Moseley National Practice Exam

A homeowner is having carpeting installed in his home. The area to be carpeted is 16'6" x 15'. The cost of the carpet is $19.95 per square yard and the pad is an additional $5.00 per square yard. How much will it cost to install the carpeting? A. $548.63 B. $686.13 C. $2,058.39 D. $6,175.13

(general math concepts) First, we need to find the amount of carpet that needs to be installed: Area = 16.5ft x 15 ft.= 247.5 sq. ft Next, we need to convert this information into square yards: 1 yard = 3 ft. 1 sq. yard = 3ft. x 3 ft. = 9 sq. ft Area = 247.5 sq ft. / 9 sq. ft. = 27.5 sq. yards Now, we can determine the amount that it will cost to install the carpet. Price = $19.95 + $5 per sq. yard = $24.95 per sq. yard Price = $24.95 x 27.5 = $686.125 Rounded to the nearest amount, this it will cost $686.13 to install the carpeting. The correct answer is: $686.13

A property is worth $12,000, and its furniture and household goods are worth $4,000. The owner insures them both for 80% of their value. The annual rate on the dwelling is $2.80 per $1,000, and the furniture and household goods are $3.30 per $1,000. If the premium for a three-year policy is 2-1/2 times the premium for one year, what savings would be affected by taking out a 3-year policy? Select one: A. $10.56 B. $18.72 C. $28.88 D. $37.44

(general math concepts) Let's separate this into an easy to read format. First, determine the annual premium for the real property: Insured Property Value = $12,000 x 0.80 = $9,600 Rate for Insured Property = $2.80 / $1,000 = 0.0028 Premium for Insured Property = $9,600 x 0.0028 = $26.88 Next, determine the annual premium for the household goods: Insured Goods Value = $4,000 x 0.80 = $3,200 Rate for Insured Goods = $3.30 / $1,000 = 0.0033 Premium for Insured Goods = $3,200 x 0.0033 = $10.56 Now, we can figure the premium for a 1 yr policy and for a 3 yr policy: Premium for a 1-year policy = $26.88 + $10.56 = $37.44 Premium for a 3-year policy = $37.44 x 2.5 = $93.60 Finally, we can use these numbers to determine the amount of savings: Premium for three 1-year policies = $37.44 x 3 = $112.32 Total savings = $112.32 - $93.60 = $18.72 The correct answer is: $18.72

A homeowner has a 95% PMI loan. If the loan balance is $60,000, what is the PMI insurance for the third year of the loan? A. $75 B. $150 C. $300 D. $600

(general math concepts) This is a really tough question because you must supply a missing assumption. PMI insurance premiums vary between the insurance company and the policy of the lender. However, the general rule is that PMI is 0.25% of the loan amount: $60,000 x 0.0025 = $150 This questions demonstrates that a person may come across unfamiliar information on the licensing exam. The correct answer is: $150

Desmond the Developer owns a 30-acre tract of land along a major river. He plans to build a river front community in this location. However, before applying for his building permit, Desmond realizes that the zoning has changed to prohibit residential development. Desmond will likely: A. Receive compensation if he sues on a theory of inverse condemnation B. Receive no compensation because the regulation is not pervasive C. Receive just compensation following condemnation D. Receive compensation only if the zoning change is for a public purpose

(government rights in land) Desmond's property is not being physically taken by the government. However, short of a physical taking, a property could be so overly regulated that its owner loses all economic value. Such circumstances could lead to an inverse condemnation. If the facts support an inverse condemnation, the owner could be compensated for the property because it has been over-regulated. However, inverse condemnation is a very high standard to meet. Based on the description, there is no indication that Desmond's property is useless (for example, there's no prohibition against a commercial development). The correct answer is: Receive no compensation because the regulation is not pervasive

What is not a private limitation on title? A. Lien B. Deed restriction C. Eminent domain D. Encroachment

(government rights in land) Except for eminent domain, all of the other choices are private limitations on title because they are man-made. In other words, they arise due to the actions or omissions of one or more of the parties. By contrast, eminent domain arises pursuant to application of the law. The correct answer is: Eminent domain

The State of Order plans to condemn several pieces of inner city property in order to build a sports complex. This will displace many poor families. The State of Order then plans to lease the assembled property to three private citizens, who will operate the complex. Is this use of eminent domain consistent with the US Constitution? Select one: A. Yes, but only of the lots are vacant B. Yes, if just compensation is paid to the land-owners C. No, because there is no public purpose D. No, because condemned property cannot benefit private individuals

