MODULE 5

If the brokerage is incorporated, which of the following statements is true? The corporation must have at least one principal broker. The corporation must be a valid corporation under Oregon law and registered with the Business Registry. Once registered with the Real Estate Agency, the registered name will not expire. A, B, and C A and B only A only B only

ABC

Principal brokers must supervise which of the following activities of brokers? Completion of a listing agreement. Completion of a CMA. Completion of a purchase and sale agreement. B and C only A only A, B, and C A and C only

ABC

Which statements are true regarding a title search? A title search traces the chain of title by researching every record available for a property. A title search determines whether the person or entity who is selling the property actually has legal ownership and the right to sell it. A title search reveals "defects" against the title

ABC

Which of the following business types must register with the Oregon Real Estate Agency in order to engage in real estate activity? Sole Proprietorship General Partnership Corporation Limited Liability Company A, B, C, and D B, C, and D only B and C only Neither A, B, C, nor D. They only have to register with the Oregon Secretary of State's Business Registry.

ABCD

Waldo is buying Marianne's house. The closing date (day belongs to seller) of the sale transaction is September 1 (day 244 of the year). Current Year real estate taxes are $1,100 (will be billed to buyer next year). Use the 365-day method for prorating. What is Marianne's share of the real estate taxes? $364.66. $367.67. $732.33. $735.34

Assuming a 365 day year, the daily tax expense is ($1,100 ÷ 365), or $3.013. As taxes are paid in arrears, the buyer will be paying the annual bill. Thus, he will be owed a credit for the seller's share of the bill, which is $3.013 x 244 days, or $735.34.

Oregon Administrative Rules dealing with neutral escrow and clients' trust accounts requires: all funds to be deposited first in the clients' trust account and then transferred into a neutral escrow. the principal broker to account for all funds received by maintaining appropriate documentary evidence.

B

Encumbrances are a right another person has in a property that diminishes the rights of the property owner. are frequently accepted by a buyer with the passing of title

BOTH

The ALTA Owner's Standard Title Policy expressly excludes from coverage any loss or damages arising from which of the following? Any law, ordinance or governmental regulation that affects the use and enjoyment of the property. Taxes and assessments that are not shown as existing liens by the records of the appropriate taxing authority. B only A only Both A and B Neither A nor B

BOTH

When interviewing for a listing, who can give a seller an estimate of a reasonable sales price? Broker Principal broker A only Both A and B B only Neither A nor B

BOTH

An objective standard would require that the fact in question affect the value or desirability of the property for most buyers. True False An objective standard means the standard in question would affect value or desirability for MOST buyers

TRUE

The basic information necessary to open an escrow is found in the real estate sale agreement and its addenda. in the preliminary title report. in the listing agreement. in the escrow instructions submitted by the brokers.

in the real estate sale agreement and its addenda.

Under the real estate law, a brokerage: is required to place all trust funds into an escrow company's trust account. is not required to have a trust fund account. is required to have a trust fund account. is required to have a trust fund account if the average brokerage transaction dollar amount exceeds $250,000 (the amount of FDIC insurance).

is not required to have a trust fund account.

At settlement, all of the following items, if applicable, will be prorated between the buyer and seller, EXCEPT: interest on an assumed loan. lender's ALTA extended title insurance premium. rents collected in advance. real property taxes

lender's ALTA extended title insurance premium.

A broker representing a seller has an obligation to disclose known material facts to the buyer. True False

TRUE

Keisha is buying John's house. The closing date (day belongs to seller) of the sale transaction is September 1 (day 244 of the year). Existing hazard insurance of $350 has been paid by John through December 31. Use the 365-day method for prorating. What is Keisha's share of the existing hazard insurance already paid in full? $116.03. $117.99. $232.01. $233.97.

$116.03. The buyer's share is the unused portion, or (365 days - 244 days), or 121 days. The daily expense is ($350 ÷ 365), or $.9589. ($.9589 x 121) = $116.03. The seller receives this amount as a credit and the buyer a debit.

Each client with funds deposited in a trust account in a federally insured bank is insured up to: $100,000. $150,000. $250,000. $500,000.

