CE Shop Practice Exam Missed Q's

Your client, Judy, with a credit score of 620, has been approved for an FHA loan for a home with a sales price of $200,000. What is the minimum down payment that will apply?

$7,000 (For borrowers with a credit score of at least 580, the minimum down payment on an FHA loan is 3.5%. Additional closing costs apply.

What "quick and dirty" investment formula seeks to achieve a percentage of gross monthly rental income as compared to purchase price?

2%

Your client Joseph has a commercial income-producing property. How long does he depreciate this property?

39 years

Kenneth entered into a contract to sell his home to Valerie, who put down a $5,000 earnest money deposit. At the last minute, Valerie backed out of the deal and Kenneth kept the earnest deposit. This is an example of ______.

Accepting liquidated damages

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

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

A CMA or a BPO is an example of ______.

An informal estimate of market value

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

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

What is it called when one party to a contract transfers the contractual rights and obligations to another but remains liable for the contract terms?

Assignment

Which type of analysis is a broad estimate of price in case the lender must take over the property and sell it to an investor or on the market?

Broker's price opinion

What is one way that the FHA has helped to stabilize and improve the mortgage market?

By requiring appraisers to be state licensed or certified to evaluate property for FHA-insured loans

Conrad has purchased a home in California and, as a veteran, he's been able to take advantage of the CalVet home loan program. How does this loan program work?

CalVet holds the legal title to the property until the loan is paid off.

The process in which the government actually takes someone's property through the power of eminent domain is called __________.

Condemnation

Which of the following describes a universal agent?

Conservator (A universal agent has broad authority to act on behalf of the principal, such as a person with a power of attorney or a conservator. A special or specific agent has limited scope of authority.)

With the cost approach to value, what is the reproduction cost?

Cost to build an exact replica of the subject, with the same materials and deficiencies

Which of the following is an instrument of conveyance?

Deed

Which mortgage clause requires the lender to discharge the mortgage lien once the borrower has paid in full?

Defeasance

What do you do to determine debt coverage ratio?

Divide net income by debt service

The Town of Petersville has just decided to restrict density in one area of town that previously allowed a higher density. This is known as ______.

Downzoning

Which of the following groups represents a niche?

Empty nesters

Which of the following has the legal effect of preventing a person from making a claim based on her prior behavior or statements?

Estoppel

In which of the following types of contracts has one or more of the contract's terms yet to be completed?

Executory contract

Jericho and Cindy, an unmarried couple, have three children, ages 3, 5, and 12. A seller's broker refuses to show them a house in a neighborhood where residents tend to be older, and no one else has children. Which protected class status applies?

Familial status, included in the federally protected classes, includes discrimination when someone lives with (or is about to live with, in the case of pregnancy and pending adoption) a child under the age of 18 and is treated differently from others.

Which of these describes a bridge loan?

Gina is moving across the country to be closer to her family. Her existing home hasn't sold, but she is ready to purchase her new home.

California licensee Renee makes sure she follows the DRE requirements when she prepares listing agreements and purchase agreements by ______.

Giving a copy of the agreement to her client after it's signed

The FHA loan program is designed for borrowers who ______.

Have a minimal down payment and less-than stellar credit

What's NOT true about building codes in California?

Homeowners performing their own construction aren't required to follow building codes.

Your neighbor hires a middle school student to mow his lawn every two weeks. He draws up a written contract in which he clearly outlines the student's mowing responsibilities and the payment the student will receive in return. Which of the following is true in this situation?

If the neighbor and the student are content to uphold their agreement, the fact that it's not legally binding doesn't matter.

Sean hasn't paid his property tax. The tax collector places a lien on his property. How is this lien classified?

Involuntary, specific

Why is a home inspection recommended?

It gives the buyer a snapshot in time of the home's condition.

You've assisted the Juarez family with the purchase of a beautiful home in an established neighborhood. The sellers had owned the home since 1980. What's true about the amount of property tax the Juarezes will pay for their new home?

It will be reassessed because of the transfer, and the Juarezes will be taxed at 1% of the home's current market value.

Which of these is the best definition of real estate?

Land, plus all things permanently attached to it naturally or artificially

A mortgage is a legally binding document that creates a lien on a piece of property and gives the lender the right to foreclose on the property if the borrower defaults. Who or what entity is considered the mortgagee?

