National Practice Exam 2

The best example of rescission is: Select one: A. A mutual agreement of a landlord and a tenant to cancel a lease B. An option which is not exercised by the optionee C. A seller making a counteroffer to a buyer's offer D. A buyer accepting a counteroffer made by a seller

A. A mutual agreement of a landlord and a tenant to cancel a lease

The 1988 Amendment to the Federal Fair Housing Act, Title VIII, declared it unlawful to discriminate: Select one: A. Against households with children under 18 years of age B. On the basis of age C. Because of sexual preference D. On the basis of gender

A. Against households with children under 18 years of age

In a typical agreement, the property manager would be authorized to do all of the following EXCEPT: Select one: A. Enter into a 2 year lease, verbally B. Hire and fire employees C. Collect rent every month D. Furnish the owner with a monthly statement of income and expenditures

A. Enter into a 2 year lease, verbally

A person who rents a property from June 1st to June 30th of the same year most likely has a(n): Select one: A. Estate for years B. Periodic estate C. Tenancy at will D. License

A. Estate for years

A salesperson took a listing on a property that had a foundation crack due to water seepage. Although the owner told him that the water problem was fixed, it's obvious that the owner only filled in and painted over the crack. If the salesperson shows the property without advising potential buyers of the issue, the salesperson would be guilty of: Select one: A. Fraud B. Misrepresentation C. Puffery D. Nothing

A. Fraud

Which of the following leases would base rent on sales volume? Select one: A. Percentage B. Graduated C. Reappraisal D. Ground

A. Percentage

In the event of any conflict, which clause would best state the extent of ownership? Select one: A. Premises B. Testimonium C. Habendum D. None of the above

A. Premises

Which of the following amounts is NOT prorated between buyer and seller at closing? Select one: A. Recording fees B. Real estate taxes C. Rents D. Homeowner's insurance premiums

A. Recording fees

When an owner of real property obtains a new mortgage to pay off an old mortgage, it is known as: Select one: A. Refinancing B. Foreclosure C. Assumption D. Subordination

A. Refinancing

A buyer purchases a seller's home "subject to" the existing loan. If the buyer defaults, who is liable for the balance of the debt? Select one: A. Seller only B. Buyer only C. Seller and buyer, jointly D. Seller and buyer, jointly and severally

A. Seller only

All of the following terms are physical characteristics of land except: Select one: A. Situs B. Immobility C. Heterogeneity D. Indestructibility

A. Situs

If a tenant and a landlord enter into a 3-month lease that expires at the end of the year, which of the following is correct? Select one: A. The lease may be oral B. The tenant must give 30 days notice before terminating the lease C. The landlord must give 30 days notice before terminating the lease D. The lease will extend for another term if the parties fail to provide proper notice

A. The lease may be oral

An owner has been using a parcel of land for heavy industry since 1973. Subsequently, the property is zoned commercial, excluding industrial uses. The owner's continued industrial use of the property is a(n): Select one: A. Violation of the existing zoning B. Deviation from the master plan C. Zoning variance D. Illegal non-conforming use

A. Violation of the existing zoning

Which of the following items is NOT a latent defect? Select one: A. Worn carpeting B. Seasonal flooding in the basement C. A foundation crack covered with paneling D. A faulty, but working, heating system

A. Worn carpeting

A property is listed at $185,000. Four offers are presented. Which offer BEST describes an offer made by a ready, willing, and able buyer? Select one: A. An all cash offer of $175,00 B. A full price offer from a financially qualified buyer, subject only to financing at current market rates C. A full price offer, contingent upon the buyer (offeror) first selling his current residence D. Both B and C

B. A full price offer from a financially qualified buyer, subject only to financing at current market rates

When the grantor of a deed swears that he is conveying title of his own free will, this action is referred to as: Select one: A. Execution B. Acknowledgment C. Novation D. Authentication

B. Acknowledgment

All of the following statements are true of buyer-broker agreements, except: Select one: A. Buyer-broker agreements cannot be assigned B. Buyer-broker agreement terms may be disclosed to customers C. Buyer-broker agreements may be created verbally D. The salesperson is not a party to the agreement

B. Buyer-broker agreement terms may be disclosed to customers

How can a broker best demonstrate his compliance with Fair Housing Laws? Select one: A. Obtain the Equal Housing Opportunity Poster B. Document all transactions with all clients or customers C. Show all prospective buyers all listed properties D. All of the above