$250,000

A sale transaction closes on July 4. The day of closing belongs to the seller. On January 1, the seller paid a hazard insurance premium of $375 for the calendar year. According to the 12-month/30-day method, what is the seller's share of the insurance premium? $183.33 $187.50 $189.05 $191.67

191.67 This method assumes all months are 30 days long, making the year a total of 360 days. The daily proration would be $1.04166 ($375 ÷ 360 days = $1.04166). The closing occurs on the 184th day of the 360-day year (6 months x 30 days per month =180 days + 4 days (July 4) = 184 days). $1.04166 × 184 days = $191.67 Note that if the day of closing is the buyer's, there would be 183 day's worth of prorated expense.

Any document prepared by a broker relating to real estate activity performed must be reviewed and initialed by the principal broker within: 7 banking days 10 days. 3 hours of document creation. 1 week.

7 banking days

The ALTA extended policy removes the five standard policy exceptions as exceptions to coverage and insures the policyholder against them. is generally granted to the buyer without additional charge in Oregon.

A

A buyer will receive a water bill for an estimated $100 at the end of the month. At closing, the seller has used an estimated $43 in water. What should appear on the closing statement? A debit to the seller and credit to the buyer for $57. A debit to the buyer and credit to the seller for $57. A debit to the buyer and credit to the seller for $43. A debit to the seller and credit to the buyer for $43.

A debit to the seller and credit to the buyer for $43.

A seller received a rental payment of $900 in advance of closing. At closing, the seller is due only $320 of this rent and the balance will be paid to the buyer. What should appear on the closing statement? A debit to the seller and credit to the buyer for $320. A debit to the seller for $320 and a credit to the buyer for $900. A debit to the seller for $580 and a credit to the buyer for $320. A debit to the seller and credit to the buyer for $580.

A debit to the seller and credit to the buyer for $580. For income the seller received in advance, the buyer receives a credit and the seller receives a debit. In effect, the seller has received some of the buyer's income, and the seller must pay this share to the buyer. Therefore, the seller is debited and the buyer is credited the $580 the buyer is entitled to earn as the new owner.

An extended coverage title insurance policy provides coverage against which of the following? Unrecorded easements Unrecorded liens Rights of parties in possession C only A and B only B and C only A, B, and C

ABC

Under REA rules and regulations, which of the following are true? A brokerage is not required to maintain a trust account. Every brokerage business must maintain a client trust account. A property manager who receives security deposits on behalf of an owner must open and maintain a security deposits account that is separate from the property manager's clients' trust account.

AC

The following documents or records must be made available to the Oregon REA if requested: Listing Agreements Trust fund account records All unaccepted offers Property Management agreements B only B, C, and D only B and C only All of the above

ALL

If a licensee converts trust funds to personal use, the licensee is: criminally liable. civilly liable. subject to license revocation. All of the above

All of the above

The unlicensed personal assistant of a broker can do which of the following? Discuss information with a caller about a property listed by their broker. Deliver documents to a buyer. Discuss the terms of an offer with a seller. Prepare and submit advertising to a newspape

Deliver documents to a buyer.

Material facts are only those that affect the value of a property. True False

FALSE Material facts are information from the seller that may adversely affect the value of the property or affect the buyer's interest or performance in the real estate contract; had the buyer known the material fact, the buyer may have offered less or nothing at all. A material fact can influence more than just value.

A subjective standard would require that the fact in question affect the value or desirability of the property for most buyers. True False

FALSE A subjective standard would require that the fact in question affect the value or desirability of the property for the specific buyer.

Julie is buying Makya's house. The closing date (day belongs to seller) of the sale transaction is September 1 (day 244 of the year). The buyer's loan amount is $78,750 (90%; 30 years @ 8%). The monthly payment on this loan is $577.84, with $525 going to interest in the first month. At closing, Julie must pre-pay interest for the period of Sept. 2-Sept. 30. Use the 365-day method for prorating. What is Julie's prepaid interest amount? $507.50. $525.00. $543.10. $558.58.

If the buyer pays $525 interest for 30 days, the daily expense is ($525 ÷ 30), or $17.50. If there are 29 days of pre-paid expense, the buyer's charge is ($17.50 x 29), or $507.50.

