Real Estate Final Exam
Suppose a homeowner purchased a three-year hazard insurance policy for $2,000. Based upon a banker's year, what is the daily rate for the policy?
$1.85/day
The buyer of a $450,000 residential property obtains a 80% loan. The seller, who must pay off the $247,000 remaining on his mortgage, agrees to pay the total 7% commission to the two real estate firms involved. ABC Realty will receive 4% commission and XYS Realty will receive 3% commission. What is the dollar amount each real estate firm will receive from the sale?
$18,000 to ABC Realty; and $13,500 to XYZ Realty
What are capital gains tax exemption limits on the sale of an owner's primary residence?
$250,000 if single or $500,000 if married, every two years
The Cannons of Professional Ethics say the __________ must be displayed in a prominent location in each place of business the broker or inspector maintains.
1-1 form
How many classroom hours of continuing education must a licensee complete to renew a license that is not subject to the first renewal period education requirements?
18
Which of the following loan types is NOT guaranteed by the VA for eligible veterans?
80-10-10 Mortgage
How many people serve on the Texas Real Estate Commission?
9
Which one of the following situations best describes an unethical practice on the part of a broker?
A broker accepts extra money from a seller in order to embellish the details of a property.
Which one of the following descriptions describes the purchase price of a property?
A debit to the buyer
What is the legal description of a property?
A detailed description that uniquely identifies the property in such a way that a surveyor would be able to locate it
What is a note in the real estate financing industry?
A promise to repay a loan
Which one of the following definitions best describes a tax deduction?
A reduction in the taxable amount of a taxpayer's income
Which of the following is NOT an encumbrance?
A tax exemption
What is (are) the qualifying ratio(s) for FHA-insured loans?
A total housing expense ratio of 29% and a total debt service ratio fo 41%
Which kind of taxes are calculated as a percentage of the appraised value of a property?
Ad valorem taxes
Real Property includes a. Land b. Improvements c. Bundle of legal rights d. All of the above
All of the above
What is used to modify a contract that has previously been accepted?
Amendment
When a loan is paid off in equal monthly payments that contribute to both principal and interest until the entire loan is paid, it is ________.
Amortized
What is an executed contract?
An existing contract in which all terms have been fulfilled
Which of the following could cause real estate prices to fall?
An increase in the interest rate
The federal Fair Housing Act applies to which of the following properties?
Apartment building
What is the correct term for encouraging the panic selling of homes at below their market value?
Blockbusting
When an agency relationship has been formed the ________ and ________ have fiduciary duties to the _______.
Broker/all his sales agents/client
How does the VA pay for its loan guarantee program?
By charging a funding fee
Which type of report identifies any insurance claims made on a parcel of real estate in the past five years?
CLUE report
Which law was enacted by the Congress in 1977 with the goal of encouraging depository institutions to make loans to meet the credit needs to grow healthy communities?
CRA
Life insurance companies' two biggest investments are bonds and real estate. The majority of their real estate exposure comes in the form of financing which properties?
Commercial multifamily real estate investments
In Texas, which of the following is NOT an executory contract?
Condominium contract
To determine the value of a highly specialized building, like a museum, an appraiser would most likely use and heavily weight which of the following appraisal methods?
Cost approach
What does an asset manager do?
Deal with the purchase, sale, and financing of investment or foreclosure properties
Which of the following is a legally written contract that transfers a property's title (temporarily in case of default) to a third party as security for a loan?
Deed of trust
Some FHA lenders have the authority to approve FHA loans in house. This is called __________.
Direct endorsement
How are real estate properties often categorized?
Economic Use
Which one of the following statements is CORRECT regarding ethics and morals?
Ethics are essentially comprised of a set of principles based on morals.
Which of the following statements best describes the relationship between ethics and morals?
Ethics are standards of conduct and morals are an individual's belief of what is right and wrong
What type of listing gives the owner the right to sell the property and pay no one a commission even though he has an exclusive agreement with a single broker?
Exclusive agency
Which of the following types of listing agreements provides that the broker will get paid regardless of who buys the listed property?
Exclusive right to sell
A buyer decides to exercise her right to terminate under the Third Party Financing Addendum for Credit Approval. What is the proper process?
Execute and deliver a Notice of Buyer's Termination of Contract
What is the secondary market investor for agricultural loans?
Farmer Mac
When the property owner has ownership for an undetermined or unspecified period of time with full ownership rights and the right of disposition or right to convey the interest he or she owns they have a ________ estate.
Freehold
In addition to a $10,000 senior citizen tax deduction, in Texas the school taxes become _________.
Frozen
What is the role of ethics?
Guide professional conduct
Which entity investigates federal fair housing complaints?
HUD
Where do the Cannons of Professional Ethics say the consumer Form 1-1 must be displayed?
In a prominent location in each place of business the broker or inspector maintains
When are forbearance agreements often used?
In lieu of a foreclosure
Which type of co-ownership involves four unities?
Joint tenancy
What does RESPA prohibit in federally related mortgage loans?
Kickbacks for settlement service referrals
When the property occupant has possession for a specified period of time with no ownership rights, he or she has a _____________ estate.
Leasehold
What is the purpose of an acceleration clause?
Make an entire loan amount due upon default
The Treasury Department is the executive agency responsible for promoting economic prosperity and ensuring the financial security of the United States. The Department is NOT responsible for which of the following activities?
Manufacturing and distributing U.S. coins
The ECOA prohibits discriminatory practices on the basis of __________.
Marital status
Which of the following is NOT a benefit of the FHA program?
No credit check
Which FNMA loan document starts out by saying "I promise to pay"?
