Real Estate Prelicensing National Exam

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79 A buyer purchased a property for $200,000 by obtaining an 85% LTV loan at 7.25% for 20-years, with a mortgage factor of 7.775. How much will one month of interest cost the borrower? Review Later $1,027 $1,208 $12,325 $14,500

$1,027 Explanations (SELECT THIS TO SEE EXPLANATIONS) Mortgage interest is based upon the loan amount. The factor is a distracter that would be used to calculate the monthly principal and interest payment. Loan amount: $200,000 X 85% = $170,000 Annual Interest: $170,000 X 7.25% = $12,325 Monthly Interest: $12,325 / 12 = $1,027.08

A broker who is representing a property owner through a valid property management agreement will typically be authorized to perform which of the following tasks? Choose only ONE best answer. A Make improvements to the property that the broker believes will increase the rent that can be charged each month. B A property manager may take action to evict a tenant for failure to pay rent, as outlined in the property management agreement. C Pay for replacing an HVAC system at the cost of $5,000 from trust account funds when the trust account balance is $100,000, and the client's repair reserve account balance is $4,500. D Encourage a prospective tenant to select another property in a different location that will better cater to his/her religion.

**D Encourage a prospective tenant to select another property in a different location that will better cater to his/her religion. This answer is incorrect. The correct answer is 'D' A property manager is typically not authorized to make changes to the property, even when the changes may result in increased rent. The owner of the property would have to approve those changes. A property manager can hold repair funds on behalf of the owner. She/he would not be permitted to deficit spend, spending more than the amount paid by the property owner, even if she/he have sufficient funds to cover the expense in the trust account (conversion). Trust account money is other people's money. The property manager can expend his or her operating account and invoice the owner for the HVAC repair. Trying to influence a prospective tenant to rent in a certain area by directing them away from a property is steering, which may be called directing or channeling.

78 A seller has agreed to sell her home for $275,000 and contracted to pay a brokerage 6% of the gross sales price. The seller owes $117,000 on the mortgage which includes accrued interest through the date of closing. The following expenses were paid by the customary party: deed preparation $200 recording fees $75 origination fee $2,500 attorney fee $800. How much will the seller net from the sale of the property? Review Later $157,800 $154,425 $141,300 $137,925

-$141,300 Explanations (SELECT THIS TO SEE EXPLANATIONS) SP $275,000 - Comm $16,500 - Loan $117,000 - Deed Prep $200 = $141,300. The seller customarily pays CD&E - Commission, Deed Prep and Excise Tax. The remaining expenses are the buyers.

74 A borrower is purchasing a $300,000 property by obtaining an 80% LTV Conventional loan and is trying to decide if they should obtain a 30-year loan at 7% or 20-year loan at 6.5%. Using the amortization chart, how much lower will the payment be if the borrower selects the 30-year loan, rounded to the nearest thousand? YEAR YEAR YEAR RATE 15 20 30 6 1/4% 8.57 7.31 6.16 6 1/2% 8.71 7.46 6.32 6 3/4% 8.85 7.60 6.49 7% 8.98 7.75 6.65 Review Later $243 $194 $149 $118

-$194 Explanations (SELECT THIS TO SEE EXPLANATIONS) Loan amount: $300,000 X 80% = $240,000 Recall to calculate the PI payment take loan, divide by 1,000 and then multiply by the factor/amortization rate. 20 Yr Loan: $240,000 / 1,000 X 7.46 = $1,790.40. 30 YR Loan: $240,000 / 1,000 x 6.65 = $1,596. Payment Difference: $1,790.40 - $1,596 = $194.40

74 What would be the total interest paid over the life of a $200,000, 30-year loan at 6% interest with a monthly principal and interest payment of $1,200 and escrow payment of $200 monthly? Review Later $504,000 $360,000 $240,000 $232,000

-$232,000 Explanations (SELECT THIS TO SEE EXPLANATIONS) Total P&I Payments: $1,200 x 360 mos. = $432,000 Total Interest: $432,000 - $200,000 original balance = $232,000

76 A buyer is obtaining a 90% LTV Conventional loan for 30-years at an interest rate of 7.5% that amortizes at 6.99. Property taxes and insurance are $3,600 for the year. What is the monthly PITI payment if the purchase price is $500,000? Review Later $3,145.50 $3,445.50 $3,496.00 $3,796.00

-$3,445.50 Explanations (SELECT THIS TO SEE EXPLANATIONS) Loan: $500,000 X 90% = $450,000 PI Payment: $450,000 / 1000 X 6.99 = $3,145.50 Monthly Tax and Insurance: $3,600 / 12 = $300 Monthly PITI Payment: $3,145.50 + 300 = $3,450.50

57 Which of the following is TRUE about loan types? Review Later A budget mortgage requires a borrower to pay the lender monthly discount points. A buydown mortgage is temporary financing used to purchase a new home, then using proceeds from the sale of another home to pay off the loan balance. A blanket mortgage may be used to finance multiple investment properties into one loan. A balloon mortgage requires the borrower to make one payment to the lender for principal, interest, taxes and insurance.

-A blanket mortgage may be used to finance multiple investment properties into one loan. Explanations (SELECT THIS TO SEE EXPLANATIONS) A blanket mortgage finances multiple properties or lots. For example, a person that buys 10 investment units using one loan or when a subdivision developer finances the subdivision. The lender will release the lien against the lot for sale when a negotiated payment is made. A balloon payment has an outstanding balance at the end of the loan term. A budget mortgage requires the payment of principal, interest, taxes, and insurance. A bridge loan is temporary financing, typically not greater than 9 months, that allows a person to buy a new home, then use the proceeds from sale of the old home to pay off the loan. A buydown mortgage temporarily decreases the interest rate on the loan, which will slowly climb to the agreed upon rate.

69 What is most likely allowable of the following activities according to the Federal Fair Housing Act? Review Later A property owner who owns 8 investment homes and rents them all refuses to rent to persons of a certain religion A seller that has listed a property with a licensee refuses to negotiate an offer from a Muslim family. A female property owner places will only rent a room to another female A real estate licensee who wishes to rent their own personal property refuses to rent to persons with children

-A female property owner places will only rent a room to another female Explanations (SELECT THIS TO SEE EXPLANATIONS) When renting rooms in an owner-occupied unit there is a limited ability to refuse to rent based upon sex of the applicant. The government and courts do not want to intervene in matters within a household. An owner can discriminate when they do not advertise or disclose to an applicant that they will not rent based on sex. The exemptions for owner-occupied housing is for 1-4 units. A licensee loses all ability to discriminate. Children are protected under Federal Fair Housing under familial status.

71 Which of the following would be a violation of the Federal Fair Housing Act? Review Later A homeowner that hired a broker refuses to rent to a tenant that is Hindu. A property manager refusing to rent to a prospective tenant that does not have stable income. A homeowner refuses to rent to a family that is Muslim. A property manager refusing to rent a 3 bedroom apartment to a 7 person family.

-A homeowner that hired a broker refuses to rent to a tenant that is Hindu. Explanations (SELECT THIS TO SEE EXPLANATIONS) A broker cannot discriminate and the seller loses his/her ability to discriminate when the hire a broker. NOTE: A broker can sue for compensation when the client discriminates as it is a breach. A property owner, that does not hire a broker, has a limited ability to discriminate so long as they do not advertise or tell the person that they are discriminating. A buyer can discriminate in "their heart" as long as they do not ask the agent to participate. A property manager can refuse to rent to a family when they exceed the allowed limit. As with a lender, the property manager can refuse to rent to a prospective tenant when the tenant does not have stable income.

50 Which of the following would be allowable under RESPA? Review Later A home warranty company paying a real estate broker $50 for each warranty sold to clients of the broker A real estate licensee receiving a $100 gift card from a lender as a "thank you" for a business referral A real estate licensee who also has a mortgage lending license receiving some portion of an origination fee on a residential loan A home inspector who provides free home inspection services to real estate agents whose clients use the inspector

-A real estate licensee who also has a mortgage lending license receiving some portion of an origination fee on a residential loan Explanations (SELECT THIS TO SEE EXPLANATIONS) The fee is not a kickback as the person is a lender. Recall KEUBDL - Kids Eat Up Boogers Dirt and Lead. RESPA prevents Kickbacks among settlement service providers, limit the among a bank can hold in Escrow, requires a Uniform settlement statement (CD), a Booklet, the Disclosure of loan servicing and that a Loan estimate is provided within 3-days of mortgage application.

65 The subject property has a stone patio, and the comparable property does not. The value of the patio is $8,000. What adjustment would a licensee make? Review Later Subtract $8,000 from the subject. Add $8,000 to the subject Subtract $8,000 from the comparable Add $8,000 to the comparable

-Add $8,000 to the comparable Explanations (SELECT THIS TO SEE EXPLANATIONS) Never adjust the subject property. If the subject is superior, then the comparable property is inferior. When the comp is inferior, you increase for the contribution of the stone patio. NOTE: Comp superior = subtract / Comp inferior = increase

20 An agent, working in a firm with 43 agents, lists a property. Which of the following is true? Review Later All agents with the firm automatically become subagents of the seller when the property is listed Every agent in the firm automatically becomes a dual agent if he/she brings a buyer to the home An agent who learns confidential information about the seller prior to showing the property can never work with a buyer on the property Every agent, except for the listing agent, becomes a designated agent if he/she brings a buyer to the home Comments

-All agents with the firm automatically become subagents of the seller when the property is listed Explanations (SELECT THIS TO SEE EXPLANATIONS) Every agent in the firm immediately becomes a subagent of the seller once the property is listed. Some of the agents may later become dual agents or designated agents if they bring a buyer but it is not automatic as they could just remain seller subagents and work with buyer customers. If an agent does receive confidential information prior to showing the property, he can still bring a buyer to the property as a dual agent or seller subagent.

32 Which of the following most likely violates CAN-SPAM laws? Review Later An email message containing a header reflective of the body's contents, a physical office address, and a prominently displayed opt-out link. An email message containing a header reflective of the body's contents, a virtual office contact, and a prominently displayed opt-out link. A facsimile message with a physical office address, a message that matches the header, but fails to include any instructions on how to opt-out of further messages. A dir

-An email message containing a header reflective of the body's contents, a virtual office contact, and a prominently displayed opt-out link. Explanations (SELECT THIS TO SEE EXPLANATIONS) CAN-SPAM laws require the header and body contents to match, no misleading titles, no sexual innuendo, a physical office address must be included, and the ability to opt-out of further emails must be prominently displayed. Facsimiles are faxes. The Do Not Fax laws more closely mirror Do Not Call laws than CAN-SPAM. Direct mailers are sent via USPS and there is little restriction on what is "snail mailed."

6 Which of the following is TRUE about condominium ownership? Review Later An owner owns the entirety of their unit as tenants in common with other condo owners. The condo association is responsible for paying the real estate taxes on the individual units. An owner may purchase a garage or storage area. If the condo owner fails to pay his/her mortgage, the lender will foreclose against the entire complex.

-An owner may purchase a garage or storage area. Explanations (SELECT THIS TO SEE EXPLANATIONS) When purchasing a condo or townhouse, a complex may have limited to common elements. Covered parking, garage access or storage areas may be limited. The condo/townhouse may be deeded the right to the limited elements or may pay rent. Ownership of a condo blends severalty for the unit and tenants in common for the common areas. The townhouse/condo owner is responsible for the property taxes assessed to the unit. The lender may foreclose against the individual unit, not the entire complex as the loan is for the specific unit.

15 Which of the following environmental contaminants risk can be minimized by encapsulation? Review Later Radon Asbestos Leaking UST Polychlorinated Biphenyls

-Asbestos Explanations (SELECT THIS TO SEE EXPLANATIONS) Lead-based paint and asbestos risk can be minimized through encapsulation. To remove the risk, the owner would need to remove the lead or asbestos. Radon may be reduced by installing ventilation fans and exhaust pipes. Polychlorinated Biphenyls were widely used in electrical equipment as coolant.

57 What type of loan has a term that is shorter than the amortized period? Review Later Subordinated loan Negative amortization Reverse annuity mortgage Balloon payment mortgage Comments

-Balloon payment mortgage Explanations (SELECT THIS TO SEE EXPLANATIONS) Balloon loans have a large balance remaining at the end of the loan term. Negative amortization means that the mortgage balance increases each month as the payment is not sufficient to cover the monthly interest expense. Reverse mortgages are limited to people 62 and older. Subordinated loans are generally secondary financing.

17 Barb was working for an out of town seller when a great offer was presented. The buyer insisted that the seller respond to the offer within two hours. Unable to reach the seller but knowing that the full price offer would be appealing to the seller, Barb signed the offer for her seller. Which of the following is TRUE? Review Later Under a typical agency agreement, an agent has authority to sign contracts for her client The agent's apparent authority would make any power of attorney unnecessary An agent would never have the authority to sign a contract binding her seller Barb's authority, as a special agent, would not give her the authority needed to sign a binding contract

-Barb's authority, as a special agent, would not give her the authority needed to sign a binding contract Explanations (SELECT THIS TO SEE EXPLANATIONS) Real estate agents most often work with buyers and sellers as special agents, which does not give the agent the authority to bind the client to contracts. On occasion, agents are given a power of attorney to sign for their clients, but this is rare. Apparent authority would appear to give an agent power to sign for the client, but the agent would still need a power of attorney to legally sing on behalf of the client.

31 Which of the following methods of solicitation would be permissible without further action for Bill who is trying to build his listing business? Review Later Bill calls a neighbor who attended one of his open houses two weeks prior and filled out an information card Bill calls a previous client of his who purchased in the neighborhood three years before to ask if they would be interested in selling. Bill sends a blast email to every owner in a particular neighborhood with the only content being his contact information and the fact that he is looking to sell in their area Bill purchases a list of mobile numbers and sends texts to all residents of the neighborhood offering his services.

-Bill calls a neighbor who attended one of his open houses two weeks prior and filled out an information card Explanations (SELECT THIS TO SEE EXPLANATIONS) Because Bill is soliciting a listing, he must follow the rules of the Do Not Call Registry as well as the CAN SPAM act. The DNC registry requires that he verify any numbers he uses unless: They are a for sale by owner and Bill is calling because he has a buyer, they have given permission to call (good for 90 days), or they were a previous client (good for 18 months).Of these, only the seller who attended an open house and filled out a card qualifies. Bills text would also fall under the same DNC rules. His email is an issue because he did not include any way for consumers to unsubscribe or opt out.

7 Which of the following would typically be used to finance school construction? Review Later Excise Tax Special Assessment Writ of Execution Bonds Paid by Taxes

-Bonds Paid by Taxes Explanations (SELECT THIS TO SEE EXPLANATIONS) School construction is typically funded by the issuance of municipal bonds. The tax rate will be adjusted to cover the cost of paying the bond back. Special assessments may be public or private. Public assessments are commonly for roads, sidewalks, water, sewer or street-lights. Private assessments are usually charged for siding, roofs or amenities are often associated with condo or townhouse ownership. A writ of execution is issued by the courts instructing a sheriff to sell an asset to recover money to pay a judgment. Excise taxes are paid when a property is sold.

16 An agent is listing a house built in 1965. According to the Lead Based Paint Hazard Reduction Act, the seller would be required by federal law to do which of the following Review Later Encapsulate any area of known lead-based paint Provide the appropriate RESPA brochure Complete the lead-based paint addendum Remediation of known lead-based paint

-Complete the lead-based paint addendum Explanations (SELECT THIS TO SEE EXPLANATIONS) The seller is only required to do three things: complete the LBP Addendum, provide the EPA pamphlet "Protect your family from lead in the home," and give buyer a 10-day risk assessment period. Remediation is a remedy for lead-based paint but it is not required by law. Encapsulation will typically be used with asbestos. RESPA stands for real estate settlement and procedures act which involves rules about closing procedures

16 An underground storage tank removal company discovered a buried fuel tank already cracked and leaked due to lack of maintenance for at least the past 20 years. The current owner purchased the home last week. Even though the current owner did not cause the problem, he is still probably liable according to which law? Review Later Underground Storage Tank Compliance Act of 2005 Clean Water Act of 1972 Comprehensive Environmental Response, Compensation, and Liability Act of 1980 Sediment Pollution Control Act of 1973

-Comprehensive Environmental Response, Compensation, and Liability Act of 1980 Explanations (SELECT THIS TO SEE EXPLANATIONS) CERCLA, also known as the Superfund, is a federal law governing the investigation and clean-up of hazardous contamination sites. Under CERCLA, the current owner is most likely the liable party even if the current owner is not responsible for the contamination. The UST Compliance Act is a subsection of the Energy Policy Act of 2005. These laws focus on operator training, inspections, secondary containment and more. The Clean Water Act is a federal law preventing pollutants in surface waters such as rivers. The Sediment Pollution Act is NC legislation controlling sediment runoff while still permitting growth and development in an area.

9 Which of the following would be considered a voluntary transfer of title, during life? Review Later Consummation of sale Escheat Adverse Possession Eminent Domain

-Consummation of sale Explanations (SELECT THIS TO SEE EXPLANATIONS) Consummation of sale is voluntary, and one has to be alive to sale the property. Eminent domain is a government taking of land for public use. Adverse possession is taking land through long-term adverse use. Escheats occurs after someone dies if he/she does not have an heir.

21 Thomas is a buyer who visits a property listed by Samantha of Fresh Perspectives Realty. Thomas informs Samantha that he is not working with any real estate licensee in helping him purchase a property. What is the relationship currently between Samantha and Thomas? Review Later Dual Agency Client Customer Principle

-Customer Explanations (SELECT THIS TO SEE EXPLANATIONS) Since the listing agent has an agency relationship with the seller, the seller would be considered the client/principal of the listing agent. The listing agent does not have any sort of agency agreement with this buyer, making the buyer a customer. This is not an example of dual agency because Samantha has not offered the representation of her or her firm to Thomas and he remains unrepresented.

73 A property is under contract for $250,000. The closing is scheduled for October 27th and taxes have been paid for the year by the seller. What is the entry on the settlement statement if the assessed value is 90% of the sales price and the municipality charges 11 mills? Review Later Debit Seller $433.13 / Credit Buyer $433.13 Debit Buyer $433.13 / Credit Seller $433.13 Debit Seller $2,041.87 / Credit Buyer $2,041.87 Debit Seller $2,041.87 / Debit Buyer $433.13

-Debit Buyer $433.13 / Credit Seller $433.13 Explanations (SELECT THIS TO SEE EXPLANATIONS) Assessed Value: $250,000 X 90% = $225,000. Tax for year: $225,000 / 1000 X 11 = $2,475. Daily Tax Rate: $2,475 / 360 = $6.875. Buyer Days: (O) 3 + (ND) 60 = 63 days. Buyer Charge: $6.875 X 63 = $433.13. Since taxes have been paid for the year the buyer needs to reimburse the seller - so the entry is debit buyer / credit seller same dollar amount.

