Real Estate National PSI practice exam 2

A couple bought a rental house for $195,000. Its assessed value was $180,000. If the tax rate is $1.50 per $100 of assessed value, what is the monthly contribution the lender will REQUIRE for taxes? Round to the nearest cent. 1. $225.00 2. $162.50 3. $150.00 4. $112.50

1

A couple listed their home with a broker. After 2 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: 1. an exclusive agency listing. 2. an exclusive right to sell listing. 3. a net listing. 4. an advance fee listing.

1

A minority couple come to a salesperson looking for a house. The salesperson has some properties for which the couple qualify but avoids showing or mentioning these listings. Instead, the salesperson shows only properties in low-priced and integrated neighborhoods. This practice is known as: 1. steering. 2. blockbusting. 3. redlining. 4. conciliation.

1

Earnest money should be deposited into a trust account: 1. in a timely manner, according to state laws. 2. upon removal of all contingencies. 3. at the broker's discretion. 4. according to MLS rules.

1

Even after an offer has been accepted and is binding, the buyer and seller may still choose to sign mutual release papers rather than proceed to closing. Which of the following circumstances would NOT give either party a justifiable reason to insist on a mutual release? 1. The buyer finds a better property for better terms. 2. A title defect that will take months to clear is discovered. 3. A basement fire causes damage that requires extensive repairs. 4. The buyer is unable to obtain financing that meets the terms of the contract's financing contingency.

1

A buyer wants to purchase a home for $160,000 with a 15% down payment. The lender charges 2 points. How much money does the buyer need up front to make the purchase? 1. $2,720 2. $24,000 3. $24,408 4. $26,720

4

A broker represents a group of investors who purchase single family residences when they can be found at very low prices. Their offers are typically made with $500 deposits and cash closings within 7 days of acceptance of the offers. When the last property closed, the investors suggested the broker keep the deposit money to be used for their next purchase, as yet not identified. What must the broker do with these deposit funds? 1. Return them to the purchasers. 2. Deposit them in his escrow account. 3. Deposit them in his rental trust account. 4. Hold them in his personal account until needed.

1

A broker, acting as agent for the seller, presents an offer to buy from the broker's former college roommate. The broker knows that the buyer will increase the amount of the offer if the seller turns down the offer. When presenting the offer, the broker should: 1. tell the seller that the buyer will pay more. 2. not disclose that the buyer will pay more to ensure fair treatment of all parties. 3. try to negotiate a fair compromise between what the seller is asking and what the buyer is offering. 4. encourage the seller to delay accepting the offer.

1

A company agrees to lease a property to be used as a gambling casino. State laws prohibit gambling. This particular contract would be legally defined as 1. void. 2. voidable. 3. valid. 4. unenforceable.

1

A competitive market analysis takes into consideration: 1. square footage of the subject property. 2. neighborhood nuisances. 3. unemployment levels in the community. 4. age of the sellers.

1

A major difference between freehold and nonfreehold estates is that all freehold estates: 1. are of indeterminable duration. 2. terminate upon the death of the person on whose life they are based. 3. are inheritable by the holder's heirs. 4. are estates for a fixed term.

1

A realty firm has just entered into an agreement to represent a home builder in the sale of a new subdivision. The firm has located several potential buyers and five homes have been sold to purchasers that the firm's agents have contacted. The realty firm has an agency relationship with: 1. the builder. 2. the buyers. 3. the builder and the buyers. 4. neither the builder nor the buyers.

1

A seller's statement in a property disclosure document means: 1. the owner is disclosing known latent defects. 2. nothing, because the seller will not be responsible for any defects. 3. the property is fully suitable for the uses contemplated by the buyer. 4. the owner creates a warranty that there are no defects in the property.

1

An agency relationship between a property owner and a property manager is usually created by 1. a management agreement. 2. payment of a management fee. 3. an exclusive agency agreement. 4. an independent contractor agreement.

1

An equal housing opportunity notice MUST be 1. displayed in the brokerage office. 2. included in all written advertisements. 3. specified in all listing agreements and offers to purchase. 4. given to all prospective clients.

1

In an exclusive right-to-sell listing, an owner lists the property for sale with how many brokers? 1. One. 2. Two. 3. Three. 4. Any number.

1

Legal descriptions using the government survey system are NOT generally used in: 1. the original 13 states. 2. subdivisions. 3. quitclaim deeds. 4. mortgages or deeds of trust.

