BF Practice test 3

A broker's contract for selling a building called for a fee of 6% of the first $100,000 and 2 1/2% of all over that amount. The broker's fee on the sale was $7,600. What was the sales price?

$100,000 X 6% = $6,000 commission on first $100,000. $7,600 - $6,000 = $1,600 commission on amount above first $100,000. We know that the amount of the sales over $100,000 X 2 1/2% is going to give us $1,600 in commission. Therefore, if we divide the commission by 2 1/2%, we will know the amount of the sales. $1,600 divided by 2 1/2% = $64,000 amt of sale over 1st $100,000. Don't forget that we have to add the two amounts together. $100,000 + $64,000 = $164,000 total sale price. The correct answer is: $164,000.

If the capitalization rate is 8% and the yearly net income is $100,000, what is the selling price?

$100,000 net income divided by a cap rate of 8% equals a value of $1,250,000. The correct answer is: $1,250,000

An office building producing a gross annual income of $45,000 is purchased for $225,000. If the only expense is an 11.5% interest payment on a $200,000 term loan, what is the owner's rate of return on equity?

$200,000 * .115 = $23,000 annual interest expense. $45,000 (income) - $23,000 (expense) = $22,000 net income. $225,000 (value) - $200,000 (debt) = $25,000 equity. $22,000 (income) / $25,000 equity = 0.88 or 88% return on equity. The correct answer is: 88.0%.

A term loan is 75% of the property appraisal. The annual interest rate on the loan is 8% and the interest for the first year is $3,870. What was the amount of the appraisal?

$3,870 divided by 8% = $48,375 loan. $48,375 divided by 75% = $64,500 appraised value. The correct answer is: $64,500.

An agent was to receive 5% commission on a piece of property that listed for $30,000. How much commission would he receive if the owner reduced the selling price by 15%?

$30,000 X 15% = $4,500 amount reduced $30,000 - $4,500 = $25,500 new listed price. $25,500 X 5% = $1,275 commission. The correct answer is: $1,275.

The purchase price of the property was $200,000. The purchaser obtained an 80% loan. What is the amount of the intangibles tax due?

$480.00 The Intangibles Tax is paid on the New Loan Amount at the rate of $1.50 per increment of 500 or any portion of 500. The loan amount of $160,000 / 500 = 320 x $1.50 = $480.00 The correct answer is: $480

Sam sold a property to Emma for $225,000. Sam's loan balance was $44,500 with an interest rate of 7%. Emma's conventional loan was at 8% with a 90% loan to value ratio. The taxes for the year were $1250 and the home owner's insurance was $495. Closing took place on October 30th. Based on this information, answer the following question. How much was the accrued interest and to whom was it paid?

(A) &Seller's Lending Institution $259.58 along with loan balance to pay off loan. $ 44,500 x 7% = $ 3,115 / 360 = 8.6527 x 30 days = $ 259.5833 = $259.58 (Accrued interest is paid for the due date through and including the day of closing.) The correct answer is: Lending Institution $259.58

A parcel of land is divided into two lots. Each lot is 432 feet X 522 feet. What is the total acreage in the two lots combined?

432 ft. X 522 ft. = 225,504 sq. ft. in each lot 225,504 divided by 43,560 sq. ft. per acre = 5.177 acres in each lot 5.177 X 2 lots = 10.35 total acres. The correct answer is: 10.35 acres.

A salesperson received 1.5% commission on all sales and listings sold. What was the total value of the real estate handled last year if the agent's income was $33,000?

If 1% (.015) X Total value = $33,000, then $33,000 / .015 = Total Value. Total value handled = $2,200,000. The correct answer is: $2,200,000

Under a net lease, which of the following is the tenant NOT required to pay?

Mortgage

Using a gross rent multiplier of 120, what is the value of a property that produces $12,000 annual income?

The gross rent multiplier refers to the relationship between MONTHLY income and the selling price or value of the property. If the annual income is $12,000 then the monthly income is $1,000. The monthly rent is then multiplied by the multiplier (120) to arrive at the value. $1,000 X 120 = $120,000 The correct answer is: $120,000.