Which one of these items would not be prorated at closing? Taxes. Inspection fees. Utilities. Condominium assessments.

Inspection fees.

Commingling is the practice of Mixing escrow funds with the broker's operating funds. Allocating commission funds from a transaction for use in the agency's business. Mixing socially with prospects at open houses or other marketing functions. Blending escrow funds on a number of properties in one escrow account.

Mixing escrow funds with the broker's operating funds.

A branch office registration is necessary to use a: model unit in a subdivision which is available for sale but used for promotion of interest in the entire development. temporary structure for dissemination of information. Both A and B B only A only Neither A nor B

NEITHER

Which of the following are exceptions to commingling that are permitted under Oregon Real Estate law? The principal broker may maintain up to $300 of personal funds in a trust account to cover service fees and other bank charges. The principal broker may deposit rents and deposits from broker owned real estate into the trust fund account. The principal broker may retain commissions earned in the trust fund account up to 30 days from the date they were earned. The principal broker may deposit into the trust fund account any sum required to cover trust fund shortages.

NONE

Which of the following business entities is generally prohibited from brokering real estate? Non-profit corporation. Partnership. Sole proprietorship. Corporation for profi

Non-profit corporation.

Which of the following is NOT a trust fund? Fees for brokerage services to be conducted in the future. Earnest money deposit relating to a purchase of property. Security deposits received for a property the broker is managing for the property owner. Rents and deposits derived from rental property owned by the broker.

Rents and deposits derived from rental property owned by the broker.

A sale transaction closes on April 1, the ninety-first day of the tax year. The day of closing belongs to the seller. Real estate taxes for the year, not yet billed, are expected to be $2,190. According to the 365-day method, what is the seller's share of the tax bill? $1,364.66. $1,644.00. $546.00. $9530.

The daily tax expense, first, is ($2,190 ÷ 365) or $6.00. Since the buyer will pay the taxes after closing, the seller will owe the buyer his or her portion of the tax bill, which is the 91 days from the beginning of the year through closing. Therefore, credit the buyer and debit the seller ($6.00 x 91), or $546.00.

If escrow instructions differ from the real estate sale agreement, and the escrow instructions have been signed by both the buyer and seller, which of the following is correct? The real estate sale agreement takes precedence. The escrow instructions will take precedence. A new real estate sale agreement must be created and signed. Everything is void and the transaction is subject to renegotiation.

The escrow instructions will take precedence.

Four friends, Russ, Mike, Arthur, and Duncan, want to start a real estate brokerage. They intend to form a Limited Liability Company. All of the friends are licensed Oregon principal brokers, except Duncan, who doesn't hold a real estate license. Which of the following statements is true? The four friends cannot form an LLC because all owners of an LLC must be Oregon licensees in order to register the LLC with the Real Estate Agency. They can only form an LLC if they notify the REA and agree to supervise Duncan's real estate activities. The four friends can form an LLC and register the LLC with the Oregon Real Estate Agency They can form an LLC if they make Duncan an honorary real estate licensee.

The four friends cannot form an LLC because all owners of an LLC must be Oregon licensees in order to register the LLC with the Real Estate Agency.

A certain item is to be prorated between a buyer and seller. If no outside party is concerned, which of the following statements is true? The item must be prorated and recorded as a debit to one party; the remainder is recorded as a credit to the other party. The item must be prorated and recorded as a debit to one party and a credit to the other party for the same amount. The party who is owed money receives a credit for the entire item and a debit for the prorated amount. The party who owes money receives a debit for the portion owed and a credit for the portion that is not owed.

The item must be prorated and recorded as a debit to one party and a credit to the other party for the same amount.

A principal broker accepted an earnest money deposit check from a buyer for an accepted offer on one of the principal broker's listings and then endorsed it over to the associated broker who listed the property as a partial commission advance. Which statement is correct? The broker has to keep the check uncashed until closing so it can be returned if the transaction falls through. The principal broker has illegally converted trust funds for business use. Nothing is wrong with this, provided this is done within three days from receiving the check. The principal broker and the agent are guilty of price fixing. The principal broker has illegally converted trust funds for business use; conversion is the act of misappropriating trust funds for the principal broker's business or personal use; conversion carries serious consequences, including license revocation.

