Final Exam Multiple Choice Questions
In a tax deferred exchange "boot" is the: a. taxable unlike property b. non-taxable unlike property c. taxable like property d. non-taxable like property
a. taxable unlike property
Bill gives Tom $1,000 for the option to purchase Tom's property within 90 days at a price of $10,000. This optionis: a. valid b. invalid c. void d. illegal
a. valid
To check for encroachments on a property, a buyer would obtain: a. title insurance b. lis pendens c. a deed d. a survey
d. a survey
When should the section of a policy guide dealing with vacation and days off be developed? a. Before the associates are hired b. Employees should develop and present to management c. Employees and management should develop together d. After the office is fully staffed
a. Before the associates are hired
Broker Smith is the active broker for Quickrich realty. He decides to open a second corporation, Richquick realty and be the active broker for that corporation also. He: a. Can with a multiple license b. Can without a multiple license, because multiple licsnsure is not required c. Cannot, as this is a violation of Chapter 475 d. Cannot because federal anti trust laws prohibit this practice
a. Can with a multiple license
In the 1990s, what would have been a good hedge against the recession? a. Corporate or municipal bonds b. Gold c. Common stock d. Savings account
a. Corporate or municipal bonds
Jim is an unlicensed officer of ABC Realty, Inc. Jim wishes to oversee and manage the corporation. What must Jim do? a. Nothing else provided he is registered b. Become an active broker c. Become an inactive broker d. Nothing, because the corporation is licensed
a. Nothing else provided he is registered
Buyer and seller agree to abandon a sales contract and seller instructs Broker to return Buyer's deposit. Broker feels that he has earned a commission. What should the Broker do? a. Obey the seller b. Notify FREC of an escrow dispute c. Seek arbitration d. Keep 50% of the deposit
a. Obey the seller
Sam passed his broker exam, and would like to begin to operate as a sole proprietor, using the fictitious name Super Sam's Realty. Sam must: a. register the name with the Division of Real Estate and have a license issued in that name b. advertise the name for two consecutive weeks in the local legal advertisements. c. advertise the name in the local yellow pages d. advertise the name in the local Penny Saver or similar type newspaper
a. register the name with the Division of Real Estate and have a license issued in that name
An article which a commercial tenant attaches to the property as a necessary part of their trade or business is a: a. Trade fixture b. Fixture c. Attachment d. Cognovit
a. Trade fixture
The characteristics of a partnership would not include: a. all partners sharing equally in the income of the partnership b. all partners are equally liable for the debts of the artnership c. all partners can bind each other by acts or promises d. parnership agreement may be oral, written or implied
a. all partners sharing equally in the income of the partnership
An investor has $600,000 to invest and not much management time. A broker would most likely recommend a/an: a. industrial property purchase with a leaseback of 15 years b. medical office c. shopping center d. apartment building
a. industrial property purchase with a leaseback of 15 years
The lending institution most likely invest in a sale and leaseback would be a: a. life insurance companies b. mortgage bankers c. commercial banks d. savings and loan associations
a. life insurance companies
The minimum number of investors for a Real Estate Investment Trust (REIT) is: a. 75 b. 100 c. 150 d. 200
b. 100
The maximum long-term capital gains on property sold by a taxpayer in the 25% bracket who earns less than $400,000 in ordinary income is a. 12% b. 15% c. 25% d. 28%
b. 15%
A lead based paint disclosure along with the lead based paint information pamphlet must be given to a buyer before they sign a contract if the house was built before: a. 1968 b. 1978 c. 1988 d. 1992
b. 1978
Although there is no set minimum number of comparable properties required for a single family residential appraisal, if there are truly competitive comparables in the market, how may are preferred? a. 10-15 b. 8-10 c. 5 d. 3
b. 8-10
"A" lists "B's" property for $125,000. "C" submits an offer for $120,000 which "B" accepts. Before "A" can communicate acceptance to "C", "A" receives an offer from "D" for $125,000. What should "A" do? a. Tell "D" that property has been sold b. Advise "B" of "Ds" offer c. Communicate acceptance to "C" d. Ask his broker what to do
b. Advise "B" of "Ds" offer
The appraiser requires all of the following except: a. NOI b. DS c. EGI d. Operating expenses
b. DS
In order to expedite closing, the broker reviews the public records and gives the buyer his opinion that title is clear. This is: a. Legal for a broker but not a sales associate b. Illegal c. Illegal unless the buyer requested that the broker perform the service d. Legal if the broker does not charge a fee
b. Illegal
Advertising which focuses on the cmpany name rather than on any particular property is called: a. Specific advertising b. Institutional advertising c. Company advertising d. Brokerage advertising
b. Institutional advertising
The ability of an investment to be converted to cash without any loss of the initial investment is: a. Marketability b. Liquidity c. Homogeneity d. Conversion
b. Liquidity
A broker partnership consists of three partners. If the license of one of the partners expires: a. the license of the partnership and all partners are automatically canceled until all of the licenses are in order, including the licenses of the sales associates. b. Only the one partner whose license expired is affected and he must not perform real estate services until his license is renewed. c. only the one partner whose license expired is affected, so long as at least one of the other partners holds an active broker license d. there is no effect on the partnership, as long as the partnership itself is properly licensed and the individual brokers and sales associates whose licenses have not expired may continue to operate for a reasonable period of time.
b. Only the one partner whose license expired is affected and he must not perform real estate services until his license is renewed.
