest Money Deadline

B: If other than at the time of tender of this contract it must be delivered no later than the Alternative Earnest Money Deadline Explanation: Earnest money checks are not always delivered with the contract. Most often they are delivered by the Alternative Earnest Money Deadline. From the Contract to Buy/Sell Real Estate: Alternative Earnest Money Deadline. The deadline for delivering the Earnest Money, if other than at the time of tender of this Contract, is as set forth as the Alternative Earnest Money Deadline More info: A check for the earnest money should either accompany the offer until accepted or be delivered prior to expiration of the Alternative Earnest Money Deadline. Most often, a buyer's agent holding the deposit forwards a copy of the earnest money check with the offer and then specifies a date in the Alternative Earnest Money Deadline when the actual check will be delivered after contract acceptance. If the deposit was tendered with the contract; it must be deposited no later than 3 business days after notice of acceptance of the contract. From the real estate manual: "Unless otherwise agreed, earnest money deposits held by the specified broker must be deposited not later than the third business day after notice of acceptance of the contract. The broker should keep a copy of the validated escrow deposit slip and earnest money check in the office transaction file for later inspection."

According to CP-6 on the Release of Earnest Money Deposits, should a broker refuse to release earnest money to the appropriate party when there is no dispute until such time as both parties have signed a written release? A: Earnest money deposits should never be issued without a signed release by all parties B: If there is no dispute, the broker should release earnest money to the appropriate party immediately C: Regardless if there is a dispute or not; the broker decides who should receive the earnest money in accordance with commission rules D: If there is no dispute, agency rules require the listing broker to release earnest money in accordance with the express direction of the seller

B: If there is no dispute, the broker should release earnest money to the appropriate party immediately Explanation: Releases are not required when there is no dispute - the money should be released immediately. When there is a dispute, there are no commission rules as to who should receive the earnest money, nor is the broker allowed to make a decision. Disputed earnest money must be resolved by the parties to the contract, by an agreed upon arbitrator or in a court of law. CP-6 Commission Position on Release of Earnest Money Deposits Rule E-15 states in part that: "When for any reason the owner fails, refuses, neglects or is unable to consummate the transaction as provided for in the contract, and through no fault or neglect of the purchaser the real estate transaction cannot be completed, . . . the deposit should be returned to the purchaser at once . . ." The Commission will not pursue disciplinary action against a broker for refusal to disburse disputed funds when the broker is acting in accordance with the language of the appropriate Commission-approved contract to buy and sell. It is clear in the contract to buy and sell real estate that the broker holds the earnest money on behalf of both buyer and seller. If there is no dispute, the broker should disburse to the appropriate party immediately. Some brokers unnecessarily require a signed release by both parties even when there is no disagreement. Audits have disclosed many instances where brokers have held deposits for extended periods just because one or both parties will not sign a release. While good judgment is always urged, releases are not a requirement of the Real Estate Commission. In addition, where one party has given written authorization for the release of a deposit to another, a written release by the other party is not required.

The seller of the property is including the refrigerator and window coverings with the sale. Where in the offer to purchase is this addressed? A: Since these items are in the multiple listing, there is no need to mention them B: In the inclusions section of the contract C: In the other provisions section of the contract D: Since these items are personal property, they cannot be mentioned in the contract to purchase the real property

B: In the inclusions section of the contract Explanation: All items that are inclusions to the sale and not to be sold as personal property must be included in the inclusions part of the contract.

The method of appraising property in which net income is converted into value by use of a capitalization rate. A: Cost Approach B: Income Approach C: Sales Comparison Approach D: Depreciation Approach

B: Income Approach Explanation: Income Approach is one of the three main methods of appraisal in which an estimate of the subject property's value is based on the net income it produces; also called the capitalization method or investor's method of appraisal. The formula for determining the value of a property using this method is: 1) Estimate potential gross income 2) Subtract vacancy rate Result is Effective Gross Income 3) Subtract building operating expenses (note debt service also know as mortage payments are NOT considered an operating expense for determining value) Result is Net Operating Income 4) Determine Capitalization Rate - Capitalization Rate is the return on investment based on the income of the property. Find this by looking at the Cap Rate of other like properties in the area. 5) Net Operating Income divided by Capitalization Rate = Value of Property

Which of the following would be considered community property? A: A gift of property to the wife during the marriage B: Income earned by a spouse during the marriage C: Property inherited by the husband during the marriage D: Income earned by the wife prior to the marriage

B: Income earned by a spouse during the marriage Explanation: In a community property jurisdiction, most property acquired during the marriage (except for gifts or inheritances) is owned jointly by both spouses and is divided upon divorce, annulment or death

In Colorado, who of the following is exempt from real estate license law? A: Property Manager renting single family homes for a variety of owners B: Investor who owns 12 investment properties and sells one to an owner-occupant C: Inactive licensee assisting a friend in filling out a purchase offer D: Attorney-at-law collecting a five percent commission for helping

B: Investor who owns 12 investment properties and sells one to an owner-occupant Explanation: Private owners may always act for themselves and are not subject to real estate license laws. Attorneys are normally exempt from real estate license law while practicing law but must have a license to act as a broker. An inactive licensee is still bound by all rules of the commission, and the right-of-way specialist is exempt only for certain specific activities.

In Colorado, who of the following is exempt from real estate license law? A: Property Manager renting single family homes for a variety of owners B: Investor who owns 12 investment properties and sells one to an owner-occupant C: Inactive licensee assisting friends in filling out purchase offers and negotiating deals D: Attorney at law collecting a five percent commission for helping

B: Investor who owns 12 investment properties and sells one to an owner-occupant Explanation: Private owners may always act for themselves and are not subject to real estate license laws. Attorneys are normally exempt from real estate license law while practicing law but must have a license to act as a broker. An inactive licensee is still bound by all rules of the commission, and the right-of-way specialist is exempt only for certain specific activities.

Tenant Teri signs a six-month lease and agrees to pay $375.00 a month in rent, utilities included, on an apartment unit. Teri moves out after two months because the electrical service has been cut off. Teri: A: Is in violation of her lease and is obligated to continue paying rent B: Is not obligated to continue making rent payments as she has been constructively evicted C: Has been actually evicted and need not continue paying rent D: Has abandoned the property and may be sued for specific performance

B: Is not obligated to continue making rent payments as she has been constructively evicted Explanation: This is constructive eviction.

In Colorado, each county requires the "Real Property Transfer Declaration" to be completed at closing and mailed to the county. Which of the following statements are true regarding this document? A: It is usually executed by the seller B: It discloses the inclusion of personal property in the transfer C: It discloses any relationship the buyer may have to the broker D: It discloses certain terms of the financing that was secured by the seller

B: It discloses the inclusion of personal property in the transfer Explanation: The buyer customarily executes the Real Property Transfer Declaration; the seller could fill it out if the buyer was unable to do so.

In Colorado, a broker may pay a referral fee to an unlicensed person in which of the following circumstances? A: Only licensed brokers may receive referral fees, thus it is never acceptable B: It is acceptable as long as the unlicensed person does nothing that requires a real estate license C: It is acceptable only if the unlicensed person is a party to the transaction D: It is acceptable if the unlicensed person only helps to identify and qualify one party to the transaction

B: It is acceptable as long as the unlicensed person does nothing that requires a real estate license Explanation: According to the real estate commission, there is no public harm in paying a referral fee to an unlicensed person as long as the person has done nothing requiring a license, and the amount paid is "reasonable" under the circumstances. The most common acceptable example is paying a referral fee to an unlicensed individual whose sole activity was providing a name. Do not confuse "referral fee" with "commission". You can only pay a commission to a Colorado licensed agent. Referrals are ok to pay to anybody. The difference is what you do for the money. If the person receiving the money is doing something that requires a license such as negotiating then it is a commission. If the person is just passing a name along, which does not requires a license - then it is a referral fee. Referral Fee's also have to be reasonable and cannot be a commission in disguise. On the flip side - it is not permissible for a licensed agent to RECEIVE a referral fee from any service provider to a transaction such as the Title Company, Lender or Appraiser. This would violate federal RESPA rules as it is considered a conflict of interest.

When a counteroffer is made, what happens to the original offer? A: It is considered a novation B: It is deemed rejected C: It is held in secondary position D: It can be used as a fall back position, in the event that the counteroffer is rejected

B: It is deemed rejected Explanation: A counteroffer rejects the original offer and is considered the new contract.

What would you say is the real basis for value of the average property; i.e. the economic characteristic of value? A: Opportunity for a profit if purchased B: Its relative scarcity and the demand for it C: How it is zoned D: Replacement cost

B: Its relative scarcity and the demand for it Explanation: This is an example of supply and demand. All other matters affecting the property's value revolve around its usefulness and scarcity.

An older couple owned a property together. The man died and his wife is the sole owner of the property. How did the couple acquire title to the property? A: In Severalty B: Joint tenants with right of survivorship C: Tenants in Common

B: Joint tenants with right of survivorship Explanation: In estate law, joint tenancy is a special form of ownership by two or more persons of the same property. The individuals, whoare called joint tenants, share equal ownership of the property and have the equal, undivided right to keep or dispose of theproperty. Joint tenancy creates a Right of Survivorship. This right provides that if any one of the joint tenants dies, the remainder of the property is transferred to the survivors. - West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

Which of the following statement(s) is (are) true? A: New real estate licenses expire at midnight on December 31st of the year they are issued B: Licenses are renewed for three year periods C: Licenses renew one year after you pass the state exam D: Employing broker licenses are for five years

B: Licenses are renewed for three year periods Explanation: Licenses are renewable three years from your date of acquiring your license.

Lily listed her house for sale with a broker on February 1st. The listing agreement was to last for five months but in April she decided that the house was no longer for sale. Which of the following statements is true? A: Lily is required by law to leave her house on the market until June B: Lily has withdrawn the broker's authority to sell the property and may be subject to reimbursing some broker expenses C: Lily has cancelled the agreement and there are no penalties D: The real estate commission will decide if Lily's action was justified

B: Lily has withdrawn the broker's authority to sell the property and may be subject to reimbursing some broker expenses Explanation: Lily may cancel the agreement but she may be responsible for some expenses. The real estate commission will not be involved.

Lily listed her house for sale with a broker on February 1st. The listing agreement was to last for five months but in April she decided that the house was no longer for sale. Which of the following statements is true? A: Lily is required by law to leave her house on the market until June. B: Lily has withdrawn the broker's authority to sell the property and may be subject to reimbursing some broker expenses. C: Lily has cancelled the agreement and there are no penalties. D: The real estate commission will decide if Lily' s action was justified.

B: Lily has withdrawn the broker's authority to sell the property and may be subject to reimbursing some broker expenses. Explanation: Lily may cancel the agreement but she may be responsible for some expenses. The real estate commission will not be involved.

Who holds the earnest money in a transaction with a listing broker and a buyer's agent? A: Buyer's Broker B: Listing Broker C: Must be in a neutral escrow company D: The brokers establish a joint escrow account

B: Listing Broker Explanation: The listing broker usually establishes the escrow account, but the parties can always agree on any other practice they specify.

Broker had a property on the market last yr & knows there was a serious problem. The current owners of the property are aware of this problem, but tell the listing broker they are not going to disclose the problem to prospective buyers as buyers would not want the property and the property would not be as marketable. The agent should: A: Be obedient to the client, do nothing, and list the property B: Listing agent informs the seller they need to disclose this information on the property disclosure and if they are not willing to put this information on the property disclose the broker will not take the listing. C: Disclose the problem to prospective buyers without the owner's knowledge D: Take the listing, do not disclose the problem, but recommend to prospective buyers they perform an inspection

B: Listing agent informs the seller they need to disclose this information on the property disclosure and if they are not willing to put this information on the property disclose the broker will not take the listing. Explanation: Easy answer, agents cannot be creeps or dishonest

Who usually pays the earnest money check into escrow after a contract has been accepted? A: Buyer B: Listing broker C: Seller D: Buyer broker

B: Listing broker

As a transaction broker in an exclusive right to sell listing contract, the listing broker must disclose: A: The motivation of seller if requested by buyer B: Material facts about the property known to the broker C: Facts about the seller known by the broker D: All facts known by the broker about the transaction

B: Material facts about the property known to the broker Explanation: All licensees have a statutory duty to disclose material facts about a property that are known by the broker.

As a transaction broker in an exclusive right to sell listing contract, the listing broker must disclose: A: The motivation of seller if requested by buyer B: Material facts about the property known to the broker C: Facts about the seller known by the broker D: All facts known by the broker about the transaction

B: Material facts about the property known to the broker. Explanation: All licensees have a statutory duty to disclose material facts about a property that are known by the broker.

Personal property may be distinguished from real property by its: A: Great Variety B: Mobility C: Overhead Price D: Multiplicity of Uses

B: Mobility Explanation: Personal property is not attached to the land or the improvements and it usually is movable. Even though it may be personal property, the contract can include it in the sale of the real estate and then, by means of the contract it does become real estate.

Mr. Ackerman leased a property for five years to Mr. Bones. During this term, Mr. Ackerman died and then Mr. Bones discovered that Mr. Ackerman's interest was a life estate. The owner of the property was correct in advocating which of the following? A: Mr. Bones' leasehold estate is valid for the length of the lease B: Mr. Bones' interest was terminated upon Mr. Ackerman's demise C: Mr. Ackerman's heir would receive the fee title D: The owner has an estate in remainder

B: Mr. Bones' interest was terminated upon Mr. Ackerman's demise Explanation: This question illustrates the rare situation where a lease may be terminated by death. The lessor can only lease the property for the term of his life. Upon the lessor's death, he no longer has an interest in the property and the lessee's interest also ceases.

An agreement appointing an agent in Colorado in a real estate transaction: A: Contain a holdover clause B: Must be in writing C: Be recorded in the county seat D: Use the approved Exclusive Right to Sell form

B: Must be in writing Explanation: Colorado state laws dictate that all contracts must be in writing.

In the Colorado Contract to Buy & Sell, encumbrances to be paid by the seller: A: Must be paid prior to closing B: Must be paid at or before closing C: Must not be paid from proceeds from the sale of the property D: May be paid by the seller after closing

B: Must be paid at or before closing Explanation: The encumbrances must be paid by the Seller before the property can transfer. From the Contract to Buy/Sell Real Estate: PAYMENT OF ENCUMBRANCES. Any encumbrance required to be paid will be paid at or before Closing from the proceeds of this transaction or from any other source.

According to Commission Position 2 on Earned Fees - can a commission be paid to a broker whose license is in an inactive status? A: Yes B: No

B: No Explanation: A broker with an inactive license is not licensed CP-2 Commission Position on Earned Fees Section 12-61-113(1)(j), C.R.S. of the license law forbids a broker from paying a commission or valuable consideration, for performing brokerage functions, to any person who is not licensed as a real estate broker. Brokerage functions include negotiating the purchase, sale or exchange of real estate.

Broker Bill Butter is working with Buyer Brian Bread and has found a property on which the Buyer wants to place an offer. The property that he likes is owned by Seller Sammy Samuel and listed by Broker Cherry Cleary. The property is located at 2443 E Westgate Ave in Durango, CO. The asking price is $315,000. Buyer Bread offers $299,000 on April 10th and wants all appliances, including the washer and dryer included in the sale price; these appliances were excluded in the listing as was the hot tub on the patio. The offer is countered by Seller Samuel on the recommendation of his agent Broker Cherry Cleary on April 11th at $309,000 and will include all appliances, except the washer and dryer. Buyer Bread accepts this counter offer on April 12th and the closing is scheduled for May 25. An inspection is held on April 16th and Buyer Bread wants some roof shingles repaired and the carpet in the master bedroom to be replaced. Seller Samuel agrees to the shingles being repaired, but will only give a $750 credit at closing to the Buyer Bread to replace the carpet; Buyer Bread accepts. Prior to closing, Buyer Bread requests that the seller allow them to start a kitchen remodel prior to closing. Seller Samuel will not allow this and Buyer Bread gets angry and wants out of the contract. Should you ever encourage or recommend commencing with any type of property improvements or remodeling prior to closing on the property? A: Yes B: No

B: No Explanation: No. The only repairs or improvements that should be initiated after contract acceptance are those identified in the Inspection Notice as required to close the sale. You should always advise and council your buyer against investing money and/or making improvements to any property that does not legally belong to them. They should only invest money to improve the property after they close and have title to the property. Investing money to repair, improve or alter a property prior to receiving title to the property is never a good idea. Had Broker Butter properly explained the risk associated with commencing a remodel project prior to ownership, Buyer Bread would not have asked Seller Samuel to start a kitchen remodel. Buyer Bread would have clearly understood the risks associated and agreed to start the remodel after closing on the property. Moral to the story... It's your responsibility to manage your client's expectations throughout the transaction. Avoid these situations entirely, before they become an issue between the buyer and seller. If your buyer wants to do something that's not a good idea, and has the potential to enflame the relationship (buyer/seller), you'll be better served to council your buyer rather than ask the seller to agree to something that neither party should agree to. The buyer should not have asked for this, and the seller was very wise not allow the remodel to take place while they still own the property.

Which of the following is not essential to a valid real estate sales contract? A: Offer and acceptance B: Notarization C: Consideration D: Description of the property

B: Notarization Explanation: In many states, a real estate contract does not have to be notarized to be valid.

The Residential Contract to Buy and Sell includes various provisions that call for notification to one of the parties about various events or objections. Which of the following is correct with regard to whom the notification must be delivered? A: Notice may be sent to the broker but is legally delivered only when received by the party. B: Notice is legally delivered when received by either the party or the broker working with that party. C: Notice must be delivered directly to the party and not its broker. D: Notice to the party must be by "normal channels of communication," such as telephone, mail, or fax

B: Notice is legally delivered when received by either the party or the broker working with that party. Explanation: The notice is legally delivered and thus effective when received by either the other party or the broker working with that party. Because the contract form provides for notice in this manner, the contract would have to be altered if the form was unsatisfactory.

Which of the following would normally be a reason for suspension or revocation of a real estate license? A: Charging more than a regular commission B: Offering a property for sale on terms or at a price other than stipulated by the owner C: Holding only one open house during a six month listing period D: Not selling the property within the listing time period

B: Offering a property for sale on terms or at a price other than stipulated by the owner Explanation: Anti-trust laws prohibit "standard," "average," "regular," or "going rate" commissions. Offering a property for more or less than the seller wants is a violation of license law.

Select the correct statement about a lease in Colorado: A: Every lease contains an implied warrant of habitability and quiet enjoyment B: Only residential leases have an implied warrant of habitability C: Every lease contains an implied warrant of habitability

B: Only residential leases have an implied warrant of habitability Explanation: Property Mangement and Leases - Duties and Liabilities of the Parties, All residential leases have an implied Warranty of Habitability. This means they must meet a minimal set of standards for housing established by the State. "Implied" means the Warranty of Habitability standards do not have to be physically listed in a lease to be effective as they are State law. Commercial leases do not have a Warranty of Habitability. As to responsibility of making repairs - neither a landlord or tenant is required to make a repair unless stated in the lease. However the Landlord on residential properties is required to provide a habitable home that satisfies the conditions of the Warranty of Habitability. If the home is deemed not habitable, the Landlord cannot be compelled to make a repair, but the Tenant cannot be compelled to stay. When a tenant files a legal action to break a lease due to an unhabitable situation - this is called "constructive eviction."

A broker allowed her license to expire and renewed it 32 days after the expiration date. What does she need to do to reinstate her license?" A: Pay the renewal fee B: Pay the renewal fee, and pay half the renewal fee for it being over 30 days C: Pay the renewal fee and retake the state examination D: Pay the renewal fee and take 8 credit hours of continuing education

B: Pay the renewal fee, and pay half the renewal fee for it being over 30 days Explanation: On Renewal Fees as per Real Estate Commission: I) If proper application is made within thirty-one days after the date of expiration, by payment of the regular three-year renewal fee; (II) If proper application is made more than thirty-one days but within one year after the date of expiration, by payment of the regular three-year renewal fee and payment of a reinstatement fee equal to one-half the regular three-year renewal fee; (III) If proper application is made more than one year but within three years after the date of expiration, by payment of the regular three-year renewal fee and payment of a reinstatement fee equal to the regular three-year renewal fee.

Under a lease for commercial property a tenant agrees to pay $4,000 per month plus 3% of the monthly sales, This type of lease is called a: A: Net lease B: Percentage lease C: Graduated lease D: Ground lease

B: Percentage lease Explanation: Any lease which is based upon the sales of a tenant is a percentage lease.

Depreciation caused by deterioration to the physical structure is: A: Functional Obsolesence B: Physical Obsolesence C: External Obsolesence D: Deteriorating Obsolesence

B: Physical Obsolesence Explanation: One of the three forms of obsolesence along with Functional and External. Physical Obsolesence is a loss of value due to wear and tear or deferred maintenance.

A seller approached you saying they are unhappy with the broker currently listing their property and wants you to take it over, you: A: Tell them to cancel the listing and then come and see you B: Prepare a listing agreement for after the current agreement expires C: Coach them on how to cancel their current listing agreement D: Prepare a current listing agreement immediately

B: Prepare a listing agreement for after the current agreement expires Explanation: A licensee who coaches or encourages a seller to cancel an existing listing contract may be found guilty of "sign-crossing" that is; interfering with the brokerage relationship between a broker and a client. Negotiating and/or preparing a future listing agreement when responding to a seller who wishes not to continue a relationship with another broker is perfectly acceptable.

A competitive market analysis is performed when: A: Condemning property B: Pricing property C: Appraising property D: Assessing property

B: Pricing property Explanation: Appraisal and assessments are done for determining value. The competitive market analysis (also referred to as a comparative market analysis or CMA) is used extensively by real estate brokers in pricing property

Which of the following is required to have a real estate license? A: Resident manager of an apartment building B: Property manager specializing in handling buildings in commercial districts C: A salesperson who works in a builder's model homes D: An appraiser

B: Property manager specializing in handling buildings in commercial districts Explanation: A licensee is someone who offers real estate services to the public. A resident manager of an apartment building, who is employed by the owner and does not negotiate leases, does not need a real estate license as he/she is considered to be an extension of the owner and is not offering his/her services to the public. Salespersons working for a home builder or any developer, although they are often not salaried and work for commission, are specifically excluded from needing a real estate license by State law. An appraiser needs an appraisers license - not a real estate license. A property manager managing multiple properties, owned by different owners, is clearly offering his/her services to the public and requires a real estate license.

Which statement is false? A: A broker may deliver to an owner the security deposits, so long as it is disclosed B: Property managers may use security deposits for an emergency C: Delivery of earnest money to anyone without proper notice constitutes a violation of the license law escrow statute D: Delivery of earnest money to anyone without proper notice may be subject the broker to civil liability

B: Property managers may use security deposits for an emergency Explanation: Security deposits are the tenant's money held for surety against possible damage. They are not the owner's money to use in an emergency.

The earth's surface extending downward to the center of the earth and upward into space, including all things permanently attached, but not the rights such as an easement, is known as: A: Real property B: Real estate C: Land D: A bundle of legal rights

B: Real estate Explanation: The terms real property and land are often confused with the term "real estate." However, "land" is a more specific definition, since it includes the earth's surface and all things attached by nature; real estate includes the land and all things attached by nature and mankind, while "real property" includes all of real estate plus the rights including the "bundle of legal rights" that are obtained with ownership.

An agent sells a mobile home. Its purpose will be a residence, with the transfer of real property. What kind of license is needed? A: Motor vehicle license B: Real estate license C: Mobile home dealer's license D: Mobile home vehicle license

B: Real estate license Explanation: The sale of real property requires a real estate license.

How should you respond if a client asks you about sex offenders in the neighborhood in which they are planning to buy a property? A: Canvas the neighborhood asking about sex offenders B: Refer them to the local law enforcement agency that keeps the information C: Call the police station to get the information for them D: Tell them the information is protected under "fair housing" disability category

B: Refer them to the local law enforcement agency that keeps the information Explanation: You should never provide the information for them just refer them to where to get the information. It is a liability issue

A lady goes to a bank to get a loan for a subdivision she wants to build. The bank orders a phase one environmental assessment. What does this assessment include? A: Soil and water samples looking for hazardous materials B: Review of records, a site inspection and interviews with owners, occupants, neighbors and local government officials C: A review of a development's impact on air and water quality D: The performance of environment mitigation to minimize or eliminate known hazards

B: Review of records, a site inspection and interviews with owners, occupants, neighbors and local government officials

The rights of an owner with property abutting the bank of a stream is/are called; A: Littoral rights B: Riparian rights C: Eminent domain D: Dominant tenements

B: Riparian rights Explanation: Riparian rights are along a stream, river or creek; littoral rights are abutting a pond, lake, or ocean.

The Principal of Substitution, which states that no one will pay more for one item if an equally substitutable item is available at a lower price, applies to what appraisal methods? A: Market data only B: Sales Comparison, replacement cost, and income C: Income only D: Replacement cost and market data only

B: Sales Comparison, replacement cost, and income Explanation: All methods of appraisal are based upon the principal of substitution. An appraisal principle that holds that the maximum value of a property tends to be set by the cost of acquiring an equally desirable and valuable substitute property, assuming no costly delay is encountered in making the substitution. The principle of substitution states that a buyer will not pay more for a property than the cost of an equally desirable alternative property. This is a fundamental of any of the three approaches to valuing a property, but is the backbone of the Sales Comparison Approach (AKA (market data approach.)

Mr. and Mrs. Davis, tenants, decide to have their apartment redecorated on June 15. Contractor Jones says he will do the job for $4,000 and informs Smith (the property owner), by registered letter, the job will be completed by June 13. Upon completion, Davis tells Jones to see Smith for payment: A: Smith is not liable since he did not contract with Jones B: Smith may be liable since he had notice and did nothing C: Smith is not liable since his wife signed for the registered letter D: Mr. and Mrs. Davis only are liable

B: Smith may be liable since he had notice and did nothing Explanation: Smith must pay the contractor. He had express notice (the registered letter) that the work was being performed. His failure to respond indicated approval. He may, however, take legal action against Davis. Smith should have provided notification of his non-responsibility as soon as he was notified.

Under the Commission-approved Contract to Buy and Sell, if the buyer diligently tried to get a loan, was unable to do so and notified the Seller of such before the Loan Objection Deadline had passed, what would happen to the earnest money deposit? A: The broker and owner would split the money B: The broker would release the money back to the buyer C: The buyer and broker would split the money 50/50 D: The seller is entitled to liquidated damages and other things of value

B: The broker would release the money back to the buyer Explanation: A buyer has until the Loan Objection Deadline to provide written notice s/he cannot get a commitment for a satisfactory loan and wants to terminate the contract. If s/he does provide such notice, the earnest money is refunded to the buyer. If the buyer does not provide such notice, the contract continues, but the buyer's earnest money becomes nonrefundable should s/he not receive a loan. From the Contract to Buy/Sell Real Estate: Loan Objection. If Buyer is to pay all or part of the Purchase Price with a New Loan, this Contract is conditional upon Buyer determining, in Buyer's sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions, and cost of such New Loan. This condition is for the sole benefit of Buyer. Buyer has the Right to Terminate on or before Loan Objection Deadline, if the New Loan is not satisfactory to Buyer, in Buyer's sole subjective discretion. IF SELLER IS NOT IN DEFAULT AND DOES NOT TIMELY RECEIVE BUYER'S WRITTEN NOTICE TO TERMINATE, BUYER'S EARNEST MONEY WILL BE NONREFUNDABLE, except as otherwise provided in this Contract (e.g., Appraisal, Title, Survey).

An offer has been presented to the sellers of a property. They ask their agent to change the terms through a counterproposal. The seller's agent prepares the counterproposal and delivers it to the buyer's agent. The buyers don't want to accept the new terms the seller is offering and would like to submit a revision. Sometimes what is LEGAL is not best PRACTICE. What is the best PRACTICE for the buyer's agent in this situation? A: The buyer's agent should prepare a counterproposal and attach it to the previous offer and counterproposal B: The buyer's agent should rewrite the original contract and submit a new one C: The buyer's agent should tell the sellers to withdraw their counterproposal D: None of the above are possible in this scenario

B: The buyer's agent should rewrite the original contract and submit a new one Explanation: Countering a counterproposal using a counterproposal, although legal is not considered a good practice. It is instead considered good practice to revise and submit a new contract. The problem with countering a counterproposal with another counterproposal is each purports to change the terms and conditions of the original offer. This makes it easy to misunderstand the final agreed terms. It better to start fresh with one revised purchase contract. In reality, when multiple counterproposals are placed upon an offer, only the last counter is valid. The earlier counterproposals are void as they have been rejected.

Someone living in a condominium exclusively owns: A: The walls separating the units B: The carpet inside the unit C: The building elevator D: The balcony outside the unit

B: The carpet inside the unit Explanation: Condominums are a form of cooperative ownership. Within this ownership, elements inside the condominium exclusively belong to the unit owner such as the carpet listed in the question. The unit owner has fractional ownership of the elements outside of the condominium which are shared by other owners and controlled by the HOA. Fractional ownership elements belong to one of two categories - "common elements" or "limited elements". Both common and limited elements belong to the HOA. A common element is something outside of the unit, examples are the elevator, the walls surrounding the unit, the grounds, the pool and the roof. A limited element is dedicated to the exclusive use of a unit, but as it is outside the unit, is still owned by the HOA. An example of this is a balcony or an unshared staircase providing exterior access to the front door.

The Colorado Contract to Buy & sell includes a provision about lead-based paint disclosure. According to this provision, if the building permit was issued prior to Jan 1, 1978: A: The broker is responsible to disclose the age of the property B: The contract is void unless disclosure is signed by the seller, buyer and brokers prior to the parties signing the sales agreement C: Disclosure is required only if the sellers are aware of lead-based paint on the property D: The seller and brokers must make a disclosure prior to closing

B: The contract is void unless disclosure is signed by the seller, buyer and brokers prior to the parties signing the sales agreement Explanation: It must be signed by buyer, seller and brokers prior to the contract being accepted.

Which statement is true of a VA loan? A: The original veteran is responsible for an assumption, when the new buyer is a veteran and arranges for a "substitution of entitlement" B: The funding fee may be financed C: The Government guarantees the entire loan amount D: All VA loans require at least a 3% down payment

B: The funding fee may be financed Explanation: The original veteran is responsible for the assumption when the new buyer does a non-qualifying assumption. The funding fee may be financed.

An interest bearing trust account: A: The seller gets the interest B: The interest may be donated to a qualified affordable housing program C: The buyer gets the interest D: The broker gets the interest

B: The interest may be donated to a qualified affordable housing program Explanation: In Colorado most earnest money interest is donated to CARHOF.

All of the following are false about the law of agency as it applies to a broker EXCEPT: A: The commission must always be based on the listing price B: The principal and client are the same person C: The broker must always charge a commission and it must be in the listing agreement D: The broker may sue for his/her commission even thought they had a suspended license

B: The principal and client are the same person Explanation: The principal and client are the same person as defined in the law of real estate agency.

Water Rights: Who owns the water rights to a property? A: The property owner owns the water rights B: The recorded owner of the water rights, not necessarily the owner of the property C: The State of Colorado D: The local water district

B: The recorded owner of the water rights, not necessarily the owner of the property Explanation: Water rights transfer with their very own deed separate from the deed which transferred ownership of the property. Therefore the person owning the surface rights may not have water rights. This is very common in subdivisions served by a community water system.

On The Contract to Buy and Sell Real Estate, if the buyer is in default and the seller remedy is specific performance: A: The seller is entitled to the earnest money as the sole and only remedy B: The seller gets the earnest money and may sue C: The seller waives the right to sue D: The contract is terminated

B: The seller gets the earnest money and may sue Explanation: From the Contract to Buy and Sell Real Estate: TIME OF ESSENCE, DEFAULT AND REMEDIES. Time is of the essence hereof. If any note or check received as Earnest Money hereunder or any other payment due hereunder is not paid, honored or tendered when due, or if any obligation hereunder is not performed or waived as herein provided, there shall be the following remedies: x.1. If Buyer is in Default: x.1.1. [ ] Specific Performance. Seller may elect to treat this Contract as canceled, in which case all Earnest Money (whether or not paid by Buyer) shall be paid to Seller and retained by Seller; and Seller may recover such damages as may be proper; or Seller may elect to treat this Contract as being in full force and effect and Seller shall have the right to specific performance or damages, or both. x.1.2. Liquidated Damages, Applicable. This §x.1.2 shall apply unless the box in § x.1.1. is checked. All Earnest Money (whether or not paid by Buyer) shall be paid to Seller, and retained by Seller. Both parties shall thereafter be 590 released from all obligations hereunder. It is agreed that the Earnest Money specified in § x.x is LIQUIDATED DAMAGES, and not a penalty, which amount the parties agree is fair and reasonable and said payment of Earnest Money shall be SELLER'S SOLE AND ONLY REMEDY for Buyer's failure to perform the obligations of this Contract. Seller expressly waives the remedies of specific performance and additional damages. x.2. If Seller is in Default: Buyer may elect to treat this Contract as canceled, in which case all Earnest Money received hereunder shall be returned and Buyer may recover such damages as may be proper, or Buyer may elect to treat this Contract as being in full force and effect and Buyer shall have the right to specific performance or damages, or both.

At a trustee's sale, a property was sold for $160,800. The fees and court costs amounted to $1,600. The property was encumbered with a first deed of trust in the amount of $156,500 and a second deed of trust in the amount of $2,000. Which of the following is correct? A: There would be a surplus, which would go to the beneficiary B: There would be a surplus, which would go to the trustor C: There would be a surplus, which would go to the trustee D: The beneficiary of the second trust deed could initiate court action for a deficiency against the trustor

B: There would be a surplus, which would go to the trustor Explanation: The total of the liens and foreclosure costs was $160,100. The property sold for $160,800, with a surplus of $700. It belongs to the trustor (the borrower).

How are court costs and legal fees handled if a dispute over the Residential Contract to Buy and Sell goes to court? A: They are split evenly between the parties. B: They are awarded to the winning party. C: They are awarded to the broker. D: They are awarded to the losing party

B: They are awarded to the winning party. Explanation: The contract specifies that both parties will go to mediation before court. At mediation the expenses are split evenly. However, should the matter go to court the contract specifies that court costs and legal fees shall be awarded to the prevailing party. Only in a special case of a dispute over earnest money would fees be awarded to the broker.

A Contract to Buy and Sell has only been signed by the buyer, but has been given to the seller's agent along with an earnest money check: A: The earnest money belongs to the seller B: This is considered an offer C: This constitutes a valid contract D: The buyer can sue the seller for specific performance

B: This is considered an offer Explanation: Until the seller signs the contract it is considered an offer and nothing more.

A pool has a bad lining and a non-working pump. What should the buyer's agent tell their client about this situation and its effect on the price of the home? A: This is external obsolescence as it is outside the house, offer less B: This is physical obsolescense as it is broken, offer less C: This is functional obsolescense as no one has pools anymore, offer less D: This is economic obsolescense as pools are expensive to maintain, offer less

B: This is physical obsolescense as it is broken, offer less Explanation: The correct answer is Physical Obsolescence. This occurs when the property loses value due to its physical condition. Generally this occurs as a result of deferred or neglectful maintainence. External and Economic Obsolescense are synonyms i.e., different names for the same thing. This form of obsolescence causes a loss of property value as a result of factors outside of the property such as: a deteriorating neighborhood, a highway or a garbage dump next door and other such undesirable items. Functional Obsolescence causes a loss of property value due to outdated or unsuitable design, style, amenities, technology or features which are no longer useful.

A pool has a bad lining and a non-working pump. What should the buyers' agent tell their client about this situation and its effect on the price of the home? A: This is external obsolescence as it is outside the house, offer less. B: This is physical obsolescense as it is broken, offer less. C: This is functional obsolescense as no one has pools anymore, offer less D: This is economic obsolescense as pools are expensive to maintain, offer less.

B: This is physical obsolescense as it is broken, offer less. Reference: The correct answer is Physical Obsolescence. This occurs when the property loses value due to its physical condition. Generally this occurs as a result of deferred or neglectful maintenance. External and Economic Obsolescense are synonyms i.e. different names for the same thing. This form of obsolescence causes a loss of property value as a result of factors outside of the property such as, a deteriorating neighborhood, a highway or a garbage dump next door and other such undesirable items. Functional Obsolescence causes a loss of property value due to outdated or unsuitable design, style, amenities, technology or features which are no longer useful.

In which of the following instances would you use the Agreement to Amend/Extend Contract? A: To make changes in the purchase price of an offer prior to acceptance B: To change the loan application deadline in an accepted purchase contract C: To change the time allowed to accept an offer to purchase D: All of the above

B: To change the loan application deadline in an accepted purchase contract Explanation: The Agreement to Amend/Extend Contract is used to changes the conditions in an accepted contract to purchase. It cannot be used to change the conditions of an offer as an offer has not been accepted. If you want to change the terms or conditions of an offer prior to acceptance, you need to rewrite the contract or use a counterproposal.

In which of the following instances would you use the Agreement to Amend/Extend Contract? A: To make changes in the purchase price of an offer that has not been accepted B: To change the loan application deadline in an accepted purchase contract C: To change the time allowed to accept an offer to purchase D: All of the above

B: To change the loan application deadline in an accepted purchase contract Explanation: The Agreement to Amend/Extend Contract is used to changes the conditions in an accepted contract to purchase. It cannot be used to change the conditions of an offer as an offer has not been accepted. If you want to change the terms or conditions of an offer prior to acceptance, you need to rewrite the contract or use a counterproposal.

Right of rescission is part of: A: Real Estate Settlement Procedures Act (RESPA) B: Truth in Lending Act C: Consumer Protection Act D: Fair Housing Act

B: Truth in Lending Act Explanation: What is the right of rescission? The right of rescission is a consumer protection law found within the Truth in Lending Act Truth In Lending Act -- Regulation Z The Truth in Lending Act (TILA), Title I of the Consumer Credit Protection Act, is aimed at promoting the informed use of consumer credit by requiring disclosures about its terms and costs. In general, this regulation applies to each individual or business that offers or extends credit when the credit is offered or extended to consumers; the credit is subject to a finance charge or is payable by a written agreement in more than four installments; the credit is primarily for personal, family or household purposes; and the loan balance equals or exceeds $25,000.00 or is secured by an interest in real property or a dwelling.

An appraiser, who estimates value, looks for what elements to see if an object has value? A: Utility and usefulness only B: Utility, demand, scarcity, and transferability C: Original cost of object and utility D: Price of the object and usefulness in the future

B: Utility, demand, scarcity, and transferability Explanation: These are the 4 elements of market value of concern to an appraiser.

An appraiser, who estimates value, looks for what ingredients to see if an object has value? A: Utility and usefulness only B: Utility, demand, scarcity, and transferability C: Original cost of object and utility D: Price of the object and usefulness in the future

B: Utility, demand, scarcity, and transferability Explanation: These are the 4 elements of market value of concern to an appraiser.

The objective of the buyer's walk through just prior to closing is: A: Give the buyer an opportunity to renegotiate the price. B: Verify that physical condition is in compliance with previous agreements C: Renegotiate the inspection points D: Last chance to terminate the contract without penalty

B: Verify that physical condition is in compliance with previous agreements Explanation: Gives the buyer an opportunity to verify that the property meets the requirements that were previously agreed.

A Certificate of Reasonable Value is commonly used in the real estate business. It is issued by the: A: Federal National Mortgage Association B: Veterans Administration C: Federal Housing Administration D: all of the above

B: Veterans Administration Explanation: A CRV is used by the Veterans Administration to estimate a property's value.

The Licensee Buy-out Addendum must be used under all of the following conditions except: A: when a licensee enters into a contract to purchase a property concurrent with listing the property B: When a licensee is purchasing the property as a real estate investment C: When a licensee enters into a contract to purchase a property to facilitate or induce the owner to purchase another property D: When a licensee enters into a contract to purchase a property from an owner but continues to market the property on behalf of the owner under an existing listing contract?

B: When a licensee is purchasing the property as a real estate investment

Under which circumstance is it NOT necessary to use a Colorado Real Estate Commission-approved form? A: When purchasing a home in the resale market through a licensed broker B: When purchasing a newly constructed home C: When purchasing a duplex D: When purchasing a commercial property

B: When purchasing a newly constructed home Explanation: Builders use contracts prepared by their own attorneys.

When is an offer to purchase considered accepted? A: The minute the seller signs the offer B: When the buyer's broker is notified that the offer has been accepted by the seller C: The law is clear - a purchase contract is accepted only when the buyer's agent receives a signed copy of the offer from the seller, or the seller's agent D: When the buyer receives copies of the contract from his/her broker

B: When the buyer's broker is notified that the offer has been accepted by the seller Explanation: Standard contract law states that a contract must be signed and accepted to be binding. A signature alone is not sufficient to constitute valid acceptance: the accepting party must also communicate acceptance to the party who made the last offer or counteroffer. This communication is key. If the listing party signs the contract, sends an email communicating acceptance to the buyer broker and mails the signed contracts, the contract would have been accepted before the signed contract was delivered to the buyer's party. Although receipt of a signed contract is a method of communicating acceptance, it is not the only one. When it is used, acceptance would have typically occured when the buyer's representative, their broker, received the contract, not when the broker returned copies to his/her client.

Under what conditions is it permissible for a broker to pay a referral fee to a person who does not possess a Colorado real estate license? A: Under no conditions B: When the duties performed by that person would not normally require a real estate license C: Only if the unlicensed person is in the employ of and under the direct control of the broker D: The unlicensed person may perform any duty deemed acceptable by the broker and receive a referral fee, if permission is granted by all interested parties, and so stipulated in writing

B: When the duties performed by that person would not normally require a real estate license Explanation: The Colorado Real Estate Commission states that a referral fee payment is permissible provided that an unlicensed person not perform duties requiring a license, and that the fee be a reasonable amount according to the circumstances. Do not confuse "referral fee" with "commission". You can only pay a commission to a licensed agent. Referrals are ok to pay to anybody. The difference is what you do for the money. If the person receiving the money is doing something that requires a license such as negotiating then it is a commission. If the person is just passing a name along, which does not requires a license - then it is a referral fee. Referral Fee's also have to be reasonable and cannot be a commission in disguise. On the flip side - it is not permissable for a licensed agent to RECEIVE a referral fee from any service provider to a transaction such as the Title Company, Lender or Appraiser. This would violate federal RESPA rules.

Under what conditions is it permissible for a broker to pay a referral fee to a person who does not possess a Colorado real estate license? A: Under no conditions B: When the duties performed by that person would not normally require a real estate license C: Only if the unlicensed person is in the employ of and under the direct D: The unlicensed person may perform any duty deemed acceptable by the broker and receive a referral fee, if permission is granted by all interested parties, and so stipulated in writing

B: When the duties performed by that person would not normally require a real estate license Explanation: The Colorado Real Estate Commission states that a referral fee payment is permissible provided that an unlicensed person not perform duties requiring a license. Do not confuse "referral fee" with "commission". You can only pay a commission to a licensed agent. Referrals are ok to pay to anybody. The difference is what you do for the money. If the person receiving the money is doing something that requires a license such as negotiating than it is a commission. If the person is just passing a name along, which does not requires a license - then it is a referral fee. Referral Fee's also have to be reasonable and cannot be a commission in disguise.

Which statement is NOT true? A: Depositing earnest money must be within three business days after acceptance of contract B: Withdrawing earnest money must be within the last business day before closing C: The beneficiary's transaction ledger should be zeroed out after closing and dispersing of funds D: A copy of the earnest money check with a copy of the validated deposit slip should be placed in the transaction file

B: Withdrawing earnest money must be within the last business day before closing Explanation: It can be anytime before closing-most commonly 1 day before.

Essential elements for a deed include: A: Recording B: Words of conveyance C: Signatures of grantor and grantee D: All of the above

B: Words of conveyance Explanation: Although it is recommended that a deed be recorded, in Colorado it is not required. Required is: the signature of the grantor, words of conveyance (granting clause), that it be in writing, that the grantee is named, consideration (payment), a description of the ownership interests being conveyed, a legal description, delivery of the deed and acceptance by the grantee. More info on Deeds: In Colorado real estate, there are several types of deeds, depending on the type/amount of protection given and received from the seller and buyer. From the Colorado Real Estate Manual: Types Of Deeds There are four major classifications of deeds: (1) General warranty deed, (2) Special warranty deed, (3) Bargain and sale deed, (4) Quitclaim deed. The types of deeds differ solely in the degree of protection that the grantor (seller) promises or warrants to the grantee (buyer). No type of deed transfers any greater or lesser interest than another. For example, if a grantor conveys title in fee simple by a general warranty deed, the same fee simple ownership is conveyed as if he or she had used a quitclaim deed. However, the general warranty deed grantor promises to defend against any loss incurred due to any title defect, whereas transfer by quitclaim deed contains no such warrant. 1. General Warranty Deed. A deed in which the grantor warrants or guarantees title against defects that existed before the grantor acquired title or that arose during the grantor's ownership. It does not warrant against encumbrances or defects arising from the grantee's own acts. The usual covenants or warranties contained in a general warranty deed are: a. Covenant of seisin. Guarantees the grantor's ownership and that he or she has the right to convey it. The fact that the property is mortgaged or is subject to some restriction does not breach this covenant. b. Covenant against encumbrances. Guarantees that there are no encumbrances or claims against the property except those specifically excluded in the deed. c. Covenant of quiet enjoyment. Guarantees that the grantee will not be evicted or disturbed in possession of the property. Threats or claims by a third party do not breach this covenant. The grantee would have to actually be dispossessed before being entitled to seek recovery under this covenant against the grantor. d. Covenant of further assurance. Guarantees that the grantor will procure and deliver any other instruments that are subsequently necessary to make the title good. e. Covenant of warrant forever. Guarantees that the grantee shall have title and possession to the property. Sometimes considered part of "quiet enjoyment". The first two covenants relate to the past, and generally do not generally "run with the land" - meaning that only the current grantee may sue the grantor for a breach. The last three covenants protect against future defect and are said to run with the land - allowing any subsequent grantee to seek remedy for breach against any previous grantor. According to Colorado statute, "Covenants of seizin, peaceable possession, freedom from encumbrances, and warranty contained in any conveyance of real estate, or of any interest therein, shall run with the premises, and inure to the benefit of all subsequent purchasers and encumbrancers." (38-30-121 C.R.S.) 2. Special Warranty Deed. The grantor of a special warranty deed warrants the title only against defects arising after the grantor acquired the property and not against defects arising before that time. 3. Bargain and Sale Deed. Technically, any deed that recites a consideration and purports to convey the real estate is a bargain and sale deed. Thus, many quitclaim and warranty deeds are also deeds of bargain and sale. Bargain and sale deeds often contain a covenant against the grantor's acts, whereby the grantor warrants only that the grantor has done nothing to harm the title. This covenant would not run with the land. Examples of bargain and sale deeds with a covenant against the grantor's acts are an executor's deed, an administrator's deed, and a guardian's deed. 4. Quitclaim Deed. The grantor of a quitclaim deed warrants absolutely nothing. A quitclaim deed conveys the grantor's present interest in the land, if any. A quitclaim deed is frequently used to clear up a technical defect in the chain of title or to release lien claims against the property. Examples of such deeds are correction deeds, and deeds of release.

Colorado Commission Rule E-35 regarding disclosure of agency relationships requires: A: Real Estate agents to use commission approved forms B: Written disclosure of agency relationships C: An escrow account for earnest money D: Use of the licensee buyout agreement when purchasing his/her own listing

B: Written disclosure of agency relationships Explanation: E-35 requires the written disclosure of agency relationships.

Colorado Commission Rule E-35 regarding disclosure of agency relationships requires: A: Real estate agents to use commission-approved forms B: Written disclosure of agency relationships C: An escrow account for earnest money D: Use of the Licensee Buyout Agreement when purchasing his/her own listing

B: Written disclosure of agency relationships Explanation: E-35 requires the written disclosure of agency relationships.

Colorado Commission Rule E-35 requires: A: Real Estate agents to use commission approved forms B: Written disclosure of agency relationships C: An escrow account for earnest money D: Use of the licensee buyout agreement when purchasing his/her own listing

B: Written disclosure of agency relationships Explanation: E-35 requires the written disclosure of agency relationships.

According to CP-7 on Closing Costs - In reference to a Closing; is the listing broker responsible for paying the costs of legal document preparation? A: Yes, even if the documents were prepared by the Seller's Attorney B: Yes, when the broker is responsible for preparing such documents C: No, this expense is split between the Buyer and Seller

B: Yes, when the broker is responsible for preparing such documents Explanation: 1. Licensees are still responsible for paying the costs of legal document preparation when they are preparing such documents for their clients. If the broker delegates this function to an agent (title company or closing service) the broker is still responsible for bearing the cost. 2. Other costs associated with closings can be paid for by the licensee or any other party. The Commission will no longer require that licensees bear these costs. Licensees are urged to use the Closing Instructions and Earnest Money Receipt form developed by the Commission. 3. It is now permissible for brokers to close their own transactions and make additional charges for providing closing services so long as the charges are not tied to legal document preparation. If a licensee does this it must be with the consent of the parties and all charges must be specified. This consent may be obtained through the Listing Contract, the Contract to Buy and Sell, the Closing Instructions and Earnest Money Receipt form, or otherwise. 4. Licensees are not responsible for bearing the cost of legal document preparation where the documents are prepared by an attorney representing the parties to the transaction. However, the broker should not designate the broker's own attorney to prepare legal documents for the parties and then charge as if the attorney had prepared the documents on behalf of a client. 5. The broker must still provide accurate closing statements.

A buyer is concerned that new construction a mile away could have a negative environmental impact on the home they are considering purchasing. Can they make the Contract to Buy/Sell contingent on the result of an environmental impact report? A: No, it is impossible to determine the negative impact of construction a mile away B: Yes, you can make a contract contingent on anything

B: Yes, you can make a contract contingent on anything Explanation: This is a matter of negotiation between the buyer and seller. The law has no jurisdiction on matters of negotiation between a buyer and seller.

Under an agreement for purchase and sale of a condominium: A: a copy of the covenants must be delivered to the buyer before title deadline B: a copy of the covenants must be delivered to the buyer prior to the Association Documents Deadline C: a copy of the covenants must be delivered to the lender within 30 days of closing

B: a copy of the covenants must be delivered to the buyer prior to the Association Documents Deadline Explanation: The term Association Documents consists of all owners' associations (Association) declarations, bylaws, operating agreements, rules and regulations, party wall agreements, minutes of most recent annual owners' meeting and minutes of any directors' or managers' meetings during the six-month period immediately preceding the date of this Contract, if any (Governing Documents), most recent financial documents consisting of (1) annual balance sheet, (2) annual income and expenditures statement, and (3) annual budget (Financial Documents), if any (collectively, Association Documents).

The following is true of discount points: A: the seller must always pay the discount points B: a discount is a percentage of the loan amount required by the lender to obtain the same yield that could be obtained on loans offering a higher interest rate C: the buyer must always pay the discount points D: discount points are the same as the origination fee

B: a discount is a percentage of the loan amount required by the lender to obtain the same yield that could be obtained on loans offering a higher interest rate Explanation: Discount points are a percentage of the loan amount and either party can pay discount fees. Definition of Discount Points Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

When showing properties permitted prior to January 1, 1978: A: the seller should display a lead-based paint disclosure B: a lead-based paint disclosure should be displayed along with a pamphlet titled "Protect Your Family from Lead in Your Home" C: the lead-based paint disclosures only apply to multiple dwelling units D: lead-based paint is only a concern along the East Coast

B: a lead-based paint disclosure should be displayed along with a pamphlet titled "Protect Your Family from Lead in Your Home" Explanation: When selling or renting properties that were built prior to 1978, the owner/seller must provide a lead-based paint disclosure form as well a pamphlet titled " Protect Your Family from Lead in Your Home".

In Colorado, all of the following would be required to obtain a real estate license except: A: a time share salesperson B: a resident property manager who is an employee of a building owner C: a property manager managing properties for multiple owners D: a commercial real estate broker

B: a resident property manager who is an employee of a building owner Explanation: A rental referral agent is not required to have a real estate license. The other three are required to have a license.

A real estate contract or land contract is described as a method of financing often substituted for mortgage or trust deed financing. Consequently a land contract can be: A: the same as a mortgage B: a security device C: similar to a lease D: a lease with an option to buy

B: a security device Explanation: The real estate land contract secures the debt for the seller (vendor).

A Condominium owner files a declaration with the county clerk which divides his individual ownership and ownership in common elements into time-share units. Each time-share owner will have individual ownership of the common elements for three weeks each year. The condominium owner may have created: A: a planned unit development B: a subdivision C: a townhouse complex D: a cooperative project

B: a subdivision Explanation: This would be creating a subdivision.

Which of the following clauses will put the priority of an existing mortgage of deed of trust below that of a mortgage recorded later? A: an exculpatory clause B: a subordination clause C: an assumption clause D: a prepayment clause

B: a subordination clause

A court order that authorizes and directs the proper officer of the court to sell the property of a defendant as required by the judgment or decree of the court is known as: A: a writ of attachment B: a writ of execution C: constructive eviction D: actual eviction

B: a writ of execution Explanation: A writ of execution authorizes the sale of the property. Don't confuse this with writ of attachment, which is an action taken by a creditor in which the court simply retains custody of the property while a lawsuit is being decided.

The real estate broker is liable to the buyer if he: A: executes a contract in the seller's name after proper power of attorney authorization B: acts in excess of the authority given by his principal C: makes statements based on misrepresentations by the seller D: gives buyer's earnest money to seller and sale later fails through no fault of agent

B: acts in excess of the authority given by his principal Explanation: A broker may be held liable for acting in excess of his authority but, normally, not for making a misrepresentation based on statements from the owner. Executing a contract in the name of the principal or acting in excess of the authority given to him by the principal would make him liable to the principal not the buyer.

A 1994 Colorado law allows "undesirable and dangerous persons" to be evicted: A: after a five-day notice to quit B: after a three-day notice to quit C: within 24 hours of a posted notice

B: after a three-day notice to quit Explanation: A 1994 Colorado Law allows "undesirable and dangerous persons" to be evicted after a three-day notice to quit.

Which of the following relationships is NOT acceptable for a broker in a single transaction? A: agent for the seller with a buyer as an unrepresented customer B: agent for the buyer and transaction-broker for the seller C: transaction-broker for the seller and transaction-broker for the buyer

B: agent for the buyer and transaction-broker for the seller Explanation: An agent's duties conflict with a transaction-broker's duties, thus the license law specifically prohibits representing one party as agent and the other party as transaction-broker in the same transaction. Think of the agent as being a coach and a transaction broker as being a referee. You cannot be an advocate (coach) for one party in a transaction and declare yourself to be a neutral party (referee) for the other.

A final walk-through is: A: required by law B: agreed to by contract C: required by the Real Estate Commission D: required by the listing agent

B: agreed to by contract Explanation: A walk-through is not required, but is recommended.

A final walk-through is: A: required by law B: agreed to by contract C: required by the Real Estate Commission D: required by the listing agent

B: agreed to by contract Explanation: A walk-through is not required.

By executing a listing agreement with a seller, a licensed broker has: A: become a procuring cause B: agreed to use diligence in procuring a buyer C: subjected himself to a possible suit for specific performance D: obligated himself to open a special trust account

B: agreed to use diligence in procuring a buyer Explanation: Procuring cause only becomes applicable when the property is sold. A trust account needs to be in existence only upon receipt of earnest money.

Agent Mike is the broker owner of AAA Realty, a trade name registered with the state of Colorado and licensed with the Colorado Real Estate Commission. Which of the following is correct? A: Mike's signs must have his full name and the name of his company B: all licensees employed by Mike must only do business under AAA Realty C: all advertising must be in Mike's name and AAA Realty D: Mike may do business under his name or an alias

B: all licensees employed by Mike must only do business under AAA Realty

A lender requires the use of a Name Affidavit to identify: A: the legal names of all borrowers B: all of the alias' used by the borrowers C: the beneficiary in the event of the death of the borrower D: the birth name of all female borrowers

B: all of the alias' used by the borrowers Explanation: A name affidavit identifies all of the names, nicknames, middle initials, etc., that a buyer may have used.

The broker is required by statute to present: A: all offers prior to one being accepted B: all offers including those received subsequent to an accepted offer C: all reasonable offers D: all offers with no contingencies

B: all offers including those received subsequent to an accepted offer Explanation: The broker must present all offers period. (REM 13-5)

A managing broker can be held responsible for: A: any action by a salesperson/associate broker B: all real estate activities of salespersons/associate brokers C: is not responsible for the activities of independent contractors D: is responsible only for activities of which they have knowledge

B: all real estate activities of salespersons/associate brokers

Beatrice a listing agent who has received two similar offers to purchase. She has made an appointment with the sellers to present the offers, but meanwhile another offer comes in from an associate in the same company. In this situation, which should Beatrice present? A: the older offers first since that is why she made the appointment; if neither is accepted, she could present the in-company offer at this appointment B: all three offers for simultaneous review C: the in-company offer first as a courtesy to her associate; if it is not accepted, she should present the other two offers D: the offers in order received; she should ask for a decision on each before moving on to the next

B: all three offers for simultaneous review Explanation: All available offers must be presented and reviewed. The seller has the right to see each to compare them, and the order received is immaterial.

A counterproposal: A: is a rejection of a proposed contract to buy/sell B: amends the terms and conditions of a proposed contract to buy/sell C: is mandatory to modify the terms and conditions of a contract to buy/sell D: is used to counter the purchase price only of a proposed contract to buy/sell

B: amends the terms and conditions of a proposed contract to buy/sell Explanation: The key here is "supersede and replace." This is not merely a rejection of an offer, it is amending the original offer, not rejecting it entirely.

A counterproposal: A: is a rejection of a proposed contract to buy/sell B: amends the terms and conditions of a proposed contract to buy/sell C: use is mandatory to modify the terms and conditions of a contract to buy/sell D: is used to counter the purchase price only of a proposed contract to buy/sell

B: amends the terms and conditions of a proposed contract to buy/sell Explanation: The key here is "supersede and replace." This is not merely a rejection of an offer, it is amending the original offer, not rejecting it entirely.

Under the Federal and State Fair Housing Acts, to which of the following may a landlord refuse to rent? A: commercial space for use as a studio for African American art because the studio would "attract the wrong element" B: an apartment to three students for fear they will have loud parties C: an apartment to a single mother because the landlord is worried about who will supervise her child after school D: a gay couple

B: an apartment to three students for fear they will have loud parties Explanation: Students are not a protected class under the Colorado Fair Housing Act so a landlord may refuse to rent an apartment to them. Colorado is one of a majority of states that has its own fair housing law. If you're renting or looking for an apartment in Colorado, you're covered by the Fair Housing Act (FHA), a federal law, which protects tenants and prospective tenants alike from illegal housing discrimination based on the following protected classes: race color religion national origin sex disability familial status. In addition to these protected classes, Colorado offers legal protection based on: creed sexual orientation marital status ancestry. Caution: There are two exceptions under Colorado law: • Housing operated by religious organizations and private clubs which may give preference to or limit occupancy to members • For familial status only: certain housing operated for seniors 55 and older, or 62 and older, with specific other requirements to meet the qualifications of the exemption

A contract in which all the parties have fulfilled all their promises and performed the contract is known as: A: an executory contract B: an executed contract C: an express contract D: a unilateral contract

B: an executed contract Explanation: If a contract is EXECUTED, that means all parties have done what they agreed to do. Don't confuse this with an executory contract, in which something remains to be done by one of the parties of the contract

If conditions for purchase are included in a deed and these conditions are violated, what is the penalty? A: penalty charges are to be assessed B: an injunction against further use of the property C: a court order enforcing compliance can be issued D: the property may be returned to the original owner

B: an injunction against further use of the property

Adverse financial conditions of the buyer: A: need not be disclosed B: are considered material facts and must be disclosed C: are a concern only to the lender D: are difficult to prove and considered "hearsay"

B: are considered material facts and must be disclosed Explanation: Adverse financial conditions of the buyer could make a deal fall, so they must be disclosed.

An employing broker (AKA sponsoring broker) is required to: A: be a signer on all bank accounts opened in the company name B: be a signer on all trust accounts opened in the company name C: be a signer on all contracts negotiated in the company name D: all of the above

B: be a signer on all trust accounts opened in the company name Explanation: An employing broker, also referred to as a sponsoring broker, must be able to write checks drawn on his trust account with just his signature, and must be a signer on all trust accounts opened in the company name.

If at all possible the broker should set up showings for he/she and the buyer: A: when in front of the house B: before heading out for the day, so the time can be well spent C: two days prior to the desired date of showing D: no notice is needed

B: before heading out for the day, so the time can be well spent Explanation: Setting up showings prior to heading out can save you and your buyer time and you can organize the route in which to take that day.

An escrow account is: A: always under the jurisdiction of the broker B: beyond the control of either party to the escrow C: always under the control of the title company D: under the control of the seller

B: beyond the control of either party to the escrow Explanation: The escrow account is established by written instructions in the purchase and sale contract. It is beyond the control of the buyer or the seller individually, but may be modified by mutual agreement.

A brokerage, XYZ Realty, is part of a franchise or marketing cooperative with a strong public image. The broker's advertising must indicate this relationship by advertising A: the franchise name with the broker's phone number so that people are led to the correct office. B: both the franchise name and XYZ Realty with the same level of prominence. C: only XYZ since that is how the license is held with the commission. D: the franchise name prominently with "fine print" identifying XYZ.

B: both the franchise name and XYZ Realty with the same level of prominence. Explanation: Both the franchise name and XYZ Realty with the same level of prominence.

Broker Needa leaves for vacation. In his absence, associate Wanna will be handling the escrow accounts. If Wanna errors with the accounting procedures: A: broker Needa's license will be revoked B: broker Needa's vacation may be permanent as he is ultimately responsible C: the Commission will excuse Needa and Wanna; everyone needs a vacation D: broker Wanna's solely responsible for her actions

B: broker Needa's vacation may be permanent as he is ultimately responsible Explanation: The broker is ALWAYS responsible for agents under their license.

Ordinances that specify construction standards when repairing or erecting buildings are known as: A: equipment codes B: building codes C: variances D: permits

B: building codes Explanation: This is a definition of building codes.

Just before the close, the buyer noticed a broken window and a mandoor hanging by one hinge in the detached garage, her inspector had missed these as he considered outbuildings as outside the scope of the inspection. What is the buyer's recourse? A: seller must fix window B: buyer's responsibility because she had missed the inspection deadline C: the inspector is at fault D: buyer may terminate the agreement or negotiate a settlement with the seller

B: buyer's responsibility because she had missed the inspection deadline

If a non-veteran purchases a property encumbered by a VA-guaranteed loan, the debt: A: must be repaid at closing B: can be assumed by the new purchaser C: will require additional mortgage insurance D: none of the above

B: can be assumed by the new purchaser Explanation: If a non-veteran purchases a property encumbered by guaranteed loan, the debt can be assumed by the new purchaser.

The term "rescind" means: A: change B: cancel C: substitute D: subordinate

B: cancel Explanation: Rescind means that the contract is canceled and everyone returns to their original positions.

Someone living in a condominium exclusively owns the: A: walls separating the units B: carpet inside the unit C: building elevator D: balcony outside the unit

B: carpet inside the unit Explanation: Condominums are a form of cooperative ownership. Within this ownership, elements inside the condominium exclusively belong to the unit owner such as the carpet listed in the question. The unit owner has fractional ownership of the elements outside of the condominium which are shared by other owners and controlled by the HOA. Fractional ownership elements belong to one of two categories - "common elements" or "limited elements". Both common and limited elements belong to the HOA. A common element is something outside of the unit, examples are the elevator, the walls surrounding the unit, the grounds, the pool and the roof. A limited element is dedicated to the exclusive use of a unit, but as it is outside the unit, is still owned by the HOA. An example of this is a balcony or an unshared staircase providing exterior access to the front door.

The Exclusive Right-to-Sell listing contract gives the listing broker the right to: A: sign the purchase agreement for the seller B: collect deposits from the purchasers C: deposit earnest money into operating bank account D: all of the above

B: collect deposits from the purchasers Explanation: The listing broker is authorized by the seller to collect and hold earnest money in the broker's escrow account, or deliver it to a neutral escrow agent.

A couple vacates their house and moves across town, turning their former home into a rental unit. Who may they discriminate against and still be within the guidelines of Federal Fair Housing Act? A: a Muslim college professor B: college students C: a single woman with children D: a legal Mexican immigrant

B: college students

The parts of the property that are necessary or convenient to the existence, maintenance and safety of a condominium and are normally in common use by all of the condo residents are known as: A: community property B: common elements C: conveyance D: covenant

B: common elements Explanation: Each condo owner has an undivided ownership interest in the common elements.

The benefit, interest or value that induces a promise, and the glue that binds a contract, is known as: A: an option B: consideration C: earnest money D: novation

B: consideration Explanation: Consideration is the thing of value which induces a party to enter a contract. Don't confuse this with earnest money, which can be considered consideration -- but isn't the ONLY kind of consideration.

When a tenant terminates a lease because the landlord has not furnished hot water for two months, it is called what type of eviction: A: forced B: constructive C: cooperative D: absolute

B: constructive Explanation: When a tenant early teminates a lease because they claim the property is not habitable, it is called a constructive eviction. There are strict rules and regulations regarding Constructive Evictions in Colorado. They are detailed under the State's Warranty of Habitability which outlines under what circumstances may a property be declared uninhabitable and what steps must be taken by the tenant to perform a constructive eviction to be legally released from a lease.

In the purchase of real estate, the buyer is held responsible for facts and information obtainable through: A: media notice B: constructive notice C: restrictive notice D: construction notice

B: constructive notice Explanation: A purchaser is responsible for facts and information obtainable through actual or constructive notice.

A type of value estimate approach, in which value equals the estimated land value plus reproduction costs of any improvements, after the depreciation costs have been subtracted, is called the: A: market approach B: cost approach C: substitution approach D: income approach

B: cost approach Explanation: The cost approach is what is described here - it estimates the amount needed to reproduce or replace the property.

Procuring cause means: A: showing the property to the buyers B: creating an uninterrupted chain of events that resulted in a closed transaction or sale C: a broker that provided affirmative service D: the broker returned all of the buyer's calls in a timely manner

B: creating an uninterrupted chain of events that resulted in a closed transaction or sale Explanation: Procuring cause means creating an uninterrupted change of events that resulted in a closed transaction or sale.