75 A seller is scheduled to close on the sale of his property on February 3rd. The HOA billed $900 for the year on January 1st. The attorney will collect money at the closing and pay the bill for the year. What entry would be made on the settlement statement? Review Later Debit Seller / Credit Buyer $82.50 Debit Buyer / Credit Seller $82.50 Debit Seller $817.50 / Debit Buyer $82.50 Debit Buyer $817.50 / Debit Seller $82.50

-Debit Buyer $817.50 / Debit Seller $82.50 Explanations (SELECT THIS TO SEE EXPLANATIONS) Daily Rate: $900 / 360 = $2.50. Seller Days: (J) 30 + F (3) = 33. Seller Charge: $2.50 X 33 = $82.50. Buyer Charge: $900 - $82.50 = $817.50. Since the attorney is paying the full bill, they will charge each party the amount based on the number of days the seller and buyer owned the property.

77 A duplex rents for $1,800 per unit. The tenants paid rent prior to the 3rd of the month. Closing is scheduled for June 25th. What entry would be made on the closing disclosure? Review Later Debit Seller / Credit Buyer $3,000 Debit Seller / Credit Buyer $600 Debit Seller / Credit Buyer $1,500 Debit Seller / Credit Buyer $300

-Debit Seller / Credit Buyer $600 Explanations (SELECT THIS TO SEE EXPLANATIONS) A duplex has 2 units - total monthly rent $1,800 X 2 = $3,600. Daily Rent: $3,600 / 30 = $120.Buyer Days: 30 - 25 = 5. Proration: $120 X 5 = $600 debit seller / credit buyer as the seller was paid for the entire month.

80 A property is under contract for $360,000 with an assessed value of $300,000. The closing is scheduled for May 28th and taxes have been paid for the year by the seller. What is the entry on the closing disclosure if the tax rate is 10 mills? Review Later Debit seller and credit buyer $3,600 Debit buyer and credit seller $3,000 Debit seller and credit buyer $1,233 Debit buyer and credit seller $1,767

-Debit buyer and credit seller $1,767 Explanations (SELECT THIS TO SEE EXPLANATIONS) Since taxes have been paid for the year by the seller, the entry is debit the buyer and credit the seller the same dollar amount. The buyer needs to reimburse the seller for the number of days that the buyer owns the property. Property taxes are charged based on the assessed value. The mills rate represents the taxes amount per thousand. Tax for year: $300,000 / 1,000 X 10 = $3,000. Daily Rate: $3,000 / 360 = $8.3333. Buyer Days: M (2) + JJASOND (210) = 212. Entry: $8.3333 X 212 = $1,766.66 or $1,767.

11 Which of the following is required to transfer the title and ownership of real property? Review Later Signing of a purchase contract Consideration Delivery of the deed from the grantor to the grantee Recordation of a deed

-Delivery of the deed from the grantor to the grantee Explanations (SELECT THIS TO SEE EXPLANATIONS) IGPWED - I Get Paid With Every Deal. The deed must be In writing, Grantor must be competent, adequate Property description, Words of conveyance, Execution (signing) and Delivery and acceptance.

68 A residential property manager is tasked with all of the following EXCEPT: Review Later Maintenance of the property to protect its function and value Setting rental rates in accordance with local comparable properties that have been rented Determining the best possible path of investment for the before-tax cash flow generated by the property Processing legal actions including evictions on behalf of the property owner

-Determining the best possible path of investment for the before-tax cash flow generated by the property Explanations (SELECT THIS TO SEE EXPLANATIONS) A property manager does not have the authority to reinvest the profits. The primary objective of the property manager is to achieve the highest rate of return while complying with the law.

56 Which of the following entitles operate in the secondary mortgage market? Review Later local banks and lenders mortgage brokers Insurance companies FNMA

-FNMA Explanations (SELECT THIS TO SEE EXPLANATIONS) Fannie Mae, Freddie Mac, Ginnie Mae and Wall Street purchase mortgages on the secondary mortgage market. The remaining are primary mortgage lenders.

70 Certain housing communities and developments are exempt from the familial status requirement under the: Review Later Fair Housing Act of 1968 Fair Housing Act Amendments of 1988 Housing for Older Persons Act Civil Rights Act of 1866

-Fair Housing Act Amendments of 1988 Explanations (SELECT THIS TO SEE EXPLANATIONS) Don't know why you need to know when they added the status...but you do...so study it!! The test should just ask can you as a broker discriminate, and that answer would be NO!! Federal Fair Housing laws have an exemption to familial status when 80% or more of the units have at lease one person 55 years or older. NOTE: The Civil Rights Act of 1866 does not permit discrimination based upon race in housing, commercial real estate and personal property sales/leasing. The buyer can discriminate in his/her heart.

72 It is a violation of fair housing laws for a buyer's agent to influence which property a buyer client does or does not view based on one of the protected classes. Doing so means the agent is guilty of: Review Later panic peddling. redlining. steering. blockbusting.

25 A broker working as a seller's agent would owe which of the following to a buyer? Review Later Obedience Full Disclosure Fairness Loyalty Comments

-Fairness Explanations (SELECT THIS TO SEE EXPLANATIONS) A seller's agent would not owe much to a buyer but would be required to act fairly in all transactions. Loyalty, obedience, and disclosure are all duties to an agent's client

50 In qualifying a borrower for a home loan, what type of income does the lender utilize? Review Later Gross annual income Net annual income Net monthly income Gross monthly income

-Gross monthly income Explanations (SELECT THIS TO SEE EXPLANATIONS) Lenders look at gross monthly income and prefer that income is stable. The lender does not look at net income as the percentages are based on gross income. NOTE: The Equal Credit Opportunity Act does not permit discrimination about age, the source of income (unless illegally obtained), or marital status.

22 According to the Common Law of agency, a seller owes which of the following to a buyer? Review Later Caveat Venditor Disclosure of material fact Honesty Confidentiality

-Honesty Explanations (SELECT THIS TO SEE EXPLANATIONS) Sellers, in general, owe honesty to consumers. Sellers are prohibited from acting fraudulently by hiding information or behaving in a deceitful manner. Sellers can choose to share information or refrain. Some states, such as NC, are caveat emptor states meaning "buyer beware." Here, buyers cannot expect the seller to divulge all known information and instead must perform their own inspections. Sellers do not owe disclosure of material fact in these caveat emptor states. Confidentiality is owed by agents to their clients. Caveat venditor means let the seller beware.

30 A listing agent would be entitled to compensation in which of the following cases? Review Later If a buyer contracts on the property but the buyer is ultimately unable to close At the expiration of the listing agreement, the listing agent would be entitled to reimbursement of marketing fees If the seller contracts with a buyer during the listing agreement but later the seller is unable to close Procurement of a ready and willing buyer

-If the seller contracts with a buyer during the listing agreement but later the seller is unable to close Explanations (SELECT THIS TO SEE EXPLANATIONS) Note that the question has to do with an agents entitlement to compensation. When a seller is brought to contract, the agent has "earned" the compensation, even if the seller later backs out of the contract. Procurement of a ready and willing buyer is good, useless the buyer is unable to close the purchase. Generally, unless an agreement states otherwise, the licensee is not reimbursed for marketing expenses. When a buyer is not able to close, the licensee has not procured a ready, willing, and able buyer and therefore forfeits compensation.

15 When a property has been designated as a CERCLA environmental hazard site, full disclosure to all prospective buyers must occur for what period? Review Later Indefinitely For a period of twenty years from the date of contamination Until the site has been remediated Only while the site is actively contaminated

-Indefinitely Explanations (SELECT THIS TO SEE EXPLANATIONS) A broker must disclose that the site was contaminated in the past so that a buyer can perform additional testing. This is a material fact.

52 All of the following are exempt from RESPA, EXCEPT: Review Later Cash transactions Office buildings Investment properties Vacant 30-acre lot

-Investment properties Explanations (SELECT THIS TO SEE EXPLANATIONS) RESPA applies to residential transactions, including the purchase of 1-4 family homes where financing is obtained. RESPA does not apply to commercial transactions or land 25 acres or greater.

3 Ben and Jerry own a property as tenants in common. Jerry dies suddenly, and his will provides that any interests in real property will be passed to his two children. Which of the following is a CORRECT statement of ownership of the property following Jerry's death? Review Later Jerry's two children each own 50% of the property Jerry's children will co-own 50% of the property as tenants in common with Ben who owns 50% of the property Ben will co-own the property with Jerry's children as joint tenants Ben has a 100% ownership interest in the property

-Jerry's children will co-own 50% of the property as tenants in common with Ben who owns 50% of the property Explanations (SELECT THIS TO SEE EXPLANATIONS) Tenants in common hold ownership interests that are passed to their heirs at the time of their death. Joint tenancy and tenancy by the entirety have the right of survivorship, where title will automatically pass to the other co-owner regardless of the will.

5 An unmarried couple would like to purchase a property together. If either die, it is the desire that the remaining partner own 100% of the property. What would be the most likely recommendation by an attorney? Review Later Joint Tenancy Tenancy by the Entirety Tenancy in severalty Tenancy in common

-Joint Tenancy Explanations (SELECT THIS TO SEE EXPLANATIONS) Joint tenancy allows for survivorship outside of the marital entity. Tenancy by the entirety is for married couples only. Tenancy in common does not include survivorship and severalty ownership is one name on the deed.

4 Which of the following would NOT be an encumbrance against a property? Review Later License Encroachment Easement Lien

-License Explanations (SELECT THIS TO SEE EXPLANATIONS) A license can be revoked; therefore is not an encumbrance to real property. Liens, easements and encroachments are all encumbrances. An easement allows an individual/entity to use the property of another. An encroachment occurs when a person uses property beyond his/her property lines. Encroachments are discovered with a current and accurate survey. Liens may be specific against one property, or general against all property owned.

10 A seller of a parcel of land is conveying his freehold interest in the property to a buyer and wishes to warranty there are no defects whatsoever in the quality of the title as it relates to the time from the day the seller purchased the property until it is sold. Which deed would most likely be used in this instance to accomplish the goals of the seller? Review Later General Warranty Deed Quitclaim Deed Trustee's Deed Limited Warranty Deed

-Limited Warranty Deed Explanations (SELECT THIS TO SEE EXPLANATIONS) Limited (Special) Warranty deeds convey title with a warranty from the grantor that there are no title issues that have arisen during their time of ownership. General Warranty deeds convey title with a warranty from the grantor that there are no title issues dating back to the beginning of time and continuing forward into the future. Quitclaim deeds have no warranty at all however do adequately convey title. Trustee's deeds are used in foreclosure sales in states that practice the Power of Sale foreclosures.

37 Which of the following statements regarding contractual remedies is TRUE? Review Later Compensatory damages are generally awarded as a result of foreseeable losses to a party Liquidated damages would limit the exposure of a buyer in a sales contract to the amount that is predetermined Specific performance involves a lawsuit seeking all three types of damages at once. Consequential damages are intended to make a party whole for their actual losses

-Liquidated damages would limit the exposure of a buyer in a sales contract to the amount that is predetermined Explanations (SELECT THIS TO SEE EXPLANATIONS) Damages happen when there is a breach of contract. Compensatory damages are awarded to repay actual losses suffered (think showing receipts). Consequential damages are those awarded as a result of actions (think pain and suffering). Liquidated damages are those that are decided in advance by the buyer and seller to prevent the first two types of damages from being an issue. A suit for specific performance is one in which the buyer issuing the seller to force the completion of the sale of the property.

31 The Sherman Antitrust Act prohibits which of the following? Review Later Redlining A firm from restricting the practice areas of their agents Blockbusting Market Allocation

-Market Allocation Explanations (SELECT THIS TO SEE EXPLANATIONS) Antitrust laws prohibit price-fixing and boycotting. There are no usual, standard, customary or comparable amounts of compensation. Redlining occurs when a lender refuses to make loans in an area based upon a protected class. Blockbusting or panic peddling are used to induce the sale of property based based on a protected class. A firm/responsible broker can restrict the areas in which affiliated brokers/agents can practice.

45 Which of the following is required to create a binding contract? Review Later Signatures of the parties Mutual agreement Monetary consideration A written document

-Mutual agreement Explanations (SELECT THIS TO SEE EXPLANATIONS) The question is not limited to real estate. Mutual agreement is sufficient to create a legally binding contract. Money does not need to change hands. NOTE: For real estate contracts, the Statute of Frauds requires most contracts to be in writing.

23 A client has requested that their agent sign a contract addendum on their behalf. Which of the following statements is CORRECT? Review Later The agent may only sign on behalf of the client if the client gave them express permission Special agents can sign on behalf of clients No one may legally sign documents for another person without a valid power of attorney It is never permissible for an agent to sign on behalf of a client

-No one may legally sign documents for another person without a valid power of attorney Explanations (SELECT THIS TO SEE EXPLANATIONS) An agent typically acts as a special agent, which means that the agent has no signing authority whatsoever. A special agent has not decision making authority. A client would need to sign a power of attorney (or limited power of attorney) for the purpose of signing on the client's behalf.

59 A broker informs a buyer that only a qualifying veteran can assume a mortgage. Is the broker CORRECT? Review Later No. A qualifying veteran or non-veteran can assume a mortgage. No. A veteran or qualifying widow is permitted to assume a mortgage. Yes. Only a veteran with a certificate of eligibility can assume a loan. Yes. Only a veteran with a certificate of reasonable value can assume a loan.

-No. A qualifying veteran or non-veteran can assume a mortgage. Explanations (SELECT THIS TO SEE EXPLANATIONS) Only a qualifying veteran or widow/widower is allowed to originate a VA loan. Any qualifying buyer can assume a VA loan (veteran or non-veteran). The VA appraisal is known as the Certificate of Reasonable Value. To qualify for a mortgage, a veteran must have a certificate of eligibility.

44 A buyer is demanding the return of her earnest money deposit after the lender denied her loan. The denial was received after the expiration of the loan contingency period. The buyer stated that the contract was not valid since it was not recorded. Is the buyer CORRECT? Review Later Yes. The earnest money is refundable when a buyer cannot obtain a loan. No. An offer to purchase and contract cannot contain a financing contingency. No. An offer to purchase and contract does not need to be recorded to be enforceable. Yes. An offer to purchase and contract must be recorded to be valid.

-No. An offer to purchase and contract does not need to be recorded to be enforceable. Explanations (SELECT THIS TO SEE EXPLANATIONS) An offer to purchase and contract is not required to be recorded in order to be valid. A deed must be recorded to be enforceable against 3rd parties. Be careful as the exam will mix important topics to confuse you. An offer to purchase and contract may contain a financing contingency. In order to be entitled to a refund of the EMD you must terminate by the deadline. After the deadline has passed the buyer loses the EMD. 45

24 An agent, working with a buyer customer, learns that the seller is desperate to sell. He passes this information to the buyer who proceeds to make a low offer and ultimately contracts on the home. Was the agent's conduct proper? Review Later No. Any information that is not deemed material should never be disclosed by agents on either side of the transaction. Yes. Since he was working for the buyer, the buyer deserved to know any information that would help his negotiating position Yes. Facts regarding the seller's distress in selling the property become material facts as they affect the seller's ability to deliver title. No. The agent was working for the seller and should not disclose the seller's confidential information without permission Comments

-No. The agent was working for the seller and should not disclose the seller's confidential information without permission Explanations (SELECT THIS TO SEE EXPLANATIONS) Note that the buyer is a customer in this case, which means that the seller is the client. Therefore, the agent should not disclose the seller's confidential information. Seller distress is not material unless it affects the seller's ability to convey clear title. Non-material information can be disclosed under the appropriate circumstances such as when an agent is acting in his/her fiduciary capacity. A licensee working "with" a buyer means the buyer is a 3rd party customer. A licensee working "for" a buyer means the buyer is a principal/client.

43 A landlord enters into an oral lease agreement for 5 years with a commercial tenant. Two years later, the landlord sells the property to a new owner without transferring the lease. The new owner was not aware of the tenant and demanded that the tenant leave. Has the new owner violated the law? Review Later Yes. The new owner is bound to honor the lease for the remain 3 years. No. The lease is not binding under the Statute of Frauds. No. The lease was not properly assigned to the new owner. Yes. The lease represents a legally binding contract under the Connor Act.

-No. The lease is not binding under the Statute of Frauds. Explanations (SELECT THIS TO SEE EXPLANATIONS) The Statute of Frauds requires lease agreements to be in writing (in some states when they exceed 1 year / in NC when the lease is greater than 3 years). The Connor Act requires the lease to be recorded to be binding against 3rd parties. This lease is oral which violates the Statute of Frauds and has not been recorded so, therefore, is not binding on 3rd parties under the Connor Act.

19 Buyer Carlos has been working with Blue Horizons Real Estate while viewing a listing of theirs. Carlos has not signed any written buyer agency agreement, nor has he engaged an oral conversation regarding representation. Which of the following would NOT be a duty which is owed to Carlos by Blue Horizons? Review Later Disclosure of relevant material facts Fair Dealing Obedience Honesty

-Obedience Explanations (SELECT THIS TO SEE EXPLANATIONS) Since Carlos has no agency agreement with Blue Horizons, he is the customer of the firm, not the client/principle. Customers are owed honesty, fair dealing, and disclosure of material fact. Only clients are owed obedience.

60 Under TRID the Closing Disclosure must be provided 3 days before settlement by the lender to whom? Review Later The borrower and the seller All parties to the transaction The parties and the agents Only the borrower

-Only the borrower Explanations (SELECT THIS TO SEE EXPLANATIONS) The borrower needs to see their figures at least 3 banking days in advance. The seller could wait until the day of closing.

33 Under which of the following listing agreements would an agent be entitled to compensation only if she procures the buyer? Review Later Open Listing Exclusive Agency Agreement Exclusive Right to Sell Listing Agreement Protection Agreement

-Open Listing Explanations (SELECT THIS TO SEE EXPLANATIONS) Open listing agreements state that an agent can list the property but will only be compensated if he/she procures the buyer. In an exclusive listing agreement, the agent will get paid if any agent brings a buyer but will not be compensated if the seller procures the buyer. In an exclusive right to sell, the agent will get paid regardless of where the buyer comes from. Protection Agreements are not listing contracts

34 A seller is having second thoughts about selling her house after having signed a binding contract. If she chooses to terminate the contract, what is a remedy that a buyer might pursue? Review Later Adverse Possession Prescription Eminent Domain Specific Performance

72 A Property Manager runs an ad that states, "Apartment available, handicap accessible. Only apply if you have a 640 or better credit score. No college students please. Professional couples preferred." Which of the phrases used in the ad could be considered discriminatory? Review Later Handicap accessible Professional couple No college students 640 or better credit score Comments

-Professional couple Explanations (SELECT THIS TO SEE EXPLANATIONS) Professional couples preferred could discriminate against families with children. Handicapped accessible I would be considered a benefit to a class. Credit scores are legitimate restrictions if used neutrally. College students are not a protected class so there would no discrimination for limiting that group.