(government rights in land) The state has the power to do this through its power of eminent domain. The construction of a sports complex could be considered as a public good because it would create additional revenue and offer employment. The US Supreme Court has upheld the taking of property for private use, while recognizing that states may impose different standards (including legislation which prohibits taking property for private use). Therefore, while states CAN take property for private use consistent with the US Constitution, they may also choose not to. The correct answer is: Yes, if just compensation is paid to the land-owners

When a metes and bounds survey is used to describe property, the word "metes" refers to: A. Monuments B. Areas twenty-four miles square C. Parallel lines that run north and south D. The length in inches, feet, or yards of a property line

(land characteristics & property descriptions) Metes is the length of a property line in inches, feet, yards, rods, or any linear measurement. Bounds are the monuments used to identify the boundary of the property. The correct answer is: The length in inches, feet, or yards of a property line

All of the following statements are true about land, except: A. Land exists forever B. Real estate is immobile C. Land cannot be insured D. Land may be depreciated

(land characteristics and property descriptions) The concept of indestructibility is the legal basis for neither insuring land nor being able to depreciate it. Therefore, it is false to say that land may be depreciated. The correct answer is: Land may be depreciated

Tommy the Tenant takes over a tattoo parlor from an existing tenant. The parlor came with a comfortable dentist chair, which was perfect for people to sit on while getting their tattoo. One day, the chair breaks. Tommy installs a new dentist chair that he picked up at a flea market. The new chair is: A. Personal property, regardless of when it is removed B. Real property, if not timely removed C. Personal property, so long as it is timely removed D. Real property, regardless of when it is removed

(land characteristics and property descriptions) This one is tricky. The issue is whether the chair is a trade fixture or a replacement fixture. Replacement fixtures are improvements that are installed by a tenant to replace worn out items that were already in place before the start of the lease. Replacement fixtures are classified as real property and belong to the owner. Because Tommy is merely replacing the chair. it is not a trade fixture, but merely a replacement fixture. Therefore, the chair is real property regardless of when or if it is removed (and Tommy cannot remove it without the owner's permission). The correct answer is: Real property, regardless of when it is removed

The relationship most likely to exist between a licensee and the seller is a: Select one: A. Universal agency B. Special agency C. Restricted agency D. None of the above

(law, definition, & nature of agency relationships) Do not assume that "licensee" means "salesperson"; it also includes "broker". The relationship between the broker (licensee) and the seller would be that of a special agency since that is the type of agency created by the usual listing agreement. It is possible that the broker could have additional authority to act for the seller, but that is generally NOT the case. The correct answer is: Special agency

Which of the following situations is an example of dual agency? A. A broker's undisclosed representation of both buyer and seller B. Two salespersons represent a different buyer and seller in the same transaction C. A salesperson represents both buyer and seller D. Both A and C

(law, definition, & nature of agency relationships) It doesn't matter whether disclosure is made; a dual agency exists where the broker represents both the buyer and the seller. A salesperson who represents both parties in a transaction is an example of dual agent. In the situation, the parties should have an agreement with the salesperson's broker, but the salesperson might have instead created an implied agency by her words or actions. Nevertheless, two salespersons representing a different buyer and seller for the same broker is a designated agency. The correct answer is: Both A and C

The relationship that generally exists between a salesperson and a seller is a: A. Universal agency B. Special agency C. General agency D. None of the above

(law, definition, & nature of agency relationships) Only the broker has entered into agency relationship with the seller. Meanwhile, the salesperson acts as the broker's agent when assigned to a real estate transaction (commonly known as a sub-agency). If the question had asked, the usual relationship between a broker and seller is special agency. It may be possible for a broker to have additional authority, but that is generally NOT the case. The correct answer is: None of the above

Phil is a salesman working for Broker Joan. Phil takes a listing on January 3rd. The listing is a 60-day exclusive right-to-sell agreement. On February 1st, Phil was killed in an automobile accident. What is the status of the listing? A. The listing becomes an open listing B. The listing terminates by operation of law C. The listing remains valid D. The seller may now list the property with another salesman working for Broker Joan

(law, definition, & nature of agency relationships) The listing is between the seller and the BROKER (Joan). Phil's death has no affect on the listing. The correct answer is: The listing remains valid

The clause in a lease that allows rent to increase is a(n): A. Acceleration clause B. Percentage clause C. Escalator clause D. Contingency clause