When earnest money is withdrawn from the escrow account and brought to the closing by the agent, the settlement statement will show: A: debit seller, credit buyer B: credit buyer, debit broker C: debit buyer, credit broker D: credit broker, debit closing company

B: credit buyer, debit broker Explanation: Short answer - Buyer gets credit for earnest money and to do this the broker has to first deposit it into the escrow account. Credit Buyer Debit Broker For more inquiring minds: This question refers to two different escrow accounts. One account is maintained by the brokerage firm and is used to hold earnest money pending the closing. The other escrow account is used at the closing. This answer to this question refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdrawals into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column. Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet twists slightly the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done the accounting gods are happy as all debits and credits are in balance.

Interest on an assumed loan is shown as: A: debit to the buyer B: credit to the buyer C: credit to the broker D: credit to the seller

B: credit to the buyer Explanation: Credit to the buyer, a debit to the seller.

A point, line, or surface from which elevations are measured is known as the: A: point of beginning B: datum C: township D: section

B: datum Explanation: The datum is a measurement that applies to elevations.

What is the debit/credit entry when a buyer assumes a loan from the seller? A: debit broker, credit buyer B: debit seller, credit buyer C: debit buyer, credit seller D: debit seller, credit broker

B: debit seller, credit buyer Explanation: The seller still owes the amount that is assumed (debit seller). On an assumption, that the buyer will be making payments against the loan does not relieve the seller of the obligation that it be paid in full. The buyer will not be required to bring this amount to the closing (credit buyer)

On the settlement statement, the broker's commission appears as a: A: credit to the seller B: debit to the seller C: credit to the buyer D: debit to the buyer

B: debit to the seller Explanation: Typically the real estate commission is a charge to the seller.

The seller agrees to pay $1500 of the buyer's closing costs; this is shown on the settlement sheet as: A: debit to the seller, credit to the broker B: debit to the seller, credit to the buyer C: debit to the seller single entry D: debit to the broker, credit to the buyer

B: debit to the seller, credit to the buyer Explanation: Debit Seller/Credit Buyer. The term Closing Costs covers a variety of charges such as Recording Fees, Survey, Documentary Fee, Appraisal and others. The Seller contribution may not cover all of them. To keep it simple and make it work the concession itself is a Seller Debit and Buyer Credit. This gets the dollars into the Buyer's side. The Buyer is then debited for his/her share of the Closing Costs. The Buyer's individual closing cost charges will each be a debit to the Buyer and a credit to the Broker (this deposits the money into the Trust Account for the Broker/Closing Agent to actually pay the vendor who is owed the Closing Costs.)

The seller agrees to pay $1500 of the buyer's closing costs, this is shown on the settlement sheet as: A: debit to the seller, credit to the broker B: debit to the seller, credit to the buyer C: debit to the seller single entry D: debit to the broker, credit to the buyer

B: debit to the seller, credit to the buyer Explanation: Debit Seller/Credit Buyer. The term Closing Costs covers a variety of charges such as Recording Fees, Survey, Documentary Fee, Appraisal and others. The Seller contribution may not cover all of them. To keep it simple and make it work. The concession itself is a Seller Debit and Buyer Credit. This gets the dollars into the Buyer's side. The Buyers is then debited for his/her share of the Closing Costs. The Buyer's individual closing cost charges will each be a debit to the Buyer and a credit to the Broker (this deposits the money into the Trust Account for the Broker/Closing Agent to actually pay the vendor who is owed the Closing Costs).

Title to real property is passed when a valid deed is: A: signed and filed B: delivered and accepted C: recorded and filmed D: signed and mailed

B: delivered and accepted Explanation: Title passes when a valid deed is delivered and accepted. Usually this takes place at the closing. The seller signs the deed, it is acknowledged, given to the buyer who accepts it, then, the deed will be taken or sent in to the county to be recorded.

At the time of closing, the warranty deed is: A: given to the grantee B: delivered to the grantee then immediately mailed to the county for recording by the title company C: given to the lender until all payments on the loan have been made D: brought in by the seller and endorsed over to the buyer

B: delivered to the grantee then immediately mailed to the county for recording by the title company Explanation: At a closing, the deed is signed by the grantor, given to the grantee (delivery) then the title company takes the deed and mails it to the county for recording. The county returns the original deed to the grantee after it has been recorded.

When zoning authorities restrict particular land to accommodate an average maximum number of houses per acre, this is known as: A: cluster zoning B: density zoning C: maximum zoning D: gross zoning

B: density zoning Explanation: Density zoning ordinances restrict the average number of houses per acre that may be built within a particular subdivision.

A deceased person who dies testate devises real property to: A: successors B: devisees C: legatees D: heirs

B: devisees Explanation: A person devises property to his/her devisees

Broker Brown met buyers (the Bakers) at an open house. They established good rapport with each other, and the purchasers signed an Exclusive Right-to-Buy Contract with Broker Brown. The Bakers called Brown on numerous occasions to make an appointment to view properties. In each case Brown had a previous engagement. Finally the Bakers found a home they wanted at a house that was being held open by another broker and the Bakers purchased the property through that broker. When Brown learned of the transaction he demanded his commission, claiming it was rightfully his as a result of the Exclusive Right-to-Buy Contract. Broker Brown: A: is entitled to receive his commission under the terms of the Exclusive Right-to-Buy agreement B: did not fulfill his obligations under the terms of the Exclusive Right-to-Buy agreement and is likely not entitled to receive a commission C: should receive a referral fee from the broker holding the open house as the buyers are rightfully his D: none of the above

B: did not fulfill his obligations under the terms of the Exclusive Right-to-Buy agreement and is likely not entitled to receive a commission Explanation: Broker Brown did not fulfill his obligations under the terms of the contract. Broker Brown has not earned a commission. He was obligated to be available when the Bakers' wanted to view properties. By not being reasonably available, he breached the contract.

If a property owner tells you the land only flooded during the "great flood" over 100 years ago, a licensees obligation to a potential buyer is.... A: provide them with necessary documentation and assure them that there''s nothing to worry about B: direct them towards the public records which would specify whether the land is in a flood zone C: assure them there is nothing to worry about because the flooding only occurs every 100 years D: recommend the install necessary infrastructure to avoid future flooding.

B: direct them towards the public records which would specify whether the land is in a flood zone Explanation: Recognizing when you are out of your area of expertise and knowing how to deal with it, is an important skill and required by the Real Estate Commission. Recommending a review of public records to determine if the property is in a flood zone demonstrates that skill. The other three have the agent stepping out of their area of expertise.

If the property does contain lead-based paint, the seller must: A: have it removed at the seller's expense B: disclose that there is lead-based paint C: disclose that they have painted the house, therefore there is no problem D: disclose the family's medical records to demonstrate that it has not caused any health problems

B: disclose that there is lead-based paint Explanation: The seller must only disclose that there is lead-based paint.

If an earnest money check does not clear the bank: A: quickly get the buyer to write another before seller finds out B: disclose to seller, who may elect to void the contract C: immediately void the contract D: the buyer has three days to make the check good

B: disclose to seller, who may elect to void the contract Explanation: No valid consideration was given therefore it is a voidable contract.

The office policy manual establishes the types of brokerage relationships your broker offers. If your seller requests you to offer one that is not offered, you should: A: offer that relationship to your seller anyway B: discuss the issue with your broker C: have the seller sign an agency form and tell them everything will be fine D: do nothing

B: discuss the issue with your broker Explanation: Your broker establishes an office policy manual for guidelines involving the real estate transactions in that office. Any deviation from office policy should be discussed with your employing broker.

Buyer Wilson and Seller Smith have a voided sales contract. They have both agreed to disperse the funds, against the suggestions from Broker Bob. Broker Bob should: A: call the attorney B: disperse the escrowed money, as directed by seller, and as agreed between buyer and seller C: sue for a commission D: none of the above

B: disperse the escrowed money, as directed by seller, and as agreed between buyer and seller Explanation: The broker must obey the parties so long as they have come to a lawful agreement between them.

The X and Y coordinate system is a method of describing land used in Colorado. This method of describing land: A: references lot and block numbers B: divides the state into three zones C: uses courses and directions to describe property D: is part of the government survey system

B: divides the state into three zones Explanation: The x and y coordinate system divided the state into 3 zones each containing 1/3 of the counties: the northern zone, central zone and the southern zone.

Which of the following clauses in a conventional mortgage instrument entitles the lender to accelerate the loan if the loan is assumed? A: prepayment B: due on sale C: right to sell D: defeasance

B: due on sale

The following statement is NOT true: A: the buyer may write a promissory note for earnest money B: earnest money should be deposited the next time you go to the bank, at your convenience C: earnest money shall be credited to buyer on the settlement statement at time of closing D: earnest money checks should be photocopied prior to deposit

B: earnest money should be deposited the next time you go to the bank, at your convenience Explanation: A check for the earnest money should either accompany the offer until accepted or be delivered prior to expiration of the Alternative Earnest Money Deadline. Most often, a buyer's agent holding the deposit forwards a copy of the earnest money check with the offer to prove s/he has it, and then specifies a date in the Alternative Earnest Money Deadline when the actual check will be delivered after contract acceptance. If the deposit was tendered with the contract; it must be deposited no later than 3 business days after notice of acceptance of the contract. From the real estate manual: Except as provided in Rule E-l (o), all money belonging to others which is received by a broker as a property manager shall be deposited in such broker's escrow or trust account not later than five business days following receipt. All other money belonging to others which is received by a broker shall be deposited in such broker's escrow or trust account not later than the third business day following receipt.

A property owner has an easement to allow them access to their driveway. What kind of easement is this? A: easement in gross B: easement appurtenant C: easement prescriptive

B: easement appurtenant Explanation: The answer is easement appurtenant. This is when an owner benefits from an easement over an adjoining property. In this case, an easement exists to allow the owner to drive across anothers property to get access to their driveway. This easement could be granted by the adjoining owner or when the subdivsion was created. An easement in gross is granted to utility companies to provide service to parcels such as electricity or water. An easement prescriptive is created without the approval of the burdened adjoining property owner by judicial action, such as when a road across a property has been used by others for many years in what is described as an "Open", "Notorious" and "Hostile" fashion. The person(s) benefiting from the road could request the courts to grant them a easement prescriptive allowing permanent access.

A property owner has an easement to allow them access to their driveway. What kind of easement is this? A: easement in gross B: easement appurtenant C: easement prescriptive

B: easement appurtenant Explanation: The answer is easement appurtenant. This is when an owner benefits from an easement over an adjoining property. In this case, an easement exists to allow the owner to drive across anothers' property to get access to their driveway. This easement could be granted by the adjoining owner or when the subdivision was created. An easement in gross is granted to utility companies to provide service to parcels such as electricity or water. An easement prescriptive is created without the approval of the burdened adjoining property owner by judicial action, such as when a road across a property has been used by others for many years in what is described as an "Open", "Notorious" and "Hostile" fashion. The person(s) benefiting from the road could request the courts to grant them an easement prescriptive allowing permanent access.

Who of the following is required to obtain errors and omissions professional liability insurance: A: the employing broker only B: every active Colorado licensee C: active and inactive Colorado licensees D: resident Colorado brokers only

B: every active Colorado licensee Explanation: Errors and omissions insurance coverage is required for every active Colorado licensee. Inactive licensees are not required to carry this insurance, however, they cannot conduct any real estate activities either

Who of the following is required to obtain errors and omissions professional liability insurance? A: the employing broker only B: every active Colorado licensee C: active and inactive Colorado licensees D: resident Colorado brokers only

B: every active Colorado licensee Explanation: Errors and omissions insurance coverage is required for every active Colorado licensee. Inactive licensees are not required to carry this insurance, however, they cannot conduct any real estate activities either

In Colorado, when must real estate licenses be renewed? A: every three years with expiration on December 31 of the third year B: every three years on the anniversary date of first being licensed, or any date mandated by the CREC C: Each year at the anniversary of licensing D: every three years if the licensee passes the state examination

B: every three years on the anniversary date of first being licensed, or any date mandated by the CREC Explanation: All license renewals shall be for a full three-year period called the "anniversary date renewal period."

In Colorado, when must real estate licenses be renewed? A: every three years with expiration on December 31 of the third year B: every three years on the anniversary date of first being licensed, or any date mandated by the CREC C: each year at the anniversary of licensing D: every three years if the licensee passes the state examination

B: every three years on the anniversary date of first being licensed, or any date mandated by the CREC Explanation: All license renewals shall be for a full three-year period called the "anniversary date renewal period."

In Colorado, when must real estate licenses be renewed? A: every three years with expiration on December 31 of the third year B: every three years on the anniversary of licensing. C: each year at the anniversary of licensing D: every three years if the licensee passes the state examination

B: every three years on the anniversary of licensing. Explanation: All license renewals shall be for a full three-year period called the "anniversary date renewal period

A broker acting as an agent must: A: act as an advocate for the buyer or seller B: exercise reasonable skill and care, as well as act as an advocate for buyer or seller C: not act as an advocate for either the buyer or the seller D: not inform the buyer or seller that they could be legally responsible for the agent

B: exercise reasonable skill and care, as well as act as an advocate for buyer or seller Explanation: Agency requires a fiduciary responsibility from the agent to the Principal, therefore, an agent must exercise reasonable skill and care as well as be an advocate for buyer or seller.

The type of depreciation caused by outside factors, which are external to the property, is known as: A: curable depreciation B: external obsolescence C: functional obsolescence D: physical depreciation

B: external obsolescence Explanation: External obsolescence is usually related to conditions outside of - or EXTERNAL TO - the property itself. Each of the other types of depreciation mentioned involve the property ITSELF.

The Colorado Real Estate Commission can decide on their own to investigate all of the following EXCEPT: A: a broker depositing salaries into her trust account B: failure to disclose stigmatizing property C: violating the Colorado Consumer Protection Act D: broker failing to disclose licensed status to seller while buying a property for personal use

B: failure to disclose stigmatizing property Explanation: Colorado statute states that certain items that could psychologically impact (stigmatize) a property is not material to a real estate transaction. Therefore, these facts not being disclosed is not a violation.

What are the lawful duties owed to an unrepresented buyer by a seller's agent? A: no specific duties apply; agency duties are to the principal B: fair and honest dealing and disclosure of material facts about the property C: honest dealing and full disclosure of anything the broker knows about the transaction D: loyalty, fidelity, and disclosure of material facts about the property

B: fair and honest dealing and disclosure of material facts about the property Explanation: The legal duties owed by the seller's agent are fair and honest dealing and disclosure of material facts. Loyalty and fidelity would imply an agency relationship.

A person who has complete control over a parcel of real estate is said to own a: A: leasehold estate. B: fee simple estate. C: defeasible fee estate. D: life estate.

B: fee simple estate. Explanation: Fee Simple, also known as fee simple absolute is known as the highest degree of ownership. The other "estate" terms are all much more limited forms of ownership - a life estate expires over time, a leasehold estate has a definite term, and a defeasible estate is limited by a certain event happening.

A lease in which the tenant agrees to pay $600 a month, utilities included, would be a: A: net lease B: fixed lease C: graduated lease D: percentage lease

B: fixed lease

Checking the will owe box in the "holdover clause" in the Exclusive Right to Sell listing contract protects the listing broker's commission for disclosed buyers: A: usually for 60 days after the expiration of the contract B: for the period of time specified in the contract even if the property is relisted by another broker C: for the period of time specified in the contract or until the property is relisted with another broker D: for up to six months after the listing expires

B: for the period of time specified in the contract even if the property is relisted by another broker

A house which has five bedrooms and one bathroom, is an example of: A: economic obsolescence B: functional obsolescence C: incurable constructional obsolescence D: incurable economic obsolescence

B: functional obsolescence Explanation: Functional obsolescence deals with the property itself and its design or condition. Functional obsolescence is either curable or incurable. Economic obsolescence deals with the property ie., a refinery across the street.

ADA laws require a landlord to: A: select a certain percentage of minorities as tenants B: give special consideration to the individuals with disabilities C: ignore the sexual orientation of a prospective tenant D: provide housing to adults with children under the age of 18

B: give special consideration to the individuals with disabilities Explanation: ADA addresses the rights of individuals with disability in employment and public accommodations. ADA laws require the landlord to make reasonable accommodations.

The type of survey system that is based on sets of intersecting lines, which are principal meridians and base lines, is known as: A: metes-and-bounds B: government survey C: lot-and-block system D: anticipation

B: government survey Explanation: The government survey system, or rectangular survey system, is the form of survey that uses principle meridians and base lines -- think of lines forming rectangles.

The type of lease that allows for the step-up of rent payments and is used to attract tenants to difficult-to-rent properties is called a: A: percentage lease B: graduated lease C: index lease D: assignment lease

B: graduated lease Explanation: A graduated lease allows for a periodic increase in payments.

A single party listing: A: does not require a contract B: has no holdover clause C: does not fall under the statute of frauds D: requires two agents

B: has no holdover clause Explanation: According to Real Estate Commission Position 13 it is recognized that a Seller getting involved in a single party listing generally wants to limit the right of the listing broker to the one potential buyer. Hence, one or more of the following options are included in the contract: The first and the third limits the contract to the named buyer, the second removes the holdover clause. The holdover clause preserves the listing agents right to a buyer for a period of time after the listing contract expires. What is a Single Party Listing? Do not confuse Single Agency representation with Single Party Listing. Single Agency refers to the relationship of an agent that represents one party in any single transaction. The agent is required to provide either fiduciary or statutory duties exclusively to one principal within the transaction. Examples of this is either a Seller's or Buyer's Agent. A Single Party Listing in one that identifies the potential buyer in the listing agreement at the time the listing agreement is signed. The intention is for the agent to be able to earn a listing commission if they procure a sale from one specific buyer. An example might be if your buyer saw a FSBO (For Sale By Owner) property and were interested in purchasing the property. You might approach that (FSBO) seller with a single party listing agreement (identifying your client as the potential buyer) to secure the listing so you could sell the property to your client and have the seller pay you a commission for the sale.

A Single Party listing: A: does not require a contract B: has no holdover clause C: does not fall under the Statute of Frauds D: requires two agents

B: has no holdover clause Explanation: As per commission position 13: Brokers often secure single-party listings because they have what they believe to be a good prospect for purchase. These listings are usually only for a few days, but occasionally the broker wishes to be protected for a longer period while the broker is negotiating with a particular prospective purchaser. Usually, when an owner signs an exclusive right to sell with an exclusive brokerage adendum concerning a single party, the owner wishes to limit the rights of the broker under the listing contract. Therefore, in the space provided for additional provisions, one, two, or all of the following limitations should be inserted in this space: 1. The provisions of this listing contract shall apply only in the event a sale is made to ___________________________________. 2. The termination date shall not be extended by the "Holdover Period" of this listing contract. 3. In the event a sale is made by the owner or their broker to any other party than the above names, this isting contract is void.

A trust account maintained by a licensed broker in Colorado must have all of the following except: A: be located in the state of Colorado B: have a regular specified minimum balance C: designate the broker as trustee D: be the subject of a record showing deposits and withdrawals

B: have a regular specified minimum balance Explanation: Trust accounts must be in Colorado, name the broker as owner of the accounts and be reconciled monthly.

A broker has overbooked his Saturday for showing buyers some homes. The broker may suggest all of the following except: A: getting together on Sunday instead of Saturday B: have his unlicensed assistant show and sell the buyers a home C: give a referral to another agent in his office for taking the buyers to see the properties D: reschedule for the following weekend or next available time for the buyers

B: have his unlicensed assistant show and sell the buyers a home Explanation: An unlicensed assistant may chauffeur the buyer to the property, but may not be involved in any type of sales.

The least expensive way of getting clients is: A: bulk mailing to 5,000 residents B: holding open houses C: advertising in print and television D: farming a 200-block subdivision

B: holding open houses Explanation: Open houses are one of many affordable ways to find a prospect, as there is little direct expense required.

In Colorado representing two opposing parties as an agent in the same transaction is: A: dual agency and legal in Colorado B: illegal in Colorado C: universal agency D: special agency

B: illegal in Colorado Explanation: The State of Colorado does not allow "dual agency," but "non-agent" transaction brokerage (considered not an agency relationship but a non-agency "working relationship") -- which allows a real estate licensee to work with both buyer and seller in the same transaction. It is the default form of real estate representation in the state in the absence of a written agency agreement such as a Buyer Agency Agreement or a Listing Agreement (creates a Seller's Agency.

Agreement to accept facsimile signatures would be found: A: on a side agreement B: in the Contract to Buy and Sell Real Estate C: in the closing instructions D: in the additional provisions

B: in the Contract to Buy and Sell Real Estate Explanation: Agreement to accept facsimile signatures has been added as part of the commission-approved Contract to Buy and Sell Real Estate.

When appraising a commercial property, the appraiser is most concerned with: A: accrued depreciation B: income C: sales prices of comparable properties D: total annual mortgage payments

B: income Explanation: Commercial property is most generally evaluated though the income approach.

A person who dies without leaving a will is known as having died: A: testate B: intestate C: reversionary right D: reversionary interest

B: intestate Explanation: Remember that INTESTATE is WITHOUT a will, while testate is with a will.

The amount of commission a listing broker offers to cooperating brokers: A: is specified by antitrust law B: is inserted into the listing contract C: is regulated by MLS D: is determined by the actual costs the respective brokers incur

B: is inserted into the listing contract Explanation: Commissions are negotiable and included in the listing contract.

Tenant Teri signs a six-month lease and agrees to pay $375 a month in rent, utilities included, on an apartment unit. Under the "warranty of habitability," Teri moves out after two months because the electrical service has been cut off. Teri: A: is in violation of her lease and is obligated to continue paying rent B: is not obligated to continue making rent payments as she has been constructively evicted C: has been actually evicted and need not continue paying rent D: has abandoned the property and may be sued for specific performance

B: is not obligated to continue making rent payments as she has been constructively evicted

If a Lead-Based Paint Disclosure form is not executed at the time of the sale of a dwelling built prior to 1978, the purchaser: A: may sue the seller for damages B: is not obligated under the terms of the contract C: is entitled to an inspection paid for by the seller D: may suffer damages as a result of caveat emptor

B: is not obligated under the terms of the contract Explanation: A buyer is not obligated under the terms of a contract until the lead-based disclosure has been executed. More info:WARNING! LEAD FROM PAINT, DUST, AND SOIL CAN BE DANGEROUS IF NOT MANAGED PROPERLY Penalties for failure to comply with Federal Lead-Based Paint Disclosure Laws include treble (3 times) damages, attorney fees, costs, and a base penalty up to $11,000 (plus adjustment for inflation). The current penalty is up to $16,000 for each violation. Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards Lead Warning Statement Every purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women. The Seller of any interest in residential real property is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspections in the Seller's possession and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase.

Dual Agency: A: is legal with full disclosure B: is not permissible in Colorado C: was designed to create double commissions for brokers D: is legal if the principal is from out of state

B: is not permissible in Colorado Explanation: Although permissible in many states, the State of Colorado does not allow "dual agency," but does allow "non-agent" transaction brokerage (considered not an agency relationship but a non-agency "working relationship") -- which allows a real estate licensee to work with both buyer and seller in the same transaction. It is the default form of real estate representation in the state in the absence of a written agency agreement such as a Buyer Agency Agreement or a Listing Agreement which creates a Seller's Agency.

The brokerage fee or commission usually: A: becomes a lien if not paid B: is paid from the seller's proceeds C: is paid from the buyer's proceeds D: must be a set rate for every broker

B: is paid from the seller's proceeds Explanation: The brokerage or commission fee is usually paid out of the seller's proceeds unless otherwise agreed upon.

An executory contract is one which: A: is made by executor of an estate for the sale of probate property B: is yet to be performed C: has been completely performed D: has been proposed but not accepted by either party

B: is yet to be performed Explanation: A contract is considered to be executory until it is fully performed by both parties.

When a counteroffer is made, what happens to the original offer? A: it is considered a novation B: it is deemed rejected C: it is held in secondary position D: it can be used as a fallback position, in the event a counteroffer is rejected

B: it is deemed rejected

When a broker turns over funds to a title company and has the closing statement prepared by the title company: A: the broker is not responsible for the accuracy of the figures on the statement B: it is the responsibility of the title company to provide the buyer and seller with copies of the closing statement C: the title company may charge no more than $75.00 to prepare the uniform settlement statement D: the responsibility for the accuracy of the figures is the title company's

B: it is the responsibility of the title company to provide the buyer and seller with copies of the closing statement Explanation: The broker is always responsible for the accuracy of the figures that the title company prepares.

A seller providing financing may be exempt from attaining a lender's license if they have completed: A: a seller providing financing always needs a mortgage license B: less than 3 transactions in the past 12 months C: less than 5 transactions in the past 12 months D: less than 5 transactions is the past 15 months.

B: less than 3 transactions in the past 12 months Explanation: This section from the real estate manual outlines the exceptions to needing a mortgage license: § 12-61-904, C.R.S. Exemptions - rules. (1) (b) With respect to a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of no more than three properties in any twelve-month period to purchasers of such properties, each of which is owned by such person, estate, or trust and serves as security for the loan;

A special agent has: A: unlimited authority B: limited authority C: no authority D: mutual authority

B: limited authority Explanation: A special agent is usually limited to the one task at hand, which might be either selling the owner's home or finding a buyer a home to purchase.

Broker had a property on the market last year and knows there was a serious problem. The current owners of the property are aware of this problem, but tell the listing broker they are not going to disclose the problem to prospective buyers as buyers would not want the property and the property would not be as marketable. The agent should: A: take the listing, do not disclose the problem, but recommend to prospective buyers they perform an inspection B: listing agent informs the seller they need to disclose this information on the property disclosure and if they are not willing to put this information on the property disclosure, the broker will not take the listing. C: disclose the problem to prospective buyers without the owner's knowledge D: do not disclose the problem, the duty of obedience requires the broker to follow the clients instruction.

B: listing agent informs the seller they need to disclose this information on the property disclosure and if they are not willing to put this information on the property disclosure, the broker will not take the listing.

When a contract is contingent upon the purchaser's ability to obtain special financing, (i.e. down payment or closing cost assistance), the: A: selling broker should not disclose anything to the listing agent B: listing broker should verify the ability of the purchaser to obtain such financing, the availability of the program, and disclose this information to his or her seller C: seller needs to investigate D: buyer should leave everything to his agent

B: listing broker should verify the ability of the purchaser to obtain such financing, the availability of the program, and disclose this information to his or her seller Explanation: The listing broker should verify as much information about the contract as possible.

An acceleration clause allows the lender to: A: increase the number of payments made in a year to accelerate payment on the loan B: make the entire amount due and payable immediately upon buyer's default C: increase the interest rate D: all of the above

B: make the entire amount due and payable immediately upon buyer's default Explanation: The acceleration clause is what allows the lender to pursue foreclosure. When the borrower defaults, the lender makes the full balance of the loan due and payable. If the borrower cannot pay, the lender will foreclose. This is a clause closely associated in meaning with Due-On-Sale Clause and Alienation Clause. An alienation clause in a mortgage can give the lender the option to call the loan (declare the entire balance due) when the property owner transfers ownership, title or interest without the lender's consent.

Rule E-35 of the Colorado Real Estate Commission requires brokers: A: make oral disclosure of brokerage relationship first, then followup with correct Commission form prior to closing B: make written disclosure of his/her brokerage relationship before eliciting or receiving confidential information C: make written disclosure of brokerage relationship using forms prepared by the managing broker D: make written disclosure of brokerage relationship prior to closing

B: make written disclosure of his/her brokerage relationship before eliciting or receiving confidential information Explanation: Rule E-35 states that when a real estate broker elicits or accepts confidential information from a buyer or tenant concerning the buyer's or tenant's real estate needs, motivation, or financial qualifications, the real estate broker must provide a written brokerage relationship disclosure identifying his or her brokerage relationship with the buyer or seller.

As per terms of Closing Instructions, a closing company must do all except: A: provide an accurate and detailed closing statement B: mandatory release of earnest money if buyer fails to close C: provide copies of all signed documents D: authorized to obtain any information necessary for the Closing

B: mandatory release of earnest money if buyer fails to close Explanation: As per Closing instructions: EARNEST MONEY DISPUTE. Except as otherwise provided herein, Earnest Money Holder shall release the Earnest Money as 36 directed by written mutual instructions, signed by both Buyer and Seller. In the event of any controversy regarding the Earnest Money 37 (notwithstanding any termination of the Contract), Earnest Money Holder shall not be required to take any action. Earnest Money Holder, at 38 its option and sole discretion, may (1) await any proceeding, (2) interplead all parties and deposit Earnest Money into a court of competent 39 jurisdiction and shall recover court costs and reasonable attorney and legal fees, or (3) provide notice to Buyer and Seller that unless Earnest 40 Money Holder receives a copy of the Summons and Complaint or Claim (between Buyer and Seller) containing the case number of the 41 lawsuit (Lawsuit) within one hundred twenty days of Earnest Money Holder's notice to the parties, Earnest Money Holder shall be authorized 42 to return the Earnest Money to Buyer. In the event Earnest Money Holder does receive a copy of the Lawsuit, and has not interpled the 43 monies at the time of any Order, Earnest Money Holder shall disburse the Earnest Money pursuant to the Order of the Court.

What is typically not negotiable in the Contract to Buy and Sell Real Estate A: closing service fee B: mediation fee C: appraisal fee D: title fee

B: mediation fee Explanation: The purchase contract indicates that should there be a legal dispute between buyer and seller, the first legal recourse is mediation and both both parties will split the fee equally regardless of who prevails. From the Contract to Buy and Sell: MEDIATION. If a dispute arises relating to this Contract, prior to or after Closing, and is not resolved, the parties shall first proceed in good faith to submit the matter to mediation. Mediation is a process in which the parties meet with an impartial person who helps to resolve the dispute informally and confidentially. Mediators cannot impose binding decisions. The parties to the dispute must agree, in writing, before any settlement is binding. The parties will jointly appoint an acceptable mediator and will share equally in the cost of such mediation. The mediation, unless otherwise agreed, shall terminate in the event the entire dispute is not resolved within thirty days of the date written notice requesting mediation is delivered by one party to the other at the party's last known address. This section shall not alter any date in this Contract, unless otherwise agreed

What is typically not negotiable in the Contract to Buy and Sell Real Estate: A: closing service fee B: mediation fee C: appraisal fee D: title fee

B: mediation fee Explanation: The purchase contract indicates that should there be a legal dispute between buyer and seller, the first legal recourse is mediation and both both parties will split the fee equally regardless of who prevails. From the Contract to Buy and Sell: MEDIATION. If a dispute arises relating to this Contract, prior to or after Closing, and is not resolved, the parties shall first proceed in good faith to submit the matter to mediation. Mediation is a process in which the parties meet with an impartial person who helps to resolve the dispute informally and confidentially. Mediators cannot impose binding decisions. The parties to the dispute must agree, in writing, before any settlement is binding. The parties will jointly appoint an acceptable mediator and will share equally in the cost of such mediation. The mediation, unless otherwise agreed, shall terminate in the event the entire dispute is not resolved within thirty days of the date written notice requesting mediation is delivered by one party to the other at the party's last known address. This section shall not alter any date in this Contract, unless otherwise agreed.

Requirements of a real estate applicant: A: must be at least 21 or older B: meet the state requirements for licensing C: must have a high school diploma or GED D: must be a US citizen

B: meet the state requirements for licensing Explanation: An applicant for a real estate license must be 18 years or older, take 168 hours of pre-licensing education, pass the state's exam and work under an employing broker.

Unclaimed funds held in escrow after five years: A: may be used by the broker for the annual office party B: must be reported and remitted to the state treasurer C: should be invested in real estate investment trusts D: should be kept indefinitely

B: must be reported and remitted to the state treasurer Explanation: Must be remitted to state treasurer after five years. These funds do not belong to the Broker.

Which of the following is true for a person activating an inactive or expired Colorado real estate license? A: are not required to make up for the continuing education requirements they missed B: must satisfy the continuing education requirement before they apply to activate an inactive license or to reinstate an expired license to active status

B: must satisfy the continuing education requirement before they apply to activate an inactive license or to reinstate an expired license to active status Explanation: This answer is a two-edged sword. To convert an inactive or expired license to active status the licensee must be current on or otherwise satisfy the CE requirements, pay a renewal fee and get Errors and Omissions insurance. If the licensee has no intention of ever activating their inactive or expired license they do not need to take continueing education, pay a renewal fee or purchase insurance. CE requirements are listed in Commission Rule B-2 below: B-2. Methods of completing continuing education. Licensed brokers must satisfy the continuing education requirement before they apply to renew an active license, activate an inactive license or to reinstate an expired license to active status. Licensed brokers may satisfy the entire continuing education requirement through one of the following options: a) Complete the twelve hours required bysection 12-61-110.5 (1) (c), C.R.S., and required by this rule in annual 4-hour increments developed by the Commission, otherwise referred to as the "Annual Commission Update Course." Licensees who choose this option must complete an additional 12 hours of elective credit hours to meet the 24-hour total continuing education requirement during the license period in subject areas listed in section 12-61-110.5(3), C.R.S. Please note that a licensee may not take the same version of the Annual Commission Update Course more than once. If a licensed broker takes more than 12 hours of the Annual Commission Update Course during a license period, the licensee will receive elective credit hours for any additional hours. b) Completing the Commission-approved 24-hour "Broker Reactivation Course." This option is available to licensees under one of the following conditions: (1) Licensee is currently active and did not use the Broker Reactivation Course to satisfy the Rule B-2(a) requirements in the previous license year (2) Licensee is inactive or expired for up to thirty-six months prior to active status and unable to comply with the education requirements listed in Rule B-2(a). c) Pass the Colorado state portion of the licensing exam. d) Completing 72 total hours of pre-licensure education concerning the understanding and preparation of Colorado real estate contracts (48 hours) and real estate closings (24 hours). The courses and course providers are required to comply with the requirements as described at section 12-61-103(4)(a), C.R.S. Any inactive or expired licensees who cannot meet the education requirements listed in Section 4(a), (b), or (c) must comply with the education requirements found in Section 4(d) before activation or reinstatement of the license.

An associate broker has developed a web site. What must he or she include on the site? A: name of the home office of the company that holds the salesperson's license and a list of states in which company is licensed B: name and location of the brokerage company that holds the associate's license C: names of all licensees in the broker's office and the states in which they are licensed D: license number of the brokerage and a list of current active licensees

B: name and location of the brokerage company that holds the associate's license Explanation: All advertising by an employed licensee must include the identity of the brokerage that holds the associate's license. This also applies to internet advertising.

An elderly couple is selling their house; they accept an offer but the closing hasn't happened yet. The couple gets in a car wreck and the man dies. Knowing it would be a hardship to make the surviving wife move, is she able to pay the broker's commission and get out of the contract? A: yes B: no

B: no

If a broker shows a home for another broker who has it listed and a married couple comes in and he answers all questions the best he can and he promises to find out answers to the ones he doesn't know and get back to them. What type of relationship has been established? A: implied agency B: no fiduciary relationship has been established C: express agency D: buyer agency

B: no fiduciary relationship has been established

A requirement of RESPA is that: A: licensees be tipped for recommending a good title company B: no seller may require the buyer to purchase title insurance from a particular title company C: buyers are not required to purchase a mortgagee's title policy D: title insurance is always a requirement for all transactions

B: no seller may require the buyer to purchase title insurance from a particular title company Explanation: RESPA eliminates kickbacks, and prevents sellers from requiring the use of a specific title company.

You competed for and won a listing contract by offering a considerably reduced commission. In order to recoup some of your normal fee, you charge for each contract document that you prepare. Your seller agrees to this arrangement. It is: A: perfectly all right, so long as you use approved forms B: not allowable C: all right, so long as the seller's attorney prepares the forms D: anything that you and the seller agree upon in writing is allowable

B: not allowable

The Colorado Real Estate Commission can investigate a licensee in all cases except: A: improper supervision by a managing broker B: not cooperating with a broker in the MLS C: when a valid complaint is received

B: not cooperating with a broker in the MLS Explanation: Disputes between brokers, cooperating through the MLS a (Multiple Listing Service), are resolved through mediation at the Association of Realtors or in the courts.

Brian purchased a second home three years ago for $ 169,000. He sold it this year for $154,000. He decided to go ahead and sell it for a loss because his work schedule prevented him from enjoying the second property. His tax return will: A: reflect a loss of $15,000 B: not show any loss, as you cannot write off a loss on your personal residence C: not show a loss this year, but Brian may carry this loss over into a year when he shows a gain on the sale of a principal residence and write it off then D: not show a loss this year, but Brian may carry this loss over into a year when he shows a gain on the sale of a principal residence and write it off then if that happens within the next three years

B: not show any loss, as you cannot write off a loss on your personal residence Explanation: The IRS only plays with the owner of a personal residence if the house is sold at a profit; if there is a loss the IRS does not want to be your partner on your residence.

When an existing contract is replaced with a new contract, this is referred to as: A: rescission B: novation C: hypothecation D: subordination

B: novation

Acceptance of a written offer to purchase real estate requires the signature of the: A: offeree B: offeror and offeree C: offeree and agent D: offeree, offeror, and agent

B: offeror and offeree Explanation: To have a valid contract, it must be signed by all parties and accepted and that acceptance must be communicated to the person making the offer before the contract deadline.

If the buyer and seller have not reached a resolution on inspection issues by the Inspection Resolution Deadline the contract will terminate: A: one day following the resolution deadline B: on the expiration of the resolution deadline C: one day following the objection deadline D: on the objection deadline

B: on the expiration of the resolution deadline Explanation: The Buyer solely determines if the condition of a property is satisfactory or not. Although the Buyers normally will list items they wish the Seller to address, they are not required to do so. The Buyer can simply terminate the contract should they so desire. Should the Buyer submit items to correct to the Seller, the Seller has until a resolution deadline to come to a negotiated agreement regarding the items with the Buyer. If a satisfactory agreement is not reached, the contract will terminate automatically on the deadline unless the Buyer withdraws the objections.

FHA loans are available for: A: low-income families only B: owner-occupied homes C: investors only D: owner-occupied homes and low-income families only

B: owner-occupied homes Explanation: FHA are for owner occupied properties only.

The accumulation of several contiguous properties under one ownership, thus creating a large parcel of proportionate greater value, involves: A: depreciation B: plottage C: corner influence D: zoning value

B: plottage Explanation: Contiguous means adjoining. The question represents the definition of plottage.

The contract to purchase addresses the following issues: A: the buyer will furnish an owner's title insurance policy B: pre-owned home warranty programs are available C: the selling agent's rights to be paid a commission and how much he is being paid D: the broker's rights if the contract is not executed

B: pre-owned home warranty programs are available Explanation: The seller will furnish the owner's title insurance; the possibility of purchasing a home warranty plan

A real estate broker is legally responsible for: A: searching the title records B: preparation of the settlement statements C: the wire transfer from the borrower's lender D: all of the above

B: preparation of the settlement statements Explanation: The Title Company searches the title records and handles the wire transfer; it is the broker who is responsible for the preparation of the legal documents; the Title Company acts only as a scrivener for the broker.

The concept holding that real estate values are constantly in flux in response to various social, economic, governmental and environmental forces is called the: A: principle of substitution B: principle of change C: principle of supply and demand D: principle of competition

B: principle of change Explanation: The principle of change holds that no physical or economic condition remains constant and that change is largely the result of cause and effect and that existence occurs in three states: integration, equilibrium and degeneration.

Recording a deed: A: guarantees ownership B: protects the interests of the purchaser C: eliminates prior liens D: perfects the instrument if it was improperly executed

B: protects the interests of the purchaser Explanation: Recording a deed protects the interests of the buyer; it does not guarantee ownership or eliminate prior liens. Recording an invalid document does not perfect it.

At the time of taking the listing, the broker has the responsibility of: A: providing buyers B: providing comparable properties and their prices C: driving a nice car D: listing the property high

B: providing comparable properties and their prices Explanation: At the time of the listing, a broker should call to the attention of the owner comparable properties and prices.

The most expensive and time-consuming method of estimating the cost of construction is: A: unit-in-place B: quantity survey C: comparison method D: income approach

B: quantity survey Explanation: The quantity survey is the most time consuming, of the methods employed, in the cost approach to estimate replacement cost.

An underground pipeline for irrigation of a farm is: A: personality B: realty C: a riparian right D: an emblement

B: realty Explanation: Real property (Realty) includes that which is affixed to the land, here, the pipeline. Real property and realty are synonymous. Personal property are items not fixed to the land. A riparian right is a form of water right. Emblements are crops. .

Al Jones, Harold Murphy, and Josh Hagstrom are joint tenants owning a parcel of land. Hagstrom conveys his interest to his friend, Willy Phillips. After the conveyance, Jones and Murphy: A: become tenants in common B: remain joint tenants owning an undivided 2/3 interest in the land C: become joint tenants with Phillips D: continue to be joint tenants with Hagstrom

B: remain joint tenants owning an undivided 2/3 interest in the land Explanation: It is possible to be a joint tenant with one party, and a tenant in common with another party. In this case Jones and Murphy are tenants in common with Phillips. Jones and Murphy remain as joint tenants.

When using a Counterproposal form, the client submitting the counterproposal would: A: sign the original offer and check the "is countered" box B: sign only the counterproposal C: generate a new contract to purchase D: sign the original offer, check the "is countered" box and sign the counterproposal

B: sign only the counterproposal Explanation: The client submitting the counterproposal would not sign the original purchase offer. The client would instead check the box at the bottom of the offer indicating that the offer is countered, initial same where indicated and sign only the Counterproposal.

The value of all vacant land is influenced by its best potential use. One of the leading factors or influences in the valuation of urban industrial land is: A: front footage B: size of acreage C: corner influence D: unearned increment

B: size of acreage Explanation: The vital factor for an industrial site is the size of the parcel. Industrial complexes usually require considerable space and are not concerned with exposure to the retail public.

Regarding an Earnest Money dispute -If a lawsuit is filed, the broker may: A: surrender the money to an interpleader B: surrender the money in an interpleader action and request to be removed as a defendant C: surrender the money to the state Real Estate Commission D: surrender the money to the party with the best lawyer

B: surrender the money in an interpleader action and request to be removed as a defendant Explanation: An option for the broker is to interplead all parties by depositing the earnest money into a court of competent jurisdiction and request to be removed as a defendant

Commingling of funds in real estate means: A: putting all your money in one savings account B: that a broker mixes trust accounts with his personal funds C: buying property with your brother or other family member D: using your commission as part of the down payment

B: that a broker mixes trust accounts with his personal funds Explanation: Commingling of Funds is Prohibited The most serious accounting violation when administering a trust account is the commingling of owner and broker/manager funds. Owner funds contained in a trust account cannot be commingled with any other funds. Commingling is strictly prohibited by law and is grounds for revocation or suspension of the license of a real estate professional. Commingling occurs when: 1. Personal or company funds are deposited into a trust account. This is typically a violation of the law even if separate records are kept. 2. Trust funds are deposited into the licensee's general or personal bank account rather than into the trust account. This is also grounds for suspension or revocation of a realtor's license.

Broker K arrives to present an offer to Mrs. G, an invalid, and finds her son and his wife also present. Both individuals persistently urge Mrs. G to accept the offer on her home, though it is much lower than the price she was asking. If Mrs. G signs the offer, she may later claim: A: that Broker K should not have brought her a low offer B: that she was under undo duress from her son and daughter-in-law and that the agreement is voidable C: that Broker K defrauded her by allowing her son and daughter-in-law to see the agreement D: that her son and his wife have usurped her consumer protection rights

B: that she was under undo duress from her son and daughter-in-law and that the agreement is voidable Explanation: Because she is an invalid, and her son and daughter-in-law persisted in their efforts to have Mrs. G sign the terms of the contract, (under duress) it is a voidable contract.

It is the duty of an agent to disclose fully to the principal every step taken in the transaction of the principal's business. This is because: A: the agent's commission can be adjusted up or down according to the agent's efforts B: the agent is a fiduciary C: it is stated in the listing contract that the agent call the seller daily D: all of the above

B: the agent is a fiduciary Explanation: The fiduciary responsibility, of the agent to the principal, requires full disclosure

A seller instructs the broker to only market the property to families on the south side of town. The broker refuses to comply. In this case: A: the broker has violated fiduciary duty B: the broker has not violated fiduciary duty C: the broker is liable for breach of contract D: the broker should do what the seller asks

B: the broker has not violated fiduciary duty Explanation: This would be a case of discrimination if the broker where to obey the seller's instructions.

A broker purchases software for contract printing. If there is an error in the contract wording: A: the Software Company is legally liable for any errors in the package B: the broker is liable for the contract's accuracy C: the Software Company must be on the Real Estate Commission's "approved" list of preparers D: he must send it to his attorney for review before using the software

B: the broker is liable for the contract's accuracy Explanation: A broker is ultimately responsible for the accuracy of all contracts and closings, unless legal counsel of one of the parties to the transaction prepares them.

An ad in the newspaper must appear under the name of: A: the branch office B: the broker of record C: the listing licensee D: none of the above

B: the broker of record Explanation: All advertising must contain the name of the employing broker.

A tenant with disability would like to make reversible changes to the property that effect the structure. In this scenario: A: the changes must be allowed, but only in an apartment building that has more than 4 units B: the changes must be allowed as long as the tenant pays for it C: the tenant must get approval from the owner for any change D: the landlord must pay for changes to meet ADA regulations

B: the changes must be allowed as long as the tenant pays for it

The law of agency is: A: a statutory law established by the Constitution B: the end result of common law, court decisions, and local practices C: a law that defines the rights of the United States government D: real estate laws enforced by the Real Estate Commission

B: the end result of common law, court decisions, and local practices Explanation: The law of agency is the end result of common law, court decision, and local practices. The agency relationship evolved from the master-servant relationship under English common law. The servant owed absolute loyalty to the master. This loyalty was superior to the servant's personal interests as well as the interests of others. Common law is established by court decisions. Under common law, the agent owes the principal five duties, including: (1) care: (2) obedience, (3) accounting, (4) loyalty (including confidentiality), and (5) disclosure.

The individual responsible for the proper closing of the transaction and settlement statement is: A: the employing broker B: the individual who has personally established a relationship with the buyer or seller C: the closing agent representing the title company D: the representative of the lender

B: the individual who has personally established a relationship with the buyer or seller Explanation: The individual who attends the closing shares the responsibility for accuracy of documents with the individual who establishes a relationship with the client.

A licensee may negotiate the terms upon which to take a future listing when: A: by first contacting the current listing broker and receiving permission to seek the seller's future business B: the licensee is contacted by a seller C: the licensee contacts a seller and the seller agrees to sign a future listing D: this is not permitted under any circumstance

B: the licensee is contacted by a seller Explanation: When a licensee attempts to interfere in the written relationship between another agent and his/her client - this is called "signcrossing" and is prohibited by the Real Estate Commission. This means do not steal another agents business. However, negotiating a listing or buyers agency agreement is permissable if: 1) it is for a future date after the expiration or termination of an existing agreement and 2) the initial contact was initiated by the Seller.

On the Commission-approved purchase and sale agreement, the Contract to Buy and Sell Real Estate, regarding remedies in the event of a buyer default; if no box is checked what is the default? A: no default - a judge will have to decide B: the liquidated damages clause is automatically in effect C: the buyer cannot sue for specific performance D: the seller can sue for specific performance

B: the liquidated damages clause is automatically in effect Explanation: On the commission approved purchase and sale agreement form; if the specific performance box is not checked the liquidated damages clause is automatically in effect. If Buyer is in Default: ___ Specific Performance. Seller may elect to treat this Contract as cancelled, in which case all Earnest Money (whether or not paid by Buyer) will be paid to Seller and retained by Seller; and Seller may recover such damages as may be proper; or Seller may elect to treat this Contract as being in full force and effect and Seller has the right to specific performance or damages, or both. Liquidated Damages, Applicable. This applies unless the box above is checked. All Earnest Money (whether or not paid by Buyer) will be paid to Seller, and retained by Seller. Both parties will thereafter be released from all obligations hereunder. It is agreed that the Earnest Money specified is LIQUIDATED DAMAGES, and not a penalty, which amount the parties agree is fair and reasonable and (except as provided in §§ xx.x), said payment of Earnest Money is SELLER'S ONLY REMEDY for Buyer's failure to perform the obligations of this Contract. Seller expressly waives the remedies of specific performance and additional damages.

On the Commission-approved purchase and sale agreement regarding remedies in the event of a buyer default, if no box is checked what is the default? A: no default - a judge will have to decide B: the liquidated damages clause is automatically in effect C: the buyer cannot sue for specific performance D: the seller can sue for specific performance

B: the liquidated damages clause is automatically in effect Explanation: On the commission-approved purchase and sale agreement form; if the specific performance box is not checked the liquidated damages clause is automatically in effect. If Buyer is in Default: ___ Specific Performance. Seller may elect to treat this Contract as canceled, in which case all Earnest Money (whether or not paid by Buyer) will be paid to Seller and retained by Seller; and Seller may recover such damages as may be proper; or Seller may elect to treat this Contract as being in full force and effect and Seller has the right to specific performance or damages, or both. Liquidated Damages, Applicable. This applies unless the box above is checked. All Earnest Money (whether or not paid by Buyer) will be paid to Seller, and retained by Seller. Both parties will thereafter be released from all obligations hereunder. It is agreed that the Earnest Money specified is LIQUIDATED DAMAGES, and not a penalty, which amount the parties agree is fair and reasonable and (except as provided in §§ xx.x), said payment of Earnest Money is SELLER'S ONLY REMEDY for Buyer's failure to perform the obligations of this Contract. Seller expressly waives the remedies of specific performance and additional damages.

The property is leased through September, and the new buyer closes on June 30. A: he can take possession June 30, since he did not enter into the lease, the former owner did B: the new buyer must honor all leases C: he can evict the buyer if he has not moved by July 30 D: he received a sheriff's deed, so the lease does not apply

B: the new buyer must honor all leases Explanation: All existing leases remain in effect even though the property has been sold.

A bilateral contract is one in which: A: only one of the parties is bound to act B: the promise of one party is given in exchange for the promise of the other party C: a restriction is placed, by one party, to limit the actuarial performance by the other party D: something is to be done by one party only

B: the promise of one party is given in exchange for the promise of the other party Explanation: A bilateral agreement requires each of the parties to do something for the other.

The remnant of an estate that has been conveyed to take effect and be enjoyed after the termination of a prior estate, as when an owner conveys a life estate to one party and the remainder to another, is called: A: the right of survivorship B: the remainder estate C: the reversionary right D: the reversionary interest

B: the remainder estate Explanation: The remainder estate is that which is left from a life estate. Don't confuse this with reversionary interest, which is the future interest that reverts to a grantor or his heirs.

According to the Statute of Frauds - a real estate sales contract is not effective unless it is signed by: A: the buyer B: the seller C: either the buyer or the seller

B: the seller Explanation: Although Colorado's statute of frauds only provides that the seller must sign the real estate contract, the obvious best practice is for both parties to sign. Statute of Frauds. To prevent fraud through perjury, the law requires that the parties' agreement evidencing their mutual assent must be in writing in certain cases. As to real estate, the Colorado law provides: Every contract for the leasing for a longer period than one year, or for the sale of any lands or any interest in lands, is void, unless the contract, or some note or memorandum thereof, expressing the consideration is in writing, and subscribed by the party by whom the lease or sale is to be made. (C.R.S. 38-10-108) In Colorado, real estate contracts not signed by the seller are void, not voidable. Colorado differs from most other states that provide that "the party to be charged" (in a lawsuit by the other party) must have signed the contract. Other agreements that are declared void by law are (C.R.S. 38-10-112): (i) Every agreement that by the terms is not to be performed within one year from the making thereof; (ii) Every special promise to answer for the debt, default, or miscarriage of another person; (iii) Every agreement, promise, or undertaking made upon consideration of marriage, except mutual promises to marry. Generally, the statute of frauds provides that no civil action can be brought to enforce a contract unless there is some writing signed by the party to be charged (in civil action to enforce the contract). The writing does not have to be the "perfect" contract but it does have to be sufficient to allow a court to determine that the parties intended to sell the property. Such things as (1) the identity of the parties, (2) subject matter, (3) terms and conditions, (4) recital of consideration and (5) signatures of the parties are necessary. Although Colorado's statute of frauds only provides that the seller must sign the real estate contract, the obvious best practice is for both parties to sign. Some states have statutes of fraud provisions in their real estate license laws. These laws provide that a real estate licensee shall not be entitled to a commission unless there is a written employment agreement between the licensee and the buyer or seller. Although the Colorado license law does not have such a statute of frauds.

If the Specific Performance box is not checked, and the buyer defaults: A: the buyer cannot default without mediation B: the seller keeps the earnest money, but cannot sue C: the buyer is entitled to receive the earnest money D: buyer and seller split the earnest money

B: the seller keeps the earnest money, but cannot sue Explanation: When the Specific Performance box is checked on the purchase and sales contract, this is the Seller's sole and only remedy for a Buyer default. If no box is checked - the default remedy is Liquidated Damages. Specific Performance means that the Seller can sue the Buyer for damages and take their Earnest Money. Liquidated Damages means the Seller CANNOT sue for damages and may only take the Earnest Money.

You submit an offer to the seller. They agree with price, inclusions, everything except the closing date. The proper way to handle this is: A: prepare another offer with a different closing date B: the seller should sign a counterproposal with their preferred date of closing C: an amend/extend form can be used in the case of date changes only D: the seller should reject the offer

B: the seller should sign a counterproposal with their preferred date of closing Explanation: A counteroffer to change the date of closing must be submitted by the seller.

Which of the following situations would cause a deed to create tenancy in common instead of joint tenancy with right of survivorship? A: the parties agree that all have the right of possession B: the three parties agree to divide the property 40 per cent, 30 per cent, 30 per cent between them C: the parties receive their interests at the same time D: all parties are named on a single deed conveying the property

B: the three parties agree to divide the property 40 per cent, 30 per cent, 30 per cent between them Explanation: If the ownerships interests were unequally divided like this it would invalidate the joint tenancy and create the default of tenancy in common. More info on joint ownership - There are three types of concurrent ownership, or ownership of property by two or more persons: Tenancy by the Entirety, Joint Tenancy, and Tenancy in Common. A Tenancy by the Entirety can be created only by married persons. Anybody regardless of married status may choose to create a Joint Tenancy or a Tenancy in Common. First of all Tenancy by the Entirety is not used in Colorado we use Joint Tenancy for this purpose instead. Still, the term occasionally makes an appearance on the National side of the licensing exam as some state do use it. So, it is best to know it. Tenancy by the Entirety allows spouses to own property together as a single legal entity. Under a tenancy by the entirety, creditors of an individual spouse may not attach and sell the interest of a debtor spouse: only creditors of the couple may attach and sell the interest in the property owned by tenancy by the entirety. The most important difference between a tenancy by the entirety and a joint tenancy or tenancy in common is that a tenant by the entirety may not sell or give away his interest in the property without the consent of the other tenant. Upon the death of one of the spouses, the deceased spouse's interest in the property devolves to the surviving spouse, and not to other heirs of the deceased spouse. This is called the right of survivorship. Tenants in common do not have a right of survivorship. In a tenancy in common, persons may sell or give away their ownership interest. Joint tenants do have a right of survivorship, but a joint tenant may sell or give away her interest in the property. If a joint tenant sells her interest in a joint tenancy, the tenancy becomes a tenancy in common, and no tenant has a right of survivorship. A tenancy by the entirety cannot be reduced to a joint tenancy or tenancy in common by a conveyance of property. Generally, the couple must Divorce, obtain an Annulment, or agree to amend the title to the property to extinguish a tenancy by the entirety.

Which of the following is true for a person activating an inactive or expired Colorado real estate license: A: they are not required to make up for the continuing education requirements they missed B: they must satisfy the continuing education requirement before they apply to activate an inactive license or to reinstate an expired license to active status

B: they must satisfy the continuing education requirement before they apply to activate an inactive license or to reinstate an expired license to active status Explanation: This answer is a two-edged sword. To convert an inactive or expired license to active status the licensee must be current on or otherwise satisfy the CE requirements, pay a renewal fee and get Errors and Omissions insurance. If the licensee has no intention of ever activating their inactive or expired license they do not need to take continueing education, pay a renewal fee or purchase insurance. CE requirements are listed in Commission Rule B-2 below: B-2. Methods of completing continuing education. Licensed brokers must satisfy the continuing education requirement before they apply to renew an active license, activate an inactive license or to reinstate an expired license to active status. Licensed brokers may satisfy the entire continuing education requirement through one of the following options: a) Complete the twelve hours required bysection 12-61-110.5 (1) (c), C.R.S., and required by this rule in annual 4-hour increments developed by the Commission, otherwise referred to as the "Annual Commission Update Course." Licensees who choose this option must complete an additional 12 hours of elective credit hours to meet the 24-hour total continuing education requirement during the license period in subject areas listed in section 12-61-110.5(3), C.R.S. Please note that a licensee may not take the same version of the Annual Commission Update Course more than once. If a licensed broker takes more than 12 hours of the Annual Commission Update Course during a license period, the licensee will receive elective credit hours for any additional hours. b) Completing the Commission-approved 24-hour "Broker Reactivation Course." This option is available to licensees under one of the following conditions: (1) Licensee is currently active and did not use the Broker Reactivation Course to satisfy the Rule B-2(a) requirements in the previous license year (2) Licensee is inactive or expired for up to thirty-six months prior to active status and unable to comply with the education requirements listed in Rule B-2(a). c) Pass the Colorado state portion of the licensing exam. d) Completing 72 total hours of pre-licensure education concerning the understanding and preparation of Colorado real estate contracts (48 hours) and real estate closings (24 hours). The courses and course providers are required to comply with the requirements as described at section 12-61-103(4)(a), C.R.S. Any inactive or expired licensees who cannot meet the education requirements listed in Section 4(a), (b), or (c) must comply with the education requirements found in Section 4(d) before activation or reinstatement of the license.

The 42nd U.S. Code, Section 1982 bans all racial discrimination as a result of the outcome of the "Jones vs. Mayer Case". Constitutionality for this rests on the: A: Fifth amendment B: Thirteenth amendment C: Fourteenth amendment D: Twenty-fourth amendment

B: thirteenth amendment Explanation: Jones vs. Mayer is a United States Supreme Court case which held that Congress could regulate the sale of private property in order to prevent racial discrimination: "42 U.S.C. § 1982 bars all racial discrimination, private as well as public, in the sale or rental of property, and that the statute, thus construed, is a valid exercise of the power of Congress to enforce the Thirteenth Amendment."

Closing statements must be delivered: A: within 30 days of closing B: three days prior to closing C: 24 hours prior to closing D: at time of closing

B: three days prior to closing Explanation: Closing statement must be delivered prior to closing.

To close in escrow means: A: some of the parties to the transaction are out of state B: title, all paperwork, and funds are held in an escrow account until all documents are received by the closing agents and reviewed by the brokers C: title, all paperwork, and funds are held in an escrow account for an indefinite time D: the parties to the transaction are not available to close at the same time

B: title, all paperwork, and funds are held in an escrow account until all documents are received by the closing agents and reviewed by the brokers Explanation: To close in escrow means that all parties provide the necessay documents to the closing agent. When the closing agent decides all is in order, he/she conducts the closing. The parties are not normally present. Escrow is for a definite period of time.

You would use the comparative method in the appraisal of property: A: to evaluate worn out or otherwise non-repairable fixtures B: to compute the land value C: to determine the value of amenities D: to do all of the foregoing

B: to compute the land value Explanation: Land cannot be manufactured; therefore the comparative method (market data approach) must be used to arrive at a value of land.

What is the purpose of the real estate commission in Colorado? A: to mediate commission disputes between licensee's B: to protect the public C: to provide legal assistance to the public regarding real estate transactions D: to mediate disputes between licensees and Colorado residents

B: to protect the public

A broker acting as a transaction broker for a buyer, with no written agreement needs: A: nothing. This is the default representation in Colorado B: to provide the buyer with a copy of the "Brokerage Disclosure to Buyer" with the broker's signature showing the date it was given to the Buyer. C: a signed Exclusive agreement in order to show the buyer property. D: a signed disclosure form from the Buyer.

B: to provide the buyer with a copy of the "Brokerage Disclosure to Buyer" with the broker's signature showing the date it was given to the Buyer. Explanation: Even though the broker has no written agreement - the broker is still required to make a written disclosure as to their relationship. Absent a written agreement - the default relationship is transaction broker.

In Colorado in the absence of a written agency agreement, a broker is considered to be a: A: free agent B: transaction broker C: sub agent D: general agent

B: transaction broker Explanation: Agency agreements are established only by a written contractual agreement. If no contractual agreement has been signed then the default relationship is transaction broker. Transaction broker can also be established by a written contractual agreement.

In Colorado a broker acting as an intermediary between a buyer and a seller is a: A: dual agent B: transaction broker C: general agent D: buyer's or seller's agent

B: transaction broker Explanation: To act as an intermediary between two parties in a transaction the Broker must be in a position of neutrality which is a Transaction Broker.

Conventional loans refer to loans that: A: involve government guarantees and insurance B: typically have a maximum loan to value ratio of 80% without private mortgage insurance C: are only for loans larger than $100,000 D: are protected by the Mutual Mortgage Insurance Fund, where the buyer purchases P.M.I

B: typically have a maximum loan to value ratio of 80% without private mortgage insurance Explanation: Conventional loans do not provide any government assurances. Conventional financing is available for loans of all sizes and only involve private mortgage insurance for loan to value ratio above 80%.

A broker may advertise a property for sale only if the broker: A: personally listed the property B: uses the name of the employing broker in the ad C: personally pays for the ad D: is a member of the local real estate board

B: uses the name of the employing broker in the ad Explanation: Blind ads are not legal. The name of the employing broker must be included in any ad an agent places.

A Flood Certificate is required for the purposes of: A: indemnifying the property owner in the event of loss due to flood B: verifying for the lender that the property does not lay in a flood zone C: verifying for the lender that the borrower has obtained flood insurance D: certifying the existence of proper drainage

B: verifying for the lender that the property does not lay in a flood zone Explanation: The flood certificate is not insurance; it is a report indicating whether or not the property is in a flood zone.

Previewing a property means: A: showing the property to the buyer for the first time B: viewing the property before the broker takes the buyer to see it C: a showing on a property that the broker does not need to set up before hand D: showing flyers or the MLS listing information to the buyer before taking them out to see the property

B: viewing the property before the broker takes the buyer to see it Explanation: A broker may preview properties before taking the buyer there.

A Seller signs an offer prior to the acceptance time and date. Before the offer is returned to the Buyer, the Buyer calls and withdraws the offer. This offer is: A: binding on all parties as it has already been signed prior to the acceptance time and date B: void and not binding as it was withdrawn before acceptance was communicated to the Buyer C: void, but the Buyer is in default and will forfeit the earnest money D: binding, the withdrawal must be in writing

B: void and not binding as it was withdrawn before acceptance was communicated to the Buyer Explanation: Standard contract law states that a contract must be signed and accepted to be binding. The Buyer had every right to withdraw an offer at no penalty before the signed contract was accepted. A signature alone is not sufficient to constitute valid acceptance: the accepting party must also communicate acceptance to the party who made the last offer or counteroffer. Since acceptance was not communicated, the purchase contract was not binding and either party could withdraw at no penalty. More info: To have a valid contract, it must be signed and accepted and that acceptance must be communicated to the person making the offer before the contract deadline. There is no question that written notification is preferable to a verbal one. In real life a savvy agent would have followed up the verbal withdrawal with a written one. However, in this case they are both legal. The disadvantage of a verbal notification is the difficulty in enforcing it in a court of law, not that it is illegal. The terms of the purchase contract are not in force until it has been signed AND accepted by both parties. Even though it has been signed, absent acceptance the purchase contract is not fully in force, general contract law is in charge and says that verbal works. Please note that once the purchase contract is in force it specifies all sorts of places where written notification is mandatory and verbal will not do. The preferred form of acceptance is returning the signed contract. The popularity of electronic contact has made this easy 24/7 - click and you delivered it to everybody. BTW, interestingly enough, if the Seller agent also had called the buyer agent before the withdrawal and indicated that they had signed and accepted the contract, that would have also constituted legal acceptance and the buyer could not then withdraw the offer as it would be binding. Of course by then we possibly could have dueling verbal notifications and that is why lawyers drive nice cars.

A Seller signs an offer prior to the acceptance time and date. Before the offer is returned to the Buyer, the Buyer calls and withdraws the offer. This offer is: A: binding on all parties as it has already been signed prior to the acceptance time and date B: void and not binding as it was withdrawn before delivery to the buyer C: void, but the buyer is in default and will forfeit the earnest money D: binding, the withdrawal must be in writing

B: void and not binding as it was withdrawn before delivery to the buyer

If a 17 year old signs a contract is the contract: A: void B: voidable C: unenforceable D: invalid

B: voidable Explanation: A voidable contract, unlike a void contract, is a valid contract. At most, one party to the contract is bound. The unbound party may repudiate the contract, at which time the contract is void. An option to purchase is a voidable contract as the holder (buyer) of the option can choose to execute or not execute the agreement whereas the seller of the option is bound to its terms. Another way to look at it is: an agreement which is enforceable by law at the option of one or more parties but not at the option of the other or others is a Voidable Contract. A contract can become voidable when the consent of one or more of the parties to a contract is obtained by coercion, undue influence, misrepresentation or fraud an agreement which is enforceable by law at the option of one or more parties but not at the option of the other or others is a voidable contract. This is the reason a contract with a minor is a voidable contract by the minor or a minor's legal representatives (the minor by him/herself does not have legal capacity to enter a contract) and not a void contract.

When an out-of-state investor sells a property in Colorado, which of the following is required of the closing entity? A: withhold up to 2 percent of the selling price as a state transfer tax B: withhold up to 2 percent of the selling price as possible income tax liability C: withhold up to 2 percent of the net proceeds of the sale as sales tax D: withhold up to 2 percent of the net proceeds of the sale as possible income tax

B: withhold up to 2 percent of the selling price as possible income tax liability Explanation: When the seller lives out of state after closing, the Colorado Department of Revenue requires withholding of either 2 percent of the selling price, or the entire net proceeds due to the seller, whichever is less at closing. This is to ensure the out-of-state seller files a Colorado State Income Tax report just-in-case s/he made a profit on the sale and owes the State a capital gains tax (a form of income tax). It is important to note that this is a "withholding" and not a "tax". Depending on the personal tax situation of the seller, the seller may or may not owe a tax. If the answer is s/he does not, then s/he would get the withholding back.