27 Which of the following functions would be expected of a buyer's agent? Review Later Provide a competent CMA to advise buyer of the appropriate price range for a property Draft addenda to reflect unusual transaction conditions Ensure for the buyer that all of the systems of the house are functioning as designed Advise regarding effect of 1031 on the purchase of the buyer's investment property

-Provide a competent CMA to advise buyer of the appropriate price range for a property Explanations (SELECT THIS TO SEE EXPLANATIONS) A competent CMA would be expected as a duty of an agent. Drafting a contractual provision is the work of an attorney. Competent tax advise should be left to an accountant. Ensuring working appliance should be left to inspectors and service professionals.

53 Which of the following lending laws was designed to let consumers known about the true cost of lending as seen in advertising? Review Later Real Estate Settlement Procedures Act Truth in Lending and Real Estate Settlement Procedures Integrated Disclosure Act Equal Credit Opportunity Act Regulation Z

-Regulation Z Explanations (SELECT THIS TO SEE EXPLANATIONS) Regulation Z was designed to let borrowers know the true cost of lending in advertisements. TRID consolidated the disclosure forms used in TILA and RESPA as well as established timelines for when certain disclosures must be made to borrowers. RESPA was designed to disclose certain information and also to prevent unlawful practices between settlement providers, or vendors. The ECOA is to protect certain classes when they seek new loans from discrimination.

14 Which of the following is TRUE regarding lead laws when selling residential real property built before 1978? Review Later Sellers must disclose all lead-based paint hazards within 10 days of contract acceptance. Sellers have no particular obligation for homes built prior to 1978. Sellers must provide a mandatory disclosure form to buyers informing them of the possibility of lead-based paint hazards in the property. Sellers must diagnose any lead-based paint hazards so they can be disclosed to buyers before the transaction.

-Sellers must provide a mandatory disclosure form to buyers informing them of the possibility of lead-based paint hazards in the property. Explanations (SELECT THIS TO SEE EXPLANATIONS) Residential property built prior to 1978 may have lead-based paint hazards and sellers are required to provide a mandatory disclosure form stating such. Sellers are NOT obligated to find out if their property has lead-based paint....just notify the buyer of the possibility and allow the buyer to test if they like. The buyer is allowed 10-days to test for lead. The seller is not required to pay for remediation.

55 The process of pledging real property as collateral for a loan results in which of the following? Review Later Specific lien General lien Equity Cash Flow

-Specific lien Explanations (SELECT THIS TO SEE EXPLANATIONS) Mortgages are an example of a specific lien against the property. General liens are against all assets (cash, investments, cars, property). Equity is the difference between the fair market value of the home, and the amount owed.

69 An agent regularly takes clients of a certain nationality to certain areas of the city. She believes that these buyers would want to be around others "like themselves." This would be an example of? Review Later A proper, fiduciary practice Steering Redlining Blockbusting

-Steering Explanations (SELECT THIS TO SEE EXPLANATIONS) Steering is channeling or funneling people into certain areas based on their race or ethnicity. Blockbusting is also known as panic selling. Redlining is a lender not making its best loans in an area represented by a protected class. The agent has not acted appropriately in this case (even if the action had been at the request of the client).

1 The clause in an insurance policy that gives the insurance company the right to act in a lawsuit on behalf of the insured is the? Review Later Habendum Hypothecation Subrogation Co-insurance

-Subrogation Explanations (SELECT THIS TO SEE EXPLANATIONS) The answer is the Subrogation cause. The co-insurance clause states that if a party is uninsured, that party will share in the cost of a claim with the insurer to the extent of which they were underinsured. Hypothecation is a term associated with finance. A habendum clause refers to the ability to transfer title without restrictions.

22 Which of the following would have to be disclosed to a buyer by the seller's agent? Review Later That there was a convicted sex offender three doors away from the listing That the 1960s era home used aluminum wiring That the schools in the area were low performing That the sale of the property would be a short sale at the current price

-That the sale of the property would be a short sale at the current price Explanations (SELECT THIS TO SEE EXPLANATIONS) Short Sales always require disclosure if the agents are aware. Psychological stigmas are not typically material facts. Schools performance is something that the buyer should research before buying the property if it is important to him/her

47 Zelda is a real estate licensee who is working as an exclusive buyer's agent in a transaction. She has presented an offer to listing agent Barney who has forwarded the offer via email to his seller client. Barney and Zelda are members of the same multiple listing service but affiliated with two different firms within the MLS. The seller signs the offer without making any changes and drops it in the mail to Zelda's office. The next day the seller emails the signed agreement to Barney, who immediately forwards to Zelda. The mailed version of the agreement shows up two days later. Which of the following is accurate? Review Later The agreement became a binding contract the moment Barney emailed the signed agreement to Zelda The agreement became a binding contract when the seller emailed Barney. The agreement became a binding contract the moment the seller placed the signed version in the mail to Zelda The agreement is not binding because acceptance was sent in multiple forms and is thus vague.

-The agreement became a binding contract the moment the seller placed the signed version in the mail to Zelda Explanations (SELECT THIS TO SEE EXPLANATIONS) Contracts become binding at the moment of "communication of acceptance". In this case, the first moment when the acceptance was communicated from the seller's side to the buyer's side was when the agreement was mailed, not when it was received. This is called the mailbox rule. Yes, Barney emailing the signed agreement to Zelda would make this be a binding agreement, but it already was...from the moment it was mailed.

61 In determining the valuation of an apartment complex, an appraiser would most likely need to know which of the following factors about the property? Review Later The annual net operating income of the subject apartment complex Vacancy rates for surrounding properties Monthly rent not collected from vacant units in the complex The monthly debt service payments being made by the property owner

-The annual net operating income of the subject apartment complex Explanations (SELECT THIS TO SEE EXPLANATIONS) Net Operating Income would be considered more important than vacancy rates. Net Operating Income would have already taken Vacancy & Collection losses into account. The formula an appraiser would use to calculate the value = NOI / Cap Rate. NOTE: The owner's debt service payments are not used to calculate what a property should rent or sell for.

29 A buyer is unhappy with the service that he is receiving from his agent, but he has three months remaining in his Exclusive Buyer Agency Agreement. Which of the following is most accurate? Review Later The buyer could fire the agent prior to the termination of the agreement, without penalty, if the agent has breached his/her fiduciary duty If the buyer works with another agent, the first agent must waive his right to compensation Agents must release buyers from agency agreement if a buyer requests that the agency agreement be terminated If the buyer is unhappy with his agent, he can fire the agent at any time without penalty Comments

-The buyer could fire the agent prior to the termination of the agreement, without penalty, if the agent has breached his/her fiduciary duty Explanations (SELECT THIS TO SEE EXPLANATIONS) The buyer, in this case, would only be able to fire the agent "without penalty" if the agent has breached the agency agreement. Having said that, the buyer can terminate the agreement at any time, but the agent still may have the right to compensation if the agent has acted diligently. The buyer may enter into an agreement with another agent but that would not automatically terminate the first agent's right to be compensated if the buyer purchases a property within the first agent's exclusive period. Agents are not required to release buyers from the agency agreement (but may choose to if the relationship sours).

23 An exclusive buyers agent is working on a commercial real estate transaction in which she represents a buyer who wishes her to negotiate the purchase of land to be used as a convenience store. The land is currently used as farmland and was recently rezoned to make the use as commercial property possible. Which of the following is INCORRECT of the buyer's agent in the transaction? Review Later The buyer's agent should not inform the seller that the buyer intends to make changes to the lot to maximize the value. The buyer's agent should not inform the seller or any listing agent of the rezoning because sellers should be aware of changes on their property. The buyer's agent must accurately disclose all material facts according to the same rules a listing agent would follow in the transaction. The buyer's agent must inform the seller and any listing agents if the buyer learns that the loan is denied.

-The buyer's agent should not inform the seller or any listing agent of the rezoning because sellers should be aware of changes on their property. Explanations (SELECT THIS TO SEE EXPLANATIONS) All licensees must disclose known material facts such as this one to all parties of a transaction. Thus, the buyer's agent must disclose the zoning change. The buyer's agent should not, however, go further in explaining to the seller (who they do NOT represent) that the property is more valuable because of the zoning change. An inability to perform is a material fact that must be disclosed.

40 Rebecca is a buyer who has made an offer to purchase 587 Ridge Rd through her buyer's agent Sarah. Sarah conveys the offer to listing agent Maurice, who forwards the offer to his seller electronically. The seller makes a minor change to the proposed closing date, and signs the offer. Maurice returns the document to Sarah, who presents it to buyer Rebecca. Rebecca initials and dates the closing date change and Sarah immediately scans and emails the document back to Maurice. By this point the seller is on vacation and cannot be reached until three days later. At what point, is a binding legal agreement formed? Review Later The agreement is not binding until the seller returns from vacation and is informed of the buyer's acceptance of the closing date change. The contract becomes binding when the seller returns from vacation. The contract becomes binding when Sarah returns it to Maurice after the buyer's initialing of the closing date change. The contract becomes binding when Rebecca initials and dates the closing date change.

-The contract becomes binding when Sarah returns it to Maurice after the buyer's initialing of the closing date change. Explanations (SELECT THIS TO SEE EXPLANATIONS) The test for a legally binding contract is (1) offer, unconditional acceptance, and communication back to the offering party (client or agent) and (2) in writing and signed by the parties. The fact that someone did not listen to a delivered voicemail or read a delivered email does not matter.

79 A married couple earns $150,000 per year. They are interested in a home with a mortgage payment of $3,000 per month and annual taxes and insurance of $7,200. In addition, the couple have monthly long-term debts of $900. Will the buyer qualify under 28% housing and 36% total debt ratios? Review Later The couple qualifies under housing expenses. The couple qualifies under total debt. The couple qualifies for both housing and total debt ratios. The couple qualifies for neither housing nor total debt.

-The couple qualifies under total debt. Explanations (SELECT THIS TO SEE EXPLANATIONS) First convert annual income to monthly amounts. Principal, interest, taxes and insurance are included in housing debt. Total debt includes housing expenses plus recurring obligations. Monthly Income: $150,000 / 12 = $12,500. Maximum Housing: $12,500 X 28% = $3,500. Maximum Debt: $12,500 X 36% = $4,500. Monthly taxes and insurance: $7,200 / 12 = $600. Actual PITI: $3,000 + $600 = $3,600. Actual Total Debt: $3,600 + 900 = $4,500. Buyer does not qualify under housing but does qualify under total debt.

20 An agent representing a buyer would be obligated to disclose which of the following to a seller? Review Later The fact that the buyer must sell his home in Georgia before he can purchase the seller's property The fact that the buyer will be using the property as a rental The fact that the buyer is in a relocation program and needs to close within 45 days the fact that the buyer has a criminal background

-The fact that the buyer must sell his home in Georgia before he can purchase the seller's property Explanations (SELECT THIS TO SEE EXPLANATIONS) Agents must disclose that a buyer has to sell a home in order to purchase another home. The ability of a buyer to complete the transaction is a material fact that a seller is entitled to know. All of the other answers are information that may be treated as confidential and not shared with the seller unless the buyer chooses to share it

11 Which of the following statements is TRUE about title insurance? Review Later The mortgagor policy must be renewed each year to retain coverage. The mortgagee policy premium is paid once at the time of closing. The policy covers all future title defects that arise against the property. The policy covers losses found by the closing attorney before closing.

-The mortgagee policy premium is paid once at the time of closing. Explanations (SELECT THIS TO SEE EXPLANATIONS) The mortgagee and mortgagor policy premium are only paid once at the time of closing. The mortgagee (lender) policy decreases as the mortgage balance decreases. The mortgagor (borrower) policy remains at the purchase price. The purpose of the title insurance policy is to cover defects that the attorney missed in the title examination. The insurance company will not cover a loss that is known about.

34 An offeror may revoke their offer in all of the following situations EXCEPT: Review Later The offeree has failed to respond to the offer The offer was transmitted electronically via email The offeree has communicated acceptance of the offer The offer was submitted with an automatic expiration of December 10th, but the offeror chooses to revoke it on December

-The offeree has communicated acceptance of the offer Explanations (SELECT THIS TO SEE EXPLANATIONS) Offers that have not been accepted can be rescinded when notice is provided back to the offeror. To form a legally binding real estate purchase contract there must (1) be an offer that is unconditionally accepted, and acceptance is communicated back to the offeror, and (2) the contract is in writing and signed by the parties (not the agent).

67 Uniform Landlord and Tenants Acts provide which of the following rights to tenants? Review Later The right to disposition of the property while the lease is in effect The right to have the property painted between tenants To have the rent reduced in exchange for taking the property "as is" The right to quiet enjoyment or to peacefully use the premises

-The right to quiet enjoyment or to peacefully use the premises Explanations (SELECT THIS TO SEE EXPLANATIONS) The tenant has a right or reasonable expectation of quiet enjoyment, i.e., the right to possess the premises, exclusively, during the tenancy. Tenants cannot be forced to take the property "as is" if there are deficiencies that affect the "safety and habitability" of the premises. Although tenants often believe that the property is required to be painted between tenants, this is not the case. Tenants possess the property during the tenancy but they do not have the right to sell the property or use it as collateral for a debt.

5 Which of the following best defines an easement? Review Later A hostile interest in taking ownership of someone's real property away from him/her. An intrusion, typically of a dwelling, onto the land of another A revocable privilege to cross another person's property The right to use the real property of someone else without seeking ownership.

-The right to use the real property of someone else without seeking ownership. Explanations (SELECT THIS TO SEE EXPLANATIONS) Easements are an example of a nonpossessory interest in someone else's land. The revocable privilege to use someone else's property is a license. Hostile and intentional taking of property is adverse possession and has time constraints associated. A physical intrusion on someone else's property is an encroachment. All except the license are examples of encumbrances. A license is not an encumbrance because it is revocable and does not "run with the land."

26 Which of the following statements is true regarding agency rules and rentals? Review Later Commercial tenant representatives do not require agency agreements A property manager has a fiduciary responsibility to the tenant The same agency obligations apply in rentals as well as sales Residential Tenant Representatives are under no obligation to insure compliance with Lead Based Paint laws

-The same agency obligations apply in rentals as well as sales Explanations (SELECT THIS TO SEE EXPLANATIONS) Agents owe the same duties and loyalties to their clients as sales agents do. Commercial tenant reps are required to follow the same agency laws as agents on the residential side. Property Manager owes loyalty to property owner, not the tenant

46 A buyer and seller enter into a contract. The seller had agreed, in the multiple listing service, to leave the John Deere lawn tractor with a full-price offer. The offer was, in fact, full price but the contract was silent about the lawn tractor. Which of the following is TRUE? Review Later The buyer would be entitled to the lawn tractor, however the seller would be entitled to be compensated separately for it Because the contract was silent on the lawn tractor, a court of competent jurisdiction would be needed to determine who gets the tractor The seller may keep the lawn tractor as it is considered personal property and would need to be identified in contract before seller would be obligated to convey it The buyer will get the lawn tractor because the MLS entry constitutes an offer to sell by suing for specific performance

-The seller may keep the lawn tractor as it is considered personal property and would need to be identified in contract before seller would be obligated to convey it Explanations (SELECT THIS TO SEE EXPLANATIONS) The seller cannot be compelled to convey the lawn tractor since it was not in the contract and is considered personal property. This is an example of the parol evidence rule that states that preliminary negotiations do not take precedence over the written contract. NOTE: This is an area that cause disputes among buyers, sellers and agents and therefore is highly testable.

8 Which of the following statements is FALSE regarding federal income taxation of real estate sales? Review Later An investor can exchange investment property and defer the gain when certain conditions are met. A couple can avoid paying taxes on $500,000 of gain from the sale of a primary residence. To calculate capital gains, subtract basis from the amount realized. In a 1031 Exchange, an investor will pay taxes on the boot received.

-To calculate capital gains, subtract basis from the amount realized. Explanations (SELECT THIS TO SEE EXPLANATIONS) To determine capital gains, the formula is: Amount Realized - Adjusted Basis. Basis is another term for purchase price. Adjusted basis adds capital improvements to the basis. When a property is used as a primary residence for 2 out of the last 5 years, a single person can avoid paying taxes on $250,000 of gain and a married couple can avoid paying taxes on $500,000 of the gain. A 1031 Exchange allows an investor to trade investment property for other investment property. The investor must identify replacement property within 45 days and close on the sale within 180 days from the sale of the traded property.

19 A licensee that is involved in a real estate transaction, but does not owe fiduciary duties to any party, is most likely practicing as: Review Later Transactional broker Single agent An independent broker Dual agent

-Transactional broker Explanations (SELECT THIS TO SEE EXPLANATIONS) Transaction brokers represent the transaction itself, not the buyer or seller in a property purchase. Exclusive agency may be referred to as single-agency, where the firm represents one party in the transaction. Dual agency arises when the firm represents both parties in a transaction (both buyer and seller, or both landlord and tenant).

18 A licensee who is acting as a dual agent should do which of the following? Review Later Should provide advice of equal value to each party Disclose both parties' financial and confidential information to the other party Treat both parties fair, equally and impartially Owes all of fiduciary duties to both parties

-Treat both parties fair, equally and impartially Explanations (SELECT THIS TO SEE EXPLANATIONS) Dual agents cannot advocate for one party over the other. They walk a fine line, making sure that the transaction progress but cannot disclose personal/confidential information they learn about the buyer to the seller or seller to the buyer.

60 The acronym TRID stands for which of the following? Review Later Truth in Lending, Regulation Z, integrated disclosure Truth in Lending, RESPA, integrated disclosure Treasury Reliable Independent Data Trustee Review of Independent Data

-Truth in Lending, RESPA, integrated disclosure Explanations (SELECT THIS TO SEE EXPLANATIONS) TRID stands for: Truth in lending, RESPA, Integrated Disclosure. Regulation Z is a part of the Truth in Lending Act that requires certain disclosure when trigger terms are used in advertising. Trigger terms include payment, down payment and interest rate. NOTE: Regulation Z does not prohibit advertising of loan related information. It requires disclosure when certain terms are used. APR is not a trigger, however if triggered must be disclosed.

65 In the cost approach, how does the appraiser determine the value of the land? Review Later Using comparable sales Using cap rates Using reproductive cost Using replacement cost

-Using comparable sales Explanations (SELECT THIS TO SEE EXPLANATIONS) Land is valued using the sales comparison approach. An appraiser would determine the cost to build new, less depreciation, plus land and improvements to calculate the value. Replacement cost reflects the cost to repair or rebuild using current building standards. Reproduction cost reflects the cost to repair or rebuild based on the methods used at the time the property was built.