In an Environmental Site Assesment, a complex soil, water and air quality analysis would be included in: a. Phase I b. Phase II c. Phase III d. Phase V
b. Phase II
What are the three methods for estimating reproduction cost? a. Unit survey, unit in place, quantity survey b. Quantity survey, unit in place, unit comparison c. Market approach, comparable sales, cost d. Physical, functional, external
b. Quantity survey, unit in place, unit comparison
A brokerage limited partnership has four active partners and two inactive limited partners. One of the inactive limited partners decides to become an active partner. How would this affect the limited partnership? a. This is impossible, since a limited partner cannot become a general partner b. The partner desiring to become active must be properly licensed and would automatically change from a limited to a general partner c. Nothing would happen d. The partnership itself would automatically change from a limited partnership to a general partnership
b. The partner desiring to become active must be properly licensed and would automatically change from a limited to a general partner
When could an investor postpone or eliminate paying capital gains tax? a. When she sells a strip center b. When she sells her own house c. When she sells an industrial building d. When she sells vacant land
b. When she sells her own house
Dual Agency is: a. not a violation of Chapter 475, if the broker receives informed consent from both the buyer and the seller in a real estate transaction b. a violation of Chapter 475, since a broker cannot represent adverse parties in the same transactions c. not a violation of Chapter 475, if the broker discloses that he is representing both the buyer and the seller in a real estate transaction. d. not a violation of Chapter 475, if the broker obtains written authorization from the FREC
b. a violation of Chapter 475, since a broker cannot represent adverse parties in the same transactions
Three brokers intending to work together in real estate brokerage ask their attorney to draw up a partnership agreement. They are forming a/an: a. limited partnership b. general partnership c. ostensible partnership d. syndicate
b. general partnership
The VA-guarantees: a. may be spread out over several properties b. may only be used for a principal residence c. protects the borrower d. requires the seller to pay the discount points, if any
b. may only be used for a principal residence
A branch office license will renew every: a. year b. two years c. three years d. four years
b. two years
When an owner has high equity in a property and the existing mortgage is at a low rate of interest, which of the following financing devises would be helpful in selling the property? a. blanket mortgage b. wraparound mortgage c. participation mortgage d. reverse annuity mortgage
b. wraparound mortgage
Renter give broker $300 to find her an apartment rentng the $500 per month. The broker knows that there are no $500 rentals available, but takes the tenants money anyway, and tells renter that he will find one. Later, the broker tells the renter that none are available much should be returned to the renter? a. Nothing b. $225 c. $300 d. $375
c. $300
The economic principle which says that property values are maximized when architectural homogeneity and uniformity of land use occur in a neighborhood is called: a. Substitution b. Anticipation c. Conformity d. Externalities
c. Conformity
How do documentary stamp taxes on the deed appear on the closing disclosure? a. Debit: seller, credit buyer b. Debit: buyer, credit seller c. Debit: seller d. Debit: buyer, receipt to broker
c. Debit: seller
Commercial properties typically quote rental rates as dollars per square foot. The area inside the tenants space, including bathrooms and sometimes common hallways is called: a. Net leasable area b. Base leasable area c. Gross leasable area d. Effective leasable area
c. Gross leasable area
Tenant Tom gave the broker an advance rental fee of $900. Tom lived in the house for 3 months of his one year lease and decided to move. What should the broker do with the advance rental fee? a. Return 75% b. Return 100% c. Leave it in escrow d. Ask FREC for disbursement instructions.
c. Leave it in escrow
Which is true regarding PMI: a. PMI is for FHA loans b. PMI is for VA loans c. PMI is for conventional loans d. PMI does not exist, the correct term is MIP
c. PMI is for conventional loans
The instrument a buyer normally receive after a foreclosure sale is: a. warranty deed b. quit claim deed c. certificate of title d. bargain and sale deed
c. certificate of title
Magnificent Margie's Realty has a main office in Orlando, and a branch office in Tampa Margie wants to move the Orlando office to Jacksonville. Due to poor traffic, she wants to close the Tampa office, and open a new branch office in St. Petersburg. Margie must: a. call FREC for instructions b. request a new license for the Orlando office c. file a change of address form to change the address of the Orlando office d. file a change of address form to change the address of the St. Petersburg office
c. file a change of address form to change the address of the Orlando office
If the broker wants to put an agent's name on the sign, how should it appear? a. between the corporation and broker's name b. after the corporation name broker's name c. in a separate place below the corporate name and the broker's name d. on the top of the sign
c. in a separate place below the corporate name and the broker's name
A sale-leaseback: a. allows the lessor to deduct rent b. allows the lessee to deduct depreciation c. is a financing device which allows the seller to free up working capital d. causes the seller-developer to become the lessor
c. is a financing device which allows the seller to free up working capital
A deed in lieu of foreclosure is: a. the deed given at a public sale b. an exercise of the statutory rights by the mortgagee c. is a voluntary method of avoiding foreclosure by transferring of title by the mortgagor d. a mandatory method of foreclsoure
c. is a voluntary method of avoiding foreclosure by transferring of title by the mortgagor
Title insurance is available for the: a. owner only b. lender only c. owner and the lender d. seller
c. owner and the lender
Insurable risk is: a. buyers risk b. operating risk c. static risk d. economic risk
c. static risk
In a real estate brokerage corporation, who can sign applications, change of address or notice of termination? a. the president b. the secretary c. the active broker who is an officer or director d. an Inactive or active broker who is an officer or director
c. the active broker who is an officer or director
A brokerage corporation wishes to open a branch office. Who will file the application on behalf of the corporation? a. the president b. the non-licensed president c. the actively licensed president d. the secretary
c. the actively licensed president
Which penalty may be imposed by the Florida Real Estate Commission for a violation of F.S. 475: a. Civil Penalties only b. $10,000 fine per offense c. Civil, criminal and administrative penalties d. Adminsitrative Penalties only
d. Adminsitrative Penalties only
When the DRE sends a broker a letter stating their intent to do an office audit, it will say that they are going to check: a. Required office sign b. Licenses of all associates c. Escrow reconciliation d. All of the above