A high level of supervision: A: is what an employing broker must provide for all licensed persons B: would include: review of documents in preparation for a closing, assistance in preparing contracts, monitoring of transactions from contracting to closing, attending closings, or making sure an experienced licensee attends the closing, being reasonably available for consultation C: is an employing broker giving leads to new agents to help them get business D: is required to fully understand the Zen of real estate and the psychic Karma of computers as another level in transcendence

B: would include: review of documents in preparation for a closing, assistance in preparing contracts, monitoring of transactions from contracting to closing, attending closings, or making sure an experienced licensee attends the closing, being reasonably available for consultation Explanation: Review of all new licensees activities is a requirement of a high level of supervision.

A power of attorney requires: A: consideration B: written authority C: the agent to use an attorney-at-law D: a safety clause

B: written authority Explanation: A power of attorney must be in writing.

Under Colorado Real Estate Commission rule E-35: A: only oral disclosure of agency to a buyer is required B: written disclosure of agency is required C: a broker should not commingle funds D: broker must use Commission-approved forms

B: written disclosure of agency is required Explanation: 23. Under Rule E-35 agency contracts must be in writing with full disclosure

You hold open one of your listings that you took as a seller's agent. A buyer comes through the front door and wants to buy on the spot. The following is true: A: you cannot write the offer for him -- he must use another agent B: you can write the offer, so long as you disclose that you are a seller's agent and indicate that in the offer to buy that he signs C: you automatically become a transaction broker for both parties D: you are a transaction broker for the buyer, but an agent for the seller

B: you can write the offer, so long as you disclose that you are a seller's agent and indicate that in the offer to buy that he signs Explanation: The buyer will be the customer and the seller is the principal. You cannot be a transaction broker to one part of the transaction and have an agency relationship with the other. You must receive permission from both parties to become a transaction broker.

You are a buyer's agent. The buyer is anticipating a large legal settlement that will allow them to purchase a home with cash. It hasn't come through yet, but is anticipated within the next three months. Your buyer finds a home right away and wants to write an offer. The owners of the property are being transferred and the only way an offer will be accepted is if the closing is within 30 days. The buyer's ask you to write and present an offer for cash, with a 30-day close, knowing that it is highly possible that their funds will not be available at that time. As a buyer's agent: A: you cannot disclose this information to the seller's agent B: you must disclose this information to the seller's agent C: you may disclose this information, if your conscience is bothering you D: you tell the buyer that you cannot write the offer

B: you must disclose this information to the seller's agent Explanation: This is considered to be a material fact and it must be disclosed to the listing agent. You should also tell your buyer that you have to disclose it to the seller.

When you, as a licensee, are selling your own property: A: you are required to list it with another broker B: you must inform all prospective purchasers that you are the owner as well as a licensee C: you are required to list it at or under the market price D: you are not allowed to list your own property

B: you must inform all prospective purchasers that you are the owner as well as a licensee Explanation: A licensed salesperson must inform all prospective purchasers that he is a licensee.

For tax purposes you are considered an independent contractor, and therefore: A: you need to complete a W-2 form B: your income will be reported on a 1099 C: your taxes will automatically be deducted from your commissions D: you need not file with the IRS

B: your income will be reported on a 1099 Explanation: No deductions will be taken out because you are an independent contractor.

A house is closed on May 15. HOA dues are $108 per month and are due and payable on the first day of each month. The HOA dues will appear on the closing statement as a: A: $49 debit to the seller B: $59 debit to the seller C: $59 credit to the seller D: $49 credit to seller

C: $59 credit to the seller. Explanation: The seller paid the HOA dues on May first for the entire month. With a closing on May 15 (remember the Buyer is responsible for the day of Closing), this means the Seller paid 17 days (May 15-31) too much. Since the Buyer is receiving the advantage of the overpaid HOA dues, the Buyer owes this money to the Seller. $108 / 31 days = $3.4839 per day. $3.4839 x 17 days = $59.23 to be credited to the seller and debited to the buyer.

Roberto and Maria Martinez have a new loan in the amount of $80,000. The interest rate is 10%. The monthly payments are $710, principal and interest. What is their loan balance after the they make two month's worth of loan payments? A: $80,000.00 B: $79,929.10 C: $79,912.80 D: $78,580.76

C: $79,912.80 Explanation: The formulas used for amortization calculation can be confusing. First up, let's begin by describing amortization, in simpleze, it is the process of reducing the balance of a loan by a fixed payment until the loan is fully paid off. Each payment is part interest and part principal. The principal is the loan amount, or the balance that must be paid off. Each time a payment on a loan is made some interest is paid along with a part of the principal. Since the principal is being paid down, every time a payment is made. less of it goes to interest allowing more of the payment to go to principal. Over time, the principal gradually decreases, and when it reaches zero, the loan is completely paid off. The steps to amortizing a loan along with an explanation of answering this question: Step 1 - Gather information. You need the principal (in this question $80,000). The interest rate (10%). The payment ($710). Step 2 - Calculate the amount paid in interest for the month by converting the annual interest rate (10%) to a monthly dollar amount. Annual interest (10%) x principal balance ($80,000) = $8,000 (annual interest) divided by 12 (months) = $666.67 (amount of the payment which went for interest this month). Step 3 - Calculate the principal portion of the fixed payment. Fixed payment ($710) - amount of payment paid to interest ($666.67) = $43.33 (amount the loan principal was paid off in this payment) Step 4 - Calculate the new principal (amount owed on loan) Current principal ($80,000) - amount paid off this payment ($43.33) = $79,956.67 the new principal after this payment. Step 5 - Calculate the principal after the next payment Repeat steps 2 through 4 replacing the old balance ($80,000) with the new one ($79,956.67). Here are steps 2 through 4 in short form - $79,956 x 10% = $7,995 / 12 = $666.30; $710 - $666.30 = $43.70; $79,956 - $43.70 = $79,912.80

The lender computed the interest for the previous month on a $120,000 mortgage loan balance at $825. What is the rate of interest? A: 0.07500000000000001 B: 0.07750000000000001 C: 0.0825 D: 0.085

C: 0.0825 Explanation: $825 X 12 = $9900 (Annual Interest) / $120,000 = .0825 or 8 1/4 %

Find the annual rate of return percentage on an $88,000 investment if the weekly gross income is $225 and monthly expense is $370: A: 0.072 B: 0.085 C: 0.0825 D: 0.0775

C: 0.0825 Explanation: Calculate the annual income which is $225 X 52 = $11,700. Then calculate the annual expenses $370 X 12 = $4,440. Next subtract $4,440 from $11,700 = $7,260 then divide this by $88,000 = 8.25 %

How many times can the exclusion on capital gains taxes be claimed? A: 3 transactions over the past 12 months B: 5 transactions over the past 15 months C: 1 transaction every 24 months D: 2 transactions every 18 months

C: 1 transaction every 24 months

How many times can the exclusion on capital gains taxes be claimed? A: 3 transactions over the past 12 months B: 5 transaction over the past 15 months C: 1 transaction every 24 months D: 2 transactions every 18 months

C: 1 transaction every 24 months Explanation: If your client(s) sold their main home and made a profit, they may be able to exclude that profit from taxable income. Here's how: Individuals can exclude up to $250,000 in profit from the sale of a principal residence (or $500,000 for a married couple) as long as s/he has owned and lived in the home for a minimum of two years. Those two years do not need to be consecutive. In the 5 years prior to the sale of the house, s/he needs to have lived in the house for at least 24 months in that 5-year period. This 2-out-of-5 year rule can be used to exclude profits each time a principal residence is sold or exchanged. Generally, the exclusion can be claimed only once every two years. Some exceptions do apply.

What portion of the 24-hour continuing education requirement is to consist of the mandatory credits developed by the Real Estate Commission? A: 4 hours B: 8 hours C: 12 hours D: All 24 hours are mandatory subjects

C: 12 hours Explanation: Within every three year license renewal period, a licensee must complete 12 hours of electives and 12 hours of mandatory continuing education (three four-hour Annual Commission Update classes - one for each year of licensure) for their next license renewal.

How many credit hours of Continuing Education classes does an Associate Broker need to renew his/her license? A: 24 hours of elective class credit B: 24 hours of mandatory class credit C: 12 hours of elective class credit and 12 hours of mandatory class credit D: 4 hours of mandatory class credits and 20 hours of elective class credit

C: 12 hours of elective class credit and 12 hours of mandatory class credit Explanation: Renewal requires twenty-four hours of education credit, twelve of which shall be the credits developed by the real estate commission, currently the 4-credit-hour Annual Commision Update class that is to be taken every year. A licensee can also satisfy all educational requirements by retaking the Colorado portion of the real estate exam. Reference Statute 12-61-110.5 Colorado Real Estate Manual

The maximum time allowed for the sale of a residential property, through the Public Trustee's office after filing of the notice of election and demand (NED) to foreclose is: A: 45 days B: 90 days C: 125 days D: 230 days

C: 125 days Explanation: For residential properties, the public trustee schedules the sale 110-125 days ( 215-230 days for agricultural) after the initial foreclosure action was recorded. The notice of sale is published in a local newspaper for 5 weeks. The public trustee also mails a copy of the notice to the borrower. The public trustee typically conducts the sale at the courthouse. At the sale, the public trustee reads the written bid submitted by the lender, and any party may bid. If anyone other than the lender is the winning bidder, that person must deliver the bid amount in cash or cashier's check to the public trustee. The winning bidder is given a certificate of purchase.

A purchaser desires to offer $174,900 for a home. The buyer will put a total of 15% down of which 1% will be put down as an earnest money deposit. How much will the new loan be for? A: 147143.5 B: 146916 C: 148665 D: 147178.35

C: 148665 Explanation: $174,900 X 15% = $26,235 $174,900 - $26,235 = $148,665

The section of land that was reserved for schools in the government (rectangular) survey system is number: A: 12 B: 20 C: 16 D: 36

C: 16 Explanation: By law, each Section 16 was set aside for school purposes, and the sale or rental proceeds from this land were originally available for township school use. The schoolhouse was usually located in this section so it would be centrally located for all the students in the township. As a result, Section 16 is commonly referred to as a school section. Section 16 is dedicated to the support of schools - proceeds of sales and leases in section 16 are given to school districts as well as being the physical location of any schools.

The net income from a commercial property is $66,000 the capitalization rate is 4%. What is the value of the property? A: 1250000 B: 1450000 C: 1650000 D: 1850000

C: 1650000 Explanation: Divide $66,000 by 4% = $1,650,000 which is the value of the property This question is about the Income Approach to valuing a property. This approach is used on investment properties to determine the market value of a property based on the income it generates. In simpleze, this is the process: Step 1) Determine the most amount of revenue this property could generate in a perfect world where every unit was rented at the highest possible market rate always. This is referred to as Potential Gross Income. Step 2) Since we do not live in a perfect world, deduct from the Potential Gross Income the amount of revenue you will likely lose each year due to units being vacant (Vacancy Rate) and credit losses. The result is called Effective Gross Income. Step 3) If life were really wonderful an owner could take the Effective Gross Income and go shopping, but life is not that cool because there are bills to pay. From the Effective Gross Income deduct hard expenses. The result is the owner's profit called Net Operating Income or N.O.I. Determining what is, or is not a hard expense to deduct is a place where students really stumble - so pay attention. A hard expense is something that any owner of a property would be stuck paying such as: property taxes, landscaping, maintenance, reserve for repairs, Murray the doorman...yada yada. Personal expenses such as debt service (AKA mortgage payment) and depreciation are not hard expenses and are not included as an expense. Real Estate is not like a gas pump - one price for cash and another for credit. If one person wants to buy a property paying cash and another wants to buy the same property paying with a loan - the market value of the property is not impacted. The same goes for depreciation, depreciating a property is used by the IRS to determine an individual's income tax, it has nothing to do with determining market value. Step 4) If all you needed to do is determine the profit of an investment you could stop here. However, we are trying to determine the market value of a property based on the profit it generates. For that you need to divide the NOI by a Capitalization Rate. A Capitalization Rate (AKA Cap Rate) is the percentage of the purchase price the owner will earn back each year. Cap Rates are pretty handy. Using the Cap Rate of properties sold nearby will result in the market value of the property. However, if your client is savvy and has a desired Cap Rate for any property s/he owns, then the result would be the value of the property to the savvy client. Great way to determine if the asking price of an investment property is reasonable. More on Cap Rate: Since Cap Rate uses income, it is only used for income producing properties, not for example, the home you are buying for yourself. First let's define cap rate AKA Capitalization Rate: Cap rate indicates how fast an investment will pay for itself. For example, a 10% Cap Rate means you will get 10% of your purchase price back each year. If a commercial apartment building is purchased for $5,000,000 and it generates $500,000 a year in net operating income (the dollars left over after operating costs are subtracted from your gross income), then: $500,000 / $5,000,000 = 10% cap rate This means 10% of the building's purchase price is paid each year by the proceeds. Another way of saying this - the property will pay for itself in 10 years. How do you use this tool? Way one; it allows investors a fairly easy and quick method of comparing investment properties. For example: take two properties as identical as the cute twins you flirted with in high school, with the same net operating income. One has a cap rate of 8% (same income, priced higher) and the other a cap rate of 15% (same income, priced lower). The 15% cap rate property MIGHT just be a heck of a deal or the 8% one overpriced. BUT you have to dig deeper, because it might be that the higher cap rate property is in a bad neighborhood and the owner has to discount the price to get it sold. Higher risk means you as a buyer get more bang for the buck with the 15% cap rate property, but you are going to have to work harder for it and your spouse is mad because you haven't been able to take a vacation in years because of that "dang" property you bought. The 8% cap rate property may be more expensive and have a longer payback period, but that is because there is less risk and more investors want to buy it. The rents just come in without grief and it could save your marriage. Way two: Cap Rate is also used in the Income Method of appraisals to value a property. Generally, investors could care less if a property is pretty; they want to know how much they are going to make off it. The Income Method allows an investor to value a property based on its income. If most like investment properties in an area have an average cap rate of 7%. You can divide the net operating income of the property your client is interested in (provided by the listing agent) by the average cap rate in the area (digging in sold comps of various MLS's) and it will give you the approximate market value of the property. For example: $225,000 net operating income / 7% = $3,214,285 market value. If the property is listed for $5,000,000 you might want to pass it by because it is overpriced for the neighborhood. If it is listed for $2,500,000 you call your client quick because you think you found a good deal. So, If you want to play with investors you will need to make cap rates your well understood best buddy.

The selling landlord has collected the September rents from all five tenants: two at $845 and three at $925. Determine the proration to be allowed the buyer when the sale is closed on September 19. A: 1965 B: 1637 C: 1786 D: 1690

C: 1786 Explanation: 2 x $845 = $1690 3 x $925 = $2775 $4465 total rent divided by 30 days = $148.8333 PER DAY x 12 (days the buyer owns the property) = $1786

Adverse possession matures into title after open, notorious and hostile possession for: A: 18 years; 17 years with color of title B: 7 years; 18 years with color of title C: 18 years D: 7 years

C: 18 years

The Real Estate Commission requires the use of a Lead-Based Paint Disclosure form on all dwellings permitted prior to: A: 1976 B: 1977 C: 1978 D: 1979

C: 1978 Explanation: Homes built pre-1978 must use the Lead-Based Paint disclosure form.

A contract calls for the buyer to pay $174,000 for the house and one acre of land, plus $6,500 for each additional acre of land. The survey reveals a total land area of 6.7 acres. What is the total the buyer will pay for the house and the land? A: 43550 B: 217550 C: 211050 D: 210750

C: 211050 Explanation: 6.7 - 1 = 5.7 X $6,500 = $37,050 + $174,000 = $211,050

As a property manager, you have an agreement that your fee will be 8% on the first $150,000 gross rent, 5% on the next $100,000, and 2.5% on everything over the $250,000. If last year's gross rent was $417,500 what was the management fee? A: 4187.5 B: 9187.5 C: 21187.5 D: 16187.5

C: 21187.5 Explanation: First calculate the commission earned on the first tier - ($150,000 X .08 = $12,000 commission) then calculate the commission on the second tier - ($100,000 X .05 = $5,000) then calculate the amount of the remaining gross rent over $250,000 - ($417,500 - ($150,000 + $100,000) = $167,500) then calculate the commission on the remaining amount ($167,500 X .025 = $4,187.50). Add the commissions together $12,000 + $5,000 + $4,187.50 = $21,187.50 total management fee

To renew an active Colorado real estate license, what continuing education is required of the licensee? A: 24 hours of continuing education and successful completion of the Colorado portion of the state licensing exam B: 8 hours of mandatory continuing education taken within the last three years C: 24 hours of approved continuing education, of which 12 hrs must consist of the 4 hour Annual Commission Update Course taken each year D: 24 hours of additional education from any source

C: 24 hours of approved continuing education, of which 12 hrs must consist of the 4 hour Annual Commission Update Course taken each year Explanation: The licensee must complete 24 hours of approved continuing education during the three year license period. Twelve of those hours must consist of taking 4 hour Annual Commission Update Course each year. CE requirements are listed in Commission Rule B-2 below: B-2. Methods of completing continuing education. Licensed brokers must satisfy the continuing education requirement before they apply to renew an active license, activate an inactive license or to reinstate an expired license to active status. Licensed brokers may satisfy the entire continuing education requirement through one of the following options: a) Complete the twelve hours required bysection 12-61-110.5 (1) (c), C.R.S., and required by this rule in annual 4-hour increments developed by the Commission, otherwise referred to as the "Annual Commission Update Course." Licensees who choose this option must complete an additional 12 hours of elective credit hours to meet the 24-hour total continuing education requirement during the license period in subject areas listed in section 12-61-110.5(3), C.R.S. Please note that a licensee may not take the same version of the Annual Commission Update Course more than once. If a licensed broker takes more than 12 hours of the Annual Commission Update Course during a license period, the licensee will receive elective credit hours for any additional hours. b) Completing the Commission-approved 24-hour "Broker Reactivation Course." This option is available to licensees under one of the following conditions: (1) Licensee is currently active and did not use the Broker Reactivation Course to satisfy the Rule B-2(a) requirements in the previous license year (2) Licensee is inactive or expired for up to thirty-six months prior to active status and unable to comply with the education requirements listed in Rule B-2(a). c) Pass the Colorado state portion of the licensing exam. d) Completing 72 total hours of pre-licensure education concerning the understanding and preparation of Colorado real estate contracts (48 hours) and real estate closings (24 hours). The courses and course providers are required to comply with the requirements as described at section 12-61-103(4)(a), C.R.S. Any inactive or expired licensees who cannot meet the education requirements listed in Section 4(a), (b), or (c) must comply with the education requirements found in Section 4(d) before activation or reinstatement of the license.

To renew an active Colorado real estate license, what education is required of the licensee? A: 24 hours of continuing education and successful completion of the Colorado portion of the state licensing exam B: 8 hours of mandatory continuing education taken within the last three years C: 24 hours of approved continuing education, of which 12 hrs must consist of the 4 hour Annual Commission Update Course taken each year D: 24 hours of additional education from any source

C: 24 hours of approved continuing education, of which 12 hrs must consist of the 4 hour Annual Commission Update Course taken each year Explanation: The licensee must complete 24 hours of approved continuing education during the three year license period. Twelve of those hours must consist of taking 4 hour Annual Commission Update Course each year. CE requirements are listed in Commission Rule B-2 below: B-2. Methods of completing continuing education. Licensed brokers must satisfy the continuing education requirement before they apply to renew an active license, activate an inactive license or to reinstate an expired license to active status. Licensed brokers may satisfy the entire continuing education requirement through one of the following options: a) Complete the twelve hours required bysection 12-61-110.5 (1) (c), C.R.S., and required by this rule in annual 4-hour increments developed by the Commission, otherwise referred to as the "Annual Commission Update Course." Licensees who choose this option must complete an additional 12 hours of elective credit hours to meet the 24-hour total continuing education requirement during the license period in subject areas listed in section 12-61-110.5(3), C.R.S. Please note that a licensee may not take the same version of the Annual Commission Update Course more than once. If a licensed broker takes more than 12 hours of the Annual Commission Update Course during a license period, the licensee will receive elective credit hours for any additional hours. b) Completing the Commission-approved 24-hour "Broker Reactivation Course." This option is available to licensees under one of the following conditions: (1) Licensee is currently active and did not use the Broker Reactivation Course to satisfy the Rule B-2(a) requirements in the previous license year (2) Licensee is inactive or expired for up to thirty-six months prior to active status and unable to comply with the education requirements listed in Rule B-2(a). c) Pass the Colorado state portion of the licensing exam. d) Completing 72 total hours of pre-licensure education concerning the understanding and preparation of Colorado real estate contracts (48 hours) and real estate closings (24 hours). The courses and course providers are required to comply with the requirements as described at section 12-61-103(4)(a), C.R.S. Any inactive or expired licensees who cannot meet the education requirements listed in Section 4(a), (b), or (c) must comply with the education requirements found in Section 4(d) before activation or reinstatement of the license.

A house sold for $164,000. The total commission was 7%. The listing company received 48% of the total commission and paid their listing broker 55% of that amount. How much did the listing company make? A: 5510.4 B: 3030.72 C: 2479.68 D: 6314

C: 2479.68 Explanation: $164,000 X .07 = $11480 total commission for buyer and listing firm X .48 = $5510.40 listing firm's share X .55 = $3030.72 listing broker's share of listing firm's share. $5510.40 - $3030.72 = $2479.68 employing broker's share

A $75,000 loan requires $1,875 in discount points to be paid by seller and $375 in discount points to be paid by the buyer. This is how many total discount points? A: 2 B: 2.5 C: 3 D: 3.5

C: 3 Explanation: $1875 + $375 = $2,250. I / V = R. $2,250 / $75,000 = .03 Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

A closing is set for March 15, the next tax payment is due April 1. How many months of escrow can the lender take for taxes? A: 1 B: 2 C: 3 D: 4

C: 3 Explanation: The private lender will collect its loan in monthly installments, along with one month's taxes to be held in reserve so that sufficient funds are on hand to pay the yearly taxes when due. This reserve is based lender's own loan requirement and state law, C.R.S. 39-1-119. This law provides that any amount held on May 20 in excess of 3/12 of the taxes paid that year must be refunded to the borrower on or before May 30. Payments to a reserve escrow account must be adjusted annually upon reasonable belief of substantial improvements to the property or upon official notification of an increase in the actual amount of taxes levied. Failure to make a refund is subject to interest and penalty.

Closing March 15, next payment due April 1. How many months of escrow can lender take for taxes? A: 1 B: 2 C: 3 D: 4

C: 3 Explanation: The private lender will collect its loan in monthly installments, along with one month's taxes to be held in reserve so that sufficient funds are on hand to pay the yearly taxes when due. This reserve is based lender's own loan requirement and state law, C.R.S. 39-1-119. This law provides that any amount held on May 20 in excess of 3/12 of the taxes paid that year must be refunded to the borrower on or before May 30. Payments to a reserve escrow account must be adjusted annually upon reasonable belief of substantial improvements to the property or upon official notification of an increase in the actual amount of taxes levied. Failure to make a refund is subject to interest and penalty.

Once a contract to purchase has been accepted by the seller, when does the earnest money tendered with the contract need to be deposited into the appropriate escrow account? A: 1 business day after notice of acceptance B: 2 business days after notice of acceptance C: 3 business days after notice of acceptance D: 4 business days after notice of acceptance

C: 3 business days after notice of acceptance Explanation: A check for the earnest money should either accompany the offer until accepted or be delivered prior to expiration of the Alternative Earnest Money Deadline. Most often, a buyer's agent holding the deposit forwards a copy of the earnest money check with the offer and then specifies a date in the Alternative Earnest Money Deadline when the actual check will be delivered after contract acceptance. If the check was tendered with the contract; it must be deposited no later than 3 business days after notice of acceptance of the contract. From the real estate manual: "Unless otherwise agreed, earnest money deposits held by the specified broker must be deposited not later than the third business day after notice of acceptance of the contract. The broker should keep a copy of the validated escrow deposit slip and earnest money check in the office transaction file for later inspection."

Once a contract to purchase has been accepted by the seller, when does the earnest money tendered with the contract need to be deposited into the appropriate escrow account? A: 1 business day after notice of acceptance B: 2 business days after notice of acceptance C: 3 business days after notice of acceptance D: 4 business days after notice of acceptance

C: 3 business days after notice of acceptance Explanation: A check for the earnest money should either accompany the offer until accepted or be delivered prior to expiration of the Alternative Earnest Money Deadline. Most often, a buyer's agent holding the deposit forwards a copy of the earnest money check with the offer and then specifies a date in the Alternative Earnest Money Deadline when the actual check will be delivered after contract acceptance. If the check was tendered with the contract; it must be deposited no later than 3 business days after notice of acceptance of the contract. From the real estate manual: "Unless otherwise agreed, earnest money deposits held by the specified broker must be deposited not later than the third business day after notice of acceptance of the contract. The broker should keep a copy of the validated escrow deposit slip and earnest money check in the office transaction file for later inspection."

Sellers are required to keep a copy of the lead-based paint disclosure form in their files for a minimum of: A: 6 months B: 1 year C: 3 years D: 7 years

C: 3 years Explanation: Sellers are required to keep lead paint disclosure forms for 3 years. Real estate brokers are required to keep them for 4 years.

A home was appraised for tax purposes at 70 percent of its $150,000 purchase price. The mill rate is 28.6. What are the annual taxes? A: 2889 B: 4290 C: 3003 D: 3182

C: 3003 Explanation: ($150,000 x 70 % x .0286) = $3003

The city ordinances for Toon Town require a 25` front setback, a 20` rear setback, and 15` side setbacks. Your property measures 100` length (depth) X 90` width (front of the lot). What is the largest square foot single story home you could build on this lot? A: 2250 square feet B: 2950 square feet C: 3300 square feet D: 4500 square feet

C: 3300 Square Feet Explanation: 1. Remove setbacks from dimensions 100 length - 25 (front setback) - 20 (rear setback) = 55 90 width - 15 (side setback) - 15 (other side setback) = 60 2. Calculate buildable square footage 55 x 60 = 3,300 square feet (largest single story house you can build)

A township contains: A: 6 square miles B: 18 sections C: 36 sections D: 640 acres

C: 36 sections Explanation: A township contains 36 square miles and 36 sections. Each section contains 640 acres.

The owner of a house has paid the advance water charge for three months beginning October 1. The owner sold the house, and it closed November 27. How much credit will the owner receive at closing? The total water bill is $95. A: 35.10 B: 35.89 C: 36.14 D: 36.94

C: 36.14 Explanation: $95 / 92 days = $1.0326 X 35 days = $36.14

A house is sold on June 15. The annual taxes of $850 for the current year have not been paid. What does the seller owe the buyer at closing? A: 315.21 B: 381.92 C: 384.25 D: 475.18

C: 384.25 Explanation: $850 / 365 = $2.3288 tax per day x 165 days seller owned house = $384.25

Trust account records must be kept for: A: 1 years B: 3 years C: 4 years D: 6 years

C: 4 years Explanation: Trust account and transaction records must be maintained for four years.

The number of square feet in an acre is: A: 34560 B: 35460 C: 43560 D: 45360

C: 43560 Explanation: There are 43,560 square feet in an acre. You will need to know this for the test.

What is the amount charged to the seller for the current year's taxes, if the previous year's taxes were $852 and the closing is July 7? A: 442.57 B: 438.84 C: 436.5 D: 428.29

C: 436.5 Explanation: Remember, this is the state side so we use a 365-day calendar and the buyer is responsible for the day of closing. $852 / 365 = $2.3342 X 187 = $436.50

A lender charged a 2% loan origination fee and 3 discount points to provide a conventional insured loan of $95,000. What was the cost of these charges to the borrower? A: 2850 B: 2236 C: 4750 D: 1844

C: 4750 Explanation: ($95,000 loan amount X 2% origination fee = $1900) + ($95,000 loan amount X 3% discount points = $2850) = $1900 + $2850 = $4750 The loan origination fee is a lender charge for the purpose of securing a new loan. Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

A property appraised at $250,000 and has an assessed value of $200,000. The taxes on the house are $3,000. What would a house with an appraised value of $450,000 and an assessed value of $400,000 pay in taxes? A: 1500 B: 3000 C: 6000 D: 7500

C: 6000 Explanation: The first thing you have to do is find out the mill rate, to do that take the first property's taxes $3,000 and divide by the assessed value of that property $200,000 that will give you the tax rate of .015 or 15 mills; then multiply the .015 X the assessed value of property two: $400,000, and that will give you the taxes on the second property $6,000.

A section of a township contains the following number of acres: A: 360 B: 580 C: 640 D: 560

C: 640 Explanation: A section is one square mile and contains 640 acres.

Charlie Brown sold a home. The commission rate was 7%. Charlie gave Linus Brown, half of the $4,760 commission - what was the selling price of the house? A: 86000 B: 50932 C: 68000 D: 136000

C: 68000 Explanation: $4760 (Total Commission) / 7% = $68,000. Use the IRV method form the math moment.

How many linear feet of fence is needed along 1-1/2 miles of roadway? A: 43560 B: 16500 C: 7920 D:8250

C: 7920 Explanation: One mile equals 5280ft x 1.5 = 7920

A broker sells the NW 1/4 of the SE 1/4 of Section 31, T 4N, R5E P.M. for the owner at $ 5225.00 per acre. The commission is 5%. The broker must pay 10% of the commission to the salesman who listed the property. What is the net amount the broker receives in the sale? A: 20900 B: 10450 C: 9405 D: 1045

C: 9405 Explanation: 640 / (4 x 4) = 40 acres X $5,225 = $209,000 x 5% = $10,450 - $1,045 (10%) = $9,405

When the amortized payment of a mortgage remains constant over the period of the loan but leaves an outstanding balance to be paid at the end, this payment is called: A: An alienation payment B: An escalation payment C: A balloon payment D: An acceleration payment

C: A balloon payment Explanation: A balloon loan does not fully amortize over the term of the note, thus leaving a balance due at maturity. The final payment is called a balloon payment because of its large size. Balloon loans are used primarily in commercial real estate rather than in residential real estate.

A mortgage that covers several parcels of land and contains a provision that allows for the sale of an individual parcel with clear title is called: A: An amortized mortgage B: A declining balance mortgage C: A blanket mortgage D: A wraparound mortgage

C: A blanket mortgage Explanation: A blanket mortgage covers several properties and individual properties can be sold off this is called the partial release clause

An applicant for a Colorado real estate license who has been licensed in any other state must file which of the following proofs of that licensure? A: Photocopy of her license from that state B: Letter from the last employing broker C: A certificate of licensing history from the other state's real estate licensing authority

C: A certificate of licensing history from the other state's real estate licensing authority Explanation: A certificate of licensing history that indicates the licensee's current status. Any complaints and disciplinary actions taken against the individual must accompany an application for a real estate license in a new state.

An applicant for a Colorado real estate license who has been licensed in any other state must file which of the following proofs of that licensure? A: Photocopy of her license from that state B: Letter from the last employing broker C: A certificate of licensing history from the other state's real estate licensing authority D: A copy from the testing center that they have passed the Colorado exam

C: A certificate of licensing history from the other state's real estate licensing authority Explanation: A certificate of licensing history that indicates the licensee's current status. Any complaints and disciplinary actions taken against the individual must accompany an application for a real estate license in a new state.

The capitalization rate has considerable effect upon the appraised value of property. Which of the following statements is true? A: The capitalization rate consists only of the component related to return on investment B: An increase in the capitalization rate produces an increase in the appraised value C: A decrease in the capitalization rate produces an increase in the appraised value D: The capitalization rate will be higher for property where a long-term tenant has shown a good record of payment than for one with a relatively new tenant with a poor record of payment

C: A decrease in the capitalization rate produces an increase in the appraised value Explanation: A decrease in capitalization rate would indicate less risk and, therefore, greater value of the investment. The cap rate allows investors a fairly easy and quick method of comparing investment properties. For example: take two properties as identical as the cute twins you flirted with in high school, with the same net operating income. One has a cap rate of 8% (same income, priced higher) and the other a cap rate of 15% (same income, priced lower). The 15% cap rate property MIGHT just be a heck of a deal or the 8% one overpriced. BUT you have to dig deeper, because it might be that the higher cap rate property is in a bad neighborhood and the owner has to discount the price to get it sold. Higher risk means you as a buyer get more bang for the buck with the 15% cap rate property, but you are going to have to work harder for it and your spouse is mad because you haven't been able to take a vacation in years because of that "dang" property you bought. The 8% cap rate property may be more expensive and have a longer payback period, but that is because there is less risk and more investors want to buy it. The rents just come in without grief and it could save your marriage.

All of the following are evidence of merchantability of title EXCEPT: A: Torrens title certificate B: Title Insurance policy C: A general warranty deed D: A title insurance commitment

C: A general warranty deed Explanation: A deed is not evidence of merchantability of title, it is only evidence of title. It is not title. Title is a bundle of rights, (a concept) not a document.

A title insurance policy usually includes all of the following except: A: A legal description of the insured parcel of real estate. B: The exceptions, which are not covered by the policy. C: A history of all owners of the property. D: Name of the insured party.

C: A history of all owners of the property. Explanation: History of all owners is the chain of title and is done in an abstract but not in a title insurance policy.

An appraiser who is using the market data approach to appraise a family residence would never use the selling price of which of the following? A: A similar home that sold over six months ago B: A similar home that sold recently but is located in another neighborhood C: A similar home that was sold by owners who were forced to sell at any price because of financial difficulties D: A home of similar size but situated on a corner lot

C: A similar home that was sold by owners who were forced to sell at any price because of financial difficulties Explanation: The scarcity or supply of property, the transferability and the utility all contribute to the value of property.

Which of the following would have first priority in a foreclosure: A: IRS tax lien B: Mechanics lien C: Ad valorem taxes D: A first mortgage

C: Ad valorem taxes Explanation: Property taxes or Ad Valorem are owed to the government, and the government always comes first; the remainder would have priority by the date they were filed.

The Colorado-approved Agreement to Amend/Extend form should be signed: A: Before the listing expires B: After the purchase contract has expired C: After the purchase contract has been accepted D: After the offer has been made

C: After the purchase contract has been accepted Explanation: The Amend and Extend is used with contracts between the buyer and seller - the most important one being the Contract to Buy and Sell Real Estate (Purchase Contract). The Amend and Extend With Broker contract is used for contracts between the client and their broker - principally the listing contract or the buyer agency agreement. They are often confused. For either to be used you must have an executory contract, i.e., a contract that is signed but not completed - it is in the process of being executed. Once a contract is complete - neither of these Amend/Extend agreements can be used.

Which form should be used when the licensee wishes to extend one of his listings? A: Extension letter prepared by the attorney of the brokerage firm B: Agreement to Amend/Extend Contract C: Agreement to Amend/Extend Contract with Broker D: Alter the date on the original listing and have the seller initial the change

C: Agreement to Amend/Extend Contract with Broker Explanation: This is the specific form to be used for this purpose and to make any other changes regarding the listing of the property. Remember, the listing contract is the one between client and agent and the only contract to which the agent is a party.

Title insurance protects the buyer against: A: All liens B: All liens of record C: All liens of record that are not listed in the schedule of exceptions D: Default by the seller on their existing loan

C: All liens of record that are not listed in the schedule of exceptions Explanation: Title insurance protects the buyer only against liens or defects of record that are not listed in the schedule of exceptions.

According to the Exclusive Right-To-Sell listing agreement - when the Transaction Broker option is selected, the listing broker must disclose to any possible buyer: A: Seller's motivation for selling B: All facts about the transaction the broker knows C: All material facts about the property the broker knows D: All facts about the seller the broker knows

C: All material facts about the property the broker knows Explanation: Material facts must always be disclosed whether you are working as an agent or as a transaction broker.

Taking property into custody, or seizure of goods by due legal process is called: A: An eviction B: A forfeiture C: An attachment D: Annexation

C: An attachment Explanation: The legal term for seizure of goods is attachment. Here is a good definition of writ of attachment found on Wikipedia. BTW Wikipedia is a great resource for the national side of the test, not so much for the State side. Here ya go: "A writ of attachment is a court order to "attach" or seize an asset. It is issued by a court to a law enforcement officer or sheriff. The writ of attachment is issued in order to satisfy a judgment issued by the court. A prejudgment writ of attachment may be used to freeze assets of a defendant while a legal action is pending. Common grounds for obtaining a prejudgment writ of attachment are that a defendant has committed fraud or that a defendant is prepared to hide assets from a court." When a writ of attachement is issued to secure a proprerty prior to a judgement, the plaintiff obtaining the writ, must file a bond to protect the defendant against any loss caused by the attachment in the event the plaintiff loses the case.

The Amend/Extend Contract With Broker is used to change : A: Any Commission approved contract B: The Contract to Buy and Sell C: Any contract to which the broker is a party D: None of the above

C: Any contract to which the broker is a party Explanation: Do not confuse the Agreement to Amend and Extend with Broker with the Agreement to Amend and Extend. The first is used to change the terms and condition of a contract to which the broker is a party. These are principally the Exclusive Right to Buy (Buyer agency contract), the Exclusive Right to Sell (Listing agreement), Exclusive Right to Lease Listing Contract ( listing contract for property managers to market a rental) and the Exclusive Tenant Contract (Buyer agency contract for property managers looking for a rental for a client). The Contract to Amend and Extend is used to alter the terms and conditions of a contract between the buyer and seller. This is principally the various Contracts to Buy and Sell Real Estate (Purchase Contract). Both of these agreements must be used on an active (Executory) contract. You cannot change the terms of a contract which has been ended in any way regardless of whether it was: terminated, closed, expired, shot, defaulted, bit-the-bullet, gone to meet the maker, mortified, reposing, pushing up daises, out of one's misery, defunct, bereft of life, offed, or resting in peace. When is is "d-u-n" it is done and can't be changed

The Real Estate Commission must investigate: A: Any licensee accused of a crime B: Disputes between brokers C: Any verified written complaint D: At least 5% of all brokers each year

C: Any verified written complaint Explanation: The operative word here is MUST. Colorado law requires investigation of all verified, written complaints. A licensee convicted of a crime may be investigated if the crime involved real estate activities. Also, a licensee may be investigated for any reason, or no reason.

When can you talk to a seller about listing his house if the house is listed with another broker? A: Five days before listing expires B: The day after listing is taken C: Anytime, if the seller approaches you first D: After the holdover period expires

C: Anytime, if the seller approaches you first Explanation: Talking to the seller anytime prior to the listing expiration date is called "going behind the sign" and is illegal unless the seller approaches the agent first. Rule E-13 allows this practice. Rule E-13 A real estate licensee shall not negotiate a sale, exchange, lease or listing contract of real property directly with an owner for compensation from such owner if such licensee knows that such owner has a written unexpired contract in connection with such property which grants to another licensee an exclusive right to sell or lease or which grants an exclusive agency right to sell or lease. However, when a licensee is contacted by an owner regarding the sale, exchange, lease or listing of property that is exclusively listed with another broker, and the licensee has not initiated the discussion, the licensee may negotiate the terms upon which the licensee might take a future listing or, alternatively, may take a listing to become effective upon expiration of any existing exclusive listing.

The commissioners are selected in the following way: A: Popular vote B: Appointed by the real estate director C: Appointed by the governor D: They volunteer

C: Appointed by the governor Explanation: The real estate commissioners are appointed by and serve at the pleasure of governor.

The owner decides to make 1 payment for an entire years property taxes. That payment must be made by: A: within 30 days of receiving the tax bill B: March 1 C: April 30 D: June 30

C: April 30 Explanation: Property taxes become due on the first day of the year, January 1. If a person wants to make a years taxes in one payment - that payment must be made no later than the last day in April. They also can be paid in this manner: a half payment may be made no later than the last day of February with the second half payment made no later than June 15.

Broker Beatrice meets with Buyer Bob, and together they negotiate the terms of an Exclusive Right-to-Buy Contract. Buyer Bob is unrealistic in his expectations of properties available in his price range, and after looking at several houses decides to wait until next year and save some more money before making a purchase. In regards to the Exclusive Right-to-Buy Contract, which of the following is true? A: Beatrice may retain the contract in her original files until next year B: Beatrice may destroy the contract, as it never came to fruition C: Beatrice must submit the contract to the office to be retained with all other permanent records D: Beatrice can hold on to the contract and use it again next year

C: Beatrice must submit the contract to the office to be retained with all other permanent records Explanation: All contracts must remain with the permanent records of the office. Exclusive Right-to-Buy Contracts expire in one year, so a new contract will be needed.

In the event that the seller and broker have a dispute about the Exclusive Right-to-Sell Listing Contract, which of the following is true? A: Both agree to submit to arbitration with the local REALTOR association B: Both agree to submit the matter to binding mediation C: Both agree to mediation before proceeding to arbitration or litigation D: The matter must be resolved by a real estate commission hearing

C: Both agree to mediation before proceeding to arbitration or litigation Explanation: In a Exclusive Right-to-Sell Listing Contract both agree to mediation before proceeding to arbitration or litigation.

According to the Contract to Buy and Sell Real Estate earnest money is held on behalf of: A: Seller B: Buyer C: Buyer and Seller D: Seller and Broker

C: Buyer and Seller Explanation: As per the Contract to Buy and Sell: Earnest Money. The Earnest Money set forth in this section, in the form of _________________________________, is part payment of the Purchase Price and shall be payable to and held by _________________________________________________ (Earnest Money Holder), in its trust account, on behalf of both Seller and Buyer.

What is the responsibility for disclosure involving registered sex offenders (Megan's Law) according to the Exclusive Right-to-Buy Contract? A: Sex offenders' privacy rights are protected by state and federal law B: Sellers will be required to disclose any sex offenders in the neighborhood C: Buyers must obtain information on known sex offenders from local law enforcement officials D: Brokers must disclose the presence of any known registered sex offenders

C: Buyers must obtain information on known sex offenders from local law enforcement officials Explanation: If the possible presence of registered sex offenders is a concern, the buyer is responsible for contacting local law enforcement officials. This is clearly stated in Exclusive Right-to-Buy Contracts.

In the Exclusive Right to Buy Contract, who is responsible with regard to registered sex offenders? A: Sex offenders privacy rights are protected by state and federal law B: Sellers will be required to disclose any sex offenders in the neighborhood C: Buyers must obtain this information from local law enforcement agencies D: Brokers must disclose the presence of any known sex offenders

C: Buyers must obtain this information from local law enforcement agencies Explanation: It is the buyer's responsibility to do research to find out about registered sex offenders that may be living in the neighborhood, if they are concerned about it.

John Bargas of Buywell Realty wants to place a listing in the phone book. At a minimum he must list: A: John Bargas, Buywell Realty B: John Bargas C: Buywell Realty D: John Bargas, Buywell Realty, Each Branch Independently Owned and Operated

C: Buywell Realty Explanation: The minimum is the employing broker's name (the firm, not the person) Chapter 2 - CREC Manual Rule E-8. Advertising "A real estate licensee who performs any act requiring a license, including advertising services or advertising property belonging to another, shall do so in the name of the employing broker;...."

"No physical or economic condition remains constant" refers to which of the following basic principles of value? A: Competition B: Anticipation C: Change C: Contribution

C: Change Explanation: Principle of change: The principle of change realizes the economic and social forces that affect value. A diligent appraiser asks: 'Is this community experiencing growth, stability, decline or restoration?' in other words, the area the property is in will effect the value more than the property itself.

When a Seller decides to submit a Counterproposal in response to a Contract to Buy and Sell, the Seller: A: Checks the Countered box, signs both the original Contract and the Counterproposal B: Checks the Rejected box, initials the original Contract and signs the Counterproposal C: Checks the Countered box, initials the original Contract and signs the Counterproposal D: Carefully signs and submits only the Counterproposal

C: Checks the Countered box, initials the original Contract and signs the Counterproposal Explanation: To counter: the Seller would check the Countered box, initialing directly underneath in the space provided indicating the Seller is the one countering, The next step is to complete and sign the Counterproposal. The last step is to return the original offer and the counterproposal to the Buyer. The Seller does not sign the original offer as that would indicate acceptance.

When a Seller decides to submit a Counterproposal in response to a Contract to Buy and Sell, the Seller: A: Checks the Countered box, signs both the original Contract and the Counterproposal B: Checks the Rejected box, initials the original Contract and signs the Counterproposal C: Checks the Countered box, initials the original Contract and signs the Counterproposal D: Carefully signs and submits only the Counterproposal

C: Checks the Countered box, initials the original Contract and signs the Counterproposal Explanation: To counter: the Seller would check the Countered box, initialing directly underneath in the space provided indicating the Seller is the one countering, The next step is to complete and sign the Counterproposal. The last step is to return the original offer and the counterproposal to the Buyer. The Seller does not sign the original offer as that would indicate acceptance.

The seller at closing refuses to pay the broker. What should the broker do? A: Refuse to close the deal B: File a complaint with the Real Estate Commission C: Close the transaction, then sue for the commission D: Keep the earnest money as commission

C: Close the transaction, then sue for the commission Explanation: The broker is not allowed to delay the transfer of the property

If a broker is asked for additional information on working relationships, the broker must provide: A: the written office policy B: definitions of relationships C: Commission-approved form "Definitions of Real Estate Working Relationships" D: the telephone number for the Real Estate Commission

C: Commission-approved form "Definitions of Real Estate Working Relationships" Explanation: Definitions of Real Estate Working Relationships is a form that gives the official Real Estate Commission-approved definitions of the various relationships such as Buyer Agency, Seller Agency or Transaction Broker. It is an optional form that may be used if someone wants more information about the relationships, but it is not a "disclosure" of which relationship a broker is operating under. There are other forms, such as the purchase contract and the listing contracts where actual disclosure of a relationship is specified; the Definitions of Real Estate Working Relationships is merely that - a form that defines the types of relationships one might have with an agent.

What must appear in the title of a trust account? A: Company name B: Employing broker's name C: Company name and employing broker's name D: Responsible broker's name

C: Company name and employing broker's name Explanation: How to Open Escrow Bank Accounts 1. Select a Colorado depository that offers FDIC insurance coverage or as authorized for the specific engagement. 2. Include the following "fiduciary elements" in the account title. These must identify the true owner of the account, specify the type or purpose of account being established (sales, management, homeowner association, etc.), include one of the fiduciary words "escrow" or "trust," state the employing broker's personal name, and show his or her fiduciary capacity as "broker." The employing broker must be able to independently control and operate all escrow bank accounts, but others may be designated as signatories as well. These elements may be abbreviated to facilitate printing the broker's monthly bank statement heading, checks, and deposit stock. The general account title format follows: Licensed brokerage name and/or d.b.a. (brokerage TIN/SSN) Type of escrow, broker's name, broker Statement mailing address

A broker is working with a buyer. The buyer believes there to be a water leak in the home. What should the broker do? A: Get an inspection done B: Immediately order a repair of the plumbing C: Contact the listing broker and inform her of the problem D: Terminate the contract

C: Contact the listing broker and inform her of the problem

In which of the following approaches to value must land value be computed separately from building value? A: Income approach B: Direct market comparison approach C: Cost approach D: Datum approach

C: Cost approach Explanation: Since it is impossible to replace land, when using the cost approach to value, it is necessary to evaluate the land separately from the building.

On a service property, (i.e., church, school), which approach to value is most reliable? A: Income approach B: Sales Comparison approach C: Cost approach D: Gross multiplier

C: Cost approach Explanation: Since they do not produce income and are not frequently sold, the only method of appraisal is the replacement or reproduction cost approach. A library or public swimming pool would fall into this category, as well. The cost approach is based on the premise that the value of a property is limited by the cost of replacing it. (This is the principal of substitution: if the asking price for a home is more than it would cost to build a new one just like it, no one will buy it.) The estimate of value arrived at through the cost approach usually represents the upper limits of the property's value. The cost approach involves estimating how much it would cost to replace the subject property's existing buildings, then adding to that the estimated value of the site on which they rest. Because the cost approach involves estimating the value of land and buildings separately, then adding the estimates together, it is sometimes called the summation method.

On a service property (i.e., church, school) which approach to value is most reliable? A: Income approach B: Sales Comparison approach C: Cost approach D: Gross multiplier

C: Cost approach Explanation: Since they do not produce income and are not frequently sold, the only method of appraisal is the replacement or reproduction cost approach. A library or public swimming pool would fall into this category. The cost appraoch is based on the premise that the value of a property is limited by the cost of replacing it. (This is the principal of substitution: if the asking price for a home is more than it would cost to build a new one just like it, no one will buy it.) The estimate of value arrived at through the cost approach usually represents the upper limits of the property's value. The cost approach involves estimating how much it would cost to replace the subject property's existing buildings, then adding to that the estimated value of the site on which they rest. Because the cost approach involves estimating the value of land and buildings separately, then adding the estimates together, it is sometimes called the summation method.

On a service property, (i.e. church, school), which approach to value is most reliable? A: Income approach B: Sales comparison approach C: Cost approach D: Gross multiplier

C: Cost approach Explanation: Since they do not produce income and are not frequently sold, the only method of appraisal is the replacement or reproduction cost approach. A library or public swimming pool would fall into this category. The cost approach is based on the premise that the value of a property is limited by the cost of replacing it. (This is the principal of substitution: if the asking price for a home is more than it would cost to build a new one just like it, no one will buy it.) The estimate of value arrived at through the cost approach usually represents the upper limits of the property's value. The cost approach involves estimating how much it would cost to replace the subject property's existing buildings, then adding to that the estimated value of the site on which they rest. Because the cost approach involves estimating the value of land and buildings separately, then adding the estimates together, it is sometimes called the summation method.

The water bill has been paid in advance by the seller for the month of August. The bill was $35.82. The closing is August 25. The correct entry on the settlement statement would be: A: Credit Seller $35.82, Debit Buyer $35.82 B: Credit Buyer $9.50, Debit Seller $9.50 C: Credit Seller $8.09, Debit Buyer $8.09 D: Credit Seller $8.09, Debit Buyer $27.73, Credit Broker $27.73

C: Credit Seller $8.09, Debit Buyer $8.09 Explanation: Seller overpaid, so buyer owes seller - Credit Seller/Debit Buyer To calculate the amount owed: $35.82 / 31 (days in August) x 7 (Buyer owned days in month, including day of closing)= $8.09 Credit Seller $8.09, Debit Buyer $8.09

A listing agreement may be terminated for all but which of the following reasons? A: Sale of the property B: Agreement of the parties C: Death of the agent who took the listing D: Destruction of the premises

C: Death of the agent who took the listing Explanation: The parties to a listing agreement are the Seller and a Brokerage Firm. The licensee is the person signing on behalf of the Brokerage Firm. The death of the licensee does not in itself terminate the listing contract as the agent was not a party to the agreement. The death of either the Seller or the dissolution of the Brokerage Firm would.

A listing agreement may be terminated for all but which of the following reasons? A: Sale of the property B Agreement of the parties C: Death of the agent who took the listing D: Destruction of the premises

C: Death of the agent who took the listing Explanation: The parties to a listing agreement are the Seller and a Brokerage Firm. The licensee is the person signing on behalf of the Brokerage Firm. The death of the licensee does not in itself terminate the listing contract as the agent was not a party to the agreement; the death of either the Seller or the dissolution of the Brokerage Firm would.

A buyer employed a broker through a sales associate. Which of the following would not terminate the buyer agency? A: The house was significantly damaged by a fire B: Death of the broker C: Death of the sales associate

C: Death of the sales associate Explanation: Correct is the death of the Salesperson. First up, please note the "NOT" in the question, easy to miss and changes the whole complexion of the question. As to the answer, remember that all contracts are with the company. Legally, the Sales Associate is just someone who has been appointed to represent the company in the transaction. The unfortunate demise of the licensee has no legal impact on the transaction because s/he is not a party to the contract. The house burning up (nothing to sell or buy), the employing broker who is the personification of the company can both cause the termination of a listing or buyer agency agreement. As a side, please note that on a purchase contract the rules change. Although the significant damage to the house would likely result in the buyer having the ability to bail on the contract, the death of either party does not automatically terminate the agreement. The agreement is still binding on the estate of the deceased. The reason for this is a contract like a buyer agency or listing contract is considered to be a personal services agreement and as such the death of either party terminates it. However a purchase contract is not a personal services agreement and as such the death of the parties does not automatically terminate the agreement.

When brokers receive earnest money, the money must be: A: Hold the money in the safe until the property closes B: Deposited into the broker's operating account C: Deposited into the broker's trust account D: All of the above

C: Deposited into the broker's trust account Explanation: Earnest money must be deposited into a trust account or turned over to a title company who will deposit it in its trust account.

According to CP-22 Handling of Confidential Information, the sharing of confidential information is prohibited according to the rules set forth by: A: Confidential Brokerage B: Secret Brokerage C: Designated Brokerage D: Seller Agency

C: Designated Brokerage Explanation: CP-22 Commission Position Statement on Handling of Confidential Information in Real Estate Brokerage Prior to designated brokerage, it was common for brokers to share the motivations of a buyer or seller during office sales meetings, for example. Under designated brokerage, the law specifically prohibits sharing of such information. Confidential information, and the broker responsibility thereto, are defined in C.R.S. 12-61-804 (2), 12-61-805 (2), 12-61-807 (3), and Rules E-32 and E-39. Confidential information can include, but is not limited to, motivation of the parties.

The following statements refer to RESPA regulations except which one? A: A good faith estimate of finance costs must be given to a buyer B: Residential transactions financed by federally related mortgage loans C: Discrimination because of race is not allowed D: An informational book regarding closing costs must be given to a mortgagor

C: Discrimination because of race is not allowed Explanation: Discrimination is not a part of RESPA.

The Torrens System is most commonly used in which part of Colorado? A: Northern B: Southern C: Eastern D: Western

C: Eastern

Depreciation caused by forces outside the property, such as neighborhood decline or proximity to nuisances is: A: Functional Obsolesence B: Physical Obsolesence C: External Obsolesence D: Depreciation Obsolesence

C: External Obsolesence Explanation: One of the three forms of obsolesence along with Physical and Functional. External Obsolesence is a loss of value from factors outside the property itself, such as proximity to an airport. Also called ecomonic obsolesence or external inadequacy.

Which rule-of-thumb is being used to an investor who is told that a house renting for $900 a month should sell for about $90,000? A: NOI B: IRV C: GRM D: CMA

C: GRM Explanation: According to Wikipedia - Gross Rent Multiplier is the ratio of the price of a real estate investment to its annual rental income before expenses such as property taxes, insurance, and even utilities for vacation rental properties. Other expenses could include the cost of hiring a property management company. To sum up Gross Rent Multiplier, it is the number of years the property would take to pay for itself in gross received rent. For the investor, a higher GRM (perhaps over 20) is a poorer opportunity, whereas a lower one (perhaps under 15) is better. The GRM is useful for comparing and selecting investment properties where depreciation effects, periodic costs (such as property taxes and insurance) and costs to the investor incurred by a potential renter (such as utilities and repairs) can be expected to be uniform across the properties (either as uniform values or uniform fractions of the gross rental income) or insignificant in comparison to gross rental income. As these costs are also often more difficult to predict than market rental return, the GRM serves as an alternative to a measure of net investment return where such a measure would be difficult to determine. The common measure of rental real estate value based on net return rather than gross rental income is the Caitalization Rate or Cap Rate. In contrast to the GRM, the Cap Rate is not a multiplier but a rate of annual return.

When a licensee misrepresents facts in property sales, they are subject to which action? A: Paying a fine to the county in which the misrepresentation occurred B: Immediately having their license suspended by the Real Estate Commission C: Having a hearing before the Real Estate Commission D: Immediately having their license revoked by the Real Estate Commission

C: Having a hearing before the Real Estate Commission Explanation: A licensee is always under the jurisdiction of the real estate commission. Acts of fraud may also require a broker to appear in civil or criminal court.

In the Colorado Contract to Buy & Sell the inspection provision allows the buyer to terminate the contract: A: Immediately if the seller refuses to correct certain defects B: Only after listing unsatisfactory conditions that cause the buyer to terminate C: If the property is unsatisfactory in the buyer's subjective opinion D: Only if a licensed inspector determines that there are significant problems with the property

C: If the property is unsatisfactory in the buyer's subjective opinion Explanation: The buyers are the judge of what conditions may cause them to terminate and they do not have to give any reason for the termination other than "it's not satisfactory." From the Contract to Buy and Sell: Inspection Objection. Deliver to Seller a written description of any unsatisfactory physical condition that Buyer requires Seller to correct. Buyer shall have the Right to Terminate on or before Inspection Objection Deadline, based on any unsatisfactory physical condition of the Property or Inclusions, in Buyer's sole subjective discretion.

In the Colorado Contract to Buy & Sell the inspection provision allows the buyer to terminate the contract: A: Immediately if the seller refuses t correct certain defects B: Only after listing unsatisfactory conditions that cause the buyer to terminate C: If the property is unsatisfactory in the buyer's subjective opinion. D: Only if a licensed inspector determines that there are significant problems with the property

C: If the property is unsatisfactory in the buyer's subjective opinion. Explanation: The buyers are the judge of what conditions may cause them to terminate and they do not have to give any reason for the termination other than "it's not satisfactory". From the Contract to Buy and Sell: Inspection Objection. Deliver to Seller a written description of any unsatisfactory physical condition that Buyer requires Seller to correct. Buyer shall have the Right to Terminate on or before Inspection Objection Deadline, based on any unsatisfactory physical condition of the Property or Inclusions, in Buyer's sole subjective discretion

The Real Estate Commission will NOT issue a temporary hardship employing broker license to: A: Corporation B: Partnership C: Individual Proprietor D: LLC

C: Individual Proprietor Explanation: There is no provision for an individual proprietor to receive a temporary employing broker license for a hardship. Statute 12-61-103, Application for license - rules. (7) (c) If the person so designated is refused a license by the real estate commission or ceases to be the designated broker of such partnership, limited liability company, or corporation, such entity may designate another person to make application for a license. If such person ceases to be the designated broker of such partnership, limited liability company, or corporation, the director may issue a temporary license to prevent hardship for a period not to exceed ninety days to the licensed person so designated. The director may extend a temporary license for one additional period not to exceed ninety days upon proper application and a showing of good cause; if the director refuses, no further extension of a temporary license shall be granted except by the commission. If any broker or employee of any such partnership, limited liability company, or corporation, other than the one designated as provided in this section, desires to act as a real estate broker, such broker or employee shall first obtain a license as a real estate broker as provided in this section and shall pay the regular fee therefor.

If a defaulting buyer forfeits an earnest money deposit, based on the language of the Colorado Exclusive Right-to-Sell Listing Contract: A: Broker would receive the funds B: Seller is entitled to keep the funds C: It is negotiable according to the contract D: Broker and Seller would submit the funds for mediation

C: It is negotiable according to the contract Explanation: The seller chooses when filling out the contract. FORFEITURE OF PAYMENTS. In the event of a forfeiture of payments made by a buyer, the sums received will be: (1) 100% will be paid to Seller; (2) divided between Brokerage Firm and Seller, one-half to Brokerage Firm but not to exceed the Brokerage Firm compensation agreed upon herein, and the balance to Seller; (3) Other: If no box is checked in this Section, choice (1), 100 % paid to Seller, applies. Any forfeiture of payment under this section will not reduce any Brokerage Firm compensation owed, earned and payable under §x. More on the process of returning Earnest Money: The Contract to Buy and Sell Real Estate (AKA Purchase Contract) says the agent holding earnest money has 5 days to return earnest money to whomever is supposed to get it. This is covered in the Broker Acknowledgements sections of the purchase contact. The actual language reads like this - "Broker agrees that if Brokerage Firm is the Earnest Money Holder and, except as provided in § 24, if the Earnest Money has not already been returned following receipt of a Notice to Terminate or other written notice of termination, Earnest Money Holder will release the Earnest Money as directed by the written mutual instructions. Such release of Earnest Money will be made within five days of Earnest Money Holder's receipt of the executed written mutual instructions, provided the Earnest Money check has cleared." BUT!!!!!! to make it even more fun for you, the Real Estate has issued Commission Position 6, whereby they say that if there is no controversy over who gets the earnest money, they want the money returned as quickly as possible and the agent does NOT have to get writen permission from all parties to do so. Most companies as a prudent measure have both parties sign that they agree who gets the earnest money, before they release it. This just makes sense, woe to the agent who releases the earnest money and one of the parties throws a fit over it. Safer to get the parties to agree in writing first. However, sometimes the party that is giving up the earnest money and their agent makes this a pretty low priority on their things-to-do-list. Keep in mind, they are grumpy the deal is dead and even if they know they need to release the earnest money, they are not happy about it. In the meantime, the other party wants their money. Buyers in particular are anxious as they are back on the market looking for a property and can't make an offer until they get their earnest money returned. Therefore, the Commission has made is very clear, that they do not want slow paperwork to hold things up when there is no controversy. Does this occasionally put us in an awkward position? Yup. Smart agents who do not like to even get within sniffing distance of having to write out a personal check to cover a perceived, if not actual screw up (that be me, except my wife would probably dispute the "smart" assertion) will move heaven and earth to get quickly signed releases by both parties before releasing earnest money. If you find that one of your parties due to the stress of the failed deal ran instantly to consult with the yogi on the mountaintop and are not returning messages. You need to have a talk with your managing broker before doing something you may regret. It is always cooler to share the love and say "my managing broker said to do it and will make it good" then "how do I spell your name on my check".

If a defaulting buyer forfeits an earnest money deposit, based on the language of the Exclusive Right-to-Sell Listing Contract: A: Broker would receive the funds B: Seller is entitled to keep the funds C: It is negotiable according to the contract D: Broker and Seller would submit the funds for mediation

C: It is negotiable according to the contract Explanation: The seller chooses when filling out the contract. FORFEITURE OF PAYMENTS. In the event of a forfeiture of payments made by a buyer, the sums received will be: (1) 100% will be paid to Seller; (2) divided between Brokerage Firm and Seller, one-half to Brokerage Firm but not to exceed the Brokerage Firm compensation agreed upon herein, and the balance to Seller; (3) Other: If no box is checked in this Section, choice (1), 100 % paid to Seller, applies. Any forfeiture of payment under this section will not reduce any Brokerage Firm compensation owed, earned and payable under §x. More on the process of returning Earnest Money: The Colorado Contract to Buy and Sell Real Estate (AKA Purchase Contract) says the agent holding earnest money has 5 days to return earnest money to whomever is supposed to get it after receipt of written instructions to do do. This is covered in the Broker Acknowledgements sections of the purchase contact. The actual language reads like this - "Broker agrees that if Brokerage Firm is the Earnest Money Holder and, except as provided in § .., if the Earnest Money has not already been returned following receipt of a Notice to Terminate or other written notice of termination, Earnest Money Holder will release the Earnest Money as directed by the written mutual instructions. Such release of Earnest Money will be made within five days of Earnest Money Holder's receipt of the executed written mutual instructions, provided the Earnest Money check has cleared." BUT!!!!!! to make it even more fun for you, the Real Estate has issued Commission Position 6, whereby they say that if there is no controversy over who gets the earnest money, they want the money returned as quickly as possible and the agent does NOT have to get writen permission from all parties to do so. Most companies as a prudent measure have both parties sign that they agree who gets the earnest money, before they release it. This just makes sense, woe to the agent who releases the earnest money and one of the parties throws a fit over it. Safer to get the parties to agree in writing first. However, sometimes the party that is giving up the earnest money and their agent makes this a pretty low priority on their things-to-do-list. Keep in mind, they are grumpy the deal is dead and even if they know they need to release the earnest money, they are not happy about it. In the meantime, the other party wants their money. Buyers in particular are anxious as they are back on the market looking for a property and can't make an offer until they get their earnest money returned. Therefore, the Commission has made is very clear, that they do not want slow paperwork to hold things up when there is no controversy. Does this occasionally put us in an awkward position? Yup. Smart agents who do not like to even get within sniffing distance of having to write out a personal check to cover a perceived, if not actual screw up (that be me, except my wife would probably dispute the "smart" assertion) will move heaven and earth to get quickly signed releases by both parties before releasing earnest money. If you find that one of your parties due to the stress of the failed deal ran instantly to consult with the yogi on the mountaintop and are not returning messages. You need to have a talk with your managing broker before doing something you may regret. It is always cooler to share the love and say "my managing broker said to do it and will make it good" then "how do I spell your name on my check".

Which of the following is correct with regard to an office for a resident Colorado licensee? A: It must be a virtual office doing business by phone and using a post office box mailing address B: It must be in a commercial office building to comply with zoning C: It must have a physical address in Colorado where the commission staff can inspect records

C: It must have a physical address in Colorado where the commission staff can inspect records Explanation: C-2. Resident broker required to have office; exceptions: Every resident Colorado real estate broker shall maintain and supervise a brokerage practice available to the public, except those brokers registered in the Commission office as in the employ of another broker or those brokers registered as inactive. Editor Note: Please note that the above statute refers to "resident" brokers. Colorado brokers not residing in the State are not required to have a physical location in the State.

Which of the following is a less-than-freehold estate? A: Fee simple defeasible B: Fee simple absolute C: Leasehold estate D: Life estate

C: Leasehold estate Explanation: Under a less-than-freehold estate the holder does not have a title to the property. A less-than-freehold estate is a leasehold estate. A leasehold merely gives possession and use of the property, not title

RESPA requires the use of a: A: real estate attorney in every transaction B: licensed Title Company to close every transaction C: Loan Estimate and Closing Disclosure forms D: federally related form in every transaction

C: Loan Estimate and Closing Disclosure forms Explanation: The Real Estate Settlement Procedures Act requires the use of Loan Estimate and Closing Disclosure forms.

Based on the Contract to Buy and Sell, loan discount points: A: Are tax deductible only by the seller B: Are always paid by the seller because of Truth in Lending Laws C: May be paid by either party or a combination of both D: Are always paid by the buyer since he/she is obtaining the loan

C: May be paid by either party or a combination of both Explanation: Whatever is agreed upon in the contract determines who will pay for the discount points.

A Colorado licensee filling in the blanks in a standard commission approved form: A: Cannot do it because this would be practicing law without having passed the bar exam B: Is allowed if the agent only uses pre-approved standard clauses C: May do so, even though this is the practice of law, but permitted by Colorado law D: May do so, this is not the practice of law

C: May do so, even though this is the practice of law, but permitted by Colorado law Explanation: If any commission were to be paid, the seller would be responsible for payment.