The principal broker has illegally converted trust funds for business use.

If a brokerage is going to be organized to allow multiple principal brokers to manage its brokers, which statement is true? There should be a written agreement between principal brokers, but none is required. There must be a written agreement between the principal brokers defining how the supervision and control of the brokers shall occur. The brokers must select which one of the principal brokers he/she prefers to work under. There can only be one managing principal broker and the responsibility cannot be shared.

There must be a written agreement between the principal brokers defining how the supervision and control of the brokers shall occur.

In a typical real estate transaction, which one of the following IS a violation of license law? To deposit the funds into the brokerage trust fund account. To never deposit an earnest money check from a client. To deposit the funds into a neutral escrow depository. To give the funds to the owner of the funds based on written instructions from all principals in the transaction.

To never deposit an earnest money check from a client.

Six investors purchase a shopping center. One of them manages the tenants and another manages the marketing and leasing. Two other investors manage accounting and finance, and the remaining two run the management office. The six investors spend equal time at their managment responsibilities for the shopping center. This example best matches an investment conduit. a real estate investment trust. a general partnership. a limited partnership.

a general partnership.

State laws differ on whether a buyer is entitled to know about a suicide that occurred in the house. the fact that the roof leaks when it rains. the seller's are getting divorced. lead-based paint

a suicide that occurred in the house.

An item paid in arrears is normally paid whenever it is incurred. on a monthly or yearly basis. only after it is billed. at some time after the expense is incurred.

at some time after the expense is incurred.

If a broker is dishonest, the trust fund bank account does not guarantee protection against the dishonest conduct of the licensee. will prevent a dishonest licensee from converting the funds to personal use. is insured by the FDIC, so the client will still receive their funds. will protect the client's funds regardless of the broker's conduct.

does not guarantee protection against the dishonest conduct of the licensee.

Clients' trust fund accounts should be reconciled at least: twice quarterly. once a month. four times a year. once a week.

once a month.

Martin bought a property and agreed that the transaction would close in escrow on August 31. The closing statement will provide that the seller will pay the buyer for nine months of taxes. buyer will pay the seller for July and August taxes. buyer will be debited and the seller credited for nine months of taxes. seller will be debited for July and August property taxes and the buyer will be credited.

seller will be debited for July and August property taxes and the buyer will be credited.

Prorations are the apportionment of certain expenses at closing between the broker and buyer. the seller and broker. the buyer and the lender. the buyer and seller

the buyer and seller.

At the closing of a mortgage loan the borrower's loan application is complete and the file closed. the parties complete all loan origination documents and the loan is funded. the borrower pays off the note and receives clear title. the lender issues a firm loan commitment.

the parties complete all loan origination documents and the loan is funded.

Standard exceptions to title insurance are found in the listing agreement. the purchase and sale agreement. the preliminary title report. the initial letter from the escrow agent to the parties.

the preliminary title report.

When a principal broker establishes an independent contractor relationship with an associated broker the broker is not required to have the broker's personal transactions supervised by the principal broker. the listings obtained by the broker will automatically transfer with the broker's license if the broker moves to another brokerage. the principal broker is not responsible for reviewing the real estate broker's advertising. the principal broker must supervise all of the real estate broker's real estate activities, including the purchase or sale of personal real estate

the principal broker must supervise all of the real estate broker's real estate activities, including the purchase or sale of personal real estate.

Title insurance protects the buyer by providing that the mortgage balance will be paid off in case of default. there will be protection against adverse claims to the ownership of the property except those exclusions listed in the policy. the mortgage balance will be paid off in case of death or disability. the property will be restored in the event of any damage covered by the policy.

there will be protection against adverse claims to the ownership of the property except those exclusions listed in the policy.

Principal Broker Deanna accepted Broker Jean-Luc as an affiliated licensee and they entered into an independent contractor agreement. All of the following statements are true about an independent contractor EXCEPT: under IRS rules, real estate licensees who are independent contractors cannot be supervised. Deanna is not required to withhold payroll taxes on money paid to Jean-Luc. Jean-Luc can be compensated on a commission basis. Deanna must control the real estate activities of Jean-Luc.

under IRS rules, real estate licensees who are independent contractors cannot be supervised.