According to BRRETA, a licensee is responsible, under certain circumstances, for disclosing facts known about the area surrounding a property. What is the extent, in miles, that this disclosure encompasses?

a. 1

Which mortgage clause allows a lender to regain their investment ifa borrower does not pay his payment?

a. Acceleration clause

The 1988 Amendment to the Federal Fair Housing Act, Title VIII, declared it unlawful to discriminate:

a. Against households with children under 18 years of age.

Which can an unlicensed secretary in a broker's office do?

a. Collect rents submitted to her at her desk

The HUD information booklet must be given to which of the following?

a. Every person who submits a loan application to a lender over which RESPA has jurisdiction.

The owner of a condominium apartment holds which of the following interests in his or her individual living unit?

a. Fee simple title in his unit.

An agent may discriminate against a potential buyer on the basis of:

a. Inability to pay.

A client is obligated to her agent for:

a. Indemnification against loss not caused by the agent.

A broker and salesperson owe all EXCEPT which of the following to the purchaser/customer?

a. Negotiation of the lowest possible price.

The vendee is:

a. One who buys or offers to buy.

A person who is licensed in another state applies for a license in Georgia. The GREC learned that the applicant Did NOT have a high school diploma nor a GED. Which of the following is true regarding the issuance of a license?

a. The applicant could NOT get a license because of the lack of a high school diploma or a GED

When a property is sold with an existing lease:

a. The entire lease interest is transferred.

If your friend told you that he had just purchased a home with no money down, he probably obtained:

b. A VA guaranteed loan.

According to the 1988 Fair Housing law, which of the following is NOT considered to be handicapped?

b. A person addicted to a controlled substance.

After taking the pre-license class and passing the state exam, in applying for license, what type of documentation would be required?

b. A photo ID

Jean transfers a fee simple interest in her property to her daughter Lisa, but reserves for herself a life estate in the property. The interest that Lisa holds during Jean's life time is considered to be:

b. A remainder interest.

Which of the following best describes a condominium?

b. Air lot.

Which of the following is NOT essential to the validity of a mortgage?

b. Attorney.

A salesperson represents the:

b. Broker

Once a property has been appraised, then exposed to the market for a reasonable length of time and finally sells, who has determined the value of the property?

b. Buyer.

When a mortgagor has paid his debt in full, he is said to have defeated the mortgage. Which legal document is used to record the fact that the mortgage has been paid?

b. Deed of release.

Which of the following criteria is NOT a requirement of an applicant for a salesperson's license?

b. Furnish evidence of completion of at least 60 hours in a salesperson's course or courses of study approved by the commission

What type of foreclosure does a lien theory state provide?

b. Judicial

A contract for the sale of land in which the buyer makes regular payments, takes possession, but does not receive title is known as a(n):

b. Land contract.

A seller's listing expired on August 31st. On August 10th, another broker contacted the seller about listing the property when the current listing expired. Is this legal?

b. No, because the broker contacted the seller prior to the expiration date

A listing agreement will automatically terminate:

b. On the date specified in the listing agreement

The right of a landlord to reenter or regain possession of the premises upon expiration of a lease is known as:

b. Reversion.

The client in a listing agreement would be the:

b. Seller of the listed property

A broker decides to lower the prices of her listings after the properties have been on the market for 120 days. She finds that more buyers are now calling on these listings. Which of the following is true about such a practice?

b. She can do this only with the owner's approval

The order of priority of liens would most likely be:

b. Tax, mortgage, mechanic's.

Which of the following is used to estimate value using a comparison between gross monthly rents and the selling price?

b. The gross rent multiplier

The buyer in a purchase agreement is known as a/an:

b. Vendee.

An agent showed a property. After writing an offer and presenting it, the seller accepted it. What date must be listed on the contract?

b. When any signatures or initials are obtained

A buyer wrote an offer to purchase for a $130,000 house. The buyer asked the salesperson if they could use the title to a speed boat as an earnest deposit. Would this be acceptable as an earnest deposit?

b. Yes, as long as it is agreeable with the seller

A salesperson pre-qualified a buyer and took personal information at that time. The salesperson then showed the buyer several homes. Prior to showing the homes the salesperson had the buyer sign an agency disclosure form. Did the salesperson do anything wrong?

b. Yes, the salesperson should have disclosed their agency prior to taking personal information

All of the following are requirements for licensure of a salesperson EXCEPT:

b. a credit report no more than 30 days old

A farmer leased a property on an annual basis whereby the farmer or the owner could terminate the lease by giving the other party 90 days notice. One half of the crop value would be the annual rent. This type of lease would best be described as a:

b. periodic estate

A house sold for $140,000 with the buyer making a 20% down payment. The grantor's tax is charged at $1.00 per $1,000, what would the tax amount to:

c. $140.00 - based on the selling price.