The system of legal description that defines the perimeter of a parcel is the: A: geodetic survey B: rectangular survey C: metes and bounds D: lot and block system

C: Metes and bounds Explanation: The metes and bounds method of description describes land, defining the boundaries of the property.

After the Sellers columns on a Settlement sheet have been subtotaled, to balance the two debit and credit columns, a credit to the Seller and a debit to the broker would represent: A: Money due to the Buyer B: Money due to the Seller C: Money owed by the Seller D: Money owed by the Buyer

C: Money owed by the Seller Explanation: When the Sellers credit column is less than the debit column you need to add a credit to make them both equal. This means the credit column (containing the sale price) is less than the debits (containing amoung items - money owed on the property). This Seller is "upside-down." This credit ends up representing money the Seller must bring to the Closing and give to the Broker to pay off debts. (A Broker Debit is a deposit into the escrow account and a check that has to be written). More info: That is a common spot of confusion, so do not let it break your head. The situation occurs at the bottom of the 6 column worksheet when you are reconciling the columns. Let's assume for a moment you are looking at a Buyer's columns. You have applied all the debits and credits and all you have to do is reconcile the columns which have $100,000 in the Credit column (money the buyer has proven they have) and $125,000 in the Debit column (what the Buyer owes). Looks like this Buyer is a little short, but by how much? To determine this amount, you have to make both columns equal. This enables the Closing Agent to determine how much the Buyer is short; which is also how much of a check the Buyer needs to bring and be deposited into the escrow account. So you add $25,000 to the Buyer's Credit column to make both columns equal. Therefore this $25,000 CREDIT represents how much the Buyer is short, meaning this CREDIT does not represent how much they have, it represents how much they still OWE. This is how a CREDIT becomes something you OWE. We are not done reconciling yet. We have a $25,000 Credit, to balance it out we need a $25,000 Debit. That debit goes to the Broker account which represents the Escrow Account. Back to practical language - the Buyers needs to bring a $25,000 check to the closing so that they can make their Credit column (what they got) equal to the Debit column (what they owe) and the Broker (Closing Agent) needs to deposit it into the Escrow Account ($25,000 Debit). For extra points - the reverse is most common with the Seller. When a Sellers Debit column (what they owe) is lower than their Credit column (what they sold their property for), the amount added to the DEBIT column to make both columns equal represents money the Seller is receiving. The balancing CREDIT in the Broker column, reminds the Closing Agent to cut a check to the Seller out of the escrow account. Reference Closings

Bank reconciliation of a trust account: A: Helps prevent bank errors B: Must be done annually by a CPA C: Must be done any month in which the account has had activity D: Is a good safeguard but is not required

C: Must be done any month in which the account has had activity Explanation: Bank reconciliation of a trust account is to be done every month there was activity as required by law.

A real estate broker: A: Becomes an agent of the vendee on obtaining a valid listing B: Becomes an agent of the seller only when a buyer is found C: Must disclose all material facts to the principal D: Can disclose any true information received from the principal

C: Must disclose all material facts to the principal Explanation: All material facts must always be disclosed.

A real estate agent does a open house for a fellow colleague. The listing is not hers. The potential buyers ask her questions about the property and the questions she does not know she says she will get back to them. A: Implied agency was created B: Express agency was created C: No agency was created D: She is now their agent

C: No agency was created Explanation: Only a written contract such as a listing or buyer agency agreement can create an agency relationship in real estate.

After what point will the owner of these new lofts need to turn control of the homeowner's association over to the homeowners? A: After 60% of the homes are sold B: After the first title is conveyed C: No later than 60 days after conveyance of 75% of the maximum number of units D: Developers are never required to relinquish control of the homeowner's association

C: No later than 60 days after conveyance of 75% of the maximum number of units Explanation: Explanation The owner will need to turn over the homeowner's association no later than 60 days after conveyance of 75% of the maximum number of units.

The owner of a commercial warehouse has the building listed for $250,000. The net income of the building is $20,000. An investor wants to buy it at a cap rate of 12%. Will the investor offer the owner the same price as the owner has it listed for? If not, by how much will the owner have to change his price to meet the investor's request for a 12% cap rate? A: Yes, $0 B: No, $166,667 C: No, $83,333 D: No, $250,000

C: No, $83,333 Explanation: Buyer's offer indicates a value of: V= I/ R = $20,000 / .12 = $166,667 No! He does not like the listed price of $250,000. Seller would have to lower his price by:$250,000 - $166,667 = $83,333 This question is about the Income Approach to valuing a property. This approach is used on investment properties to determine the market value of a property based on the income it generates. In simpleze, this is the process: Step 1) Determine the most amount of revenue this property could generate in a perfect world where every unit was rented at the highest possible market rate always. This is referred to as Potential Gross Income. Step 2) Since we do not live in a perfect world, deduct from the Potential Gross Income the amount of revenue you will likely lose each year due to units being vacant (Vacancy Rate) and credit losses. The result is called Effective Gross Income. Step 3) If life were really wonderful an owner could take the Effective Gross Income and go shopping, but life is not that cool because there are bills to pay. From the Effective Gross Income deduct hard expenses. The result is the owner's profit called Net Operating Income or N.O.I. Determining what is, or is not a hard expense to deduct is a place where students really stumble - so pay attention. A hard expense is something that any owner of a property would be stuck paying such as: property taxes, landscaping, maintenance, reserve for repairs, Murray the doorman...yada yada. Personal expenses such as debt service (AKA mortgage payment) and depreciation are not hard expenses and are not included as an expense. Real Estate is not like a gas pump - one price for cash and another for credit. If one person wants to buy a property paying cash and another wants to buy the same property paying with a loan - the market value of the property is not impacted. The same goes for depreciation, depreciating a property is used by the IRS to determine an individual's income tax, it has nothing to do with determining market value. Step 4) If all you needed to do is determine the profit of an investment you could stop here. However, we are trying to determine the market value of a property based on the profit it generates. For that you need to divide the NOI by a Capitalization Rate. A Capitalization Rate (AKA Cap Rate) is the percentage of the purchase price the owner will earn back each year. Cap Rates are pretty handy. Using the Cap Rate of properties sold nearby will result in the market value of the property. However, if your client is savvy and has a desired Cap Rate for any property s/he owns, then the result would be the value of the property to the savvy client. Great way to determine if the asking price of an investment property is reasonable. More on Cap Rate: Since Cap Rate uses income, it is only used for income producing properties, not for example, the home you are buying for yourself. First let's define cap rate AKA Capitalization Rate: Cap rate indicates how fast an investment will pay for itself. For example, a 10% Cap Rate means you will get 10% of your purchase price back each year. If a commercial apartment building is purchased for $5,000,000 and it generates $500,000 a year in net operating income (the dollars left over after operating costs are subtracted from your gross income), then: $500,000 / $5,000,000 = 10% cap rate This means 10% of the building's purchase price is paid each year by the proceeds. Another way of saying this - the property will pay for itself in 10 years. How do you use this tool? Way one; it allows investors a fairly easy and quick method of comparing investment properties. For example: take two properties as identical as the cute twins you flirted with in high school, with the same net operating income. One has a cap rate of 8% (same income, priced higher) and the other a cap rate of 15% (same income, priced lower). The 15% cap rate property MIGHT just be a heck of a deal or the 8% one overpriced. BUT you have to dig deeper, because it might be that the higher cap rate property is in a bad neighborhood and the owner has to discount the price to get it sold. Higher risk means you as a buyer get more bang for the buck with the 15% cap rate property, but you are going to have to work harder for it and your spouse is mad because you haven't been able to take a vacation in years because of that "dang" property you bought. The 8% cap rate property may be more expensive and have a longer payback period, but that is because there is less risk and more investors want to buy it. The rents just come in without grief and it could save your marriage. Way two: Cap Rate is also used in the Income Method of appraisals to value a property. Generally, investors could care less if a property is pretty; they want to know how much they are going to make off it. The Income Method allows an investor to value a property based on its income. If most like investment properties in an area have an average cap rate of 7%. You can divide the net operating income of the property your client is interested in (provided by the listing agent) by the average cap rate in the area (digging in sold comps of various MLS's) and it will give you the approximate market value of the property. For example: $225,000 net operating income / 7% = $3,214,285 market value. If the property is listed for $5,000,000 you might want to pass it by because it is overpriced for the neighborhood. If it is listed for $2,500,000 you call your client quick because you think you found a good deal. So, If you want to play with investors you will need to make cap rates your well understood best buddy.

According to the buy and sell contract, a copy of covenants governing a condominium must be delivered to the purchaser: A: Upon closing B: Upon making a loan application C: On or before Association Documents Deadline D: Upon delivery of possession

C: On or before Association Documents Deadline Explanation: Homeowners' Association Documents. The term Association Documents consists of all owners' associations (Association) declarations, bylaws, operating agreements, rules and regulations, party wall agreements, minutes of most recent annual owners' meeting and minutes of any directors' or managers' meetings during the six-month period immediately preceding the date of this Contract, if any (Governing Documents), most recent financial documents consisting of (1) annual balance sheet, (2) annual income and expenditures statement, and (3) annual budget (Financial Documents), if any (collectively, Association Documents).

Lot 17 of Benton addition, City of Aurora would be part of what type of legal description? A: Township survey B: Metes and bounds C: Platted subdivision D: Condominium

C: Platted subdivision Explanation: Lot and block numbers are contained in a plat map.

Federal Truth-in-Lending laws are also known as: A: Equal Credit Opportunity Act B: Freedom of Information Act C: Regulation Z D: Title VIII

C: Regulation Z Explanation: DEFINITION OF 'REGULATION Z' from Investopedia A specific Federal Reserve Board regulation that requires debt lenders to disclose all the specifics of a given loan. This was done to promote a level of credit protection for the underlying consumer. Most of the requirements imposed by the 1968 Truth in Lending Act are contained within Regulation Z, and the two terms are often used interchangeably.

Which of the following would be the most expensive method of appraisal of large, income-producing properties? A: Market data approach B: Comparative approach C: Replacement cost approach D: Capitalization approach

C: Replacement cost approach Explanation: The replacement cost method is normally the most time consuming and expensive method.

Who is responsible for controlling the daily operations of an apartment building? A: The property manager B: On-site janitor C: Resident manager D: On-site maintenance employee

C: Resident manager Explanation: The resident manager is responsible for the daily operating routine of an apartment building.

The method of appraisal in which the appraiser compares the subject property to recently sold comparable properties is: A: Cost Approach B:Income Approach C: Sales Comparison Approach D: Depreciation Approach

C: Sales Comparison Approach Explanation: Sales Comparison is one of the three main methods of appraisal in which the sales prices of comparable sold properties are used to estimate the value of the subject property. Also called the market data approach

The method of appraisal in which the appraiser compares the subject property to recently sold comparable properties is: A: Cost Approach B: Income Approach C: Sales Comparison Approach D: Depreciation Approach

C: Sales Comparison Approach Explanation: Sales Comparison is one of the three main methods of appraisal, in which the sales prices of comparable sold properties are used to estimate the value of the subject property. Also called the market data approach

When a license law complaint is made to the Commission against a licensee, the licensee must: A: Pay a fine and give up license B: Appear before the Commission within 30 days C: Submit a written response to the Commission if requested D: Temporarily give up license

C: Submit a written response to the Commission if requested Explanation: Rule E-21. Licensee must respond to complaint or audit notice in writing When a licensee has received written notification from the Commission that a complaint has been filed against the licensee, the licensee has been selected for an audit, or that an audit has identified record keeping or trust account deficiencies, such licensee shall submit a written answer to the Commission. Failure to submit a written answer within the time set by the Commission in its notification shall be grounds for disciplinary action unless the Commission has granted an extension of time for the answer in writing and regardless of the question of whether the underlying complaint warrants further investigation or subsequent action by the Commission. The licensee's written answer shall contain the following: (a) A complete and specific answer to the factual recitations, allegations or averments made in the complaint filed against the licensee, whether made by a member of the public, on the Commission's own motion or by an authorized representative of the Commission. (b) A complete and specific response to any additional questions, allegations or averments presented in the notification letter. (c) Any documents or records requested in the notification letter. (d) Any further information relative to the complaint that the licensee believes to be relevant or material to the matters addressed in the notification letter. Reference Rule E-21

A listing broker is creating a listing agreement and notices the sellers didn't include previous damage to the home. The broker knows of the damage and when questioned the sellers they say the want to leave it out because it will deter buyers. The agent should? A: Take the listing but discretely tell any potential buyers about the damage. B: Take the listing. Its not her job to tell the buyers everything C: Tell the sellers they have to fill the form out honestly and if they don't, she should not take the listing.

C: Tell the sellers they have to fill the form out honestly and if they don't, she should not take the listing. Explanation: Agents are not allowed to lie or not disclose material facts. From the Colorado Real Estate Manual, § 12-61-804, C.R.S. Single agent engaged by seller or landlord: A broker acting as a seller's or landlord's agent owes no duty or obligation to the buyer or tenant; except that a broker shall, subject to the limitations of section 38-35.5-101, C.R.S., concerning psychologically impacted property, disclose to any prospective buyer or tenant all adverse material facts actually known by such broker. Such adverse material facts may include but shall not be limited to adverse material facts pertaining to the title and the physical condition of the property, any material defects in the property, and any environmental hazards affecting the property which are required by law to be disclosed.

A tenant rented a townhome, signing an 18-month lease. After the lease expired, the tenant paid 1 month's rent and got a receipt. What kind of leasehold does the tenant have? A: Tenancy at sufferance B: Gross lease C: Tenancy at will D: Tenancy for years

C: Tenancy at will Explanation: A tenancy at will is a property tenure that can be terminated at any time by either the tenant or the owner (landlord). It exists without a contract or lease, and is unspecific in duration or the exchange of payment. A tenancy at will arrangement is desirable to tenants and owners wishing to have the flexibility to change rental situations easily and without breaking a contract. In the question - since the signed lease expired, absent a written replacement, the landlord and tenant were in a tenancy at will arrangement. More info on Leasehold Tenancies: Leasehold Tenancy also known as Nonfreehold Estates A nonfreehold estate is an interest in real property that is less than a freehold estate. Nonfreehold estates are not inheritable and are said to exist without seisin. Seisin denotes ownership: an individual who is "seised" of an estate is the owner of the estate. Also known as a leasehold estate, a nonfreehold estate is created through a lease or rental agreement that can be either written or oral. The holder of a nonfreehold estate (the tenant or lessee) holds no ownership interest in the real property, and only has the right to use the property as established in the terms of the lease or rental agreement. Ownership remains with the landlord (lessor). Types of Nonfreehold Estates Because nonfreehold estates involve tenants, they are often referred to as "tenancies." There are four types of tenancies: Tenancy for Years This is, also called an estate for years or tenancy for a definite term, is an estate that is created by a lease. A lease is a contractual agreement where a tenant takes a leasehold interest in a real property for a specified duration. The defining characteristic of a tenancy for years is that the term must have a definite beginning and end; that is, a beginning date and either a specific time period (such as one year or one month) and an end date must be declared. As long as a lease is for a definite term, it is identified as a tenancy for years. These leases terminate automatically at the specified end date without the need for notice by either party Tenancy from Period to Period A tenancy from period to period is an estate that exists when the tenancy is for a definite initial time, but is automatically renewable unless terminated by the lessor or lessee with prior notice that the tenancy is to be ended. These estates, which are also called periodic tenancies, are of indefinite duration since they can be renewed indefinitely. A tenancy from period to period may be from year to year, month to month, week to week or even day to day, and renews for a like period of time. For example, a month to month periodic tenancy is renewable in one-month periods until it is terminated at the end of a month through proper notice by either party. Tenancy at Will A tenancy at will, or an estate at will, exists at the pleasure of both the lessor and the lessee. This type of tenancy can be terminated at any time "at the will" of either the owner or the tenant. A tenancy at will lease agreement might contain language that expresses that the lease may be terminated instantly when notice is given. In practice, a tenant is generally entitled to a reasonable amount of time in which to vacate the property. Landlords may prefer a tenancy at will when a property is for sale and any tenants would have to vacate quickly. Tenants may favor a tenancy at will if they plan on renting only for a short period of time; for example, prior to moving or while waiting to move into a new home. Tenancy at Sufferance A tenancy at sufferance is the lowest form of estate known to law. Also called an estate at sufferance, it exists indirectly as the result of circumstance, and is never deliberately created. This type of tenancy arises when a person goes into possession of land in a lawful manner, but remains on the property without any right to do so, and without the owner's consent. The only difference between a tenant at sufferance and a trespasser is that the tenant at sufferance had at one time a right to be on the property, but has stayed beyond the terms of the previous agreement. For example, a tenant who remains after a one-year lease has terminated, without consent or recognition from the owner, becomes a tenant at sufferance. The tenant can be evicted at any time without notice Reference Investopedia.com

What is the status of a broker who moves his office down the street but does not notify the Real Estate Commission? A: The broker must notify the Real Estate Commission within 30 days B: The broker's license is revoked C: The broker and all of his agents licenses are inactive D: The broker's license is suspended but all of the employed agents may continue to conduct business.

C: The broker and all of his agents licenses are inactive Explanation: All licenses of the firm are inactive

What is the status of an employing broker who moves his office down the street but does not notify the Real Estate Commission? A: The broker must notify the Real Estate Commission within 30 days B: The broker's license is revoked C: The broker and all of his agents' licenses are inactive D: The broker's license is suspended but all of the employed agents may continue to conduct business

C: The broker and all of his agents' licenses are inactive Explanation: All licenses of the firm are inactive.

A broker manages three properties for different owners. One property is in need of emergency repairs, but the owner does not have enough money in the management escrow account to cover the cost of the repairs. The broker uses excess funds from another owner's account for the emergency, then replaces the funds later with a check from the first owner. Which of the following is true? A: The broker has acted properly by safeguarding the client's interest. B: Such action is proper when the management account balance is sufficient. C: The broker is in violation of regulations for improperly handling escrow funds. D: The broker must use personal funds for repair if there is not enough money in the management account.

C: The broker is in violation of regulations for improperly handling escrow funds. Explanation: The broker improperly commingled funds and is in violation of regulations. When the broker used funds from the other account, the broker actually used another client's funds for the repair.

Which of the following is true when a broker negotiates a fee under the Exclusive Right-to-Buy Contract? A: The listing broker must pay the negotiated fee at closing B: The buyer will pay the fee at closing C: The broker may be directed to seek payment from any or all of several sources D: If the broker cannot get the fee from the listing broker or seller, the buyer is under no obligation to pay

C: The broker may be directed to seek payment from any or all of several sources Explanation: The buyer may direct the broker to seek payment from various sources. If the broker is unable to collect the fee from any of the other sources, the buyer may be obligated to pay the fee, depending upon which box is checked in para.7 of the contract. (7.1 says buyer is obligated to pay, 7.3 says buyer is not obligated to pay. All other choices in this question are not totally correct so they couldn't be the right answer.

An offer is made on a property listed with broker Green for $93,000. The offer is for $91,000 and the buyer will be obtaining FHA financing. The appraisal comes in at $88,000. What recourse does the buyer have? A: The buyer must pay the difference in cash or lose his earnest money B: The buyer may not get an FHA loan on this property C: The buyer may get an FHA loan provided the difference between the appraised price is paid in cash D: The buyer may get an FHA loan and get a second loan to cover the difference the appraised value and the purchase price.

C: The buyer may get an FHA loan provided the difference between the appraised price is paid in cash Explanation: The buyer cannot borrow the money, but can pay the difference in cash or s/he can terminate the contract at no penalty. The buyer could also try to get the seller to reduce the price to the appraised value.

Susan Seller gave her agent a 60 days listing to sell her home for $200,000. The seller specified in the Exclusions section of the listing agreement that her prized Iris plants would be removed prior to close and the iris bed repaired to eliminate the damage of plant removal. Public records indicates the home is 2,400 square feet, has 3 bedrooms, 2 bathrooms, a 90% finished basement and a two car garage. Last year's taxes were $1,832 and have been paid. An offer was made and accepted with a sales price of $190,000. The buyers submitted earnest money of $3,000 under liquidated damages. The inspection objections must be made by March 27. The survey must be completed by April 10. Review of title must be completed by April 10. The Sellers indicated in the seller's property disclosure that the water heater had leaked. The water heater was replaced and all water damage repaired. The sellers further disclosed that the concrete basement floor had lifted due to expansive soils creating a crack in the concrete floor. Although closing was set for May 1st, a delay in the lender processing of the buyer's loan forced a change in close to May 10th. This change was accepted by both parties. The cost of the survey was $450. The closing fee charged by the closing company is $150 to be split by both parties. The buyers inspector noticed the damage to the basement floor and communicated this information to the buyer on March 20th. A: The purchase contract is still binding as the listing broker guarantees the floor will be repaired by closing B: The purchase contract is still binding as the crack was disclosed in the seller property disclosure C: The buyer may terminate the purchase contract in writing. The buyer also has the option to negotiate a repair cost with the seller

C: The buyer may terminate the purchase contract in writing. The buyer also has the option to negotiate a repair cost with the seller Reference: The buyer has the ability to terminate the contract with no penalty as long as they communicated the termination to the sellers prior to the March 27th inspection deadline. The buyer alternatively may negotiate a repair with the seller. Disclosing the crack does not prohibit the buyer from objecting.

A developer is selling several parcels of property that have been developed. The developer wants to have his attorney prepare a sales contract that refers to the legal description and stipulates the warranties the developer is making. Which of the following is true? A: The developer cannot do this, as he must use only the commission approved forms B: The developer's warranties cannot be included within the body of the contract C: The developer can hire an attorney to prepare his own contracts and include warranties and other information D: The developer can hire a broker to prepare the contracts

C: The developer can hire an attorney to prepare his own contracts and include warranties and other information Explanation: The developer can include his warranties and information since he is having his attorney draw up the sales contracts. Builders are not required to use state forms.

Any excess funds above those required to pay off encumbrances realized at a foreclosure sale belong to: A: The State General Fund B: The mortgagee C: The mortgagor D: The Lender

C: The mortgagor The Mortgagor is the owner of the property. The owner placed the voluntary lien on the property which the mortgage represents to secure a loan for the property. Money left over from the sale of the foreclosed property, after all obligations were settled, would have been returned to the Mortgagor (AKA foreclosed owners). The IRS views a foreclosure sale as a normal sale of the property. The owners would need to consider the tax consequences of the sale as the excess money may be viewed by the IRS as a capital gain and thus subject to capital gain taxes. More information about foreclosures in Colorado: Foreclosures: Foreclosure is the act of selling, by legal proceedings, real property to satisfy the obligations of the landowner to a third party. It is the procedure whereby property pledged as security is sold to pay the debt in the event of default in payment. There are three main types of foreclosure in the State of Colorado: The Public Trustee System: The Public Trustee, by law, serves as the neutral, intermediate party between the lender and the borrower to assure that each party can exercise its legal rights in a foreclosure action. The Public Trustee is NOT an attorney and cannot provide legal advice to any parties involved in the foreclosure action. A foreclosure conducted by the Public Trustee's office is authorized by a deed of trust containing a power of sale (right to sell property at public auction in the event of default). The procedure for conducting the foreclosure is set by statute and must be followed precisely. The deed of trust is an agreement between three parties: the Grantor (owner), the Public Trustee (who has the power of sale) and the Beneficiary (lender). The Judicial Foreclosure: Foreclosure conducted through the Court system on a mortgage, deed of trust, or judgment. The procedure for conducting the foreclosure is under Rule 105 of the Colorado Rules of Civil Procedure. A mortgage is an agreement between two parties: the Mortgagor (owner) and the Mortgagee (lender). The Tax Sale: The Tax Sale Sale of real property by the Treasurer for failure to pay real estate taxes. The procedure for conducting the sale is set by statue

Mr. Brooks has decided to offer to buy a farm. He has been told that farmland in the area is selling for $3,500 to $4,000 per acre. Mr. Brooks offers $3,750 per acre. The legal description of the farm is: The NW-1/4, of the SW-1/4 and the E-1/2, of the NW-1/4, of Sec 3 Township 37 Range 12E of the 3rd P.M. A: Mr. Brook's offer is $425,000 B: The offer is based on 160 acres of farmland C: The offer is $450,000 and is 120 acres D: The offer is based on 5 acres of farmland

C: The offer is $450,000 and is 120 acres Explanation: The word "and" in the legal description indicates there are two different parcels. You need to determine the acreage of each one separately and then add the two together. The first parcel is "The NW-1/4, of the SW-1/4." In simpleze this is one quarter (NW ¼) of one quarter (SW ¼) of a section. To determine one quarter of a section (SW 1/4) you divide 640 by 4 equals 160 acres. To determine one quarter of that number (NW 1/4), divide the previous 160 by 4 equals 40 acres total in the first parcel. The second parcel is "the E-1/2, of the NW-1/4." In simpleze this is one half of one quarter of a section. To determine one quarter of a section (NW ¼) you divide 640 by 4 equals 160. To determine one-half of that (E ½), you divide the 160 by 2 equals 80 total acres in the second parcel. 40 plus 80 equals 120 total acres in this legal description times the offer of $3750 per acre equals $450,000.

Which of these statements is true with respect to the appraisal of a one family home? A: Capitalization of net income is the most accurate B: You should appraise it by at least three methods, total the results and divide by three C: The reproduction cost method is valid on new property D: Capitalizing the average rent of the neighborhood properties is accurate

C: The reproduction cost method is valid on new property Explanation: All the rest of the answers are used for different type properties.

Susan Seller gave her agent a 60 days listing to sell her home for $200,000. The seller specified in the Exclusions section of the listing agreement that her prized Iris plants would be removed prior to close and the iris bed repaired to eliminate the damage of plant removal. Public records indicates the home is 2,400 square feet, has 3 bedrooms, 2 bathrooms, a 90% finished basement and a two car garage. Last year's taxes were $1,832 and have been paid. An offer was made and accepted with a sales price of $190,000. The buyers submitted earnest money of $3,000 under liquidated damages. The inspection objections must be made by March 27. The survey must be completed by April 10. Review of title must be completed by April 10. The Sellers indicated in the seller's property disclosure that the water heater had leaked. The water heater was replaced and all water damage repaired. The sellers further disclosed that the concrete basement floor had lifted due to expansive soils creating a crack in the concrete floor. Although closing was set for May 1st, a delay in the lender processing of the buyer's loan forced a change in close to May 10th. This change was accepted by both parties. The cost of the survey was $450. The closing fee charged by the closing company is $150 to be split by both parties. After moving in the buyers realized the Iris plants had been removed: A: The buyers have no recourse as the removal had been communicated by the seller to the listing broker B: The listing contract takes precedence in a sale, the listing broker may consider making a concession to the buyer for damages C: The seller is bound by the terms of the purchase contract, the listing broker might consider offering a financial concession to the buyer for damages D: The buyer agent is at fault and may consider making a financial concession to the buyers

C: The seller is bound by the terms of the purchase contract, the listing broker might consider offering a financial concession to the buyer for damages Reference: The Seller is legally accountable for the terms and condition of the purchase contract she signed. Failing to ensure the exclusion of the plants in the purchase contract does not relieve the seller of the agreed obligation. However, the listing agent failed in the performance of his/her duties to the seller when the agent was not diligent in making certain the listing exclusions were included in the purchase contract his/her client signed. Ultimately, the listing agent is at fault and will suffer the consequences should he/she fail to negotiate a satisfactory settlement with the buyer. Should a settlement with the buyer not be agreed and the seller is forced to return the plants, the listing agent may be on the hook for damages to the seller. Should the listing agent decide to make a claim, the damages should be covered by the listing agent's Errors and Omissions Insurance. Here is some insight on the the easier-than-you-think-when-you-approach-it-right scenarios: For the uninitiated, when you take the National side of the State licensing exam, there are two lengthy scenarios each describing a different real estate transaction. You are then asked 5 questions about each of the scenarios. The length of the scenarios chews up a fair amount of time answering the questions. Since they come first, anxiety levels of test takers increase as they watch the clock run down and they are still on these first dang ten questions. Some rush through the remainder of the test missing questions that they should nail, others run out of time prior to completion. We have been hearing of these problems from a number of test-takers since the scenarios were added to the test earlier this year. Do not panic. We have a plan to keep you from becoming a victim. Disregard this advice at your own peril. First up is strategy, some suggestions we have reported before, some are new. Secondly, I will discuss how to approach the types of questions the scenarios pose. As to strategy, I suggest you mark the scenario questions for later completion and then address them last. This will enable you to spend quality time (and pile up correct answers while you are fresh) on 70 of the 80 questions on the test and the balance on the remaining 10. This will automatically right size the time you spend on the scenarios and give you zen knowing that you've got 70 under your belt. Worst case, you can fake your way through the last ten knowing that you are likely to get at least a few right. When you do get to them, THIS IS VERY IMPORTANT, read the questions first, then the scenarios, This way you can read through the scenarios once, picking out pertinent information as you go. The good news is most of the questions require just general real estate knowledge to answer. A quick read of the scenario and after that quicker scans for key words from the question will do. These are actually very easy questions. Here is an example of how to use this approach; the buyer's agent asks the listing agent if there are any defects of which the buyers should be aware. Now we all know that agents cannot lie and we need to disclose material facts of which we have knowledge. This alone means you can choose the answer indicating full disclosure by the listing agent. To verify this, a quick scan of the scenario indicates the seller mentioned a defect to the agent that was not mentioned on the sellers property disclosure. Easy answer, verified quickly. Another example; a buyer is upset that the seller removed some prized plants. A quick scan for a key word such as "plants" tells you all you need to know. The seller told the listing broker that they were going to pull them, and included this info in the Exclusions section of the listing contract. No mention is made whether this exclusion worked its way into the purchase contract, but given the buyer's reaction a good assumption is that didn't happen. Who is right, who is wrong and who is on the hook? The buyer did nothing wrong, their expectations were justly set by the purchase contract agreed to by them and the seller. The seller has a problem. She is legally bound by the purchase contract she signed. Not reading it carefully is a poor defense. Her agent really screwed up. The agent is supposed to be the professional guiding the listing client and did not exhibit the level of diligence which would have ensured the exclusion negotiated its way from the listing contract into the purchase contract. With this information - who do you think is going to get financially stuck with the bill for a fix? Another easy answer. We also are aware of a straight tax pro-ration that everyone who has taken our course should be more than familiar with how to handle. Knowing that a buyer can blow off without penalty a transaction based on something that came up during an inspection or cannot walk away from from a transaction without just cause without losing their earnest money are also general real estate knowledge topics that only require a glance at the scenario to make certain there is not an unexpected wiggle.

Which of the following is true with regard to the Seller's Property Disclosure form that is mentioned in an Exclusive-Right-to-Sell listing form? A: The seller is required by law to provide this form to every buyer B: The seller may check the "as is" box, making the buyer responsible to find any defects C: The seller may decline to provide the disclosure but still must disclose latent material defects D: The seller may refuse to provide the disclosure and avoid disclosure of material defects

C: The seller may decline to provide the disclosure but still must disclose latent material defects Explanation: The seller has the choice whether to provide the disclosure form, but is nevertheless responsible for disclosure of hidden material defects.

A dishwasher in a property under contract is listed affirmatively "In Working Condition" on the Seller's Property Disclosure. What must the seller do if the dishwasher fails before closing? A: The seller is not responsible since he or she could not have known it would fail B: The seller must offer the buyer a credit at closing for the price of a new dishwasher C: The seller may replace the dishwasher with a used appliance of similar age, size, and condition D: The seller must replace the dishwasher with a new one of similar capacity

C: The seller may replace the dishwasher with a used appliance of similar age, size, and condition Explanation: Based on the approved Residential Contract to Buy and Sell, the seller must replace the dishwasher with a unit of similar size, age, and quality or an equivalent at closing.

The seller agreed to clean and certify the furnace prior to closing. A: The Title Company should verify it was done B: The lender should verify the work was done C: The seller or listing broker should provide a receipt and certification at closing D: The inspector should verify the work was done

C: The seller or listing broker should provide a receipt and certification at closing Explanation: A receipt from a licensed professional, i.e., a furnace and heating technician, is a good way to verify that work was done that may not be easily detected by the naked eye.

A developer builds 50 garden apartments in an existing two story building that contains no elevator: A: All units must comply with ADA. B: None of the units must comply with ADA since it is a two-story building. C: The units on the first floor must comply with ADA. D: The developer must put in an elevator.

C: The units on the first floor must comply with ADA. Explanation: ADA requires that the units on the first floor must comply.

A client enters into a fiduciary relationship with his/her real estate broker when: A: they sit down together at the closing B: a sales contract is executed by both parties C: They enter into a listing agreement as a sellers agent D: They enter into a listing agreement as a sellers agent or transaction broker

C: They enter into a listing agreement as a sellers agent Explanation: A fiduciary relationship is created when a principal signs a listing or buyer's agency agreement with a Listing Agent or Buyer's Agent. Note: a Transaction Broker as a neutral party is not a fiduciary relationship. In real estate transactions, only the Seller's or Buyer's agency relationships are fiduciary relationships. This relationship implies a position of trust or confidence, wherein one person is usually entrusted to hold or manage property or money for another. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts them.

In Colorado the default representation status is: A: Subagent B: Seller's agent C: Transaction broker D: Buyer's agent

C: Transaction broker Explanation: In the absence of a written agreement the default non-agency relationship is a transaction broker. However, prior to performing a licensed activity such as eliciting or receiving confidential information, the Broker must at a minimum disclose this status using an approved disclosure form.

Which of the following is the largest area? A: 10% of a township B: Three sections C: Two miles squared D: 5,280 feet by 5,280 feet

C: Two miles squared Explanation: Remember always to compare apples to apples. Connect everything to square miles: 10% of a township is 3.6 square miles, 3 sections is three square miles, two miles squared is four square miles, 5280 ft by 5280 is one square mile. By converting everything to square miles let's look at each answer: 10% of a township a township is 6 miles by 6 miles or 36 square miles and 10% of that would be 3.6 square miles Each section is 1 Square - mile therefore 3 sections would be 3 square miles. Two mile squared is 2 times or 4 square miles. And 5280 feet times 5280 feet is 1 square mile Therefore the largest area would be C or 2 miles squared.

Should the lessor die after the lease has been signed by all parties what happens to the lease? A: Rescinded B: Renegotiated C: Unchanged D: Cancelled

C: Unchanged Explanation: The lease remains in force if the landlord or lessor dies.

If there is no Legal Description of a property in a Purchase and Sell contract, is the contract: A: Void B: Enforcable C: Unenforcable

C: Unenforcable Explanation: The property to be sold must be adequately described in the purchase and sale agreement. The mailing address is not an adequate description of the property. The purpose of a legal description is to describe a particular parcel of land in a unique and unambiguous manner that will survive forever. In the United States, this is done by reference to lots and blocks in a subdivision map, by metes and bounds, by aliquot (using the nomenclature of the U.S. Public Land Survey System, or by a combination of the above. Thus, it is necessary to include or attach the entire lengthy and convoluted legal description on the purchase and sale agreement for it to be enforceable.

Which of the following is the one with the least risk of default for a lender? A: A 100%-LTV VA loan B: Insured 80%-LTV conventional loan C: Uninsured 80%-LTV conventional Loan D: A 95% FHA-LTV with a gift letter from parents

C: Uninsured 80%-LTV conventional Loan Explanation: An uninsured 80% Loan to Value (LTV) loan is the loan given by lenders to their most qualified, therefore least-risk, borrowers. It has the most favorable terms for the borrower reflected in lower fees and interest rate. Since these borrowers have a minimum of 20% equity in the property, in the event of a default the lender has ample coverage of their 80% LTV loan making this a lower risk loan. In each of the other loans listed, the borrower had less than 20% equity making them a greater risk of default. In each of them, the absence of adequate equity made it necessary for the borrower to pay additional fees and/or a higher interest rate to obtain either a VA guarantee, or Private Mortgage Insurance, or an FHA insured loan to reduce their risk to the lender sufficient to qualify them for a loan. For example: A 100%-LTV VA loan - the borrower was borrowing the entire purchase price of the home with a VA guarantee of only a portion of the loan. Insured 80%-LTV conventional loan - In this loan, the borrower did not have enough of a down payment to cover 20% of the loan to qualify for a desireable 80% LTV loan which provides the best terms and conditions. So they bought Private Mortgage Insurance (PMI) to insure the portion of the 20% down payment they did not have, this allowed the lender to qualify them for an 80% LTV loan. A 95% FHA-LTV with a gift letter from parents - although this loan is insured by FHA, the limited borrower equity in the property, as evidenced by the 95% LTV and parental assistance, means they are at greater risk of default.

Which of the following is not a requirement of the broker when working with a purchaser? A: Exercising reasonable skill and care B: Presenting all offers and counter offers in a timely manner C: Verify seller's escrow account balance D: Disclosing to a buyer adverse material facts known to the broker

C: Verify seller's escrow account balance Explanation: All are a must whether dealing with a buyer or seller however the verifying the seller's escrow account balance has nothing to do with the buyer.

If a contract is signed under duress, it is: A: Bleached B: Discharged C: Voidable D: Void

C: Voidable Explanation: If not voided within a reasonable period of time it is considered an accepted contract. And only the party who signed under duress can void the contract.

When must an employing broker keep a ledger? A: When paying salaries to brokers B: When putting money in an account to maintain it C: When accepting money belonging to others D: When receiving an earned commission

C: When accepting money belonging to others Explanation: What is a "Ledger"? A record collectively called a "ledger" or an equivalent component of an accounting system which records in chronological sequence all money which is received or disbursed by the broker on behalf of each particular beneficiary of a trust account. This record must show the monetary transactions affecting each individual beneficiary and must segregate such transactions from those pertaining to other beneficiaries of the trust account. The Real Estate Commision does not require a ledger when an Employing Broker is only managing company money. However, if s/he accepts money belonging to others both an escrow account and a ledger for that account is required. If an employing broker does not take physical possession of earnest money (buyers write checks directly to the title company), rents (written directly to owners), security deposits (written directly to owners) and such; then the emplying broker does not need an escrow account. If s/he does not need an escrow account, s/he does not need a ledger.

When is a broker to open, or have access to, an escrow account? A: When he applies for his broker's license B: When he starts to work as a broker C: When he receives earnest money D: None of the above

C: When he receives earnest money Explanation: A broker is not required to open a trust account, in a recognized Colorado depository, until he takes money that belongs to others.

When at the commencement of a legal action a plaintiff asks the court to confiscate certain property belonging to the defendant to act as security for the satisfaction of the judgment he's seeking, the plaintiff is asking the court to issue a: A: garnishment B: writ of possession C: writ of attachment D: none of the above

C: Writ of Attachment Explanation: Here is a good definition of writ of attachment from Wikipedia. BTW, Wikipedia is a great resource for the national side of the test, not so much for the State side. Here ya go: "A writ of attachment is a court order to "attach" or seize an asset. It is issued by a court to a law enforcement officer or sheriff. The writ of attachment is issued in order to satisfy a judgment issued by the court. A prejudgment writ of attachment may be used to freeze assets of a defendant while a legal action is pending. Common grounds for obtaining a prejudgment writ of attachment are that a defendant has committed fraud or that a defendant is prepared to hide assets from a court."

If an offer was made on a house in which the buyer intended to have a hair salon in the basement, but found out a few days prior to closing that the zoning wouldn't allow it, can they cancel the agreement without penalty? A: Yes B: No, the buyer must perform this due diligence prior to submitting an offer C: Yes, but only if they terminate in writing prior to the Record Title Objection Deadline D: Yes, as long as they file an objection in writing prior to Closing

C: Yes, but only if they terminate in writing prior to the Record Title Objection Deadline Explanation: Zoning is a matter of Title. Buyers have the right to terminate the contact without penalty if any aspect of Title is unsatisfactory to them. However, they must due so in writing prior to either the Off-Record Title Objection Deadline or the Record Title Objection Deadline. From the Contract to Buy/Sell: Title Advisory. The Title Documents affect the title, ownership and use of the Property and should be reviewed carefully. Additionally, other matters not reflected in the Title Documents may affect the title, ownership and use of the Property, including, without limitation, boundary lines and encroachments, area, zoning, unrecorded easements and claims of easements, leases and other unrecorded agreements, and various laws and governmental regulations concerning land use, development and environmental matters. The surface estate may be owned separately from the underlying mineral estate, and transfer of the surface estate does not necessarily include transfer of the mineral rights or water rights. Third parties may hold interests in oil, gas, other minerals, geothermal energy or water on or under the Property, which interests may give them rights to enter and use the Property. Such matters may be excluded from or not covered by the title insurance policy. Buyer is advised to timely consult legal counsel with respect to all such matters as there are strict time limits provided in this Contract [e.g., Record Title Objection Deadline (§ 3) and Off-Record Title Objection Deadline

A buyer of a time-share has one unique right not shared by buyers in the resale market. It is: A: a limited interest in the common area B: the ability to choose which unit will be theirs C: a five-day right of rescission D: a longer time to sell their old property

C: a five-day right of rescission Explanation: No developer shall employ a contract that contains a provision waiving a buyer's right to such a cancellation period. This cancellation period runs until midnight on the 5th day following execution of the contract.

A real estate licensee who is an independent contractor receives: A: a regular salary B: health insurance C: a negotiated commission on transactions completed D: paid vacations

C: a negotiated commission on transactions completed Explanation: Unless otherwise agreed a real estate licensee who is an independent contractor receives commissions on transactions negotiated and closed.

When Anthony purchased his home, the title insurance company's report included all of the following EXCEPT: A: a list of outstanding mortgage loans against the property B: a report of existing tax liens against the property C: a record of all previous owners of the property D: a list of tax districts impacting the property

C: a record of all previous owners of the property Explanation: Title insurance documents include all liens and defects of record and easements, but not the chain of title.

An arm's-length transaction is best represented by: A: a father selling the family ranch to his son B: a tax sale C: a seller and buyer, unknown to each other, both ready, willing, and able to complete a sale D: all of the above

C: a seller and buyer, unknown to each other, both ready, willing, and able to complete a sale Explanation: When parties to a transaction are independent and on an equal footing it is referred to as an "arm's-length transaction". It is used specifically in contract law to describe an equitable agreement that will stand up to legal scrutiny. A simple example of not at arms length is the sale of real property from parents to children. The parents might wish to sell the property to their children at a price below market value, which could have tax and other legal consequences. Appraisers, when determining the market value of a property look for sold properties that are arm's-length transactions to use as valid comparibles. The sold price of non-arm's-length transactions are a poor gauge of true market value.

What would most likely cause housing prices to fall? A: the sale of 3 luxury homes in a neighborhood B: a company hiring 250 engineers C: a sharp increase in interest rates D: a reduction in building activity

C: a sharp increase in interest rates

The Equal Credit Opportunity Act makes it illegal for lenders to refuse credit or discriminate because an applicant is: A: a single parent who refuses to supply income verification B: a family that has had persistent and recent credit problems C: a single woman D: unemployed and without any known income

C: a single woman Explanation: The Equal Credit Opportunity Act makes it illegal for lenders to refuse credit to a single woman.

An existing mortgage loan may be changed to a junior lien by: A: court order B: satisfaction of the first mortgage loan C: a subordination agreement D: exchanging before the first mortgage was recorded

C: a subordination agreement Explanation: Subordination is the process of allowing another lien to take priority in the event of foreclosure.

An existing mortgage loan may be changed to a junior lien by: A: court order B: satisfaction of the first mortgage loan C: a subordination agreement D: exchanging before the first mortgage was recorded.

C: a subordination agreement Explanation: Subordination is the process of allowing another lien to take priority in the event of foreclosure.

The process in which boundaries are measured and land areas determined is called: A: an appraisal B: an assessment C: a survey D: an involuntary lien

C: a survey Explanation: A survey is the process that measures boundaries and land areas.

Regarding trust deeds and mortgages: A: a trust deed must be foreclosed without court intervention B: a mortgage is never foreclosed through court intervention C: a trust deed may be foreclosed without court intervention D: a mortgage may be foreclosed without court intervention

C: a trust deed may be foreclosed without court intervention Explanation: By not having to go through the courts to foreclose, a trust deed provides a faster and less expensive foreclosure process. In Colorado, to avoid having to use the courts, the Public Trustee must be named trustee in the Deed of Trust.

Which of the following is required for a person to be a broker of record for a corporation? A: a corporate position as a director with voting rights B: an executive position with the corporation such as president or chief executive officer C: a valid active Colorado broker's license D: more than nominal ownership in the corporation

C: a valid active Colorado broker's license Explanation: The only requirement in order to be the broker of record for a corporation is that one have a valid, active Colorado broker's license, and have fulfilled the necessary requirements to be an Independent Broker.

Addition to the land through natural causes, usually by a change in water flow A: accession B: acquisition C: accretion D: annexation

C: accretion Explanation: Remember, accretion always has to do with natural causes, like a river or creek (think "accretion"), while accession is the acquisition of title as a result of annexation of fixtures or annexation

It is proper for a licensee to use a Commission-approved Exclusive Right-to-Buy contract when the licensee is: A: acting as the seller's agent in the sale of property listed with another brokerage company B: acting as the buyer's agent and the seller's agent C: acting as the buyer's agent in locating real property D: acting as the buyer's agent and as a transaction broker for the seller

C: acting as the buyer's agent in locating real property Explanation: A standard Exclusive- Right -To- Buy contract should be used whenever the broker is representing the buyer.

A transaction broker may disclose the following information regarding a buyer he is assisting, in the purchase of a property: A: that the buyer is willing to pay more for the property than he offered B: what the buyer's motivation to purchase the property is C: adverse material facts regarding the buyer's financial ability to purchase the property D: what the buyer's race and country of origin is

C: adverse material facts regarding the buyer's financial ability to purchase the property Explanation: The buyer's financial ability to purchase the property is considered a fact, which MUST be disclosed to a seller, because the seller is the party most at risk.

A transaction broker may disclose the following information regarding a buyer he is assisting in the purchase of a property: A: that the buyer is willing to pay more for the property than he offered B: what the buyer's motivation to purchase the property is C: adverse material facts regarding the buyer's financial ability to purchase the property D: what the buyer's race and country of origin is

C: adverse material facts regarding the buyer's financial ability to purchase the property Explanation: The buyer's financial ability to purchase the property is considered a fact, which must be disclosed to a seller.

Mineral rights: If property is attached with mineral rights, you may be obligated to: A: charge a rate for entry B: refuse entry C: allow them to enter an use your property to gain access to the minerals D: call police

C: allow them to enter an use your property to gain access to the minerals Explanation: Just as if your neighbor had no access to their property, the law may require you to grant the neighbor an easement to drive across your property, the mineral owner has a right to access their minerals. This does not mean that the mineral rights owner has unlimited right to impact or damage your property. The law may require the mineral owner to access their minerals, for example oil, by drilling underneath the property leaving the surface undisturbed. This is a complex and litigious area of the law.

A note in which the principal amount is systematically reduced through regular payments of both principal and interest is known as a(n): A: balloon B: straight loan C: amortized loan D: none of the above

C: amortized loan Explanation: This is a definition of a amortized loan. Amortization is sometimes referred to as "liquidation" of a debt.

The Agreement to Amend\Extend is used to change the terms of: A: an offer being negotiated B: an exclusive right-to-sell listing contract C: an accepted purchase and sale contract D: an exclusive right-to-buy contract

C: an accepted purchase and sale contract Explanation: The Agreement to Amend/Extend Contract is used only to amend the terms and conditions of a sales contract while it is in process. You cannot amend a contract once it is complete (AKA "executed"), or terminated, or expired. More info: First make sure you understand the difference between the Agreement to Amend and Extend and the Agreement to Amend and Extend With Broker. Both agreements are used to alter the terms and conditions of a contract. The Agreement to Amend and Extend is used to alter the terms of the sales agreement between the buyer and seller. The Agreement to Amend and Extend With Broker is used to amend the terms of an agreement with the client and their broker such as a listing agreement or buyer agency agreement. As to why would you extend a contract before it is executed, understand the difference between the terms "executory" and "executed". When a contract is signed by all parties it is in "executory" status. This means it is in process but not complete. When it is "executed" this means it is complete i.e. fully performed. Real Estate Commission rules say that you cannot amend the terms of an agreement after it has been expired, executed or otherwise terminated. When a closing occurs, the deal is done, the associated listing and sales contracts are fully executed, can't-be-changed, done, dead, history, ex-contracts, ended, finished, achieved, accomplished, done-with, taken-to-the-bank and all-over-including-the-shouting.

The License Buyout Addendum to the Contract to Buy and Sell is required for which of the following situations? A: a listing associate offers to purchase a property immediately after the listing expires B: an associate in the listing brokerage company wishes to purchase a property listed by another associate C: an associate is offering a guaranteed buyout arrangement as an inducement to list with his or her company D: a broker wishes to acquire one of his own listings as an investment

C: an associate is offering a guaranteed buyout arrangement as an inducement to list with his or her company Explanation: The Commission Position on the use of the Licensee Buyout Addendum in Chap 3 of the real estate manual it says: "It is the Commission's position that Rule F-7 requires use of the Buyout Addendum under the following circumstances: 1. When a licensee enters into a contract to purchase a property concurrent with the listing of such property. 2. When a licensee enters into a contract to purchase a property as an inducement or to facilitate the property owner's purchase of another property, the purchase or sale of which will generate a commission or fee to the licensee. 3. When a licensee enters into a contract to purchase a property from an owner but continues to market that property on behalf of the owner under an existing listing contract." Having said this, the commission position goes on to say: "If the listing licensee or broker desires to acquire a listed property solely for personal use or future resale and not as an inducement to the owner, the licensee or broker is advised to (1) clearly sever their agency or listing relationship in writing; (2) renounce the right to any commission, fee or compensation in conjunction with acquisition of the listed property; and, (3) advise the owner to seek other assistance, representation or legal advice." In English, this second part says that although properties bought for true investment purposes do not require the use of the buyout addendum, the commission would prefer if you adopted some of the provisions of it and put some distance between you and the seller, such as not making a commission and severing the listing contract.

A lease that goes from month to month is known as: A: a life estate B: an estate at will C: an estate from period to period D: a fee simple estate

C: an estate from period to period Explanation: An estate from period to period is an interest in a leased property that goes from period to period, be it week to week, month to month, or year to year

The market value of a parcel of real estate is: A: the amount of money paid for the property B: an estimate of its future benefits C: an estimate of the most probable price it should sell for D: an estimate of its value without improvements

C: an estimate of the most probable price it should sell for Explanation: Market Value: Market Value is the present worth of one commodity to draw on the open market. The original cost of an item has no relevance to its value. Cost is defined as the actual dollars spent to produce an asset. Market price is the actual selling price of the property. Market value, cost, and market price could be the same, but they seldom are. For example, using the market data approach, an appraiser has determined that the market value of a property is $175,000. But under the cost approach, it would cost $190,000 to rebuild the property. The property sold for $200,000 which makes the price $200,000, because that is what somebody is willing to pay. The appraiser is hired to determine the market value for the property, not the price of the property.

An oral contract in which the parties state the contract's terms and express their intentions in words is known as: A: an executory contract B: an executed contract C: an express contract D: unilateral contract

C: an express contract Explanation Think of EXPRESSING yourself with an express contract, in which the contract terms are expressed to one another in words.

The broker must keep funds received on behalf of others in: A: a safe B: the general business account C: an identified trust account separate from the broker's other funds D: an account that provides the best interest

C: an identified trust account separate from the broker's other funds Explanation: Funds received on behalf of others must be held in an identified trust account separate from the brokers other funds. (REM 13-6)

If an Asian family is looking for a home, you must assume they would want a home in: A: a predominantly Asian community B: a good neighborhood C: any neighborhood D: a predominantly black neighborhood

C: any neighborhood Explanation: Stereotyping a buyer is not illegal however steering is illegal. A broker must assume that a buyer would want to live in any neighborhood.

A real estate appraiser means: A: a realtor providing a market opinion B: an inspector who evaluates the soundness of the property C: any person who provides for a fee or a salary an estimate of the nature, quality, value, or utility of an interest in, or aspect of, identified real estate and includes one who estimates value and who possesses the necessary qualifications D: the loan originator who determines the value of the property

C: any person who provides for a fee or a salary an estimate of the nature, quality, value, or utility of an interest in, or aspect of, identified real estate and includes one who estimates value and who possesses the necessary qualifications

On contracts to purchase land, crops that are growing in the field: A: automatically go with the land as part of the sales price B: are harvested by the seller, even if the property has closed C: are negotiated as part of the contract D: always go the buyer

C: are negotiated as part of the contract Explanation: Crops that are fruits of industry, i.e., they require cultivation, can always be a negotiable item; fruits of nature (think apple tree) usually go with the land.

In a new loan closing, sometimes a lender may make some of the payouts, such as recording fees, survey and reserve taxes in order to protect its interest as the holder of the 1st lien. The net loan proceeds are entered on the settlement worksheet: A: as a debit to the broker, single entry B: as a credit to the broker, single entry C: as a debit to the buyer, credit to the broker D: as a credit to the buyer, debit to the broker

C: as a debit to the buyer, credit to the broker

After a failed contract, the earnest money should be retained or returned: A: as selling broker and buyer broker agree B: as the listing and selling broker agree C: as the buyer and seller agree D: as listing broker sees fit

C: as the buyer and seller agree Explanation: After a failed contract, the return of the earnest money must be agreed upon by both parties.

The Colorado Real Estate Commission may take all of the following actions against a licensee EXCEPT: A: revoke or suspend a license B: fine a licensee C: assess actual damages D: assign mandated education for a licensee

C: assess actual damages Explanation: The commission may fine, censure or mandate education for licensee and suspend or revoke a license. Only a court can assess damages.

Each owner of a time-share estate therein shall: A: share responsibility in the title encumbrances B: be individually liable to the unit's association for all assessments and taxes C: be individually liable to the unit's association for all assessments and taxes but be responsible for only a fraction of such assessments and taxes D: purchase items of interest only for their private use in the unit

C: be individually liable to the unit's association for all assessments and taxes but be responsible for only a fraction of such assessments and taxes Explanation: Each owner is only responsible for a fraction of such assessment and taxes.

One of the required elements of a valid real estate contract is that it must: A: provide installment payments B: provide for possession of the property by the buyer C: be signed by the seller D: contain a metes and bounds description of the property

C: be signed by the seller

The owner of five parcels of land desires to obtain a loan and use all five parcels as security for the note. The mortgage he will be required to execute will be a: A: purchase money mortgage B: amortized mortgage C: blanket mortgage D: package mortgage

C: blanket mortgage Explanation: The blanket mortgage would encumber all five parcels, and in the event of default, all five would be foreclosed.

Mr. and Mrs. Seller give an exclusive 90-day listing to broker First. The broker shows the property to Mr. and Mrs. Buyer and he reveals their names to the Sellers. The buyers do not make an offer. The listing with broker First expires and the sellers sign a new exclusive right to sell 60 day listing with broker Second. Two weeks later the Buyers decide to purchase the property through broker First. If the Buyers purchase the property, who is entitled to a commission? A: broker First B: broker Second C: both brokers D: neither broker

C: both brokers Explanation: Broker First is entitled to the buying commission and broker Second is entitled to the listing commission.

If an owner refuses to pay the broker an earned commission, the broker may properly seek relief by: A: filing a mechanic's lien B: Bringing a formal complaint with the division of real estate C: bringing court action D: bringing a quiet title action against the seller

C: bringing court action Explanation: The broker must sue the seller for his/her commission. The broker cannot file a mechanic's lien, the CREC doesn't adjudicate commission complaints period, and it's against the law to cloud the seller's title.

Deposit money received by a licensee is turned over to the: A: seller of the property B: Real Estate Commission C: broker to deposit in his trust fund D: seller's attorney

C: broker to deposit in his trust fund Explanation: All earnest money must be deposited in the employing brokers trust account within three business days after acceptance of the contract, unless the buyer and seller instructed the broker, in writing, to do something different.

Escrows for sales transactions are opened for the protection of the: A: broker B: title company C: buyer and seller D: mortgagee

C: buyer and seller Explanation: Escrowing a transaction protects the buyer and the seller until the transaction is perfected.

What qualifies as "Good Funds"? A: credit union check B: title company account check C: cashier's check D: cash

C: cashier's check Explanation: From the Contract to Buy/Sell Real Estate: Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, must be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds).

Which of these qualifies as "Good Funds": A: credit union check B: title company account check C: cashier's check D: cash

C: cashier's check Explanation: From the Contract to Buy/Sell Real Estate: Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, must be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds).

Good funds would be: A: what the seller receives as net proceeds B: the buyer's loan amount for the closing C: cashier's checks, certified checks, or wire transfers D: money in an offshore account which is untraceable

C: cashier's checks, certified checks, or wire transfers Explanation: From the Contract to Buy and Sell (Purchase Contract) Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, shall be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds). This is also covered in Real Estate Commission Rule E-36: E-36. Good funds at closing Pursuant to 38-35-125, a real estate licensee who provides closing services shall not disburse funds or instruct an agent to disburse funds until those funds have been received and are either: (1) available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited or (2) available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Such agreement with a financial institution must be for the benefit of the licensee providing the closing service. If the agreement contains contingencies or reservations no disbursements can be made until these are satisfied.

When a contract is rejected by the Seller, the seller should: A: not return the contract B: write "rejected" across the front of the contract C: check the appropriate box and initial on the indicated line D: indicate a rejection on the appropriate box and complete a counteroffer

C: check the appropriate box and initial on the indicated line Explanation: They should not sign the contract. Instead there is a check box to indicate if the offer is being rejected or countered. The seller intials in the appropriate area.

When a seller decides to submit a counterproposal in response to a contract to buy and sell, the seller: A: checks the counter box, signs both the original contract and the counterproposal B: checks the rejected box, initials the contract and signs the counterproposal C: checks the countered box, initials the original contract and signs the counterproposal D: carefully signs and submits only the counterproposal

C: checks the countered box, initials the original contract and signs the counterproposal

A metes and bounds description must: A: cover an area larger than ten acres B: be in areas not covered by the rectangular survey system C: commence and finish at the P.O.B. D: always use north as a basis for directions

C: commence and finish at the P.O.B. Explanation: Metes and Bounds descriptions always commence and finish at a P.O.B. (point of beginning).

The illegal act of a real estate broker who places his client's or customer's funds with his own funds is known as: A: panic selling B: redlining C: commingling D: blockbusting

C: commingling Explanation: Commingling, or mixing funds, is ILLEGAL and brokers who commingle funds can be prosecuted. Each of the other terms listed here fall under the realm of Fair Housing violations.

A person who owns a fee simple interest, in a unit, in a multi-unit building together with a specified undivided percentage of all common elements would be the owner of a: A:cooperative B: share in a real estate investment trust C: condominium D: syndicated venture

C: condominium Explanation: A fee simple interest held in severalty with an individual interest in common areas is a condominium, regardless of the purpose of the use.

An unlicensed personal assistant may: A: create and get signatures on contracts B: share commission with licensee C: conduct an open house D: distribute copies of sales literature they wrote

C: conduct an open house Explanation: Unlicensed assistants may not perform licensed activities such as independently drafting legal documents, or distributing information on listed properties other than those prepared by a broker. They may not share commissions. On the other hand, they may: 1. Perform clerical duties for a broker which may include the gathering of information for a listing; 2. Provide access to a property with the seller's permission and hand out preprinted, objective information, so long as no negotiating, offering, selling or contracting is involved 3. Distribute preprinted, objective information at an open house, so long as no negotiating, offering, selling or contracting is involved; 4. Distribute information on listed properties when such information is prepared by a broker; 5. Deliver paperwork to other brokers; 6. Deliver paperwork to sellers or purchasers, if such paperwork has already been reviewed by a broker; 7. Deliver paperwork requiring signatures in regard to financing documents that are prepared by lending institutions; and 8. Prepare market analyses for sellers or buyers on behalf of a broker, but disclosure of the name of the preparer must be given, and it must be submitted by the broker.

On a service property, (i.e. church, school), which approach to value is most reliable? A: income approach B: sales comparison approach C: cost approach D: gross multiplier

C: cost approach

A final balance due from buyer is entered on the settlement sheet as: A: single entry debit buyer B: debit buyer, credit broker C: credit buyer, debit broker D: single entry credit buyer

C: credit buyer, debit broker

In a real estate agency relationship, the third party who is entitled to honesty and fair dealing is the: A: client B: principal C: customer D: all of the above

C: customer Explanation: The customer is the third party in the transaction.

Under the approved listing agreement, the broker is responsible for: A: all damage occurring to the premises B: maintenance of the premises C: damage caused by the broker's negligence D: only punitive damages caused by broker's negligence

C: damage caused by the broker's negligence Explanation: If the broker causes any damage to the property he/she are responsible.

Lender title insurance is shown on the settlement sheet as: A: debit seller, credit buyer B: debit seller, credit broker C: debit buyer, credit broker D: debit buyer, credit seller

C: debit buyer, credit broker

Interest charged on amortized loans: A: is normally paid in advance as evidenced at closing B: is adversely affected by the supply of loan funds C: declines in ratio directly proportionate to the declining loan balance D: may be augmented by mortgage discount points to increase the mortgagee's yield

C: declines in ratio directly proportionate to the declining loan balance Explanation: The interest is computed on the declining loan balance. As debt goes down, so does the interest.

Broker attends client closing. What must he/she do with signed closing documents? A: deliver to client within 2 business days B: deliver to title/closing company C: deliver immediately to Employing Broker D: deliver to Managing Broker within 3 business days

C: deliver immediately to Employing Broker Explanation: Clients AND employing brokers are to recieve closing doucments immediately. More info: Rule E-5. Closing responsibility; closing statement distribution. Pursuant to 12-61-113 (1)(h), at time of closing, the individual licensee who has established a brokerage relationship with the buyer or seller or who works with the buyer or seller as a customer, either personally or on behalf of an employing broker, shall be responsible for the proper closing of the transaction and shall provide, sign and be responsible for an accurate, complete and detailed closing statement as it applies to the party with whom the brokerage relationship has been established. If signed by an employed licensee, closing statements shall be delivered to the employing broker immediately following closing... Rule E-4. Document Preparation and Duplicates. ... A real estate broker shall immediately deliver a duplicate of the original of any instrument (except deeds, notes and trust deeds or mortgages, prepared by and for the benefit of third party lenders) to all parties executing the same when such instrument has been prepared by the broker or the broker's employed licensee or closing entity and relates to the employment or engagement of the broker or pertains to the consummation of the leasing, purchase, sale or exchange of real property in which the broker may participate as a broker...

Broker attends client closing. What must he/she do with signed closing documents? A: deliver to client within 2 business days B: deliver to title/closing company C: deliver immediately to Employing Broker D: deliver to Managing Broker within 3 business days

C: deliver immediately to Employing Broker Explanation: Clients AND employing brokers are to recieve closing documents immediately More info: Rule E-5. Closing responsibility; closing statement distribution. Pursuant to 12-61-113 (1)(h), at time of closing, the individual licensee who has established a brokerage relationship with the buyer or seller or who works with the buyer or seller as a customer, either personally or on behalf of an employing broker, shall be responsible for the proper closing of the transaction and shall provide, sign and be responsible for an accurate, complete and detailed closing statement as it applies to the party with whom the brokerage relationship has been established. If signed by an employed licensee, closing statements shall be delivered to the employing broker immediately following closing... Rule E-4. Document Preparation and Duplicates. ... A real estate broker shall immediately deliver a duplicate of the original of any instrument (except deeds, notes and trust deeds or mortgages, prepared by and for the benefit of third party lenders) to all parties executing the same when such instrument has been prepared by the broker or the broker's employed licensee or closing entity and relates to the employment or engagement of the broker or pertains to the consummation of the leasing, purchase, sale or exchange of real property in which the broker may participate as a broker...

The money that the agent receives from the buyer as escrow deposit should be: A: given to the seller B: deposited in the agent's account C: deposited in the agency trust account D: held by the agent until closing of title

C: deposited in the agency trust account Explanation: A check for the earnest money should either accompany the offer until accepted or be delivered prior to expiration of the Alternative Earnest Money Deadline. Most often, a buyer's agent holding the deposit forwards a copy of the earnest money check with the offer to prove s/he has it, and then specifies a date in the Alternative Earnest Money Deadline when the actual check will be delivered after contract acceptance. If the deposit was tendered with the contract; it must be deposited no later than 3 business days after notice of acceptance of the contract. From the real estate manual: Except as provided in Rule E-l (o), all money belonging to others which is received by a broker as a property manager shall be deposited in such broker's escrow or trust account not later than five business days following receipt. All other money belonging to others which is received by a broker shall be deposited in such broker's escrow or trust account not later than the third business day following receipt.

Keeping track of earnest money funds received in the course of a transaction is usually: A: the responsibility of the listing agent B: the responsibility of the selling agent C: determined by mutual agreement in accordance with the contract D: the responsibility of the listing broker

C: determined by mutual agreement in accordance with the contract Explanation: The contract to purchase stipulates who will hold the earnest money.

When improvements reach the age that the income from the property does not pay a reasonable return on the land value, the property has reached the end of its: A: amortization B: highest and best use C: economic life D: lease value

C: economic life Explanation: Economic life is the period over which buildings may be profitably utilized.

In the cost approach to estimating value, the type of depreciation that is always considered incurable is: A: physical deterioration B: functional obsolescence C: economic obsolescence D: market obsolescence

C: economic obsolescence Explanation: Economic obsolescence also referred to as "external obsolescence" is always considered to be incurable. It basically refers to is the loss in value resulting from influences external to the property itself. External conditions causing this may be international, national, industry-based, or local in origin. Various external factors affect potential economic returns, thus having a direct impact on the market value of an asset or property. More info: In real estate appraisal, the Cost Approach is one of three basic valuation methods. The others are market, or sale comparison, and income. The Cost Approach is based on the principle of substitution which asserts that no sane buyer will pay more for a property than that amount for which the land could be acquired and upon which similar improvements can be constructed. It is a method of appraising property based on the depreciated reproduction or replacement cost (new) of improvements, plus the market value of the land. Although there are several approaches available to determine how much it will cost to construct the improvements, only a higher authority than us can create land. Therefore, an appraiser will estimate the cost of constructing improvements using cost-based approaches and add to it the market value of the land using a sales comparison approach.