(lease clauses and covenants) Of the choices given, only an escalator clause specifies that rent will increase at periodic times by pre-determined amounts. The correct answer is: Escalator clause

Under the terms of an FHA loan, a lender agrees to loan 96.5% for the sale of a $46,000 home. The lender is quoting four loan discount points. How much would the seller pay in discount points if he agreed to pay all four points? A. $1,776 B. $1,797 C. $2,300 D. $2,329

(lending calculations) Remember that points are computed on the loan amount, not the sales price. Discount points are worth 1% of the loan amount. Loan amount = $46,000 x 0.965 = $44,390 Discount point = $44,390 x 0.01 = $443.90 Total Points = $443.90 x 4 = $1,775.60 Rounded to the nearest dollar, the seller would pay $1,776 if he agreed to all four discount points. The correct answer is: $1,776

When showing and selling property, a salesperson must: A. Inform buyers about hidden property defects B. Avoid statements which may deceive the buyer C. Present all offers, even after the seller has already accepted D. All of the above

(material facts) Although a salesperson is an agent of the broker, who is an agent of the principal (seller), the salesperson acts as a fiduciary of the seller as a sub-agent. Therefore, all offers must be presented to the seller. Salespersons and brokers also have certain obligations towards their customers (buyers), and must to inform them of material facts about the property. The correct answer is: All of the above

While previewing a house, the salesperson notices water stains behind the draperies. When asked, the owner denied that there were any water problems. If the salesperson shows the property and fails to mention the water stains, the salesperson is guilty of: A. Fraud B. Misrepresentation C. Nothing, because his fiduciary responsibility is with the owner D. Puffery

(material facts) Since they are evidence of leakage or flooding, water stains are material facts that must be disclosed if known by the salesperson. Because the salesperson knew of the stains and failed to disclose them, his conduct is fraudulent. The correct answer is: Fraud

Broker Johnson has listed Cheever's property and sells it to Brevard for $75,000. Before closing, Johnson discovers that the property has a serious structural defect. What should Johnson do? A. Tell Cheever only because he is Cheever's agent B. Tell Brevard only to satisfy his fiduciary duty C. Tell no one if the sales contracts already been executed D. Tell Cheever and Brevard to avoid liability

(material facts) The broker is obligated to reveal all material facts about a property to both parties. The correct answer is: Tell Cheever and Brevard to avoid liability

Broker A shows a house with a faulty roof. When he finds out about the roof, should he tell the buyer/customer? A. Yes, it is an agency responsibility B. Yes, it is a material fact C. Only if he is a dual agent D. Only if he has the seller's permission

(material facts) The broker must disclose all material adverse facts about the physical condition of the property that are known to the broker. The correct answer is: Yes, it is a material fact

A salesperson listed a property where a murder recently occurred. If the salesperson shows the property without advising potential buyers of the murders, the salesperson would be guilty of: A. Fraud B. Misrepresentation C. Puffery D. Nothing

(material facts) The salesperson is not required to disclose occurrences which have no effect on the physical structure, the environment, the property, or its improvements. The correct answer is: Nothing

When a salesperson or broker does a CMA, he could be doing any of the following services, EXCEPT: Select one: A. Helping a seller set a reasonable price B. Providing an appraisal of value C. Obtaining information about prices of similar properties D. Helping a potential buyer locate suitable property

(methods of estimating value) An appraisal is a professional estimate of market value by a licensed appraiser. A CMA is NOT an appraisal, but rather, an informal estimation of value by someone who is NOT an appraiser. The correct answer is: Providing an appraisal of value

Which method would an appraiser most likely use in estimating the value of an office building? A. Comparative market analysis B. Cost approach C. Income approach D. Market data approach

(methods of estimating value) Like other income-producing properties, an office building is primarily valued by determining the return on one's investment. Such a property would therefore be appraised by the income approach. The cost approach is performed for special use property (like churches, schools, etc). The market data approach is generally used for residential property. The correct answer is: Income approach

What provides the best estimate of a property's value? A. The amount a lender is willing to lend B. A formal appraisal C. A comparative market analysis D. The market data approach

(methods of estimating value) The amount of money a lender is willing to lend is based on many factors, which may include economic factors independent of the property. A comparative market analysis is, at best, an educated guess of the market value of a property. A formal appraisal is performed by a licensed appraiser who develops his opinion based on experience, education, and an analysis of the subject property. Therefore, of the choices listed, an appraisal is likely to produce the best estimate of a property's value. The correct answer is: A formal appraisal