Lender (The lender holds the mortgage on the property, so the lender is the mortgagee.

Which of these is an example of conversion of funds?

Monica used funds from the firm's trust account to pay her firm's rent. (Conversion means that a licensee or brokerage firm uses trust funds for personal or operating purposes.)

What does MLS stand for?

Multiple listing service

The ______ is a purpose-driven organization propelled by a passionate combination of entrepreneurial spirit, cultural heritage, and the advocacy of its members.

National Association of Hispanic Real Estate Professionals (NAHREP)

Many supplementary statutory disclosures will be included in the ____________ when provided by a third-party company.

Natural Hazards Disclosure statement (The NHD will contain disclosures for airport vicinity, Mello-Roos districts, and proximity to a number of other possible issues that must be disclosed.)

You're helping prepare a sales contract for buyer clients. When is it acceptable for you to provide your clients with legal advice?

Never

Gregory is looking for an apartment to rent for six months. He's hired Franklin as his agent to help with this search. Is Franklin required to provide Gregory with an agency disclosure form?

No, agency disclosure is only required for lease agreements exceeding one year in length.

Mardee represented condo owner Carol, and they signed an exclusive agency listing agreement. If Carol found her own buyer, would she owe Mardee a commission?

No, because Carol procured the buyer. (It's easy to confuse the types of listing agreements. With exclusive agency, the seller retains the right to sell the property and not pay a commission. Exclusive right to sell agreements guarantee payment to the listing agent no matter who brings the buyer.

Stacy is selling her home in a nice neighborhood. She no longer wants to live there because a gruesome murder occurred next door. Would Stacy need to disclose that this is why she is selling?

No, she is not required to disclose a death that didn't occur on her property.

Carla's landlord raised her rent 12% over the previous year's rental rate and gave her 45 days' notice. Was this legal under California's Tenant Protection Act?

No; landlords may not raise rents more than 10% annually.

Grant owns a property that's subject to an option contract. Grant is the ______.

Optionor

To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which one of these elements listed is applied last?

Physical characteristics (The elements considered in the sales comparison approach are applied in a specific order: financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location, and physical characteristics.

What is the term for an increase in property value caused by the joining of two neighboring parcels of land?

Plottage is an increase in property value caused by the joining of two neighboring parcels of land. It's usually more than the sum total of its parts (where 1+1 = 3, 4, or even 10).

At the start of the escrow process, the escrow agent delivers the ______ from the title insurance company to the buyer for review.

Preliminary report

Leigh Ann is a licensee. Her cousin, Carly, is interested in buying a house. Leigh Ann shows Carly how to look for properties online and runs some CMAs for her. When Carly finds a property she likes and asks Leigh Ann to help her make the offer, Leigh Ann decides she should ratify the agreement with Carly. What are Leigh Ann's options for accepting an agency relationship after the fact?

Prepare an agency agreement or continue to assist Carly with the purchase.

Which of the following belongs in a property management plan?

Property condition

A rundown home, overgrown with weeds and in desperate need of repairs, is driving down property values on the block. What economic principle is at work here?

Regression

An investor is analyzing a property by looking at its ability to produce future income. The property is a 10-unit apartment building. Which of the following would be used to determine this value?

Remember, rent has four letters. Gross rent multiplier is used for income-producing properties with four or fewer units. Properties with five or more units use gross income multiplier.

Which category of appraiser can appraise one- to four-unit residential property valued under $1 million and that are not complex in nature, and non-residential properties valued below $250,000?

Residential license

Monty retired 10 years ago and would like to see the world, but his retirement account won't support his desire to travel. Monty heard of a loan that would allow him to take advantage of the equity in his home by getting monthly payments from the bank by using his house as collateral. What is this type of loan called?

Reverse annuity mortgage (RAM)

For which of these situations will a California property be assessed property taxes for multiple base year values?

Samantha needed more room for her growing cat family, so she had a contractor build an addition to the home she's owned for the past 10 years.

Which of the following scenarios is considered a violation of FTC advertising rules?

Sarah has just started her career as a solo agent and decides to try a new marketing campaign slogan: "Come let our team of hard-working agents find you the home of your dreams!"

