National RE Practice Exam Wrong Answers

In which of these situations would a listing be most likely to terminate due to listing agreement expiration? 1. A market with high inventory and low demand 2. A market with low inventory and high demand 3. A moderately-priced home in a neighborhood slated for renewal 4. A moderately priced home sold as-is in a market full of investors

1. A market with high inventory and low demand

Related to reasonable accommodation of being allowed to have an assistance animal, which statement is true? 1. If the disability for which the tenant is making the request is obvious, the landlord may not ask why it is needed. 2. If the disability is not obvious, the tenant must provide the landlord with full medical records to support the request. 3. The landlord is not obligated to consider the request unless the tenant can produce either the original or a certified true copy of the animal's service certification. 4. The landlord must consider the request but may require an additional "pet" security deposit

1. Housing providers may inquire as to the nature of the disability if it's not apparent, and they must permit assistance animals for tenants with documented disabilities without charging an additional pet deposit.

Roberto, a licensee, filled in the blanks on a standard form used in his brokerage firm. Is this okay? 1. Yes, licensees can use standard forms originally created or approved by an attorney. 2. Yes, real estate licensees may draft contracts and fill in blanks on existing contracts.

1. Yes, licensees can use standard forms originally created or approved by an attorney.

On average, how many years does a home warranty cover structural damage?

10 years

The appraisal report submitted to Jenkins, the lender, notes that the property is being conveyed with all property rights intact. Which step in the appraisal process does this represent?

1st - State the problem.

Meg is considering a move to a foreign country and wants to deed her property to her son, Christian, who's 16. Which of these must occur to make this transfer legal? 1. Christian must agree to the transfer and sign the deed. 2. Christian must provide monetary compensation to Meg. 3. Meg must sign the deed and have her signature acknowledged. 4. Meg must wait until Christian has reached the age of majority.

3. Meg must sign the deed and have her signature acknowledged.

Which of these is an example of blockbusting? 1. A lender withholds mortgage loans in areas considered demographically risky. 2. A licensee doesn't tell her buyer client about a first-floor condo because she felt it wasn't safe for the client. 3. A licensee focuses on showing properties in areas that are demographically similar to her buyer clients' ethnicity. 4. A real estate agent approaches a homeowner as soon as a demographic shift starts to occur in her neighborhood and convinces her that she needs to sell now, or she'll never be able to sell.

4. A real estate agent approaches a homeowner as soon as a demographic shift starts to occur in her neighborhood and convinces her that she needs to sell now, or she'll never be able to sell.

Jerome is developing an ad for three properties he has listed in an upscale community. He wants to keep it short and simple. Which of these would NOT trigger full disclosure under TILA? 1. 10% down payment 2. 30-year fixed rate with no points 3. A monthly payment of $900 4. Get a low 4.925% APR

4. Get a low 4.925% APR - An ad can show the APR without disclosing all the other credit terms. But if certain other "trigger" terms are included, such as down payment, payment amount, number of payments, or interest rate (other than APR), this would require full disclosure.

A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What is the total amount of interest the borrower will pay over the course of the loan?

485357.6

When real estate licensee Brian discovered that Arnold was using a "Choose Your Neighbor" letter to market a property without also listing the property in the MLS, in the local paper, or even putting a for sale sign in the yard, what charge could he bring against Arnold to the National Association of REALTORS®?

A charge of agreeing to discriminate by limiting access to the property

Your buyers step outside to view the backyard of a property they're touring, but then they can't get the back door closed again. You recognize that this could be a symptom of ____, and realize that if they are interested in this property, they will want to discuss this issue with a home inspector.

A foundation problem

Lamar closes on his new home next week. It's a 37-year-old split level, so his agent asked if he's interested in purchasing a home warranty. "Why would I need a warranty?" he wondered. "Didn't the home inspection identify all of the issues?" What's the agent's best response to Lamar's question?