If property decreased in value as a result of an interstate being built in the backyard, this loss of value would be termed: A: physical deterioration B: functional obsolescence C: economic obsolescence D: zoning obsolescence

C: economic obsolescence Explanation: It is something beyond the control of the property owner therefore it is economic obsolescence

An attorney-in-fact, executing the powers given him under the provisions of a power of attorney, has the right to do all of the following except: A: sign his principal's name B: collect money for his principal C: encumber the principal's property, with the attorney-in-fact as the beneficiary, without the knowledge of the principal D: change the date of possession with the agreement of the other party

C: encumber the principal's property, with the attorney-in-fact as the beneficiary, without the knowledge of the principal Explanation: Such action would constitute a breach of fiduciary relationship between principal and attorney-in-fact.

When private property is abandoned, the state may acquire title to that property under the right of: A: taxation B: eminent domain C: escheat D: suborgation

C: escheat

A licensed real estate broker engaging in short-term rentals should: A: not put deposits into their escrow accounts B: not combine short-term occupancy and lease agreements as a business practice C: escrow and account for funds coming into their possession D: commingle funds so as not to confuse the general public

C: escrow and account for funds coming into their possession Explanation: The funds need to be escrowed, because the broker is entrusted with the money of others.

Provisions of the Colorado Common Interest Ownership Act: A: provides a statutory right for an HOA homeowner's access to common community elements B: establishes a social media forum for HOA homeowner discussions C: establishes the right of an HOA to place a lien on a property for unpaid HOA dues and assessments

C: establishes the right of an HOA to place a lien on a property for unpaid HOA dues and assessments Explanation: When someone buys a house, condo, or townhome that is part of a community with an HOA, s/he will most likely pay monthly fees and assessments to the homeowners' association. Becoming delinquent in paying those fees and assessments, the homeowners' association will be able to get a lien on the home that could lead to a foreclosure. This right to lien is established in the Colorado Common Interest Ownership Act. The Colorado Common Interest Ownership Act ("CCIOA") is modeled on the Uniform Common Interest Ownership Act, some form of which has been enacted by more than 20 states. The super-lien provision, Colorado Revised Statutes §38-33.3-316 authorizes the existence of a lien on a unit for: "any assessment levied against that unit or fines imposed against its owner. Unless the declaration otherwise provides, fees, charges, late charges, attorney fees, fines and interest charged pursuant to section 38-33.3-302(1)(j), (1)(k) and (1)(.), 313(6) and 315(2), are enforceable as assessments under this article".

An agent who is an independent contractor, must make: A: estimated tax payments when there is extra money B: estimated tax withdrawals against their upcoming refund C: estimated tax payments every quarter D: at least $50,000 per year

C: estimated tax payments every quarter Explanation: Broker is not responsible for FICA, state or federal tax with holdings of independent contractors.

In Colorado, all of the following topics are regulated by Real Estate License Law or Real Estate Commission Rules except: A: qualifications of licensure B: record keeping C: ethical standards D: Commission-approved contracts

C: ethical standards Explanation: The real estate commission enforces laws, approves contracts and approves license applications. The National Association of Realtors (NAR) regulates ethics.

Every potential purchaser in Colorado must be given a copy of: A: the HUD booklet "Settlement Statements and You" B: the Real Estate Commission's audit report C: every document that they have signed D: the exclusive right-to-sell listing agreement

C: every document that they have signed Explanation: HUD booklets are only given to buyers that are securing a loan. Buyers do not sign exclusive-right-to-sell listing contracts.

A seller listed her home with a broker. After a few months, the seller found a buyer, and the sale closed. The seller was not obligated to pay a commission to the broker. This listing was MOST likely: A: net listing B: buyer agency agreement C: exclusive agency listing D: exclusive right to sell listing

C: exclusive agency listing Explanation: Do not confuse an exclusive agency agreement with an exclusive right to sell. An exclusive agency means that if the seller finds a buyer independent of their listing broker - the seller owes no commission. An exclusive right means that the listing agent is owed a commission regardless of who found a buyer.

The listing contract that provides the most protection for the broker is a(n): A: exclusive brokerage listing B: open listing C: exclusive right-to-sell listing D: net listing

C: exclusive right-to-sell listing Explanation: An exclusive right-to-sell listing contract provides the most protection for the broker. This contract engages the broker and guarantees a commission regardless of whether the seller or the broker initially found the buyer.

Where both parties have fulfilled their agreements, the contract is known to be: A: voidable B: canceled C: executed D: invalid

C: executed Explanation: Executed means that both parties have fulfilled their agreements.

Ranges of land are strips of land six miles wide that: A: run east and west B: are protected in the Range Land Act C: extend north and south D: run around the perimeter of the property

C: extend north and south Explanation: Range strips run north and south, township tiers run east and west.

A buyer and seller have written two contracts for one property: a higher contract to submit for a larger loan request and another with a lower actual purchase price because they know the seller is anxious to sell quickly. Which correctly describes this arrangement? A: risky but acceptable because the lender will have the right to appraise and inspect the property B: good business since the parties agree and the loan can only be made if the property appraises at the higher value C: fraudulent dual contracting D: acceptable for conventional loans, but not for VA or FHA loans

C: fraudulent dual contracting Explanation: The buyer and seller are committing fraud and if a broker knew of the arrangement, he or she is also committing fraud and risks disciplinary action as well.

A seller hired broker N under the terms of an open listing. While that listing was still in effect, the seller without informing broker N, hired broker K under an exclusive right-to-sell listing for the same property. If broker N produces a buyer for the property whose offer the seller accepts, then the seller must pay a: A: full commission only to broker N B: full commission only to broker K C: full commission to both broker N and broker K D: half commission to both broker N and broker K

C: full commission to both broker N and broker K Explanation: In an open listing whomever sells the property receives the commission, this means N by bringing a buyer is entitled to a commission. In an exclusive right to sell listing, no matter who sells the property, the broker who listed the property will receive a commission. This means K will receive a commission. Therefore the seller would be responsible to pay both brokers a commission.

Broker John Steele listed the Kanter's property for sale under an exclusive right-to-sell agreement. Today, one of the Steele's salespeople, Michael Todd, obtained the signatures of John and Joyce Peters on a sales contract to purchase the Kanter home. The salesperson also accepted the Peter's certified earnest money check for 10% of the purchase price.Todd should take the earnest money check and: A: give it to the Kanter's B: hold it until closing C: give it to Steele for deposit in broker's trust account D: deposit it in Todd's earnest money account

C: give it to Steele for deposit in broker's trust account Explanation: The listing broker must deposit it in his trust account.

A lease that provides for specific increases of rent at regular intervals is called: A: fixed lease B: variable lease C: graduated lease D: percentage lease

C: graduated lease

At time of closing, a lender is allowed to collect a loan origination fee that: A: does not exceed 1% B: does not exceed the usury rate C: has been agreed to by the buyer in the contract D: does not exceed 2%

C: has been agreed to by the buyer in the contract Explanation: While many lenders charge a 1% loan origination fee, it is negotiated between the lender and the buyer and referenced in the contract.

Starting out you might prefer a lower split versus keeping 100% of your commission for: A: more training and support given to licensees on higher splits B: lower splits that typically include higher monthly office fees C: higher splits that typically include higher monthly office fees D: less training and support that is given to licensees on lower splits

C: higher splits that typically include higher monthly office fees Explanation: Higher splits typically include higher monthly office fees and when first starting out you need support and supervision to get your career moving.

In order for each beneficiary to be covered in case of bank failure, the broker must: A: open a new account for each earnest money check B: deposit each check into a working account C: identify the broker's "escrow or trust" account including licensed name, broker's name, type of account D: the trust account must be with a title company

C: identify the broker's "escrow or trust" account including licensed name, broker's name, type of account Explanation: Identify the brokers "escrow" or "trust" account including licensed name, brokers name and type of account.

Security deposits may be retained by the lessor: A: never B: only if a tenancy at will exists C: if notice is given to the tenant in the lease, rental agreement, or separate written notice D: whenever a period-to-period lease exists

C: if notice is given to the tenant in the lease, rental agreement, or separate written notice Explanation: Security deposits may be retained by the lessor, if notice is given to the tenant in the lease, rental agreement, or separate written notice.

The Commission Position on earnest money deposits indicates: A: the broker cannot release earnest money funds from the trust account without written releases from all parties B: in the event of a dispute, the broker must decide to the "best of their ability" who is deserving of the earnest money and release it to that party C: if the transaction fails and there is no dispute over who is to receive the earnest money the broker should release the funds immediately

C: if the transaction fails and there is no dispute over who is to receive the earnest money the broker should release the funds immediately Explanation: Commission Position 6: " If there is no dispute, the broker should disburse to the appropriate party immediately."

Commission Position 6 on the release of earnest money deposits indicates: A: the broker cannot release earnest money funds from the trust account without written releases from all parties B: in the event of a dispute, the broker must decide to the "best of their ability" who is deserving of the earnest money and release it to that party C: if the transaction fails and there is no dispute over who is to receive the earnest money the broker should release the funds immediately D: since the Seller is the Listing Broker's client - the Seller gets to decide

C: if the transaction fails and there is no dispute over who is to receive the earnest money the broker should release the funds immediately Explanation: Commission Position 6: "If there is no dispute, the broker should disburse to the appropriate party immediately."

When must a listing broker disclose to a potential buyer the broker's working relationship with the seller? A: in writing before any conversation B: orally before writing a contract and in writing before closing C: in writing before receiving or eliciting confidential information D: in writing at the same time a purchase contract is signed

C: in writing before receiving or eliciting confidential information

June is a listing broker in Colorado. When and how must she disclose to a potential buyer that she has a working relationship with the seller? A: in writing, before any conversation or discussion B: in writing, at the time the contract to buy and sell is signed C: in writing, before providing specific real estate services D: orally, before writing the contract and in writing before closing

C: in writing, before providing specific real estate services Explanation: The real estate commission allows conversation and discussion recognizing it is necessary to build rapport, but the law requires disclosure in writing at the earliest practical moment. June must disclose an agency relationship before she receives any confidential information from the prospective buyer.

A house, which is located at the end of runway for a large airport, suffers from: A: incurable location obsolescence B: curable economic obsolescence C: incurable economic obsolescence D: incurable functional obsolescence

C: incurable economic obsolescence Explanation: Economic obsolescence is loss in value due to conditions in the area of the property. It is incurable.

Agency means the broker owes to their clients certain duties. Which of the following is NOT TRUE: A: loyalty B: honesty C: indemnification D: accounting

C: indemnification

Licensee gets asked by out-of-state party to manage 15 rental units. Broker should: A: put money in sales escrow account B: set up escrow account in own name C: inform employing broker to create Property Management Contract and set up proper escrow account D: inform employing broker and set up own escrow account

C: inform employing broker to create Property Management Contract and set up proper escrow account Explanation: Section 12-61-103 (10) requires all business to be conducted only in the licensed name of the employing broker. Within a brokerage, only the employing broker or an attorney for the brokerage can create contracts from scratch.

Licensee gets asked by out-of-state party to manage 15 rental units. Broker should: A: put money in sales escrow account B: set up escrow account in own name C: inform employing broker to create Property Management Contract and set up proper escrow account D: inform employing broker and set up own escrow account

C: inform employing broker to create Property Management Contract and set up proper escrow account Explanation: Section 12-61-103 (10) requires all business to be conducted only in the licensed name of the employing broker. Within a brokerage, only the employing broker or an attorney for the brokerage can create contracts from scratch.

A licensee, upon discovering a latent defect in a building, should discuss the problem with the seller and: A: inform the seller that the defect must be repaired B: inform the seller that the defect exists C: inform the seller and any prospective buyer of the defect D: inform the building inspector of the latent defect

C: inform the seller and any prospective buyer of the defect Explanation: Licensee's are required to be honest. A defect in the condition of the property is a material fact and must be disclosed to all parties.

A broker is attending a closing. He notices a mistake on the settlement sheet, the purchaser rather than the seller, has been charged for the title insurance. He should: A: do nothing as he works for the buyer B: suggest that changes be made on the settlement statement and initialed by both parties C: insist on a new settlement statement D: insist that the seller reimburse the buyer for the title insurance

C: insist on a new settlement statement Explanation: A new settlement sheet is the proper way to correct an error.

Who of the following is exempt from real estate license law? A: attorney at law collecting a five percent commission for helping market a property B: inactive licensee assisting a friend in filling out a purchase order C: investor who owns 12 investment properties and sells one to an owner-occupant D: right of way specialist accepting a commission referral for finding investment acreage for a friend

C: investor who owns 12 investment properties and sells one to an owner-occupant

The Interstate Land Sales Full Disclosure Act stipulates: A: a prospectus must be filed with OILSR B: it requires developments to be registered if they are selling less than 100 lots or condominiums C: it requires developments to be registered if they are selling more than 100 lots or condominiums D: prospective purchasers must inspect property prior to purchase to prevent fraud

C: it requires developments to be registered if they are selling more than 100 lots or condominiums Explanation: The Interstate Land Sales Full Disclosure Act of 1968 (ILSFDA or ILSA or "Act") was an act of Congress passed in 1968 to facilitate regulation of interstate land sales, to protect consumers from fraud and abuse in the sale or lease of land. The Act was patterned after the Securities Act of 1933 and required land developers to register subdivisions of (currently 100 or more) non-exempt lots or condominium units. Originally, the filings were to be with the United States Department of Housing and Urban Development. Currently, the responsibility for administering the Act [1] and its regulations [2] is with the Bureau of Consumer Financial Protection (CFPB). A regulated developer is to provide each purchaser with a disclosure document called a Property Report. The Property Report contains relevant information about the subdivision and must be delivered to each purchaser before the signing of the contract or agreement and gives the purchaser at a minimum a 7-day period to cancel the purchase agreement.

RESPA applies to the activities of: A: real estate brokers selling commercial property B: security salespeople when selling interests in limited partnerships C: lenders financing the purchase of a borrower's residence D: lenders financing the purchase of a commercial property

C: lenders financing the purchase of a borrower's residence Explanation: RESPA applies to the purchase of land and a dwelling.

The owner of real estate who leases it to another is called a: A: vendor B: lessee C: lessor D: grantor

C: lessor Explanation: The lessor is the landlord; the lessee is the tenant.

The amount of a loan expressed as a percentage of the value of the real estate offered as security is the: A: damages B: amortization C: loan-to-value ratio D: none of the above

C: loan-to-value ratio Explanation: The loan to value ratio is the percent of the sales price that will be loaned to the borrower. A house with a 100,000 sales price, where the borrower obtains an 80,000 loan, would have an 80% loan-to-value ratio.

Which of the following is NOT an example of a marketable title? A: Title Insurance B: Abstract of Title C: Location Survey D: Certificate of Title

C: location survey Explanation: All of the others except location survey show evidence of a marketable title.

In a recorded plat, the lots are described by: A: distances and courses B: reference to townships C: lot and block number D: none of the above

C: lot and block number Explanation: Plats reference lot and block numbers.

An appraiser uses several approaches in estimating the value of a parcel of real estate. These consist of replacement cost and: A: capitalization process and depreciated cost B: income and highest and best use C: market comparison data and income approaches D: gross rent multiplier and alienation

C: market comparison data and income approaches Explanation: The 3 approaches to valuation are the replacement cost approach, the market data approach and the income approach.

Building ordinances may specify and regulate: A: use of land B: zoning C: materials used in plumbing D: easements

C: materials used in plumbing

Building Ordinances may specify & regulate: A: use of land B: zoning C: materials used in plumbing D: easements

C: materials used in plumbing Explanation: Building ordinances, also called building codes, are a set of standards established and enforced by local government that specify the minimum standards for construction. The main purpose of building codes are to protect public health, safety and general welfare as they relate to the construction and occupancy of buildings and structures.

The owner of subsurface mineral rights: A: must pay royalties to surface owner B: has no rights to enter and use surface of property C: may have the right to enter and use property D: must go to court to gain access to the rights

C: may have the right to enter and use property Explanation: As per the Contract to Buy and Sell real estate: "The surface estate may be owned separately from the underlying mineral estate, and transfer of the surface estate does not necessarily include transfer of the mineral rights or water rights. Third parties may hold interests in oil, gas, other minerals, geothermal energy or water on or under the Property, which interests may give them rights to enter and use the Property." Unless the deed transferring the mineral rights indicated a royalty, the owner is under no obligation to pay royalties to the owner of the surface rights. Rights are owned and may not require judicial approval to utilize.

New home builders: A: must advertise their homes through the MLS B: must be members of the BRC C: might use non-commission approved sales contracts D: must use commissioned approved forms

C: might use non-commission approved sales contracts Explanation: Each builder has his or her own type of purchase and sale contracts.

On what time basis must trust accounts be reconciled: A: daily B: weekly C: monthly D: annually

C: monthly Explanation: At least Monthly. From the real estate manual: The purpose of reconciliation is to verify that the records for the account are in balance per the escrow accounting equation. Rule E-1(p)(3) requires the ending bank statement cash balance to be reconciled with the office journal and ledger account cards during any month when there has been escrow account activity

On what time basis must trust accounts be reconciled: A: daily B: weekly C: monthly D: annually

C: monthly Explanation: At least Monthly. From the real estate manual: The purpose of reconciliation is to verify that the records for the account are in balance per the escrow accounting equation. Rule E-1(p)(3) requires the ending bank statement cash balance to be reconciled with the office journal and ledger account cards during any month when there has been escrow account activity

Reconciliation refers to: A: getting back together with your significant other B: looking over account balances to be sure you are still operating at a positive cash flow C: monthly review and comparison of the bank statement with your records D: what is turned over to the bookkeepers for safe keeping

C: monthly review and comparison of the bank statement with your records Explanation: Reconciliation is required monthly to balance the escrow account against individual accounts.

All of the following must be disclosed to a tenant by a property manager EXCEPT: A: in writing that the property manager works for the landlord B: that the tenant is not "vicariously liable" for acts of the agent C: name and address of the landlord D: adverse material facts about the property known by the agent

C: name and address of the landlord Explanation: From the Brokerage Disclosure to Tenant: Landlord's Agent: A landlord's agent works solely on behalf of the landlord to promote the interests of the landlord with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the landlord. The landlord's agent must disclose to potential tenants all adverse material facts actually known by the landlord's agent about the property. A separate written listing agreement is required which sets forth the duties and obligations of the broker and the landlord. and Tenant understands that Tenant shall not be liable for Broker's acts or omissions that have not been approved, directed, or ratified by Tenant - this is vicarious liability.

A transaction broker when handling both sides of the transaction has a fiduciary responsibility to: A: the buyer B: the seller C: neither the buyer nor the seller D: both the buyer and the seller

C: neither the buyer nor the seller

A tenant leases property and agrees to pay taxes and insurance. This is a: A: gross lease B: variable lease C: net lease D: ground lease

C: net lease

A lease in which the tenant pays rent plus maintenance and property charges is a: A: gross lease B: fee simple estate C: net lease D: percentage lease

C: net lease Explanation: A lease in which the tenant pays rent plus maintenance and property charges is a net lease.

A real estate agent does an open house for a fellow colleague. The listing is not hers. The potential buyers ask her questions about the property and the questions she does not know she says she will get back to them. A: implied agency was created B: express agency was created C: no agency was created D: she is now their agent

C: no agency was created

The minimum amount of time you must give a seller to respond to your offer is: A: 24 hours B: 8 hours C: no minimum D: 24 hours when in town, 48 hours if out of town

C: no minimum Explanation: The amount of time a buyer will allow a seller to respond to the offer is up to the buyer, and should be stated in date and time in the contract. There is no minimum or maximum.

A tenant's, written, estate for years lease will expire on May 1. In order to obtain possession on May 1, the landlord must give the tenant: A: 30 days' notice B: 60 days' notice C: no notice D: notice on April 30

C: no notice Explanation: An estate for years lease requires no notice for termination by either the landlord or the tenant.

The numbering of sections in a township begins in the: A: northwest corner section and runs easterly B: northwest corner section and runs southerly C: northeast corner section and runs westerly D: southeast corner section and runs northerly

C: northeast corner section and runs westerly Explanation: Townships are numbered from the northeast quarter- remember we started surveying from the earlier part of the country and worked our way west.

The numbering of sections in a township begins in the: A: northwest corner section and runs easterly B: northwest corner section and runs southerly C: northeast corner section and runs westerly D: southeast corner section and runs northerly

C: northeast corner section and runs westerly Explanation: Townships are numbered from the northeast quarter- remember we started surveying from the earlier part of the country and worked our way west.

The numbering of sections in a township begins in the: A: northwest corner section and runs easterly B: northwest corner section and runs southerly C: northeast corner section and runs westerly D: southeast corner section and runs northerly

C: northeast corner section and runs westerly Explanation: Townships are numbered from the northeast quarter- remember we started surveying from the northeastern part of the country (the state of Ohio) and worked our way west and sou

If a Colorado real estate licensee's license is revoked, his employing broker's license, if implicated is: A: automatically revoked B: automatically suspended C: not suspended or revoked until a hearing is held

C: not suspended or revoked until a hearing is held Explanation: Licenses are never automatically revoked or suspended without a hearing.

Implied agency (also known as Implication) arises when: A: an agent accepts an oral listing B: a principal accepts an oral listing C: one person behaves toward another in a way that suggests or implies that he is acting as that other person's agent

C: one person behaves toward another in a way that suggests or implies that he is acting as that other person's agent Explanation: An agency may be created by implication (implied agency) when one person behaves toward another in a way that suggests or implies that he is acting as that other person's agent. If the other person reasonably believes that there is an agency relationship, and the supposed agent fails to correct that impression, he may owe the other person agency duties. More info: Under general agency law, an agency relationship may be formed in four ways: by express agreement, by ratification, by estoppel, or by implication. Most agencies are created by express agreement: the principal appoints someone to act as her agent, and the agent accepts the appointment. An agency is created by ratification when the principal gives approval after the fact to acts performed by another. Under the legal doctrine of estoppel, a person is not allowed to take a position that contradicts her previous conduct, if someone else has relied on the previous conduct. An agency can be created by estoppel when it would be unfair to a third party to deny the agent's authority, because the principal has allowed the third party to believe there was an agency relationship. An agency may be created by implication when one person behaves toward another in a way that suggests or implies that he is acting as that other person's agent. If the other person reasonably believes that there is an agency relationship, and the supposed agent fails to correct that impression, he may owe the other person agency duties.

The best definition of a voidable contract is: A: one that is no contract at all B: one that appears valid on its face and cannot be voided by either party C: one that appears valid on its face but can be voided by damaged party D: one that is missing just one of the elements of a contract

C: one that appears valid on its face but can be voided by damaged party

Title insurance fees or premiums are paid: A: by the buyer B: by the seller C: only once, and the policy continues in force without further payment D: by the lender

C: only once, and the policy continues in force without further payment Explanation: Unlike other insurance, title insurance is paid only once and the policy continues in force without further payment.

Deferred maintenance is best represented by: A: pink carpeting in a living room B: the need for a larger water heater due to a larger sized family C: peeling paint on the exterior of a house D: a gravel driveway

C: peeling paint on the exterior of a house Explanation: Deferred maintenance refers to needed repairs that are presently hurting value. Deferred maintenance allowed to go too long is called rehabilitation.

If the buyer does not provide written notice of any unsatisfactory conditions by the date specified under the inspection clause, the: A: contract can terminate B: seller can sell to another buyer C: physical condition of the property and inclusions shall be deemed to be satisfactory to the buyer D: listing agent should re-list the home

C: physical condition of the property and inclusions shall be deemed to be satisfactory to the buyer Explanation: If the buyer does not provide written notice of unacceptable conditions, then the property is deemed satisfactory. The Buyer solely determines if the condition of a property is satisfactory or not. Although the Buyers normally will list items they wish the Seller to address; they are not required to do so. The Buyer can simply terminate the contract should they so desire. Should the Buyer submit items to correct to the Seller, the Seller has until a resolution deadline to come to a negotiated agreement regarding the items with the Buyer. If a satisfactory agreement is not reached, the contract will terminate automatically on the deadline unless the Buyer withdraws the objections.

The law of agency governs: A: the buyer-seller relationship B: the FDIC and lenders C: principal-agent relationship D: the Real Estate Commission

C: principal-agent relationship Explanation: The law of agency governs the relationship between the agent and the principal.

The Commission's intent in promulgating Rule E-13 (Sign Crossing Rule) was to: A: allow two agents to collect a commission on the same property B: assist brokers in obtaining more listings C: protect the owner from possible claims that two commissions are owed D: allow brokers to compete for existing listing contracts

C: protect the owner from possible claims that two commissions are owed Explanation: Only when an owner contacts and initiates the discussion may the licensee negotiate the terms upon which to take a future listing if the property is currently listed.

While showing properties, your buyer points out a house that she wants to see: A: since you have showed that property before you pull over immediately and take her in B: because it is not on the list for today's showings, you tell her it is under contract C: pull over and call the listing office to set up the showing ASAP D: keep on driving and pretend you didn't hear her

C: pull over and call the listing office to set up the showing ASAP Explanation: Even though you have been to the property before, you must call the listing office and set up the showing for that day.

A naturally occurring gas that is suspected of causing lung cancer is known as: A: lead based paint B: asbestos C: radon D: Polychlorinated biphenyls (PCBs)

C: radon Explanation: While each of these items are environmental hazards, radon is the radioactive, odorless, tasteless gas produced by the natural decay of other radioactive substances.

If your Contract to Buy and Sell does not need the Seller or Private Financing Section, you as broker may do all of the following except: A: cleanly crossing out the section B: putting n/a in all blank fields in the section C: remove the section in its entirety as it is not applicable D"remove the section text leaving the title and the words "omitted as not applicable"

C: remove the section in its entirety as it is not applicable Explanation: Whenever a section which is allowed to be omitted from any approved contract is omitted (such as the Seller Financing section of the Contract to Buy and Sell contact when the buyer is getting a new loan from a bank), you cannot remove it completely. You need to either: 1) cross it out cleanly such that someone can see what you are crossing out, 2) put n/a for "not applicable" in all the blank fields of the paragraph, or 3) if you are using a contract software package the software will remove the paragraph, but leave the title of the paragraph with the words "omitted as not applicable" next to it.

A property owner advertises property available for lease with a swimming pool. The property owner may: A: require the families to live in a specific area away from the pool B: refuse to rent to families with children C: require the parents to supervise their children when they are in the pool D: be required to hire a lifeguard

C: require the parents to supervise their children when they are in the pool

A remedy that puts the parties back in the positions they were prior to entering into a contract is: A: specific performance B: waiver C: rescission D: accord and satisfaction

C: rescission Explanation: A real estate contract may be rescinded at varying points during a transaction. Putting parties back into their original positions is rescission; the cancellation of a real estate contract between the buyer and seller. The act of rescinding a contract will "unwind" the transaction specified in the contract.

The return of the rights of the possession and quiet enjoyment to the lessor at the expiration of a lease is known as: A: recision B: revision C: reversion D: restoration

C: reversion Explanation: Reversion or a reversionary interest REVERT back to the lessor at the end of the lease. This also applies to life estates. In general a reversion is an interest in an estate that reverts to the grantor or his heirs at the end of a period

On a real estate closing transaction involving an Exclusive-Right-to-Sell listing, the commission would be a debit to the: A: buyer and a credit to the seller B: seller and a credit to the buyer C: seller D: buyer

C: seller Explanation: On a real estate closing the real estate commission is a debit to the seller.

Typical functions of a property manager include all of the following except: A: maintaining quality service with the lowest possible expenses B: generating the highest return for the owner C: selling the property at the highest price for the owner D: keeping the property in good repair

C: selling the property at the highest price for the owner Explanation: A property manager does not sell the property.

You are holding a rental deposit on behalf of an owner and tenant. The owner requests that his rental deposit be sent to him: A: send it immediately by certified mail B: it cannot be turned over to the owner of the property C: send it to the owner after notifying the tenants by certified mail D: send it to the tenant first and have him send it directly to the owner

C: send it to the owner after notifying the tenants by certified mail Explanation: Rental deposit money may not be removed from a trust account until the tenants have been notified of the withdraw and disposition of money. Tenants ALWAYS have a right to know who is holding their money, and how to contact that person.

Megan's Law requires: A: real estate brokers to disclose to buyers if a sex offender lives in the area B: real estate brokers to disclose to sellers if a sex offender lives in the area C: sex offenders to register with the local police department D: sellers to disclose to buyers if a sex offender lives in the area

C: sex offenders to register with the local police department Explanation: For a broker to disclose if a sex offender lives in the area would be to illegally stigmatize a property. The broker can provide to their clients the means (i.e., a phone number) to research this issue if it is important to clients to do so.

If buyer finds out the property on which they have a contract is in a Special Taxing District: A: buyer may not be released and is obligated to continue on with the contract B: seller should thank their lucky stars they found a buyer and volunteer any information C: should give written notice of unsatisfactory conditions to be released from the contract D: can wait until the day of closing before deciding to be released from the contract

C: should give written notice of unsatisfactory conditions to be released from the contract Explanation: If buyer finds out the property they have a contract on is in a Special Taxing District, they could give written notice of unsatisfactory conditions to be released from the contract.

One of the requirements of a valid deed is that the deed be: A: dated B: recorded C: signed by the grantor

C: signed by the grantor Explanation: Although it is recommended that a deed be recorded, in Colorado it is not required. The grantee protects his interest in the property by recording it - making the ownership transfer a matter of public record. Acknowledgement is also recommended, and usually required for it to be recorded. Required is: the signature of the grantor, words of conveyance (granting clause), that it be in writing, that the grantee is named, consideration (payment), a description of the ownership interests being conveyed, a legal desciption, delivery of the deed and acceptance by the grantee.

An owner has refinanced his primary residence and decided to take cash out of the loan to buy a fixer-upper. If the closing is scheduled for today (Monday) on the primary residence, How early can the owner close on the fixer upper? A: right after the closing B: since he will get a check and since that check needs to be cashed, the earliest he can go buy is Thursday C: since the right of rescission is 3 days, he will not get the check until 3 business days days after the closing which would be Friday D: since the right of rescission is 5 days, he will not get the check 5 days from the closing, the earliest he can buy is the following Monday

C: since the right of rescission is 3 days, he will not get the check until 3 business days days after the closing which would be Friday

There are three approaches to valuation, and all three should be used. Depending on the type of property being appraised however, one approach will have more weight and should afford greater authority. The comparison approach is given greater weight in the appraisal of: A: apartment property B: service property C: single-family dwellings D: industrial property

C: single-family dwellings Explanation: The comparison approach would be the most reliable method regardless of the type of property being appraised, because recent sales prices of similar type properties reflect the attitudes of buyers and sellers on the open market - an invaluable guide for any appraiser. However, when appraising something other than a residence, the appraiser very often is not able to find enough sales of similar properties to serve as reliable value indicators and he must then apply other techniques.

Whenever possible all three approaches to value are used. The comparison approach is given greater weight than the others are when appraising: A: apartment property B: service property C: single-family dwellings D: industrial property

C: single-family dwellings Explanation: The comparison of market data approach is most often used in appraising residential property, because of the widespread availability of acceptable comparables. The comparison approach loses its reliability when there are few comparable sales.

The Colorado law that requires real estate contracts to be in writing is called the: A: statute of estoppel B: statute of descent and distribution C: statute of frauds D: statute of limitations

C: statute of frauds Explanation: It is the statue of frauds that requires all contracts to be in writing.

A minority couple comes to an agent looking for a house. The agent knows of properties for which the couple qualify but avoids showing or mentioning these listings. Instead, the agent takes them to only properties in low-priced and integrated neighborhoods. This practice is known as: A: conciliation B: redlining C: steering D: blockbusting

C: steering Explanation: Steering is a practice in which agents guide prospective home buyers towards or away from certain neighborhoods based on their race. Steering is often divided into two broad classes of conduct; Advising customers to purchase homes in particular neighborhoods on the basis of race Failing, on the basis of race, to show, or to inform buyers of homes that meet their specifications

A home that was built over a cemetery or where a murder took place, is a example of: A: environmental hazards B: latent defects C: stigmatized properties D: conditions that must be disclosed

C: stigmatized properties Explanation: The Colorado Real Estate Commission's position on psychologically stigmatized properties is events that would cause this are NOT TO BE disclosed and agents are protected from legal actions resulting from nondisclosure. Stigmatized property is a controversial term used in the real estate business for a property which buyers or tenants may shun for reasons that are unrelated to its physical condition or features. These can include events invloving murder or suicide or AIDS in addition to a belief that a house may be haunted. Material facts such as the foundation is bad or the house tested high for Radon ARE required to be disclosed. Nondisclosure of Information Psychologically Impacting Real Property § 38-35.5-101, C.R.S. Circumstances psychologically impacting real property - no duty for broker or salesperson to disclose. (1) Facts or suspicions regarding circumstances occurring on a parcel of property which could psychologically impact or stigmatize such property are not material facts subject to a disclosure requirement in a real estate transaction. Such facts or suspicions include, but are not limited to, the following: (a) That an occupant of real property is, or was at any time suspected to be, infected or has been infected with human immunodeficiency virus (HIV) or diagnosed with acquired immune deficiency syndrome (AIDS), or any other disease which has been determined by medical evidence to be highly unlikely to be transmitted through the occupancy of a dwelling place; or (b) That the property was the site of a homicide or other felony or of a suicide. (2) No cause of action shall arise against a real estate broker or salesperson for failing to disclose such circumstance occurring on the property which might psychologically impact or stigmatize such property.

When the license of an employing broker is suspended or revoked, his/her licensees must: A: transfer existing contracts to a new employer B: continue listing and selling pending an appeal C: stop listing and selling D: obtain an independent broker's license

C: stop listing and selling Explanation: A licensee must be affiliated with an approved active broker to practice real estate. They will need to be hired by another Broker.

Tim has 13 months left on his lease when he receives notice of a job transfer. He transfers possession of his apartment to Brenda for the remaining term of the lease. Brenda pays the rent directly to Tim. Tim is known as a(n): A: lessor B: sublessee C: sublessor D: assignee

C: sublessor Explanation: If a lease is transferred from one party to another and the second party pays the first party the rent money the first and original party is considered the sublessor.

A broker, acting as a transaction broker, lists a property for $248,500. He finds a prospect who is willing to sign an offer at $247,000, but will pay $248,500 if the owner declines the offer. The broker should: A: buy the property himself at $248,500 B: submit the $247,000, but disclose that the buyer may pay more C: submit the offer without disclosing the purchaser's position D: refuse to submit the $247,000

C: submit the offer without disclosing the purchaser's position Explanation: A transaction broker may not disclose confidential information.

A builder purchased a lot with seller financing. The seller's loan would allow for a later construction loan to be the priority loan. The loan obtained contained a: A: release clause B: defeasance clause C: subordination clause D: due-on-sale clause

C: subordination clause. Explanation: A subordination clause allows for the initial loan to take the second position if a new loan is taken out on the property.

When tenants hold possession of a landlord's property without a definite lease term or arrangement, but with the landlord's approval, this is called: A: tenancy in common B: joint tenancy C: tenancy at will D: trespass

C: tenancy at will Explanation: Tenancy at will can be terminated at any time by notice from either party.

The originally scheduled number of years for a loan is also called the: A: lien B: encumbrance C: term D: period

C: term Explanation: A term is the original time period of the loan.

The Real Estate Settlement Procedures Act provides: A: a secondary market for mortgage loans B: that real estate advertisements must include the annual percentage rate C: that the mortgagor must be given an estimate of closing costs D: that the mortgagee must be given an estimate of closing costs

C: that the mortgagor must be given an estimate of closing costs Explanation: RESPA requires the disclosure within three days of loan application. TRID - This acronym stands for TILA-RESPA Integrated Disclosures and refers to new forms intended to make the mortgage process clearer to consumers. As a result of this rule, two forms will be used for essentially all real estate transactions involving a new closed-end consumer mortgage application. These forms are called the Loan Estimate (LE) and the Closing Disclosure (CD). The Loan Estimate provides information to consumers to make comparison shopping easier and to ensure that consumers understand loan and closing costs. The Loan Estimate must be provided to the consumer within three days of the submission of a loan application, and the consumer must acknowledge receiving it. The Loan Estimate must be reissued for all Buyer/Borrower requested changes and The Closing Disclosure must be received by the buyer and seller three days before closing, and the lender must have proof of receipt. It represents a combination of the old HUD-1 Settlement Statement and the old Final Truth-in-Lending (TIL) disclosure and is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction. A revised Closing Disclosure may trigger an additional 3-day waiting period if the APR changes, or changes are made to the loan producer or product, or a prepayment penalty is added. It is imperative that the Borrower understands that requested changes or underwriting decisions made late in the transaction can cause delays in their Closing if the three-day waiting period must be reset.

A broker may operate from: A: his or her office B: any office C: the address on the broker's license D: his or her car

C: the address on the broker's license Explanation: A broker does their business from the address on the broker's license.

The amount a qualified lending institution may loan to a qualified veteran, on a VA-guaranteed loan, is limited by VA to: A: the same as FHA loans B: the amount of the veteran's income C: the amount shown on the Certificate of Reasonable Value D: all of the above

C: the amount shown on the Certificate of Reasonable Value Explanation: A VA guaranteed loan is limited by VA to the amount of the qualified veterans entitlement and the amount shown on the Certificate of Reasonable Value.

The amount a qualified lending institution may loan to a qualified veteran, on a VA-guaranteed loan, is limited by the VA to: A: the same as FHA loans B: the amount of the veteran's income C: the amount shown on the Certificate of Reasonable Value D: all of the above

C: the amount shown on the Certificate of Reasonable Value Explanation: A VA-guaranteed loan is limited by the VA to the amount of the qualified veteran's entitlement and the amount shown on the Certificate of Reasonable Value.

In states where allowed; in dual-agency relationships the broker represents: A: one party B: the buyer or seller C: the buyer and seller D: the seller

C: the buyer and seller Explanation: Dual agency is one broker working with both buyer and seller in the same transaction in an agent relationship. Although permissible in many states, the State of Colorado does not allow "dual agency," but "non-agent" transaction brokerage (considered not an agency relationship but a non-agency "working relationship") -- which allows a real estate licensee to work with both buyer and seller in the same transaction. It is the default form of real estate representation in the state in the absence of a written agency agreement such as a Buyer Agency Agreement or a Listing Agreement (creates a Sellers Agency.)

A buyer enters into an Exclusive Right-to-Buy Contract and subsequently submits an offer on a property that is accepted; if the transaction fails through no fault of the purchaser: A: the buyer is obligated to pay his broker a commission B: the buyer is obligated to sue the seller for commission C: the buyer is under no obligation to pay his broker a commission D: none of the above

C: the buyer is under no obligation to pay his broker a commission Explanation: The buyer is only obligated to pay a commission if a contract fails because the buyer intentionally chose to terminate the contract.

A buyer enters into an exclusive right-to-buy contract and subsequently submits an offer on a property that is accepted; if the transaction fails, through no fault of the purchaser: A: the buyer is obligated to pay his broker a commission B: the buyer is obligated to sue the seller for commission C: the buyer is under no obligation to pay his broker a commission D: none of the above

C: the buyer is under no obligation to pay his broker a commission Explanation: The buyer is only obligated to pay a commission if a contract fails because the buyer intentionally chose to terminate the contract.

The broker does not have the responsibility to disclose: A: adverse material facts about the buyer's financial ability to perform the terms of the transaction B: the buyer's intent to occupy the property as a principal residence C: the buyer's ethnic background D: the buyer's contractual capacity

C: the buyer's ethnic background Explanation: According to contract the brokers must disclose financial ability and intent to occupy

Under the tax law on the sale of a personal residence, an owner may exclude: A: $250,000 of capital gains on the first and second home B: $500,000 of capital gains on the first home if filing singly C: the capital gain of up to $500,000 on the home if filing jointly D: all the capital gain if the owner lived in the property two of the preceding five years

C: the capital gain of up to $500,000 on the home if filing jointly

A developer is selling parcels of property that have been developed. The developer wants to have his attorney prepare a sales contract that refers to the legal description and stipulates the warranties the developer is making. Which of the following is true? A: the developer cannot do this, as he must only use commission approved forms B: the developer's warranties cannot be included within the body of the contract C: the developer can hire an attorney to prepare his own contracts and include warranties and other information D: the developer can hire a broker to prepare the contracts

C: the developer can hire an attorney to prepare his own contracts and include warranties and other information

According to Colorado license law, which of the following is correct with regard to the terms, "employing broker" and "employed licensee?" A: supervisory duties of brokers apply only to employees and not to associate brokers who are independent contractors B: employed licensees cannot be independent contractors under the rules of the IRS C: the employing broker has specific supervisory requirements for all employed licensees D: employed licensees must be offered a minimum salary and benefits

C: the employing broker has specific supervisory requirements for all employed licensees Explanation: Rules E-30, E-31, and E-32 apply to supervision of all employed licensees in Colorado. Thus, the employing broker has specific supervisory requirements for all employed licensees.

Which of the following is required before an owner of a 35-parcel of undeveloped land may drill a well for water only? A: nothing is required; a 35-acre site is entitled to an exempt well B: the owner must purchase water rights C: the owner must obtain a well permit from the state engineer D: if there is a stream on the property it must be diverted

C: the owner must obtain a well permit from the state engineer Explanation: Small wells on domestic property must have a permit from the state engineer even though they are exempt from a requirement to purchase water rights.

No common interest community, except cooperatives, can be created until: A: the people vote on an association B: the land is cleared of debris C: the plat map for the common interest community is recorded

C: the plat map for the common interest community is recorded Explanation: The plat map for the common interest community must be recorded.

The fee to notarize a Warranty Deed is charged on the settlement statement to: A: the buyer B: the listing broker C: the seller D: the buyer and seller

C: the seller Explanation: The seller(s) signs the warranty deed, not the buyer. The charge is debit seller. On the settlement sheet do not confuse "recording" the deed with "notarizing" the deed. Recording the deed is "debit buyer" as it is considered in the buyers best interest to have the deed recorded into the public record. For more info: THE WARRANTY DEED - Although title may be transferred by a number of types of deed such as a quit claim deed, the most common type of deed used in a closing to transfer title is the warranty deed. The seller signs the warranty deed, not the buyer. In addition, a notary public must notarize the deed and an unofficial witness who is not a party to the transaction must sign as well so the deed can be recorded. The notary and the witness are usually employees of the closing attorney, although sometimes the attorney may ask the licensee to be a witness. Once the seller, the notary, and the unofficial witness have signed the deed, and the seller or attorney hands (delivers) it to the buyer and the seller has officially transferred title. It is standard practice for the attorney to keep the original warranty deed at closing for recording at the courthouse. The original deed is then mailed to the buyer after the recording.

Regarding the Colorado Homestead Exemption, as indicated in the approved deed of trust forms, the buyer agrees that: A: the homestead exemption is not addressed in the deed of trust forms B: that the homestead exemption is not waived C: the trustor waives the right to the homestead exemption D: the trustee waives the right to the homestead exemption

C: the trustor waives the right to the homestead exemption Explanation: The trustor (buyer) waives all rights to the homestead exemption in all Colorado approved deed of trust forms. The buyer is the "Trustor" because the buyer originates the Deed of Trust to provide security for a loan, the Public Trustee is the "Trustee" as he/she receives and holds the Deed of Trust, the lender is the "Beneficiary" because it is their loan that is being protected i.e the benefit. The Colorado Homestead Protection Exception provides a $75,000 (This number changes with time) exemption from any debt, contract or civil obigation entered into after July 1, 1975. This exemption is for the head of family householder. Elderly or disabled individuals recieve a $105,000 exemption. Generally, the exemption is waived as a requirement for getting a loan.

Most condominium owners can alter: A: the area surrounding their back porch, also known as a limited common element B: the interior of their own unit, even if it means altering a weight-bearing wall C: their unit, so long as it does not impair the structural integrity, electrical systems, or lessen the support of any portion of the common interest community D: enclose their patio without notice or approval

C: their unit, so long as it does not impair the structural integrity, electrical systems, or lessen the support of any portion of the common interest community Explanation: The owner may alter their unit as long as it doesn't impair the structural integrity, electrical systems, or lessen the support of any portion of the common interest community.

Which of the following is true concerning listings based on a "net price?" A: they are illegal in Colorado B: they are more profitable because no minimum is set on the amount of commission C: they are legal in Colorado as long as the seller agrees, and the broker has the necessary form prepared by an attorney representing one of the parties to the transaction. D: they are permissible with approval of the real estate commission

C: they are legal in Colorado as long as the seller agrees, and the broker has the necessary form prepared by an attorney representing one of the parties to the transaction. Explanation: A traditional Net Listing is one in which the broker receives as commission all proceeds above a set net price. Net listings are legal in Colorado. Because of the potential for conflict of interest between the seller and broker, they can be problematic.

When a broker presents the Definitions of Working Relationships form to a purchaser: A: this is considered adequate disclosure of agency B: no other agency documents need be executed C: this is not considered complete disclosure of agency D: this form is never necessary or required

C: this is not considered complete disclosure of agency Explanation: The definitions form is an explanation of types of agency - not a disclosure.

When a broker presents the Definitions of Working Relationships form to a purchaser: A: this is considered adequate disclosure of agency B: no other agency documents need be executed C: this is not considered complete disclosure of agency D: this form is never necessary or required

C: this is not considered complete disclosure of agency Explanation: The definitions form is an explanation of types of agency - not a disclosure.

There are two types of time-share estates: These are known as: A: unit owner and time-share owner B: interval estates and time span owner C: time span estate and interval estate D: time-share owner and common interest community estate

C: time span estate and interval estate Explanation: Time span estate means an undivided interest, in a unit in a present estate in fee simple. Interval estate is an estate for years, terminating on a certain date. Title to a time-share unit circulates among the interval owners.

The best assurance of good title that a real estate purchaser can obtain is: A: a valid quitclaim deed executed by the seller B: a general warranty deed C: title insurance D:: a special warranty deed

C: title insurance Explanation: Even though a seller promises there are no liens or defects he is not telling the buyer about, there is no indemnification (reimbursement) for losses incurred unless there is a title insurance policy.

A contract or document that protects (subject to specific exceptions) against loss due to defects of public record and against hidden risks such as forgeries is called: A: chain of title B: certification C: title insurance D: abstract of title

C: title insurance Explanation: The chain of title is the list of owners who have owned the property. Title insurance provides indemnification (reimbursement) for certain losses in connection with the ownership of property.

The title company may be hired by the listing broker: A: to prepare legal documents B: and may charge the buyer and/or seller for the preparation of legal documents C: to act as scrivener for the transaction D: and has ultimate responsibility for the accuracy of legal documents

C: to act as scrivener for the transaction Explanation: Preparation of Legal Documents Although buyers and sellers may be charged a fee for closing, no fee may be charged for preparation of legal documents, except by an attorney representing the buyer or seller. The Conway-Bogue decision granted real estate brokers the right to prepare certain legal documents, but prohibits licensees from charging a separate fee for such service. The companion Title Guaranty case specifically prohibits title companies from preparing legal documents. Today, title companies only fill in blanks on legal documents under explicit instructions from the broker responsible for the closing. The listing broker who is responsible for completing the deed, bill of sale, and any notes and deeds of trust called for in the contract uses the second section of the Closing Instructions form to hire the title company as scrivener to complete the legal forms. The listing broker will be responsible for paying for legal documents and for their accuracy. However, the listing broker is not responsible for the cost of legal documents prepared by the buyer or seller, or by attorneys hired by the buyer or seller.

A licensee who assists both parties in a transaction but is not an advocate of either one, is a: A: general agent B: limited agent C: transaction broker D: dual agent

C: transaction broker Explanation: A Transaction Broker is a broker who asists one or more parites throughout a contemplated real estate transaction with communication, interposition, advisement, negotiation, contract terms, and the closing without being an agent or advocate for the interests of any party. In sporting terms, a transaction broker is a referee and not a coach.

On October 2 a buyer made an offer, which he agreed to keep open for three days. The seller made a counter offer, which the buyer rejected. The seller then accepted the original offer. The status of the original contract is: A: unenforceable B: enforceable C: void D: valid

C: void Explanation: The seller's counter offer has the effect of rejecting the original offer. The seller cannot later change his mind and accept it.

When must the "Change of Status" form be signed? A: before eliciting or receiving confidential information B: when changing brokerage relationship from transaction broker to agent C: when changing brokerage relationship from agent to transaction broker D: when taking a listing

C: when changing brokerage relationship from agent to transaction broker Explanation: A broker may not represent one party as an agent and work as a transaction-broker with the other party in the same transaction unless the principal to the agency agreement has agreed to revert to transaction brokerage. To accommodate this change, the commission listing forms contains a selection by the client at the time of the listing and a "Change of Status" form to notify the client at the time the "double ended" situation develops.

A recorded deed of trust is removed from the county records: A: by recording a new deed of trust B: when final payment is made by the trustor C: when the deed of reconveyance is recorded D: when ownership and encumbrance title work is ordered

C: when the deed of reconveyance is recorded Explanation: The deed of reconveyance must be recorded before a trust deed is released as a lien. A deed or reconveyance is a document issued by a mortgage holder indicating that the borrower is released from the mortgage debt and transfers the property title from the lender, also called the beneficiary, to the borrower, also called the trustor.

The Colorado Legislature passed a bill on April 22, 1996, establishing single licensing. The primary effect of this law is that Colorado: A: you now can be single or married to receive a state real estate license B: you can only hold one state license at a time C: will no longer issue a real estate salesperson license D: you can only have a real estate license from one state

C: will no longer issue a real estate salesperson license Explanation: As of January 1, 1997, only real estate broker's license will be issued. Salesperson licensed under the old law will eventually need to upgrade to a broker. You are allowed to hold real estate licenses from several states, you are allowed to hold different state licenses i.e., appraiser, insurance, real estate broker.

A high level of supervision by employing brokers: A: must be provided for all licensed persons B: is giving leads to new agents to help them get business C: would include: review of documents in preparation for a closing, assistance in preparing contracts, monitoring of transactions from contract to closing, attending closings, or making sure an experienced licensee attends the closing, being reasonably available for consultation D: includes the attending all sales presentations by new agents

C: would include: review of documents in preparation for a closing, assistance in preparing contracts, monitoring of transactions from contract to closing, attending closings, or making sure an experienced licensee attends the closing, being reasonably available for consultation

You receive an offer with an earnest money check. The seller counters the offer. What do you do? A: you hold on to the earnest money to see if the buyer accepts the counterproposal B: you give the earnest money check to your broker for deposit in the escrow account C: you send the earnest money check back to the buyer's broker with the counter offer D: you deposit the money in the broker's trust account to make sure it is safe

C: you send the earnest money check back to the buyer's broker with the counter offer Explanation: This is a case of what you are supposed to do versus what really happens. It is not a statute item, but more of a best practice from the Real Estate Commission. Unfortunately, the Commission tests on what is official rather than what really happens. Officially - when a Seller counters an offer, the original offer is void and, you, as a listing broker have no legal right to retain the earnest money check therefore it should be returned with the counter. Practically - both agents consider this to be a period of negotiation and nobody wants to schlep a check back and forth, so the listing broker will not deposit or return the earnest money check until we have an accepted or dead deal, nor will the buyer's agent expect anything else. Going even further into reality versus the Test - most deals these days are done electronically with contracts and copies of checks faxed, or signed electronically, or emailed back and forth. Few deals are being performed via physical paper copies. For the Test - assume everything is performed via paper.

A $175 water bill is paid on June 1 for three months, the home is sold and the closing is August 25. How is this shown on the settlement statement? A: $161.69 credit to the seller, debit to the buyer B: $13.31 credit to the buyer, debit to the seller C: $161.69 credit to the buyer, debit to the seller D: $13.31 credit to the seller, debit to the buyer

D: $13.31 credit to the seller, debit to the buyer Explanation: $175 / 92 = $1.9022 X 7 = $13.31 credit seller debit buyer

A home closes for $365,000 how much would you pay the county clerk and public trustee? A: $3,650 B: $65 C: $365 D: $36.50

D: $36.50 Explanation: And you are asking yourself how the heck am I supposed to know that?! They are assuming you know what the documentary fee is. So what is a documentary fee? According to C.R.S. 39-13-102 (2b), passed in 1985, a documentary fee authorizes county clerks to collect a fee on all real-estate related documents received for recording or filing. The fee is one penny per every $100 of the selling price.. Once you know what you are dealing with It is a very simple equation to find the answer: $.0001 x $365,000 = $36.50

A home closes for $365,000; how much would you pay the county clerk and public trustee? A: $3,650 B: $65 C: $365 D: $36.50

D: $36.50 Explanation: And you are asking yourself how the heck am I supposed to know that?! They are assuming you know what the documentary fee is. So what is a documentary fee? According to C.R.S. 39-13-102 (2b), passed in 1985, a documentary fee authorizes county clerks to collect a fee on all real-estate related documents received for recording or filing. The fee is one penny per every $100 of the selling price.. Once you know what you are dealing with it is a very simple equation to find the answer: $.0001 x $365,000 = $36.50

The Martin's have obtained a 30-year loan amortized loan for $80,000 at 10%. The monthly debt service is $702.06. What is the first month's interest payment? How much interest is paid during the 30 years? A: $695, $250,200 B: $666.67, $240,000 C: $695, $80,0000 D: $666.67, $172,741.60

D: $666.67, $172,741.60 Explanation: $80,000 x .10 = $8,000 interest $8,000 / 12 = $ 666.67; $702.06 x 360 = payments = $252,741.60 - $80,000 loan = $172,741.60 interest The equal monthly payments of principal and interest over a specified period of time will completely payoff an amortized loan. Interest on amortized loans is paid in arrears (Example: a Feb 1 payment is for the previous month of January NOT for February) and as the loan balance is paid down (it is recalculated each month), there is less interest to be paid and more of the payment being applied to the principal. This means more interest is paid during the early period of the loan than at the end of the loan. Borrowers can shorten the loan periods by paying more principal with each payment.

How many days after notice of discrimination does someone have to file a complaint under Colorado Fair Housing Laws with the Colorado Civil Rights Commission? A: 30 days B: 60 days C: 6 months D: 1 year

D: 1 year Explanation: From the Colorado Civil Rights Commission: Filing a Timely Charge of Discrimination There is a legal requirement that a charge must be filed within a specific period of time (statute of limitations) from the date of notice of the last discriminatory act. After the statute of limitations has passed the Colorado Civil Rights Commission does not have jurisdiction. In Employment cases the statute of limitations is six months; in Housing cases the statute of limitations is one year. Employment filing deadline: six (6) months Housing filing deadline: one (1) year

In Colorado the minimum time following recording the Notice of Election and Demand before a residential foreclosure sale can be held is: A: 45 days B: 60 - 90 days C: 90 - 100 days D: 110 - 125 days

D: 110 - 125 days Explanation: A residential foreclosure sale must be within 110 to 125 days of the recording of the Notice of Election and Demand. For agricultural properties the window is 215-230 days.

If a property sells for $12,100, and gains a 10% profit for the owner, what was the original cost of the property? A: 1100 B: 10000 C: 13200 D: 11000

D: 11000 Explanation: Add 100% (the cost of the property) to 10% (the profit) for a total of 110% to get the selling price percentage. Then take $12,100 and divide it by the 110% to get the original cost of the property, $11,000

A building was sold for $115,000. Earnest money in the amount of $15,000 was deposited, and the buyer obtained a loan for the balance. The lender charged a fee of 2% of the loan. What was the total cash used by the buyer for this purchase? A: 2180 B: 2300 C: 16300 D: 17000

D: 17000 $15,000 + 2% of $100,000 = $17,000

A house has a market value of $ 110,000. The assessed value is 30% of the market value. If the mill levy is 52 mills, what is the yearly tax on the house? A: 5720 B: 4004 C: 572 D: 1716

D: 1716 Explanation: $110,000 X 30% = $33,000 (Assessed value) X .052 = $1,716

ABC property management manages an office building with $60,000 annual leases. Their agreement with the owners is that they will be paid 7% the first year, 5% the 2nd and 3rd years, and 3% for the next four of their seven year agreement. What will be the total management fee? A: 15000 B: 13500 C: 15400 D: 17400

D: 17400 Explanation: Multiply $60,000 X .07 = $4,200. Multiply $60,000 X .05 = $3,000 X 2yrs = $6,000. Multiply $60,000 X .03 = $1,800 X 4yrs = $7,200 add all three together $7,200 + $6,000 + $4,200 = $17,400

If a home that originally cost $142,500 three years ago is now valued at 127% of its original cost, what is the current market value? A: 164025 B: 172205 C: 174310 D: 180975

D: 180975 Explanation: $142,500 x 127% = $180,975

Kevin, a real estate broker, sold a property and received a 6-1/2% commission. Kevin gave the selling broker 30% of the commission, or $3,575. What was the selling price of the property? A: 55000 B: 95775 C: 152580 D: 183333

D: 183333 Explanation: $3,575 (agent share of commision in dollars) / 30% (agent share of commission as a percentage) = $11,916.666 (total commission in dollars) / 6.5% (total commission as a percentage) = $183,333.32 (Selling Price of Property)

If the mailing address of the Seller is out of state, the Seller is subject to Colorado income tax withholding. How much will be withheld from the proceeds of the sale? A: 0.1 B: 10%, with a maximum of $2,500 C: 0.02 D: 2%, or the net proceeds of the sale, whichever is less

D: 2%, or the net proceeds of the sale, whichever is less Explanation: Title Companies are generally required to withhold the lesser of (1) two percent of the sales price, or (2) the entire net proceeds, to cover any POTENTIAL tax liability on the sale of Colorado property when the seller has moved or will move out of state. In Simple-eze - the State is worried that they will not get their cut if someone lives out of state or is moving out of state as they may not file a Colorado Tax Return. Soooo, the State withholds some money from the closing to motivate the seller to file a Colorado Tax Return and settle the taxes, if any is owed.

A lot with a depth of 80 feet and an area of 4,800 square feet was sold for $350 per front foot. What was the total sales price? A: 31800 B: 28000 C: 35000 D: 21000

D: 21000 Explanation: 4800sf / 80 = 60 front feet. 60 x 350 = 21,000 A front foot is the front length of a parcel - in this case 60 feet. Front feet are a big deal for commercial properties who rely on walk-in traffic. They want to have as must exposure to the traffic. Also, vacation properties along a lake. Everybody wants as much property as they can facing the lake.

The maximum time allowed for the sale of an agricultural property, through the Public Trustee's office after filing of the notice of election and demand (NED) to foreclose is: A: 45 days B: 90 days C: 125 days D: 230 days

D: 230 days Explanation: For agriculutural properties the public trustee schedules the sale 215-230 days days (110-125 for residential) after the initial foreclosure action was recorded. The notice of sale is published in a local newspaper for 5 weeks. The public trustee also mails a copy of the notice to the borrower. The public trustee typically conducts the sale at the courthouse. At the sale, the public trustee reads the written bid submitted by the lender, and any party may bid. If anyone other than the lender is the winning bidder, that person must deliver the bid amount in cash or cashier's check to the public trustee. The winning bidder is given a certificate of purchase.

A property sold for $80,000 and the buyer obtained an FHA insured loan for $77,000, how much money would the buyer pay in discount points the lender charged three points? A: 3080 B: 3120 C: 3180 D: 2310

D: 2310 Explanation: The loan was for $77,000 X 3 % = $2310 Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

The assessed value is 35% of a property valued at $250,000. The mill rate is 40. What are the monthly taxes on the property? A: 3500 B: 933.32 C: 4721.28 D: 291.66

D: 291.66 Explanation: $250,000 X .35 = $87,500 X .04 = $3500 / 12 = $291.66

A brokerage firm holding 4 earnest money deposits, and 15 security deposits for managed single-family residences must have a minimum of how many trust accounts? A: 19 B: 1 C: 2 D: 3

D: 3 Explanation: If a Broker is going to deposit rent or security deposits into the employing broker's trust account(s), the Broker is required to keep records relative to these monies. Rule E-1 requires that all money belonging to others that is accepted by Broker be deposited in one or more accounts separate from money belonging to the Broker, employing broker or brokerage entity. Separate trust accounts must be maintained in the name of the employing broker, or the employing broker and the licensed business entity, and the maintenance of the separate accounts is the responsibility of the employing broker (Rule E-1(a) and (c)). This includes rent checks. A Broker who manages fewer than seven residences may deposit rental receipts and security deposits, and disburse money for such purposes, in the "sales escrow" account (Rule E-1(i)), although this is not recommended. A better practice is to maintain separate accounts for property management. At a minimum, a Broker is recommended to have two trust accounts for property management; one for security deposits and one for operating trust monies. As an alternative to trust accounts, a Broker may deposit rent monies or security deposits directly into an account owned and controlled by the landlord. Reference Colorado Real Estate Manual Chap 2 - Rule E-1 (h)

The current value of a property is $255,000, and it is assessed at 35% of its current market value. What is the amount of the real estate tax due on the property if the tax rate is $3.50 per $100 of assessed value? A: 2039.99 B: 2499 C: 115.63 D: 3123.75

D: 3123.75 Explanation: 255,000 x .35 = 89,250.00, 89,250 x .035 = 3,123.75

According to the Real Estate License Law, a transaction and trust account record must be kept for a minimum of how many years? A: 1 B: 2 C: 3 D: 4

D: 4 Explanation: The real estate commission requires all records to be kept for four years.

Money received by a property manager must be deposited within __________ days and money received as earnest money in a real estate transaction must be deposited within __________ days after contracted has been accepted. A: 3, 1 B: 3, 3 D: 5, 3 C: 5, 1

D: 5, 3 Explanation: Money received for property management and short-term rentals shall be deposited within five (5) business days after receipt unless the parties agree otherwise. All other types of money belonging to others shall be deposited not later than the third business day after receipt or as provided in the agreement with those concerned Rule E-1 (n)

Property taxes are based on an assessed value of $132,000 and the tax rate is 8.5 mills. The property closes on Jun 14. On a basis of the banker's calendar (360 days in a year, 30 days in a month) the seller owes how much in taxes? A: 3432 B: 2211 C: 1122 D: 511

D: 511 Explanation: $132,000 X .0085 = $1,122 / 360 = $3.1166 X 164 = $511.13

You paid a 15% down payment on a tract of undeveloped land. The down payment was $8,250. What was the purchase price? A: 12375 B: 123750 C: 18181 D: 55000

D: 55000 Explanation: $8,250 / .15 = $55,000

The taxes on a house valued at $60,000 are $450.00. The tax ratio is 16%. What are the taxes on the house next door with a market value of $75,000? A: 612 B: 532 C: 592 D: 562.5

D: 562.5 Explanation: $450 / $60,000 = .0075 X $75,000 = $562,50

Which would need to be registered with the CREC (Colorado Real Estate Commission) for a subdivision? A: A membership-based campground with 75 campsites B: Bulk sale of 500 lots between two developers C: A development with15 residential units D: A 60 unit co-op building

D: A 60 unit co-op building Explanation: The Subdivision Developer's Act affects the types of subdivisions that must be registered with the Commission. The following types of subdivisions within the State of Colorado, and subdivisions located outside the state if being offered for sale in Colorado, must be registered before offering, negotiating, or agreeing to sell, lease, or transfer any portion of the subdivision: * 1. Any division of real property into 20 or more interests for residential use; * 2. Subdivisions consisting of 20 or more time-share interests (a time share interest includes a fee simple interest, a leasehold, a contract to use, a membership agreement, or an interest in common); * 3. Subdivisions consisting of 20 or more residential units created by converting an existing structure (e.g., condominium conversions); and * 4. Subdivisions created by cooperative housing corporations with 20 or more shareholders with proprietary leases, whether the project is completed or not. * B. Exempt from Registration under the Subdivision Developer's Act: * 1. The selling of memberships in campgrounds; * 2. Bulk sales and transfers between developers; * 3. Property upon which there has been or upon which there will be erected residential buildings that have not been previously occupied and where the consideration paid by the purchaser for such property includes the cost of such buildings (this does not apply to conversions, time share, or cooperative housing projects); * 4. Lots that, at the time of closing of a sale or occupancy under a lease, are situated on a street or road and the street or road system is improved to standards at least equal to streets and roads maintained by the county, city, or town in which the lots are located; have a feasible plan to provide potable water and sewage disposal; and have telephone and electricity facilities and systems adequate to serve the lots, which facilities and systems are installed and in place on the lots or in a street, road, or easement adjacent to the lots and which facilities and systems comply with applicable state, county, municipal, or other local laws, rules, and regulations; or any subdivision that has been or is required to be approved after September 1, 1972 by a regional, county, or municipal planning authority pursuant to Article 28 of Title 30 or Article 23 of Title 31, C.R.S.; and * 5. Sales by public officials in the official conduct of their duties.

An employing broker can usually avoid disciplinary action for the improper conduct of one of his employed licensees if: A: a licensee with 10-years experience produced an Installment Land Contract without the knowledge of the employing broker B: the broker can establish that he never authorized the improper conduct C: the licensee has less than two years in the business D: A broker can never avoid disciplinary action for improper conduct of a licensee. They are always ultimately responsible

D: A broker can never avoid disciplinary action for improper conduct of a licensee. They are always ultimately responsible Explanation: A broker can never avoid disciplinary action for improper conduct of a licensee. They are always ultimately responsible.

A defect that is described as latent is: A: An old defect B: A breach of contract by the seller C: A defect that a prudent buyer can see D: A defect that is hidden from view

D: A defect that is hidden from view Explanation: A defect that is hidden from view is considered a latent defect.