66 In the cost approach, how does the appraiser determine the value of the land? Review Later Using comparable sales Using replacement cost Using reproductive cost Using cap rates

49 Which loan has the highest loan to value? Review Later USDA Conventional VA FHA

-VA Explanations (SELECT THIS TO SEE EXPLANATIONS) A higher LTV would mean that a buyer made little to no down payment. VA loans require as little as zero down, thus 100% LTV. NOTE: FHA has an LTV of 96.5%, with a down payment of 3.5%. Conventional loans often require a down payment of 20% to avoid PMI, therefore have an LTV of 80%

13 Ms. Jones would like to build a structure on her vacant lot. Because the lot has an odd shape, the front corner of the structure would fall into the setback. What strategy would she most likely employ to build the structure in this manner? Review Later Spot zoning Special exception Nonconforming use Variance

-Variance Explanations (SELECT THIS TO SEE EXPLANATIONS) A variance is a slight deviation from strict adherence to the zoning ordinance due to an unusual hardship (weird shaped lot). Spot zoning would entail an actual change of zoning to the property. Special exceptions are designed for public convenience (not a particular lot). Nonconforming uses are uses that are grandfathered when there is a zoning change.

28 A seller's agent typically earns commission at what point? Review Later When s/he procures a ready, willing, and able buyer at the terms of the contract At the time of deed recordation, according to the Good Funds Settlement Act When the closing occurs At the time of the signing of the exclusive listing agreement

-When s/he procures a ready, willing, and able buyer at the terms of the contract Explanations (SELECT THIS TO SEE EXPLANATIONS) A buyer is unhappy with the service that he is receiving from his agent, but he has three months remaining in his Exclusive Buyer Agency Agreement. Compensation is payable at the time of closing (cash and keys) once the deed has been recorded.

28 A seller signed an exclusive agency agreement with ABC Realty and while that listing was in effect signed an exclusive right to sell agreement with XYZ Realty. While the property was listed, the seller entered into a contract to sell the property to a close family member. Which of the following statements is CORRECT? Review Later The seller owes a full commission to both ABC Realty and XYZ Realty XYZ is entitled to a commission The seller owes no commissions because neither brokerage was the procuring cause of the buyer ABC Realty is entitled to a commission because that listing agreement was signed first

-XYZ is entitled to a commission Explanations (SELECT THIS TO SEE EXPLANATIONS) Under an Exclusive Right to Sell listing agreement no matter how the property is sold, optioned, exchanged, conveyed or transferred, the firm is entitled to compensation. With Exclusive Agency listings, the listing firm competes against the seller. The seller is not obligated to pay ABC as the brokerage was not the procuring cause.

40 A seller accepts a buyer's offer, which contains a promissory note for the earnest money deposit. The buyer has agreed to pay the earnest money 14-days before the scheduled closing date, time being of the essence. Will the contract automatically terminate if the buyer fails to pay the funds by the agreed-upon date? Review Later Yes. The contract automatically terminates upon the agreed-upon date when payment is not made. Yes. A seller retains the right to terminate the contract for any reason before the payment of earnest money. No. The buyer will have a reasonable amount of time to pay the promissory note before the seller can terminate the contract. No. The buyer has 7-days to make the pay the promissory note before the seller can terminate.

-Yes. The contract automatically terminates upon the agreed-upon date when payment is not made. Explanations (SELECT THIS TO SEE EXPLANATIONS) When a date is "time is of the essence" it is a drop-dead date. The required action must take place by that date or the contract will automatically terminate. It is considered a material breach of the contract.

64 The best comparable property when a broker is completing a CMA using the sale comparison approach is: Review Later the cost of building the property new less actual depreciation. a similar home recently listed in the same neighborhood. the calculation of net operating income and capitalization rate. a similar home recently sold in a nearby neighborhood.

-a similar home recently sold in a nearby neighborhood. Explanations (SELECT THIS TO SEE EXPLANATIONS) For a property to be considered a comparable it must be SOLD. Recently sold less than 12 months, with the sale on the open market and without distress. The cost approach to value uses the cost new, less depreciation, plus land and improvements. The income capitalization approach takes net operating income and the capitalization rate.

27 A buyer hires a licensee to act as an exclusive buyer's agent, which authorizes both dual and designated agency. The licensee shows a property that is listed with another firm, which is listed by the broker-in-charge. In this situation, the licensee will act as: Review Later a single agent. a dual agent. a designated agent. a seller subagent.

-a single agent. Explanations (SELECT THIS TO SEE EXPLANATIONS) When the firm represents only one party in the transaction, they act as exclusive or single agents. Dual agency arises when the firm represents both parties in the transaction, which must be expressly agreed to. Designated dual agency arises when the firm represents both parties in the transaction, where the broker-in-charge appoints one agent to act as represented of the seller and another broker to act as representative of the buyer (no BIC and PB and no P&C). Since the buyer has hired the licensee to represent them, the buyer's agent would not act as a seller's subagent. Subagency would arise if the buyer refused to hire the licensee to act as a buyer's agent.

70 Federal fair housing laws: Review Later require a property owner to have a handicap accessible office with 15 employees or more. prohibit discrimination on the sale or lease of real or personal property. require the rental of a home to a convicted drug dealer. allow an exemption from familial status when a required portion of units are rented to people 55 and older.

-allow an exemption from familial status when a required portion of units are rented to people 55 and older. Explanations (SELECT THIS TO SEE EXPLANATIONS) Federal Fair Housing does not permit discrimination on the basis of familial status. Familial status protects families with minor children and pregnant/expectant mothers. An exemption exists for senior only housing. The Americans with Disabilities Act sets requirements for places of public accommodation, such as businesses. The Civil Rights of 1866 outlaws discrimination based on race in real and personal property sales/leasing. NOTE: The Civil Rights Act outlaws discrimination by the seller. The buyer can discriminate in their heart.

25 A seller has listed his property with one broker however retains the right to find the buyer and avoid paying commission. This is an example of: Review Later a net listing. an exclusive listing. an exclusive right to sell listing. an open listing.

-an exclusive listing. Explanations (SELECT THIS TO SEE EXPLANATIONS) Exclusive listing agreements allow the owner to compete with the property owner, where the owner is required to pay compensation to the listing agent only when the listing agent finds the buyer. An open listing allows the owner to hire more than one broker, while still competing to find the buyer. An exclusive right to sell listing agreement requires the owner to pay commission to the listing brokerage no matter how the property is sold, optioned, exchanged, conveyed or transferred. A net listing obligates the seller to pay the brokerage the funds that the property sells for over and above an agreed-upon net to seller.

54 Which of the following amounts or percentages is NOT a trigger term for closed-end credit loans according to Regulation Z? Review Later finance charge down payment annual percentage rate monthly payment

-annual percentage rate Explanations (SELECT THIS TO SEE EXPLANATIONS) Regulation Z is a component of Truth in Lending requiring all lending advertisement fairly and accurate depict the terms for acquiring a loan. If specific trigger terms are used, then additional disclosures are required. The trigger terms are specific amounts or percentages of: down payment, monthly payment, interest rate, and payment period.

46 A buyer has agreed to assume a mortgage and pay the seller an addition $50,000 for a property. Once complete, the seller will be released from liability. This is known as: Review Later assignment of a mortgage with novation. assignment of a mortgage without novation. a purchase money mortgage with novation. a purchase money mortgage without novation.

-assignment of a mortgage with novation. Explanations (SELECT THIS TO SEE EXPLANATIONS) When a buyer assumes a mortgage with the release of liability it is known as an assignment with novation. Novation releases the seller from liability (nova=new...new party for an old party). A purchase money mortgage is seller financing. The seller is not providing financing in this instance.

48 If a borrower's monthly payments result in a partially amortized loan and an additional final payment must be made to pay off the balance at the end of the loan, this repayment structure typically indicates the borrower has which of the following types of loans? Review Later buy down balloon term graduated

-balloon Explanations (SELECT THIS TO SEE EXPLANATIONS) A buy down loan temporarily reduces the interest rate on the note. The rate adjusts to the full amount the lender desires, typically over a few years. Loan repayments characterized by interest only payments are called term loans. At the end of this loan the full principal balance must be paid. There is no amortization on this loan. By contrast, a partially amortized loan is where the monthly payments are applied to both principal and interest, however the monthly payment is insufficient to reduce the balance to zero by the last payment. A final balloon payment is needed. This repayment structure is common in commercial, and construction loans and the monthly payment generally stays the same.

39 A buyer was notified the contract for deed is canceled and yet the seller is not in breach. Which of the following may explain why this contract is now canceled? Review Later the listing broker is declared insane death of the seller inability to secure a loan bankruptcy

-bankruptcy Explanations (SELECT THIS TO SEE EXPLANATIONS) Contracts are commonly terminated because of either full performance, agreement between the parties, breach, impossibility of performance, or an operation of the law (all of which can be abbreviated to F.A.B.I.O.). Death does not terminate a contract because death has a legal process behind it. A broker's state of sanity does not impact a sales contract between a buyer and seller. While financing is a contingency in some states, the buyer's inability to secure financing would not result the seller causing the contract to be canceled. A seller in bankruptcy may be forced to liquidate real and personal property to repay a debt. Bankruptcy is an example of the operation of law canceling, or terminating, a contract.

36 A buyer promises to pay an agreed upon purchase price and in exchange the seller promises to sell his house to the buyer. Both parties have accepted and signed the contract. Which of the following best describes the contract? Review Later option executed unilateral bilateral

-bilateral Explanations (SELECT THIS TO SEE EXPLANATIONS) A bilateral contract has two parties and both exchange promises. A unilateral contract has two parties but only one has made a promise in exchange for an action to be performed by the other party. An option contract is an example of a unilateral contract during the option period and if the optionee exercises the option then it becomes a bilateral contract. Executed contracts are ones in which both parties have fulfilled all their duties and promises so the contract is finished. In real estate, an executed contract is a successfully closed transaction.

10 A lender title insurance policy: Review Later covers losses identified by the attorney prior to closing. declines when payment is made toward principal. is based on the sales price of the home. must be renewed ever year.

-declines when payment is made toward principal. Explanations (SELECT THIS TO SEE EXPLANATIONS) The lender/mortgagee policy declines to zero as the borrower makes principal payments. The policy is paid for at closing and does not require additional payments. The lender policy is based on the loan amount, not the sales price. The insurance company will not cover known issues that are discovered by the attorney before closing.

51 A borrower interested in reducing the interest rate for the life of the loan is most likely to inquire about which of the following items? Review Later debt service PI payments APR discount points

-discount points Explanations (SELECT THIS TO SEE EXPLANATIONS) Discount points are prepaid interest and lower your interest rate by one eighth of a percent. The cost of one discount point is equal to 1% of loan amount (not sale price). APR is the true cost of credit and is a combination of the interest rate plus all other fees. Debt service is a synonym for principal and interest payments.

62 A four-bedroom home with one bath is an example of: Review Later physical deterioration. functional obsolescence. external obsolescence. economic obsolescence.

-functional obsolescence. Explanations (SELECT THIS TO SEE EXPLANATIONS) Functional obsolescence are a result of poor design within a property. Functional obsolescence may be curable. Leaking roofs, cracked foundation walls and worn out windows are examples of physical deterioration which is often repairable. Economic/external obsolescence is a result of issues outside the property, such as a deteriorating neighborhood, expanding airport runways that will result in more planes flying over the home, a public dump located near the property or a new train line behind the property.

54 The type of loan a developer would use when financing a subdivision: Review Later is a graduated loan. is a blanket loan. is a package loan. is a construction loan.

-is a blanket loan. Explanations (SELECT THIS TO SEE EXPLANATIONS) A blanket loan typically covers multiple properties or lots. Package loans are for real and personal property. Graduated payment loans result in increased payments at set intervals. Construction loans are risky, where the lender releases money upon certain milestones based upon work performed.

67 The primary duty of a property manager: Review Later that the owner maintains a repair reserve in the trust account. is to ensure that the owner is earning the highest net return. that the owner a unit is rented as quickly as possible. is to ensure that all units are rented.

-is to ensure that the owner is earning the highest net return. Explanations (SELECT THIS TO SEE EXPLANATIONS) The property manager's primary duty is to earn the highest rate of return for the owner while complying with laws and rules. It is important to minimize the number of units vacant, however that could be achieved by lower rents below market. The property manager is required to screen tenants which may delay the rental of a unit to ensure fewer problems.

1 An investor purchased a triplex by obtaining an 80% LTV conventional loan. She is the sole owner of the property. Her use of debt to purchase an asset is known as: Review Later equity. basis. indemnity. leverage.

-leverage. Explanations (SELECT THIS TO SEE EXPLANATIONS) The use of other people's money to purchase real estate is known as leverage. Equity is the difference between the fair market value of the home and the amount of money owed. Indemnity is an insurance term that where the loss is covered. Basis is best defined as the sales price of a property (the amount paid at the time of purchase).

44 Damages that are predetermined at the formation of a contract are considered to be: Review Later liquidated. compensatory. consequential. determinable.

-liquidated. Explanations (SELECT THIS TO SEE EXPLANATIONS) Liquidated damages are determined at contract formation. Compensatory damages are designed to make a party whole in the event of a breach by the other party. Consequential damages are designed to compensate a party if the loss is a proximate cause of a breach by the other party.

45 Which of the following would cause a listing contract to terminate? Review Later buyer dies listing brokerage dies listing subagent dies buyer's agent dies

-listing brokerage dies Explanations (SELECT THIS TO SEE EXPLANATIONS) When a firm's operations terminate all agency agreement will terminate, including listing agreements. A listing contract is an agency agreement between the seller and listing firm. Death of a buyer or buyer's agent does not impact a listing agreement. NOTE: The broker who advertises the property is an affiliated, or associated, broker with the listing firm. Death of an affiliate does not terminate a listing.

58 Which of the following characteristics make adjustable-rate mortgages more attractive to borrowers? Review Later payment caps potentially resulting in negative amortization lower initial "teaser" interest rates interest rates that will always be lower than fixed rates over the life of the loan steady, unchanging mortgage loan payments over the life of the loan

-lower initial "teaser" interest rates Explanations (SELECT THIS TO SEE EXPLANATIONS) Adjustable-rate mortgages have a lower initial interest rate as the risk transfers to the buyer, not the lender, for changes in interest rates. NOTE: A borrower on a fixed income should choose a fixed-rate loan as the payment remains the same throughout the life of the loan. A budget mortgage that escrows property taxes and insurance would provide the most protection.

35 Which of the following is an example of a unilateral contract? Review Later installment land contract open listing agreement promissory note for financing offer to purchase and contract

-open listing agreement Explanations (SELECT THIS TO SEE EXPLANATIONS) In a unilateral contract, one party makes a promise in exchange for an action or behavior from the second party. In open listings, the seller promises to pay the listing firm that procures the buyer. This is a promise to compensate in exchange for selling the property. Installment land contracts, and offers to purchase and contract are common bilateral real estate contracts where the buyer promises to pay a sum of money in exchange, or the seller promises to sell the property. A promissory note is a bilateral contract between the borrower who promises to repay a debt and the lender who promises to lend the money.

2 Which of the following components is found below the eave? Review Later soffit ridge board pier rafter

-pier Explanations (SELECT THIS TO SEE EXPLANATIONS) An eave consists of the fascia, soffit, and frieze board. Eaves are alternatively referred to as an overhang. Above this are roof components such as ridge boards and rafters. Below the overhang are many parts of house to include the piers which are additional vertical columns of support found in crawl spaces to reduce the chances of floor sag.

32 A listing agent under an Exclusive Right to Sell Listing Agreement is obligated to: Review Later sell the property as quickly as possible. prepare a CMA before advising the seller. disclose all latent defects that impact the property. protect the property against any and all losses.

-prepare a CMA before advising the seller. Explanations (SELECT THIS TO SEE EXPLANATIONS) The listing broker must provide competent advice about the list price. There is no guarantee that the property will sell quickly. Latent defects are hidden, therefore, the listing agent is not responsible unless they are aware of the issue. The listing agent should protect the property, however, does not have absolute liability in the event the property is damaged.

42 A listing agent receives multiple offers on a property. The agent has a fiduciary obligation to: Review Later accept the highest offer on behalf of the seller. counter the lower offers and disclose the highest offer received. present the offers in the order in which they were received until such time as the seller accepts. present all offers that were received and review the merits of each.

-present all offers that were received and review the merits of each. Explanations (SELECT THIS TO SEE EXPLANATIONS) The listing agent has a duty to present all offers. The agent is acting as a special agent and therefore lacks the ability to make a decision to accept, reject or counter any offer.

62 The final analysis of an appraiser is called: Review Later regression. abrogation. a comparative market analysis. reconciliation.

-reconciliation. Explanations (SELECT THIS TO SEE EXPLANATIONS) The financial analysis when an appraiser uses multiple approaches to value is known as reconciliation. Stating or defining the problem is the first step an appraiser uses to determine how best to value a property. Regression occurs when a very large home is built in a small home neighborhood. A CMA is prepared by licensed brokers for his/her clients which is an estimate of the probable sale price of a home. Abrogation prevents a person from signing away rights that are grated by law.

12 A property can currently be used for single-family residential purposes. The owner desires to build multi-family houses as this will substantially increase the value. The owner will need to seek a: Review Later variance. non-confirming authorization. conditional use permit. rezoning.

-rezoning. Explanations (SELECT THIS TO SEE EXPLANATIONS) The owner of the property desires to change the use and therefore, must apply for the property to be rezoned. A variance is used for a minor change, such as additional parking, decrease setbacks, etc. A non-conforming use occurs when the municipality has changed the zoning and grandfathers in a previous use. A conditional use permit is granted to the first party to meet the requirements set by a municipality of building something that is in the public interest (hospital, museum, affordable housing).

26 A licensee represents a tenant that is seeking to rent a property listed by another brokerage. The licensee is acting as: Review Later general agent. designated agent. special agent. dual agent.

-special agent. Explanations (SELECT THIS TO SEE EXPLANATIONS) A broker acts as a special agent when representing a buyer, seller or tenant. This means that the broker cannot bind the client to a contract and no decision-making authority. A general agent has the limited ability to bind his/her client to a contract in limited circumstances, such as a property manager signing on behalf of the owner to execute a lease agreement. For dual or designated agency to arise, both clients must be represented by the same firm.