A home warranty covers things the inspection didn't address, like appliances, as well as structural issues that occur within the first year. Also, even the systems that WERE inspected are subject to problems or failure.

Steven owns 114 acres of wooded, rural land. The abundance of wildlife on his property means that his friends are always asking for permission to hunt on it during various game seasons. If Steven gives a friend permission to hunt on his land, it can be said that he has given his friend a ______.

A license: is permission to do something on another's land without actually possessing any interest or ownership in the land.

An example of this type of leasehold estate is a month-to-month lease.

A periodic estate automatically renews at the end of its lease term, such as at the end of a given month.

Your client Faye is buying a condo downtown for $565,000 and financing 60% of the purchase. Her lender is charging a one-point loan origination fee and two discount points. Can you help Faye calculate the dollar amount for points she's going to pay on her loan?

A point is 1% of the loan amount. Faye's loan amount is 60% of the sales price, or $339,000 ($565,000 x 0.60). Her lender is charging three points total, or 3% of the loan amount. That comes out to $10,170 ($339,000 x 0.03).

What's it called when all parties sign a contract, but before the seller's acceptance is delivered to the buyer?

Acceptance

Related to the legal test of a fixture, in the acronym MARIA, what do the two As stand for?

Adaptability of item to land's use and agreement of the parties

What does the Federal Trade Commission regulate?

Advertising: The Federal Trade Commission Act includes rules to encourage truthful, non-deceptive, and fair advertising, and require advertisers to have evidence to back up any claims made.

what is an Agency coupled with interest?

Agency coupled with interest is an agency relationship in which a licensee is given some sort of interest in or right to a principal's property. A standard commission-based transaction isn't agency coupled with interest.

Camille, a buyer, wants to change the price already agreed to in a sales contract. She should use a(n) ______.

Amendment

What's the primary difference between an ordinary and a pur autre vie life estate?

An ordinary life estate ends when the estate holder dies. A pur autre vie life estate ends when a named person other than the estate holder dies.

What does the Federal Trade Commission consider to be an UNFAIR ad?

Any ad or business practice that causes or is likely to cause injury

Saul was unhappy after he and Janelle liquidated their business. Janelle sold some items for less than he'd initially agreed to and he wanted the full price to be included in the profit split. He wanted to sue, but he was required to pursue other options. What contract clause kept Saul from being able to sue?

Arbitration

The Walton family got a great deal on their new home. They bought it for $101,295, and it appraised at $187,000. Using an assessment ratio of 25%, what is the assessed value of their new home?

Assessed value is based on the appraised value of the home. So, in this case, $187,000 × 0.25 = $46,750.

Tristan's offer has been signed by all parties and delivered back to the seller. This means that ______ has occurred.

Binding acceptance

When Gillian looked at the legal description of the property she was interested in purchasing, she read the following: "Beginning at the corner of State Route 61 and Hallowell Road, north for 314 feet, then southwest for 193 feet." In this description, what does "Beginning at the corner of State Route 61 and Hallowell Road" represent?

Bounds

You represent the buyer in one transaction and the seller in a different transaction. What type of agency relationship do you have with the buyer?

Buyer agency

In states where full disclosure isn't required, it's the ______ responsibility to perform due diligence on the property.

Buyer's

According to the rule of thumb, how can a borrower lower the interest rate on a loan by 1%?

By paying four points up front

Which act was the first to prohibit any exceptions for discrimination based on race or color?

Civil Rights Act of 1866

_______ is the principle that the more similar properties there are on the market, the lower the price will be driven.

Competition: If the competition is high, and there are many similar properties on the market, prices are likely to be driven down.

What are the two types of physical depreciation?

Curable and incurable

Chip is a residential and commercial agent. His friend asks him to list his cattle ranch for sale, but Chip's never listed an agricultural property before. How should Chip handle this listing so he can still work for his friend but also not work outside his area of expertise?