B. Document all transactions with all clients or customers

Lindon purchased a home in a Greenview neighborhood. He later finds out that an industrial site will be build right next to that neighborhood. The negative effect on neighborhood property values is called: Select one: A. Environmental deterioration B. External obsolescence C. Functional obsolescence D. Planned obsolescence

B. External obsolescence

An agency relationship is created when a broker employs a property manager. This agency is considered to be: Select one: A. Specific B. General C. Managerial D. Universal

B. General

In relation to the Closing Disclosure Form, which situation would not trigger an additional 3 day waiting period before settlement? Select one: A. Increasing the APR B. Increasing the loan amount C. Switching to a different type of loan D. Adding a pre-payment penalty to the loan

B. Increasing the loan amount

Which items are set by Federal regulations? Select one: A. Real estate license laws B. Lending institution regulations C. Zoning ordinances D. Real estate tax rates

B. Lending institution regulations

A buyer and a seller enter into a valid sales contract. For personal reasons, the buyer asks to be released by the seller. The buyer also locates another person to buy the property. The seller then enters into a sales contract with the new buyer and releases the first buyer. This is most likely an example of: Select one: A. Assignment B. Novation C. Implied consent agreement D. Redemption

B. Novation

Sarah wants to purchase Rico's home and assume his mortgage. Rico's mortgage contract allows for an assumption. However, Rico does not want to be liable. In this situation, the parties should sign a(n): Select one: A. Assignment B. Novation C. Sublease D. Cancellation

B. Novation

Which act regulates the closing procedures in a real estate transaction? Select one: A. ECOA B. RESPA C. FIRPTA D. Lead Act

B. RESPA

If a lending institution refuses to consider a property loan because of the religious make-up of that area, the lender is: Select one: A. In violation of Truth-in-Lending Regulations B. Redlining C. Violating RESPA regulations D. Practicing good fiscal management

B. Redlining

Liquidated damages from breach of a sales contract are usually available to the: Select one: A. Buyer, in the event of the seller's default B. Seller, in the event of the buyer's default C. Broker, in the event of the buyer's default D. Either the buyer or seller where the other defaults

B. Seller, in the event of the buyer's default

A property has three owners. These parties own 10%, 20%, and 70% interest, respectively. What type of ownership do they have? Select one: A. Joint tenancy B. Tenancy in common C. Tenancy by the entireties D. Either A or B

B. Tenancy in common

Which of the following items is NOT essential to a valid sales contract? Select one: A. Competent parties B. Termination date C. Consideration D. All of the above are essential

B. Termination date

Enforcement of the Fair Housing Law of 1968 is the primary responsibility of: Select one: A. The Federal Housing Administration B. The Federal Department of Housing and Urban Development C. The Federal National Mortgage Association D. The Government National Mortgage Association

B. The Federal Department of Housing and Urban Development

A property management contract is between the property manager and: Select one: A. His or her employees B. The owner of the property C. The tenants D. All of the above

B. The owner of the property

The capitalization approach is considered to be: Select one: A. A statement of future income B. The present value of property based on present and future income C. The actual cost of the property D. Another name for the GRM (Gross Rent Multiplier)

B. The present value of property based on present and future income

Which of the following statements is true about an open listing? Select one: A. The commission is split between all brokers that have an open listing for the property B. The seller only pays the broker who produces a ready, willing, and able buyer C. No more than two brokers may attempt to sell the property D. If the owner sells the property, she owes a commission to the broker that took the listing first

B. The seller only pays the broker who produces a ready, willing, and able buyer

A unilateral contract arises: Select one: A. When the offeror signs the contract B. Upon completion of the requested act C. When the offeree signs the contract D. After a reasonable period of time

B. Upon completion of the requested act

Broker A shows a house with a faulty roof. When he finds out about the roof, should he tell the buyer/customer? Select one: A. Yes, it is an agency responsibility B. Yes, it is a material fact C. Only if he is a dual agent D. Only if he has the seller's permission

B. Yes, it is a material fact

A broker could act as a fiduciary in all of the following functions, EXCEPT: Select one: A. Leasing property B. Selling property C. Appraising property D. All of the above