Thelma, a widow, owns her home free and clear. She has a fixed income which does not meet her current financial needs. Thelma wants to borrow money on her house in order to supplement her income. What type of loan would Thelma most likely apply for?

c. A RAM (reverse annuity mortgage).

If a buyer gives a note and a mortgage to a seller as part of the purchase price, the resulting mortgage is commonly referred to as:

c. A purchase money mortgage.

A new residential development requires that all single family houses have a 20' X 22' attached garage. This requirement is an example of:

c. A restrictive covenant

Negative amortization is a loan feature that?

c. Allows the principal balance to increase because payments are insufficient to pay the interest owed.

Which of the following is NOT an example of a real estate contract?

c. Bill of sale.

Encouraging a homeowner to sell his or her property because minority group families are moving into the neighborhood is:

c. Blockbusting.

Which of the following statements, included in an advertisement, would constitute a Fair Housing violation?

c. Catholics preferred.

In agency representation, the employer is called the:

c. Client.

A developer is considering construction of a new subdivision in a rural area on a very hilly tract of land. What type of map will be most beneficial to the developer in making his decision to build?

c. Contour.

Seller Carr instructed Agent Dole to inform buyers that the plumbing was in excellent shape. However, the plumbing was needing repair. Dole followed the owner's orders. What can happen in this case?

c. Dole is subject to license revocation

A seller wants to list her home with a broker but would like the option to sell it herself and not pay a commission. Which type of listing should she AVOID signing?

c. Exclusive right-to-sell listing.

During the period of time after a real estate contract is ratified, but before title actually passes to the buyer, the status of the contract is:

c. Executory

Outdated bathroom fixtures are an example of:

c. Functional obsolescence - curable

Mr. Gregory has a home for sale with a sign, FOR SALE BY OWNER, in the front yard. Salesperson Gary calls, identifies himself and asks for the key to show the property. Mr. Gregory agrees. Which of the following best describes any agency relationship that may exist?

c. Gary's broker is the agent of Mr. Gregory for a reasonable time.

Someone sells real estate for another for a fee without a license. What could the GREC do in this case?

c. Issue a cease and desist order and impose a fine up to $1,000 a day

Which legal instrument is used to convey a tenancy for years from one person to another?

c. Lease.

An agent was working with a buyer. The agent explained agency to the buyer and presented the buyer with an agency disclosure form as part of a sales contract for the buyer to sign. However, the buyer refused to sign. What should the agent do?

c. Make a note and give it to the broker to be kept in the files

Under Truth-In-Lending requirements, the mortgagee:

c. Must advise the borrower the total amount of interest that will be paid, if the loan is paid at the scheduled maturity date.

An unlicensed person worked for a real estate company. The unlicensed person showed a friend a home listed by C the real estate company. The friend purchased the home and the unlicensed person is asking for a 2% real estate commission. Can the broker of the real estate company pay the 2% commission?

c. No, as the employee was unlicensed

An owner and tenant signed a one year lease agreement. The owner sold the property to a buyer 4 months later. The buyer wanted to move into the property immediately. The original lease contract signed by the seller and tenant was silent on this point. Can the buyer of the property move in immediately?

c. No, because the tenant can stay in the property for the duration of the original lease contract

A real estate broker wishes to deposit an earnest money check in his business operating account until settlement, so the purchaser can earn a higher rate of interest on his funds. Can he legally do this?

c. No, these funds must be placed in a separate escrow account

Which of the following contracts is voidable?

c. One of the parties was drunk at the time the contract was signed

A seller had a house listed with a broker for $86,000. The broker was working with a buyer who told the broker that the buyer would start by offering $85,000 but would pay $86,000 for the property. What should the broker do?

c. Present the offer as is and inform the seller of the possible increase

A couple with good income and excellent credit want to buy and renovate an older home located in an economically distressed neighborhood. They have been turned down by 3 different lenders. This is an example of:

c. Redlining.