Disclose to his friend that he's not an agricultural expert and ask his friend's permission to work with an agricultural expert in his firm.

What fiduciary duty is missing: loyalty, care, obedience, confidentiality, accounting, and ______?

Disclosure

What is a common problem with roof shingles?

Discoloration or curling

Derrick just bought his first condo, and he's ready to crack the champagne. Which of the following will Derrick be able to deduct from his income for tax purposes? 1. Closing costs 2. Discount points 3. Down payment 4. Transfer fees

Discount points

Leonard is offered a loan at 5.75%. Because he plans to be in his home for several years, he chooses to pay points up front to have the rate reduced to 5.25%. What's this an example of?

Discount points

Residents of Tinytown have been complaining to town officials that the village-like character of their town is being affected by the medium-rise condos that developers are building on the edge of town. In response, local government officials rezoned the areas on the edges of town as parklands. What type of zoning is this?

Downzoning: assigns a lower density use to an area that previously allowed a higher density.

Ted is in foreclosure but has some equity in his property. An investor suggests that Ted enter into a sales contract with him for a substantially higher price than the investor would actually be paying. The investor pockets the cash and allow the house to be foreclosed on. What sort of scheme is this?

Equity skimming occurs when an investor receives title to a property, usually rents out the home but doesn't make the mortgage payments. When types of equity skimming fraud like this occurs, houses usually end up in foreclosure.

A buyer, hoping to beat out all other offers, included a clause in the offer that reads, "Buyer to beat all competing offers by $1,000 up to a price of $700,000. Seller to provide copies of competing offer to buyer on acceptance." What type of offer is this an example of?

Escalator

Janice wanted to sell her townhome, and her neighbor was considering buying it. She wanted to put it on the market while she waited to find out if her neighbor was going to buy. In order to receive the best possible representation but avoid paying a commission if her neighbor buys the property, what type of listing agreement would best suit Janice's needs?

Exclusive agency

A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What is the total amount of interest the borrower will pay over the course of the loan?

First, multiply the monthly payment ($2,042.71) by the total number of payments (180 = 12 payments/year for 15 years). The total paid back is $367,687.80. Then subtract the original loan value: $367,687.80 ‒ $250,000 = $117,687.80.

A borrower has a 30-year, $500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3,078.59. What's the total amount of interest he'll pay over the course of the loan?

First, multiply the monthly payment by the total number of payments. Then subtract the original loan value: $3,078.59 x 360 = $1,108,292.40 ‒ $500,000 = $608,292.40.

A form of depreciation or loss in value caused by defects in design is called _______.

Functional obsolescence is a form of depreciation or loss in value caused by defects in design.

As interest rates fall, the number of buyers in the market is likely to ______.

Increase

Independent contractors are required to fill out what form for IRS reporting purposes?

Independent contractors are required to fill out a W-9 for IRS reporting purposes. Only actual employees are required to complete the W-4.

Sander and Ginny bought an old industrial site and plan to get grant money to put an environmental education center on the site. There are a few structures on the property, but they are in disrepair, and it will likely be less expensive to tear them down and build new than to rehabilitate them. However, the new owners are sure that they've made a great investment because the land is in great shape. This reflects which physical characteristic of real property?

Indestructibility: is the physical characteristic that states that while improvements may deteriorate, land can't be destroyed.

What term means: the cost of replacing a building in the case of total loss?

Insured value should be the cost of replacement in the event the property's destroyed.

Why do many property managers have separate operating and trust accounts?

It prevents the misuse of tenant funds for operating expenses.

You've just signed a listing with a new seller client. What's true about electronic delivery of written notice or contract forms to your seller?

It's allowed if the seller consented to it in the listing contract.

Jared has a 70/30 split with his brokerage firm, and his firm has a 50/50 split with cooperating brokerages. Last month, he was paid $12,239.50 in commissions from his home sales, which totaled $538,000. What is Jared's brokerage's commission rate?