Which of the following statements is true about the cost approach to estimating value? A. Replacement costs denote property that is replaced by another with similar utility B. Reproduction costs denote property that is replaced by another identical property C. Using the cost approach tends to set the upper limits of value D. All of the above

(methods of estimating value) Under the cost approach, replacement cost is the cost to build a structure with similar utility and amenities. Reproduction cost is the cost to build an exact replica of the subject property. Any time that a cost approach is used (replacement or reproduction), the value will be on the upper end of the value scale. The correct answer is: All of the above

An individual defaults on a $100,000 mortgage and only $95,000 is received by the lender as a result of foreclosure. In this situation, which of the following statements is true? A. The lender must fine a $5,000 judgement B. The lender may be entitled to a $5,000 judgement C. The lender cannot recover the $5,000 D. None of the above

(mortgages/deeds of trust) In the situation described, the lender could file for a deficiency judgment against the original borrower and could recover the full amount, depending on the borrower's other assets. The correct answer is: The lender may be entitled to a $5,000 judgement

The promissory note accompanying a mortgage could create a: A. Personal obligation B. Two-way obligation C. Three-way obligation D. None of the above

(mortgages/deeds of trust) The promissory note accompanying a mortgage is legal evidence of the debt. This expresses the personal obligation of the borrower. The correct answer is: Personal obligation

In the process of taking a listing, a salesperson notices water stains on the ceiling of one of the rooms. What should the salesperson do? Select one: A. Nothing, because it is not a latent defect B. Nothing, because the stain is old C. Ask the owner if there is a leak D. Decline to list the property

(need for inspection, obtaining, verifying information) The licensee must disclose all material facts about the property. The agent should inquire about the stain in order to determine if there is a problem. Remember that the licensee is required to disclose known material information to prospective buyers. The correct answer is: Ask the owner if there is a leak

A property is listed at $185,000. Four offers are presented. Which offer BEST describes an offer made by a ready, willing, and able buyer? A. An all cash offer of $175,00 B. A full price offer from a financially qualified buyer, subject only to financing at current market rates C. A full price offer, contingent upon the buyer (offeror) first selling his current residence D. Both B and C

(offers/purchase agreements) By definition, ready, willing, and able must be on the TERMS OF THE SELLER. The other choices do NOT meet the terms of the seller. Therefore, the best choice is "a full price offer, from a financially qualified buyer, subject only to financing at current market rates." The correct answer is: A full price offer from a financially qualified buyer, subject only to financing at current market rates

An option holder is obligated to do which of the following actions? A. Withdraw the option prior to acceptance B. Convey further assurance to the optionor C. Exercise the option contract within a set period to time D. Nothing

(offers/purchase agreements) The option holder (person with the right to exercise the option) is not obligated to do anything--he has the option to buy, but not the obligation to buy. It is true that the option is only available for the stated period of time, but the option holder doesn't have to exercise the option at all. Further, the option holder doesn't have to provide any further assurances or withdraw the option (the option automarically expires after the specified time). The correct answer is: Nothing

An owner builds a beautiful brick colonial house in a neighborhood of contemporary, single level houses. The owner lists his newly constructed house, but is unable to sell. This would be consistent with the appraisal principle of: A. Highest and best use B. Progression and regression C. Conformity D. Substitution

(principles of value) Due to the question's emphasis on the style of the house (rather than amenities or price), the best answer is conformity. We don't know whether the other houses have factors which would skew desirability up or down. However, the principle of conformity states that a property attains its highest value when it conforms to surrounding properties. In this situation, the inability to sell is probably because it does not match the style of the neighborhood. The correct answer is: Conformity

The period of time over which an income-prducing property gives benefit to its owner is called: A. Investment life B. Value life C. Physical life D. Economic life

(principles of value) Economic life (useful life) is the period of time over which an income-producing property is expected to remain economically profitable to its owner. Economic life is SHORTER than physical life. The correct answer is: Economic life

The construction of a new highway will divert traffic away from an area and cause a decline in property values. This is an example of which type of depreciation? A. Functional B. Physical C. Economic D. None of the above

(principles of value) External factors that affect property value are considered to be economic obsolescence. Economic obsolescence is always incurable because the owner has no control over matters outside of their property boundaries. The correct answer is: Economic