d. All of the above
Which formula would be used to calculate the required down payment on an investment. a. Net Operating Income divided by Debt Coverage Ration b. Annual debt service divided by Mortgage Loan Constant c. Net Operating Income divided by Debt Service d. Before tax cash flow divided by required Rate of Return
d. Before tax cash flow divided by required Rate of Return
How long would a buyer of a condominium have to cancel the contract? a. 3 days from receipt of the condo documents on a resale b. 15 days on the purchase of a new condo from the developer c. 10 days on the purchase of a new condo from the developer d. Both A and B
d. Both A and B
If a Brokerage corporation has three active brokers and the broker named on the sign dies, what needs to be done? a. Change the sign b. Notify FREC c. Notify the sales associates d. Both A and B
d. Both A and B
Broker Sue discovered that one of her sales assoicate's licenses has expired and the renewal period has passed. Between appointments Sue advises the sales associate to sign the renewal and send it to the DBPR with a check a. This is legal b. The sales associate is in violation of Ch 475 c. The broker is in violation of Ch. 475 d. Both the broker and sales associate are in violation of Ch. 475
d. Both the broker and sales associate are in violation of Ch. 475
Seller Taxim Harder sells an income producing property for a $42,000 profit. Which tax will the seller pay? a. No tax if the profit is re-invested with the statutory 24 month rollover period b. Capital gains tax on the selling price less costs of the sale c. Capital gains tax on a percentage of the profit, depending uon the time the property was held, provided the owner is 55 or over. d. Capital gains tax on the entire profit
d. Capital gains tax on the entire profit
Uncle Bob was subdividing his farm into smaller lots. He hired his niece Sally to sell the lots Bob paid Sally a salary for her efforts. a. Bob is in violation of Ch. 475 b. Sally is in violaiton of Ch. 475 c. Both Bob and Sally are in violation of Ch. 475 d. Chapter 475 has not been violated
d. Chapter 475 has not been violated
The creation of a condominium would not require a/an: a. Declaration b. Map c. Deeds to the units d. Estimated date of completion
d. Estimated date of completion
Cash basis accounting is the accounting method used by most real estate firms and many small businesses. Which statement below is NOT true about cash basis accounting? a. It may distort the financial results of the operations of a business. b. Expenses may be incurred in one period and paid in a later period c. It allows the taxpayer some control over the timing of the recognition of income and expenses d. Income is recorded when earned not when received
d. Income is recorded when earned not when received
A broker desires to operate as a sole properietor. The advantages of this business structure would not include: a. Less paperwork b. Tax savings c. Lower annual fees d. Liability
d. Liability
In order for an appraiser to appraise an income property, he/she would need the: a. EGI b. OER c. DS d. NOI
d. NOI
The law that requires buyers to be informed about credit rates and terms is: a. RESPA b. ECOA c. Title VIII d. Truth in Lending
d. Truth in Lending
When must a broker reimburse an advance fee to a seller? a. Within 5 years b. Within 18 months c. At the expiration of the sales contract d. Upon the expiration of the listing, or within 18 months, whichever occurs first
d. Upon the expiration of the listing, or within 18 months, whichever occurs first
Which officer in a real estate brokerage corporation must be licensed? a. an attorney retained by the board of directors to advise the corporation on legal matters, with no public contact. b. an officer managing the corporation, with no public contact. c. an accountant retained by the corporation to provide financial services with no public contact d. an officer of the corporation responsible for the writing of all advertisements, with no public contact.
d. an officer of the corporation responsible for the writing of all advertisements, with no public contact.
The income appraisal approach would most likely be used for a/an: a. vacant site b. county courthouse c. residential single family home d. apartment building
d. apartment building
Cash throw-off is the same as the: a. debt service b. net operating income c. after tax cash flow d. before tax cash flow
d. before tax cash flow
The law of agency would cover the relationship between the: a.landlord and lessee b. buyer and seller c. landlord and lessor d. broker and seller or buyers
d. broker and seller or buyers
A dealer is one who inventories property for sale to customers. He may: a. deduct depreciation b. take advantage of installment sales c. take advantage of tax deferred exchanges d. deduct mortgage interest
d. deduct mortgage interest
An example of static risk would be: a. changes in business conditions b. market fluctuations c. legislative changes d. fire
d. fire
An example of tangible assets of a business is the: a. name of the company and reputation of the employees b. franchises and leasehold interests c. licenses of the employees d. furniture in the home office
d. furniture in the home office
RESPA requires that on any transaction, not exempt, a buyer must be given at time of loan application or within three business days a/an: a. Regulation Z statement b. agency disclosure c. radon gas disclosure d. loan estimate
d. loan estimate
The buyer would not receive a ___________________ at closing. a. closing disclosure b. deed c. abstract d. mortgage
d. mortgage
Chapter 475 requires all active brokers to maintain an: a. operating account b. escrow account c. advance fee account d. office
d. office
External (economic" obsolescence is divided between site and structure on the basis of the ratio of: a. structure value to site value b. site value to structure value c. site value to total property value d. structure value to total property value
d. structure value to total property value
An example of external (economic) obsolescence would be: a. noxious odors from a nearby paper mill b. a none-bedroom condominium for sale in a market in which buyers are demanding two and three bedroom units c. the living area located on the second floor and bedrooms located on the first floor. d. cracked foundation
a. noxious odors from a nearby paper mill
The seller could get a current tax deduction for rent paid by utilizing a: a. sale-leaseback b. exchange c. sale-contractback d. lease
a. sale-leaseback
In calculating taxable income an investor may not deduct: a. depreciation b. capital improvements c. operating expenses d. interest
b. capital improvements
Murl is forming his new real estate business, Little Mo Realty Company. He has already filed his articles of incorporation with the Florida Department of State. What other filing(s) is (are) required before Murl can begin operating his company? a. Murl must register the business entity and only the officers and directors who hold active broker licenses with the DBPR. b. Murl must register the names of only the licensed officers and directors with the DBPR. c. Murl must register the names of all the corporate owners with the DBPR, Division of Real Estate. d. Murl must register the corporation including the names of all the officers and directors with the DBPR.