Jared was paid $12,239.50, which is 70% of the amount paid to his broker as commission. That makes his firm's commission $12,239.50 ÷ .70 = $17,485. Multiply that by two for the total commission the firm grossed, since it's shared 50/50 with a cooperating brokerage (the brokerage that brings the buyer to the sale), giving you $34,970. Then divide by the total sales amount for the brokerage's commission rate: $34,970 ÷ $538,000 = 0.065, or 6.5%.

What type of insurance protects a lender's collateral interest in a property that's being financed?

Lender's title insurance policies protect the lender's collateral investment in a given property.

Lawrence is a buyer closing on a home for which he's obtaining financing. Which document will give Lawrence an estimate of the costs he'll likely pay at closing?

Loan Estimate

Lucas, Ivan, Chad, and Trace own a property as joint tenants. After a few years, Ivan sells his interest to Tom (with permission from Lucas, Chad, and Trace). Chad dies intestate but is survived by a wife, Amy. Trace also then passes away but wills his property to Monique. Who owns the property after Trace's death?

Lucas & Tom

Datums and benchmarks are used for measuring ______.

Measuring Elevation

Juan secures a fixed rate amortized 30-year loan for $295,000 at 4.25%. If his monthly P&I payment is $1,750, how much interest does he pay in the second month of the loan?

Month 1: Interest= $1,044.79 ([$295,000 x .0425] ÷ 12 Principle= $705.21 ($1,750 - $1,044.79 Month 2: Principle= $294,294.79 ($295,000 - $705.21) Interest= $1,042.29 ([$294,294.79 x .0425] ÷ 12)

Home inspector Maura was walking Thad through a property inspection. The frame house, on a slab foundation, had mulch piled up about 18 inches next to the house. Why was Maura noting this as a concern?

Mulch next to wood siding may lead to wood rot.

Gabi owns one parcel measuring one square mile and another parcel measuring one mile x half a mile. She combined the parcels and sold them for $2.5 million. What price per acre did she receive for the land?

One square mile is 640 acres. The area of the second parcel is 5,280' x 2,640' = 13,939,200 sq. ft. Divide that by 43,560 (sq. ft. in an acre) to get 320 acres. 640 + 320 = 960 acres. $2.5 million divided by 960 acres = $2,604.17 per acre. Retake this Exam Return to Course Home View Exam Results

Elaine owns a home on a flag lot behind James. Her easement for a common driveway runs through James's property. What kind of ownership rights does Elaine have of the driveway that runs through James's property?

Possessory

Which document is used to give a buyer an overview of the title history and information about what is or isn't covered in an insurance policy?

Preliminary report

When a buyer finances a newly built home with a Federal Housing Administration loan, FHA requires the builder to ______.

Purchase a third-party home warranty to protect the buyer

What is ratification?

Ratification means "affirming something after the fact," so since Danielle permitted Joanna to start scheduling showings, she ratified an unwritten agency agreement between them.

Conrad just closed on the house he's buying to fix up. Why should he follow up to be sure the deed has been recorded?

Recording provides constructive notice that he owns the property.

Jayne was tired of waiting for her subcontractor to get his part of the deal done. The agreed-upon deadlines came and went, and Jayne lost money waiting for the subcontractor to come through. She decided that if the subcontractor wasn't going to honor his commitments, neither was she, so Jayne consulted with her attorney and then terminated the contract. This is an example of ______.

Rescinding the contract unilaterally

Gina is in the county assessor's office looking at the maps of her county. She sees several areas that are one mile square, or 640 acres each. What are these areas?

Sections; Townships are divided into 36 one-mile-square sections.

In states where full disclosure isn't required, whose responsibility is it to disclose any items required by law and respond honestly to any questions about the property's condition?

Seller

What is an example of severability?

Severability refers to the concept that a court can strike down one or more contract terms while leaving the remainder in place.