Which of the following statements best describes the principle of highest and best use? Select one: A. Value created by, and maintained in proportion to, the use characterized by nearby real estate B. Property utilized in the most profitable manner C. Future performance, not past performance D. Property attains its highest value when homogeneously developed

(principles of value) The highest and best use of property is the legal use which will provide the greatest net income to the owner. It must also be a use that is feasible and customary. The correct answer is: Property utilized in the most profitable manner

Which of the following statements is true? A. Physical life is generally longer than economic life B. Physical life is generally shorter than economic life C. Physical and economic life are generally the same D. It is impossible to tell

(principles of value) The physical life of a building is generally longer than its economic life. For example, a little shop is located in what was once the business center of town. When a new shopping center is built, the customers go to the new center. The structure of the little shop may still be very good, but it has no business. Thus, the economic life has passed. The correct answer is: Physical life is generally longer than economic life

Which of the following provisions is NOT an enforceable deed restriction? A. Exterior design B. Building size C. Landscaping set back D. All of the above are enforceable

(private controls) All of the listed restrictions are common and enforceable. The correct answer is: All of the above are enforceable

A person who owns a fee simple estate could be subject to which of the following controls? Select one: A. Zoning and building codes B. Subdivision restrictions C. Escheat D. All of the above

(private controls) All of these are restrictions on private property. Zoning, building codes, and escheat are rights of the government. Restrictive covenants and subdivision restrictions are usually private in nature. Even though you own the property in fee simple, you are still subject to all of the restrictions listed. The correct answer is: All of the above

Deed restrictions are imposed by: A. Developers B. Zoning ordinances C. Neighborhood associations D. All of the above

(private controls) Deed restrictions are imposed on property by the property owner. Of the choices given, a developer is the only property owner. Neighborhood associations can create rules to enforce deed restrictions, but these rules must be consistent with the deed restrictions. The correct answer is: Developers

If a clause in a deed specifies that title reverts to the grantor if the grantee operates a dance hall on the property, this would be: A. Invalid deed restriction B. Valid public control C. Valid deed restriction D. Enforceable only through zoning laws

(private controls) This is a valid condition (although, arguably illogical) to the deed, contained in the granting clause. The grantee would receive a qualified fee (fee simple defeasible). The grantor retains a "possibility of reverter." The correct answer is: Valid deed restriction

The legal process to remove a tenant from property is: A. Eviction B. Ejection C. Quitting D. Constructive notice

(property management and landlord/ tenant) Eviction is a legal process to remove a tenant that has possession of the property. Ejection is an action by an owner to regain possession from someone has possession illegally. Quitting means departing. Constructive notice of ownership can be provided by recording a deed. The correct answer is: Eviction

An agency relationship is created when a broker employs a property manager. This agency is considered to be: Select one: A. Specific B. General C. Managerial D. Universal

(property management and landlord/tenant) A property manager is a textbook example of general agency (i.e., a person empowered to do a number of things for the principal). The correct answer is: General

A broker that is acting as a property manager could be: A. An employee of the owner B. A fiduciary C. The principal in the agreement D. Both A and B

(property management and landlord/tenant) A property manager is often controlled by an agency agreement between him (the agent) and the property owner (the principal). The agency relationship makes the property manager a fiduciary of the client (a position of trust and confidence that carries specified duties). Depending upon the terms of the contract and nature of the relationship, the broker could also be an employee or an independent contractor of the property owner. Therefore, a broker acting as a property manager is likely to be a fiduciary AND could be an employee of the property owner. The correct answer is: Both A and B

In a typical agreement, the property manager would be authorized to do all of the following EXCEPT: A. Enter into a 2 year lease, verbally B. Hire and fire employees C. Collect rent every month D. Furnish the owner with a monthly statement of income and expenditures

(property management and landlord/tenant) An oral lease that is longer than ONE year is unenforceable (statute of frauds). Regardless of the time period, a property owner would probably not be authorized to enter into a verbal lease agreement. It's in the best interest of the owner to have all lease contracts in writing. The correct answer is: Enter into a 2 year lease, verbally

A property management contract is between the property manager and: Select one: A. His or her employees B. The owner of the property C. The tenants D. All of the above

(property management and landlord/tenant) The parties to a property management agreement are the manager and the owner of the property. The correct answer is: The owner of the property

A house sells for $54,000 and is assessed at $39,400. Annual taxes are calculated at $0.92 per $100 and are paid every 6 months. What is the semi-annual tax bill? Select one: A. $496.80 B. $363.40 C. $248.40 D. $181.24