d. Murl must register the corporation including the names of all the officers and directors with the DBPR.
An investor is going to restore an old Victorian home. The lender wants to know what its value will be after the restoration. The appraiser should use: a. restoration cost b. replacement cost c. physical cost d. reproduction cost
d. reproduction cost
Figuring tax depreciation would not consider: a. straight-line method b. ACRS c. useful life d. reproduction cost
d. reproduction cost
Income property may be ex changed for "like" property, and realized gain on the exchange need not be recognized. If property owner A owns a 40 unit motel and would like to exchange it for a "like" property, which would probably not qualify? a. shopping center b. hotel c. warehouse d. single-family residence
d. single-family residence
The adjusted balance sheet includes: a. intangible assets b. goodwill c. goodwill and intangible assets d. tangible assets
d. tangible assets
A successive sale was located in the subject property neighborhood. The initial sale price was $62,500, and 18 months later the property sold for $75,000. What is the monthly rate of change? a. .0111 b. .0167 c. .0667 d. .0833
a. .0111
What is the formula to calculate the equity dividend rate? a. Before-tax cash flow divided by the owner's equity b. Owner's equity divided by the before-tax cash flow c. Net operating income divided by the value d. Annual debt service divided by the equity
a. Before-tax cash flow divided by the owner's equity
Which form does the Real Estate Settlement Procedures Act (RESPA) require to be given to borrowers at LEAST three days before the closing of real estate transaction? a. Closing Disclosure b. Loan Estimate c. Special Information booklet called Settlement Costs and You d. Mortgage servicing disclosure statement
a. Closing Disclosure
Which element of comparison is adjusted to derive a normal sale price using the sales comparison approach? a. Conditions of Sale b. Market Conditions c. Location d. Physical characteristics
a. Conditions of Sale
Which statement is FALSE regarding the Interstate Land Sales Full Disclosure Act (ILSA)? a. Developers must register subdivisions of 25 or more lots with the Bureau of Consumer Financial Protection before they can offer unimproved lots in interstate commerce. b. Developers of 25 or more lots must provide buyers with a property report before signing the sale contract. c. ILSA is intended to prevent fraudulent marketing schemes when land is sold without being seen by purchasers. d. Developers who market subdivisions of fewer than 25 lots are exempt from ILSA regulations.
a. Developers must register subdivisions of 25 or more lots with the Bureau of Consumer Financial Protection before they can offer unimproved lots in interstate commerce.
Which statement regarding corporations is FALSE? a. FREC rules prohibit a not-for-profit corporation from registering as a real estate brokerage entity. b. Corporations are dissolved by filing a dissolution of corporation with the Division of Corporations c. Ownership in a corporation is transferred by the purchase and sale of stock. d. All the officers and directors of a real estate brokerage corporation must be registered with the DBPR.
a. FREC rules prohibit a not-for-profit corporation from registering as a real estate brokerage entity.
Each office location that a real estate broker operates out of must be properly registered. Under which of the following circumstances may a Florida broker maintain an office in another state. a. Only if he signs an affidavit allowing the DBPR to conduct an investigation, if necessary, and the broker would not interfere with the investigation. b. Only if he maintains a proper escrow account in that state. c. Only if he maintains a proper escrow account in that state and has a broker on the premises. d. A Florida broker may not maintain an office out the state of Florida
a. Only if he signs an affidavit allowing the DBPR to conduct an investigation, if necessary, and the broker would not interfere with the investigation.
Which statement is TRUE concerning radon? a. Radon tests conducted in homes within a single neighborhood provide reliable estimates of whether radon is a potential hazard in neighboring properties. b. Federal law requires testing for radon. c. Buyers who include radon inspection contingency agreement in a real estate contract and later cancel the contract because cause the radon exceeds a level specified in the contract must agree to surrender the deposit to the seller as liquidated damages. d. Florida law exempts lease contracts form the radon disclosure requirements.
a. Radon tests conducted in homes within a single neighborhood provide reliable estimates of whether radon is a potential hazard in neighboring properties.
Which type of ownership allows property to be inherited? a. Tenancy in severalty and tenancy in common b. Tenancy at will and joint tenancy c. Tenancy by the entireties and tenancy in common d. Tenancy by the entireties and joint tenancy
a. Tenancy in severalty and tenancy in common
Which statement applies ONLY to restricted appraisals reports? a. The intended user of the appraisal is exclusively the client. b. A signed certification must be included. c. The appraisal must state and define the type of value that was estimated. d. The appraisal must indicate the property rights that were appraised.
a. The intended user of the appraisal is exclusively the client.