1

Ordinances that specify construction standards are 1. building codes. 2. building permits. 3. construction alterations. 4. certificates of occupancy.

1

The buyer is assuming a mortgage presently on the property in the amount of $110,000. What is the adjustment made at closing? 1. Credit buyer $110,000; debit seller $110,000. 2. Credit seller $110,000; debit buyer $110,000. 3. Credit buyer $110,000; no adjustment to seller. 4. Credit seller $110,000; no adjustment to buyer.

1

The day after a broker's listing on a house expired, it was listed with another broker and offered in the MLS. Several days later, a third licensee called the first broker and asked for the key to show the home. The broker should inform the caller that 1. he is no longer the listing agent. 2. he will set up an appointment for showing the home. 3. he will leave the key under the door mat. 4. the house is currently off the market.

1

The sellers want to accept a purchase offer, but only if the price is raised by $5,000. What should they give the prospective buyer? 1. Counteroffer. 2. Novation. 3. New listing contract. 4. Contingency.

1

Unrepresented buyers ask the licensee who listed the home whether they should order a property inspection as a part of their due diligence for the purchase of the home. Which of the following would be the most appropriate way for the listing agent to respond? 1. If you feel it is in your best interest, please do so. 2. Since I represent the seller I am not able to answer your question. 3. I am not aware of any issues that such an inspection would identify. 4. Since the seller has provided a property disclosure, there should be no need for any further inspection.

1

When a listing broker is preparing an Offer to Purchase for a buyer customer, contingencies involving inspections or approval by a third party should 1. have short deadlines. 2. be discouraged by the broker. 3. be stated as briefly as possible. 4. be limited to mortgage arrangements.

1

A borrower has defaulted on the mortgage. The mortgage contains an acceleration clause. This permits the lender to 1. confiscate the borrower's personal assets. 2. demand immediate payment of the entire note. 3. report the borrower to the Federal Housing Administration. 4. force the borrower to vacate the premises.

2

A buyer is getting a fully amortized loan for $220,000. The bank will give the buyer the loan for 15 years at 5 1/2% or for 30 years at 6 1/2%. To the nearest dollar, what is the difference between the monthly payments for these two loans? (BE SURE TO USE THE AMORTIZATION TABLE.) 1. $141 2. $407 3. $526 4. $548

2

A charge of violation of Federal Fair Housing laws can be heard by an administrative law judge within the Department of Housing and Urban Development (HUD) or by a Federal district court judge in Federal court. The advantage of a Federal court hearing to the complaining party is that 1. the case will be more thoroughly reviewed. 2. there is no dollar limit on damages paid. 3. only a district court judge can order that the property be sold to the complaining party. 4. only a district court judge can order jail time for the guilty party.

2

A commercial property lost value because a recently constructed highway moved traffic away from the property. This is an example of: 1. accelerated depreciation. 2. economic or external obsolescence. 3. functional or physical obsolescence. 4. incurable physical deterioration.

2

A competitive market analysis is MOST often used for 1. estate tax purposes. 2. setting a listing price. 3. divorce proceedings. 4. property tax assessment.

2

A contract for the sale of a home has been signed by both parties. This contract will remain executory until: 1. acceptance of the buyer's offer is delivered to the buyer. 2. the transaction has closed. 3. all contingencies have been met. 4. the buyer takes possession.

2

A contract has been drawn which obliges the sellers to convey title to their land to the buyers if the buyers come up with $22,000 on or before December 31st. This is called: 1. a buy-sell agreement. 2. an option contract. 3. an installment contract. 4. a vendor's lien interest.

2

A gross lease can be best defined as one where the tenant pays, as a part of the rent, 1. all property changes excluding utilities. 2. no operating expenses of the leased space. 3. outside maintenance and property taxes only. 4. all property expenses except the interest on the owner's mortgage.

2

A prospective 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: 1. it satisfies or exceeds all terms included in the counteroffer. 2. the owner withdraws the counteroffer before it is accepted. 3. the owner gives the first buyer notice that another offer was received and an opportunity to revise the bid. 4. the first buyer is informed, in writing, of the owner's intent to accept another offer.