63 A property is most likely to increase when which of the following principles is low? Review Later supply utility transferability demand

-supply Explanations (SELECT THIS TO SEE EXPLANATIONS) The four economic principles of value are demand, supply, utility, and transferability. Demand and supply are inversely related. As the demand for a particular property increase and the supply decreases, the market prices rise. As demand decreases and supply increases, market prices fall. Utility refers to the property's ability to meet an owner's needs now or in the future. For example, if someone knows they want to build an addition and the property cannot be increased for any reason (septic restriction, setbacks, etc), then the property has low utility for that person. Transferability refers to the ability to transfer or convey owner from one person to another. Marketable title has the highest transferability. Cloudy titles have less transferability.

53 In a lien theory state: Review Later the lender takes title to the property after a specified period of time. the lender must sell the property at public auction. the title is held by a trustee until the final payment is made. the lender must sue to obtain legal title to the property.

-the lender must sue to obtain legal title to the property. Explanations (SELECT THIS TO SEE EXPLANATIONS) The borrower holds legal/actual title in a lien theory state, where the lender sues for the right to foreclose. It is a judicial process. NOTE: In a title theory state, the process is non-judicial. There is a mini-court hearing heard by a magistrate. It may be referred to as a foreclosure by advertisement. The property is sold at public auction to the highest bidder, even if the bid will not cover the amount owed.

24 A property management agreement will terminate when Review Later the tenant is evicted from the property. the property is taken through eminent domain. the landlord fails to make repairs to the HVAC system. the housing authority fines the owner for violations.

-the property is taken through eminent domain. Explanations (SELECT THIS TO SEE EXPLANATIONS) The property management agreement is between the owner and the brokerage firm. It terminates when property notice has been provided as outlined in the property management agreement. Actual eviction and constructive eviction terminate the lease agreement, NOT the property management agreement. Action taken by the housing authority may result in a termination of the lease, but not the property management agreement.

42 An aging widow was coerced by her oldest daughter to convey the family farm to the daughter to avoid losing the property to the State if the widow is later institutionalized. The daughter really wanted the property for herself and had no plans to share the property with her siblings when the mom died. This conveyance could possibly be deemed void because of: Review Later undue influence. mistake of law since the mother did not understand the repercussions of her actions. misrepresentation of fact to the mom by the daughter. duress.

-undue influence. Explanations (SELECT THIS TO SEE EXPLANATIONS) This is an example of the daughter using "undue influence" to get the widow to act outside of her normal free will. Undue influence is abusing a position of trust. There doesn't appear to be an actual misrepresentation in this case and the widow did not appear to be threatened (therefore, duress does not apply).

66 When valuing property, a borrower is more likely to experience an increase in value when the property currently meets, or has the ability to meet, the borrower's needs. This demonstrates which of the following principles? Review Later supply transferability utility demand

-utility Explanations (SELECT THIS TO SEE EXPLANATIONS) The four economic principles of value are demand, supply, utility, and transferability. Demand and supply are inversely related. As the demand for a particular property increase and the supply decreases, the market prices rise. As demand decreases and supply increases, market prices fall. Utility refers to the property's ability to meet an owner's needs now or in the future. For example, if someone knows they want to build an addition and the property cannot be increased for any reason (septic restriction, setbacks, etc), then the property has low utility for that person. Transferability refers to the ability to transfer or convey owner from one person to another. Marketable title has the highest transferability. Cloudy titles have less transferability.

39 What is the contract status when legally competent parties demonstrate mutual assent for a lawful reason, with consideration? Review Later unenforceable valid void voidable

-valid Explanations (SELECT THIS TO SEE EXPLANATIONS) Valid contracts have four essential elements: mutual assent (agreement often demonstrated with an offer and unconditional acceptance), consideration, lawful objective, and legal capacity (legal age, not drunk, not under the influence of drugs, and not adjudicated insane or in need of a guardian). Void contracts are missing one or more of these elements. For example, the Statute of Frauds requires real estate contracts be in writing so an oral contract to purchase is legally void. The parties to an oral purchase interestingly can continue forward with the transaction if they desire, but have no recourse to seek a remedy for breach. Voidable contracts are binding to one party in a transaction but not the other. For example, if a landlord enters into a lease with a minor, the minor can get out of the lease contract, but the landlord must abide by the lease terms and conditions. Unenforceable contracts typically arise when both parties have breached therefore neither party can sue the other for remedies because they are both at fault.

38 What type of validity does a contract have when a buyer and seller shake hands on the purchase terms of real property and do not reduce any of the terms down to writing? Review Later void voidable valid unenforceable Comments

-void Explanations (SELECT THIS TO SEE EXPLANATIONS) The contract is legally void according to the Statute of Frauds. Valid contracts have four essential elements: mutual assent (agreement often demonstrated with an offer and unconditional acceptance), consideration, lawful objective, and legal capacity (legal age, not drunk, not under the influence of drugs, and not adjudicated insane or in need of a guardian). Void contracts are missing one or more of these elements. For example, the Statute of Frauds requires real estate contracts be in writing so an oral contract to purchase is legally void. The parties to an oral purchase interestingly can continue forward with the transaction, if they desire but have no recourse to seek a remedy for breach. Voidable contracts are binding to one party in a transaction, but not the other. For example, if a landlord enters into a lease with a minor, the minor can get out of the lease contract, but the landlord must abide by the lease terms and conditions. Unenforceable contracts typically arise when both parties have breached therefore neither party can sue the other for remedies because they are both at fault.

41 What is the contract status when a contract it is formed 17 years old, and a 28 years old, yet they both demonstrate mutual assent, for a lawful reason, for good consideration? Review Later void voidable valid unenforceable

-voidable Explanations (SELECT THIS TO SEE EXPLANATIONS) Voidable contracts are binding to one party in a transaction but not the other. For example, if a landlord enters into a lease with a minor, the minor can get out of the lease contract, but the landlord must abide by the lease terms and conditions. Valid contracts have four essential elements: mutual assent (agreement often demonstrated with an offer and unconditional acceptance), consideration, lawful objective, and legal capacity (legal age, not drunk, not under the influence of drugs, and not adjudicated insane or in need of a guardian). Void contracts are missing one or more of these elements. For example, the Statute of Frauds requires real estate contracts be in writing so an oral contract to purchase is legally void. The parties to an oral purchase interestingly can continue forward with the transaction, if they desire but have no recourse to seek a remedy for breach. Unenforceable contracts typically arise when both parties have breached therefore neither party can sue the other for remedies because they are both at fault.

43 If a married landlord gives his wife a power of attorney to sign on his behalf and she enters into a lease contract with a single minor, this contract: Review Later universal. unilateral. unenforceable. voidable.

-voidable. Explanations (SELECT THIS TO SEE EXPLANATIONS) A general power of attorney grants universal authority to the POA holder. A specific POA grants general authority to the POA holder. Unilateral contracts are characterized by one party making a promise in exchange for the other party performing a certain task. Unenforceable contracts commonly start out as valid contracts but after both parties breach, the contract because unenforceable. Voidable contracts are created by a number of situations, one of which includes creating a contract with a minor party. In this case the tenant is a minor and the lease is voidable by the minor tenant.

80 What must the GRM be if monthly rent for a duplex is $975 per unit and the property value is $230,100? Review Later 118 236 218 136 Comments

118 Explanations (SELECT THIS TO SEE EXPLANATIONS) The formula for GRM is value divided by monthly rent = gross rent multiplier. In this case, the property is a duplex and the rent must be doubled. $230,100 divided by $1,950 = 118 GRM.

A property is located in a county where the assessed value is 70% of the fair market value. The county charges 18 mills. The fair market value of the property is $280,000. What is the monthly tax burden? Choose only ONE best answer. A $ 294 B $ 420 C $3,528 D $5,040

A $ 294 This answer is incorrect. The correct answer is 'A' Property taxes are charged per $1,000 of the assessed value when using the mills rate method. Property taxes for the year are calculated by taking the assessed value, dividing by 1,000, then multiplying by the mills rate. This question has the added trick of asking for monthly tax liability. To calculate the monthly amount, divide the annual tax by 12. Assessed Value: $280,000 X 70% = $196,000Tax for Year: $196,000 ÷ 1,000 X 18 mills = $3,528Monthly Tax: $3,528 ÷ 12 = $294

Which of the following would tend to increase property values? Choose only ONE best answer. A A large employer relocates into the city near the subject property B The number of homes available for sale increases C Interest rates rise sharply D A refinery opens beside a residential neighborhood

A A large employer relocates into the city near the subject property

A A large employer relocates into the city near the subject property This answer is incorrect. The correct answer is 'A' When a new business relocates to a city, it will increase the demand for available housing, thus increasing property values. When inventory levels increase, without a corresponding increase in demand, prices will fall. Interest rate increases will cause the cost of homeownership to rise and reduce demand. When an area becomes more commercial around a particular property, which can cause pollution, it is common for residential property values to fall.

Eric desires to purchase a property by investing an inheritance and obtaining a new loan. He asks his broker to explain the lending process. Which of the following statements by the agent is FALSE? Choose only ONE best answer. A An extender clause in a mortgage permits a borrower to lock in an interest rate for a specific period. B The loan origination fee charged by a lender covers the administrative costs of making a loan. C A lender will require account statements to confirm the borrower's assets from checking, savings, and investment accounts. D The lender will review the debt to service ratio to determine the borrower's creditworthiness.

A An extender clause in a mortgage permits a borrower to lock in an interest rate for a specific period. This answer is correct.A borrower is allowed to lock in an interest rate for a set period, known as an interest rate lock. The lender will often require the payment of additional funds to extend the rate lock. An extender clause(tail clause, protection period) is common in a listing agreement, where the broker/brokerage is entitled to a commission after the expiration of the listing when a buyer is introduced to the property during the listing term and purchases the property.

A seller has paid the homeowner association dues for the year totaling $918. The closing is scheduled for September 29th, with the seller responsible through the day of closing. What is the entry on the settlement statement? Choose only ONE best answer. A Debit buyer $232.05 / Credit seller $232.05 B Debit buyer $685.95 / Credit seller $685.95 C Debit buyer $232.05 / Debit seller $685.95 D Debit seller $232.05 / Debit buyer $685.95

A Debit buyer $232.05 / Credit seller $232.05 This answer is incorrect. The correct answer is 'A' Since taxes are paid for the year, the buyer will need to reimburse the seller. Daily Rate: $918 / 360 = $2.55Buyer Days: S (1) + OND (90) = 91 daysCharge to Buyer: $2.55 X 91 = $232.05 Debit buyer / Credit Seller Same Amount

J makes an offer to purchase a property on Monday at 5 p.m. for $425,000, with the seller paying $5,000 in closing cost and closing within 45 days. The seller agrees to all the terms except for the days to close, changing it to 30 days and returns it to J's agent at 4 p.m. on Tuesday. J's agent emails the counteroffer to J. On Wednesday at 3 p.m. J initials and dates the change and emails his agent. Has a legally binding contract been formed? Choose only ONE best answer. A No. A legally binding contract did not form. B Yes. A legally binding contract formed when J signed and emailed the agreement. C No. A counteroffer occurred when the buyer initialed the agreement. D Yes. A legally binding contract formed at 4 p.m. on Tuesday.

A No. A legally binding contract did not form. To form a legally binding contract to purchase real estate, there must be a written offer which the offeree accepts without change and communication of acceptance to the offeror or the offeror's agent. In this example, the offeree accepted the offer, but communication did not make it back to the offeror or the offeror's agent. J sent notification to his agent, the buyer agent. J's acceptance must be communicated to the seller or the seller's agent.

Which of the following would violate state or federal law? Choose only ONE best answer. A Sending unsolicited emails without providing an opt-out from receiving future emails B Sending unsolicited mail through the US Postal Service C Sending unsolicited faxes with a prominent opt-out notice D Sending a fax to a past business client two years after the business relationship was established

A Sending unsolicited emails without providing an opt-out from receiving future emails This answer is incorrect. The correct answer is 'A' The CAN-SPAM act restricts the ability to send unsolicited emails without a prominent opt-out. There are very few limitations to sending unsolicited mail through the US Postal Service. Junk fax laws allow sending unsolicited faxes when a prominent opt-out is provided. The junk fax laws do not have a time limit for a past business relationship.

Which of the following defines when a lien with a higher priority takes a lower position? Choose only ONE best answer. A Subordination B Refinancing C Disintermediation D Affirmation

A Subordination This answer is correct.When a lender agrees to take a lower priority, it is known as subordination. Disintermediation is directly investing rather than passing through a middle man, such as a real estate investment trust. Affirmation is the continuation of a void or voidable contract through closing, thus affirming it is legally binding.

Which of the following TRUE regarding property ownership? Choose only ONE best answer. A Tenants in common ownership may be acquired at the same time, from the same sources, at the same level of ownership. B Co-tenants with equal shares, purchased at the same time, from the same source with interest passing to their heirs upon death are joint tenancy. C A couple that purchases a property and then later marries will now own the property as tenants by the entirety. D When two or more people own a property that is inheritable upon death, it is known as ownership in severalty.

A Tenants in common ownership may be acquired at the same time, from the same sources, at the same level of ownership. This answer is incorrect. The correct answer is 'A' When multiple people own property as tenants in common, they may have the same level of ownership or different levels of ownership. Under joint tenancy, the property passes to the other co-owners rather than one's heirs. One way to remember this is that you do not give a joint to your kids. Tenancy by the entirety requires a couple to be married at the time of purchase. One owner owns in severalty.

An agent is trying to determine the probable selling price for a property using the sales comparison approach. The subject property is inferior as it does not have a deck; however, the comparable property does. A deck contributes $4,000. Which of the following adjustments should the agent make? Choose only ONE best answer. A The comparable property should be adjusted downward. B The comparable property should be adjusted upward. C The subject property should be adjusted downward. D The subject property should be adjusted upward.

A The comparable property should be adjusted downward. This answer is correct.When using the sales comparison approach it is essential to remember that you never adjust the subject property. One way to ensure this is to recall comp superior subtract and comp inferior increase. When the subject property is inferior that means that the comparable property is superior, so the comparable property would be adjusted downward.

QUESTION 7 OF 80 The listing agent receives a call from a prospective buyer who is interested in the property. The seller has only agreed to exclusive representation and refuses to permit representation of the buyer in any capacity. Assuming the buyer agrees to represent herself in the transaction, which of the following statements is TRUE? Choose only ONE best answer. A The listing agent is not required to determine if the home will meet all of the buyer's needs unless the buyer discloses his/her proposed use and then needs to instruct the buyer to verify the possibility or refer the buyer to an attorney. B The listing agent can prepare a comparative market analysis for the buyer so long as it does not provide for a specific offer price, only a range of value. C The listing agent can disclose to the buyer that the seller will accept less than the offer price if, in fact, the seller is willing to accept less. D The prospective buyer is owed honesty, fairness, and disclosure of the seller's reason for moving.

A The listing agent is not required to determine if the home will meet all of the buyer's needs unless the buyer discloses his/her proposed use and then needs to instruct the buyer to verify the possibility or refer the buyer to an attorney. This answer is incorrect. The correct answer is 'A' When a seller refuses to authorize dual agency, the listing agent and/or the listing agent's company would not be permitted to represent the buyer. The buyer would be considered a 3rd party, which the listing agent owes honesty, fairness and disclosure of material facts. The listing agent has no duty to determine if the property will meet the buyer's needs. When a buyer discloses his/her intended use of the property, the listing agent should recommend the buyer to investigate the use or refer the buyer to an attorney. The listing agent can provide unadjusted sales data to the buyer, however cannot prepare a comparative market analysis as this could weaken the seller's bargaining position. The listing agent owes the seller the duty of confidentiality and therefore should not disclose that the seller will accept less than the list price.

A licensee acting under a property management agreement is authorized to do which of the following for the owner? Choose only ONE best answer. A Bind the principal to all contracts. B Make improvements designed to increase the property value and charge the owner. C Authorize the repair of a burst pipe without the consent of the owner. D Place the security deposit into the brokerage operating account

A The owner is anxious to sell the property, so you should offer less than the list price. This question is silent about whether you represent the seller, however based upon the other answers you can figure out the correct response. A broker representing the seller would breach her fiduciary duty to the seller if she discloses that the seller is anxious and would take less than the list price. Nationally, the offer to purchase may be contingent upon financing - so the buyer MAY or MAY NOT be entitled to a refund of the earnest money deposit. It is a material fact that nearby roads are subject for widening or that a defect has been discovered regarding the property.

Which of the following statements about option agreements is NOT correct? Choose only ONE best answer. A The seller is obligated to check with the option holder before selling the property to another. B An option is a unilateral contract until exercised and then becomes a bilateral contract. C All terms of purchase of the are agreed to at the time the option agreement is signed. D The option automatically terminates when the option expires.

A The seller is obligated to check with the option holder before selling the property to another. This answer is incorrect. The correct answer is 'A' Under an option agreement, the owner has tied up their property, preventing sale to another party until the option is exercised or expires. It is very important to remember that all terms of an option are agreed to upfront including the purchase price, period of time to exercise, period of time to close and steps that must be taken to exercise. When a seller agrees to a right of first refusal, the seller would be obligated to check with the party that contracted for the right before being able to sell the property to another.

K's agent submits an offer to L's agent at 3 p.m. on Thursday. L's seller agrees to all terms but increases the earnest money by $500, then signs, and L's agent delivers the document to K's agent. K's buyer makes a counteroffer, and K's agent sends it back to L's agent. On Friday at 9 a.m. L's seller receives the agreement. At 10 a.m. Friday L's seller signs, and L's agent emails the document back to K's agent. Has a legally binding contract been formed? Choose only ONE best answer. A Yes. A legally binding contract formed at 10 a.m. Friday. B Yes. A legally binding contract formed when Thursday at 3 p.m. C No. The buyer needs to deliver the earnest money before a legally binding contract can form. D No. The signed contract must be delivered and accepted to form a legally binding contract.

A Yes. A legally binding contract formed at 10 a.m. Friday. This answer is incorrect. The correct answer is 'A' A legally binding real estate purchase contract forms when a written offer has been accepted, signed, and notification is made to the offeror. Note: Delivery of the signed document is not required. Since the seller countered the buyer, the seller becomes the offeror. When the buyer counters back, he/she becomes the offeror, and the seller is now the offeree. A legally binding contract formed when the seller signed the counteroffer and notified the buyer's agent of acceptance at 10 a.m. Payment of earnest money is not required in the contract. Unless the contract states that it is time is of the essence, failure to deliver the earnest money would not automatically terminate the purchase contract. NOTE: Exam questions will mix items - in this instance, contract and deed requirements. A deed must be delivered and accepted; however, contract acceptance only needs to be communicated to the offeror or his/her agent.

An example of a place of public accommodation under ADA requirements is: Choose only ONE best answer. A a real estate brokerage office. B an owner-occupied home. C a single-family vacation home. D a duplex with both units available for rent.