Which statement is TRUE regarding a broker who changes the business address and does not notify the DBPR? a. The license ceases to be in effect until the broker notifies the DBPR of the new business address. b. The license is suspended until the broker notifies the DBPR of the new business address. c. The broker cannot conduct brokerage business; however, the broker's sales associates may continue to conduct new business under the broker. d. The broker may continue to conduct brokerage business without interruption as long as the broker notifies the DBPR within 10 days of the change in business address.
a. The license ceases to be in effect until the broker notifies the DBPR of the new business address.
Two brokers are involved in a tax deferred exchange involving properties of different values. The brokers agree to share the commissions on a 50/50 basis. a. The sellers can refuse to pay any commission, if they did not approve the arrangement. b. This arrangement is satisfactory if the brokers agree in advance c. The sellers can revoke the contract d. none of the above
a. The sellers can refuse to pay any commission, if they did not approve the arrangement.
Which statement describes the principle of substitution as it applies to the sales comparison approach? a. The theory is that a knowledgeable purchaser would pay no more for a property than the cost of acquiring an acceptable substitute property. b. The theory is that a knowledgeable purchaser would pay no more for a property than the cost of acquiring an equally desirable site, combined with building an acceptable substitute structure. c. The theory is that the value of a property tends to be related to its competitive position among substitute investment choices producing equivalent investment returns and risk. d. The theory is that value is created by expectation of future benefits.
a. The theory is that a knowledgeable purchaser would pay no more for a property than the cost of acquiring an acceptable substitute property.
In the highest and best use analysis an appraiser should not consider the: a. condition of improvements on the property b. profitability of different uses of the property c. physical characteristics of the land d. current zoning laws and ordinances
a. condition of improvements on the property
The correct order of the appraisal process is: a. define the problem, collect and analyze data and analyze highest and best use b. collect and analyze data, analyze highest and best use and define the problem c. physical characteristics of the land d. current zoning laws and ordinances
a. define the problem, collect and analyze data and analyze highest and best use
The factor by which an appraiser multiplies total income from a property to obtain an estimate of the property's value is the: a. gross income multiplier b. gross loan constant c. effective income multiplier d. net rent multipler
a. gross income multiplier
The sequence of dollar adjustments in the comparable sales approach: a. is financing terms, location, and physical b. is financing terms, physical and location c. is location, financing terms, and physical d. makes not difference
a. is financing terms, location, and physical
All describe or are associated with "dynamic risk", except: a. it may be shifted to an insurer b. it is associated with changes in general business conditions c. market risk d. risk of default
a. it may be shifted to an insurer
The financial statements that restates the owner's equity in terms of tangible assets at market values is the: a. market balance sheet b. actual balance sheet c. adjusted balance sheet d. income statement
a. market balance sheet
The Federal Housing Administration (FHA) program that insures condominium mortgage loan is a Section a. 203(b) b. 234(c) c. 235 d. 245
b. 234(c)
Which statement is TRUE of telephone solicitation for real estate services? a. Real estate licensees may not telephone potential buyers and sellers before 9:00 am or after 8:00 pm. b. Brokers who use telemarketing must develop written procedures regarding their firms' telemarketing policies. c. Real estate licensees are exempt from the telemarketing laws. d. Real estate licensees may transmit to fax machines unsolicited advertisements featuring their listings.
b. Brokers who use telemarketing must develop written procedures regarding their firms' telemarketing policies.
Broker Cunningham's monthly reconciliation statement for his escrow account shows a shortage of $75. Which applies? a. There is no problem, since a broker is allowed to have a shortage n the escrow account of up to $1,000 b. Cunningham must document and explain the shortage in writing. He must then show the steps taken to correct the shortage c. Cunningham will probably be charged with "failure to account" and be subject to disciplinary action d. The is not possible, since the escrow account would never show a shortage, but may show an overage.
b. Cunningham must document and explain the shortage in writing. He must then show the steps taken to correct the shortage
A 10-year lease requires the tenant to pay $4,000 per month, as well as taxes, insurance and maintenance on the building. What type of lease is this? a. Gross b. Net c. Participation d. Expense stop
b. Net
A broker projects office expenses to be $162,700 for the year. Her salary is included in the expense budget, but she want to make a least $20,000 over and above that to compensate her for her investment. Her average sales associate produces $58,000 in gross commissions, and her sales associates average a 55% split. How many sales associates does the broker need to achieve her goal? a. Six b. Seven c. Eight d. Nine
b. Seven
An owner agreed to sell his restaurant property. The buyer gave the broker an earnest money deposit of $4,000. One day before closing, the buyer told the broker she had found another property and would not be closing the transaction. The owner lost more than $12,000 because of the default. What remedy would BEST compensate the owner? a. Suit for rescission on breach b. Suit for compensatory damages c. Suit for liquidated damages d. Suit for interpleader
b. Suit for compensatory damages
Jack, Jill and Heidi are active general partners in a partnership registered as a real estate brokerage entity. They have irreconcilable differences, and Jack withdraws as a general partner. Which statement is TRUE of this situation? a. The partnership registration is canceled automatically b. The partnership registration and the partners' and sales associates' licenses are unaffected by the vacancy. c. JIll and Heidi must register the re-formed partnership within 14 calendar days and cannot engage in any new real estate business before doing so. d. JIll and Heidi must file the new organization with the Florida Department of State.
b. The partnership registration and the partners' and sales associates' licenses are unaffected by the vacancy.