Rhonda purchased an existing pet store in her neighborhood, and she's so excited! Her animal-loving aunt is thrilled for Rhonda but disappointed that she won't be able to visit the store in her wheelchair, as the aisles are narrow and there isn't enough room to move around. What is true about Rhonda's responsibilities to her aunt and other people with disabilities?

Since Rhonda purchased an existing building and business, the ADA requirements aren't as strict as with new construction and vary by building.

Sue is selling her house for $265,000. Closing is set for June 19, and Sue owns the day of closing. She has a loan balance of $78,000 at a 4.2% rate, and she's current on her payments. She prepaid the property taxes ($1,350) and insurance ($925). Using a calendar-year proration method for calculations, how will these amounts appear on Sue's closing statement?

Since she already prepaid the property taxes, first determine the tax daily rate: $1,350 ÷ 365 = $3.70. Next, determine how many days from closing until the end of the year, which is 195 days. Next, multiply the daily rate you calculated in the first step, $3.70, by how many days from closing, 195: $3.70 X 195 = a $721.50 seller credit. Any prepaid seller's homeowners insurance will be refunded to the seller outside of closing, so this doesn't appear on the closing statements.

When working with a client on a real estate sale, a real estate licensee is usually acting as which type of agent?

Special

Which one of the following types of ownership termination allows each tenant to have a specific, divided portion (partition) of the property exclusively?

Termination of co-ownership by partition (Termination of tenancy in common by partition allows each tenant to have a specific, divided portion of the property exclusively. If the property can't be divided, the court may rule that the property be sold and the proceeds divided by the tenants.)

When Tara is working with a client to sell his mountain cabin, she asks the client to complete the Seller Property Questionnaire and the TDS. The seller says, "But we haven't received any offers yet." What can Tara tell him about the timing required for providing the TDS?

The TDS should be submitted as soon as is practicable.

Millie and Jerry are purchasing a home using their VA loan benefit. The sales price is $320,000, with 100% financing. Assuming that Jerry has a typical level of entitlement, how much of their loan does the VA guarantee?

The VA guarantees up to a quarter of the total loan amount, up to $104,250, so Millie and Jerry's loan is guaranteed for one-fourth of $320,000, which is $80,000.

Angie, a California homeowner, neglected to pay her property tax bill on time. Which of these statements is NOT true?

The county may foreclose on her property within 180 days of the delinquency. (Angie's late payment will cost her an additional monthly penalty and a redemption fee. If she doesn't pay, a lien will be attached to her property. The taxing authority can't foreclose on her property for five years after the initial delinquency.

What's true about the documentary transfer tax in California?

The county rate for a documentary transfer tax is 55 cents per $500 of sales price, if they charge one, and some cities add an additional transfer tax.

Frank's youngest daughter recently died of AIDS. He and his wife are selling the home where she lived her last few weeks, and where she died. Which of the following is true?

The death must not be disclosed, even if asked directly, because it was caused by AIDS.

What's another term for front-end ratio?

The housing ratio is also known as a front-end ratio.

What does the quick and dirty 70% formula mean to investors?

The purchase price shouldn't be more than 70% of the repaired value

The Farm Credit System funds are acquired from ______.

The sale of debt securities and international money markets

What happens to a California real estate licensee if they are involved in a case and cannot pay the judgment amount, and the consumer is awarded money from the real estate Recovery Account?

Their license will be suspended until they pay back the amount paid to the victim, plus interest.

Which type of ownership includes the unity of time, title, interest, possession, and marriage, and dissolves to a tenancy in common after a divorce?

This type of ownership is tenancy by the entirety. It's similar to joint tenancy in that it has the right of survivorship and includes unity of time, title, interest, and possession. The difference is that marriage is added to the mix.

You have listed a property for Jim and Alice, a couple who loves DIY projects. Does the TDS provide a place for sellers such as these to disclose non-permitted work they have done on the property?

Yes, they can record such issues in the seller's information section of the TDS

You're on a planning board that's discussing how to keep the city more livable by reducing building density. The subject of bulk zoning comes up. What is your response?

Your response should be, "That's a great way to meet our objectives." Bulk zoning can apply to both residential and commercial zones, and it doesn't increase density.