Which amendment to CERCLA says that "innocent landowners" aren't responsible for clean-up of hazardous contamination?

Superfunds Amendments and Reauthorization Act

When is the "Choose Your Neighbor" flyer an allowable strategy for finding prospective buyers?

The "Choose Your Neighbor" flyer would be allowed only in conjunction with other marketing strategies that make the property available to all types of buyers.

What acts support and purpose the prohibiting monopolies by prohibiting mergers or acquisitions that would create a monopoly?

The Clayton Act supports the Sherman Antitrust Act's

Johannes must obtain a permit for a construction project that is located right next to a wetlands. Which federal law or regulation requires him to get the permit?

The Clean Water Act protects wetlands and other waterways.

What's the relationship between TILA, RESPA, and TRID?

The Dodd-Frank Act requires that lenders use the TILA-RESPA Integrated Disclosures (TRID).

A "homes for sale" magazine contains the following ad: "Cozy two-bedroom starter home, neat and clean, ready for move-in. $140,000. Low down payment and easy financing!" Is this ad in compliance?

The ad is in compliance with TILA because it doesn't contain any of the trigger terms that require full disclosure of all financing terms.

Moira has delivered a counter-offer to some potential buyers for her property. What is the time frame for the buyers' acceptance?

The buyers must respond by the time and date specified in the counter-offer.

Tom and Martha live in a neighborhood where lawn ornaments are prohibited. They want to put up a nativity scene at Christmas and argue that the covenant doesn't apply to temporary decorations but only to permanent ones. Their homeowners association disagrees. Which entity enforces subdivision covenants?

The civil court system

If there's no state or local building code to cover a specific situation, what code must the builder abide by?

The federal building code

The question, "What's the purpose of this appraisal?" can be answered by this first step of the appraisal process.

The first step is to state the problem so the appraiser can identify what data is needed. After that, the appraiser will identify the data needed, gather it, and analyze it.

Which of these statements about frontage is true? 1. A lot that's 75 feet wide by 30 feet deep has a frontage of 30 feet. 2. Frontage is used in calculating property taxes. 3. The frontage for a lot that's 120 feet by 85 feet is 120 feet. 4. The frontage of a property on a corner is measured from the lot line on one side to the street's center on the other.

The frontage for a lot that's 120 feet by 85 feet is 120 feet. When reading lot dimensions, if the frontage isn't identified, it's the first number stated.

What must be included with a deed?

The grantor is the seller; the grantee is the buyer. The grantor must sign the deed, be of legal capacity, and be positively identified. The deed must include the habendum clause and an act of conveyance.

Rex has a reputation in the community for being a bit odd. He listed his ranch for sale and insisted on the low price he's placed on it, though his agent told him it's underpriced. Rex's distant family hears of the potential sale, and they go through the courts to present evidence that Rex isn't legally competent to manage his business affairs; the judge agrees. What's the status of the listing agreement?

The listing agreement is terminated by force of law.

Alison and Brent are financing their house purchase of $232,500 with an FHA loan. Their credit score qualifies them for the minimum down payment. What do they need to put down?

The minimum down payment for an FHA loan is 3.5%, so Alison and Brent's down payment needs to be $8,137.50 ($232,500 x 0.035).

Real estate professionals handle many documents related to real estate transactions. What item one of the most important in detecting mortgage fraud?

The original sales agreement and any addenda to that agreement must be accurate. They should clearly identify the property and all parties to the transaction.

Tom and Jim are neighbors. Jim wants to buy Tom's rental property. In the contract they sign, Jim is identified only as "the neighbor." Which statute or contract element does this violate?

The statute of frauds requires not only that a contract to convey property be in writing, but also that the contract identify the parties to the contract.

A requirement that all property owners in a subdivision have a six-foot privacy fence surrounding their entire property is an example of a _______,

This is an example of a restrictive covenant that may be part of the CC&Rs for a property, neighborhood, or subdivision.