2

A seller tells the listing agent that her home was treated for termites 10 years ago, so there are no termites now. Before listing the property, the agent should: 1. tell the seller not to disclose, because the statute of limitations has run out. 2. tell the seller to disclose the termite treatment on the property disclosure. 3. talk to neighbors to see if there are termites in the neighborhood. 4. talk to the planning and zoning department for local termite eradication ordinance.

2

An exclusive right to sell listing obtained by a broker associate belongs to: 1. the seller only. 2. the employing broker only. 3. the broker associate only. 4. both the broker associate and the responsible broker.

2

Building codes are: 1. created to establish zoning in a neighborhood. 2. ordinances that specify construction standards. 3. established in each neighborhood or development. 4. set up to hear complaints about effects of zoning ordinances.

2

Even if a loan applicant's current income seems adequate to qualify for a certain loan, the Equal Credit Opportunity Act allows a lender to refuse the loan as a high risk if the applicant's main source of income is 1. alimony. 2. commission sales. 3. pension fund. 4. child support payments.

2

If the terms of a contract indicate that Party A will be obliged to perform her part of the contract only if Party B chooses to take a certain action, then the contract is a: 1. unilateral contract in which only Party B has made a promise to perform. 2. unilateral contract in which only Party A has made a promise to perform. 3. bilateral contract which both parties are obliged to perform. 4. void contract.

2

If you own a building free and clear that is worth $115,000 and want an annual return of 12%, what net income is needed each month? 1. $1,062 2. $1,150 3. $9,583 4. $13,800

2

In MOST states, foreclosed property is sold through: 1. sealed bids. 2. public auction. 3. deficiency judgment. 4. right of redemption.

2

Real property can be converted to personal property by 1. annexation. 2. severance. 3. accession. 4. extension.

2

Salesperson Susan was at the local coffee shop with some agents from other offices. The subject of commissions came up, and agents began to compare their commission rates. Susan should: 1. excuse herself from the discussion as this could constitute illegal blockbusting. 2. advise her friends this could constitute a violation of Sherman Antitrust Act. 3. listen carefully so she can be more competitive in the market. 4. be certain her company is charging as much as the others.

2

The Civil Rights Act of 1866 prohibits any type of discrimination based on: 1. gender. 2. race. 3. race and gender. 4. religion.

2

Three people buy a house as tenants in common. Subsequently, two of the owners want to sell, but the third discourages each potential purchaser. The two owners who wish to sell the house can: 1. sell without the third owner's consent. 2. file an action for partition against the third owner. 3. file for a lien against the third owner's interest as damages. 4. force the third owner to sell if they invoke the rule of specific performance.

2

Which of the following real estate contracts is a service contract? 1. a purchase agreement 2. a listing agreement 3. an option contract 4. a mortgage

2

A broker has signed a listing contract for the sale of a home. Which of the following could make this contract voidable? 1. The seller cannot write and sign with an "X". 2. The listing contract specifies that no other broker may show the house. 3. The seller is heavily under the influence of alcohol at the time of signing. 4. The listing contract specifies that a commission will be paid only if the house is sold within 3 weeks.

3

A formal appraisal will ALWAYS be REQUIRED when the: 1. seller wants to be sure of the home's value. 2. buyer wants to obtain private mortgage insurance. 3. lender wants to sell the mortgage to the secondary market. 4. agent cannot locate enough comparables to complete a CMA.

3

A judgment has been properly recorded. Any subsequent purchasers, whether they have actually examined the record or not, have been given: 1. actual notice. 2. prescriptive notice. 3. constructive notice. 4. exculpatory notice.

3

A lawsuit for inverse condemnation may be brought by 1. the police. 2. the city. 3. a homeowner. 4. the zoning board.

3

A licensee is listing a property in a known flood plain. The seller flatly denies that the structure and the property have ever been flooded. What is the licensee required to do in this situation? 1. Rely on the face value of seller's statement. 2. Inform the seller of potential legal consequences if this claim is untrue. 3. Inform the seller of the legal obligation to disclose facts regarding flood plains. 4. Refuse to list the property and explain to the seller that all properties in this area flood.

3

A mentally disabled person who has been declared incompetent by a judge wishes to enter into a contract. Under what conditions can such a person do so? 1. The person must obtain prior written approval by a licensed psychiatrist or psychologist. 2. The person must be capable of understanding the transaction. 3. The person appointed by the court to act for the disabled person must contract on his or her behalf. 4. The person may enter a contract under any conditions, because the law prohibits discrimination against persons with disabilities.