Which statement describes the principle of substitution as it applies to the cost-depreciation approach? a. The theory is that a knowledgeable purchaser would pay no more for a property than the cost of acquiring an acceptable substitute property. b. The theory is that a knowledgeable purchaser would pay no more for a property than the cost of acquiring an equally desirable site, combined with building an acceptable substitute structure. c. The theory is that the value of a property tends to be related to its competitive position among substitute investment choices producing equivalent investment returns and risk. d. The theory is that value is created by expectation of future benefits.
b. The theory is that a knowledgeable purchaser would pay no more for a property than the cost of acquiring an equally desirable site, combined with building an acceptable substitute structure.
In the appraisal process which is a basic step in the cost approach? a. adjust comparable to subject b. compute value of site as if vacant c. estimate a capitalization rate d. divide rate by income
b. compute value of site as if vacant
In direct capitalization, an overall capitalization rate is: a. multiplied by the annual net operating income b. dividing into the annual new operating income c. divided by the annual net operating income d. divided into the annual effective gross income.
b. dividing into the annual new operating income
The internal rate of return is the discount rate at which the present value of the cash flows equals the a. price of the property b. down payment c. mortgage balance d. annual debt service
b. down payment
Three brokers intending to work together in real estate brokerage ask their attorney to draw up partnership agreement. They are forming a/an: a. limited partnership b. general partnership c. ostensible parntership d. syndicate
b. general partnership
The value of a business which reflects the fact that it is worth more than the sum of the values of its individual assets is termed: a. liquidation value b. going concern value c. intangible asset value d. market residual value
b. going concern value
A broker allocating a commission to be shared: a. must pay a cooperating broker his share of the commission from the escrow account b. may pay a cooperating broker or his sales associate from either the escrow account or operating account depending on the circumstances c. may pay his sales associate only from the operating account d. must pay a cooperating broker his share of the commission from the operating account.
b. may pay a cooperating broker or his sales associate from either the escrow account or operating account depending on the circumstances
Which expenses are allowed as a deduction on a homeowner's tax return? a. depreciation and insurance b. mortgage interest and real estate taxes c. mortgage payment and capital improvements d. mortgage payment and insurance
b. mortgage interest and real estate taxes
Pooling funds of several lenders to make a single loan is: a. a package mortgage b. mortgage participation c. an open end note d. a participation mortgage.
b. mortgage participation
The cost-depreciation approach would most appropriately be used to appraise a/an: a. office building b. new tract housing c. single-family residence d. apartment building
b. new tract housing
The ability of a company to meet its short term obligations is expressed by the: a. debt to worth ratio b. quick ratio c. equity ratio d. inventory turnover ratio
b. quick ratio
The steps used in the cost-depreciation approach do not include: a. the building's reproduction cost new is estimated b. sales prices of comparable structures are adjusted to reflect the characteristics of the subject property c. the value of the site is estimated separately from the value of the building d. accrued depreciation is subtracted from the building's reproduction cost new.
b. sales prices of comparable structures are adjusted to reflect the characteristics of the subject property
To determine after-tax cash flow, which is not subtracted from the NOI: a. mortgage payments b. tax depreciation c. taxes due d. debt service
b. tax depreciation
A tax shelter is: a. a deductible expense b. the excess of cash flow over taxable income c. The amount by which mortgage principal payments exceed depreciation. d. a tax deductionfor residential property.
b. the excess of cash flow over taxable income
An environmental site assessment involving field testing and analysis such as testing and underground storage tanks would be a phase: a. one b. two c. three d. four
b. two
A buyer of a new home for $240,000 will have annual taxes of $5,200 and insurance for $1,200. She gets a new 90% conventional mortgage for 30 years at 7.25%. The monthly mortgage insurance premium is $110. The loan constant from a mortgage payment table is .0068218. Using this information, what will be the new homeowner's total monthly payments of principal, interest, taxes, and insurance (PITI)? a. $1,473.51 b. $2,046.84 c. $2,116.84 d. $2,280.56
c. $2,116.84
The cost-depreciation approach is MOST applicable to which appraisal assignment? a. 20-year old residential home in a fully developed subdivision. b. Millpond Bread Company - real estate and business value c. 1-year old duplex in an area of mixed use d. 5-year old gasoline station on an exit of I-75
c. 1-year old duplex in an area of mixed use
A brokers' financial statements for last year show that her office broke even. Her expenses were $120,000 for the year, and she had 94 transactions. If increased expenses will add $20,000 to last year's total, and if the average company dollar remains the same, how many transactions will the broker need to pay the expenses and make a $30,000 profit? a. 110 b. 117 c. 133 d. 148
c. 133
If the closing is on July 6, the prepaid interest on a new institutional mortgage covers a period of how many days and is charged to whom? a. 6 days; seller b. 6 days; buyer c. 26 days, buyer d. 57 days; buyer
c. 26 days; buyer
The investor's criteria is best described by the: a. Debt service coverage ratio b. Loan to value ratio c. Equity dividend rate d. Bank of investment analysis
c. Equity dividend rate
Which business structure is NOT required to file with the Florida Department of State? a. Limited liability company b. S corporation c. General partnership d. Limited partnership
c. General partnership Filing with the Florida Department of State is permissive, not required, for general partnerships.