A salesperson told a buyer that the air conditioner would stay with the house. However, he had NOT checked it out with the seller. After closing, the seller took the air conditioner. Which would happen?

c. The GREC can take disciplinary action or dismiss a complaint if filed

When necessary, who forecloses in a trust deed state?

c. The Trustee

Which of the following contracts will provide instruction for the distribution and proration of escrow and impound funds?

c. The sales contract.

For answering some of the following questions, you may need to be sure of the number of days in each month. For those items, you should refer to the table below. Tax calculations assume that property taxes are due and payable on July 1. If a closing is before July 1, you are to assume the taxes have not been paid (unless told otherwise). If closing is July 1 or later, you are to assume taxes have been paid (unless told otherwise). The tax year will begin on January 1 and end on December 31 and is a 365 day year. Interest prorations will be based on a 360 day year unless told otherwise. Loan amounts will be lowered to the next lower $100 increment if not in even $100 amounts. Who pays the intangibles tax?

c. The seller and buyer may negotiate who is to pay the tax.

An insured loan, amortized over 25 years, in which payments would increase or decrease in accordance with some economic indicator would be an example of:

c. Variable rate mortgage.

A person finished the pre-license school on July 31, 2011. After taking and passing the state examination on December 15, the applicant applied for a license on January 20, 2012. Could this person receive a license?

c. Yes, because the applicant applied for the license within 12 months of passing the state examination

To supervise a branch office, you must be:

c. a Broker or Associate Broker

A licensed salesperson is looking for a home for herself. She is interested in a home listed with another company. If she wishes to purchase the home, she must:

c. include in the offer the fact that the buyer is a licensed salesperson

The minimum balance that must be maintained in the real estate education, research, and recovery fund is:

d. $1,000,000.

Property was sold and closing was on May 15th. The taxes for the current year had NOT been paid. Annual taxes are $3,096. What is the settlement sheet entry to prorate the taxes between buyer and seller?

d. $1,161 credit to buyer; $1,161 debit to seller.

Agnes has an interest in property and by virtue of her interest she may place a deed restriction on the property that will apply to any future owner. Her interest in the property would be:

d. A fee simple estate.

Which of the following would cause what appears to be an otherwise valid contract to be declared invalid?

d. Any of the above.

When a buyer obtains a loan for the purpose of financing the purchase of real property, how does the amount of the loan obtained appear on the settlement sheet?

d. As a credit to the buyer, only.

A citizen phoned the GREC with a complaint on a licensee. The GREC sent him a form to fill out. However, he never followed up the complaint in writing. What would the GREC do?

d. Even though he did not put it in writing, the GREC may investigate anyway at their own discretion

Georgia's law that is focused on deceptive advertising is:

d. FBPA.

If the landlord (owner) of property dies during the period of a valid lease, what effect would it have on the lease and the tenant?

d. It has no effect

Which is true about a net listing?

d. It is illegal in Georgia

A restrictive covenant in a deed could:

d. Prevent the use of the property as a dance hall

A bill of sale would be used instead of a deed for all EXCEPT which of the following?

d. Real estate.

A person who had been convicted of a felony 10 years ago was turned down for license. If he still desired a license, what is his next course of action?

d. Request a hearing before the Real Estate Commission

If a prospective buyer (who is of a minority group) asks an agent to show her properties, the agent should:

d. Show her any property for which she is financially qualified.

A corporation buying real property would take title under:

d. Tenancy in severalty.

According to a community association management agreement, the duties of a property manager include all of the following except?

d. The agreement must be made by a CAM licensee.

John, an adult, entered into a contract with Paul, who is 16 years old. When John learned that Paul was a minor he decided to terminate the contract. Which of the following statements is true?

d. The contract is valid and binding only on John.

A broker listed a property for $87,500. While showing the property, a buyer remarked that $84,500 is what the buyer would like to offer for the property. The broker told the buyer that the seller will not accept anything less than $86,500. Did the broker do anything illegal under the Georgia License Law?

d. Yes, as the broker cannot disclose to the buyer that the seller will take anything less than the list price

Broker Falk had a listing. Broker Carr found a buyer for Broker Falk's listing. A salesperson could close the transaction if:

d. a salesperson can NOT close a transaction, only attorneys can close them

In order to keep a license on inactive status, one must:

d. renew every four years and pay a renewal fee