Which of the following best describes an installment land contract? A: A contract to buy land only B: A mortgage on land C: A means of conveying title immediately while the buyer pays for the property D: A means of selling a property whereby the buyer pays for the property in regular installments while the seller retains title to the property

D: A means of selling a property whereby the buyer pays for the property in regular installments while the seller retains title to the property Explanation: An installment land contract can be very risky for the buyer but does allow the buyer to get into a property which they may not qualify for. Can be used to avoid the acceleration clause in a mortgage. More info on Installment Land Contracts: Installment Land Contracts AKA "Land Contracts" is a purchase agreement in which the owner retains legal title to a property while the buyer, usually a tenant, makes payments. ONCE THE BUYERS COMPLETES THESE PAYMENTS, THE SELLER DEEDS THE PROPERTY TO THE BUYER. Two big points here: 1) Since the buyer does not take legal ownership until they complete payments, this means the buyer, who usually has possession of the property, has no legal rights to the property beyond that of a renter. THEY DO NOT OWN IT - THE SELLER DOES. 2) Because of the number of creeps who have used installment land contracts to defraud unknowing buyers, the real estate commission does not have an approved form for us as agents to use. These contracts are not illegal, if you have clients who want to enter into such an agreement, they (notice the "they" here - I for one would not touch a land contract transaction for all the tea in China) need to bring in an attorney to draw up the necessary paperwork. The real estate commission feels so strongly about this, they issued a position statement on it. Here it is: CP-39 Commission Position on Lease Options, Lease Purchase Agreements and Installment Land Contracts (4-5-2011) The Commission recognizes that in order to maintain the resilience of the real estate market during times when conventional lending requirements are rigorous, alternative funding practices are utilized to sustain the market conditions of supply and demand. The Commission has received and investigated numerous complaints pertaining to lease options, lease purchase agreements and installment land contracts. Although the Commission does not have the authority to prohibit the types of real estate transactions that real estate brokers participate in, the Commission strongly cautions real estate brokers to utilize the services of an attorney licensed to practice law within the State of Colorado. It has been the Commission's observation, based on complaints received, that lease option and lease purchase transactions are complex and generally contain provisions with significant financial risk posed to the prospective buyer and seller. Installment land contracts and the other transactions mentioned in this position statement afford buyers the opportunity to take possession of the real property and make installment payments to the seller. There is a significant potential for harm to the seller, buyer or assignee if the installment land contract is not properly drafted. In all of the above transactions, the seller retains legal title to the property while the buyer may acquire equitable title. The Commission does not have an approved contract form necessary to memorialize the terms and nuances related to these complex transactions, or any jurisdictional regulations that may be germane. Pursuant to Rule F, the appropriate provisions of the license law and the brokerage relationship act (§§12-61-113, 12-61-804, 805 and 807, C.R.S.), real estate brokers are prohibited from drafting a contract document that would reflect the terms of such a transaction as it would exceed their level of competency and is a matter requiring the expertise and advice of an attorney. Additionally, such behavior may be construed as the unauthorized practice of law by the real estate broker and subject to civil penalties. The contracts for these transactions should not be prepared by a real estate broker; rather, the documents should be drafted by a licensed Colorado attorney-at-law engaged for each particular transaction.

A property manager may refuse to lease to: A: A Muslim tenant renting near a Catholic church B: A gay individual C: A disabled veteran D: A person addicted to or using illegal drugs

D: A person addicted to or using illegal drugs Explanation: The Fair Housing Act considers alcoholism and drug addiction to be a disability. This means that a landlord can't reject a rental application or otherwise discriminate simply because someone is an alcoholic or a drug addict. HOWEVER, a landlord may reject if (s)he learns that someone is currently using illegal drugs. Use of illegal drugs is an illegal activity. Many landlords ask about this on their rental application, and it's perfectly legal to do so. The other answer options all represent protected classes and may not be discriminated against. Reference Fair Housing Act

Which of the following documents accompanies the deed of trust? A: A deed B: An abstract of title C: A contract of sale D: A promissory note

D: A promissory note Explanation: The promissory note is secured by a deed of trust or mortgage.

In Colorado "good funds" include a A: A personal check from the buyer that will clear the bank B: A title insurance company check C: A check drawn on the broker's escrow account D: A teller's check from a savings and loan

D: A teller's check from a savings and loan Explanation: From the Contract to Buy and Sell (Purchase Contract) Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, shall be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds). This is also covered in Real Estate Commission Rule E-36: E-36. Good funds at closing Pursuant to 38-35-125, a real estate licensee who provides closing services shall not disburse funds or instruct an agent to disburse funds until those funds have been received and are either: (1) available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited or (2) available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Such agreement with a financial institution must be for the benefit of the licensee providing the closing service. If the agreement contains contingencies or reservations no disbursements can be made until these are satisfied.

In Colorado "good funds" include a: A: A check from the buyer that will clear the bank B: A title insurance company check C: A check drawn on the broker's escrow account D: A teller's check from a savings and loan

D: A teller's check from a savings and loan Explanation: From the Contract to Buy and Sell (Purchase Contract) Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, shall be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds). This is also covered in Real Estate Commission Rule E-36: E-36. Good funds at closing Pursuant to 38-35-125, a real estate licensee who provides closing services shall not disburse funds or instruct an agent to disburse funds until those funds have been received and are either: (1) available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited or (2) available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Such agreement with a financial institution must be for the benefit of the licensee providing the closing service. If the agreement contains contingencies or reservations no disbursements can be made until these are satisfied.

When comparing/analyzing CMA, these are the factors that would be NOT be taken into consideration: A: Similar size properties sold in the neighborhood B: Date of sale C: Age of the property D: Accrued Depreciation

D: Accrued Depreciation Explanation: Accrued Depreciation is used by businesses to reduce their taxes. It is not a factor in determining market value. For tax purposes only, a building is considered to lose value each year to reflect its reduced functional life even if real estate market values are increasing. More on accued depreciation: Accrued depreciation is the amount of total value that an asset has lost since it was newly purchased. Also known as accumulated depreciation, it is included on the balance sheet of a company or business as a liability to reflect the lesser value of the asset in question. There are many different ways that an asset's depreciation may be calculated, with the most common examples being straight-line depreciation and declining balance depreciation. No matter the method of depreciation, the accrued depreciation represents the amount of value that has been lost over the life span of the asset. When a business purchases an asset, whether it's a business vehicle or a computer or something else that can lose value with the passage of time, it is allowed to write off the amount of value the asset loses each year. This process, known as depreciation, allows the business to pay taxes based on what the asset is worth as time passes rather than always paying off on it as if it was new. After the amount of value lost begins to build up over a period of several years, the total amount of depreciation is known as accrued depreciation.

A broker supplies the financing for a project to build condominiums with the stipulation that he has the exclusive right to sell the completed condos. Which of the following BEST describes this relationship? A: General agency B: Exclusive agency C: Specific agency D: Agency coupled with an interest

D: Agency coupled with an interest Explanation: Not only does the agent have an agency relationship with the client, the agent also has a financial interest.

In the Colorado Brokerage Relationship law, the seller's agent may not disclose which of the following to the buyer? A: All adverse material facts about the title to the property B: All adverse material facts about the property C: All of the environmental hazards effecting the property D: All adverse psychological impacts or stigmas about the property

D: All adverse psychological impacts or stigmas about the property Explanation: A stigmatized property (A property where some event has occurred or continues to occur) should not be disclosed to the buyer.

What forces affect value? A: Social B: Economic C: Government regulations D: All of the above

D: All of the above Explanation The market is impacted by all those forces, hence they all affect value.

Common purpose(s) for a "buydown" of an interest rate would be: A: To help a buyer afford a more expensive home B: To help a buyer qualify for a home more easily C: To help the seller make their home more attractive to a prospective buyer D: All of the above

D: All of the above Explanation: A "buydown" is paying money to a lender in exchange for a lower interest rate. It reduces the the monthly payment for a homebuyer. The payment made to a lender is in the form of "discount points." One discount point is one percent of the loan amount, hence paying 2 discount points to a lender would be paying 2% of the loan amount for a negotiated reduction in the interest rate. As a marketing tool it is frequently used by builders and sellers to make properties more attractive to buyers.

A newly appraised apartment house is valued by the income approach. Under which of the following circumstances would you deduct management cost for the net operating income? A: The owner manages the apartments and occupies one of them B: A tenant manages the complex in exchange for free rent C: Where an occupant/manager of an adjacent apartment house also manages this apartment complex, at no additional cost to the investor D: All of the above

D: All of the above Explanation: A prudent investor will consider all expenses to arrive at a net income. Free rent is certainly an expense. Also, that the apartment is presently managed by the owner or by someone else, at no cost, does not alter the fact that management is necessary and a potential operating expense for anyone contemplating a purchase of the property.

Which circumstance would terminate a nonconforming property's use? A: Until the property is destroyed B: Until the property is torn down C: Until the property's current use is abandoned D: All of the above

D: All of the above Explanation: All of the answers would allow the use to terminate. Any fundamental change such as residential to commercial or more commonly vice versa would require a zoning change or a request for a non-comforming use from the existing zoning from the Board of Adjustments (this name changes from governmental entity to another). The tricky part for zoning changes or waiver requests for grandfathered non-conforming properties is they often open up a can of worms for the owner. Changing the functionality of a grandfathered property may also trigger requirements from the government to bring the property in conformance with the zoning. An example of that in Denver occurred very publicly a few years back in a case involving the Firehouse Car Wash on 6th Avenue. A grandfathered car wash in a zoned residential area had bad relationships with the neighbors - they added a separate detail shop on the premises. The neighbors went to the City saying the car wash had added new functionality and thus no longer qualified as a grandfathered non-conforming use of the premises. The neighbors won and the car wash was shut down.

Which of the following can terminate an agency relationship? A: Mutual rescission B: Incapacity of either party C: Expiration of subject matter D: All of the above

D: All of the above Explanation: An agency relationship may be terminated by mutual agreement; revocation by principal; renunciation by agent; expiration of its term; extinction of its subject matter; death or incapacity of either principal or agent.

According to Commision Position 31 on Acting as a Transaction Broker, you cannot be a Transaction Broker for: A: Your brother B: Your close friend C: Your best client D: All of the above

D: All of the above Explanation: CP-31 Commission Position on Acting as a Transaction Broker or Agent in Particular Types of Transactions (Adopted 9-8-04) The public may enter into either a Transaction-Broker relationship or an Agency relationship with a Broker. Fundamental among the differences between Agency and Transaction-Brokerage is that an Agent is an advocate with fiduciary duties, while a Transaction-Broker should remain neutral, not advocate. However, in some situations the relationship of the Broker with a particular party or property may make a particular relationship inappropriate or problematic. Before acting as a Transaction-Broker in transactions where neutrality is difficult, the Broker should consider whether the Transaction-Brokerage arrangement is suitable, consult with the Broker's supervising Broker and then make the necessary disclosures. Some examples of these situations include: 1. Selling or purchasing for one's own account (whether the property is solely or partially owned or to be acquired by the Broker), (See Rule E-25 regarding proper disclosures); 2. Selling or purchasing for the account of a spouse or family member of the Broker; 3. Selling or purchasing for the account of a close personal friend, business associate, or other person where it would be difficult for the Broker to remain neutral; or 4. Selling or purchasing for the account of a repeat or regular client/party where it would be difficult for the Broker to remain neutral (i.e., undertaking as a Transaction-Broker the listing of multiple units, lots or properties such as listing a real estate development or condominium complex for a single developer, listing multiple residential or commercial properties for the same seller that will be sold to different buyers, or listing for lease a multiple unit residential or commercial property that will be leased to different tenants). An agency relationship between a Broker and a seller or landlord, buyer or tenant, requires a written agency agreement. The duties of an agent go beyond facilitation of the transaction as a neutral party and require representing the interests of the Broker's principal over the interests of the other party. In certain circumstances, fulfilling the duties of an Agent including acting as an advocate may be difficult. A Broker who enters into an agency relationship must fulfill the duties of advocacy, fidelity, loyalty and other fiduciary duties associated with a single agency relationship. In circumstances where the Broker may not be able to fulfill the duties imposed on an agent the Broker should consider whether the agency arrangement is appropriate, consult with the Broker's supervising Broker and act accordingly.

Which of these acts could result in license suspension or revocation? A: Conviction of a forgery crime B: Accepting compensation from more than one party in a transaction without full disclosure C: Advertising in the name of another broker D: All of the above

D: All of the above Explanation: Committing a crime. Not disclosing compensations (secret profits) and representing another broker without the permission of your employing broker, are grounds for disciplinary action. There are many more covered in The Colorado Real Estate Manual statute 12-61-113

Which of these acts could result in license suspension or revocation? A: Conviction of a forgery crime B: Accepting compensation from more than one party in a transaction without full disclosure C: Advertising in the name of another broker D: All of the above

D: All of the above Explanation: Committing a crime. Not disclosing compensations (secret profits) and representing another broker without the permission of your employing broker, are grounds for disciplinary action. There are many more covered in The Colorado Real Estate Manual statute 12-61-113.

Which of the following forms of payment would be considered good funds? A: Savings and Loan teller's check B: Electronic transfer of funds C: Cashier's check D: All of the above

D: All of the above Explanation: From the Contract to Buy and Sell (Purchase Contract) Good Funds. All amounts payable by the parties at Closing, including any loan proceeds, Cash at Closing and closing costs, shall be in funds that comply with all applicable Colorado laws, including electronic transfer funds, certified check, savings and loan teller's check and cashier's check (Good Funds). This is also covered in Real Estate Commission Rule E-36: E-36. Good funds at closing Pursuant to 38-35-125, a real estate licensee who provides closing services shall not disburse funds or instruct an agent to disburse funds until those funds have been received and are either: (1) available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited or (2) available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Such agreement with a financial institution must be for the benefit of the licensee providing the closing service. If the agreement contains contingencies or reservations no disbursements can be made until these are satisfied.

If a buyer and seller cannot agree on what to do with the earnest money deposit, the broker may: A: Hold the earnest money until receiving written instructions from buyer and seller B: Interplead in court C: Interplead in court and recover attorney and court costs D: All of the above

D: All of the above Explanation: Instructions from seller and buyer must match before broker will release money. In case of a suit, the broker may "interplead", or turn over, the money to the court and release any future rights to all or a portion of the earnest money. The broker may also recover costs associated with involvement in the suit.

Recording fees may appear on a closing statement as a: A: Debit to the buyer B: Debit to the seller C: Credit to the broker D: All of the above

D: All of the above Explanation: Recording fees are charged to the buyer and seller respectively for recording documents that benefit them. The broker credit column is credited for the amounts charged to the buyer and seller so that a check for the recording fees are sent to the County Recorder. More info: This answer to this question refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdrawals into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column. Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet slightly twists the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done accounting gods are happy as all debits and credits are in balance.

Termination of an offer can occur by: A: A counteroffer by the seller B: The death of the offeror C: Withdrawal by the purchaser D: All of the above

D: All of the above Explanation: Remember this is an offer and does not become a contract until it is accepted by the seller.

We have an accepted Contract to Buy and Sell, the seller breaches the contract; the buyer may: A: treat the contract as cancelled B: Sue for specific performance C: Sue for damages D: All of the above

D: All of the above Explanation: The buyer can sue for purchase of the property (Specific performance) or sue for damages, or both. Or treat the contract as cancelled, in which case, the buyer may recover his earnest money and any damages.

Regardless of who attends a closing, what are the employing broker's responsibilities in a real estate transaction? A: To provide accurate, complete, detailed closing statements B: To monitor a transaction from beginning to end C: To maintain transaction and trust account records D: All of the above

D: All of the above Explanation: The employing broker is ultimately responsible for each transaction.

Just as an agent owes duties to the principal, a principal owes duties to the agent. They may include which of the following? A: Perform the agency contract B: Compensate the agent C: Reimburse the agent for expenses D: All of the above

D: All of the above Explanation: The law of agency governs the duties and obligations of both the agent and the principal.

Which of the following statements is true concerning the market data approach? A: Most frequently used approach in residential appraising B: Involves analyzing similar properties that are on the market, sold, or expired C: Takes into consideration homes that are very similar D: All of the above

D: All of the above Explanation: The market data approach is the same technique used by listing agents when doing a comparative market analysis. Therefore, we evaluate the competition and recent sales.

RESPA covers which of the following? A: Use of TILA-RESPA Integrated Diclosure (TRID) B: Limits escrow reserves a lender can require C: Prohibits kickbacks D: All of the above

D: All of the above Explanation: These are some of the key elements of RESPA. 'Real Estate Settlement Procedures Act - RESPA' was designed to protect potential homeowners and enable them to become more intelligent consumers. RESPA requires that lenders provide greater amounts of information to prospective borrowers at certain points in the loan settlement process.

Title companies derive directions for closing from which of the following documents? A: The purchase and sale contract B: The closing instructions C: Amendments to the purchase and sale contract D: All of the above

D: All of the above Explanation: Title companies derive their directions for closing from the original contract, all amendments to the contract, and the closing instructions executed by the buyer and seller.

Acceptance of an offer must be which of the following? A: Absolute and unqualified B: Expressed or communicated C: Within time limits D: All of the above

D: All of the above Explanation: To be valid and binding an offer must be unconditionally accepted, and communication conveyed to the offeror, within the time limits.

Acceptance of an offer must be which of the following? A: Signed by all parties B: Acceptance must be communicated C: Within time limits D: All of the above

D: All of the above Explanation: To have a valid contract, it must be signed and accepted and that acceptance must be communicated to the person making the offer before the contract deadline.

Acceptance of an offer must be which of the following? A: Signed by all parties B: acceptance must be communicated C: Within time limits D: All of the above

D: All of the above Explanation: To have a valid contract, it must be signed and accepted and that acceptance must be communicated to the person making the offer before the contract deadline.

Which of the following is (are) correct concerning the parties of a trust deed? A: The trustee has naked title B: The lender is named the beneficiary C: The trustor has legal title D: All of the above

D: All of the above Explanation: Trustee oversees the provisions of the Trust Deed. The lender benefits from any action taken by the Trustee. The trustor is the borrower and has legal title in a lien theory state.

Agency disclosure does not have to be made to a buyer under which of the following circumstances? A: When showing a home at an open house B: When responding to general factual questions concerning advertised properties C: Prior to "small talk" regarding general price range, location, property styles, etc. D: All of the above

D: All of the above Explanation: You need to disclose your brokerage relationship in writing before engaging in any activity which requires a brokerage license. Commission rule E-35 states that "brokerage activities" occur when a broker elicits or accepts confidential information from a party concerning specific real estate needs, motivations, or financial qualifications. Activities such as open house, preliminary conversations, or small talk concerning price range, location, property styles, or responding to general factual questions about properties that have been advertised for sale or lease do not qualify as triggering brokerage activities.

Agency disclosure does not have to be made to a buyer under which of the following circumstances? A: Showing a home at an open house B: When responding to general factual questions concerning advertised properties C: During "small talk" regarding general price range, location, property styles, etc. D: All of the above

D: All of the above Explanation: You need to disclose your brokerage relationship in writing before engaging in any activity which requires a brokerage license. Commission rule E-35 states that "brokerage activities" occur when a broker elicits or accepts confidential information from a party concerning specific real estate needs, motivations, or financial qualifications. Activities such as open houses, preliminary conversations, or small talk concerning price range, location, property styles, or responding to general factual questions about properties that have been advertised for sale or lease do not qualify as triggering brokerage activities.

Which does the buyer have to disclose to the seller when using the Licensee Buyout Addendum? A: That the Buyer stands to make a profit B: That the Buyer is exposed to possible losses and expenses C: That the property may be immediately sold by the Buyer D: All of the above are required disclosures

D: All of the above are required disclosures Explanation: From the Licensee Buyout Addendum: RESALE, PROFIT/LOSS, EXPENSES. Seller acknowledges that in entering into the Contract, Buyer is exposed to possible losses and expenses. Seller acknowledges that following Closing, the Property may be held by Buyer for a period of time or may be resold immediately, and any profit or loss shall be solely that of Buyer. Seller further acknowledges that there is a chance for profit to Buyer and that certain expenses may accrue to Buyer. Such expenses include costs and expenses of Closing, holding, and reselling the Property. Buyer may incur additional expenses, or some anticipated expenses may vary, or may not be incurred. In any event, after Closing, Buyer will absorb the loss or receive the profit from any sale and ownership of the Property.

Which of the following actions on the part of a real estate broker could result in revocation of his license? A: Failing to submit to an owner all formal, written offers for property listed for sale B: Quoting to prospective buyers, of a property, a price other than the one stipulated by the owner C: Failure to report material facts D: All of the above could result in revocation

D: All of the above could result in revocation Explanation: A licensee must submit all offers and represent each property under the terms stipulated by he owner.

Real estate closing fees customarily appear on a settlement statement as a: A: Charge that is shared equally by the buyer and seller in the case of a conventional loan B: Charge to the seller in the case of a VA loan C: Charge that may be shared equally by the buyer and seller in the case of an FHA loan D: All of the foregoing is true

D: All of the foregoing is true Explanation: By custom in Colorado buyers and sellers share the cost of closing a transaction where the buyer is getting a conventional loan. VA requires the seller to pay the cost of closing. FHA allows the buyer to pay 1/2 of the closing fee. This is shown as a debit to whomever is paying it and a credit to the broker so that a check is written to the title company for providing the service. More info: This debit and credit explained above refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdrawals into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column. Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet slightly twists the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done the accounting gods are happy as all debits and credits are in balance.

A release clause in a mortgage: A: Provides for an option to extend its due date B: Releases a guarantor from further liability under specified conditions C: When part of a document creates a lien second only to the lien of taxes and assessments D: Allows portions of the property, given as security, to be released from the mortgage lien upon performance of a specified act

D: Allows portions of the property, given as security, to be released from the mortgage lien upon performance of a specified act Explanation: When a blanket mortgage is used to secure a debt, there is usually a provision in the mortgage which provides for the "release" of part of the property held as security.

The Exclusive Brokerage Listing Addendum attached to an Exclusive Right-to-Sell Agreement A: Removes the seller's vicarious liability for activities of the broker B: Eliminates the broker's confidentiality duties C: Allows the seller to sell to anyone after the listing period is expired D: Allows the seller to negotiate a sale and not pay the broker

D: Allows the seller to negotiate a sale and not pay the broker Explanation: This contract allows the seller to sell the property on their own, and also allows the broker to sell the property. If the seller sells it before the broker, then the broker is out.

An Exclusive Agency Addendum to the Exclusive Right-To-Sell Listing Contract: A: Engages the licensee as the Exclusive Agent for the property B: Engages the licensee as the Exclusive Agent who will receive a commission upon any sale of the property C: Allows a second broker to represent the seller under dual agency D: Allows the seller to not pay a commission to the listing broker if the seller should procure a buyer

D: Allows the seller to not pay a commission to the listing broker if the seller should procure a buyer Explanation: Exclusive Agency is an addendum you add to a listing contract. In it, the seller reserves the right to not to pay a commission to an agent if the seller finds the buyer. Exclusive agency weakens the desire of any agent to list a home. Its acceptance by any agent varies greatly. Many agents will find it acceptable if you have a particular buyer in mind and the property is desirable. They will sign the listing, with the seller's understanding that they will but not market the property until the situation with the specific buyer resolves itself. The idea is to lock up the listing and hope the buyer falls through. Not too many agents who are savvy will accept an Exclusive Agency if the seller does not have a buyer in mind and simply wants to market the property in competition with their own agent in the hopes of avoiding a commission.

Which of the following requires the use of the Licensee Buyout Addendum to the Contract to Buy and Sell Real Estate? A: A listing associate's offer to purchase a listing immediately after it expires B: A broker is not offering a guarantee to sell the property, as an inducement to list with his company C: An associate in the brokerage wishes to purchase another associate's listing D: A licensee offers to purchase a property as an inducement to the Seller to purchase another

D: Alter the date on the original listing and have the seller initial the change Explanation: Rule F-11 specifies certain conditions for the use of the Licensee Buyout addendum. Rule F-11 only applies in one or more of the following instances: When a licensee enters into a contract to purchase a property: (1) concurrent with the listing of such property; (2) as an inducement or to facilitate the property owner's purchase of another property; or (3) continues to market that property on behalf of the owner under an existing listing contract . . . More info: What Is a Licensee Buyout Addendum? by Maxwell Wallace, Demand Media A licensee buyout addendum is a form used in certain real estate and property transactions in the state of Colorado. The LBA is used only in the purchase and sale of properties between licensed real estate professionals and their own clients. History and Purpose The Licensee Buy-Out Addendum to Contract to Buy and Sell Real Estate is intended to prevent improprieties and conflicts of interest in licensee/client transactions, as well as to make sellers contractually aware of the potential differences in selling to a licensed real estate professional as opposed to conventional buyers. Situations Dictating Use Licensed real estate agents are required to use an LBA when they enter into contracts to purchase properties concurrently with the initial listing of that property, when it immediately hits the market. Licensees also are required to use the LBA form when they are purchasing a property to facilitate its owner's purchase of another property, as well as when they continue to market that property to other potential buyers. Deleted Provisions Under the provisions of the licensee buyout addendum, several conventional provisions of standard real estate listing contracts reached under Colorado state law are deleted. Deleted provisions include a property's appraisal condition, liquidated damages or pre-assessed damages to the property, provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms. Profit and Loss Stipulations Colorado's LBA also stands as contractual acknowledgment by a property seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the LBA protects the property seller by acknowledging that any fees related to closing, holding and reselling the property are all absorbed by the buyer and not the property seller as the original or prior landowner.

To the owner of the land an easement runs across, it is a/an A: An appurtenance B: An attachment C: An annexation D: An encumbrance

D: An encumbrance Explanation: An easement is an encumbrance

What is a life estate? A: A remainder interest B: An estate granted for the grantor's lifetime C: An estate granted for the functional life of the property D: An estate whose duration is granted for an individual's lifetime

D: An estate whose duration is granted for an individual's lifetime Explanation: A life estate is an interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person or persons. A grantor is someone granting a life estate. A grantee is someone receiving a life estate..

A contract was terminated when the buyer and seller were unable to resolve inspection issues. The buyer had included the buyer's inspection report as part of the inspection notice, which included information about a number of small material items. The seller of the property has what if any obligation for disclosing the issues noted in the report? A: No obligation to disclose because the contract was terminated B: An obligation to disclose only those items which are not latent defects C: No obligation to disclose if the total amount of items is less than $5,000 D: An obligation to fully disclose all material items the buyer found which the seller now has knowledge of

D: An obligation to fully disclose all material items the buyer found which the seller now has knowledge of

In what form may earnest money be? A: Cash or cashier's check only B: Personal or cashier's check only C: Cash or good funds only D: Any form the seller will accept

D: Any form the seller will accept Explanation: The seller can accept any form the seller desires. The amount and form is specified in the listing agreement. Most often sellers accept personal checks as there is plenty of time before the closing for the check to clear.

A landlord can evict a delinquent tenant by: A: Giving him three days notice B: Giving him thirty days notice C: Calling the sheriff D: Bringing court action

D: Bringing court action Explanation: A landlord must institute court action in order to evict a tenant which is called an unlawful detainer action.

A transaction broker relationship may be created by: A: Lead-Based Paint Disclosure B: an oral disclosure is sufficient C: approval of the employing broker D: Brokerage Disclosure to Buyer

D: Brokerage Disclosure to Buyer Explanation: Seller and Buyer Agency relationships must be in writing. In the absence of a written agreement the default non-agency relationship is a transaction broker. However, prior to performing a licensed activity such as eliciting or receiving confidential information, the Broker must at a minimum disclose this status using an approved disclosure form.

Which of the following is the ONLY section which must be a office policy manual? A: Human Resource Benefits B: Commission Plan C: Backup Contracts D: Brokerage Relationships Offered to Public

D: Brokerage Relationships Offered to Public Explanation: There are only three sections which are mandatory, whereas there are a number that are suggested. The mandatory ones are: written brokerage relationship policy, a policy to protect confidential information and designation brokerage relationships. The suggested ones are the long list below. More info: From the real estate manual: Office Policy Manuals Commission Rules E-29 through E-32 require brokers to demonstrate reasonable supervision over all licensees and non-licensed employees, including but not limited to secretaries, bookkeepers, and personal assistants of licensed employees. To comply with these supervision Rules, brokers who employ others are required to establish an office policy manual. This is in addition to the requirements for a written brokerage relationship policy (Rule E-39), a policy to protect confidential information (Rule E-39), and designation brokerage relationships (Rule E-38), whether performing sales or management activities. The following topical guidelines (as applicable) are suggested for office policy manuals. Sales Transactions • Parties responsible for delegated duties/agreements; • Preparation and review of contracts prior to closing; • Handling earnest money deposits, disputes, and releases; • Backup contracts; • Closing documents and closing instructions for the broker's agent; • Maintenance/custody of contract files; • Escrow records and written procedures for handling business operations; • Fair housing/affirmative action marketing; • Staff training - dissemination of information, staff meetings; • Use of personal assistants; • Guaranteed buyouts; • Investor purchases; • Non-qualifying assumptions and owner financing; • Licensee's purchase and sale of property; • Listing procedures and release of listings; • Rental occupancy before closing; • Computer system - data control, backup, and physical security; and • Internal audit and supervisory reviews of business operations. Management Activity • Operating policies and required disclosures; • Use of unlicensed on-site managers; • Administration of rentals and leasing activity; • Items under "Sales" above, where applicable; • Supervision of accounting services, records, and reporting to others; • Cash handling, collection of delinquent rents and deposits; • Ownership/management of rental properties by agents; • Administration and policies for in-house services; • Maintenance of records and business reports by any outside service; • Advances of funds on behalf of clients/customers; • Cancellation of agreements and termination of services; • Related services performed by affiliated entities; • Backup and disaster recovery plan for loss of business records; • Eviction and legal action; and • Return of security and advance deposits.

According to Commission Position 4 on Interest Bearing Trust Accounts who cannot receive interest earned by a trust account: A: Buyers B: Sellers C: Tenants D: Brokers

D: Brokers Explanation: CP-4 Commission Position on Interest Bearing Trust Accounts The Commission has taken the position that in the absence of a contract signed by the proper parties to the contrary, any interest accumulating on a trust account does not belong to the broker who is acting as escrow agent. (This position is based upon 12-61-113(l)(q) and upon the well-established tenet of agency that the agent may not profit personally from the agency relationship except for agreed upon compensation.)

How is the relationship handled when a buyer wishes to work with a broker to locate property to purchase? A: Brokerage will be an agent for the buyer unless there is written agreement for another relationship. B: Buyer and broker must sign an exclusive representation agreement. C: Buyer will be a customer with no working relationship to the brokerage company. D: Buyer and broker may agree to a relationship which could include agency, transaction-brokerage, or no working relationship between the parties

D: Buyer and broker may agree to a relationship which could include agency, transaction-brokerage, or no working relationship between the parties Explanation: The buyer has many options: he or she can be a unrepresented "customer" after appropriate disclosure, can sign an agency representation agreement, or can hire the broker as a transaction-broker either in an exclusive arrangement, oral agreement, or by default.

An agent and buyer enter into an Exclusive Right-to-Buy Contract, the A: Broker must be a buyer's agent B: Buyer may have agreements with several brokers C: The broker is bound to work with one buyer at a time D: Buyer is bound to work with only one broker during the term of the contract

D: Buyer is bound to work with only one broker during the term of the contract Explanation: The buyer agrees to only work with one broker with the Exclusive Right-to-Buy Contract regardless of whether it is an Agency or TB contract.

When making a counter offer by using the approved Counterproposal form - how do you change dates? A: Add an addendum B: Mark through the old dates and enter new ones. C: Do nothing, a verbal notification is sufficient. D: Change only the dates that needed to be changed

D: Change only the dates that needed to be changed Explanation: The only dates which are changed in the original Contract to Buy/Sell Real Estate are those specified as changed in the Counterproposal form. All other dates are assumed to not have been affected.

According to CP-25 on Recording Contracts, should a listing broker decide her Seller client is attempting to cheat her out of a commission, the broker can: A: File a mechanics lien to ensure the brokers' claim for the commission is honored B: Record the listing contract so that it would appear in any Title Commitment for the property C: File a lis pendens to warn any potential buyer that a legal action is pending D: Commence mediation, arbitration or a civil action

D: Commence mediation, arbitration or a civil action Explanation: CP-25 Commission Position on Recording Contracts Over the years the Commission has received many inquiries and complaints concerning the recording of listing contracts to protect claims for commissions. In addition, some licensees have attempted more "creative" ways of holding up a closing, such as filing mechanics liens or notices of lis pendens, as well as recording demand letters or purchase contracts. The end result is usually a cloud on the title and sometimes a slander of title action. Some states have passed statutes authorizing the filing of such liens. Colorado has not. Filings and recordings such as these are inappropriate and will result in Commission action. Here is a typical scenario: Broker lists a property at $125,000 for 120 days and actively markets it. No offers come in during the first 30 days. Broker advises her seller to lower the price by $5,000 to encourage some activity. The seller is adamant that the property is worth the list price and refuses. After another 15 days with no offers, the seller reluctantly lowers the price. He also tells the broker that he doesn't feel she is trying hard enough to sell the property and he's going to take it off the market if nothing happens. A week later an offer for $100,000 comes in from another company, which is presented and rejected. The seller is quite upset at the low offer and demands to be released from the listing. There is no further communication between the parties, but the listing is never formally terminated. Three weeks later the broker learns that the seller has entered into a contract with the same buyer for $110,000 and closing is set. The broker is very upset and wants to protect her commission. What can she do? 1. File a mechanics lien? ANS: No. Real estate licensees are not a protected class of lien claimant under the statute except as provided in C.R.S. 38-22.5 (Commercial Real Estate Brokers Commission Security Act). 2. File a lis pendens (notice of pending lawsuit)? ANS: No. A lis pendens relates to a title or ownership dispute involving the land itself. The broker has no legal interest in the real estate. 3. Record the listing contract? ANS: No. This will usually have the effect of clouding title to the property, which in turn affects the closing between buyer and seller. The broker should not interfere in the process of transferring title to property. 4. Escrow the disputed commission? ANS: Maybe. This is a touchy area. If the broker makes demand on the seller for the commission prior to closing and states her possible rights (mediation; arbitration; civil action) the parties may agree to an escrow pending settlement of the dispute. However, there is no legal requirement that the closing entity escrow funds absent an agreement. 5. Commence mediation, arbitration or civil action (as appropriate). ANS: Yes. Nothing prevents a licensee from asserting any legal claim against a principal. A commission dispute is an emotional issue. Sometimes a licensee has put in considerable time on a listing only to be faced with a seller who refuses to pay, attempts to renegotiate or is outright deceitful. On the other side, the Commission has witnessed instances in which the licensee had no legitimate right to a commission and was using superior knowledge and scare tactics to force payment. Clearly this is a time to consult a good real estate attorney and avoid the risk of a complaint based on a hasty decision.

According to Commission Position 25 on Recording Contracts, should a listing broker decide her Seller client is attempting to cheat her out of a commission, the broker can: A: File a mechanics lien to ensure the brokers'' claim for the commission is honored B: Record the listing contract so that it would appear in any Title Commitment for the property C: File a lis pendens to warn any potential buyer that a legal action is pending D: Commence mediation, arbitration or a civil action

D: Commence mediation, arbitration or a civil action Explanation: CP-25 Commission Position on Recording Contracts Over the years the Commission has received many inquiries and complaints concerning the recording of listing contracts to protect claims for commissions. In addition, some licensees have attempted more "creative" ways of holding up a closing, such as filing mechanics liens or notices of lis pendens, as well as recording demand letters or purchase contracts. The end result is usually a cloud on the title and sometimes a slander of title action. Some states have passed statutes authorizing the filing of such liens. Colorado has not. Filings and recordings such as these are inappropriate and will result in Commission action. Here is a typical scenario: Broker lists a property at $125,000 for 120 days and actively markets it. No offers come in during the first 30 days. Broker advises her seller to lower the price by $5,000 to encourage some activity. The seller is adamant that the property is worth the list price and refuses. After another 15 days with no offers, the seller reluctantly lowers the price. He also tells the broker that he doesn't feel she is trying hard enough to sell the property and he's going to take it off the market if nothing happens. A week later an offer for $100,000 comes in from another company, which is presented and rejected. The seller is quite upset at the low offer and demands to be released from the listing. There is no further communication between the parties, but the listing is never formally terminated. Three weeks later the broker learns that the seller has entered into a contract with the same buyer for $110,000 and closing is set. The broker is very upset and wants to protect her commission. What can she do? 1. File a mechanics lien? ANS: No. Real estate licensees are not a protected class of lien claimant under the statute except as provided in C.R.S. 38-22.5 (Commercial Real Estate Brokers Commission Security Act). 2. File a lis pendens (notice of pending lawsuit)? ANS: No. A lis pendens relates to a title or ownership dispute involving the land itself. The broker has no legal interest in the real estate. 3. Record the listing contract? ANS: No. This will usually have the effect of clouding title to the property, which in turn affects the closing between buyer and seller. The broker should not interfere in the process of transferring title to property. 4. Escrow the disputed commission? ANS: Maybe. This is a touchy area. If the broker makes demand on the seller for the commission prior to closing and states her possible rights (mediation; arbitration; civil action) the parties may agree to an escrow pending settlement of the dispute. However, there is no legal requirement that the closing entity escrow funds absent an agreement. 5. Commence mediation, arbitration or civil action (as appropriate). ANS: Yes. Nothing prevents a licensee from asserting any legal claim against a principal. A commission dispute is an emotional issue. Sometimes a licensee has put in considerable time on a listing only to be faced with a seller who refuses to pay, attempts to renegotiate or is outright deceitful. On the other side, the Commission has witnessed instances in which the licensee had no legitimate right to a commission and was using superior knowledge and scare tactics to force payment. Clearly this is a time to consult a good real estate attorney and avoid the risk of a complaint based on a hasty decision.

Colorado licensing law sets a standard for: A: Marketing B: Intelligence C: Performance D: Competency and integrity

D: Competency and integrity Explanation: Chapter 1 Real Estate Broker License Law from Real Estate Manual I. Reason for Its Enactment The Colorado Real Estate Broker License Law was passed to protect the people of the State of Colorado. Through licensing, the law seeks competency and integrity on the part of those engaged in the real estate business. The law has had the effect of raising the general standing of the real estate business and has helped to safeguard the interests of both the public and those engaged in the business. Reference Colorado Real Estate Manual

Which does NOT fall under Rule F? A: Contract to Buy/Sell (Commercial) B: Contract to Buy/Sell (Land) C:Deed of Trust D: Contract to purchase newly constructed home with warranties

D: Contract to purchase newly constructed home with warranties Explanation: This is an actual question from the licensing exam Rule F is the rule under which all approved contracts and the rules governing their use fall. To answer this question requires a knowledge of the contracts that are approved and those which are not. They are listed in the Printout section of our website. The non-approved contract in this list is the "contract to purchase newly constructed homes with warranties." New home builders are exempt from the rules established under the Conway-Bogues court decision. As such they are not required to use approved contracts and generally choose to use purchase contracts they create. Some students may wish to point out that some small new builders may choose to use the the approved purchase contract and add warranty info. This is true. However, please read the first sentence of this explanation again. We want you to be prepared to answer this question should you see it on the State exam.

***Which does NOT fall under Rule F? A: Contract to Buy/Sell (Commercial) B: Contract to Buy/Sell (Land) C: Deed of Trust D: Contract to purchase newly constructed home with warranties.

D: Contract to purchase newly constructed home with warranties. Explanation: This is an actual question from the licensing exam. Rule F is the rule under which all approved contracts and the rules governing their use fall. To answer this question requires a knowledge of the contracts that are approved and those which are not. They are listed in the Printout section of our website. The non-approved contract in this list is the "contract to purchase newly constructed homes with warranties". New home builders are exempt from the rules established under the Conway-Bogues court decision. As such they are not required to use approved contracts and generally choose to use purchase contracts they create. Some students may wish to point out that some small new builders may choose to use the the approved purchase contract and add warranty info. This is true. However, please read the first sentence of this explanation again. We want you to be prepared to answer this question should you see it on the State exam.

In Colorado, a developer must register with the real estate commission for which of the following projects? A: Mini-warehouse project with over one hundred storage units B: Condominium office park with 40 office warehouse units for sale C: Subdivision of 100 acres into 10 sites for residential use D: Conversion of an apartment complex into 25 residential condominiums

D: Conversion of an apartment complex into 25 residential condominiums Explanation: A developer must register with the real estate commission for the conversion of an apartment complex into 25 residential condominiums.

An inaccurate county tax certificate failed to indicate the correct taxes due. Additional tax money due would be the responsibility of the: A: Title Company B: Buyer''s Agent C: Seller D: County Treasurer

D: County Treasurer Explanation: The fault lies with the County Treasurer

An inaccurate county tax certificate failed to indicate the correct taxes due. Additional tax money due would be the responsibility of the: A: Title Company B: Buyer's Agent C: Seller D: County Treasurer

D: County Treasurer Explanation: The fault lies with the County Treasurer

The Colorado Contract to Buy & Sell states that "time is of essence hereof". This statement means that: A: All dates and deadlines must be performed within a reasonable margin of the stated time or date B: Everything not done by closing will be waived C: Everything in the contract must be complete within one year D: Dates and deadlines will be strictly interpreted

D: Dates and deadlines will be strictly interpreted Explanation: The legal phrase is that timing is important to the contract, and every date and deadline must be taken care of on or before that time.

The Colorado Contract to Buy & Sell states that "time is of essence hereof." This statement means that: A: All dates and deadlines must be performed within a reasonable margin of the stated time or date B: Everything not done by closing will be waived C: Everything in the contract must be complete within one year D: Dates and deadlines will be strictly interpreted

D: Dates and deadlines will be strictly interpreted Explanation: The legal phrase is that timing is important to the contract, and every date and deadline must be taken care of on or before that time. From the Contract to Buy and Sell: Please note the numbers in the following clause may change periodically although the language remains essentially the same.... TIME OF ESSENCE, DEFAULT AND REMEDIES. Time is of the essence hereof. If any note or check received as Earnest Money hereunder or any other payment due hereunder is not paid, honored or tendered when due, or if any obligation hereunder is not performed or waived as herein provided, there shall be the following remedies: xx.x. If Buyer is in Default: xx.x.x. Specific Performance. Seller may elect to treat this Contract as cancelled, in which case all Earnest Money (whether or not paid by Buyer) shall be paid to Seller and retained by Seller; and Seller may recover such damages as may be proper; or Seller may elect to treat this Contract as being in full force and effect and Seller shall have the right to specific performance or damages, or both. Liquidated Damages, Applicable. This § xx.x.x shall apply unless the box in § xx.x.x. is checked. All Earnest Money (whether or not paid by Buyer) shall be paid to Seller, and retained by Seller. Both parties shall thereafter be released from all obligations hereunder. It is agreed that the Earnest Money specified in § x.x is LIQUIDATED DAMAGES, and not a penalty, which amount the parties agree is fair and reasonable and (except as provided in §§ xx.x, xx, xx and xx), said payment of Earnest Money shall be SELLER'S SOLE AND ONLY REMEDY for Buyer's failure to perform the obligations of this Contract. Seller expressly waives the remedies of specific performance and additional damages. If Seller is in Default: Buyer may elect to treat this Contract as cancelled, in which case all Earnest Money received hereunder shall be returned and Buyer may recover such damages as may be proper, or Buyer may elect to treat this Contract as being in full force and effect and Buyer shall have the right to specific performance or damages, or both.

The payoff of an existing loan appears on a closing statement as a: A: Credit to the buyer B: Credit to the seller C: Debit to the buyer D: Debit to the seller

D: Debit to the seller Explanation: Sellers are charged for paying off their existing loan. Debit Seller. The corresponding entry is Credit Broker so that a check will be sent to the sellers lender. More info: This answer to this question refers to the 6 column worksheet which pre-personal computer days was used to calculate the numbers for a closing. The broker engages the title company to act as scrivener and conduct the closing which includes deposits and withdraws into and out of the closing escrow account. Although the escrow account used for closings is managed by the title company closer, legally the listing broker is still responsible for it. Therefore, on the 6 column settlement worksheet the columns pertaining to the closing escrow account are labeled "Broker Credit" and "Broker Debit." Deposits into the closing escrow account are placed into the Broker Debit Column and withdrawals are listed in the Broker Credit column. Wait a minute! How can a deposit be a debit? Unfortunately that is how it works. The 6 column settlement worksheet twists slightly the traditional rules of accounting so that the person responsible for the closing escrow account knows what checks to write and deposits to make. S/he does this by dedicating the "Broker Debit" column to deposits and the "Broker Credit" column to withdrawals. This way, for example, if the seller owes the County Treasurer for back taxes, the closer can take the money from the Seller by indicating Debit Seller and have a reminder to write a check to the County Treasurer by placing the corresponding credit into the Broker Credit column. When all is said and done accounting gods are happy as all debits and credits are in balance.

Which of the following would an unlicensed personal assistant be permitted to do? A: Complete and present a comparative market analysis B: Drive potential buyers to a listing and discuss purchase options C: Answer questions about the seller's motivations as long as they are correct D: Distribute factual literature prepared by a licensed associate

D: Distribute factual literature prepared by a licensed associate Explanation: An unlicensed assistant is allowed to distribute literature, they can chauffeur buyers to a property with the seller's permision as long as no licensed activity is performed and they may complete but not present market analysis.

Which items are not considered physically attached to the property and are not included in the sale? A: Light fixtures B: Curtain rods C: Storage rods D: Draperies

D: Draperies Explanation: Personal property is not included in the sale of real estate. Draperies do not satisfy the tests of fixtures since they are not permanently attached. All other items in the answers are permanently attached.

When doing a seller carryback, which would NOT be an approved deed of trust form? A: Due on Transfer-Creditworthy Restriction B: Due on Transfer-Strict C: Assumable-Not Due on Sale D: Due on Transfer-1% Interest Escalation

D: Due on Transfer-1% Interest Escalation Explanation: The approved Deeds of Trust forms are: Deed of Trust (Due on Transfer-Credit Worthy Restriction, Deed of Trust (Due on Transfer-Strict), Deed of Trust (Assumable-Not Due on Sale)

In Colorado, commissions for real estate transactions are set by: A: The Colorado Real Estate Commission B: Law C: Local boards of realtors D: Each brokerage firm

D: Each brokerage firm Explanation: Each brokerage firm sets its own commission structure parameters, or else it could be construed as price fixing and a violation of Sherman Antitrust Laws.

Marketable title means that the ownership and possession of property is readily transferable since it is free from valid claims by outside parties. Which of the following would NOT be acceptable as evidence of marketable title? A: Torrens certificate B: Title insurance C: Abstract and opinion D: General warranty deed

D: General warranty deed Explanation: A Torrens certificate is used in Eastern Colorado and is considered evidence of title. Title insurance indicates the condition of title. An abstract and attorney's opinion would be an indication of the condition of title. A general warranty deed conveys ownership, but does not name the current liens and defects upon the title and is NOT proof that the title is marketable.

When using the income approach to value, which of the following items is used to calculate the income? A: Gross rents, vacancies, maintenance, interest payments, property taxes, utilities B: Gross rents, vacancies, maintenance, management, property taxes, depreciation, and utilities. C: Gross rents, vacancies, maintenance, property management, property taxes, income taxes D: Gross rents, vacancies, maintenance, management, property taxes, utilities and reserve account expenses

D: Gross rents, vacancies, maintenance, management, property taxes, utilities and reserve account expenses Explanation: The items never used as operating expenses in the income approach are (1) principal and interest, (2) depreciation, (3) income taxes, and (4) capital improvements. Answer "d" does not contain any of these items.

A note accepted by the seller as earnest money must be: A: Made payable to buyer B: Made payable to seller C: Made payable to broker D: Held by the title company or listing broker, whichever is designated in the Contract to Buy & Sell

D: Held by the title company or listing broker, whichever is designated in the Contract to Buy & Sell Explanation: The earnest money is held as designated in the contract.

If a client asks whether it would be beneficial to add a second bathroom to increase profit on the sale of the home, what would be the appropriate response? A: yes, an additional bathroom will always add more value than it costs to add it in B: no, the additional bathroom will never add more value than it costs to put in C: I cannot answer this, I am a real estate broker not a construction expert and I do not have the expertise to answer this question D: I would be happy to do some research or analysis and speak to a construction expert on costs to determine if it's worth it

D: I would be happy to do some research or analysis and speak to a construction expert on costs to determine if it's worth it Explanation: Agents are experts on real estate values and transactions but not on construction costs. The best approach is to get a construction experts opinion on the cost of adding a bathroom and then perform additional research to determine if the value increase would justify the expenditure. This takes the agent out of being the expert on construction costs and places the agent in the correct role of recommending soliciting expert advise when the topic is outside the agent's expertise.

As per the Exclusive Right-to-Sell Listing Contract, fixtures listed on the approved form will be included: A: In every case B: Unless they are crossed out on the form C: If on the property at the time of the listing D: If attached on the date of the listing unless specifically excluded by the seller

D: If attached on the date of the listing unless specifically excluded by the seller Explanation: All fixtures will be included unless specifically excluded by the seller at the time the listing was taken.

As per the Real Estate Commission position regarding Megan's Law: A: the Listing Broker must make this disclosure B: this is a material fact C: The Buyer's broker should research this D: If important to the buyer, the buyer should check with law enforcement officials.

D: If important to the buyer, the buyer should check with law enforcement officials. Explanation: CP-29 Commission Position on "Megan's Law" (Adopted July 1, 1999) The Commission has been asked for its position as to the disclosure requirements for real estate licensees with regard to "Megan's Law." In 1994, and primarily as a response to the murders of two young girls, a federal law was passed creating a registration and notification procedure to alert the public as to the presence of certain types of convicted sex offenders living in a neighborhood. This is commonly referred to as "Megan's Law." Identified sex offenders are required to register with local law enforcement officials. The federal law also required states to establish registries of convicted sex offenders. It contains no disclosure requirements for real estate licensees when working with the public. In compliance with federal law, Colorado enacted legislation that sets procedures and timeframes for local registration. The office of chief of police is the designated place of registration for those offenders residing within any city, town or city and county. The office of the county sheriff is the designated place of registration for those living outside any city, town or city and county, in addition, the law enforcement agency is required to release information regarding registered persons. However, the duty to release information may differ depending on whether the inquiring party does or does not live within that jurisdiction. While legislation in a few states has specifically imposed disclosure requirements on real estate licensees working with buyers and sellers, Colorado's legislation imposes no such requirements. Colorado's legislation clearly places the duty to release information on the local law enforcement agency, after considering a request. It is the position of the Real Estate Commission that all real estate licensees should inform a potential buyer to contact local law enforcement officials for further information if the presence of a registered sex offender is a matter of concern to the buyer. Editor's Note: C.R.S. 18-3-412.5 requires the Colorado Bureau of Investigation to post on the Internet identifying information, including a picture, of each sex offender: • Sentenced as a sexually violent predator; or • Convicted of a sexual offense involving children

The Colorado Contract to Buy & Sell establishes a Loan Objection Deadline if the buyer is getting a new loan. What is the effect of the deadline? A: The buyer must provide written commitment to the seller by that date B: The contract is contingent on actual funding of the new loan at closing C: If the buyer cannot get a satisfactory loan by that date, the contract terminates on that date D: If the buyer cannot get a satisfactory loan by that date, the buyer may terminate the contract with written notice to the seller

D: If the buyer cannot get a satisfactory loan by that date, the buyer may terminate the contract with written notice to the seller Explanation: A buyer has until the Loan Objection Deadline to provide written notice s/he cannot get a commitment for a satisfactory loan and wants to terminate the contract. If s/he does provide such notice, the earnest money is refunded to the buyer. If the buyer does not provide such notice, the contract continues, but the buyer's earnest money becomes nonrefundable should s/he not receive a loan. From the Contract to Buy/Sell Real Estate: Loan Objection. If Buyer is to pay all or part of the Purchase Price with a New Loan, this Contract is conditional upon Buyer determining, in Buyer's sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions, and cost of such New Loan. This condition is for the sole benefit of Buyer. Buyer has the Right to Terminate on or before Loan Objection Deadline, if the New Loan is not satisfactory to Buyer, in Buyer's sole subjective discretion. IF SELLER IS NOT IN DEFAULT AND DOES NOT TIMELY RECEIVE BUYER'S WRITTEN NOTICE TO TERMINATE, BUYER'S EARNEST MONEY WILL BE NONREFUNDABLE, except as otherwise provided in this Contract (e.g., Appraisal, Title, Survey).

Agency means the broker owes to their clients certain duties. Which of the following is NOT TRUE: A: Loyalty B: Honesty C: Accounting D: Indemnification

D: Indemnification Explanation: Here is a definition of indemnification from The Free Dictionary: "To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person." As brokers we assist our clients with expert knowledge regarding real estate transactions. We are not an insurance company. The agency relationship evolved from the master-servant relationship under English common law. The servant owed absolute loyalty to the master. This loyalty was superior to the servant's personal interests as well as the interests of others. Common law is established by court decisions. Under common law, the agent owes the principal five duties, including: (1) care: (2) obedience, (3) accounting, (4) loyalty (including confidentiality), and (5) disclosure. Statutory law is the law enacted by the legislature.

The Colorado Real Estate Commission has approved all but which of the following forms? A: Closing Instruction and Earnest Money receipt B: Earnest Money Promissory Note C: Agency/Subagency Disclosure D: Intent to Pay off Loan

D: Intent to Pay off Loan Explanation: Intent to pay off loan is not a Colorado Real Estate Commission approved form.

In the section on Purchase Price and Terms in a Residential Contract to Buy and Sell, which of the following is true concerning the entry for cash at closing? A: It represents the total amount the buyer should plan to bring to closing B: It should match the good-faith estimate provided with the HUD-1 form C: It represents the approximate amount the seller will receive at closing D: It does not include the buyer's closing costs, such as loan fees

D: It does not include the buyer's closing costs, such as loan fees Explanation: The line item of cash at closing is entered in order to complete the math showing the sources of funds equal the total purchase price. The amount does not include closing costs or new loan fees and is not intended to represent final figures.

When an Exclusive Right-to-Buy Contract has been executed, who is obligated to pay the broker working with the buyer? A: The seller B: The listing broker C: The buyer D: It is determined by which box or boxes are checked in the contract

D: It is determined by which box or boxes are checked in the contract Explanation: Whichever box or boxes are checked in the contract is who has to pay. See para. 7.1, 7.2 (all), and 7.3. of Exclusive Right-To-Buy Contract.

K and R bought a house as tenants in common. If K dies, which of the following statements about ownership is correct? A: It automatically becomes tenancy in severalty B: R holds fee simple ownership in K's share of the property C: R holds life estate ownership in K's share of the property D: It is divided, with R retaining R's original interest and the balance going to K's estate

D: It is divided, with R retaining R's original interest and the balance going to K's estate Explanation: Tenants in Common has no rights of survivorship therefore it goes to k's estate. More info on joint ownership - There are three types of concurrent ownership, or ownership of property by two or more persons: Tenancy by the Entirety, Joint Tenancy, and Tenancy in Common. A Tenancy by the Entirety can be created only by married persons. Anybody regardless of married status may choose to create a Joint Tenancy or a Tenancy in Common. First of all Tenancy by the Entirety is not used in Colorado we use Joint Tenancy for this purpose instead. Still, the term occasionally makes an appearance on the National side of the licensing exam as some state do use it. So, it is best to know it. Tenancy by the Entirety allows spouses to own property together as a single legal entity. Under a tenancy by the entirety, creditors of an individual spouse may not attach and sell the interest of a debtor spouse: only creditors of the couple may attach and sell the interest in the property owned by tenancy by the entirety. The most important difference between a tenancy by the entirety and a joint tenancy or tenancy in common is that a tenant by the entirety may not sell or give away his interest in the property without the consent of the other tenant. Upon the death of one of the spouses, the deceased spouse's interest in the property devolves to the surviving spouse, and not to other heirs of the deceased spouse. This is called the right of survivorship. Tenants in common do not have a right of survivorship. In a tenancy in common, persons may sell or give away their ownership interest. Joint tenants do have a right of survivorship, but a joint tenant may sell or give away her interest in the property. If a joint tenant sells her interest in a joint tenancy, the tenancy becomes a tenancy in common, and no tenant has a right of survivorship. A tenancy by the entirety cannot be reduced to a joint tenancy or tenancy in common by a conveyance of property. Generally, the couple must Divorce, obtain an Annulment, or agree to amend the title to the property to extinguish a tenancy by the entirety

Which of the following is NOT a fixture: A: Shrub B: Tree C: Swimming Pool D: Land

D: Land Explanation: Land is not a fixture. Land is something to which fixtures are attached. Fixtures are anything which is permanently attached to land or improvements such as patios, garage doors, grass, windows and basketball hoops. Personal property is something that is in or on land or improvement but can be removed without damage to the land or improvement, such as a non-built-in fridge, patio furniture, cars, washer/dryers and your prized velvet Elvis. How to Tell if Personal Property is a Fixture All states have their own rules for what constitutes a fixture, but here are the five tests most courts use to determine what is a fixture and what is not. It's called M-A-R-I-A. 1) Method of attachment. Is the item permanently affixed to the wall, ceiling or flooring by using nails, glue, cement, pipes, or screws? Even if you can easily remove it, the method used to attach it might make it a fixture. For example, ceiling lights, although attached by wires, can be removed, but the lights are a fixture. 2) Adaptability. If the item becomes an integral part of the home, it cannot be removed. For example, a floating laminate floor is a fixture, even though it is snapped together. One could argue that a built-in refrigerator is considered a fixture, although it can be unplugged, because it fits inside a specified space. 3) Relationship of the parties. If the dispute is between tenant and landlord, the tenant is likely to win. If the dispute is between buyer and seller, the buyer is likely to prevail. 4) Intention of party when the item was attached. When the installation took place, if the intent was to make the item a permanent attachment, for example, a built-in bookcase, the item is a fixture. 5) Agreement between the parties. Read your purchase contract. Most contain a clause that expressly defines items included in the sale and ordinarily state "All existing fixtures and fittings that are attached to the property."

Einstein bought a property from Plato. Einstein agreed to pay Plato $1615 per month for the next 15 years. Then the total balance will be due and legal title will change hands at that time. This is called a: A: Blanket mortgage B: Amortized mortgage C: Wrap around mortgage D: Land contract

D: Land contract Explanation: If title does not pass until the property has been paid in full, then it is a land contract and the payments are going directly to the seller.

A landowner has two interested parties, which of the following strategies would give the landowner the best return. A: Lease to a rancher who wants to graze horses B: Lease to an oil company who wants to drill for oil C: Lease to only one or the other D: Lease to both

D: Lease to both Explanation: This question was testing the legal concept of "bundle of rights" using a practical situation common in Colorado. Bundle of Rights is a term used to describe that property ownership can have different aspects to it and as such each aspect or "right" can be leased or sold or otherwise treated separately. In this question, the oil company is interested in the mineral rights and the rancher in the surface rights for grazing. These are different rights. As the rights are not mutually exclusive, that is the oil company could use a portion of the property to drill and gain access to the oil, while the horse are grazing on the remainder, the landowner would likely receive maximum revenue by leasing to them both.

Which one of the following is not a person who acquires title to real estate? A: Vendee B: Devisee C: Grantee D: Lessee

D: Lessee Explanation: A lessee is the holder of a lease estate; therefore he does not actually have title to real estate.

In the Colorado Contract to Buy & Sell, if the buyer receives a property inspection report on the day after the Inspection Objection Deadline, and the report contains several serious matters. The buyer: A: Can compel the seller to correct these serious defects B: Is in default for missing the deadline and the seller may terminate the contract C: May still object since they did not receive the report until after the deadline D: Missed the opportunity to object based on inspections issues, and the contract is still in force

D: Missed the opportunity to object based on inspections issues, and the contract is still in force Explanation: Dates matter. If the buyer does not file an objection prior to the deadline they have signified the condition of the property is satisfactory. Further they have lost the right to object to an inspection item.

In the Colorado Contract to Buy & Sell , if the buyer receives a property inspection report on the day after the Inspection Objection Deadline , and the report contains several serious matters. The buyer: A: Can compel the seller to correct these serious defects B: Is in default for missing the deadline and the seller may terminate the contract C: May still object since they did not receive the report until after the deadline D: Missed the opportunity to object based on inspections issues, and the contract is still in force.

D: Missed the opportunity to object based on inspections issues, and the contract is still in force. Explanation: If the buyer does not file an objection prior to the deadline the inspection contingency is waived

Trust Account journal and ledger documentation of disbursements from trust accounts need NOT include: A: Records verifying purpose of payment B: Amount paid and the resulting balance C: Date of payment and check number D: Name of the person who wrote the check out of the account

D: Name of the person who wrote the check out of the account Explanation: Rule E-1 (p) Recordkeeping requirements A broker shall supervise and maintain, at the broker's licensed place of business, a record keeping system, subject to subsection (7) of this rule, consisting of at least the following elements for each required escrow or trust account: (1) A record called an "escrow or trust account journal" or an equivalent accounting system which records in chronological sequence all money belonging to others which is received or disbursed by the broker. For funds received, the records maintained in the system must include the date of receipt and deposit, the name of the person who is giving the money, the name of the person and property for which the money was received, the purpose of the receipt, the amount, and. a resulting cash balance for the account. For funds disbursed, the records maintained in the system must include the date of payment, the check number, the name of the payee, a reference to vendor documentation or other physical records verifying purpose for payment, the amount paid, and a resulting cash balance for the account. Reference Rule E-1 (p)

In the Contract to Buy/Sell Real Estate (AKA the purchase contract), who is responsible for the cost of the appraisal? A: Buyer B: Seller C: Split between all parties to the contract D: Negotiable

D: Negotiable Explanation: Who pays what in the purchase contract is always a matter of negotiation. Although there are traditions that we follow, such as the Seller paying for Title Insurance, this is custom and not law. Neither the Real Estate Commission or State Statutes will tell a Buyer or Seller what they must pay.That is between the buyer and the seller. From the real estate contract: Cost of Appraisal. Cost of any appraisal to be obtained after the date of this Contract must be timely paid by ___ Buyer ___ Seller. The cost of the appraisal may include any and all fees paid to the appraiser, appraisal management company, lender's agent or all three.

When is the broker obligated to advance funds on the buyer's behalf? A: When buyer is short of funds B: When additional inspection tests are done on the property to be purchased C: Always D: Never

D: Never Explanation: The broker is never obligated to advance funds on the buyer's behalf.

You're holding an open house for another agent. A prospective buyer comes in and asks a bunch of questions. You can't answer some of the questions but tell her you will get back to her. What is your relationship with this individual? A: Express Agent B: General Agent C: Buyer's Agent D: No agency was created

D: No agency was created Explanation: An agency relationship can only be created through the express consent of the potential client. Providing information does not constitute consent to establish an agency relationship.

A Seller asks an agent/friend to accept compensation to advise on Tax and Title matters for a property the seller is considering buying. Can the agent do this? A: Yes, brokers provide this advice commonly B: Yes, as long as the agent is engaged as a buyer's agent C: No, the agent is not a buyer's agent and therefore cannot provide this advice D: No, this is outside the scope of permitted activities for a holder of a real estate license

D: No, this is outside the scope of permitted activities for a holder of a real estate license Explanation: This violates the Conway-Bogue court decision which in Colorado binds the conduct of agents. Agents are recognized authorities at conducting real estate transactions. We are not experts at tax and title matters. Those are within the recognized legal expertise of accountants, title examiners and lawyers. A real estate broker is expected to recommend to clients they seek expert advice when the matter is outside their area of expertise.

A real estate agent can do which of the following for free if not involved in the transaction? A: A land contract B: A deed C: A will D: None of the above

D: None of the above Explanation: Doing any of these would be considered the practice of law without a license.

Associate Broker Jane Holmes is a party to which executory contract? A: Contract to Buy and Sell Real Estate B: Counterproposal C: Agreement to Amend/Extend D: None of the above

D: None of the above Explanation: The broker would be a party to an Exclusive Right-to-Buy or -Sell Listing Contract, but not to a purchase and sale contract. All of the contracts listed in the answers are purchase contracts or related to a purchase contract, and the broker is never a party to a purchase contract, only the buyer and seller are. The broker IS a party to any service contract, which is the listing agreement - either to buy or sell.

Which statements are true about VA guaranteed loans? A: The seller cannot pay all the closings costs, the funding fee or pay off any of the veteran's debts B: The borrower cannot pay discount points C: There is a maximum loan amount VA will lend D: None of the above

D: None of the above Explanation: With a VA loan the seller can pay all closing costs, the funding fee and pay off the veteran's debts. The maximum amount that the VA will guarantee varies by region of the country, but there is no maximum loan amount.

Broker is allowed to facilitate safeguards for seller assisted financing by adherence to the following EXCEPT: A: Advise buyers and sellers to consult legal and tax counsel for advice B: Cooperate with appraisers as they perform their due diligence in asking questions about sales C: Advise seller as to the impact of any seller paid costs D: Notify Real Estate Commission of true selling price of home

D: Notify Real Estate Commission of true selling price of home Explanation: The real estate commission does not track sale prices of homes. CP-30 State of Colorado Real Estate Commission and Board of Real Estate Appraisers Joint Position Statement The Colorado Real Estate Commission and the Colorado Board of Real Estate Appraisers have issued this Joint Position Statement to address mutual concerns pertaining to practices of real estate brokers and real estate appraisers with regard to residential sales transactions involving seller assisted down payments, seller concessions, personal property transferred with real property and other items of value included in the sale of residential real property. A residential real estate transaction has a life well beyond closing and possession of the property. Accurate sales data is crucial for appraisals and comparative market analysis (CMA) work products. Both appraisers and real estate brokers can effectively work together to maintain the safeguards that accurate sold data affords. A real estate broker can facilitate these safeguards by adherence to the following: • Note the amount of any seller paid costs (including a seller assisted down payment or fee paid to a charitable organization on behalf of the buyer) or other seller concession in the proper transaction documents, including the Buy/Sell Contract, Closing Statements, and Real Property Transfer Declaration. • Utilize all available fields in the multiple listing service to report sold information including all transaction terms and seller concessions. Sold information should be entered promptly following closing and be specific and detailed particularly when the sold price includes a seller assisted down payment or concessions. • Advise buyers and sellers to consult legal and tax counsel for advice on tax consequences of seller contributions and inducements to purchase. • Cooperate with appraisers as they perform their due diligence in asking questions about sales.

How much in personal funds can you keep in the escrow account? A: none B: $100 C: $500 D: Only enough to maintain the account

D: Only enough to maintain the account Explanation: Generally, mixing personal funds with escrow funds is considered a bad thing and even has a name attached to it called "commingling". However, the Commission does recognize that as a practical matter, banks sometimes have require a minimum balance in the account. Under these circumstances ONLY it is permitted to maintain an amount of personal funds in the escrow account to meet minimum balance requirements.

A couple owns and investment property and wants to sell it to buy a new investment property. The best way for them to defer capital gains tax is: A: Take the $500,000 capital gains exemption for this two-year period B: Take a $250,000 capital gains exemption for this two-year period C: There is no way to defer capital gains on an investment property. D: Perform a 1031 like-kind exchange for a more expensive property.

D: Perform a 1031 like-kind exchange for a more expensive property. Explanation: According to the IRS: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment." This means that as long as an investor follows the rules for a "1031 exchange" the investor will be able to sell one investment property and transfer the gain on that property to another purchased property. Since the investor never removed the gain, the investor can defer payment of capital gains taxes on that gain until such time as the asset is sold and not exchanged for another. The answers relating to the $500,000 capital gains exemption for a couple and the $25000 exemption for an individual pertain to personal residences and not investment property.