A a real estate brokerage office. This answer is incorrect. The correct answer is 'A' A real estate brokerage office is open to the public, therefore must be accessible. The other property may require reasonable modification to a property at the renter's expense under the Federal Fair Housing Act. The ADA allows a service animal (dog or miniature horse) access to public facilities. It requires facilities to be accessible (ramps, pull bars, etc.) when it is open to the public.

For a seller to qualify tax-deferred exchange, a property must Choose only ONE best answer. A be held for at least 30 years. B be used in a trade or business. C be a primary residence for two out of the last five years. D be residential if the new property is residential.

A be held for at least 30 years. This answer is incorrect. The correct answer is 'A' A tax-deferred exchange (also called 1031 Like-Kind-Exchange) applies to investment property, not a primary residence. A qualifying intermediary (attorney) exchanges the property rather than a direct exchange between two parties. Once the relinquished property sells, the seller has 45 days to identify the new property and 180 days to close. The exchange is an investment for an investment property, so the seller can sell a residential property to purchase an office building. When selling a primary residence, the owner can exclude $250,000 of gain if single / $500,000 of the gain if married requiring that the property be used as a primary residence for 2 out of the last 5 years. The deductible expenses in the current year on an owner's tax return are mortgage interest (which includes prepayment penalties and late fees), discount points, and property taxes. The origination fee MAY be deductible, so a prudent owner should check with a qualified tax professional.

QUESTION 1 OF 80 A property that must be purchased at the same time, from the same source, with the same level of ownership and has the rights of survivorship is best defined as: Choose only ONE best answer. A joint tenancy. B severalty ownership. C tenants in common. D cooperative ownership.

A joint tenancy. This answer is incorrect. The correct answer is 'A' Joint tenancy has the right of survivorship, which means it is not inheritable and upon death will pass remaining joint tenants (you don't pass a joint to your kids). Nationally, joint tenancy requires the unities of the same time, same source, and the same level of ownership. A will cannot defeat joint tenancy. Severalty ownership is inheritable, and the property is deeded to one party. Tenants in common allow for multiple owners, which may own in the same amount or not, however upon death, ownership is inheritable. When a buyer purchases a co-op, she/he is buying a share of stock and receives a proprietary lease - rather than direct ownership of the unit.

8 Which of the following best defines a quitclaim deed? Review Later A deed which remedies errors such as typos in name or inadequate legal descriptions A deed providing warranty only for the amount of time a seller owned the premises A deed which doesn't warrant against encumbrances and only implies the grantor has title A deed issued after a foreclosure auction

A deed which remedies errors such as typos in name or inadequate legal descriptions Explanations (SELECT THIS TO SEE EXPLANATIONS) Quitclaim deeds remedy administrative and clerical errors such as misspellings and are frequently used to transfer ownership between family members such as in the case of divorce. Special warranty deeds cover only the time in which the seller owned the property. Deeds issused after auctions resulting from defaulting on judgements, such as foreclosures, result in sheriff's deeds. And deed that merely imply the grantor has title and possession are called bargain and sale deeds.

A couple wants to purchase a home for $400,000 by taking out a loan of $360,000 at 6% interest. The principal and interest payment will be $2,150. The lender charged 1/2% origination and 2 discount points. What were the total lender fees? Choose only ONE best answer. A $ 7,200 B $ 9,000 C $10,000 D $12,150

B $ 9,000 This answer is correct. Loan fees are based on the loan amount. Lender fees include origination and discount points. Lender Fees: ½% origination + 2% discount points = 2.5%Cost: $360,000 X 2.5% = $9,000

A buyer is purchasing a property for $180,000 by obtaining a conventional mortgage with 90% loan to value for 20 year at 3.75% interest. The buyer paid $3,000 as an earnest money deposit, which the closing attorney deposited into his escrow account. Closing is scheduled for March 4th. The following expenses were paid by the customary party at closing: = 1% Origination Fee = 2% Discount Points = Deed Preparation $150 = Prepaid / Interim Interest = Closing Attorney Fee $850 = Appraisal Fee $400 (paid at mortgage application) = Property Taxes $1,800, unpaid and buyer responsible for property taxes beginning on the day of closing. How much will the buyer pay on the day of closing to purchase the home, rounded to the nearest dollar? Choose only ONE best answer. A $21,246 B $20,851 C $20,834 D $20,801

B $20,851 This answer is incorrect. The correct answer is 'B' When calculating the amount the buyer will need to bring to closing, it helps to remember what the seller typically pays and that the buyer will pay the remainder. The seller typically pays commission, deed prep, excise tax, and mortgage cancellation fees. It is important to remember that items that are paid outside closing have already been paid for and, therefore, do not impact the funds needed to close. When calculating the number of days to charge interim interest, subtract the day of closing from 30, then add one day since the bank is greedy. Since the closing is before September 1 and taxes are unpaid, the entry on the settlement statement would debit the seller/credit the buyer. Since the buyer will pay the day of closing, subtract a day from the seller days. Discount points and origination fees are a percentage of the loan amount, not the purchase price. Buyer Due at Closing: $180,000 SP - $162,000 Loan - $3,000 EMD + $1,620 Orig Fee + $3,240 Disc Pnt + $455.63 Interim/Prepaid Interest + $850 Attorney Fee - $315 Tax Proration = $20,850.63, rounded $20,851 Interim Interest - Days: 30 - 4 + 1 = 27 daysInterim Interest - Loan Amount: $180,000 x 90% = $162,000Interim Interest - Daily Rate: $162,000 X 3.75% ÷ 360 = $16.875Interim Interest Charge: $16.875 X 27 days = $455.63 Origination Fee: $162,000 X 1% = $1,620Discount Points: $162,000 X 2% = $3,240] Tax Proration - Seller Days: (JF) 60 + (M) 3 = 63 daysTax Proration - Daily Rate: $1,800 ÷ 360 = $5Tax Proration - Entry: $5 X 63 = $315 Debit Seller / Credit Buyer

QUESTION 26 OF 80 A commercial property sells for $5,500,000. The seller agreed to pay 6% commission on the first 2 million, 5% commission on the next million and 4% commission on the remainder of the sales price. The listing and selling broker have agreed to split the commission. How much will the seller pay in commission? Choose only ONE best answer. A $275,000 B $270,000 C $135,000 D $120,000

B $270,000 This answer is correct. Tier 1: $2,000,000 X 6% = $120,000Tier 2: $1,000,000 X 5% = $ 50,000Tier 3: $2,500,000 X 4% = $100,000Total Compensation: $270,000

Paul agreed to sell his property for $300,000, with the closing scheduled for October 23rd. Paul's mortgage payoff on the day of closing is $199,800. The following expenses will be paid by the customary party: = Mortgage Cancellation Fee $45 = Commission 7% = Deed Preparation $125 = Closing Attorney Fee $800 = Deed Recording Fee $45 = Other Seller Closing Costs $4,000 = Property Taxes Paid In Advance of Closing by Seller - $4,780, with buyer paying tax beginning on the day of closing. How much will the seller net from the sale of the property, rounded to the nearest dollar? Choose only ONE best answer. A $75,946 B $75,933 C $74,140 D $74,127 CONFIRM

B $75,933 This answer is correct. When calculating the seller's net, it is essential to recall the expenses that the seller typically pays C, D, and E - commission, deed prep, and excise tax, with the buyer paying most other costs unless otherwise stated. The seller is responsible for paying the mortgage cancellation/mortgage satisfaction/satisfaction of mortgage recording fee. Since the seller paid the entire year of property taxes, the buyer must reimburse the seller for the number of days they are responsible. Note that the problem states that the buyer is responsible for the day of closing for taxes. Sellers Net: $300,000 SP - $199,800 Loan Payoff - $45 Mtg Cancellation - $21,000 Commission - $125 Deed Prep - $4,000 Closing Costs + $902.89 Tax Proration = $75,932.89, rounded $75,933 Commission: $300,000 X 7% = $21,000 Tax Proration - Buyer Days: (O) 8 + (ND) 60 = 68 daysTax Proration - Daily Rate: $4,780 ÷ 360 = $13.2777Tax Proration - Entry: $13.2777 X 68 = $902.89 Debit Buyer / Credit Seller

Which of the following statements is CORRECT regarding title insurance policies? Choose only ONE best answer. A A borrower will pay for the policy at the time of closing and must renew the owners' policy on an annual basis to maintain coverage. B An extended policy covers unrecorded rights of persons in possession, survey errors, and unrecorded liens not known by the policyholder. C The policy covers defects that were discovered by the attorney when performing the title search. D The owner's policy coverage will decrease to zero once the mortgage is paid in full.

B An extended policy covers unrecorded rights of persons in possession, survey errors, and unrecorded liens not known by the policyholder. his answer is correct.The premium for a title insurance policy is paid once at the time of closing. There are no annual premiums paid after closing. There are standard and extended policies available, with extended being the preferred policy as it covers the buyer against more potential losses. The borrower will typically pay for both the lender/mortgagee policy and the borrower/mortgagor policy. The policy covers the sins of the past that were not discovered by the closing attorney (insurance companies won't cover known errors before the policy is issued). The lender's policy will eventually expire upon final loan payment. The owner policy remains for the full purchase price. NEXT

Which of the following loans is not subject to the Truth-in-Lending Act? Choose only ONE best answer. A Home Equity Line of Credit B Commercial Real Estate Loan C First Mortgage Loan D Second Mortgage Loan

B Commercial Real Estate Loan This answer is correct.The Truth-in-Lending Act applies to consumer finance including first mortgage, second mortgage and home equity lines of credit. It would not apply to commercial real estate loans, business loans or agricultural loans.

John hired Kelly, a provisional broker affiliated with ABC Realty, to list his home located in a quiet neighborhood. The area is desirable, and both anticipate significant interest in the property. Which of the following listing agreements would not require John to pay Kelly's firm if John locates the buyer? Choose only ONE best answer. A Exclusive Right to Sell Listing Agreement B Exclusive Agency Listing Agreement C Net Listing Agreement D Full-Service Listing Agreement

B Exclusive Agency Listing Agreement When a seller lists the property with one brokerage and can compete with the brokerage to avoid paying commission, they have agreed to an exclusive agency listing agreement. Under an exclusive right to sell, no matter how the property sells the brokerage is paid. A net listing states that the broker will receive proceeds over an agreed-upon net amount required by the seller. A broker can limit the services offered, however not the duties owed, when the owner signs a limited-service listing agreement. Full-service listing agreements do not have limitations on the services provided.

How is loan to value calculated when a borrower obtains conventional financing? Choose only ONE best answer. A The desired loan divided by a thousand and multiplied by the amortization rate B Mortgage amount divided by the lesser of the appraised value or contract price C Appraised value multiplied by the mortgage amount D Desired loan multiplied by the down payment

B Mortgage amount divided by the lesser of the appraised value or contract price This answer is correct.The calculation is in the name, loan to value, thus loan divided by value. The monthly principal and interest payment is calculated by taking the desired loan and dividing by thousand, then multiplying by the amortization rate. It is important to remember that a bank will loan the lesser of the appraised value or the contract price.

QUESTION 78 OF 80 Which of the following statements is TRUE regarding providing an adequate legal description of a property in a contract? Choose only ONE best answer. A The metes and bounds property description is the primary method used in the US. B Reference to recorded documents such as plat book and page and deed book and page are sufficient to identify a property uniquely. C The street address is sufficient to form a legally binding contract. D Only an attorney can provide an adequate legal description for a real estate contract.

B Reference to recorded documents such as plat book and page and deed book and page are sufficient to identify a property uniquely. This answer is correct.The 13 original colonies and Texas use the metes and bounds system. The rest of the country uses the government rectangular survey system. It is important to remember that a township has 36 sections, there are 640 acres in a section and that section 16 is where the school is typically located. The principal meridian runs north to south, and the baseline runs east to west. It is common practice for real estate brokers to reference recorded legal documents such as deed book and page/plat book and page, property tax ID, and other legal descriptions. The deed will contain all of these items as well as the metes and bounds or government rectangular survey system description. The street address is an informal reference, and by itself is not sufficient to form a legally binding contract. A broker can fill in the blanks to a standard form, which will provide an adequate legal description.

Which of the following would violate the Federal Fair Housing Act of 1988? Choose only ONE best answer. A A handicap tenant is permitted to widen doorways, install pull bars, and a wheelchair ramp at his own expense. B Refusal to rent to an Indian applicant when one unit is occupied by the owner if a 5-unit dwelling. C Refusal to rent based upon the marital status of the tenant. D A property owner fails to give preference to a protected class when multiple rental applications are received.

B Refusal to rent to an Indian applicant when one unit is occupied by the owner if a 5-unit dwelling. This answer is correct.There are limited exceptions for property owners under Federal Fair Housing, where the landlord can refuse to rent to a protected class when a unit is owner-occupied. The limited exception is for residential, 1-4 unit apartments, not five or greater units. The Federal Fair Housing Act allows a tenant to modify the rental premises at the tenant's expense to make a property handicap accessible. There are limited exceptions to the law for a seller so long as they do not use discriminatory advertising or tell the individual why they are refusing to rent. The Equal Credit Opportunity Act protects against discrimination based upon marital status, not Federal Fair Housing. Federal Fair Housing does not require an owner/manager to give preference to a protected class; however, it does set restrictions on discrimination. An owner is exempt when leasing a multifamily property with four or fewer units, where one unit is owner-occupied, senior housing, owner of 3 or fewer homes - selling no more than one home every two years, private clubs, and religious organizations. It is important to note that a REALTOR® cannot discriminate, and an owner that hires a REALTOR® loses the above exemptions.

Which of the following financial regulations requires the disclosure of financing terms when a trigger term is used? Choose only ONE best answer. A Real Estate Settlement Procedures Act B Regulation Z C TILA-RESPA Integrated Disclosure D Equal Credit Opportunity Act

B Regulation Z This answer is incorrect. The correct answer is 'B' Regulation Z governs financial disclosures when an individual/entity runs an ad regarding consumer finance. It does not prevent using trigger terms in an ad; it requires full disclosure of terms when a trigger term is used. Trigger terms include the amount of down payment expressed as a percentage or dollar amount, the amount of any payment, the number of payments, the period of repayment, or the finance charges. The use of one of the trigger terms requires disclosure of all of the terms and the annual percentage rate (APR). It is important to remember that APR alone does not trigger full disclosure. A broker can use general terms such as easy monthly payments, low down payment, or great financing available without triggering the disclosure requirement. RESPA - Real Estate Settlement Procedures Act governs the purchase of a residential property when finance by a federally related mortgage. To remember what RESPA covers, recall Kids Eat Up Boogers Dirt and Lead. RESPA does not permit Kickbacks among settlement service providers, limits the amount a bank can keep in Escrow for taxes and insurance, the settlement is reported on the Uniform closing disclosure, the borrower must receive a Booklet - Know Before You Owe, the bank must Disclose loan servicing - prepayment penalty and other fees, and the lender must provide a Loan Estimate within three banking days of the mortgage application. TRID is part of the Dodd-Frank Act that merged Truth in Lending and RESPA and appointed the Consumer Financial Protection Bureau to enforce the rules. The Equal Credit Opportunity Act relates to lending bans lender discriminate against fair housing protected classes, or based on age, marital status, or source of income (public assistance, disability income, etc.).

A party meets all the statutory requirements to take an acre tract of land from the current owner. Which of the following best describes the legal action? Choose only ONE best answer. A Adverse Possession B Suit to Quiet Title C Right of Redemption D Eminent Domain

B Suit to Quiet Title This answer is correct.A suit to quiet title or action to quiet title is filed to resolve a dispute about who holds legal title to the property or has the greatest claim. Adverse possession occurs when a party hostilely and intentionally takes the property of another, and the taking is open, continuous, exclusive, adverse, and notorious. The right of redemption is available when a property is in foreclosure or foreclosure has finalized. The equitable right of redemption is the right of the owner to pay off the liens before the foreclosure sale. The statutory right of redemption allows the owner to pay off the liens before the foreclosure sale finalizes (the 10-day period in North Carolina). Eminent domain is the government's right to take private property for the public good. The government pays the owner the fair market value of the property.

Which of the following would have the greatest impact on the establishment of a listing price? Choose only ONE best answer. A A similar home that sold FSBO B The current condition of the market C The seller's desire to net $50,000 D The sale of similar property in the past 12 months

B The current condition of the market This answer is correct.Current market conditions will always have the greatest impact when establishing a list price. A broker will typically look at past sales to develop a recommended price range, unless market conditions sharply improve or worsen, which can have a dramatic impact on the probable sales price. Property sold for sale by owner is typically not a good comp as the property was not sold on the open market. A seller may have unreasonable expectations regarding how much he/she will net from the sale of a property.

The contract between a buyer and seller for the purchase of real property is considered a(n): Choose only ONE best answer. A voidable contract. B bilateral contract. C unilateral contract. D conditional contract.

B bilateral contract. .This answer is correct.A bilateral contract is a mutual exchange of promises between two parties where both have agreed to perform. In this circumstance, the buyer agrees to buy, and the seller agrees to sell the property. A unilateral contract only requires one party to perform if the other party acts. A voidable contract allows one party to proceed with or terminate the contract, while the other party is obligated to perform. Some examples of voidable contracts include contracts with a minor, default by the buyer or seller depending upon the contract, damage to the property before closing in a real estate contract, or one party to the contract was intoxicated.

A single-family home has lost value as a result of the nearby airport expansion that has dramatically increased plane noise. This is an example of: Choose only ONE best answer. A functional obsolescence. B economic obsolescence. C deterioration. D abrogation.

B economic obsolescence. This answer is incorrect. The correct answer is 'B' When the property value is impacted by outside forces, it is known as economic obsolescence. Examples include expanding runways at nearby airports, the area becoming more commercial, high voltage power lines, or railway service near the property. Functional obsolescence relates to issues that are within the property, such as poor design, three bedrooms and one bath, or outdated style. Deterioration is related to functional obsolescence and may or may not be curable. Abrogation does not permit enforcement of a contract term when it is contrary to public law.

The following would typically increase a buyer's equity in the property, EXCEPT: Choose only ONE best answer. A an addition to the property to add a playroom and garage when paid for in cash. B the borrower refinances the mortgage balance for a lower interest rate. C the area in which the property is located has rapidly appreciated. D the borrower makes additional principal payments each month.

B the borrower refinances the mortgage balance for a lower interest rate. This answer is correct.Equity is defined as the difference between the fair market value of the property and the amount owed. Equity increases when a borrower makes additional principal payments, improves the property in a manner that increases its value, through appreciation or by making a larger initial down payment.

The valuation approach that considers depreciation is: Choose only ONE best answer. A the income capitalization approach. B the cost approach. C the market data approach. D the sales comparison approach.

B the cost approach. This answer is correct.The cost approach to value is determined by calculating the Cost New - Deprecation + Land and Improvements. The formula for the income approach is Value = NOI / Capitalization Rate. The market data and sales comparison approach are the same where a broker or appraiser will find a least three recently sold comparable properties and make adjustments for differences (comp superior = subtract / comp inferior = increase).