C. Appraising property

Under the Truth-In-Lending Act, all of the following items must be in the Loan Estimate EXCEPT: Select one: A. Total finance charges B. Pay-off penalties C. Attorney fees D. Annual percentage rate

C. Attorney fees

Dixie is selling her own home as a FSBO. On Sunday, a full price offer is made by an Asian couple. Dixie refuses the offer. On Monday, Dixie accepts an offer that is $4,000 below asking price from a Caucasian family. Dixie could be in violation of which of the following laws? Select one: A. Fair Housing Law of 1986 B. State license laws if Dixie is not licensed C. Civil Rights Act of 1866 D. None of the above

C. Civil Rights Act of 1866

If a man is considered a "proprietary tenant," he is most likely owns interest in which of the following types of property? Select one: A. Condominium apartment B. Apartment house C. Cooperative apartment D. Office building

C. Cooperative apartment

All of the following transfers would be considered involuntary alienation, EXCEPT: Select one: A. Foreclosure B. Eminent domain C. Devise D. Adverse possession

C. Devise

Which of the following clauses would prevent a mortgage from being assumed by a subsequent buyer? Select one: A. Condemnation clause B. Defeasance clause C. Due-on-sale clause D. Right of first refusal clause

C. Due-on-sale clause

If an owner of real estate dies, leaves no will, and has no heirs, the property will revert to the government through a process known as: Select one: A. Eminent domain B. Reversion C. Escheat D. Inverse condemnation

C. Escheat

The Fair Housing Law protects several groups. Which of the following groups are not specifically protected? Select one: A. People of a particular religious group B. Pregnant women C. Illegal drug addicts D. AIDS victims

C. Illegal drug addicts

All of the following terms are economic characteristics of land, except: Select one: A. Assemblage B. Scarcity C. Immobility D. Improvements

C. Immobility

A seller agrees to split all commission between the brokerage firm and his unlicensed brother. This agreement is: Select one: A. Permissible, as long as the brother had contractual competency B. Permissible, so long as the seller agrees C. Impermissible, unless the brother is licensed D. Impermissible, unless approved by the local board of Realtors

C. Impermissible, unless the brother is licensed

Which appraisal approach is best suited to appraising vacant land? Select one: A. Cost B. Income C. Market data D. Residual

C. Market data

Susan and Sally enter into a buyer-broker agreement. However, Sally subsequently falls on hard times. Susan gets nervous and terminates the agreement. Is Susan in breach? Select one: A. Yes, if Sally is the broker B. No, so long as Sally takes no action C. No, if Sally filed for bankruptcy D. Yes, if both parties agreed

C. No, if Sally filed for bankruptcy

The Government's right to control private land is limited by: Select one: A. Just compensation clause B. Right to privacy C. Rational relationships D. None of the above

C. Rational relationships

Which of the following actions would constitute a violation of federal Fair Housing Laws? Select one: A. Advertising property to be rented only to single persons B. Refusing to show property to a financially unqualified buyer C. Refusing to sell to a person because of his or her national origin D. Providing special loan programs for minorities

C. Refusing to sell to a person because of his or her national origin

Which of the following circumstances would diminish a fee simple estate? Select one: A. Death of the owner B. Sale of the property C. Rental of the property D. All of the above

C. Rental of the property

Federal Fair Housing Laws do NOT provide protection on the basis of: Select one: A. Gender B. Handicap C. Sexual preferance D. Single parenthood

C. Sexual preferance

Upon listing a property, a broker discovers mold in the basement. The broker should inform: Select one: A. The seller only if he is a seller's agent B. The buyer only if he is a buyer's agent C. The buyer and the seller, regardless of who he represents D. No one

C. The buyer and the seller, regardless of who he represents

Regulation Z requires that all of the following be disclosed to the borrower, EXCEPT: Select one: A. Finance charges B. The annual percentage rate C. The cost of title insurance D. The total amount of interest

C. The cost of title insurance

Zorba leases a restaurant. He installs ovens, booths, and counters. Which of the following statements is true? Select one: A. The ovens, booths, and counters cannot be removed by Zorba B. The ovens, booths, and counters can be removed by Zorba at any time C. The ovens, booths, and counters can be removed by Zorba at any time before Zorba's lease expires D. Zorba is not responsible for any damage caused by removing the ovens, booths, and counters