3

A prospective seller asks a salesperson to recommend a listing price for a property. The salesperson should suggest: 1. listing the property at the price the owner believes it is worth. 2. listing the property at least 30% above the current mortgage. 3. a competitive market analysis to determine the property's value. 4. setting the price at the value of the most recent sale in the neighborhood.

3

A written agreement in which a purchaser agrees to buy and a seller agrees to sell is called: 1. an agency. 2. an assessment. 3. a contract. 4. a fiduciary obligation.

3

Alex, 14, and Kent, 17, inherited a piece of property. The next year, Kent deeded the whole property to Alex, who immediately put it on the market. An adult buyer made a written offer which was accepted by Alex. Which of the following is TRUE? 1. Kent must also sign the contract and any deed. 2. The signature of Alex's guardian is required. 3. The buyer cannot legally compel Alex to sell. 4. Both buyer and seller are bound by the contract.

3

Failure of a real estate agent to comply with Fair Housing practices is punishable by 1. license revocation only. 2. criminal prosecution only. 3. license revocation and criminal prosecution. 4. probation.

3

Federal Truth-in-Lending laws are also known as 1. the Freedom of Information Act. 2. the Equal Credit Opportunity Act. 3. Regulation Z. 4. Title VIII.

3

If leased premises become unusable for the purpose state in the lease, the tenant may have the right to abandon the premises. This action is called 1. condemnation. 2. actual eviction. 3. constructive eviction. 4. abandoned lease property.

3

In helping a buyer to select a lender, if the buyer believes he has good credit and his income is documentable as a salary and by tax returns, the licensee might recommend a mortgage banker, instead of a mortgage broker, for all of the following reasons EXCEPT: 1. closing costs may be lower. 2. loan originator has knowledge of the underwriter's policies. 3. more variety of loan programs available. 4. originator and lender are part of same company.

3

On January 15, a seller paid $960 in annual property tax for the current calendar year. A buyer is purchasing the house with the closing set for March 1. What will be the seller's credit for the property taxes already paid if the buyer pays for the day of closing? Use a 360-day year and a 30-day month. 1. $120 2. $160 3. $800 4. $840

3

Under the common law of agency, licensees owe the broker with whom they are associated all of the following duties EXCEPT 1. loyalty. 2. competence. 3. indemnification. 4. full disclosure.

3

Under the terms of their listing contract, the owners may sell their house themselves and pay no commission. If their agent sells it, a commission will be due. What kind of listing contract do the owners have? 1. Multiple listing. 2. Net listing. 3. Exclusive agency listing. 4. Exclusive right to sell listing.

3

What is the duration of a home warranty's coverage? 1. the expected life of the purchaser 2. the expected life of the product or system covered 3. as disclosed in the contract that offers the warranty 4. a minimum of 5 years or the duration of the purchaser's ownership, whichever is shorter

3

A broker and the buyers he represents are anxiously awaiting the closing on their new home. The closing is scheduled in 4 days. The buyers inform the broker that they just received revised Loan Estimate and Closing Disclosure forms from the lender, indicating the Annual Percentage Rate on their loan has increased by 0.3%. Based on the TILA-RESPA Integrated Disclosure rule, what action should the broker take in this situation? 1. Assist the buyers in calculating the new loan payments and ask them if they want to proceed with the closing as scheduled. 2. Advise the buyers to file a legal action against the lender for violation of predatory lending practices under the Real Estate Settlement Procedures Act. 3. Call the lender and inform them that they are in violation of the seven-day waiting period and cannot change the terms of the loan this close to the closing. 4. Confirm with the seller's broker, the lender and the closing entity that the closing must be delayed to allow for a new seven-day waiting period because of the interest rate revision.

4

A buyer was negotiating the purchase of a house for himself. During a conversation with the seller, the seller agreed to include all kitchen appliances in the sale, and this fact was included in the sales contract. In this situation, if the seller takes the appliances with him, what recourse does the buyer have? 1. The buyer has no recourse because he negotiated the sale himself. 2. The buyer may declare the sales contract invalid. 3. The buyer may sue the seller for partial performance. 4. The buyer may sue the seller for specific performance.

4

A couple owns an older home in a neighborhood that is becoming a commercial area. Because of the change in the use of the land, the couple can expect the value of their parcel to increase at some future time. This is an example of the principle of: 1. substitution. 2. contribution. 3. conformity. 4. anticipation.