An underwriter will look at all of the following before extending credit, EXCEPT: Choose only ONE best answer. A the borrower's credit score. B the marital status of the borrower. C the borrower's debt ratios. D the stability of borrower's income.

B the marital status of the borrower. This answer is incorrect. The correct answer is 'B' A lender cannot discriminate based on marital status of a borrower under the Equal Credit Opportunity Act. A lender looks for stable income as one primary factor before making a loan as well as credit score, credit history and debt ratios.

Oscar agrees to purchase Emanuel's home for $140,000, with a closing set for 45 days following the effective date of the contract. Before the settlement date, Emanuel learns that Oscar is a minor. Based on this fact, the contract is now: Choose only ONE best answer. A valid. B voidable. C void. D invalid.

B voidable. This answer is correct.A minor can legally enter into a contract to purchase real estate. The contract is voidable, where the minor may terminate the contract without penalty. The adult is still obligated to perform under the terms of the contract. A valid contract is legally binding on both buyer and seller. A void contract is not legally enforceable by the courts and is considered invalid.

A minor desires to purchase real property however, her guardian has moved out of the state and relinquished her duties. The minor asked his school principal to sign the contract for him. The principal agreed, and the agent, upon review of the signed offer, stated that the property is under contract. Has a legally binding contract been formed Choose only ONE best answer. A No. The contract is voidable as the intended owner is a minor. B No. The contract is unenforceable as the principal did not have the authority to act for the minors. C Yes. The contract is enforceable against the property owner and the minor D Yes. The contract is valid against the property owner and the agent.

B)No. The contract is unenforceable as the principal did not have the authority to act for the minors. This answer is incorrect. The correct answer is 'B' A guardian may be appointed to handle the affairs of a minor. When the guardian is no longer able to perform, the courts must appoint a new party to act in that capacity. The high school principal cannot act in this role without court appointment. The property is not under contract as a legally binding contract has not been formed.

A property is subject to a lease agreement that ends in 8 months. The seller enters into a purchase contract with a buyer. The new owner: Choose only ONE best answer. A may terminate the lease with ninety days' notice to the tenant. B must honor the lease for the remainder of the lease term. C is only obligated to honor the lease agreement if the lease is recorded. D may terminate the lease with two weeks' notice to the current tenant.

B)must honor the lease for the remainder of the lease term. This answer is correct.Lease agreements are appurtenant to the property, and therefore the new owner is bound by the lease agreement. In NC, leases that exceed three years must be in writing under the Statute of Frauds and recorded under the Conner Act.

Equity is best defined as: Choose only ONE best answer. A the amount a borrower pays as a down payment when a property is purchased. B the difference between the fair market value of a property and the amount owed. C the amount of money the owner would realize when a property sells. D the difference between the fair market value and the assessed valu

B)the difference between the fair market value of a property and the amount owed. This answer is correct. Equity is calculated by taking the fair market value of the property (also called true value) and subtracting the amount of money owed. The amount realized by the seller when he/she sells is calculated by taking the sales price and subtracting seller closing costs.

The listing agreement calls for a listing price of $250,000 and an 8% commission to be split between the listing and selling agent. The agent representing the buyer submits an offer for $240,000 but later accepts the seller's counteroffer of $245,000. The selling agent's independent contractor agreement calls for a 70/30 split between the agent and the brokerage. Upon closing how much will the selling agent be paid? Choose only ONE best answer. A $19,600 B $ 7,000 C $ 6,860 D $ 6,720

C $ 6,860 This answer is incorrect. The correct answer is 'C' Selling agents procure the buyer and might be a buyer's agent or a seller's subagent. In this problem, the selling agent is the buyer's agent. Compensation between the listing and selling agent is split, with each receiving 4%. Commission splits are typically quoted as the amount paid to the agent, followed by the amount paid to the firm. The commission is based on the sales price of the property. Total Commission Selling Side: $245,000 X 4% = $9,800Selling Agent Commission: $9,800 X 70 % = $6,860

A buyer is purchasing a property for $377,000 by obtaining a conventional 80% LTV loan at 6.5% for 30 years, which amortizes at 6.33. Annual property taxes and insurance total $4,800 for the year. What is the monthly PITI payment? Choose only ONE best answer. A $2,786 B $2,386 C $2,309 D $1,909

C $2,309 This answer is incorrect. The correct answer is 'C' Paying your mortgage is a PITI (principal, interest, taxes, and insurance). When a factor or amortization rate is given it represents the dollar amount per month per thousand dollars borrowed. Payment is based on the loan amount, not the sales price. Loan Amount: $377,000 X 80% = $301,600PI Payment: $301,600 / 1,000 X 6.33 = $1,909Monthly TI: $4,800 / 12 = $400Monthly PITI: $1,909 + $400 = $2,309

Which of the following statements is TRUE regarding the income capitalization approach? Choose only ONE best answer. A Net operating income is calculated by taking the effective gross income and subtracting operating expenses and vacancy losses. B The capitalization rate is determined by taking the selling price of other buildings and dividing by the gross market rent. C Effective gross income is calculated by taking gross income and subtracting vacancy and collection losses. D To calculate the value of the property, the broker or appraiser would need to calculate the before-tax cash flow.*

C Effective gross income is calculated by taking gross income and subtracting vacancy and collection losses. This answer is incorrect. The correct answer is 'C' Effective gross income, also known as total anticipated revenue, is calculated by taking gross income and subtracting vacancy and collection losses. Net operating income is calculated by taking effective gross income and subtracting operating expenses (no depreciation, debt service or capital improvements). To calculate the capitalization rate, divide net operating income by the value of a property. To calculate before-tax cash flow subtracting debt service from net operating income.

A buyer and seller are each represented by exclusive agents who are negotiating the terms of an offer. Which of the following statements is TRUE? Choose only ONE best answer. A The Uniform Electronic Transaction Act allows the buyer to terminate the contract within 24-hours of electronically signing. B When a buyer adds a provision to an offer that allows the buyer to terminate in the event financing cannot be obtained, it is known as an amendment to offer. C If an effective contract is legally formed, the contract is bilateral. D The brokerage must deposit the earnest money deposit within three banking days from the expiration of all contract contingencies.

C If an effective contract is legally formed, the contract is bilateral. This answer is correct.A bilateral contract requires both parties to perform under the terms of the contract with a mutual exchange of promises. The buyer has offered to buy, and the seller has offered to sell. Under the Uniform Electronic Transactions Act, a digital signature is just as binding as a wet pen signature. There is no seasoning or rescission period (where the buyer has the right to terminate the contract). A provision added to an offer is an addendum that creates a contingency that must be met. A change in an enforceable contract is known as an amendment. Earnest money is deposited in the brokerage trust account the later of 3 banking days from receipt or three banking days from the effective date of the contract.

QUESTION 57 OF 80 Which of the following are required to form a legally binding contract to purchase real estate? Choose only ONE best answer. A Earnest Money B Acknowledgement C Mutual Agreement D Recording

C Mutual Agreement

Ben manages a commercial property for Kelly, where the tenant will pay a monthly rent plus taxes, insurance, and common area maintenance. What type of lease did the tenant enter? Choose only ONE best answer. A Gross Lease B Percentage Lease C Net Lease D Ground Lease

C Net Lease When a tenant signs a net lease, he/she pays monthly rent plus property tax, insurance and/or common area maintenance. A gross lease requires the tenant to pay monthly rent and the owner to pay property tax, insurance, and common area maintenance fees. A percentage lease is typical in retail rental agreements where the tenant pays a low flat rental plus a percentage of sales to the landlord. A ground lease requires the tenant to pay rent for the land as well as pay for the construction cost of the building, which is often an extended lease (ex: 99-year lease with a 99-year renewal).

QUESTION 4 OF 80 The listing agreement between a seller and brokerage can include which of the following provisions? Choose only ONE best answer. A A clause that allows for an automatic renewal of the listing agreement B A disclaimer of liability for the brokerage when an affiliated broker makes an error when advertising the property on the MLS or other internet media C The authority for the broker to disclose the existence of other offers on the property D A provision allowing the owner to discriminate against Muslim buyers

C The authority for the broker to disclose the existence of other offers on the property This answer is incorrect. The correct answer is 'C' A brokerage can seek permission to disclose the existence of other offers. Listing agreements cannot contain an automatic renewal clause. Property management agreements may include an automatic renewal clause. A brokerage is liable for the negligent or willful actions of affiliated brokers. When a broker advertises a property in error, such as wrong square footage, an illegal use based on current zoning, or an incorrect number of bedrooms based upon septic permit, the brokerage cannot disclaim liability.

A is purchasing a property from B. The listing agent discovers that a relative of B may have an interest in the property. Which of the following is FALSE? Choose only ONE best answer. A The buyer cannot sue for Specific Performance as the relative is not a party to the contract. B The seller should contact an attorney to try and obtain a quitclaim deed from the relative. C The buyer will be in breach of contract if they refuse to purchase the property. D The seller may be liable for damages for failing to deliver marketable title to the property.

C The buyer will be in breach of contract if they refuse to purchase the property. This answer is incorrect. The correct answer is 'C' The buyer has not breached the contract. The seller has as they cannot provide a marketable title to the property. Since a relative is not a party to the agreement, the buyer would not be able to sue for specific performance. Specific performance is forcing the seller to sell the property. One way of resolving this potential conflict is to have the relative sign a quitclaim deed, quitting whatever claim he/she may or may not have to the property. This would be prepared by an attorney, not a broker.

An investor purchased a duplex in an area that permitted multi-family housing in 2000. On June 1st, 2020 the county changed the zoning for the area to single-family residential. Which of the following statements is TRUE? Choose only ONE best answer. A The owner must obtain a variance to continue to use the home as a duplex. B The owner will have to stop using the property as a duplex and reset the home as a single-family. C The owner may continue the use of the property as a duplex as this is a legal non-conforming use. D The owner must obtain a special use permit to continue to use the home as a duplex.

C The owner may continue the use of the property as a duplex as this is a legal non-conforming use. This answer is incorrect. The correct answer is 'C' When a municipality changes the zoning classification, properties that were legally operating in the past may continue their use, even though the property does not conform to the current zoning requirements. This is known as a legal nonconforming use. A variance is a minor change to minimize hardship, however is not used to maximize profit - like asking for more parking spaces or smaller setbacks. In this example, the nonconforming use of the property as a duplex may continue. The owner would not be required to reset it as a single-family property. A special use permit is granted when a property owner desires to use the property in a manner that is in the public interest such as a museum, hospital or church.

A salesperson would violate the Do Not Call law in which of the following situations when the property owner has placed his/her contact phone number registered? Choose only ONE best answer. A The salesperson calls the owner of a home whose listing agreement expired 15-months ago when the property was listed by another broker affiliated with his firm. B The salesperson calls an owner of an expired property that he met while holding an open house at a neighboring property, where the expired owner gave permission to call. C The salesperson calls an owner of a property whose listing agreement expired 17-months ago, which was listed by a different company than the salesperson is affiliated with. D The salesperson calls a For Sale by Owner to inquire about the property price and whether the owner will pay commission to a buyer's agent.

C The salesperson calls an owner of a property whose listing agreement expired 17-months ago, which was listed by a different company than the salesperson is affiliated with. This answer is incorrect. The correct answer is 'C' While a salesperson/broker can call a client with a previous business relationship within the past 18-months, the salesperson did not have a prior business relationship with the seller. Other exceptions include an invitation or personal relationship.

A property along a navigable river suffered substantial damage when widespread flooding caused the owner to lose approximately 80 feet of land along the river boundary. This is known as: Choose only ONE best answer. A reliction. B erosion. C avulsion. D accretion.

C avulsion. This answer is correct.Avulsion is the sudden and violent loss of land that is commonly caused by large storms such as hurricanes with extensive flooding. Erosion is a gradual loss of land over time. Reliction is the gradual extension of land as water permanently recedes, while accretion is the gradual extension of land through soil deposits (alluvium/alluvion).

A municipality decides to expand access to public water services in a neighborhood that previously only had wells. The municipality did not require the owner to tap on to the new system. The municipality would commonly pay for this expansion: Choose only ONE best answer. A by increasing tax rates for all residents that live within municipality limits. B by increasing the rate of taxes charged to all owners in the neighborhood. C by charging a special assessment that supersedes other recorded liens. D by charging a higher amount for water use in this designated area.

C by charging a special assessment that supersedes other recorded liens. This answer is incorrect. The correct answer is 'C' When a municipality expands city water/sewer services, installs sidewalks, street lights, or paves a roadway, they can charge a special public assessment. Property taxes and special public assessments are paid first, before all other recorded liens

A buyer hires an inspector to determine if the home he/she plans to purchase has lead-based paint. The inspector finds evidence of lead. The seller: Choose only ONE best answer. A is required to remediate the lead according to the 1992 Lead-Based Paint Hazard Reduction Act. B is liable for damages if they failed to disclose the presence of lead on the Lead-Based Paint disclosure form. C is not required to remediate the lead or engage in negotiations over possible remedies. D is in breach of contract and subject to the remedies outlined in the purchase contract.

C is not required to remediate the lead or engage in negotiations over possible remedies. This answer is incorrect. The correct answer is 'C' Under the 1992 Lead-Based Paint Hazard Reduction Act, the seller must provide a lead disclosure for a property built before 1978. The seller is required to disclose if he/she are aware of lead at home or not and if the seller has reported lead or not. The seller is not obligated to remediate the lead. The buyer must be permitted at least 10-days to perform the inspection, and the buyer must be provided with the pamphlet Protection Your Family from Lead in the Home. The seller can refuse to negotiate remediation of the lead and does not have to certify if the home is lead-free.

A broker shows property and writes up an offer for the buyer and seller: Choose only ONE best answer. A must act as a dual agent with the informed consent of both buyer and seller. B will breach his fiduciary responsibility due to the reduction in duties the broker can perform. C may act as a transaction broker where the broker only represents the transaction. D may act as an exclusive agent for both buyer and seller in the transaction.

C may act as a transaction broker where the broker only represents the transaction. This answer is incorrect. The correct answer is 'C' A facilitator or transaction broker is a non-agency relationship where a licensed agent can assist the buyer and seller in the purchase/sale of a property without representing the interests of either party. The buyer and seller are customers and owed honesty, fairness, and disclosure of material facts. NOTE: North Carolina does not permit transaction brokerage.

A property located near high voltage power lines and a power transfer station with multiple transformers. A prudent buyer may test for contamination from: Choose only ONE best answer. A radon. B asbestos. C polychlorinated biphenyls. D lead-based paint.

C polychlorinated biphenyls. This answer is incorrect. The correct answer is 'C' Coolant used on transformers may contain polychlorinated biphenyls, which may cause cancer. Radon is odorless, colorless gas, which the EPA recommends remediation when readings are at or above 4.0 picocuries per liter of air. Asbestos was commonly used in insulation, siding, ceiling/floor tiles, etc. It is a danger when it becomes friable (airborne) and causes cancer. Lead-based paint - 1978 - most houses built before 1978 require the owner to disclose if she/he knows about lead or has reports about lead on the property.

QUESTION 79 OF 80 A broker has received multiple offers on a property that she has listed. The listing broker should: Choose only ONE best answer. A suggest that the seller accept the highest offer even if it contains a loan contingency. B inform the buyers that multiple offers have been received and call for highest and best. C present all offers regardless of the order received and allow the seller to determine response. D disclose the highest offer to all buyers and ask them to beat that amount.

C present all offers regardless of the order received and allow the seller to determine response. This answer is incorrect. The correct answer is 'C' The broker must first present all offers to the seller and allow them to decide how to proceed forward. The seller may decide to accept one offer, ask for the highest and best from all buyers, negotiate with one buyer first, etc. The highest offer may not be the best offer depending on offer contingencies. A broker cannot disclose the price or other material terms contained in a buyer's offer without receiving permission from the buyer, even if the seller is demanding the listing agent to do so.

A licensee that shows a prospective buyer neighborhoods based upon the buyer's color rather than on the amenities of the homes is guilty of: Choose only ONE best answer. A redlining. B blockbusting. C steering. D misrepresentation.

C steering. Directing or channeling a buyer to particular neighborhoods based on one or more of the protected classes under the federal fair housing act is known as steering. Redlining was a common practice of refusing to lend or insure loans in racially mixed areas. Blockbusting induces the sale of a property because one of the protected classes is moving into the neighborhood. Misrepresentation occurs when a licensee lies either orally or in writing.

Which of the following statements regarding financing is FALSE? Choose only ONE best answer. A To avoid private mortgage insurance, a lender may require a buyer to have at least a 20% down payment. B VA and FHA financing does not permit prepayment penalties. C Only a qualifying veteran can assume a VA loan. D A purchase money mortgage typically involves the seller financing some or all of the amount borrowed by the buyer.

C)Only a qualifying veteran can assume a VA loan. A qualifying borrower can assume a VA loan if they are a veteran or not. Only a veteran or qualifying widow/widower can originate a VA loan. A borrower can typically avoid private mortgage insurance by making at least a 20% down payment on a conventional loan. VA and FHA loans cannot charge prepayment penalties. Purchase money mortgages are seller-financed. NOTE: For the national exam, purchase money mortgages may refer to any financing obtained by the buyer.

61 Which of the following is most accurate regarding the valuation of an income-producing property? Review Later Capitalization Rate equals Net Operating Income divided by Value Capitalization Rate equals Value divided by Net Operating Income Net Operating Income equals Capitalization Rate multiplied by gross rent multiplier Value equals Net Operating Income times Capitalization Rate

Capitalization Rate equals Net Operating Income divided by Value Explanations (SELECT THIS TO SEE EXPLANATIONS) The income approach states that value equals net operating income divided by the capitalization rate. NOTE: It is best to memorize the t-bar to ensure you know the formula for calculating each component of the income approach. Value = NOI / Cap Rate. Cap Rate = NOI / Value. NOI = Value X Cap Rate.

Which of the following is FALSE about mortgage financing? Choose only ONE best answer. A The risk of default is higher for adjustable-rate mortgages than fixed mortgages. B A borrower often pays discount points to lower the interest rate stated on the banknote. C Construction loans are the riskiest and often require a borrower to obtain a take-out commitment. D A borrower with limited funds to purchase would seek a blanket loan which allows a parent to cosign on the mortgage.

D A borrower with limited funds to purchase would seek a blanket loan which allows a parent to cosign on the mortgage. This answer is incorrect. The correct answer is 'D' A blanket loan occurs when the lender finances multiple properties/parcels of land in one loan. The loan will require the borrower to pay off a portion of the loan when the borrower sells one of the properties. A kiddie-condo loan allows a parent to cosign on a mortgage & most banks enable a parent to cosign a mortgage loan. Adjustable-rate mortgages transfer the risk of increasing interest rates to the borrower & can increase the monthly mortgage payment, which could cause a borrower to default. Discount points are prepaid interest that lowers the interest rate stated on the note. A borrower pays discount payments to lower the monthly payment.