C. The ovens, booths, and counters can be removed by Zorba at any time before Zorba's lease expires

Seller Corcoran is in very poor health and cannot work on his farm anymore. Corcoran's broker discloses this fact to prospective buyers. Has the broker done anything wrong? Select one: A. No, because it is a material fact B. No, so long as the farm sells at or above the list price C. Yes, because it is contrary to Corcoran's interest D. Yes, because Corcoran's status is protected by Federal Fair Housing Laws

C. Yes, because it is contrary to Corcoran's interest

A property sold for $188,000. The broker's commission rate was 5%. The salesperson is to receive 70% of the total commission. How much will the broker net from this sale? Select one: A. $9,400 B. $6,580 C. $2,820 D. None of the above

Calculate the commission rates as follows: Total Commission = $188,000 x 0.05 = $9,400 Seller's Commission = $9,400 x 0.70 =$6,580 Broker's Commission = $9,400 - 6,580 = $2,820 Remember that the question asks how much the BROKER will net. The correct answer is: $2,820

Which of the following circumstances is an example of functional obsolescence? Select one: A. A house with a leaking water pipe B. Shutters that needed painting C. A house that isn't close to any elementary schools D. A house without indoor plumbing

D. A house without indoor plumbing

Condemnation requires that: Select one: A. The public benefit B. The owner be paid C. No other property is available D. All of the above

D. All of the above

Private restrictions on the use of land may be created by: Select one: A. Deeds B. Written agreement C. General restrictions in a subdivision's regulation D. All of the above

D. All of the above

Which of the following real estate documents must be in writing? Select one: A. Option B. Real estate sales contract C. Lease for more than one year D. All of the above

D. All of the above

Broker Carson lists a home belonging to Brandon. Buyer John, insisting on anonymity, has Salesperson Joan make an offer using her own name as the prospective buyer. What should Carson do in this situation? Select one: A. Submit the offer to Brandon B. Refuse to submit the offer to Brandon until the name of the undisclosed buyer is given C. Advise Brandon that an undisclosed buyer is involved if he suspects Joan is not the true offeror D. Both A and C

D. Both A and C

A seller accepts an offer. Later, the broker receives a second offer for the property. The broker may: Select one: A. Hold the second offer until the first offer closes B. Present the second offer C. Tell the second offeror to "stand by" D. Both B and C

D. Both B and C

S&Ls are least likely to engage in which of the following? Select one: A. Originating loans B. Secondary market activities C. Demand deposits D. Commercial loans

D. Commercial loans

All of the following classes are protected under Federal Fair Housing Laws, EXCEPT: Select one: A. Race B. National Origin C. Color D. Elderliness

D. Elderliness

An escrow account is maintained by a broker for the purpose of: Select one: A. Earning interest for the broker B. Earning interest for the broker's clients C. Disposition of money to the buyer D. Impartial protection of both parties

D. Impartial protection of both parties

A listing broker obtained a ready, willing, and able minority buyer to purchase at the listed price. However, the sellers refused the offer because of the buyer's race. The broker may legally take all of the following actions, EXCEPT: Select one: A. Sue the seller for his commission B. Advise the prospect of his right to complain to the HUD C. Warn the sellers that their refusal is a violation of the Fair Housing Laws D. Market the house only to non-minority customers

D. Market the house only to non-minority customers

Jon obtains option contract for Joan's house. On the last day of the option period, Jon finds another house and declines to exercise his right. Jon then requests that Joan return his previous payment. Must Joan comply? Select one: A. Yes, because Jon failed to exercise his right B. No, unless Jon and Joan agreed in the option contract C. Yes, because Joan would otherwise be unjustly enriched D. No, unless the contract is otherwise invalid

D. No, unless the contract is otherwise invalid

A salesperson listed a property where a murder recently occurred. If the salesperson shows the property without advising potential buyers of the murders, the salesperson would be guilty of: Select one: A. Fraud B. Misrepresentation C. Puffery D. Nothing

D. Nothing

Seeing that a property is in need of a really good paint job, an appraiser would say that the property suffers from: Select one: A. Neglect B. Economic obsolescence C. Functional obsolescence D. Physical deterioration