4

A landlord may legally refuse to rent to a prospective tenant if the tenant 1. has a history of serious mental illness. 2. is unable to live alone without assistance. 3. has ever been convicted of using illegal drugs. 4. has ever been convicted of selling illegal drugs.

4

A lender will make an 80% loan-to-value loan on a property that is appraised for $72,250 and sells for $73,500. If the buyer has saved $14,450 for a down payment, how much more (if any) will he need in order to make the down payment required under the terms of this loan? 1. He has $1,000 more than he needs for the down payment. 2. He has exactly the amount needed for the down payment. 3. He needs an additional $250 in order to make the down payment. 4. He needs an additional $1,250 in order to make the down payment.

4

A seller signs a listing agreement with a broker. The seller can cancel the listing at any time without legal liability if: 1. an offer has not yet been accepted. 2. an offer has not yet been presented. 3. the broker is given at least 48 hours notice. 4. the broker violates the terms of the contract.

4

A tenant rented an apartment, signing a 15-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? 1. Gross lease. 2. Proprietary lease. 3. Tenancy at sufferance. 4. Tenancy at will.

4

According to the Truth-in-Lending Act, if any "trigger terms" are used in an ad, all of the following disclosures MUST appear in the ad EXCEPT the 1. cash price or amount of the loan. 2. amount of down payment required. 3. number, amount, and frequency of payments. 4. prepayment penalties and rebates.

4

An exception to title insurance coverage is: 1. forged documents. 2. defects found in public newspapers. 3. incorrect records of marital status. 4. defects that clearly appear in the title search.

4

An owner lists her home at a 7% commission rate and wants to net $45,000 after paying the mortgage balance of $68,000 and the broker's commission. To the nearest dollar, what should the selling price be to net her $45,000? 1. $105,090 2. $110,753 3. $120,910 4. $121,505

4

Antitrust laws prohibit competing brokers from all of the following EXCEPT 1. boycotting other brokers in the marketplace. 2. dividing the market to restrict competition. 3. agreeing to set sales commissions and management rates. 4. receiving compensation from both the buyer and the seller.

4

At the closing on June 15, the buyer is assuming a mortgage presently on the property, on which the monthly interest charge is currently $600. The seller has made the payment due on June 1. Assuming a VA mortgage, what is the adjustment made at closing? 1. Credit seller $300; credit buyer $300. 2. Debit seller $300; debit buyer $300. 3. Credit seller $300; debit buyer $300. 4. Debit seller $300; credit buyer $300.

4

If conditions for property use are included in a deed and these conditions are violated, what is the most severe potential penalty? 1. A court may issue an order enforcing compliance. 2. The purchaser's mortgage lender may accelerate the loan. 3. The original owner may sue the purchaser for breach of contract. 4. A court may order the return of the property to the original owner.

4

The Department of Housing and Urban Development estimates that most private homes built before 1978 contain potentially dangerous levels of lead. Because of this, some Federal agencies, such as FHA, 1. will no longer lend or guarantee loans on these older properties. 2. require evidence of testing for and disclosure of any type of lead contamination before they will lend or guarantee loans on such properties. 3. require funds to be escrowed for lead abatement as a condition of lending or guaranteeing loans on such properties. 4. require the buyer to acknowledge disclosure of the presence of any known lead paint.

4

The FHA functions MOST like 1. a bank or savings and loan association. 2. a mortgage company. 3. an investment group. 4. an insurance company.

4

Under the Federal Fair Housing Law, which of the following is considered discriminatory advertising? 1. "Nonsmoker preferred. "2. "Military discount. "3. "Seniors welcome. "4. "Catholics preferred."

4

When a home is purchased using an ARM, the monthly loan payment on the mortgage will: 1. rise slightly in each adjustment period until the cap is reached. 2. be adjusted automatically to ensure that negative amortization does not occur. 3. be based on a very low interest rate to begin with, but will rise to the market rate at the first adjustment. 4. vary over the life of the loan depending on fluctuations in the interest rate to which the loan is referenced.

4

Which of the following statements best describes the risk taken by NOT recording a deed? 1. Easements of record would become void. 2. There is no risk as long as the deed has been notarized. 3. The delivery of a deed to a grantee could be invalidated. 4. A subsequent purchaser's recorded deed could take precedence over any unrecorded instrument.

4