(property tax calculations) First, write out the key information: Property tax (annual) = Assessed value x Tax rate Assessed value = $39,400 Tax rate = $0.92 / $100 = 0.0092 From here, we can use this information to determine the semi-annual tax bill: Property tax (annual)= $39,400 x 0.0092 = $362.48 Property tax (semi-annual) = $362.48 / 2 = $181.24 The correct answer is: $181.24

Smith is interested in purchasing a parcel of land, but wants to first examine any recorded documents relating to the parcel. Smith must have authorization from: A. The current owner B. The civil court having jurisdiction C. A magistrate D. No one

(recording acts) All recorded documents pertaining to land are public information. Therefore, no permission is required to gain access. The correct answer is: No one

Pete purchased a home from Tony. He did not record his deed, but took immediate possession. Tony died a few months later and according to the terms of his will, the property was to go to his nephew, Bob. Bob knew his friend Angela was interested in buying a house. They inspected the property and Angela agreed to buy it from Bob. Angela recorded her deed. Who owns the property? A. Angela, because she recorded the deed B. Bob, because Tony died testate C. Pete, because he purchased it from Tony D. Pete, due to the relation-back doctrine

(recording acts) Remember that a deed need not be recorded to effectuate a valid transfer of title. If Bob and Angela inspected the property, they would have actual notice that Pete was in possession of the property (and should have questioned the ownership rights). There could be a fight in court if Angela sues, but the property legally belongs to Pete. Note that the relation-back doctrine applies where the grantor dies while the property is in escrow. The correct answer is: Pete, because he purchased it from Tony

All of the following statements about the impossibility defense must be true, EXCEPT: A. At least one party is excused from performance B. At least one party cannot legally perform as agreed C. The contract could be rescinded, pursuant to a rescission agreement D. Neither party is liable for damages

(rescission and cancellation agreements/other contract terminations) The only statement that could be false is that the contract may be rescinded pursuant to a rescission agreement. Rescission agreements permit the parties to agree to various scenarios that justify rescinding the contract. Impossibility may or may not be an agreed upon ground for rescission. Therefore, it doesn't HAVE to be true, and this is the best answer of the choices presented. The correct answer is: The contract could be rescinded, pursuant to a rescission agreement

What is a legal action available to either the buyer or seller to enforce the terms of a sales contract? A. Pur autre vie B. A suit for specific performance C. A suit for quiet title D. All of the above

(rescission and cancellation agreements/other contract terminations) The question asks about enforcing the terms of the contract. Specific performance is remedy for breach of contract, which seeks performance as promised. The correct answer is: A suit for specific performance

Who is an intermediary between a lender and a borrower? A. Insurance company B. Mortgage broker C. Federal Reserve Board D. FDIC

(sources of loan money) An intermediary is a go-between. A mortgage broker serves as the liaison between the people who have money to lend and the people who want to borrow money. Think of the mortgage broker in the same way that you would a real estate broker. The broker knows someone who wants to sell a house and also someone who wants to buy a house. He acts as the go-between and helps close the deal. The correct answer is: Mortgage broker

Which of the following entities is NOT involved in the secondary mortgage market? Select one: A. Federal National Mortgage Association B. Government National Mortgage Association C. Federal Housing Administration D. Federal Home Loan Mortgage Corporation

(sources of loan money) Of the choices provided, only the Federal Housing Administration (FHA) does not participate in the secondary mortgage market. The Federal National Mortgage Association is also known as Fannie Mae; The Government National Mortgage Association is also known as Ginnie Mae; and The Federal Home Loan Mortgage Corporation is also known as Freddie Mac. Recognize these programs, both when they are spelled out and when they are listed as acronyms. The correct answer is: Federal Housing Administration

Which of the following entities is an investor in the secondary mortgage market? A. VA B. FHA C. HUD D. FNMA

(sources of loan money) Only one of the choices is an investor that buys and sells mortgages in the secondary mortgage market--the Federal National Mortgage Association (FNMA). Other investors in the secondary market are GNMA (Ginnie Mae) and FHLMC (Freddie Mac). The correct answer is: FNMA

What type of loan would most likely have an 80% LTV ratio? A. Conventional B. VA C. FHA D. Conventional guaranteed