Mike has recently passed the broker license exam. He plans to open his own real estate brokerage as a sole proprietorship. Mike intends to name his brokerage Mike's Complete Real Estate Services. Which statement is FALSE? a. Mike must hold an active broker license in order to deal with the public b. Mike must register his trade name with the DBPR c. Mike must register his trade name with the Florida Dept of State d. Mike must register his business address with the DBPR
c. Mike must register his trade name with the Florida Dept of State
Which statement concerning the USPAP applies to licensed real estate brokers? a. Real estate brokers are required to abide by the USPAP when preparing CMA's b. Real estate brokers are exempt from the USPAP requirements. c. Real Estate brokers who prepare real estate appraisals are required to comply with the USPAP. d. Real estate brokers are required to comply with the USPAP only if preparing an appraisal associated with a federally related transaction.
c. Real Estate brokers who prepare real estate appraisals are required to comply with the USPAP.
Which would be the least significance to an investor in real estate? a. Internal Revenue Code b. Financing c. Stock Market d. Mortgages
c. Stock Market
Which statement describes the principle of substitution as it applies to the income capitalization approach? a. The theory is that a knowledgeable purchaser would pay no more for a property than the cost of acquiring an acceptable substitute property. b. The theory is that a knowledgeable purchaser would pay no more for a property than the cost of acquiring an equally desirable site, combined with building an acceptable substitute structure. c. The theory is that the value of a property tends to be related to its competitive position among substitute investment choices producing equivalent investment returns and risk. d. The theory is that value is created by expectation of future benefits.
c. The theory is that the value of a property tends to be related to its competitive position among substitute investment choices producing equivalent investment returns and risk.
Finders Realty Company represents a buyer as a transaction broker. To whom must the sales associate for Finders Realty give the no brokerage relationship notice? a. To all sellers before showing property to the buyer. b. To every listing agent before showing the listed properties to the buyer. c. To all for sale by owner (FSBO) sellers before showing a FSBO to the buyer d. To every single agent seller represented by Finders Realty Company.
c. To all for sale by owner (FSBO) sellers before showing a FSBO to the buyer
Which statement is not correct regarding income tax deductions? a. Capital losses up to $3,000 per year may be deducted from earned income b. Business losses may be deducted to the extent of business income c. Up to 3 years prepaid interest may be deducted from earned income d. Investment interest can be deducted up to the amount of investment income.
c. Up to 3 years prepaid interest may be deducted from earned income
When preparing a residential lease agreement, a. a broker may personally prepare any lease form that she and the tenant agree on. b. the property owner may personally fill in the blanks only on a form approved by the Florida Supreme Court c. a broker may prepare only the residential lease forms approved by the Florida Supreme Court d. A broker may use either a lease form prepared by an attorney or one that has been approved by the Florida Supreme Court
c. a broker may prepare only the residential lease forms approved by the Florida Supreme Court
An improved site is valued as though it were vacant and available to be put to its highest and best use because: a. all sites either are or were vacant b. most buildings will be torn down within 50 years c. a site's use always has the potential of being changed to its most profitable use. d. the building which will be placed on the site is always known
c. a site's use always has the potential of being changed to its most profitable use.
The cost depreciation approach would not consider: a. functional depreciation b. economic depreciation c. accelerated cost recovery system (ACRS) d. physical deterioraton
c. accelerated cost recovery system (ACRS)
Leverage in real estate: a. increases yield b. decreases yield c. can either increase or decrease yield d. could be simultaneous
c. can either increase or decrease yield
The effective gross income is: a. the economic rent minus market rent b. gross income plus vacancy and collection c. economic rent minus vacancy and collection d. NOI less debt service
c. economic rent minus vacancy and collection
An income property financial analysis would not normally analyze the: a. NOI b. cash throwoff c. equity build-up d. equity dividend rate.
c. equity build-up
The steps in the income capitalization approach would not include: a. estimate potential gross income b. calculate net operating income c. estimate debt service d. divide the cap rate into the net operating income
c. estimate debt service
Which is a site residual concept? a. gross income multiplier b. cost depreciation approach c. highest and best use d. land appraisal
c. highest and best use
After an appraiser has derived three separate indicated values using the various approaches to value, the appraiser then calculates a final estimate of value using a. regression analysis b. simple averaging c. reconciliation d. probability analysis
c. reconciliation
A broker has been licensed for 10 years. If the broker does NOT renew the license by the end of the license period, the license will automatically a. expire b. revert to voluntary inactive status c. revert to involuntary inactive status d. be canceled
c. revert to involuntary inactive status
In a shared appreciation mortgage (SAM), the lender charges a below-market interest rate but shares in the property's sale proceeds at time of sale or upon maturity of the loan if the: a. sale price or value is lower than the purchase price b. mortgage balance has decreased c. sale price or value is higher than the purchase price d. mortgage balance has increased
c. sale price or value is higher than the purchase price
The estimated value of property remaining at the end of its useful life is called: a. taxable value b. insurable value c. salvage value d. economic useful life value
c. salvage value
A buyer of a new home for $695,000 is assuming the existing $240,325 mortgage. The owner is providing a new purchase money mortgage in the amount of $346,019, and the buyer will pay cash for the balance. What is total of the documentary stamp taxes and intangible taxes on the financing? a. $1,903.39 b. $2,264.14 c. $2,744.24 d. $2,744.79
d. $2,744.79
The homeowners Protection Act provides for the automatic cancellation of PMI if the mortgage payments are current when the owners' equity reaches: a. 5% b. 12% c. 17% d. 22%
d. 22%
An investor purchased an apartment building for $1,000,000 encumbered by a 7% mortgage with a balance of $1,250,000. Net operating income was $178,500. Monthly mortgage payments are $8,053.77, and depreciation in the first year was $47,900. The equity dividend rate for this property is a. 12.7% b. 13.2% c. 19.3% d. 23.4%
d. 23.4%
The rent called for in a lease is: a. Open rent b. Market rent c. Economic rent d. Contract rent
d. Contract rent
A example of an arms-length transaction would be: a. Mr. Ajax to the Ajax Corporation b. Mr. Smith to Mrs. Smith (husband and wife) c. Gateway Corp to ABC Investment (Gateway own 15 shares of ABC) d. Mr. Black to Ms. Jones (Not related)
d. Mr. Black to Ms. Jones (Not related)
A broker is considering various forms of business organizations for his new real estate brokerage. He wants protection from personal liability and favorable income tax treatment. Which business organization BEST fits his criteria? a. Limited partnership b. Corporation c. Corporation Sole d. S Corporation
d. S Corporation A corporation can avoid double taxation by electing to be treated as an S corporation under the rules of Subchapter S of the IRS Code.