Note
What is the big difference between seller financing and a contract for deed?
On a contract for deed, the new owner does not get title until all the payments are paid
Notices from one party to the other party under the contract are only effective if sent to _______.
One of the methods listed in Paragraph 21, the Notices Section
What type of ownership is "ownership in severalty"?
Ownership by a single person or business entity
Which of the following clauses in the loan contract allows the lender to foreclose without judicial proceedings?
Power of Sale Clause
John went to the bank to make application for a mortgage loan. John is working within the _______.
Primary mortgage market
What fact would be considered a material defect that must be disclosed?
Production of meth on the premises
What was the primary goal of the Dodd-Frank Wall Street Reform Act?
Protect families from unfair, abusive financial practices
It's illegal to mention which of the following details in a real estate ad?
Proximity to a synagogue
Licensee A knows of no significant defects in the property she is showing, and she exclaims to the prospective buyers, "There is absolutely nothing wrong with this home; it's just..." What is this type of statement called?
Puffing
A VA loan may be used for all of the following EXCEPT __________.
Purchasing an investment property
Which company is NOT a government sponsored entity (GSE)?
REMIC
What happens in the secondary market?
Real estate loans are bought and sold
The difference between the terms real estate and real property is:
Real property is the land, the improvements, and the bundle of legal rights
Which of the following is a form of single ownership?
Severalty
How may real property be turned into personal property?
Severance
Which agreement is a mutual decision to allow the priority of a lien to change?
Subordination
Which of the following is a type of co-ownership?
Tenancy in common
Which of the following statements about license denial is TRUE?
The Commission must give the person immediate, written notice of the license denial
Cultivated annual crops are _____________. a. Emblements b. Personal Property c. The above two are correct d. Encroachments
The above two are correct
Which of the following is NOT a common cause of default?
The borrower fails to make improvements to the collateral property
How is the discount rate defined?
The interest rate the Fed charges to member banks
In a title theory state, which party has equitable rights to a property?
The mortgagor
Which of the following statements is TRUE of an 80-10-10 (piggyback) mortgage?
The second mortgage is used in place of private mortgage insurance
Suppose a sale closes on April 12 and prorations are carried to the day of closing. Which of the following is true of accrued items?
The seller owes for 12 days in April
How does The Real Estate Commission determine a license applicant's competency?
The state's real estate licensing exam
Which of the following statements is TRUE of construction loans?
They are paid out in a series of installments called draws
Which of the following statements is TRUE concerning FHA ARMs?
They can convert to fixed-rate loans
Why are piggyback mortgages also known as 80-10-10 mortgages?
They consist of an 80% LTV loan, and a 10% down payment
Which of the following statements is TRUE of the electronic underwriting systems provided by Fannie Mae and Freddie Mac?
They use three-bureau, merged-file credit reports
Which of the following things does a lender require to underwrite a loan?
Title insurance
Why does the Sunset Act require a review of state agencies every 12 years?
To ensure they are still needed
What is the money in the Recovery Trust Account used for?
To pay an aggrieved party who has won a judgement against a licensee for damages from a real estate transaction
Which of the following is NOT one of the primary objectives of the Texas License Law?
To protect license holders from the unscrupulous acts of clients
Which legislative act requires lenders to provide ARM borrowers with the "Consumer Handbook on Adjustable Rate Mortgages"?
Truth in Lending Act
What does severance mean?
Turning real property into personal property
How long must homeowners live in a home to take advantage of capital gains exemption under the Taxpayer Relief Act of 1997?
Two years
Which of the following four unities are required for joint tenancy?
Unity of interest, time, title, and possession
What does the Statute of Frauds require?
Written real estate agreements
Jerry sold his last home five years ago and moved into a apartment. Now Jerry is thinking about buying a home and has seen some great programs for first time homebuyers. Will Jerry qualify as a "first-time buyer"? He has owned no other real estate.
Yes, because legally, anyone that has not owned for three years is a first-time buyer
Common tax-deductible expenses (for income tax purposes) associated with real estate purchase and ownership include all of the following except ________. a. Private mortgage insurance b. Mortgage interest c. Real estate taxes d. Discount points paid at closing and loan origination fees
a. Private mortgage insurance
Which credit report does Fannie Mae require to be part of the application? a. A credit report from Equifax b. A credit report from Experian c. A credit report from TransUnion d. A merged credit report for all of these reports
d. A merged credit report for all of these reports
An officially-issued legal tender generally consisting of currency and coin is called ________. a. Cash b. Currency c. Money d. All of the above
d. All of the above
Texas offers several exemptions for reduction of property taxes including the _______. a. Homestead exemption b. Over 65 exemption c. Disabled Veterans exemption d. All of the above
d. All of the above
What is the purpose of the Loan Estimate? a. To make sure the borrower has all the information about the loan b. To make the information clearer c. To enable the borrower to shop for money d. All of the above
d. All of the above
What should the buyer check to be sure what kind of pets and how many pets are going to be allowed on a certain property? a. Home Owners' Association Documents b. Property Owners' Association Documents c. Restrictive Covenants (Deed Restrictions) d. All of the above
d. All of the above
When a lender, in Texas, wants to foreclose on a property for default in payments, the first step is to send the borrower a notice that gives the borrower at least 30 days to cure the default. What must the notice include? a. The exact amount to pay b. When the payment must be paid (at least 30 days from date of notice) c. Where to pay d. All of the above
d. All of the above
If income tax or ad valorem taxes do not get paid what can the taxing authorities do? a. Send delinquency notices b. Put a tax lien on the tax payer's property c. Foreclosure on the tax payer's property d. They can do all of the above
d. They can do all of the above