(sources of loan money) Usually, an 80% loan would be a conventional loan. FHA insured loans and VA guaranteed loans may be up to 100%. Conventional guaranteed is a meaningless term. The correct answer is: Conventional

A house sold for $109,000 with the buyer making a 20% down payment. The grantor's tax is based on the: A. Down payment B. Loan amount C. Selling price D. None of the above

(tax aspects) The grantor's tax, also known as the transfer and/or recording tax, is based on the selling price of the property. It is customary in many jurisdictions for the grantor (seller) to pay the grantor's tax. The correct answer is: Selling price

Bill and Sue want to purchase the home that is occupied by their grandparents. However, they want to take title in such a way that will result in the least amount of income tax liability for themselves. How should a real estate sales agent advise them? A. Take title as tenants-in-common with their grandparents B. Acquire title as joint tenants with each other C. Take title as tenants-in-common, but each with an equal interest D. Refer Bill and Sue to an attorney or tax advisor

(tax aspects) This is a problem that licensees should NOT get involved in. Tax matters can be very complex. You will be doing them a favor and keeping yourself out of possible trouble if you refer them to a professional. The correct answer is: Refer Bill and Sue to an attorney or tax advisor

All of the following transfers would be considered involuntary alienation, EXCEPT: A. Foreclosure B. Eminent domain C. Devise D. Adverse possession

(transfer of title) Alienation means to transfer property. A devise is a gift of real property through a will, which is a voluntary act. Foreclosure (when the lender takes over property) and eminent domain (when the government takes over the property) are involuntary. Adverse possession can only occur WITHOUT the true owner's permission. The correct answer is: Devise

Nate rents a vacant lot from Zach for 30 years. Nate plans to erect a building on this land at his own expense. This lease is most likely a: A. Net lease B. Gross lease C. Ground lease D. Sale and lease back

(types of lease agreements) This is a textbook example of a ground lease. Nate will pay rent for use of the land for the duration of the lease (30 years). Nate may use any improvements that he builds during his leasehold, but Zack will own those improvements at the end of Nate's leasehold. The correct answer is: Ground lease

If a man is considered a "proprietary tenant," he is most likely owns interest in which of the following types of property? Select one: A. Condominium apartment B. Apartment house C. Cooperative apartment D. Office building

(types of ownership) A proprietary tenant is a person who lives in a cooperative apartment. To enter into this type of ownership, the purchaser buys an agreed upon amount of stock in the cooperative (worth the sales price of his particular unit). In exchange, that person is given a proprietary lease on his apartment. The correct answer is: Cooperative apartment

Mary purchased the right to use an apartment for 2 weeks every year. This is an example of: A. Interval ownership B. Ownership as a joint tenant C. Cooperative ownership D. A limited partnership

(types of ownership) Interval ownership (time-share) involves ownership for only a particular time period. Purchasers own the property as tenants-in-common, and rotate possession (use) of the property as agreed upon previously. Time share ownership is most commonly seen in vacation properties. The correct answer is: Interval ownership

Jean transfers a fee simple interest in property to her daughter, Lisa, but reserves a life estate for herself. During Jean's lifetime, Lisa holds a: A. Life interest, pur autre vie B. Remainder interest C. Reversionary interest D. Life estate

(types of ownership) Lisa holds a remainder interest in the property until Jean dies. Then, Lisa will own the property in fee simple. The correct answer is: Remainder interest

A broker could act as a fiduciary in all of the following functions, EXCEPT: A. Leasing property B. Selling property C. Appraising property D. All of the above

(agency duties) A broker who was hired by another party (the principal) to lease, sell, or exchange property has an agency relationship. This agency relationship carries certain fiduciary duties. However, an appraisal is a formal estimate or opinion of value provided by an appraiser. Even if a broker is also a licensed appraiser, it would be a violation of the broker's fiduciary duties (conflict of interest) to appraise property that he is listing or selling. Therefore, the best answer is that the broker could not act as a fiduciary appraising property. The correct answer is: Appraising property

A seller contacted three brokers to suggest the list price for his property. Broker A said $78,000, Broker B said $79,000, and Broker C said $91,000. The seller listed with Broker C and the house ended up selling for $76,000. In this situation, Broker C might be guilty of violating which fiduciary duty? A. Loyalty B. Reasonable care C. Disclosure D. None of the above

(agency duties) Of the fiduciary duties listed, reasonable care is the best description. The agent must exercise care to properly advise and consider the best interests of his client. In doing this, he's expected to act with the same degree of competence that any other reasonable broker would in similar circumstances. Quoting a drastically different (and unrealistic) list price was not in the client's best interest. The correct answer is: Reasonable care