Which of the following would be considered a material fact that a licensee must disclose to a prospective buyer? Choose only ONE best answer. A The seller is behind on his mortgage. B The previous owner died from complications of AIDS. C The seller purchased the property at a foreclosure auction. D A methamphetamine lab had been in the house.

D A methamphetamine lab had been in the house. This answer is correct.When a property is used as a methamphetamine lab, it is considered a material fact. It is not a material fact that a seller is behind on the mortgage unless foreclosure notice is received. It is a violation of fair housing to disclose a handicap such as HIV/AIDS. A property was subject to a bank foreclosure will be advertised as a foreclosure property; however, in a subsequent sale, the purchaser is not required to disclose how they purchased the home.

Property has been under contract for three weeks, and the finance contingency will expire in the next 48 hours. The buyer is requesting a one-week extension. If the seller agrees to modify the contract, which of the following has occurred? Choose only ONE best answer. A Substitution B Novation C Addendum D Amendment

D Amendment This answer is incorrect. The correct answer is 'D' The agreement to modify a contract is known as an amendment. The term substitution relates to the valuation, where the property with the lowest price will sell faster than a comparable property offered at a higher price. Novation is the act of replacing a party to the contract with the release of liability. An addendum adds provisions to an offer that must be met for the contract to be legally binding.

A seller listed property under an exclusive right to sell listing agreement. It has been nearly six months, and the property is still on the market. The seller has made several price reductions to generate traffic. The seller calls the listing broker and informs him that he is going to lower the commission to the broker. Does the seller have the authority to take this action? Choose only ONE best answer. A Yes. Since the seller has taken several price reductions, he is permitted to decrease the commission rate. B Yes. The commission is negotiable and may be changed at any time. C No. Commission rates are set by the state Real Estate Commission. D No. The commission was agreed to in a contract and can only change with the mutual agreement of the parties

D No. The commission was agreed to in a contract and can only change with the mutual agreement of the parties. This answer is incorrect. The correct answer is 'D' The listing agreement is a contract, and any amendments must be agreed to and signed by both parties. While it is sad that the seller has not been able to sell his/her home, it does not permit them to make a change in the commission unilaterally. Compensation is negotiable under the Sherman Antitrust Act, although a brokerage can set the rate charged or negotiation parameters. Compensation is established in the contract, not by the Real Estate Commission, MLS, or REALTOR? Association. A company can set a policy for compensation.

Which of the following is TRUE about RESPA (Real Estate Settlement Procedures Act)? Choose only ONE best answer. A All mortgage loans are subject to the law. B RESPA applies only to the primary financing of residential properties. C The law informs buyers and sellers about alternative financing options. D RESPA does not allow kickbacks among settlement service providers.

D RESPA does not allow kickbacks among settlement service providers. This answer is incorrect. The correct answer is 'D' The Real Estate Settlements Procedures Act applies to residential real estate purchases when a loan is involved. RESPA does not apply to commercial or business loans, vacant land sales where none of the proceeds will be used to construct a residential structure, large tracts of land of 25 acres or more and certain loan assumptions. RESPA does apply to federally related residential mortgages where the government insures or guarantees the loan, the bank is FDIC insured, or the loan will be sold on the secondary market. To recall the provisions of RESPA, memorize Kids Eat Up Boogers Dirt and Lead. There are no Kickbacks among settlement service providers; there are Escrow account limitations (aggregate accounting adjustment); a Uniform settlement statement is required; the buyer receives a Booklet (Know Before You Owe); the lender must Disclose loan servicing (prepayment penalty, adjustable-rate, can the loan be sold...); and requires a Loan estimate within three banking days of the mortgage application.*

Which of the following best describes the action an individual homeowner in a neighborhood with restrictive covenants would take when a neighbor in violation? Choose only ONE best answer. A File a complaint with the local housing department. B Encourage neighbors to send letters demanding the neighbor to stop. C Contact the police to complain. D Seek an injunction through the courts.

D Seek an injunction through the courts. This answer is incorrect. The correct answer is 'D' The best course of action when a homeowner is violating restrictive/protective covenants is to file a complaint with the homeowner's association. Since this is not an option in the question, the second-best answer is seeking an injunction through the courts. The local housing department and police department will not hear a complaint unless it is a violation of the law. It is not advisable to encourage neighbors to send letters demanding a neighbor to stop a certain action.

A property owner desires to change the zoning of a large tract of land into a subdivision that will provide affordable housing. The owner did not have to go through the typical process to obtain approval. The owner received a: Choose only ONE best answer. A Variance Permit. B Spot Zoning Permit. C Subsequent Exception Permit. D Special Use Permit.

D Special Use Permit. This answer is correct.A special use permit allows a property owner to use a property for a specific use that does not follow the current zoning in that area. It is provided for in long-term planning as it is in the public's interest (such as low-income housing, hospitals, museums, etc.). A variance is a minor change to the property - such as adding additional parking space. Spot zoning is changing the rules for one property rather than the surrounding area, typically for the financial benefit of the owner. There is no such thing as a subsequent exception permit.

Terry owns a property located near a major university. He anticipates that property values will appreciate significantly over the next few years, so rather than selling the property, he decides to rent. Which of the following statements is correct? Choose only ONE best answer. A Terry has a leasehold interest in the property and has given up the right of control. B Terry has a leasehold interest in the property and has given up the right of possession. C Terry has a leased fee interest in the property and has given up the right of control. D Terry has a leased fee interest in the property and has given up the right of possession.

D Terry has a leased fee interest in the property and has given up the right of possession. This answer is incorrect. The correct answer is 'D' The landlord receives the fee and therefore has a leased fee interest in the rental property. The tenant has a hold on the premises, and therefore the tenant has a leasehold interest in the rental property. When the landlord rents out the property, she/he gives up the right of possession in return for the rental rate. He/she does not give up the right of control - they could sell the property to another, subject to the lease agreement.

All of the following statements are correct concerning lead-based paint EXCEPT: Choose only ONE best answer. A The buyer should receive the pamphlet Protecting Your Family From Lead in the Home. B Encapsulation is the primary method to protect against the hazards of lead-based paint. C The buyer is allowed an opportunity to inspect the home for lead-based paint. D The Lead-Based Paint Addendum is required if the home is built before 1992.

D The Lead-Based Paint Addendum is required if the home is built before 1992. This answer is incorrect. The correct answer is 'D' The Lead Based Paint Addendum is used in most homes built prior to 1978. Disclosure is required in residential sales, so if the property has been converted to commercial there is no disclosure requirement. The owner does not have to certify that the property is lead free. Lead may be encapsulated to reduce the health risks or remediated from the property.

Which of the following statements is TRUE regarding agency agreements? Choose only ONE best answer. A A power of attorney creates special agency representation of a principal. B The Exclusive Right to Represent buyer is a general agency representation agreement. C The listing agent is only entitled to compensation when the property sells. D The buyer's agent may terminate the agreement if the buyer asks the agent to select neighborhoods based upon protected classes.

D The buyer's agent may terminate the agreement if the buyer asks the agent to select neighborhoods based upon protected classes. This answer is incorrect. The correct answer is 'D' A buyer cannot ask an agent to discriminate by directing or channeling the buyer to certain neighborhoods. An individual acting under a power of attorney or attorney in fact acts as a universal agent. A universal agent has all-encompassing powers to bind an individual to a contract. When a broker represents a buyer, seller, or tenant, they act as special agents. A special agent has no signing authority and is limited to gathering and presenting the information. When brokers affiliate with a brokerage under an independent contractor agreement or enter into a property management agreement, they will act as general agents. A general agent is limited to certain defined tasks such as finding tenants and signing lease agreements on behalf of an owner, however, is not authorized to sell the property or make changes. A listing agent is entitled to compensation when a seller refuses to sell the property if all terms of the listing agreement are met, or if the seller breaches the listing agreement by discriminating.

Which of the following statements is TRUE about an exclusive right to represent the buyer in a purchase transaction? Choose only ONE best answer. A The listing broker may also be referred to as the selling broker in an offer to purchase. B The buyer's broker is entitled to compensation only when they show the property that the buyer decides to purchase. C The brokerage firm cannot show similar property to the type the current buyer is looking for to other buyers as this is a breach of loyalty. D The compensation earned by a buyer's agent when the buyer enters a legally binding contract may be called a success fee.

D The compensation earned by a buyer's agent when the buyer enters a legally binding contract may be called a success fee. This answer is incorrect. The correct answer is 'D' A brokerage may show other buyers the same or similar property to the buyer clients as it would be impractical to create a deli counter. A broker granted the exclusive right to represent the buyer, is entitled to compensation regardless of how the buyer was introduced to the property. The broker that writes the offer is typically referred to as the selling broker in an offer to purchase. A buyer agent earns a success fee when the buyer enters a purchase contract and is payable at closing.

QUESTION 76 OF 80 The seller agreed to deliver a general warranty deed to the buyer in an offer to purchase and contract. Which of the following is FALSE? Choose only ONE best answer. A The seller is obligated to defend the title against third party claims of ownership based upon past activity. B The general warranty deed provides the most protection to a purchaser. C Most standard offer to purchase forms used by brokers require the seller to provide the buyer a general warranty deed. D The general warranty deed automatically transfers a marketable title to the buyer.

D The general warranty deed automatically transfers a marketable title to the buyer. This answer is incorrect. The correct answer is 'D' A general warranty deed is used to transfer ownership from grantor to grantee and is the most protective deed that can be used. It does not guarantee that marketable title is given which is why a buyer should hire an attorney/title company and obtain title insurance. The grantor or seller promises to defend the grantee/buyer against third-party claims of ownership.

The owner of a property grants a license to a hunter so she can hunt on his 100-acre property. The owner decides to sell the property. Which of the following statements is TRUE? Choose only ONE best answer. A This is an illegal act as only the state can issue a license to use the property for hunting. B This is a personal easement in gross, that the owner must honor for the hunters' lifetime. C This is a commercial easement in gross that may be sold or conveyed by the hunter. D The license is not an encumbrance, as the owner may terminate it at any time.

D The license is not an encumbrance, as the owner may terminate it at any time. This answer is incorrect. The correct answer is 'D' A license may be revoked at any time and therefore is not an encumbrance against the property. While the state does set rules for hunting, they would not be able to grant permission to use private land. A commercial easement in gross is common for utilities, railway, billboards, etc. and may be sold, inherited, or conveyed. A personal easement in gross is generally for the lifetime of the individual that is benefiting from the easement.

Which of the following violates a listing agent's duties to her principal? Choose only ONE best answer. A The listing agent discloses that the buyer prequalifies for an amount greater than the offer price. B The listing agent fails to disclose to the buyer that the seller is currently delinquent on his mortgage. C The listing agent discloses to the buyer that the seller refused to repair a major component of the property. D The listing agent fails to disclose to the seller that the buyer is relocating and needs to find a property quickly.

D The listing agent fails to disclose to the seller that the buyer is relocating and needs to find a property quickly. This answer is incorrect. The correct answer is 'D' The listing agent must disclose all information learned about the buyer, even personal and confidential information that could weaken the buyer's bargaining position. The listing agent represents the seller, not the buyer. A listing agent must disclose material facts to all parties involved in the transaction. It is not a material fact that the seller is behind on the mortgage unless foreclosure notice is sent.

During a preliminary walkthrough of a home, the seller informed the listing agent that the roof leaks during heavy rain. The listing agent made a note of this fact in his file but failed to make any further inquiries. At an open house, a prospective buyer asked if the home has any issues that would require immediate repair, to which the listing agent said no. The prospective buyer purchased the home without an inspection. Two weeks after closing, the buyer noticed a leak and was shocked to discover extensive water damage to the ceiling. Which of the following is TRUE? Choose only ONE best answer. A The listing agent is not liable as the buyer failed to order a property inspection. B The listing agent is guilty of negligent omission. C The seller is responsible for the listing agent's actions through subrogation. D The listing agent is guilty of willful misrepresentation.

D The listing agent is guilty of willful misrepresentation. This answer is incorrect. The correct answer is 'D' The determination of negligent or willful actions by a broker can be difficult. In this instance the question does not state that the agent forgot, rather failed to fulfill his or her duties to discover and disclose material facts. Therefore the actions of the agent are willful. Since the agent stated something that is not true it is a misrepresentation rather than omission (not saying something). The listing agent has a duty to disclose material facts, regardless of whether the buyer obtains a property inspection. Subrogation is the release of the right to sue in exchange for payment which is obtained when an insurance company pays the loss of an insured party.

Which of the following statements is TRUE regarding VA loans? Choose only ONE best answer. A The Government insures loans based upon a sliding scale. B VA loans have a lower loan-to-value than conventional financing. C The lending institution originates loans at interest rates set by the VA. D The loans are assumable by qualifying non-veterans.

D The loans are assumable by qualifying non-veterans. This answer is incorrect. The correct answer is 'D' VA loans are assumable by qualifying veterans and non-veterans. Only a veteran with an entitlement or qualifying widow or widower can originate a VA loan. We owe our veterans more, so VA loans are guaranteed not insured. The lender can charge origination fees and discount points. The lending institution originates the loan, and the VA guarantees it.

All of the following are true regarding the 1968 Federal Fair Housing Act EXCEPT: Choose only ONE best answer. A a religious organization that rents units at a reduced rate for the benefit of their membership are exempt. B complaints must be filed with HUD within one year from the incident, and HUD has 100 days to respond. C familial status refers to families with children under the age of 18 and pregnant women. D an owner occupant that refuses to rent a unit in a quadplex based on the prospective tenants' race would violate the act even if they did not use discriminatory advertising.

D an owner occupant that refuses to rent a unit in a quadplex based on the prospective tenants' race would violate the act even if they did not use discriminatory advertising. This answer is incorrect. The correct answer is 'D' The Federal Fair Housing Act permits the owner of an owner-occupied rental property up to four units to discriminate against protected classes so long as a real estate agent is not hired, the owner does not discriminate in advertising, and the owner does not state why they are refusing to rent. NOTE: HUD has issued guidance that they will not enforce the advertising law when an individual seeks a specific sex tenant when renting out rooms when the unit is owner-occupied.

To form a legally binding contract for real property, all of the following must occur EXCEPT: Choose only ONE best answer. A unconditional acceptance of the offer. B written agreement signed by all owners. C notification of acceptance. D delivery and acceptance of the signed offer.

D delivery and acceptance of the signed offer. This answer is incorrect. The correct answer is 'D' To form a legally binding contract there must be an offer, it must be in writing (Statute of Frauds), signed by the parties with unconditional acceptance and notification of acceptance to the offeror. Notification can be oral or in writing but does not require that the full contract be delivered. Delivery and acceptance is a requirement for the essential elements of a valid deed not purchase contracts. NOTE: It is common for the exam to mix elements to trick you - here contract vs deed.

A listing agent owes the buyer: Choose only ONE best answer. A loyalty. B advocacy. C confidentiality. D fairness.

D fairness. This answer is correct.A listing agent does not represent the buyer and therefore owes the buyer honesty, fairness, and disclosure of material facts (HFD). A listing agent owes the seller obedience, loyalty, disclosure, confidentiality, accounting and reasonable skill, care, and diligence.

Lori, through her buyer's agent, submits an offer to purchase a property contingent upon her ability to obtain financing. The contingency date is 30 days, and the settlement date 45 days from the effective date of the contract. Two days before the contingency expiration, the lender notifies the buyer that she/he needs an additional seven days to complete the loan. In this circumstance, the seller: Choose only ONE best answer. A must grant the buyer an extension for the financing contingency and settlement date. B must renegotiate the financing contingency date but not the settlement date. C can automatically terminate the contract as the buyer is in breach for failing to obtain a loan by the contingency date. D may retain the earnest money deposit if the bank denies the loan after the original loan contingency date.

D may retain the earnest money deposit if the bank denies the loan after the original loan contingency date. This answer is incorrect. The correct answer is 'D' The buyer and seller contractually agreed to the financing contingency. The buyer risks the loss of his or her earnest money deposit if the bank denies the loan after the original loan contingency date. The seller may but is not obligated to amend the contract to a later loan contingency date. For a buyer to be entitled to a refund of the earnest money deposit, she must receive a denial in writing and terminate before the contingency expiration date.

Agency agreements: Choose only ONE best answer. A become binding when the firm signs the listing or buyer agency contract. B must be reduced to writing at inception. C authorize the listing broker to sign an acceptable offer on behalf of the seller. D outline the amount of compensation the firm will receive.

D outline the amount of compensation the firm will receive. This answer is incorrect. The correct answer is 'D' Agency forms by agreement, whether the agreement is oral or in writing. Some agreements must be in writing from inception. The agreement between the parties should address compensation and dual/designated dual agency authorization. An affiliated broker has the authority to sign listing and buyer agency agreements on behalf of the brokerage, thus forming the agency relationship. The broker-in-charge is not required to sign to form the agency relationship. An agreement to list a property for sale or rent must be in writing from the start. Buyer agency agreements may be oral under certain circumstances and, therefore, would not need to be in writing from inception. Representation of a buyer or tenant does not need to be in writing unless the broker/brokerage seeks exclusivity or the buyer tenant desires to make an offer.

An Exclusive Right to Sell Listing Agreement in a multi-broker firm terminates when: Choose only ONE best answer. A the salesperson that signed the agreement dies or is declared insane. B the broker that signed the agreement resigns and affiliates with another brokerage. C the property was damaged when a pipe burst. D the property sells.

D the property sells. This answer is incorrect. The correct answer is 'D' A listing agreement ends when full performance has occurred (sale of the property). The exclusive right to sell listing agreement is binding between the firm and the client. The firm can appoint another broker to fulfill the terms of the agreement in the unfortunate circumstance of death, insanity, or the broker that signed the agreement resigns.

48 An 88-year-old widow was recently denied a loan to purchase a new residence. She believes her age was the cause of the refusal. If this is true, the lender has violated which of the following laws? Review Later Good Funds Settlement Act Fair Housing Act Fair Credit Reporting Act Equal Credit Opportunity Act

Equal Credit Opportunity Act Explanations (SELECT THIS TO SEE EXPLANATIONS) The Equal Credit Opportunity Act (ECOA) is a set of laws outlining protected classes for purposes of loan origination. These protected classes are similar to those of fair housing laws, however, ECOA protects age and marital status. The Fair Credit Reporting Act states a consumer has the right to dispute entries on their credit report and access one free report each year. The Good Funds Settlement Act requires an update of the title opinion prior to granting authorization to disburse funds from the escrow account.

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