Which of the following is not an approved form or contract: A: Exclusive Right-To-Lease Listing B: Brokerage Disclosure to Tenant C: Brokerage Duties Addendum to Property Management D: Property Management Agreement

D: Property Management Agreement Explanation: The real estate commission does indicate that a property manager must have an agreement with their clients and what the minimum topics that must be in a property management agreement are, but does not have an approved pre-written agreement.

All of the following are true when a lender must comply with RESPA, except: A: a lender is required to provide a borrower a Loan Estimate of loan settlement costs at time of loan application or within three days of loan application B: the Closing Disclosure is required for every closing C: under RESPA a lender or seller may not require the use of a particular title insurance which is to be purchased by the buyer D: RESPA applies to nearly all first loans on residential up to four family properties including construction loans

D: RESPA applies to nearly all first loans on residential up to four family properties including construction loans Explanation: Construction loans are not included.

A three-day right of rescission can be invoked for which contract? A: Residential contract to buy/sell real estate B: Commercial contract to buy/sell real estate C: Exclusive right-to-buy contract (buyer's agency) D: Refinancing of your primary residence

D: Refinancing of your primary residence Explanation: There is no 3-day right on any of the approved contracts. 3-day right of recission is valid only on refinances.

A client is buying an old gas station with the intention of building a flower shop. The lender will likely ask for: A: A Phase 1 environmental assessment with a visual inspection and neighbor interviews B: An Environmental Impact Study (EIS) C: A Phase 2 environmental statement with soil testing D: Request if a CERCLA assessment report has been issued in the prior 2 years making the property owner innocent of past environmental liabilities as per the Brownfield Revitalization Act

D: Request if a CERCLA assessment report has been issued in the prior 2 years making the property owner innocent of past environmental liabilities as per the Brownfield Revitalization Act Explanation: Some would say the "choose the longest answer" strategy would lead you to the correct answer on this question and they would be right. A better technical explanation is CERCLA is more commonly known as the Superfund law. CERCLA generally says that all current and past owners of a property may be held responsible for environmental cleanup regardless of whether any particular owner was responsible for the contamination. Recognizing that this could put a chill on anyone wanting to purchase industrial parcels, the government passed the Brownfields Revitalization Act. Brownfields is a term for contaminated properties. This act is an amendment to the federal Superfund law, which provide for BFPP (bona fide prospective purchaser) status for new buyers. This status provides assurance to lenders that the borrower will not be liable and will not affect their ability to repay the lender. Attaining BFPP status requires the client to jump through a number of hoops such as conducting a Phase 1 environmental assessment, but a lender would likely first ask if BFPP status has already been granted.

Misrepresentation by a party to a contract differs from fraud as to the: A: consideration B: voidability of the agreement C: requirement of competency D: Requirement of intent

D: Requirement of intent Explanation: Fraud is deceitful practice or material misstatement of a material fact, known to be false, and done with the intent to deceive. Misrepresentation.... actions or words that may convey a false message, may be unintentional.

Brokers should provide safeguards on seller-assisted down payments on: A: Commercial transactions B: Land transactions C: Time share transactions D: Residential transactions

D: Residential transactions Explanation: As per Commission Position Statement 30 (CP-30) "The Colorado Real Estate Commission and the Colorado Board of Real Estate Appraisers have issued this Joint Position Statement to address mutual concerns pertaining to practices of real estate brokers and real estate appraisers with regard to residential sales transactions involving seller assisted down payments, seller concessions, personal property transferred with real property and other items of value included in the sale of residential real property. A residential real estate transaction has a life well beyond closing and possession of the property. Accurate sales data is crucial for appraisals and comparative market analysis (CMA) work products. Both appraisers and real estate brokers can effectively work together to maintain the safeguards that accurate sold data affords."

Brokers should provide safeguards on seller-assisted down payments on: A: Commercial transactions B: Land transactions C: Time share transactions D: Residential transactions

D: Residential transactions Explanation: As per Commission Position Statement 30 (CP-30) "The Colorado Real Estate Commission and the Colorado Board of Real Estate Appraisers have issued this Joint Position Statement to address mutual concerns pertaining to practices of real estate brokers and real estate appraisers with regard to residential sales transactions involving seller assisted down payments, seller concessions, personal property transferred with real property and other items of value included in the sale of residential real property. A residential real estate transaction has a life well beyond closing and possession of the property. Accurate sales data is crucial for appraisals and comparative market analysis (CMA) work products. Both appraisers and real estate brokers can effectively work together to maintain the safeguards that accurate sold data affords."

What fee will ALWAYS show as a credit on the sellers closing statement? A: Recording the Warranty Deed B: Documentary Fee C: New Loan Amount D: Sales Price

D: Sales Price Explanation: The seller, not the buyer, recieves the sales price of the property, hence it is always Seller Credit.

A broker managing how many properties must maintain an operating funds trust account and a security deposit trust? A: Two B: Four C: Six D: Seven

D: Seven Explanation: A broker who manages less than seven (7) single-family residential units may deposit rental receipts and security deposits and disburse money collected for such purposes in the "sales escrow" account. The law requires that a broker managing seven or more properties must have a minimum of two escrow accounts, one for security deposits and one for operating funds. If the broker transacts seven or more sales transactions then the broker must have a third "sales escrow" account.

Mr. and Mrs. Snively have a contract to purchase a home for $257,000. A hail storm damaged the roof to the tune of $27,500 before closing. What remedy does the buyer have? A: Snivelys can be entitled to credit for half the insurance proceeds resulting from the damage B: Snivelys broker can wait until the roof is repaired then make a decision whether they want to continue with the contract C: Snivelys can demand that the roof be replaced prior to closing D: Snivelys have an option of whether they will or will not proceed with this contract

D: Snivelys have an option of whether they will or will not proceed with this contract Explanation: The damage was !0% of the purchase price: From the purchase contract: Causes of Loss, Insurance. In the event the Property or Inclusions are damaged by fire, other perils or causes of 619 loss prior to Closing in an amount of not more than ten percent of the total Purchase Price (Property Damage), and if the repair of 620 the damage will be paid by insurance (other than the deductible to be paid by Seller), then Seller, upon receipt of the insurance 621 proceeds, will use Seller's reasonable efforts to repair the Property before Closing Date. Buyer has the Right to Terminate under 622 § 25.1, on or before Closing Date if the Property is not repaired before Closing Date or if the damage exceeds such sum.

The Real Estate Commission may NOT issue a temporary license to prevent hardship to a: A: Limited Liability Company B: Corporation C: Partnership D: Sole proprietor

D: Sole proprietor Explanation: Every company must have an employing broker at all times. If something should happen to an employing broker, such as leaving the company, the real estate commission can issue a "hardship" license to someone else to act as the interim employing broker while the company settles on a permanent employing broker. The only rule for the "hardship" employing broker is that he/she must have an active Colorado license. The problem with someone who is a sole proprietor i.e. they are an independent agent working for themselves, is that there is no one else in the company to become the employing broker. Statute below: Rule 12-61.103 (7) (3) - "If the person so designated is refused a license by the real estate commission or ceases to be the designated broker of such partnership, limited liability company or corporation, such entity may designate another person to make application for a license. If such person ceases to be the designated broker of such partnership,, limited liability company or corporation, the director may issue a temporary license to prevent hardship for a periord not to exceed 90 days to the licensed person so designated." Reference Rule 12-61.103 (7) (c)

Who is responsible for the cost of Mediation? A: The buyer B: The seller C: The losing party D: Split equally between buyer and seller

D: Split equally between buyer and seller Explanation: MEDIATION. If a dispute arises relating to this Contract, prior to or after Closing, and is not resolved, the parties must first proceed in good faith to submit the matter to mediation. Mediation is a process in which the parties meet with an impartial person who helps to resolve the dispute informally and confidentially. Mediators cannot impose binding decisions. The parties to the dispute must agree, in writing, before any settlement is binding. The parties will jointly appoint an acceptable mediator and will share equally in the cost of such mediation. The mediation, unless otherwise agreed, will terminate in the event the entire dispute is not resolved within thirty days of the date written notice requesting mediation is delivered by one party to the other at the party's last known address. This section will not alter any date in this Contract, unless otherwise agreed.

Davis defaulted on his mortgage and the lender began foreclosure proceedings. At the foreclosure sale Davis's house was sold for $115,000 while the unpaid balance of the loan was $121,000. What can the lender do about the $6,000 difference? A: Sue for specific performance B: Sue for injunctive relief C: Sue for monetary damages D: Sue for a deficiency judgment

D: Sue for a deficiency judgment Explanation: Suit can be brought for the deficiency from what was owed to what was received by the lender, it is a deficiency judgment.

What should you do if a buyer shows up at your office at 1:00 PM with a personal check for the closing funds for a closing scheduled at 2:00 PM? A: Have the buyer sign a note to replace the check B: Cancel the closing for breach of contract C: Accept the check since it is on a local bank D: Take the buyer to the bank to get a cashier's check

D: Take the buyer to the bank to get a cashier's check Explanation: Note of the other answers would be bringing "Good Funds" to the closing table.

An Exclusive Right-to-Sell Listing contract establishes which of the following agreements? A: That the broker will never sue the seller B: That the seller will never sue the broker C: That the broker and the seller will use the same attorney D: That the broker and the seller will submit to mediation prior to litigation

D: That the broker and the seller will submit to mediation prior to litigation Explanation: Section 24, Alternative Dispute Resolution: Mediation provides for disputes between the parties, to submit the matter first, to mediation.

Colorado was surveyed using primarily the 6th Principal Meridian. Which of the following was used as the Baseline? A:UTE Principal Meridian B: New Mexico Principal Meridian C: New Mexico parallel D: The 40th latitude

D: The 40th latitude Explanation: The 40th latitude is the base line used to survey Colorado.

The contract to Buy and Sell Real Estate has a Dates and Deadlines section. Should these dates be ignored: A: Within 24 hours of violating a date the contract terminates B: The buyer will lose the earnest money C: The contract terminates D: The Time of Essence clause would come into effect

D: The Time of Essence clause would come into effect Explanation: Time of Essence clause mean dates matter and outlines the remedy to the damaged party should a date be violated. From the Contract to Buy and Sell Real Estate: TIME OF ESSENCE, DEFAULT AND REMEDIES. Time is of the essence hereof. If any note or check received as Earnest Money hereunder or any other payment due hereunder is not paid, honored or tendered when due, or if any obligation hereunder is not performed or waived as herein provided, there shall be the following remedies: x.1. If Buyer is in Default: [ ] x.1.1. Specific Performance. Seller may elect to treat this Contract as canceled, in which case all Earnest Money585 (whether or not paid by Buyer) shall be paid to Seller and retained by Seller; and Seller may recover such damages as may be proper; or Seller may elect to treat this Contract as being in full force and effect and Seller shall have the right to specific performance or damages, or both. x.1.2. Liquidated Damages, Applicable. This § x.1.2 shall apply unless the box in § x.1.1. is checked. All Earnest Money (whether or not paid by Buyer) shall be paid to Seller, and retained by Seller. Both parties shall thereafter be released from all obligations hereunder. It is agreed that the Earnest Money specified in § x.1 is LIQUIDATED DAMAGES, and not a penalty, which amount the parties agree is fair and reasonable and (except as provided in §§ x.4, x, x and x), said payment of Earnest Money shall be SELLER'S SOLE AND ONLY REMEDY for Buyer's failure to perform the obligations of this Contract. Seller expressly waives the remedies of specific performance and additional damages. x.2. If Seller is in Default: Buyer may elect to treat this Contract as canceled, in which case all Earnest Money received hereunder shall be returned and Buyer may recover such damages as may be proper, or Buyer may elect to treat this Contract as being in full force and effect and Buyer shall have the right to specific performance or damages, or both.

When a broker terminates his affiliation with an employing broker what must be done? A: All business cards must be returned to the employing broker B: The broker's license along with a letter of termination must be sent to the real estate commission C: The broker must give the employing broker an official letter of termination that he or she can send to the real estate commission D: The broker and the employing broker have joint responsibility to assure that the real estate commission is notified

D: The broker and the employing broker have joint responsibility to assure that the real estate commission is notified Explanation: The licensee and the employing broker have joint responsibility in notifying the real estate commission.

When a broker terminates his affiliation with an employing broker what must be done? A: All business cards must be returned to the employing broker B: The broker's license along with a letter of termination must be send to the real estate commission C: The broker must give the employing broker and official letter of termination that he or she can send to the real estate commission D: The broker and the employing broker have joint responsibility to assure that the real estate commission is notified.

D: The broker and the employing broker have joint responsibility to assure that the real estate commission is notified. Explanation: The licensee and the employing broker have joint responsibility in notifying the real estate commission.

A Contract to Buy and Sell Real Estate may disclose which of the following in the Acknowledgments section? A: The broker is an agent of the buyer B: The broker is a transaction broker C: The broker is an agent of both the buyer and the seller D: The broker is either a Buyer's Agent or a Transaction Broker or a Seller's Agent

D: The broker is either a Buyer's Agent or a Transaction Broker or a Seller's Agent Explanation: The Acknowledgments section of the Contract to Buy and Sell Real Estate (AKA Purchase Contract) is the place where the brokers disclose their relationship to their clients. Here is a wiggle for you: the person writing a Contract to Buy and Sell Real Estate (Purchase Contract) for the buyer may be working either as a transaction broker for the buyer or seller, or as a buyer's agent, or as a seller's agent. How can the agent working with the buyer be a seller's agent? Ans. When the seller's agent is selling a property to a customer ie. an unrepresented buyer. As an example: the seller's agent sells the property to someone who does not have an agent, but who saw the property in an open house the agent was holding. In this case the agent discloses that he/she represents the seller and that the buyer is a customer. From the Acknowledgements section of the Contract to Buy and Sell Real Estate BROKER'S ACKNOWLEDGMENTS AND COMPENSATION DISCLOSURE. (To be completed by Broker working with Buyer)..... ...Broker is working with Buyer as a Buyer's Agent Seller's Agent Transaction Broker in this transaction.

The broker working with the buyer in writing the Contract to Buy and Sell Real Estate must disclose which of the following? A: The broker is an agent of the buyer B: The broker is a transaction broker C: The broker is an agent of both the buyer and the seller D: The broker is either a Buyer's Agent or a Transaction Broker or a Seller's Agent

D: The broker is either a Buyer's Agent or a Transaction Broker or a Seller's Agent Explanation: Under this type of agreement, the broker may be working either as a Transaction Broker for the buyer or seller, or as a buyer's agent, or as a Seller's agent. How can the agent working with the buyer be a Seller's Agent? When the Seller's Agent is selling a property to a customer ie. an unrepresented buyer. As an example: the Seller's agent sells the property to someone who saw the house in an open house the agent was holding. In this case the agent discloses that he/she represents the Seller and that the buyer is a customer. From the Acknowledgements section of the Contract to Buy and Sell Real Estate BROKER'S ACKNOWLEDGMENTS AND COMPENSATION DISCLOSURE. (To be completed by Broker working with Buyer)..... ...Broker is working with Buyer as a Buyer's Agent Seller's Agent Transaction-Broker in this transaction.

A buyer makes an offer through the listing broker on a seller's property. The buyer offers $98,000 and asks the seller to pay 3 discount points. The property is listed for $103,900.00. The seller agrees to the $98,000, but submits a counterproposal that she will only pay 2 points. All of the following are true EXCEPT: A: The buyer's offer has been rejected and she is under no further obligation B: The buyer is the offeree C: The seller is the offeror D: The buyer is the offeror

D: The buyer is the offeror Explanation: When the buyer made her original offer, she was the offeror and the seller was the offeree. Once the seller countered the buyer's original offer their roles reversed. The seller became the offeror because the counterproposal constituted a new offer and the buyer receiving it was the offeree. As to her original offer; since the seller rejected it, the buyer was under no further obligation as to her original offer. Definition of 'Discount Points' Discount Points are a form of prepaid interest. A borrower buys a point and in return gets a lower interest rate on the loan. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. As the IRS considers discount points to be prepaid interest they are tax deductible in the year in which they were paid. For example, on a $300,000 loan, each point would cost $3,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $6,000 and will result in an interest rate of 4.50%. Both lenders and borrowers gain benefits from discount points. Borrowers gain the benefit of lowered interest payments down the road, but the benefit applies only if the borrower plans on holding onto the mortgage long enough to save money from the decreased interest payments. Lenders benefit by receiving cash upfront instead of waiting for money in the form of interest payments over time, which enhances the lenders liquidity situation. On a practical basis; discount points are most often purchased by sellers as an incentive to prospective buyers. For most sellers, discount points are a cost of selling and thus tax-deductible. Buyers usually do not see enough benefit to purchase discount points. In the earlier example; spending $6,000 to reduce the interest rate to 4.5%, would have reduced the monthly payment by about $90. It would have taken a buyer 67 months to cover the cost of the points.

A lien's priority is determined by: A: The size of the lien determines priority B: A mechanic's lien always has first priority C: The date of the lien determines priority D: The date the lien is recorded determines priority except mechanic's liens

D: The date the lien is recorded determines priority except mechanic's liens Explanation: The date that the lien is recorded determines its priority, except for a mechanic's lien. The priority for a mechanic's lien is determined by the date the work commenced or the materials delivered.

According to Real Estate Commission rules - who has responsibility for an accurate closing? A: The buyer and seller B: The title company and closer C: The lender D: The designated broker, the employing broker and any substitute broker

D: The designated broker, the employing broker and any substitute broker Explanation: The Employing Broker has responsibility for all company closings. The Designated Broker is the broker appointed by the Employing Broker on behalf of the company to service the transaction. If the Designated Broker is unable to attend a closing, a stand-in broker would need to be appointed and would thus acquire responsibility. This scenario repeats for any company representing the Buyer and the Seller. The buyer and seller and title company have a vested interested in accuracy but are not subject to Commission rules and regulations as they are not licensed. Lenders are licensed but only contribute to the loan portion of the closing. Regardless, the real estate companies and agents have the highest level of responsibility according to law for a closing.

If the individual who has personally established a brokerage relationship with a buyer or seller is unavailable to attend a closing, and selects another licensee to attend the closing, who is responsible for the accuracy of the closing and the documents? A: The employing broker B: The individual who has personally established a relationship with the buyer or seller C: The alternate who has attended the closing D: The individual who has personally established a relationship with the buyer or seller and the alternate who attended the closing jointly

D: The individual who has personally established a relationship with the buyer or seller and the alternate who attended the closing jointly Explanation: The individual who establishes the brokerage relationship shares the responsibility with the individual who attends the closing.

In an estate for years leasehold estate, what happens when the original lessor dies? A: The lease expires immediately upon notification of lessor's death B: The lessee has one month to vacate premises C: A notice to quit must be posted within three days of notice of death D: The lessee's right is unaffected

D: The lessee's right is unaffected Explanation: In an estate for years leasehold estate, the lessee's right is unaffected.

Which is not true regarding the Counterproposal form: A: The purchase contract should not be signed by the person creating the counterproposal B: The date and deadlines table can be omitted if not used C: If a date or deadline is left blank it means "no change" D: The only changes allowed are purchase price and earnest money

D: The only changes allowed are purchase price and earnest money Explanation: Whoever creates the counterproposal can make any change they want.

Once a plat is approved, what step must be taken prior to the lots being sold? A: building permits must be issued B: the site must be cleared and leveled C: the appropriate governmental authority must approve zoning D: The plat map must be recorded

D: The plat map must be recorded Explanation: The plat map must entered into the public record prior to being sold by recording. Waving around a government approval is not enough.

The broker has taken a listing agreement for six months starting June 1, on September 15 the seller decides he does not want to sell the home. Which of he following is true? A: The house must remain on the market for the full duration of time B: The seller's actions will be determined by the real estate commission as to their legality C: The contract is cancelled and there are no penalties D: The seller has withdrawn the listing and may be subject to reimbursing some broker expenses

D: The seller has withdrawn the listing and may be subject to reimbursing some broker expenses Explanation: The listing may be cancelled but the broker may be due some reimbursement for expenses.

The closing entity must withhold from the seller's proceeds up to 2% of: A: The net proceeds as a luxury tax if the seller is from out of state B: The net proceeds as a sales tax if the seller is from out of state C: The selling price as a possible property tax liability if the seller is from out of state D: The selling price as a possible income tax liability if the seller is from out of state

D: The selling price as a possible income tax liability if the seller is from out of state Explanation: 2% of the selling price as an income tax liability.

What recourse do the buyers have if they determine that property they have contracted to purchase is within a special taxing district? A: They may demand that the seller pay the indebtedness of such a district. B: They may petition to be excluded from the district. C: They may terminate the contract automatically on the Off-Record Matters date. D: They may terminate the contract by written notice to the seller.

D: They may terminate the contract by written notice to the seller. Explanation: Termination requires written notice of intent to terminate and the buyers must provide written notice to the seller no later than the Off-Record Matters date

In a buyer-agency situation, what responsibility does the agent have to the principal? A: To be vicariously liable for their actions B: To pay a commission C: To disclose psychologically impacting events surrounding a property D: To be an advocate of the buyer's best interests

D: To be an advocate of the buyer's best interests Explanation: Pursuant to the terms of an Exclusive Right-to-Buy Contract the buyer may be obligated to pay a commission.

The approved Agreement to Amend/Extend contract form is used: A: To notify the Seller of any change in deadlines B: Add information to an offer that does not belong in "additional provisions" C: To notify the Buyer of a deadline they missed D: To get mutual agreement of the parties to any change in a deadline

D: To get mutual agreement of the parties to any change in a deadline Explanation: This was one of the outcomes of Conway-Bogue court case in 1957 that allowed the broker to fill in the blanks on standardized forms approved by the Colorado Real Estate Commission.

Of the following brokerage relationships, which one does not include the duty of advocacy for the principal? A: Dual Agent B: Buyers Agent C: Sellers Agent D: Transaction Broker

D: Transaction Broker Explanation: Transaction Brokers are only a neutral referee for the transaction doing the paperwork, they do not not take sides for either party. For a Broker to be an advocate, (s)he must be the Clients' agent i.e. a Buyers Agent or a Sellers Agent. FYI - Dual Agency is illegal in Colorado. Reference CRS 12-61-802(6)

The "Additional Provisions" section of the Contract to Buy and Sell Real Estate may include: A: Personal provisions of the listing broker on the client's behalf B: Confirmation of the commission split to the cooperating brokerage firm C: Exculpatory language protecting the brokerage firm D: Transaction specific items resulting from negotiations or instructions of the parties to the contract

D: Transaction specific items resulting from negotiations or instructions of the parties to the contract Explanation: The additional provisions sections is a blank area in which Brokers have broad discretion to enter any necessary language. However, the clauses inserted must be a product of the buyer's and seller's negotiation and not language, for example, benefiting the Broker. Reference According to Rule F, the rule that specifically give guidelines regarding Commission-approved forms: A broker who is not a principal party to the contract may not insert personal provisions, personal disclaimers or exculpatory language in favor of the broker in the "Additional Provisions" section of a Commission-approved form. A broker may, at the direction of a principal party, include language regarding payment of the broker's or brokerage's commission if this is a term of negotiation between the principal parties of the Contract to Buy and Sell. All of rule F can be read here: https://drive.google.com/drive/folders/0B1VD36mBqe1EfnpNZGw2WjFyU2szVFBLYk9Reno2SHBUSElIcElSaWxmUm5xSDZ1S1RyWVE

The "Additional Provisions" section of the Contract to Buy and Sell Real Estate may include: A: Personal provisions of the listing broker on the client''s behalf B: Confirmation of the commission split to the cooperating brokerage firm C: Exculpatory language protecting the brokerage firm D: Transaction specific items resulting from negotiations or instructions of the parties to the contract

D: Transaction specific items resulting from negotiations or instructions of the parties to the contract Explanation: The additional provisions sections is a blank area in which Brokers have broad discretion to enter any necessary language. However, the clauses inserted must be a product of the buyers and sellers negotiation and not language, for example, benefiting the Broker. Reference Commission Rule F

What is a mandatory recommendation in the Contract to Buy/Sell Real Estate? A: Use of a home inspector B: Use of Legal Counsel C: Use of a surveyor to verify property boundaries D: Use of Legal and Tax Counsel

D: Use of Legal and Tax Counsel Explanation: Brokers are required to recommend use of legal and tax counsel to their clients. This is accomplished through the following verbiage: From the Contract to Buy/Sell Real Estate; RECOMMENDATION OF LEGAL AND TAX COUNSEL. By signing this Contract, Buyer and Seller acknowledge that the respective broker has advised that this Contract has important legal consequences and has recommended the examination of title and consultation with legal and tax or other counsel before signing this Contract.

When a buyer learns that the seller introduced into the contract fraudulent terms; the contract is: A: Void B: Valid C: Voidable by seller D: Voidable by buyer

D: Voidable by buyer Explanation: Only the buyer can void the contract, but it is not automatically voided.

Licensees are NOT required to use the Licensee Buyout Addendum to Contract to Buy and Sell under which of the following circumstances? A: When the licensee enters into a contract to purchase a property concurrent with the listing of such property B: When the licensee enters into a contract to purchase a property as an inducement or to facilitate the seller's purchase of another property C: When a licensee enters into a contract to purchase a property from the owner but continues to market it for that owner under an existing listing agreement D: When an agent decides to purchase a property listed by another broker

D: When an agent decides to purchase a property listed by another broker Explanation: The licensee buyout addendum must only be used when the licensee is purchasing his/her own listing. 4 is correct. 4 is the only verbiage listed NOT in the Licensee Buyout Addendum. More info What Is a Licensee Buyout Addendum? by Maxwell Wallace, Demand Media A licensee buyout addendum is a form used in certain real estate and property transactions in the state of Colorado. The LBA is used only in the purchase and sale of properties between licensed real estate professionals and their own clients. History and Purpose The Licensee Buy-Out Addendum to Contract to Buy and Sell Real Estate is intended to prevent improprieties and conflicts of interest in licensee/client transactions, as well as to make sellers contractually aware of the potential differences in selling to a licensed real estate professional as opposed to conventional buyers. Situations Dictating Use Licensed real estate agents are required to use an LBA when they enter into contracts to purchase properties concurrently with the initial listing of that property, when it immediately hits the market. Licensees also are required to use the LBA form when they are purchasing a property to facilitate its owner's purchase of another property, as well as when they continue to market that property to other potential buyers. Deleted Provisions Under the provisions of the licensee buyout addendum, several conventional provisions of standard real estate listing contracts reached under Colorado state law are deleted. Deleted provisions include a property's appraisal condition, liquidated damages or pre-assessed damages to the property, provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms. Profit and Loss Stipulations Colorado's LBA also stands as contractual acknowledgment by a property seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the LBA protects the property seller by acknowledging that any fees related to closing, holding and reselling the property are all absorbed by the buyer and not the property seller as the original or prior landowner.

Once a student has passed the Colorado licensing exam, how soon can they solicit clients to list or buy a house? A: Immediately B: Upon application to the State of Colorado for a real estate license C: When you have passed the exam and joined a brokerage firm. D: When your license has been approved by the State of Colorado

D: When your license has been approved by the State of Colorado Explanation: You cannot perform a licensed activity until you have a license. Soliciting a client to list or buy a house is a form of contract negotiating. You are negotiating the terms under which you will work with them. Negotiating a contract is a licensed activity. Passing the exam by itself does not give you a license, nor does joining a brokerage firm. You receive a license when your application has been approved by the Colorado Division of Real Estate.

When must a broker deposit earnest money funds to the trust account? A: Immediately upon receiving them B: Prior to closing C: Within 10 days D: Within 3 days of acceptance of the contract

D: Within 3 days of acceptance of the contract Explanation: A check for the earnest money should either accompany the offer until accepted or be delivered prior to expiration of the Alternative Earnest Money Deadline. Most often, a buyer's agent holding the deposit forwards a copy of the earnest money check with the offer to prove s/he has it, and then specifies a date in the Alternative Earnest Money Deadline when the actual check will be delivered after contract acceptance. If the deposit was tendered with the contract; it must be deposited no later than 3 business days after notice of acceptance of the contract. From the real estate manual: Except as provided in Rule E-l (o), all money belonging to others which is received by a broker as a property manager shall be deposited in such broker's escrow or trust account not later than five business days following receipt. All other money belonging to others which is received by a broker shall be deposited in such broker's escrow or trust account not later than the third business day following receipt.

Can broker associate Friday write an offer for a buyer if broker associate Friday listed the property and also finds the buyer? A: No, you cannot collect both commissions B: No, it is against Federal Antitrust Laws C: Yes, only you have to have a buyer broker agreement in place D: Yes, if explicitly stated in the contract and agreed to by both buyer and seller.

D: Yes, if explicitly stated in the contract and agreed to by both buyer and seller. Explanation: Broker Associate Friday could do this as a Transaction Broker for both parties, or by having an agency relationship with one party to the transaction and the other party being a customer, i.e., no working or agency relationship.

The Government's police powers enable the state to regulate and control the use of land through: A: Condemnation B: Special assessments C: Escheat D: Zoning Laws

D: Zoning Laws Explanation: Zoning laws give the government the opportunity to control land use.

An employing broker can usually avoid disciplinary action for the improper conduct of one of his employed licensees if: A: a licensee with 10-years experience produced an Installment Land Contract without the knowledge of the employing broker B: the broker can establish that he never authorized the improper conduct C: the licensee has less than two years in the business D: a broker can never avoid disciplinary action for improper conduct of a licensee, they are always ultimately responsible

D: a broker can never avoid disciplinary action for improper conduct of a licensee, they are always ultimately responsible Explanation: A broker can never avoid disciplinary action for improper conduct of a licensee. They are always ultimately responsible.

The length of the holdover period in the Exclusive Right-to-Buy Contract is best described as: A: a maximum of 120 days B: a maximum of 180 days C: a freely negotiable period D: a freely negotiable period that may be invalidated when the buyer signs a new Exclusive Right-to-Buy Contract

D: a freely negotiable period that may be invalidated when the buyer signs a new Exclusive Right-to-Buy Contract Explanation: The Holdover Period says that a broker may be entitled to a commission after the expiration of a buyer agency contract for the period of time specified in the clause if: 1) the broker negotiated with the seller during the listing period and 2) the broker submitted the name of this seller in writing to the buyer. Although the protection is for a negotiated time after the agreement expires, it can terminate early if the buyer signs another buyer agency agreement with another agent and the "Will Not" box is checked, meaning the old agent "will not" be owed a commission if another brokerage firm has earned one. If neither the "'Will' or 'Will Not' be owed a commission" box is checked - the default is "Will Not." See "Holdover Period" in the "When Earned" clause of an Exclusive Right-to-Buy agreement.

A home inspection is required by contract on: A: all homes over $150,000 B: all homes C: homes, condominiums, and townhomes D: a home inspection is not required

D: a home inspection is not required Explanation: Home inspections are not required, but are certainly recommended.

A lien placed against a specific property by workers or suppliers who have not been paid for labor or materials used in construction or improvements to the property is known as: A: a statutory lien B: a voluntary lien C: an equitable lien D: a mechanic's lien

D: a mechanic's lien Explanation: A mechanic's lien, as the name states, is placed by mechanics, other workers, or suppliers of materials. A mechanic's lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. In the realm of real property, it is called by various names, including, generically, construction lien. It is also called a materialman's lien or supplier's lien when referring to those supplying materials, a laborer's lien when referring to those supplying labor.

Every real estate sales contract must contain all of the following except: A: signatures of the parties bound by the contract B: consideration C: offer and acceptance D: a notary acknowledgment

D: a notary acknowledgment Explanation: There must be offer and acceptance and signatures of the parties bound by the contract. It also must contain consideration, however, real estate sales contracts do not have to be notarized to be valid.

A real estate appraiser does include: A: a person who conducts appraisals strictly of personal property B: a person licensed as a broker who provides an opinion of value that is not represented as an appraisal and is not used for purposes of obtaining financing C: a person licensed as a certified public accountant, provided the opinion for value for real estate is not represented as an appraisal D: a person licensed as an appraiser, who provides an estimate of value of property

D: a person licensed as an appraiser, who provides an estimate of value of property Explanation: A Real Estate Appraiser does not include any of the persons listed

All parties are presumed to have the legal capacity to enter into contracts. But certain persons, for reasons of public policy or some disability, do not have full contractual capacity. All of these do not have contractual capacity except: A: minors B: mental impairment C: intoxicated persons D: a person over eighty years old

D: a person over eighty years old

All units in a community are being assessed for sidewalk improvements to a road along one side of the community. This is: A: rise in property taxes B: a community assessment C: rise in HOA dues D: a special assessment

D: a special assessment

The type of lien that is secured by specific property and only affects that property is known as: A: a statutory lien B: a voluntary lien C: an equitable lien D: a specific lien

D: a specific lien Explanation: A specific lien involves specific property- as opposed to voluntary liens, created by choice, equitable liens, created by agreement, or statutory liens, created by law.

The type of lien that is secured by specific property and only affects that property is known as: A: a statutory lien B: a voluntary lien C: an equitable lien D: a specific lien

D: a specific lien Explanation: A specific lien involves specific property- as opposed to voluntary liens, created by choice, equitable liens, created by agreement, or statutory liens, created by law.

A summary of the history of all conveyances and legal proceedings affecting a specific parcel of real estate is called: A: affidavit of title B: certificate of title C: title insurance policy D: abstract of title

D: abstract of title Explanation: An abstract is a historical accounting of contingencies, legal proceedings, and other events that affect a parcel.

An owner is in default on a mortgage payment. The lender could call the entire loan balance due if the loan contained a(n): A: due-on-sale clause B: "or more" clause C: defeasance clause D: acceleration clause

D: acceleration clause Explanation: The acceleration clause allows the lender to call the entire loan balance due.

When comparing/analyzing CMA, these are the factors that would NOT be taken into consideration: A: similar size properties sold in the neighborhood B: date of sale C: age of property D: accrued depreciation

D: accrued depreciation

Under the law of agency, a real estate broker owes all of the following duties to the principal except: A: care B: obedience C: disclosure D: advertising

D: advertising Explanation: The law of agency applies to the duties and obligations of the agent and the principal in the real estate transaction.

A clause in a deed or trust, mortgage or promissory note which permits the lender to call the outstanding balance due and payable, should the property be sold by the borrower, is a(n): A: acceleration clause B: balloon payment clause C: exculpatory clause D: alienation clause

D: alienation clause Explanation: A clause closely associated in meaning with Due-On-Sale Clause and Acceleration Clause. An alienation clause in a mortgage can give the lender the option to call the loan (declare the entire balance due) when the proper ty owner transfers ownership, title or interest without the lender' s consent. An Acceleration Clause is a contract provision that allows a lender to require a borrower to repay all or part of an outstanding loan if certain requirements are not met. An acceleration clause outlines the reasons that the lender can demand loan repayment.

In a real estate transaction it is possible to represent only one party to the transaction as an agent when: A: the agent is the designated agent for either buyer or seller B: there is more than one broker involved in the transaction C: there is more than one company involved in the transaction D: all of the above

D: all of the above

A broker would be in violation of the rules of the Real Estate Commission if he/she: A: failed to provide a signed copy of a listing agreement to the seller B: failed to provide a signed copy of the settlement statement to the seller C: failed to provide a signed copy of the settlement statement to the buyer D: all of the above

D: all of the above Explanation: A broker must provide a copy of any documents signed to all parties who have signed the documents.

A counter offer: A: terminates the original offer B: will result in a valid contract if accepted by the other party C: must be signed by both parties D: all of the above

D: all of the above Explanation: A counter offer is a rejection of the initial offer. It becomes binding when signed by both parties.

A counter offer: A: makes the seller the offeror and the buyer the offeree B: serves as rejection of the original offer C: relieves the buyer of any further obligation D: all of the above

D: all of the above Explanation: A counter offer serves as rejection of the buyer's original offer and relieves him of any obligation. It also puts the seller in the position of being the offeror.

Those exempted from the obtaining a real estate license are: A: any person who purchases property or a business opportunity for his own account or in any way disposes of the same B: any authorized attorney in fact or attorney at law while acting in that capacity C: any escrow agent, receiver, trustee in bankruptcy, executor, administrator, guardian, or any person acting under a court order D: all of the above

D: all of the above Explanation: A license is required when an individual receives compensation for the sale of property for others.

As part of his new property management business, Ron Dvorak has just agreed to manage several downtown apartment buildings for an owner. As a property manager Dvorak must: A: collect rents and keep detailed accounting records B: be a licensed real estate broker C: not commingle rents with his own money D: all of the above

D: all of the above Explanation: A property manager must be a real estate licensee; keep financial records, collect rental incomes and deposit them into a trust account. Property managers who offer their services to the public have to have a real estate license regardless of the type of property. It is that they offer their services to the public that bring it under the jurisdiction of the Real Estate Commission.

The options of a property manager in dealing with a risk are: A: to avoid B: to retain it C: to transfer it D: all of the above

D: all of the above Explanation: A property manager must be a real estate licensee; keep financial records, collect rental incomes and deposit them into a trust account. Property managers who offer their services to the public have to have a real estate license regardless of the type of property. It is that they offer their services to the public that bring it under the jurisdiction of the Real Estate Commission.

A broker's record-keeping system for his trust account(s) must include the following: A: a trust account ledger B: a trust account journal C: a monthly bank reconciliation worksheet D: all of the above

D: all of the above Explanation: A trust account ledger and journal must be kept current at all times and the account must be reconciled monthly with the bank statement.

After a listing has expired, the original listing broker may be paid a commission under the terms of the holdover clause in the original contract if: A: the broker had worked with the purchaser before the expiration date B: the broker had disclosed the name of the purchaser to the sellers before the listing expired C: the broker was the procuring cause for the purchaser D: all of the above

D: all of the above Explanation: ALL of these are requirements in order to be paid a commission after expiration. The Holdover Period says that a listing broker may be entitled to a commission after the expiration of a listing contract for the period of time specified in the clause if: 1) the broker negotiated with the buyer during the listing period and 2) the broker submitted the name of this buyer in writing to the seller. Although the protection is for a negotiated time after the listing expires; it can terminate early if the property is re-listed by another agent and the "Shall Not" box is checked, meaning the old listing agent "shall not" be owed a commission if another brokerage firm has earned one. If neither the "Shall" or "Shall Not" be owed a commission" box is checked - the default is "Shall Not." See "Holdover Period" in the "When Earned" clause of an Exclusive Right-to-Sell listing agreement. In simpleze: the Holdover Clause addresses what happens if a buyer is found during the listing period, but does the deal after. The "Shall" and "Shall not" box addresses the wrinkle as to what happens if the property has been relisted with a new agent. The original agent "shall" get paid or "shall not " get paid. For extra points: how does this impact the new agent? Whelp - the new agent is not a part of the old contract. So, all this talk so far about commission only refers to the old agent. The new agent has another contract with the seller. BOTH contracts are valid. There is nothing in the listing contract that protects the seller from paying two commissions; other than the fact that the agents will have to collect from the seller's estate, after the Seller dies from heart failure when they figure out they owe two commissions and really really REALLY wish they had read the contract they signed.

When a real estate entity is dissolved: A: the last employing broker becomes personally responsible for making all final disbursements and accounting for all trust funds B: the last employing broker must maintain all records for a period of four years C: the agent's licenses are inactive until they join another real estate entity D: all of the above

D: all of the above Explanation: All agents have to join another company, and the responsibility of the employing broker is to maintain the records for four years and is responsible for all final disbursements.

A fiduciary is: A: a trustee named in a will B: a real estate broker who acts as an agent for another C: a person who holds a general power of attorney for another D: all of the above

D: all of the above Explanation: All are examples of a fiduciary; someone put in trust of others affairs. A fiduciary relationship is created when a principal signs a listing or buyer's agency agreement with a Listing Agent or Buyers Agent. Note: a Transaction Broker as a neutral party is not a fiduciary relationship (the T Broker owes no loyalty, only Care, Obedience, Accounting and Disclosure of non-confidential items and material facts). In real estate transactions, only the Seller's or Buyer's agency relationships are fiduciary relationships. This relationship implies a position of trust or confidence, wherein one person is usually entrusted to hold or manage property or money for another. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts them.

Regarding market value: A: it is the most probable price, not necessarily the highest or average price B: buyer and seller must be unrelated and acting without undue pressure C: the price must represent a normal consideration for the property sold, unaffected by special financing amounts, or terms, services, fees, costs, or credits incurred in the market transaction D: all of the above

D: all of the above Explanation: All are true.

If a broker holds a purchase option as well as the listing and decides to exercise his option, he must: A: reveal in writing to the owner that he may make a profit B: obtain the written consent of the owner C: disclose to his seller that he is dealing as a principal, not as an agent D: all of the above

D: all of the above Explanation: All of the above are correct.

In a real estate transaction it is possible to represent as an agent, only one party to the transaction when: A: the agent is the designated agent for either buyer or seller B: there is more than one broker involved in the transaction C: there is more than one company involved in the transaction D: all of the above

D: all of the above Explanation: All of the above. The word "represent" implies "agency".

A title insurance policy differs from property and liability insurance policies in a variety of ways, including: A: the statute of limitations for a cause of action commences at the time loss or damage occurs, and not the date the policy is issued B: the premium for a title insurance policy is payable only once, and the policy remains in effect for as long as the insured or his heirs own the property C: title policies cover claims arising from defects existing in the past, rather than those that may occur in the future D: all of the above

D: all of the above Explanation: All of the statements are true regarding title insurance.

An exclusive right-to-buy (Buyer Agency) contract may: A: not continue for an indefinite period of time without a specific termination date B: have a termination date up to one year after the start of the contract C: may involve three or more parties to the contract D: all of the above

D: all of the above Explanation: All real estate agency contracts must have a definite beginning and ending date. The start of an Exclusive Right To Buy contracts may be post dated. There is no limit to the number of parties to a contract.

An Exclusive Right-to-Buy contract may: A: not continue for an indefinite period of time without a specific termination date B: have a termination date up to one year after the start date of the contract C: may involve three or more parties to the contract D: all of the above

D: all of the above Explanation: All real estate agency contracts must have a definite beginning and ending date. The start of an Exclusive Right-to-Buy contract may be post dated. The Buy/Sell contracts are limited to a maximum of one year. There is no limit to the number of parties to a contract.

When acting as a buyer's broker, the broker should disclose to the buyer, if known, that: A: the seller is near bankruptcy B: the property is overpriced C: there are latent defects D: all of the above

D: all of the above Explanation: As a buyer's broker you must disclose all material facts and any information that would affect the transaction.

Brokers are required to: A: display the fair housing poster in their place of business B: take affirmative marketing action in advertising C: take affirmative marketing action in individual canvassing D: all of the above

D: all of the above Explanation: Brokers are required to display the fair housing poster and take affirmative action in marketing and advertising.

Personal property includes: A: chattels B: fructus industriales C: emblements D: all of the above

D: all of the above Explanation: Chattels are personal property; fructus industriales are crops (grown with the help of man); emblements are also crops usually of a tenant farmer, all of which are personal property.

Reserves are charged to the borrower at closing for: A: property taxes B: hazard insurance C: mortgage insurance D: all of the above

D: all of the above Explanation: Frequently two months reserves of taxes and insurance are collected at closing since it is often as much as 59 days until the buyer makes their first payment.

As provided in an executed, valid sales contract, a real estate sale must be closed. This means that: A: the seller must remove title objections so the condition of the title complies with the sales contract terms B: the purchaser must pay the balance of the purchase price to the seller C: the seller must deliver the deed to the buyer D: all of the above

D: all of the above Explanation: In order for a closing to happen the seller must provide merchantable title, the buyer must bring "good funds" to the closing, and the buyer and seller must execute all required paperwork.

It is illegal for a broker to work with both seller and buyer when: A: the seller is not aware of such action B: all parties to the transaction are not aware of such action C: the agent collects a commission from both buyer and seller without the knowledge and consent of both D: all of the above

D: all of the above Explanation: Lack of disclosure is illegal.

A plat map shows: A: streets B: parks C: blocks D: all of the above

D: all of the above Explanation: Plats are developed by the subdivider and must be approved by the municipality before they can be recorded.

In analyzing gross income of a property, the characteristic of the income that the appraiser is concerned with is: A: quantity B: quality C: durability D: all of the above

D: all of the above Explanation: Quantity means adequacy of income. Quality refers to financial stability and credit worthiness of tenants. Durability concerns itself with the terms of the building's leases.

A deed restriction can be placed to help control: A: type, height, and size of buildings, including square footage B: land use and setbacks C: architectural style D: all of the above

D: all of the above Explanation: Restrictive covenants set standards for all the parcels within a defined subdivision. More info on Deeds: In Colorado real estate, there are several types of deeds, depending on the type/amount of protection given and received from the seller and buyer. From the Colorado Real Estate Manual: Types Of Deeds There are four major classifications of deeds: (1) General warranty deed, (2) Special warranty deed, (3) Bargain and sale deed, (4) Quitclaim deed. The types of deeds differ solely in the degree of protection that the grantor (seller) promises or warrants to the grantee (buyer). No type of deed transfers any greater or lesser interest than another. For example, if a grantor conveys title in fee simple by a general warranty deed, the same fee simple ownership is conveyed as if he or she had used a quitclaim deed. However, the general warranty deed grantor promises to defend against any loss incurred due to any title defect, whereas transfer by quitclaim deed contains no such warrant. 1. General Warranty Deed. A deed in which the grantor warrants or guarantees title against defects that existed before the grantor acquired title or that arose during the grantor's ownership. It does not warrant against encumbrances or defects arising from the grantee's own acts. The usual covenants or warranties contained in a general warranty deed are: a. Covenant of seizin. Guarantees the grantor's ownership and that he or she has the right to convey it. The fact that the property is mortgaged or is subject to some restriction does not breach this covenant. b. Covenant against encumbrances. Guarantees that there are no encumbrances or claims against the property except those specifically excluded in the deed. c. Covenant of quiet enjoyment. Guarantees that the grantee will not be evicted or disturbed in possession of the property. Threats or claims by a third party do not breach this covenant. The grantee would have to actually be dispossessed before being entitled to seek recovery under this covenant against the grantor. d. Covenant of further assurance. Guarantees that the grantor will procure and deliver any other instruments that are subsequently necessary to make the title good. e. Covenant of warrant forever. Guarantees that the grantee shall have title and possession to the property. Sometimes considered part of "quiet enjoyment". The first two covenants relate to the past, and generally do not generally "run with the land" - meaning that only the current grantee may sue the grantor for a breach. The last three covenants protect against future defect and are said to run with the land - allowing any subsequent grantee to seek remedy for breach against any previous grantor. According to Colorado statute, "Covenants of seizin, peaceable possession, freedom from encumbrances, and warranty contained in any conveyance of real estate, or of any interest therein, shall run with the premises, and inure to the benefit of all subsequent purchasers and encumbrancers." (38-30-121 C.R.S.) 2. Special Warranty Deed. The grantor of a special warranty deed warrants the title only against defects arising after the grantor acquired the property and not against defects arising before that time. 3. Bargain and Sale Deed. Technically, any deed that recites a consideration and purports to convey the real estate is a bargain and sale deed. Thus, many quitclaim and warranty deeds are also deeds of bargain and sale. Bargain and sale deeds often contain a covenant against the grantor's acts, whereby the grantor warrants only that the grantor has done nothing to harm the title. This covenant would not run with the land. Examples of bargain and sale deeds with a covenant against the grantor's acts are an executor's deed, an administrator's deed, and a guardian's deed. 4. Quitclaim Deed. The grantor of a quitclaim deed warrants absolutely nothing. A quitclaim deed conveys the grantor's present interest in the land, if any. A quitclaim deed is frequently used to clear up a technical defect in the chain of title or to release lien claims against the property. Examples of such deeds are correction deeds, and deeds of release.

The Colorado Real Estate Commission on its own motion can investigate: A: violations of the Colorado Fair Housing Law B: failure to account for money belonging to others C: a licensee's real estate activities D: all of the above

D: all of the above Explanation: The CREC has the power to investigate the real estate activities of any licensee upon its own motion. If a written complaint is filed the office is compelled to investigate.

The Colorado Real Estate Commission on its own motion can investigate: A: a licensee's real estate activities B: failure to account for money belonging to others C: violations of the Colorado Fair Housing Law D: all of the above

D: all of the above Explanation: The CREC has the power to investigate the real estate activities of any licensee upon its own motion. If a written complaint is filed the office on any topic the commission is compelled to investigate.

Limitations placed on the transaction broker's ability to disclose include: A: motivating factors of either party B: broker cannot disclose that buyer is willing to pay more for the property C: broker cannot disclose that seller is willing to accept less D: all of the above

D: all of the above Explanation: The broker may only disclose material facts.

The closing statement is prepared to: A: determine the amount of money the seller will receive at the closing B: compute the amount of money the purchaser must bring to the closing C: serve as a receipt for all money that changes hands at the time of closing D: all of the above

D: all of the above Explanation: The closing statement is a detailed accounting of every dollar that changes hands at a closing.

A broker working as a buyer's agent in a real estate transaction: A: must be reasonably available to accompany buyers to show properties B: should never encourage buyers to view properties or open houses on their own C: should always accompany buyers on their first visit to builders' homes D: all of the above

D: all of the above Explanation: The correct answer is d all of the above. The reasons follow: A - because a buyer's agent has a contract with their client and must show performance. This is why in the buyer's agency agreement it is important to include your days off in the contract (you will see the contract in the CR series). B is also correct because if they go to see homes or open houses on their own (i.e., without professional representation) they may agree or sign something they will regret (a particular problem if they have a signed buyer agency agreement with you ensuring you a commission and they agree on their own to purchase a house without paying you a commission). C - Because builders will only pay a commission to an agent if the agent accompanies their clients on the first visit.

Fees that are due to a homeowner's association must be disclosed: A: in the title work B: in the contract C: to the lender D: all of the above

D: all of the above Explanation: The homeowner's association rules and regulations including fees must be included in the title work, in the contract and to the lender. They must also be disclosed in the MLS.

A trust account must: A: have the words "trust" or "escrow" after the type of account B: be an FDIC account that is state or federally chartered C: be reconciled monthly by the broker D: all of the above

D: all of the above Explanation: These are rules required by RESPA and the CREC.

Fees for the preparation of legal documents at a closing are to be paid by: A: the buyer or seller, when prepared by the attorney representing the parties to the transactions B: the licensee when delegating legal documentation preparation to an agent for their clients C: the licensee if preparing legal documents and closing their own transaction D: all of the above

D: all of the above Explanation: They may all pay for the preparation fees. The rules regarding who pays for legal document preparation at a closing are a part of the Conway-Bogues court decision that allows a real estate agent to practice a limited form of law. The short version of this ruling as it pertains to contracts and closing documents is that anybody but the real estate agent can draft legal documents.This is logical when you understand that the real estate commission has no jurisdiction over buyers and sellers. Therefore they and their attorneys can create legal documents. Interestingly, an attorney for the brokerage company can create legal documents. Real estate agents can only fill in the blanks on contracts approved by the real estate commission, but we are generally responsible for the cost of legal preparation of closing documents. There is a limit to this; we are not responsible for the cost of preparing documents should the parties decide to use their own lawyers. As a practical matter, the title company prepares the legal documents that are required of the agent. They typically charge us a cursory $5 for this service, as we are the rainmakers that bring them the lucrative title insurance business. Legally, they have to charge us something and so the $5. Here is the legal explanation that covers this area: Closing Fees: Commission position statement CP-7, Closing Costs, and Rule E-37 state that there is no obligation for a broker to prepare any legal document as part of a real estate transaction or closing. However, as the result of the Conway-Bogue decision (see Chapter 5, "Landmark Case Law and Opinions"), brokers may prepare certain legal documents and complete standard and approved forms. Certain fees are generally charged for preparation of real estate documents and closings: (1) a fee for closing and preparing non-legal documents such as the settlement statements, and (2) a fee for preparing legal documents executed by the parties, i.e., contracts, deeds, notes, deeds of trust, mortgages, and other security instruments. Upon agreement of the parties, fees for preparing non-legal documents may be charged to anyone. However, in the absence of an attorney representing one of the parties to the transaction, the broker must pay any fees for preparing legal documents. The broker must ensure that the proper parties pay for the closing costs. Brokers may charge (with written authorization from the parties) for the transactions that they close "in-house," when such charges are not tied to preparation of legal documents. The broker may not designate his or her own attorney to prepare the documents, and then pass these charges to the parties, as if the attorney were representing them.

In representing a buyer in an agency relationship, the broker has a fiduciary responsibility. These duties include: A: care, obedience B: accounting, loyalty C: disclosure D: all of the above

D: all of the above Explanation: This is also known as COALD. A fiduciary relationship is created when a principal signs a listing or buyer's agency agreement with a Listing Agent or Buyer's Agent. Note: a Transaction Broker as a neutral party is not a fiduciary relationship. In real estate transactions, only the Seller's or Buyer's agency relationships are fiduciary relationships. This relationship implies a position of trust or confidence, wherein one person is usually entrusted to hold or manage property or money for another. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who has their trust.

The alternative dispute resolution, mediation clause, in the Exclusive Right-to-Buy Contract is for the purpose of: A: limiting the time period for disputes to 30 days B: encouraging alternatives to litigation C: reducing the cost of resolving disputes D: all of the above

D: all of the above Explanation: The mediation clause in the Exclusive Right-to-Buy Contract limits the time prior to litigation to 30 days and is designed to reduce the cost of dispute resolution.

The replacement cost method of appraising real property: A: tends to set the upper limits of value B: would be the method used in appraising special purpose properties C: is appropriate for newly built improvements where the construction represents the highest and best use D: all of the above are true

D: all of the above are true Explanation: The replacement cost approach is frequently used to set a ceiling on the value established by the other two approach methods. It is particularly appropriate for appraising newly built improvements where the construction represents the highest and best use of the land. It is also the most appropriate method for appraising service type properties such as public schools, city halls, libraries, etc.

A buyer submits an offer to purchase to the listing agent. He finds out that more than several offers are coming in for the same property. He can expect that: A: his offer is presented first because it was received first B: if it is unacceptable to the seller, they counter his first before accepting any other offers C: the listing agent rejects all other offers until a decision is made regarding the first one D: all offers will probably be presented at the same time, and the seller will select among them

D: all offers will probably be presented at the same time, and the seller will select among them Explanation: Agents are required to submit all offers received, if more than one offer is received before an offer is presented then the agent must submit all offers at the same time.

A mortgage loan payable in equal monthly installments that are sufficient to pay the principal in full during the term of the loan is called a: A: balloon loan B: fully indexed loan C: straight loan D: amortized loan

D: amortized loan Explanation: An amortized loan requires monthly payments, of the same amount, that are sufficient to pay the loan in full during a specified term.

In Colorado, all of the following would be required to obtain a real estate license except: A: an real estate option dealer B: an employing broker C: an apartment manager (non-resident) D: an attorney acting in the litigation of real estate, for his client

D: an attorney acting in the litigation of real estate, for his client Explanation: An attorney assisting his clients in the litigation of real estate is not required to have a real estate license, as he is acting pursuant to his attorney's license.

When an initial contract for sale of property is different than the contract forms approved by the Colorado Real Estate Commission, the contract should be prepared by: A: broker representing the seller B: a real estate attorney C: broker representing the buyer D: an attorney representing one of the parties to the contract

D: an attorney representing one of the parties to the contract Explanation: An attorney of the buyer, the seller, or both, must prepare contract.

A title insurance policy will protect a buyer from financial losses that are caused by: A: a change in zoning regulations B: a recorded easement to which the policy has taken an exception C: an unrecorded easement to which the policy has taken an exception D: an encumbrance to which the policy has not taken an exception

D: an encumbrance to which the policy has not taken an exception

An agency is created when: A: owner of a property gives a person a power of attorney to sign documents B: a broker allows a broker to represent him or her in his absence at a meeting C: an owner tells a broker she can inspect the property D: an owner authorizes a broker to represent her in the sale of her property

D: an owner authorizes a broker to represent her in the sale of her property Explanation: The broker is then the seller's agent and is employed to do a specific task.

Mary is a broker in Colorado for ABC Real Estate. Mary's client John wants to purchase a home that Mary has listed. Mary must: A: terminate the buyer agency agreement and let John become a customer B: terminate the buyer agency and let John find another agent C: become a transaction broker to both parties D: any one of the above is correct

D: any one of the above is correct Explanation: In this question, Mary has to resolve a conflict of interest. Since Mary has a property listed, she is either a Seller's Agent or a Transaction broker for the Seller. Since the buyer is a "Client" he has a Buyer's Agency agreement with Mary because a buyer can only become a "Client" with a Buyer's Agency relationship. Transaction Broker does not create an agency relationship. So, to avoid a conflict of interest, because you cannot have an Agency relationship (Buyer and Seller) with two parties in the same transaction, nor can you be a Transaction Broker (ie Neutral) for one party in a transaction and an agent (ie not Neutral) for the other, Mary's choices are: a) terminate the Buyer Agency Relationship making the Buyer a "customer" and not a "client", b) Tell the buyer to get another agent c) Become a Transaction Broker (neutral) for both parties.

Mary is a broker in Colorado for ABC Real Estate. Mary's client John wants to purchase a home that Mary has listed. Mary must: A: terminate the buyer agency agreement and let John become a customer B: terminate the buyer agency and let John find another agent C: become a transaction broker for both parties D: any one of the above is correct

D: any one of the above is correct Explanation: In this question, Mary has to resolve a conflict of interest. Since Mary has a property listed, she is either a Sellers Agent or a Transaction broker for the Seller. Since the buyer is a "Client" he has a Buyers Agency agreement with Mary because a buyer can only become a "Client" with a Buyers Agency relationship. Transaction Broker does not create an agency relationship. So, to avoid a conflict of interest, because you cannot have a Agency relationship (Buyers and Seller) with two parties in the same transaction, nor can you be a Transaction Broker (ie Neutral) for one party in a transaction and an agent (ie not Neutral) for the other, Mary's choices are: a) terminate the Buyer Agency Relationship making the Buyer a "Customer" and not a "client", b) Tell the buyer to get another agent c) Become a Transaction Broker (neutral) for both parties.

During a showing on a property with a buyer, the broker is called away on a family emergency. In this situation the broker: A: should allow the buyers to lock the house up when they are finished B: should give the lock box information to the buyers so they can view the other properties, while the broker takes care of the family emergency C: call his or her assistant to show the properties to the buyers D: arrange another time to meet with the buyers and show them properties

D: arrange another time to meet with the buyers and show them properties Explanation: Lock box information should never be given to the buyer, and you the broker, should be the first into the home as well as the last person to leave the home, to make sure lights are turned off and all windows and doors are locked and secured.

If the purchaser takes possession prior to closing, the utilities are paid by: A: the purchaser B: the seller C: the purchaser's agent D: as mutually agreed

D: as mutually agreed Explanation: Utilities are paid by mutual agreement on a rental prior to closing situation, and this should be stipulated in the written agreement.

Which of the following is one of the primary reasons that the real estate commission has approved a broad variety of forms and made their use mandatory by licensees? A: allows the commission to discipline brokers for improper contracting B: protects the public by requiring the same forms for all real estate transactions in Colorado C: assists attorneys and the public in following commission rules when contracting D: assures the broker's compliance with the Conway-Bogue decision of the Colorado Supreme Court

D: assures the broker's compliance with the Conway-Bogue decision of the Colorado Supreme Court Explanation: It is used to modify the Contract to Buy & Sell Real Estate.

A real estate broker filling out a listing agreement finds that there is not enough room for the legal description. The broker may: A: abbreviate the description, as it must fit in the body of the contract B: use only the street address as it is shorter C: insert the legal description on the MLS in lieu of the listing agreement D: attach the legal description as information may be added outside the body of the contract

D: attach the legal description as information may be added outside the body of the contract

Employing Broker "reasonable supervision" includes all of the following EXCEPT: A: reviewing all contracts B: review transaction files C: maintaining an office policy manual D: attending first meeting with client

D: attending first meeting with client Explanation: E-31. Reasonable supervision. Pursuant to section 12-61-113(1)(o), C.R.S., and in addition to the requirements of Commission Rule E-30 "reasonable supervision" of licensees with two or more years of experience shall include, but not be limited to, compliance with the following: (a) Maintaining a written office policy describing the duties and responsibilities of licensees employed by the broker. A copy of the written policy shall: (1) be given to, read and signed by each licensee; (2) be available for inspection, upon request, by any authorized representative of the Commission. (b) Reviewing all executed contracts in order to maintain assurance of competent preparation. (c) Reviewing transaction files to ensure that required documents exist. (d) Nothing in this rule shall prohibit an employing broker from delegating supervisory authority to other experienced licensees. (1) Employed licensees who accept supervisory authority from an employing broker shall bear responsibility with the employing broker for ensuring compliance with the Commission statutes and rules by all supervised licensees. (2) Any such delegation of authority shall be in writing and signed by the employed licensee to whom such authority is delegated. A copy of such delegation shall be maintained by the employing broker for inspection, upon request, by any authorized Commission representative. (3) An employing broker shall not contract with any employed licensee so as to circumvent the requirement that the broker supervise employed licensees. More info on "High Level of Supervision: E-32. High-level of supervision. In addition to the requirements of Rule E-31 and pursuant to section 12-61-103 (6)(c)(I) C.R.S., an employing broker shall provide a "high level of supervision" for licensed persons with less than two years experience as follows: (a) Provide specific training in office policies and procedures; (b) Be reasonably available for consultation; (c) Provide assistance in preparing contracts; (d) Monitor transactions from contracting to closing; (e) Review documents in preparation for closing; (f) Ensure that the employing broker or an experienced licensee attends closings or is available for assistance. (g) Nothing in this rule shall prohibit an employing broker from delegating supervisory authority to other experienced licensees. (1) Employed licensees who accept supervisory authority from an employing broker shall bear responsibility with the employing broker for ensuring compliance with the Commission statutes and rules by all supervised licensees. (2) Any such delegation of authority shall be in writing and signed by the employed licensee to whom such authority is delegated. A copy of such delegation shall be maintained by the employing broker for inspection, upon request, by any authorized Commission representative.

According to the Code of Ethics and Standards of Practice, a Realtor: A: must market the property until it closes B: continue to show buyers properties, even if they have a property under contract C: must work with both buyers and sellers D: be available to show properties to the buyer at any reasonable time

D: be available to show properties to the buyer at any reasonable time Explanation: Standard of Practice 7-1, a Realtor is not obligated to market the property after an offer has been accepted by the seller and the Realtor is not obligated to continue to show properties to their clients after an offer has been accepted unless otherwise agreed in writing.

The time and place of closing is generally scheduled by the listing agent, however it should: A: always be set according to the buyer's needs B: always be set according to the seller's needs C: be set according to the lender's schedule D: be mutually agreed to by the parties

D: be mutually agreed to by the parties Explanation: The person scheduling the closing time and place should try to accommodate all of the parties.

The Colorado approved Agreement to Amend/Extend Contract form should be signed: A: before the listing expires B: after the sales contract has been executed C: prior to sales contract acceptance D: before the sales contract has been fully executed

D: before the sales contract has been fully executed

The Colorado-approved Amend/Extend Contract form should be signed: A: before the listing expires B: after the sales contract expired C: before the sales contract has been accepted D: before the sales contract has been fully executed

D: before the sales contract has been fully executed Explanation: The Agreement to Amend/Extend Contract is used only to amend the terms and conditions of a sales contract while it is in process. You cannot amend a contract once it is complete (AKA "executed"), or terminated, or expired. More info: First make sure you understand the difference between the Agreement to Amend and Extend and the Agreement to Amend and Extend With Broker. Both agreements are used to alter the terms and conditions of a contract. The Agreement to Amend and Extend is used to alter the terms of the sales agreement between the buyer and seller. The Agreement to Amend and Extend With Broker is used to amend the terms of an agreement with the client and their broker such as a listing agreement or buyer agency agreement. As to why would you extend a contract before it is executed, understand the difference between the terms "executory" and "executed". When a contract is signed by all parties it is in "executory" status. This means it is in process but not complete. When it is "executed" this means it is complete i.e. fully performed. Real Estate Commission rules say that you cannot amend the terms of an agreement after it has been expired, executed or otherwise terminated. When a closing occurs, the deal is done, the associated listing and sales contracts are fully executed, can't be changed, done, dead, history, ex-contracts, ended, finished, achieved, accomplished, done with, taken to the bank and all over including the shouting.

The tax agreement signed by the buyer and the seller at closing stipulates that the: A: buyer will give a refund to the seller if the taxes actually decrease for the year B: seller will reimburse the buyer if the taxes actually increase for the year C: seller will pay his share of the current year's property tax bill when it comes D: buyer and seller are reaching a final settlement at time of closing, and no further adjustments will be made in the future

D: buyer and seller are reaching a final settlement at time of closing, and no further adjustments will be made in the future Explanation: The tax agreement is a final settlement, no adjustments will be made.

When a buyer executes a real estate sales contract that is accepted and signed by a seller: A: buyer may take possession of the real estate B: seller gives buyer ownership rights C: buyer gets legal title D: buyer has equitable title

D: buyer has equitable title Explanation: Upon acceptance of the sales contract, the buyer has an interest in the property called equitable title. Legal title is not conveyed until closing.

A Purchase and Sale Contract may be prepared by: A: the broker's attorney B: the seller's attorney C: the buyer's attorney D: buyer or seller's attorney

D: buyer or seller's attorney Explanation: The attorney of the buyer or the seller may prepare a purchase and sale contract; the broker's attorney may not.

A good Realtor should be able to pick up on buying signs from the buyer. These signs might include: A: buyer's not saying anything as you walk through the house B: Buyer's saying bedrooms are very small C: buyer's commenting on poor housekeeping of sellers D: buyer's asking how soon can the sellers move out

D: buyer's asking how soon can the sellers move out Explanation: Being able to close means you need to be able to identify a buyer's buying signs.

To pre-qualify a buyer, a broker should obtain the following information from the buyer: A: buyer's criminal background B: buyer's marital status C: buyer's drivers license number D: buyer's present occupation information (i.e. gross income, how long at present job)

D: buyer's present occupation information (i.e. gross income, how long at present job) Explanation: To pre-qualify a buyer the broker should obtain from the buyer their social security number and current address for the lender to pull a credit report, the buyer's present occupation and an approximate amount of cash they have to invest in the new home.