An active New York broker has held a license since 2010. She now lives in Jacksonville, Florida, and wants a Florida real estate broker's license. Which statement applies to this situation? a. She must first take and pass the sales associate course and licensure exam b. She may apply for a Florida broker license under mutual recognition. c. She is required only to take and pass the state broker license exam. d. She must successfully complete the broker pre-license course and pass the state broker license examination.
d. She must successfully complete the broker pre-license course and pass the state broker license examination.
Which type of ownership has the characteristic of survivability? a. Tenancy in severalty and tenancy in common b. Tenancy at will and joint tenancy c. Tenancy by the entireties and tenancy in common d. Tenancy by the entireties and joint tenancy
d. Tenancy by the entireties and joint tenancy
Which statement applies to the situation where a classified advertisement includes the phrase "wheelchair ramp at front entrance"? a. The Fair Housing Act states that real estate advertisements should not contain explicit features such as "wheelchair ramp." b. The words "wheelchair ramp" are required by the Americans with Disabilities Act. c. Florida Real Estate Commission (FREC) rules prohibit singling out certain individuals. d. The Fair Housing Act allows advertisements to describe specific accessibility features that a property includes.
d. The Fair Housing Act allows advertisements to describe specific accessibility features that a property includes.
An executed contract for sale and purchase fails to close. What is the requirement regarding retention of the brokerage relationship documents associated with the transaction? a. The broker is not required to retain the brokerage relationship documents. b. The broker must secure a written release from both the buyer and the seller before destroying the brokerage relationship documents. c. The broker must retain the brokerage relationship documents for two years. d. The broker must retain the file with the brokerage relationship documents for five years.
d. The broker must retain the file with the brokerage relationship documents for five years.
Characteristics of a "good" comparable sale do not include: a. term and conditions of sale which must be similar to the subject property. b. zoning, locational, and physical characteristics which must be reasonably similar to the subject property c. an "arms length" transaction d. a "non-arms length" transaction
d. a "non-arms length" transaction
An investor has the right to expect: a. a return on an investment b. a return of loss of value of the asset c. a return of the investment d. all of the above
d. all of the above
In installment sales, up to what maximum percentage of the sale price can be received for realized gain not to be included in taxable income until cash is received? a. 50% b. 25% c. 30% d. any percentage is allowed
d. any percentage is allowed
The interest rate given on a mortgage may be not affected by: a. whether or not it was an FHA, VA or conventional loan b. market risk c. dynamic risk d. borrower's age
d. borrower's age
A good real estate tax-sheltered investment should provide positive: a. taxable income, negative cash throw off b. cash throw-off, elimination of tax c. cash throw off, positive taxable income d. cash throw off, negative taxable income
d. cash throw off, negative taxable income
Dynamic risk is the risk associated with the: a. variance between budgeted and actual costs of construction. b. variance between budgeted and actual operating income and expenses. c. ability to pay operating expenses from funds provided from operations, borrowing, and equity sources. d. changes in general business conditions
d. changes in general business conditions
The best order for making adjustments in the market approach to appraising would be: a. time, financing, physical characteristics, locational differences b. physical characteristics, locational differences, time, financing c. locational differences, financing, physical characteristics, time d. financing, time, locational differences, physical characteristics
d. financing, time, locational differences, physical characteristics
The best way to appraise a business is by use of the: a. comparable sales approach b. cost depreciation approach c. liquidation value approach d. income capitalization approach
d. income capitalization approach
Advantages of investing in income-producing real estate would not include: a. equity buildup b. tax shelter c. leverage d. liquidity
d. liquidity
A reconstruction operating statement should include: a. management and depreciation b. depreciation expenses and utilities c. reserve for replacements and mortgage payments d. management expenses and reserves
d. management expenses and reserves
A business appraiser, when valuing assets of a going concern should use a. liquidation value b. book value c. historical costs d. market value
d. market value
In using comparables it is a good idea to verify the sale. A good source of verification would not be: a. selling broker b. appraiser c. one of the parties involved d. neighbors
d. neighbors
An example of functional obsolescence would be: a. a change in zoning b. needs painting c. structural damage d. not enough electrical outlets
d. not enough electrical outlets
Economic obsolescence may not be: a. unpleasant odors b. changes in zoning c. changes in traffic patterns d. physical deterioration
d. physical deterioration
To be defendable, an estimate of highest and best use is not required to: a. be legally permissible b. be physically possible c. be financially feasible d. produce the highest residual income to the building
d. produce the highest residual income to the building