Why may a lender might charge a prepayment penalty?

To recover the money lost in anticipated interest

Bo's real estate ad states: "Custom homes for sale with scenic mountain views. Easy financing and low down payments." What else must be included in the ad in order for it to comply with TILA?

Under TILA, ads that mention general financing terms, such as "low down payment" or "easy financing," do not require additional disclosure. If Bo had gotten more specific (e.g., "10-year loan with 0% down") he would need to include more information.

The federal Fair Housing Act includes protections for people with disabilities. It requires multi-family buildings constructed for occupation after March 13, 1991 to have seven special features. What is one of those features?

Unit and internal doors that are usable by persons in wheelchairs

Delaney signed a buyer's representation agreement with Martha. After Delaney made an offer on a house, she changed her mind and terminated the agency agreement. How is his contract breached?

Unless Martha agrees to terminate the agency agreement with Delaney, Delaney may still owe Martha the agreed-upon compensation for breaching this agreement.

What are typical accrued adjustment? Example?

Unpaid real estate taxes: Accrued expenses are those that the seller owes at the day of closing but that the buyer will eventually pay, such as unpaid real estate taxes.

You sign a contract to purchase a machine that will allow you to travel back in time and meet Abraham Lincoln. Assuming that time machines don't actually exist (for now), what type of contract is this?

Void

Sylvia, who's 15 years old, and her neighbor Marge, who's 24, agree that Sylvia will babysit Marge's toddler for the summer for $10 an hour. What type of contract is this?

Voidable

Rhonda and Oliver bought an old schoolhouse with the hope of transforming it into a residence. They owned the property as joint tenants. After Oliver died, how did Rhonda own the building?

When there are only two joint tenants, the death of one dissolves the joint tenancy. Rhonda is now the sole owner of an estate in severalty.

Sondra thinks the new business contract she signed with her business partner is valid. Both parties are legally competent, the contract has a legal purpose, an offer was made and accepted, and a fee has been negotiated and documented. Which essential element of a valid contract has Sondra not yet considered?

Whether consent was voluntary

Niko leased a unit in a residential building Jenna owned. Niko notified Jenna about a broken window and offered to repair it if it weren't fixed by a certain date. That date had come and gone, and Jenna hadn't fixed the window. Niko hired someone to make the repair and deducted the cost from his next rent payment. Can he do this (assuming the area where he lives has adopted the Uniform Residential Landlord Tenant Act)?

Yes, but Niko should submit the receipts along with his rent payment. - URLTA provides tenants with the remedy to make repairs and deduct the cost of those repairs from their rent. Written advance notice of an issue and reasonable time to correct must first be provided to the landlord.

What is an example of legal single license dual agency?

You represent both the buyer and seller in a single transaction with appropriate consent from both.

Ashton, an appraiser, is estimating value using the sales comparison approach. He applies more weight to two comparables over several others he used. What process is he utilizing?

a correlation: the most weight may be given to one or two comparables, or equal weight may be given to all. The term reconciliation is often synonymous with correlation.

Grant and Adela arrange a $150,000 loan at 4.5% annual interest with their lender. What's their monthly interest amount?

annual interest amount is $6,750 ($150,000 x 0.045). To get the monthly amount, divide $6,750 by 12. Their monthly interest amount is $562.50.

The doctrine of laches refers to the _______ of restrictive covenants/deed restrictions.

enforcement: The doctrine of laches refers to the enforcement of restrictive covenants. If property owners don't protect their rights to enforce these covenants, they can lose them.

Janine, a professional home inspector, notices a lot of small holes burrowed in a home's attic beams. This could indicate the existence of what pest?

termites or wood-boring beetles

A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What's the total amount the borrower will pay back over the life of the loan?

total amount paid back: multiply monthly payment ($2,042.71) by the total number of payments (180 = 12 payments/year x 15 years). The total paid back is $367,687.80.