The Exclusive Right-to-Buy Contract is available as: A: various sizes and shapes B: multiple flavors C: different colors D: buyer-agency and transaction broker relationships

D: buyer-agency and transaction broker relationships Explanation: Exclusive Right-to-Buy Contracts can establish either buyer agency or transaction brokerage depending upon which box is checked at the top of the contract. If no box is checked it will be assumed to be a transaction broker relationship.

It is the broker's responsibility when showing properties to: A: set up the showing for sometime within the next week B: wait outside while the buyer looks at the house C: lock all the doors and leave the lights on so the next broker does not have to turn them on D: call ahead to set up the showing

D: call ahead to set up the showing Explanation: It is the broker's responsibility when showing priorities to call ahead to set up the showing, enter the home first and leave the home last, make sure all the doors and windows are locked and the lights turned off.

The defeasance clause in a mortgage: A: prevents the loan from being assumed B: prevents the loan from being sold C: allow for interest rate changes to be made D: cancels the mortgage when the loan is repaid

D: cancels the mortgage when the loan is repaid Explanation: The defeasance clause in a mortgage cancels the mortgage when the loan is repaid.

To be valid, a lease must have: A: consideration, legal objectives, capacity to contract B: offer and acceptance, capacity to contract, legal objectives C: capacity to contract, consideration, offer and acceptance D: capacity to contract, consideration, legal objectives, offer and acceptance

D: capacity to contract, consideration, legal objectives, offer and acceptance Explanation: To be valid, a lease must have consideration, offer and acceptance, capacity to contract and legal objectives.

A blind person with a seeing eye dog makes application with a property manager for a residence in an apartment complex. There is a no pet policy currently being enforced. What action may the property manager take? A: enforce the no pet policy and do not allow the dog in the apartments B: charge an extra $200 pet deposit C: charge an extra $450 pet deposit D: charge no pet deposit, and only require repair of damage

D: charge no pet deposit, and only require repair of damage

A broker must offer: A: 100% commission B: 50/50% commission split C: 75/25% commission split D: commission splits and office fees referenced in the broker's office policy manual

D: commission splits and office fees referenced in the broker's office policy manual Explanation: Commission splits and office policies will be addressed in the broker's office policy manual.

An unlicensed personal assistant would be permitted to do which of the following? A: host an open house while the licensed associate is showing another listing and try to negotiate an offer B: complete contract forms after the licensed associate has captured the important things like price and closing date C: show a property to a potential buyer when the licensed associate is busy and negotiate price and terms for their offer. D: complete a comparative market analysis for presentation by the licensed associate

D: complete a comparative market analysis for presentation by the licensed associate Explanation: Unlicensed assistants cannot do licensed activities, such as negotiating, providing advise or signing contracts A license is not required for completion of a market analysis as the licensed agent is presenting it. An unlicensed assistant can show a home. Their restrictions are simply to provide access to the property and confine real estate conversation to info on materials already published by the licensed agent. Which means they can answer a question on the price of the home (that is published on the MLS or in ads) but not answer a question related to "What do you think they will take?" (that answer is a licensed activity). In real life this is a very controversial topic as listing agents generally do not like the idea of unlicensed people taking strangers through their homes.

A tenant leases a heated apartment, but the landlord fails to provide heat because of a defective boiler. The tenant vacates and refuses to pay rent. This is an example of: A: actual eviction B: abandonment C: negligence D: constructive eviction

D: constructive eviction Explanation: Constructive eviction occurs when a property is not habitable.

If a building collapsed and the tenant was forced to move out, this could be called: A: actual eviction B: effective eviction C: illegal construction D: constructive eviction

D: constructive eviction Explanation: Constructive eviction occurs when a property is not habitable.

The appraisal principle that states that the value of any component of a property is what it gives to the value of the whole or what its absence detracts from the whole is called: A: conformity B: anticipation C: competition D: contribution

D: contribution Explanation: Contribution says that the value of any component of a property is what its addition contributes to the value of the whole.

The appraisal principle that states that the value of any component of a property is what it gives to the value of the whole, or what its absence detracts from the whole, is called: A: conformity B: anticipation C: competition D: contribution

D: contribution Explanation: Contribution says that the value of any component of a property is what its addition contributes to the value of the whole.

An appraiser wants to determine if it is economically feasible for the owner of an apartment building to put in a swimming pool for his tenants' use. The appraiser would be most concerned with the principal of: A: regression B: substitution C: conformity D: contribution

D: contribution Explanation: Will the proposed improvement, the swimming pool, contribute enough value in the form of higher rents from tenants and ultimately, net income to the owner, to justify the expense of installing it.

A broker believes that the seller is asking $20,000 over market price. If they cannot agree on the listing price, what might the broker suggest A: have an appraiser estimate the value B: take the listing but suggest that they meet again in two weeks and discuss the property's activity C: list the property at the price the seller wants D: could do all of the above

D: could do all of the above Explanation: This would be considered an over-priced listing and a way to remedy this would be to take the listing, if there is no activity get back with the seller and negotiate a better listing price.

Seller is giving the buyer a contingency but doesn't want to be stopped from selling forever. The seller should consider: A: increasing the earnest money B: get proof of buyer financing C: refuse the contingency D: countering with an escape clause

D: countering with an escape clause

Seller is giving the buyer a contingency but doesn't want to be stopped from selling forever. The seller should consider: A: increasing the earnest money B: get proof of buyer financing C: refuse the contingency D: countering with an escape clause

D: countering with an escape clause Explanation: Before we define "escape clause" lets define "contingency". When a seller agrees to accept a contingency from a buyer, they are agreeing to sell the property to the buyer contingent on the buyer selling their property. Sellers are more likely to accept a contingency offer in a tough real estate market when they are uncertain when and if their property will sell. In a strong market, seller are not as motivated to pull their property off the market. It is very common when a seller does accept a contingency, for the seller to want to include an escape clause into the terms of the purchase agreement. There is no set format for an escape clause, it is simply a term used to describe any clause in a contract that would let the seller not perform the contract, i.e., blow off the contingent buyer and accept another offer. It is not unusual for an escape clause to place a deadline on the contingent buyer, usually a day or two, to waive the contingency or lose the property.

When the grantor (the owner) offers the grantee (the buyer) a General Warranty Deed transferring ownership; the grantor warrants that the property is free from liens and encumbrances through which Covenant? A: covenant of seisin B: covenant of further assurance C: covenant of quiet enjoyment D: covenant against encumbrances

D: covenant against encumbrances Explanation: This covenant is easy to remember, since the title is the same as what it protects against - encumbrances

When the grantor (the owner) offers the grantee (the buyer) a General Warranty Deed transferring ownership, the grantor warrants that the property is free from liens and encumbrances through which Covenent? A: covenant of seisin B: covenant of further assurance C: covenant of quiet enjoyment D: covenant against encumbrances

D: covenant against encumbrances Explanation: This covenant is easy to remember, since the title is the same as what it protects against - encumbrances More about covenents and the General Warranty Deed A general warranty deed is one in which the grantor warrants or guarantees title against defects that existed before the grantor acquired title or that arose during the grantor's ownership. It does not warrant against encumbrances or defects arising from the grantee's own acts. The usual covenants or warranties contained in a general warranty deed are: 1. Covenant of seisin. Guarantees the grantor's ownership and that he or she has the right to convey it. The fact that the property is mortgaged or is subject to some restriction does not breach this covenant. 2. Covenant against encumbrances. Guarantees that there are no encumbrances or claims against the property except those specifically excluded in the deed. 3. Covenant of quiet enjoyment. Guarantees that the grantee will not be evicted or disturbed in possession of the property. Threats or claims by a third party do not breach this covenant. The grantee would have to actually be dispossessed before being entitled to seek recovery against the grantor under this covenant. 4. Covenant of further assurance. Guarantees that the grantor will procure and deliver any other instruments that are subsequently necessary to make the title good. 5. Covenant of warrant forever. Guarantees that the grantee shall have title to and possession of the property. Sometimes considered part of "quiet enjoyment."

In this situation, the grantor promises to obtain and deliver any instrument needed to make the title good is the: A: covenant of seisin B: covenant against encumbrances C: covenant of quiet enjoyment D: covenant of further assurance

D: covenant of further assurance Explanation: To remember this, keep in mind that this covenant ASSURES the grantee that he has what he needs to make the title good

Seller does not vacate property on the date stated in the contract. The seller is subject to: A: jail B: specific performance C: lawsuit and judgment D: daily dollar amount specified in contract

D: daily dollar amount specified in contract Explanation: Amount shown in contract should be high enough to discourage seller from remaining in the house.

An agency contract can be terminated by all except: A: mutual agreement B: revocation by the principal C: death of the principal D: death of the agent

D: death of the agent

The clauses in a deed that limit the future uses of a property are known as: A: acknowledgements B: granting clauses C: words of conveyance D: deed restrictions

D: deed restrictions Explanation: Deed restrictions can impose various limitations and conditions - in other words, they RESTRICT the types of structures that may be built on the property, or the uses for which a property can be utilized.

A notice to quit should be: A: delivered to lessee via first class mail B: delivered to any family member C: must be served by the county sheriff D: delivered to a family member of at least 15 years of age

D: delivered to a family member of at least 15 years of age Explanation: A notice to quit should be posted in a conspicuous place for lessee or delivered to a family member of at least 15 years of age. The primary function of a 3-day notice to pay rent or quit--typically referred to as a "3-day notice"--is to provide a tenant an opportunity to pay past due rent or voluntarily vacate the premises. Failing to undertake one or another of these options included in the notice exposes the tenant to an eviction lawsuit filed by the landlord.

The loss of value in any property, regardless of the specific cause, in an appraisal, is known as A: descent B: functional obsolescence C: physical deterioration D: depreciation

D: depreciation Explanation: Depreciation refers to a GENERAL loss in value, as opposed to "functional obsolescence" or "physical deterioration," which refer to specific types of depreciation, or losses in value.

Dates in the contract can do all of the following except: A: be extended by mutual agreement B: terminate the contract if not adhered to C: cause a buyer or seller to be considered in default of the contract D: determine the worthiness of the buyer's financing

D: determine the worthiness of the buyer's financing Explanation: Dates in the contract can result in the contract being terminated or the parties may mutually agree to amend or extend.

It is a violation of the listing agreement if the broker: A: lists the property as soon as the seller signs the listing agreement B: does not search out appropriate properties to show C: presents offers the same day they are delivered D: does not exert reasonable effort to sell the property

D: does not exert reasonable effort to sell the property Explanation: The owner is justified in canceling the listing if the Broker does not exert reasonable effort to sell the listing.

Regulation Z also known as the Truth in Lending Act: A: limits the amount of interest that can be charged on a promissory note B: requires sellers under an installment land contract to make appropriate disclosures C: prohibits the sales price of a property from being advertised D: does not limit the interest that can be charged, only requires total disclosure

D: does not limit the interest that can be charged, only requires total disclosure Explanation: Definition of 'Regulation Z' from Investopia A specific Federal Reserve Board regulation that requires debt lenders to disclose all the specifics of a given loan. This was done to promote a level of credit protection for the underlying consumer. Most of the requirements imposed by the 1968 Truth in Lending Act are contained within Regulation Z, and the two terms are often used interchangeably. Investopedia explains 'Regulation Z' One of the end results of this regulation is how a lender has to disclose how much interest will be charged on the loan. For example, for both credit card and mortgage loans, the respective lender (credit card issuer or the mortgage issuing bank) must clearly say just how much interest will be incurred by the loan in terms of an annual percentage rate. So, a lender would not be allowed to quote a low interest rate and then state in the fine print that the interest rate is expressed in per week terms, instead of the common expression of per annum.

A licensee who wishes to pursue a career in a specialty area of real estate: A: must have a special license for property management B: must have a special license to practice commercial real estate C: must have a special license for farm and ranch land D: does not need any special license for farm-ranch and vacant land sales, property management, as well as commercial and residential real estate

D: does not need any special license for farm-ranch and vacant land sales, property management, as well as commercial and residential real estate Explanation: There is only one license in Colorado and it allows the practice of all types of real estate activity.

In the normal real estate transaction, which of the following is accurate regarding a broker's holding of other people's money? A: licensee's commission may be held in his escrow account B: interest must be paid to the seller C: earnest money deposits may be kept in his general operating account until just before closing D: earnest money deposits must be place in a recognized depository not later than three business days following the day on which the broker receives notice of acceptance

D: earnest money deposits must be place in a recognized depository not later than three business days following the day on which the broker receives notice of acceptance Explanation: The earnest money must be deposited within three business days after acceptance of the contract to buy and sell.

A tenant's lease has expired and the tenant has not vacated or negotiated a renewal lease. The landlord has declared that he does not want the tenant to remain in the building. This occupancy is normally called: A: estate for years B: estate from year to year C: estate at will D: estate at sufferance

D: estate at sufferance Explanation: When a landlord does not want the tenant to remain on the property there is an estate at sufferance (the landlord is suffering).

Frank and Betty Taylor's apartment lease has expired, but their landlord has indicated to them that they may remain on the premises until a sale of the building is closed. The Taylor's will be charged their normal monthly rent during this period. Their tenancy may be called a(n): A: year-to-year holdover B: estate for term C: estate at sufferance D: estate at will

D: estate at will Explanation: A tenancy at will often occurs upon the expiration of an estate for years. More info on Leasehold Tenancies: Leasehold Tenancy also known as Nonfreehold Estates A nonfreehold estate is an interest in real property that is less than a freehold estate. Nonfreehold estates are not inheritable and are said to exist without seisin. Seisin denotes ownership: an individual who is "seised" of an estate is the owner of the estate. Also known as a leasehold estate, a nonfreehold estate is created through a lease or rental agreement that can be either written or oral. The holder of a nonfreehold estate (the tenant or lessee) holds no ownership interest in the real property, and only has the right to use the property as established in the terms of the lease or rental agreement. Ownership remains with the landlord (lessor). Types of Nonfreehold Estates Because nonfreehold estates involve tenants, they are often referred to as "tenancies." There are four types of tenancies: Tenancy for Years This is, also called an estate for years or tenancy for a definite term, is an estate that is created by a lease. A lease is a contractual agreement where a tenant takes a leasehold interest in a real property for a specified duration. The defining characteristic of a tenancy for years is that the term must have a definite beginning and end; that is, a beginning date and either a specific time period (such as one year or one month) and an end date must be declared. As long as a lease is for a definite term, it is identified as a tenancy for years. These leases terminate automatically at the specified end date without the need for notice by either party. Tenancy from Period to Period A tenancy from period to period is an estate that exists when the tenancy is for a definite initial time, but is automatically renewable unless terminated by the lessor or lessee with prior notice that the tenancy is to be ended. These estates, which are also called periodic tenancies, are of indefinite duration since they can be renewed indefinitely. A tenancy from period to period may be from year to year, month to month, week to week or even day to day, and renews for a like period of time. For example, a month to month periodic tenancy is renewable in one-month periods until it is terminated at the end of a month through proper notice by either party. Tenancy at Will A tenancy at will, or an estate at will, exists at the pleasure of both the lessor and the lessee. This type of tenancy can be terminated at any time "at the will" of either the owner or the tenant. A tenancy at will lease agreement might contain language that expresses that the lease may be terminated instantly when notice is given. In practice, a tenant is generally entitled to a reasonable amount of time in which to vacate the property. Landlords may prefer a tenancy at will when a property is for sale and any tenants would have to vacate quickly. Tenants may favor a tenancy at will if they plan on renting only for a short period of time; for example, prior to moving or while waiting to move into a new home. Tenancy at Sufferance A tenancy at sufferance is the lowest form of estate known to law. Also called an estate at sufferance, it exists indirectly as the result of circumstance, and is never deliberately created. This type of tenancy arises when a person goes into possession of land in a lawful manner, but remains on the property without any right to do so, and without the owner's consent. The only difference between a tenant at sufferance and a trespasser is that the tenant at sufferance had at one time a right to be on the property, but has stayed beyond the terms of the previous agreement. For example, a tenant who remains after a one-year lease has terminated, without consent or recognition from the owner, becomes a tenant at sufferance. The tenant can be evicted at any time without notice.

An appraiser's work entails: A: finding value B: determining value C: computing value D: estimating value

D: estimating value Explanation: An appraisal is an estimation of value.

A commercial lease is terminated by: A: sale of the leased premises B: death of the tenant C: abandonment of the landlord D: expiration of the term of lease

D: expiration of the term of lease Explanation: A lease is terminated when it expires. Sales are made subject to the lease, and a lease is treated as personalty and passes to the heirs of a deceased tenant.

RESPA applies primarily to: A: construction loans B: refinancing of existing loans C: owner carry loans D: first loans for residential properties

D: first loans for residential properties Explanation: The Real Estate Settlement Procedures Act applies primarily to new loans for the purpose of purchasing residential property. Truth in lending laws pertain to equity loans and seconds.

In a typical relationship between broker and seller, the broker's commission is: A: set by state law B: set by federal authorities C: fixed by the local board D: fixed by mutual agreement with the seller

D: fixed by mutual agreement with the seller Explanation: Commissions are always negotiable.

According to the Colorado Licensing Law, in order for a non-resident to become a broker: A: he must meet Colorado licensing law only B: he must be involved in real estate in his home state C: he must be 21 and have been involved in real estate for two years D: he must be a broker from his home state and comply with Colorado licensing laws, but need not open an office in Colorado

D: he must be a broker from his home state and comply with Colorado licensing laws, but need not open an office in Colorado Explanation: The minimum age requirement for a license in Colorado is 18. In order to obtain a non-residential license an applicant must be a broker in his own state and comply with Colorado licensing laws. It is not necessary to have an office in Colorado but a Colorado trust account is necessary the minute he receives any money from a client in Colorado.

A broker received an earnest money deposit from a buyer. Under Colorado law, the broker should A: open a special, separate escrow account that will contain funds for this transaction only, separated from funds received in any other transaction B: deposit the money in an existing, special non-interest-bearing escrow account in which all earnest money received from buyers may be held C: immediately deposit the earnest money in the broker's personal checking or savings account D: hold the earnest money deposit in a secure place in the broker's real estate brokerage office until the offer is accepted

D: hold the earnest money deposit in a secure place in the broker's real estate brokerage office until the offer is accepted Explanation: The broker should hold the earnest money deposit in a secure place in the broker's real estate brokerage office until the offer is accepted.

The rescission provisions of truth-in-lending apply to what type of loan? A: purchase money B: construction C: business D: home equity

D: home equity Explanation: A home equity loan has a three-day right of rescission.

Your buyer is purchasing a town home. He has heard that the community has very restrictive covenants and wants to make sure that his offer is contingent upon his approval of their rules. A: he must check this out ahead of time, since the contract makes no provision for this as a reason for termination B: you must advise him that this is discrimination, and you cannot help him further C: you must write any such contingency in the other provisions section of the contract D: if properly prepared, the buy and sell contract gives him the right to review the covenants and terminate, if they are unacceptable

D: if properly prepared, the buy and sell contract gives him the right to review the covenants and terminate, if they are unacceptable Explanation: When completing the Contract to Buy and Sell Real Estate, it is important to insure that the buyer has the opportunity to review the community or condo covenants, which allows him the right to terminate if not acceptable.

According to the Licensee Buyout Addendum to the Contract to Buy and Sell, when does responsibility extend beyond the licensee to the brokerage firm? A: when the buyout date arrives B: when the buyout is for the personal use of the principal broker C: only if the listing associate is unable to perform the buyout D: if the employing broker signs at the bottom of the addendum

D: if the employing broker signs at the bottom of the addendum Explanation: If the managing or employing broker signs the Licensee Buyout Addendum, then the brokerage company is responsible. According to the form, this is the only specification for responsibility. A is correct. A is the only verbiage listed NOT in the Licensee Buyout Addendum. More info: What Is a Licensee Buyout Addendum? by Maxwell Wallace, Demand Media A licensee buyout addendum is a form used in certain real estate and property transactions in the state of Colorado. The LBA is used only in the purchase and sale of properties between licensed real estate professionals and their own clients. History and Purpose The Licensee Buy-Out Addendum to Contract to Buy and Sell Real Estate is intended to prevent improprieties and conflicts of interest in licensee/client transactions, as well as to make sellers contractually aware of the potential differences in selling to a licensed real estate professional as opposed to conventional buyers. Situations Dictating Use Licensed real estate agents are required to use an LBA when they enter into contracts to purchase properties concurrently with the initial listing of that property, when it immediately hits the market. Licensees also are required to use the LBA form when they are purchasing a property to facilitate its owner's purchase of another property, as well as when they continue to market that property to other potential buyers. Deleted Provisions Under the provisions of the licensee buyout addendum, several conventional provisions of standard real estate listing contracts reached under Colorado state law are deleted. Deleted provisions include a property's appraisal condition, liquidated damages or pre-assessed damages to the property, provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms. Profit and Loss Stipulations Colorado's LBA also stands as contractual acknowledgment by a property seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the LBA protects the property seller by acknowledging that any fees related to closing, holding and reselling the property are all absorbed by the buyer and not the property seller as the original or prior landowner.

According to the Licensee Buyout Addendum to the Contract to Buy and Sell, when does responsibility extend beyond the broker to the brokerage firm? A: when the buyout date arrives B: when the buyout is for the personal use of the principal broker C: only if the listing associate is unable to perform the buyout D: if the managing or employing broker signs at the bottom of the addendum

D: if the managing or employing broker signs at the bottom of the addendum Explanation: The Conway-Bogue decision gives real estate licensees the limited right to practice law by completing standard and approved forms, thus these numerous mandatory forms assist brokers in their compliance with this statute.

When are faxed signatures acceptable on a Contract to Buy and Sell? A: never B: only during negotiation and not at closing C: as determined by the real estate commission D: if the parties agree and indicate this choice on the contract form

D: if the parties agree and indicate this choice on the contract form Explanation: According to the contract, parties are permitted to approve faxed signatures and either party may request original signatures at closing or earlier.

If an agent forgets to renew her license and submits the application to renew 30 days late. The status of her license during this 30 day period is: A: active B: suspended C: expired D: inactive

D: inactive Explanation: On the date a license expires, for the following 30 days it is placed into an "inactive" status and may be renewed by paying the regular renewal fee. After 30 days it is placed into an "expired" status. Renewing an expired license requires the payment of additional fees and satisfying additional educational requirements.

This appraisal approach estimates the value of the present worth of the future rights to the income the property generates by converting the net income of the property into a value. This is known as: A: comparative market analysis B: substitution C: cost approach D: income approach

D: income approach Explanation: The income approach, also called capitalization, is used to appraise investment or income-producing properties.

An owner's broker is showing a buyer an apartment building. The buyer notices water stains on the ceiling and informs the broker. The broker's best course of action is to: A: immediately contract to paint the ceiling B: immediately contract to repair the roof C: suggest the buyer not offer full price D: inform the seller

D: inform the seller Explanation: The Colorado listing agreement states, Broker will not obtain or order any other products or services unless seller agrees in writing to pay for them promptly when due.

A contract may be renegotiated after acceptance if the: A: buyer decides he or she did not get a good deal B: appraisal comes in above the purchase price C: seller cannot find a new home D: inspection reveals several items that need repair

D: inspection reveals several items that need repair Explanation: There are clauses in the contract that allow for the buyers to terminate the contract, the parties may renegotiate, if both parties are willing, and amend the contract.

A tenant has a lease in a building for another 8 months, but the owner of the building sells the building and the closing is scheduled for the end of the month. The tenant's lease: A: terminates on the day of closing B: terminates 30 days after closing with written notification by new owner. C: converts to a month-to-month after the closing pending negotiations with the new owner D: is good as signed.

D: is good as signed. Explanation: The lease is still valid as signed. Buying a property means you not only get the asset, but also the obligations. It is a bit like getting married - you get the good and the bad - you do not get to choose.

If the buyer has asked the seller to pay points, the seller needs to understand that a point: A: is 1% of the purchase price B: is paid at closing by the seller is shown as a credit to the seller and a debit to the buyer on the settlement statement C: is paid over the term of the buyer's loan D: is up front money paid to the buyer's lender at closing

D: is up front money paid to the buyer's lender at closing Explanation: A point is 1% of the loan amount. A point paid by the seller is a debit to the seller and a credit to the broker. A point is paid at closing not over the term of the loan.

After a tenant gave notice and vacated an apartment, the landlord discovered substantial damage to the unit. No time was set in the lease specifying the length of time the landlord had to account or refund the security deposit after deductions. Which of the following is an appropriate action by the landlord? A: return the deposit immediately and bill the tenant for the repairs when completed B: if the damage is obviously more than the deposit, the landlord may keep the damage deposit without notice C: notify the tenant that his or her damage deposit is forfeited within 60 days D: itemize the damage in writing and return any excess deposit within one month

D: itemize the damage in writing and return any excess deposit within one month Explanation: The maximum amount of time a landlord can specify in a lease that they will hold a security deposit after lease termination is 60 days. If no time was specified in the lease, the default maximum is 30 days.

A document that transfers possession for a consideration but does not transfer ownership is a: A: special warranty deed B: deed containing a restriction C: last will and testament D: lease

D: lease Explanation: A lease gives the lessee the exclusive right to possess the property, but does not transfer title.

A real estate appraiser is: A: who conducts appraisals strictly of personal property B: licensed as a broker who provides an opinion of value that is not represented as an appraisal and is not used for purposes of obtaining financing C: licensed as a certified public accountant, provided the opinion for value for real estate is not represented as an appraisal D: licensed as an appraiser who provides an estimate of value of property

D: licensed as an appraiser who provides an estimate of value of property

The Interval Revenue Code provides for tax-deferred exchanges only of: A: residential property B: commercial property C: urban property D: like kind property

D: like kind property

A recorded subdivision plat is used in the: A: geodetic survey system B: rectangular survey system C: metes and bounds system D: lot and block system

D: lot and block system Explanation: Plat maps reference the lot and block number of each parcel.

Broker Betty at an open house meets a young couple looking to purchase their first home. The couple asked if the Broker thought they had enough income to qualify for a loan to purchase the property. Realizing this information is of a confidential nature Broker Betty makes the agency disclosure that her office policy and State statute require. The buyers are very skeptical about making a commitment and have been coached by family members not to sign anything. They refuse to sign the signature block on the Brokerage Disclosure to Buyer form. Betty should: A: refuse to answer unless they sign B: answer the question, then ask them to sign once again C: call their attorney and make the disclosure to him D: make a note of the date and time the disclosure was made and reference the fact that the buyers declined to sign the form - then have the discussion

D: make a note of the date and time the disclosure was made and reference the fact that the buyers declined to sign the form - then have the discussion Explanation: Brokers are required to make agency disclosure. Buyers are not required to sign the disclosure. It is acceptable to note the date and time the disclosure was made, and indicate that the buyers declined to sign the form.

Broker Betty meets a young couple at an open house who are looking to purchase their first home. The couple asked if the Broker thought they had enough income to qualify for a loan to purchase the property. Realizing this information is of a confidential nature Broker Betty makes the agency disclosure that her office policy and state statute require. The buyers are very skeptical about making a commitment and have been coached by family members not to sign anything. They refuse to sign the signature block on the Brokerage Disclosure to Buyer form. Betty should: A: refuse to answer unless they sign B: answer the question, then ask them to sign once again C: call their attorney and make the disclosure to him D: make a note of the date and time the disclosure was made and reference the fact that the buyers declined to sign the form - then have the discussion

D: make a note of the date and time the disclosure was made and reference the fact that the buyers declined to sign the form - then have the discussion Explanation: Brokers are required to make agency disclosure. Buyers are not required to sign the disclosure. It is acceptable to note the date and time the disclosure was made, and indicate that the buyers declined to sign the form.

A lease that will terminate less than one year from the date of the agreement: A: is invalid C: is not allowed in this state B: must be in writing D: may be oral, but is likely unenforceable in court

D: may be oral, but is likely unenforceable in court Explanation: A lease that can be accomplished in less than a year does not have to be in writing however it is generally unenforcable in court unless the subject of the legal action admits in court a lease term. There is a legal doctrine followed in all common law jurisdictions (like Colorado) called the "Statute of Frauds." In Colorado the applicable statute is Colo. Rev. Stat. § 38- 10-108 (2004). It declares that: "Every contract for the leasing for a longer period than one year or for the sale of any lands or any interest in lands is void unless the contract or some note or memorandum thereof expressing the consideration is in writing and subscribed by the party by whom the lease or sale is to be made."

If the purchaser makes an offer to buy conditional on the ability to secure a loan and is unable to after the buyer has in good faith pursued the loan application, the buyer: A: will lose his earnest money B: will pay damages C: will pay the commission D: may cancel the contract to purchase

D: may cancel the contract to purchase Explanation: If the buyer has pursued a loan in good faith and cannot obtain the loan, the buyer may cancel the contract of purchase.

An Agreement to Amend and Extend With Broker is used for the purpose of: A: modifying the terms of a purchase and sale contract that is being negotiated B: modifying the terms of an accepted purchase and sale contract C: modifying the terms of a broker to broker commission agreement D: modifying the terms of an Exclusive Right-to-Buy or Exclusive Right-to-Sell Listing Contract

D: modifying the terms of an Exclusive Right-to-Buy or Exclusive Right-to-Sell Listing Contract Explanation: The Agreement to Amend and Extend With Broker is used to amend the terms of an agreement with the client and their broker such as a listing agreement or buyer agency agreement.while it is in process. You cannot amend a contract once it is complete (AKA "executed"), or terminated, or expired. More info: Make sure you understand the difference between the Agreement to Amend and Extend and the Agreement to Amend and Extend With Broker. Both agreements are used to alter the terms and conditions of a contract. The Agreement to Amend and Extend is used to alter the terms of the sales agreement between the buyer and seller. The Agreement to Amend and Extend With Broker is used to amend the terms of an agreement with the client and their broker such as a listing agreement or buyer agency agreement. As to why would you extend a contract before it is executed, understand the difference between the terms "executory" and "executed". When a contract is signed by all parties it is in "executory" status. This means it is in process but not complete. When it is "executed" this means it is complete, i.e., fully performed. Real Estate Commission rules say that you cannot amend the terms of an agreement after it has been expired, executed or otherwise terminated. When a closing occurs, the deal is done, the associated listing and sales contracts are fully executed, can't be changed, done, dead, history, ex-contracts, ended, finished, achieved, accomplished, done with, taken to the bank and all over including the shouting.

All of the following are true regarding the Exclusive Right-to-Sell listing contract except: A: there is one contract for all types of listings B: a listing contract may establish seller agency C: a listing contract may be executed without establishing agency D: more than one listing contract may be executed for the same time period, for the same property

D: more than one listing contract may be executed for the same time period, for the same property Explanation: The Right-to-Sell Listing contract provides exclusivity to the listing broker to sell the property. The broker will be entitled to compensation regardless of who sells the property. If there is more than one listing contract active at the same time, the seller could be liable for multiple commissions to be paid. Commission Rule E-13 does not allow a real estate licensee to enter into an exclusive listing agreement with a seller if there is a listing contract currently in force with another licensee. It allows a listing contract executed that will become effective upon the expiration of the listing currently in force - but the two cannot be in force concurrently. More info about agency and non-agency relationships: The reason the third answer is true (and therefore not the right answer to this question), a listing contract can be executed without establishing agency by simply checking the Transaction Broker box. At that point the licensee is not an agent (with agency duties) but a Transaction Broker. If the Seller Agency box was checked an agency relationship would have been established. To understand why a Transaction Broker is not an agency relationship you have to understand the agency relationship. An agency relationship is a consensual relationship created by contract or by law where the principal grants authority to the agent to act on behalf of and under the control of the principal to represent the principal with a third party. Only the Buyer and Seller Agency relationships are agency relationships. When you are a Transaction Broker you are in a "working relationship" not an "agency relationship". The Transaction Broker is a neutral party, much like a referee in a sport, the TB can assist with the transaction, but cannot advise the principal as to the risks or benefits of the transaction, nor can the TB become an advocate for the interests of the principal. Those are duties reserved to an agency relationship where the Buyer or Seller Agent is a coach for the principal. An agency relationship is referred to as "fiduciary" as the actions and words of the agent with a third party bind the principal. A TB is not "fiduciary" as the words and actions of the TB DO NOT bind the principal. The only items which bind the principal when a Transaction Broker is involved are the contracts signed by the principal.

Money realized in excess of the indebtedness and the foreclosure belong to: A: the court B: the PMI, FHA, or VA, whichever insured the loan C: mortgagee D: mortgagor

D: mortgagor Explanation: The Mortgagor is the owner of the property. The owner placed the voluntary lien on the property which the mortgage represents to secure a loan for the property. Money left over from the sale of the foreclosed property, after all obligations were settled, would have been returned to the Mortgagor (AKA foreclosed owners.) The IRS views a foreclosure sale as a normal sale of the property. The owners would need to consider the tax consequences of the sale as the excess money may be viewed by the IRS as a capital gain and thus subject to capital gain taxes. More information about foreclosures in Colorado: Foreclosures: Foreclosure is the act of selling, by legal proceedings, real property to satisfy the obligations of the landowner to a third party. It is the procedure whereby property pledged as security is sold to pay the debt in the event of default in payment. There are three main types of foreclosure in the State of Colorado: The Public Trustee System: The Public Trustee, by law, serves as the neutral, intermediate party between the lender and the borrower to assure that each party can exercise its legal rights in a foreclosure action. The Public Trustee is NOT an attorney and cannot provide legal advice to any parties involved in the foreclosure action. A foreclosure conducted by the Public Trustee's office is authorized by a deed of trust containing a power of sale (right to sell property at public auction in the event of default.) The procedure for conducting the foreclosure is set by statute and must be followed precisely. The deed of trust is an agreement between three parties: the Grantor (owner) the Public Trustee (who has the power of sale) and the Beneficiary (lender.) The Judicial Foreclosure: Foreclosure conducted through the Court system on a mortgage, deed of trust, or judgment. The procedure for conducting the foreclosure is under Rule 105 of the Colorado Rules of Civil Procedure. A mortgage is an agreement between two parties: the Mortgagor (owner) and the Mortgagee (lender.) The Tax Sale: The Tax Sale Sale of real property by the Treasurer for failure to pay real estate taxes. The procedure for conducting the sale is set by statue.

A broker working as a buyer's agent in a real estate transaction: A: should have his assistant show them houses if the broker is busy B: should encourage buyers to view properties or open houses on their own C: should not have to be inconvenienced by the buyer D: must be available to accompany buyers and show properties at the convenience of the buyer

D: must be available to accompany buyers and show properties at the convenience of the buyer Explanation: Customer service is #1; try to always be there for your client at their convenience, within reason.

An offer to purchase is given to Broker Mary who has an Exclusive Right To Sell listing agreement with a seller. She.. A: must verify buyer's financial condition by her independent investigation B: is responsible for validating sellers statements on Sellers Property Disclosure C: must personally investigate condition of property and disclose material facts to buyer D: must disclose all material facts about the property that is know to her

D: must disclose all material facts about the property that is know to her Explanation: C.R.S. 12-61-804. (3)(a) requires that the broker must disclose all material facts about the property of which she/he has knowledge.

How are real estate commissions determined in Colorado? A: set by the real estate commission B: set by law C: determined by local brokers D: negotiable between the broker and the seller or buyer

D: negotiable between the broker and the seller or buyer Explanation: Commissions are always negotiable between the principal and the agent; meaning between the seller or buyer and the broker.

A transaction broker has a fiduciary responsibility to: A: the buyer B: the seller C: both the buyer and seller D: neither the buyer nor seller

D: neither the buyer nor seller Explanation: A fiduciary relationship is the highest standard of care at law. A fiduciary is expected to be extremely loyal to the person to whom he/she owes the relationship (the "principal") and must not put personal interests before the relationship, and must not profit from his/her position as a fiduciary, unless the principal consents. In real estate an agency relationship creates a fiduciary relationship. A transaction broker is a non-agent and does not have a fiduciary relationship.

A transaction broker owes a fiduciary responsibility to: A: the buyer B: the seller C: the buyer and the seller D: neither the buyer nor the seller

D: neither the buyer nor the seller Explanation: A transaction broker is a "neutral" party that owes no fiduciary responsibility to any party. A fiduciary relationship is created when a principal signs a listing or buyer's agency agreement with a Listing Agent or Buyers Agent. Note: a Transaction Broker as a neutral party is not a fiduciary relationship (the T broker owes no loyalty, only Care, Obedience, Accounting and Disclosure of non-confidential items and material facts). In real estate transactions, only the Sellers or Buyer's agency relationships are fiduciary relationships. This relationship implies a position of trust or confidence, wherein one person is usually entrusted to hold or manage property or money for another. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.

A broker is required to disclose any psychologically stigmatizing factors, such as there was a death in/on the property, that is actually known by the broker when he is acting as: A: a seller's agent B: a buyer's agent C: a transaction broker D: never

D: never Explanation: The real estate commission's position on psychologically stigmatized properties is that they are NOT TO BE disclosed and agents are protected from legal actions resulting from nondisclosure. Stigmatized property is a controversial term used in the real estate business for property which buyers or tenants may shun for reasons that are unrelated to its physical condition or features. These can include events invloving murder or suicide or AIDS, in addition to a belief that a house may be haunted. Material facts such as the foundation is bad or the house tested high for Radon ARE required to be disclosed. Nondisclosure of Information Psychologically Impacting Real Property § 38-35.5-101, C.R.S. Circumstances psychologically impacting real property - no duty for broker or salesperson to disclose. (1) Facts or suspicions regarding circumstances occurring on a parcel of property which could psychologically impact or stigmatize such property are not material facts subject to a disclosure requirement in a real estate transaction. Such facts or suspicions include, but are not limited to, the following: (a) That an occupant of real property is, or was at any time suspected to be, infected or has been infected with human immunodeficiency virus (HIV) or diagnosed with acquired immune deficiency syndrome (AIDS), or any other disease which has been determined by medical evidence to be highly unlikely to be transmitted through the occupancy of a dwelling place; or (b) That the property was the site of a homicide or other felony or of a suicide. (2) No cause of action shall arise against a real estate broker or salesperson for failing to disclose such circumstance occurring on the property which might psychologically impact or stigmatize such property.

Loan fraud can have the following results to a real estate licensee except: A: criminal action filed in criminal court B: disbarred by HUD from all federal programs C: end of a career in real estate D: no action taken

D: no action taken Explanation: Loan fraud can also result in disbarment by HUD from all Federal programs, large fines and federal prosecution. Virtually all loan programs are affiliated with the Federal government in either the primary or secondary mortgage market, disbarment can mean the end of a career in real estate, lending or related fields. (REM 15-18)

A couple signed a lease on an apartment for a period of 1 year. The lease does NOT contain an automatic renewal clause. The couple plans to move out at the end of the lease rather than renew it. How much notice MUST they give to comply with the lease term? A: 30 days B: 45 days C: 90 days D: no notice is required

D: no notice is required Reference: A lease for a defined period of time, with no automatic renewal is a Tenancy of Years. Do not let the term "years" fool you. This tenancy simply means that the lease is for a set period of time, be it a day, a month, 6 months or a year. If it had an automatic renewal it would have been a Periodic Tenancy. The most common version of a Periodic Tenancy is a month-to-month lease which automatically renews when rent is paid. A Periodic Tenancy can go on forever as long as the set period of time is renewed. In a Tenancy of Years there is a set period of time, but no automatic renewal - when the lease is done, you are done, unless you and the landlord agree to renew, but that is not automatic.

A Seller asks an agent/friend to accept compensation to advise on Tax and Title matters for a property the seller is considering buying. Can the agent do this? A: yes, brokers provide this advice commonly B: yes, as long as the agent is engaged as a buyer's agent C: no, the agent is not a buyer's agent and therefore cannot provide this advice D: no, this is outside the scope of permitted activities for a holder of a real estate license

D: no, this is outside the scope of permitted activities for a holder of a real estate license

A broker does not have to supervise independent contractors when: A: they have at least three years experience B: they have an independent brokers license, even though a designated broker employs them C: the broker is out of town D: none of the above

D: none of the above Explanation: A broker must always supervise all independent contractors.

What is the maximum commission rate that a buyer may be charged pursuant to an Exclusive Right-to-Buy contract? A: 0.028 B: 0.03 C: 0.07 D: none of the above

D: none of the above Explanation: A buyer agency relationship establishes advocacy of the buyer's best interest; it is a fiduciary responsibility.

If a licensee negotiates a sale of real estate on behalf of a seller while her license is inactive, she may receive a commission from: A: her employing broker B: the seller C: her principal D: none of the above

D: none of the above Explanation: A licensee must have an active real estate license in order to collect a commission. It is a violation of real estate license law to negotiate a real estate transaction without an active license.

A written office policy regarding brokerage relationships is a requirement of offices that are staffed by: A: six or more agents B: three or more agents C: two or more agents D: one or more agents

D: one or more agents Explanation: Colorado statutes require all offices to have an office policy regarding agency. And a copy of that policy and all changes are to be given to all associates.

A seller may employ more than one broker to assist in selling his or her home. This would be accomplished through a(n): A: exclusive right listing B: exclusive agency listing C: net listing D: open listing

D: open listing Explanation: Open listings offer the least amount of protection to the broker because whoever sells the property gets the commission.

When determining the value of a property using the Sales Comparison Approach (also known as the Market Data Approach) the appraiser looks for similar properties that have been sold to use in comparison. Which of the following factors is NOT important to an appraiser in selecting and analyzing comparable properties using this approach: A: dates of sale B: financing terms C: appearance and condition D: original cost

D: original cost Explanation: Original cost has no bearing on current market value. Sale Date: The sale price of a comparable that sold recently will have greater weight than the older sale price of another comparable. As to Financing Terms, appraisers often analyze the financing terms of a property they are going to use as a comparable. They are looking to see if the terms of financing had an effect on the sale price of the comparable (not the subject property). For example; if the seller agreed to self-finance the property they might have been able to get an above market price from someone who cannot get a bank loan. Or if someone paid all cash on a property they might have been able to negotiate a below market price. The sales comparison approach compares a subject property's characteristics with those of comparable properties which have recently sold in similar transactions.

Which of the following is contained in the preprinted portion of a purchase and sale contract? A: legal descriptions B: developer warranties C: HOA by-laws D: preowned home warranty information

D: preowned home warranty information

The highest and best use is the use that: A: contributes to the best interest of the community B: complies with zoning and deed restrictions C: produces the highest gross income D: produces the greatest property value

D: produces the greatest property value Explanation: Highest and best use is a concept in real estate appraisal. It states that the value of a property is directly related to the use of that property; the highest and best use is the reasonably probable use that produces the highest property value. This use, the highest and best use, may or may not be the current use of the property..

An Environmental Impact Statement (EIS): A: summarizes the environmental impact of an existing projects B: is used primarily for state and federally funded projects C: must be approved by all affected water districts D: projects the impact on the environment of a proposed project

D: projects the impact on the environment of a proposed project

An Environmental Impact Statement (EIS) A: summarizes the environmental impact of an existing project B: is used primarily for state and Federally funded projects C: must be approved by all affected water districts D: projects the impact on the environment of a proposed project

D: projects the impact on the environment of a proposed project Explanation: An Environmental Impact Statement (EIS) is a document prepared to describe the effects for proposed activities on the environment. "Environment," in this case, is defined as the natural and physical environment and the relationship of people with that environment. This means that the "environment" considered in an EIS includes land, water, air, structures, living organisms, environmental values at the site, and the social, cultural, and economic aspects. An "impact" is a change in consequence that results from an activity. Impacts can be positive or negative or both. An EIS describes impacts, as well as ways to "mitigate" impacts. To "mitigate" means to lessen or remove negative impacts. Therefore, an Environmental Impact Statement, or EIS, is a document that describes the impacts on the environment as a result of a proposed action. It also describes impacts of alternatives as well as plans to mitigate the impacts.

An Environmental Impact Statement (EIS): A: summarizes the environmental impact of an existing project B: is used primarily for state- and federally-funded projects C: must be approved by all affected water districts D: projects the impact on the environment of a proposed project

D: projects the impact on the environment of a proposed project Explanation: An Environmental Impact Statement (EIS) is a document prepared to describe the effects for proposed activities on the environment. "Environment," in this case, is defined as the natural and physical environment and the relationship of people with that environment. This means that the "environment" considered in an EIS includes land, water, air, structures, living organisms, environmental values at the site, and the social, cultural, and economic aspects. An "impact" is a change in consequence that results from an activity. Impacts can be positive or negative or both. An EIS describes impacts, as well as ways to "mitigate" impacts. To "mitigate" means to lessen or remove negative impacts. Therefore, an Environmental Impact Statement, or EIS, is a document that describes the impacts on the environment as a result of a proposed action. It also describes impacts of alternatives as well as plans to mitigate the impacts.

The Colorado Real Estate Commission was formed to: A: standardize testing B: uniform forms C: regulate licenses D: protect the public

D: protect the public Explanation: a, b & c are all elements of the Commission's duties but "Protect The Public" is the reason for their existance.

The title commitment is used for all of the following purposes except to: A: disclose liens against the property B: guarantee the buyer marketable title C: disclose unpaid judgments against the seller D: provide a history of transactions related to the property

D: provide a history of transactions related to the property Explanation: This is called the chain of title, and is only included in an abstract.

Licensees are required to: A: take 32 hours of continuing education every three years B: carry a license pocket card C: display their license in a conspicuous place D: purchase E & O insurance every year

D: purchase E & O insurance every year Explanation: E & O Insurance stands for Errors and Omissions Insurance

Of the following, who is responsible for for an accurate and complete closing statement? A: closing company B: closing agent for closing company C: employing broker not attending closing D: real estate broker attending closing

D: real estate broker attending closing Explanation: Real estate brokers are required by Rules E-4 and E-5 to provide copies of complete and accurate closing statements to buyers and sellers for any transaction in which the broker assists or acts in an agency capacity. Although the brokers usually engage a closing company to create the closing statements, they cannot delegate responsibility for the statements being accurate and complete.

A property manager is normally compensated in all but one of the following ways: A: commission on new leases B: percentage of gross profits C: percentage of repair and major maintenance savings D: rebates and discounts on equipment and supplies

D: rebates and discounts on equipment and supplies Explanation: Savings from rebates and discounts should benefit the property owner, not the agent.

An applicant for a real estate license can solicit buyers and sellers after (or upon): A: applying for a license B: taking the license examination C: notification of passing examination D: receipt by broker of individual's license

D: receipt by broker of individual's license Explanation: After applying for a license and passing the exam, the real estate commission will mail a license to the broker. The licensee can then practice real estate.

According to Colorado law, in the absence of a written agreement to the contrary, a real estate broker: A: represents the seller B: represents the buyer C: represents both the buyer and seller D: represents neither the buyer nor the seller

D: represents neither the buyer nor the seller Explanation: Agency is not implied. Brokers are considered to help or assist buyers and sellers as Transaction Brokers when there is no written agreement. Do not use the term "represent" as it implies agency.

A client is buying an old gas station with the intention of building a flower shop. The lender will most likely ask for: A: a Phase 1 environmental assessment with a visual inspection and neighbor interviews B: An EIS C: a Phase 2 environmental statement with soil testing D: request if a CERCLA assessment report has been issued in the prior 2 years making the property owner innocent of past environmental liabilities as per the Brownfield Revitalization Act

D: request if a CERCLA assessment report has been issued in the prior 2 years making the property owner innocent of past environmental liabilities as per the Brownfield Revitalization Act

The lessor retains a right to possession after the lease term expires. This right is: A: restrictive B: constructive C: personal D: reversionary

D: reversionary Explanation: The lessor retains a reversionary right to possession after the lease term expires.

The part of a title insurance policy that sets forth all encumbrances and defects that are not insured, is called the: A: schedule of defects B: citation clause C: non-exclusionary clause D: schedule of exceptions

D: schedule of exceptions Explanation: The schedule of exceptions is included in every title insurance policy. It lists all of the liens and defects that are currently of record and are not insured against.

One purpose of RESPA (Real Estate Settlement Procedures Act) is to: A: see that buyers do not borrow more than they can repay B: make real estate brokers more responsible to buyer's needs C: help buyers know how much money is required D: see that buyers and sellers know all settlement costs

D: see that buyers and sellers know all settlement costs Explanation: The purpose of RESPA is to eliminate kickbacks and provide full disclosure of closing costs to buyer and seller.

Loan discount fees are paid by: A: broker B: buyer C: seller D: seller or buyer

D: seller or buyer Explanation: This is a negotiable item in the contract to Buy and Sell Real Estate

Your neighbors use your driveway to reach their garage on their property. Your attorney explains that ownership of the neighbors' real estate includes an easement appurtenant giving them the driveway right. Your property is the: A: dominant tenement B: tenement C: leasehold D: servient tenement

D: servient tenement Explanation: B. Dominant vs. Servient: 1. The "holder" of an easement right, or the party that is benefiting from the easement, is referred to as the "dominant tenant". Likewise, the property benefiting from an easement is referred to as the "dominant estate" or "dominant tenement". 2. The party "burdened" by the easement is referred to as the "servient tenant". Likewise, the property burdened by the easement is the "servient estate" or "servient tenement".

Broker B received a buyer's earnest money check for $5,000 and immediately cashed it. At closing, the broker handed the seller a personal check drawn on the broker's own bank account for $5300, representing the original earnest money plus six percent interest.The broker: A: should have deposited the money in a special non-interest-bearing bank account B: properly cashed the check but should have kept the interest C: should have deposited the money in his personal bank account and would have been entitled to keep the interest as a service fee D: should have deposited the money in a bank escrow or trust account and should have discussed the interest with the parties

D: should have deposited the money in a bank escrow or trust account and should have discussed the interest with the parties Explanation: The broker is in violation of Colorado Real Estate Rules; he should have deposited the money in a bank escrow or trust account and should have discussed the interest with the parties.

Written agency agreements require brokers to disclose their duties and obligations to a party prior to: A: writing a counteroffer B: agreement to amend/extend contract with broker C: closing of the property D: showing a home to a buyer

D: showing a home to a buyer Explanation: Agency contracts must be in writing and must be disclosed prior to negotiating any part of the real estate transaction.

Written agency agreements require brokers to disclose their duties and obligations to a party prior to: A: writing a counteroffer B: agreement to amend/extend contract with broker C: closing of the property D: showing a home to a buyer

D: showing a home to a buyer Explanation: Agency contracts must be in writing and must be disclosed prior to negotiating any part of the real estate transaction.

A home inspection may include all of the following except: A: furnace inspection B: roof inspection C: radon testing D: soil testing

D: soil testing Explanation: A home inspection should involve all the mechanical aspects of the property and may include radon, termite or pest inspections as well.

Real estate property taxes are: A: general - involuntary liens B: general - voluntary liens C: specific - voluntary liens D: specific - involuntary liens

D: specific - involuntary liens Explanation: If the property tax is unpaid, the tax can be satisfied only from the sale of the specific property upon which the tax is levied. The only voluntary liens are mortgages and deed of trust.

If a broker as agent with an exclusive listing receives two offers for the same house at the same time—one from his salesperson and one from the salesperson of a cooperating broker—the broker should: A: submit his salesperson's offer to the seller B: submit the highest offer C: reject both offers D: submit both offers

D: submit both offers Explanation: Broker must submit all offers equally for the seller to review and choose.

Comparable property "A" has central air conditioning worth approximately $2,000. Comparable property "B" does not. The subject property does not have central air conditioning. To adjust, an appraiser should: A: add air conditioning value ($2,000) to property "B" and the subject property to make them all equal B: add air conditioning value ($2,000) to the subject property, but not to comparable "B" because it's on a smaller lot anyway C: subtract air conditioning value ($2,000) from the subject property and comparable "B" because they don't have it D: subtract air conditioning value ($2,000) from comparable "A" to make it more like the subject property

D: subtract air conditioning value ($2,000) from comparable "A" to make it more like the subject property Explanation: Adjust comps to the subject. Never adjust or change the subject property.

The appraisal principle that follows the interrelationship of the supply of and demand for real estate is called: A: conformity B: anticipation C: competition D: supply and demand

D: supply and demand Explanation: The principle of supply and demand is based on economic concepts, and says that real property is subject to the influences of the marketplace.

When an employing broker changes the primary business address: A: all of the licenses of employed licensees must be sent to the commission for reissue at the correct address B: this change will be noted at the next license renewal cycle C: each employed licensee must notify the commission of the change D: the broker must notify the commission in a manner acceptable to the commission, or the brokerage license will become inactive

D: the broker must notify the commission in a manner acceptable to the commission, or the brokerage license will become inactive Explanation: The broker must notify the commission in a manner acceptable to the commission, or the brokerage license will become inactive. Any licensee who does not notify the Commission of an address change will have their license inactivated. When the licensee is also the mama or poppa bear of the office (the employing broker) the penalty goes up. Since an employing broker with an inactive license cannot have licensees reporting to him/her AND a licensee who is not independent cannot have an active licensee without reporting to an employing broker - the effect is catastrophic. Everybody's license in the office is inactive. Here are the applicable statues: From chapter in real estate manual on License Law § 12-61-109, C.R.S. Change of license status - inactive - cancellation. (1) Immediate notice shall be given in a manner acceptable to the commission by each licensee of any change of business location or employment. A change of business address or employment without notification to the commission shall automatically inactivate the licensee's license. § 12-61-110, C.R.S (5) The suspension, expiration, or revocation of a real estate broker's license shall automatically inactivate every real estate broker's license where the holder of such license is shown in the commission records to be in the employ of the broker whose license has expired or has been suspended or revoked pending notification to the commission by the employed licensee of a change of employment.

If the seller finds out he is not being transferred and defaults on the sales contract: A: it depends if specific performance or liquidated damages was checked as to what the recourse is B: the listing agent can force the sale C: neither agent is entitled to commission since the deal never closed D: the buyer can sue him for specific performance and damages

D: the buyer can sue him for specific performance and damages Explanation: A seller does not have the option of liquidated damages. The buyer is allowed to sue for specific performance or for damages, or both.

When a licensee uses a licensee buyout addendum you are putting the seller on notice that: A: the seller will be responsible for the costs of the closing and reselling of the property B: liquidated damages shall apply if the buyer is in default C: if the seller terminates the contract, the seller may terminate the listing D: the buyer is a licensee, the buyer may make a profit and the seller may incur a loss

D: the buyer is a licensee, the buyer may make a profit and the seller may incur a loss

During the processing of the loan, it is: A: a good idea for the seller to follow up on the progress B: the listing agent that follows up on the progress of the loan C: the title company's responsibility to follow up D: the buyer's responsibility to follow up with the lender

D: the buyer's responsibility to follow up with the lender Explanation: Follow up is important to successfully reach closing.

When scheduling a closing, the following parties need notification: A: the lender, the buyer, and the title company B: the title Company, the seller, and the buyer C: the buyer the seller and the lender D: the buyer, the seller, the lender and the title company

D: the buyer, the seller, the lender and the title company Explanation: All parties involved in the transaction need notification of the closing time and place.

According to the Real Estate Commission rules, who has responsibility for the accuracy of a closing? A: the buyer and seller B: the title company and closer C: the lender D: the designated broker, the employing broker and any substitute broker

D: the designated broker, the employing broker and any substitute broker

A final walk-through provides all of the following except: A: buyer the opportunity to verify that the property is in the same condition as when originally viewed B: buyer the opportunity to verify any repairs that needed to be done, have been completed C: the opportunity to re-inspect the property D: the final time to terminate the contract if not satisfied with the condition of the property

D: the final time to terminate the contract if not satisfied with the condition of the property Explanation: The final walk-through is the buyer's opportunity to verify work that was to have been completed and make sure that the property is in the same condition as when viewed.

For a deed to be valid in Colorado, which of the following must be true concerning grantor's signature? A: it must be witnessed B: it must be acknowledged C: it must be recorded D: the grantor's signature is recorded

D: the grantor's signature is recorded

When a licensee transfers from the employ of one broker to another, which of the following are responsible for surrendering the license to the Real Estate Commission: A: the licensee B: the former employing broker C: new employing broker D: the licensee and the former employing broker

D: the licensee and the former employing broker Explanation: A licensee and his former employing broker are jointly responsible for returning real estate licenses to the commission.

When a tenant sublets all or any part of rented property under a written lease: A: the tenant assigns all legal rights, title, and interest in the rented property to the new lessee B: the sublessee becomes primarily responsible to the landlord for payment of rent and upkeep of the property C: the original lease is automatically canceled, and the sublessee takes possession of the rented property on a month-to-month basis D: the original lease is unaffected, unless it contains a provision prohibiting subletting

D: the original lease is unaffected, unless it contains a provision prohibiting subletting Explanation: The original tenant in a sublease situation still has the primary responsibility for the lease, unless subletting is prohibited in the lease.

A listing broker should tell a prospective tenant everything about a property except that: A: it has structural defects B: zoning makes the present usage nonconforming C: the broker has seen evidence of termites D: the owner will accept less than the listed price

D: the owner will accept less than the listed price Explanation: Material facts must be disclosed. The fact that the owner will accept less than the listing price is not a material fact.

Once a plat is approved, what step must be taken prior to the lots being sold? A: building permits must be issued B: the site must be cleared and leveled C: the appropriate governmental authority must approve zoning D: the plat map must be recorded

D: the plat map must be recorded

Fill in the blank. As per the Contract to Buy/Sell Real Estate: LEGAL FEES, COST AND EXPENSES. Anything to the contrary herein notwithstanding, in the event of any arbitration or litigation relating to this Contract, prior to or after Closing Date (§ x), the arbitrator or court must award to ______________________________, including attorney fees, legal fees and expenses. A: each party an equal share of reasonable costs and expenses B: the prevailing party damages C: the losing party all reasonable costs and expense D: the prevailing party all reasonable costs and expense

D: the prevailing party all reasonable costs and expense Explanation: Do not confuse litigation and arbitration with mediation. Mediation is a non-binding process and all parties share in the costs equally. Litigation and arbitration is binding and the prevailing party will be awarded costs and expense from the losing party.

As per the Contract to Buy/Sell Real Estate: LEGAL FEES, COST AND EXPENSES. Anything to the contrary herein notwithstanding, in the event of any arbitration or litigation relating to this Contract, prior to or after Closing Date (§ x), the arbitrator or court must award to ______________________________, including attorney fees, legal fees and expenses. A: each party an equal share of reasonable costs and expenses B: the prevailing party damages C: the losing party all reasonable costs and expense D: the prevailing party all reasonable costs and expense

D: the prevailing party all reasonable costs and expense Explanation: Do not confuse litigation and arbitration with mediation. Mediation is a non-binding process and all parties share in the costs equally. Litigation and arbitration is binding and the prevailing party will be awarded costs and expense from the losing party. Many people get confused by the wording "prevailing party is awarded" and think that means the winner has to pay. No, the prevailing party is the winner and by being awarded the judgement, it means that any fees - court costs, attorney fees, etc., are paid by the losing party.

The co-op offered in the MLS is determined by: A: MLS B: the office policy C: the seller and buyer D: the seller and listing broker

D: the seller and listing broker Explanation: The seller and listor determine to co-op and this rate is influenced by the typical rates offered in the MLS.

In a contract to purchase in which the buyer is assuming a non-qualifying loan from the seller: A: since the loan is non-qualifying, the seller cannot ask the buyer for financial information B: the buyer must provide financial information to the seller C: the seller may ask for financial information, but cannot refuse the offer based on the information provided if the contract is for full price D: the seller may ask for financial information and terminate the contract if the information is unacceptable

D: the seller may ask for financial information and terminate the contract if the information is unacceptable Explanation: Since the seller is giving the loan he has the right to request financial information and may terminate the contract if the information is unacceptable.

A listing broker should tell a prospective buyer everything about a property except that: A: it has structural defects B: zoning makes the present use nonconforming C: if you'd like to make an offer, I'll present it to the seller D: the seller will accept less than full price if you close in two weeks

D: the seller will accept less than full price if you close in two weeks Explanation: You never disclose that the seller is willing to accept less.

A listing broker should tell a prospective buyer everything about a property except that: A: it has structural defects B: zoning makes the present use nonconforming C: if you'd like to make an offer, I'll present it to the seller D: the seller will accept less than full price if you close in two weeks

D: the seller will accept less than full price if you close in two weeks Explanation: You never disclose that the seller is willing to accept less.

An offer may be terminated by all except: A: lapse of time B: revocation C: operation of law D: the seller's broker

D: the seller's broker Explanation: A lapse of time, revocation, or operation of law may terminate an offer.

A broker may be liable for the unlawful acts or violations of his or her employees except: A: licensees B: secretaries and bookkeepers C: personal assistants to licensees D: their client's lawyers

D: their client's lawyers Explanation: The employing broker is liable for the acts of his/her licensees, secretaries and bookkeepers and the personal assistants to the licensees.

A property is listed with Rockwell Realty at $70,000. Rockwell Realty negotiates with Woods who is familiar with the property and who agrees to buy the property at that figure. Rockwell Realty prepares an agreement of sale, which is signed by Woods. Copies are then mailed to Downes, the owner, for signature on May 31, 2014. Downes receives the copies on June 3, 2014. He signs them and mails the signed copies to Woods on June 5, 2014. On June 4, 2014 Woods wired Downes, "Offer withdrawn." Under these circumstances: A: there is an enforceable contract B: Rockwell Realty is entitled to a commission C: this is not an enforceable contract but Rockwell is entitled to a commission D: this is not an enforceable contract and Rockwell is not entitled to a commission

D: this is not an enforceable contract and Rockwell is not entitled to a commission Explanation: An offer can be withdrawn anytime prior to acceptance. Acceptance means the offer has been signed AND acceptance communicated to the other party. Since the postmark is the date of acceptance the offer had been withdrawn prior to acceptance.

The listing agent calls you regarding your low offer. They ask what your buyer's real number is, and if the sellers counter, how much more your buyer will come up with? In your buyer's best interest, you tell the listing agent: A: what your buyer is willing to pay B: to accept your offer since your buyer can pay no more than what was offered C: to counter at whatever price you know that the buyer is willing to pay, and you will present it to your buyer D: to counter, and you will present it to your buyer

D: to counter, and you will present it to your buyer Explanation: You have a fiduciary responsibility to your client and cannot reveal confidential information to the other agent.

Broker Price Opinions (BPO) are created by real estate licensees not appraisers. These "estimates of value" cannot be used: A: for tax purposes B: for court testimony C: to set a listing price D: to obtain financing

D: to obtain financing Explanation: CP-24 Commission Position on Preparation of Market Analyses and Real Estate Evaluations Used for Loan Purposes The Colorado Real Estate Appraiser Licensing Act contains special provisions which allow licensed real estate brokers to perform certain real estate valuation related activities without being registered, licensed or certified as real estate appraisers. These provisions are found in Sections 12-61-702 and 12-61-718, C.R.S. The first of these allows a broker to prepare an "estimate of value" which is not represented as an appraisal and is not used to obtain financing. The position of the Commission is that this provision allows a broker to prepare a market analysis for use in the real estate brokerage process and to offer their estimate as to the value or market price of real estate for court testimony or tax purposes.

When setting up a showing, lock box information may be given: A: to the buyer B: directly to the buyer's agent C: to anybody asking for it D: to the buyer's broker, after licensee's information is taken and verified

D: to the buyer's broker, after licensee's information is taken and verified Explanation Lock box information should only be given out to the broker after verification of that broker's license status.

In Colorado in the event that an Exclusive Right-to-Buy Contract is not signed by a buyer, the default relationship is that of a: A: buyer-broker relationship B: dual agency relationship C: seller-agency relationship D: transaction broker relationship

D: transaction broker relationship Explanation: In the absence of a contractual agreement, transaction brokerage is created.

If mineral rights are not listed in the deed, and not previously transferred, the rights are: A: retained by grantor B: not owned C: not transferred D: transferred to the grantee

D: transferred to the grantee Explanation: In Colorado, all mineral rights except water are transferred with the property unless otherwise indicated in the deed or if the rights were transferred (ie sold or given away) by a previous deed. The Seller is the "Grantor" (the creator of the deed), the Buyer is the "Grantee" (receives the deed)

Obedience as a fiduciary means doing exactly as the principal instructs: A: even if it involves discriminating B: so long as it doesn't hurt anyone C: regardless if it is illegal or not D: unless such instructions condone an illegal act

D: unless such instructions condone an illegal act Explanation: You must obey the principal so long as they do not instruct you to do something illegal, such as discriminating. A fiduciary relationship is created when a principal signs a listing or buyer's agency agreement with a Listing Agent or Buyers Agent. Note: a Transaction Broker as a neutral party is not a fiduciary relationship (the T Broker owes no loyalty, only Care, Obedience, Accounting and Disclosure of non-confidential items and material facts). In real estate transactions, only the Seller's or Buyer's agency relationships are fiduciary relationships. This relationship implies a position of trust or confidence, wherein one person is usually entrusted to hold or manage property or money for another. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who entrusts them.

Broker written provisions inserted into a Commission approved form must: A: must be hand-written B: must be typed C: must be prepared by employing broker D: use a different style font from the pre-printed areas

D: use a different style font from the pre-printed areas Explanation: Any addition to a Commission approved form must be in different type then that used by the pre-printed areas.

In reviewing the documents, it is wise to: A: check the buyer's and seller's names only B: check only the legal address C: verify the buyer's birth date D: verify all relevant information

D: verify all relevant information Explanation: It is the broker's responsibility to verify that the information on the closing documents is correct.

Before making an offer, a licensee should research the market in the area of the desired property. This will help determine: A: how quickly the deal will close B: what terms the seller will accept C: how long it will take to sell the property D: what other properties have sold for and are listed for in that neighborhood

D: what other properties have sold for and are listed for in that neighborhood Explanation: Researching before making an offer can help determine what the home is worth and what to write the offer at.

Earnest money is to be deposited: A: in the seller's trust account B: within two days of contract acceptance C: in an interest-bearing account D: within 3 business days after acceptance of contract

D: within 3 business days after acceptance of contract Explanation: Earnest money is to be deposited within three business days of acceptance of contract.

A type of junior mortgage in which the existing mortgage amount, plus any additional purchase funds, is loaned to a buyer by the seller is known as: A: a writ of attachment B: a writ of execution C: a voluntary lien D: wraparound mortgage

D: wraparound mortgage Explanation: Remember that a wraparound mortgage "wraps around" -- in other words, another lender, usually the seller, finances a borrower by lending an amount over and above the existing first mortgage amount without disturbing the first mortgage.