D. Physical deterioration

Servicing a mortgage includes all of the following except: Select one: A. Collecting payments B. Distributing funds C. Supervision D. Selling loans

D. Selling loans

Dan has a loan secured by his home through Bank Trust Company (BTC). Dan has failed to make several mortgage payments and, as a result, BTC has begun to send collection notices. If Dan files for bankruptcy, BTC must: Select one: A. Send Dan a notice of acceleration before it can continue the collection efforts B. Send Dan a notice of foreclosure before it can proceed with foreclosure C. Send Dan a notice of forfeiture D. Stop all collection activity during the pendency of Dan's bankruptcy petition

D. Stop all collection activity during the pendency of Dan's bankruptcy petition

Broker Johnson has listed Cheever's property and sells it to Brevard for $75,000. Before closing, Johnson discovers that the property has a serious structural defect. What should Johnson do? Select one: A. Tell Cheever only because he is Cheever's agent B. Tell Brevard only to satisfy his fiduciary duty C. Tell no one if the sales contracts already been executed D. Tell Cheever and Brevard to avoid liability

D. Tell Cheever and Brevard to avoid liability

All of the following statements are true about valid restrictive covenants except: Select one: A. The covenant runs with the land B. The covenant may be removed without legal action C. The covenant does not need a termination date D. The covenant may be at variance with Fair Housing laws

D. The covenant may be at variance with Fair Housing laws

A tenant and landlord enter into a six month lease on July 1, 2016, to expire on December 31, 2016. Which of the following statements is correct? Select one: A. The landlord must serve notice to quit at least 30 days before expiration or the lease will renew B. The tenant must serve notice to quit at least 30 days before expiration or the lease will renew C. If neither party provides proper notice to quit, the lease will renew for another 6 months D. The lease will terminate on December 31, 2016

D. The lease will terminate on December 31, 2016

A salesperson lists a home, but the house burns down prior to receiving an offer. Which of the following statements is true for the situation? Select one: A. The listing remains in effect B. The broker is entitled to a commission based on the listed price C. All advertising must be revised to accurately describe the property D. The listing automatically terminates

D. The listing automatically terminates

To properly calculate the effective gross income (EGI) on a 16 unit apartment building, the appraiser should allow for: Select one: A. The amount of property taxes B. The amount of income tax paid C. Principal and interest paid on the mortgage D. Vacancy rate and collection loss

D. Vacancy rate and collection loss

A property is purchased for $125,000 with a 20% down payment. When the first month's payment is made, $800 is applied to interest. What is the interest rate on this loan? Select one: A. 8.0% B. 8.7% C. 9.6% D. 10%

First, determine the loan amount as follows: Loan amount = $125,000 x 0.80 = $100,000 Next, determine the annual interest: Annual Interest = $800 x 12 = $9,600 Finally, determine the interest rate: Interest rate = $9,600 / $100,000 = 0.096 = 9.6% The correct answer is: 9.6%

A salesperson sells property listed by another broker for $84,500. If the listing broker is to receive 50% of the 6% commission rate, how much will the salesperson receive if he earns 40% of his broker's share? Select one: A. $1,014 B. $1,521 C. $2,535 D. $6,070

First, determine the total commission on the sale as follows: $84,500 x 0.06 = $5,070. Next, determine the broker's share of the total commission: $5070 x 0.5 = $2,535. Finally, determine the salesperson's share of the broker's commission: $2,535 x 0.4 = $1,014. The correct answer is: $1,014

An owner receives $42,500 net income from an investment property that is valued at $542,000. What is the investor's capitalization rate? Select one: A. 7.0% B. 7.8% C. 8.0% D. 12.75%

The formula is as follows: Capitalization rate = Net Operating Income / Property Value; Capitalization rate = $42,500 / 542,000 = 0.078 Capitalization rate = 0.078 = 7.8% The correct answer is: 7.8%

A homeowner has a 95% PMI loan. If the loan balance is $60,000, what is the PMI insurance for the third year of the loan? Select one: A. $75 B. $150 C. $300 D. $600

This is a really tough question because you must supply a missing assumption. PMI insurance premiums vary between the insurance company and the policy of the lender. However, the general rule is that PMI is 0.25% of the loan amount: $60,000 x 0.0025 = $150 This questions demonstrates that a person may come across unfamiliar information on the licensing exam. The correct answer is: $150