Upon listing a property, a broker discovers mold in the basement. The broker should inform: A. The seller only if he is a seller's agent B. The buyer only if he is a buyer's agent C. The buyer and the seller, regardless of who he represents D. No one

(agency duties) The broker must disclose all material adverse facts about the physical condition of the property that are known to the broker. Agents must disclose material facts to both buyers and sellers. The correct answer is: The buyer and the seller, regardless of who he represents

A salesperson sells property listed by another broker for $84,500. If the listing broker is to receive 50% of the 6% commission rate, how much will the salesperson receive if he earns 40% of his broker's share? A. $1,014 B. $1,521 C. $2,535 D. $6,070

(calculations for transactions) First, determine the total commission on the sale as follows: $84,500 x 0.06 = $5,070. Next, determine the broker's share of the total commission: $5070 x 0.5 = $2,535. Finally, determine the salesperson's share of the broker's commission: $2,535 x 0.4 = $1,014. The correct answer is: $1,014

Property sold for $168,000. There was an existing 1st mortgage in the amount of $75,000. The seller paid 6% commission and $2,100 in closing costs. What was the seller's net proceeds from the sale of his property? A. $165,900 B. $93,900 C. $90,900 D. None of the above

(calculations for transactions) In order to find the net profit, we need to subtract the seller's pay-outs from the total selling price: Total Commission = $168,000 x 0.06 = $10,080 Profit = Sales Price - Existing Debt - Closing Costs - Total Commission Profit = $168,000 - $75,000 - $2,100 - $10,080 = $80,820 The correct answer is: None of the above

Which of the following items is most likely to be severed? A. Garden tractor B. Commercial cooler C. Rail fence D. Either B or C

(classes of property) Severance is the act of removing a fixture. A fixture is an item of real property that was previously considered as personal property. The fence was personal property before it was erected, and became real property when set in the ground. Garden tractors are personal property, but they are not affixed to land. A commercial cooler is real property, but if it is affixed to land, it will most likely be a trade fixture (severance does not apply to trade fixtures). Because only fixtures may be severed, "rail fence" is the best answer. The correct answer is: Rail fence

Real property does not include: Select one: A. Air rights B. Trade fixtures C. Improvements D. Mineral rights

(classes of property) Trade fixtures remain the personal property of a tenant, so long as they are timely removed. All other choices describe real property. Therefore, only trade fixtures are NOT real property. The correct answer is: Trade fixtures

Salesperson Lynch found a home for a buyer, who agreed to pay a commission for this service. After closing, Lynch will receive his commission from: Select one: A. The seller B. The buyer C. The buyer and seller, equally D. His broker

(commission and fees) A salesperson may ONLY receive commission from his or her employing broker. The correct answer is: His broker

Two brothers own separate real estate companies, but agree to divide their received commissions equally. Broker A pays for three-fourths of the advertising costs and finds the buyer. Broker B pays for one-fourth of the advertising costs. If the total commission on the sale is $4,500, how much does Broker B receive? A. $1,125 B. $2,250 C. $4,500 D. None of the above

(commission and fees) Since the brokers agree to divide the commission equally, each gets $2,250 despite their individual expenses. Do not be fooled into making this question more complicated than it is. The correct answer is: $2,250

Wally Wells, a licensed salesperson, listed Parcel A under an open listing agreement and Parcel B under an exclusive right-to-sell listing agreement. Both listings expired. Three days later, the two owners exchanged properties. Wally will receive: A. One commission for the exclusive right-to-sell agreement B. Two commissions because Wally was the procuring cause C. No commission so long as Wally was not the procuring cause D. A split commission

(commission and fees) Wally gets no commission because the listings expired. If the stem of the question had indicated that Wally was involved in the transaction between the two parties during his listing period, then he may have had a cause of action to collect from one or both parties. The correct answer is: No commission so long as Wally was not the procuring cause

A broker has an exclusive right-to-sell listing, but the seller finds his own buyer while the listing is still in force. The broker is entitled to: Select one: A. A full commission B. Half of the commission C. Reimbursement for out-of-pocket expenses D. No commission, because the owner is the one who sold the house

(common types of agency agreements) An exclusive right-to-sell listing entitles the broker to a full commission, regardless of who sells the property (even if the owner sells it himself). The correct answer is: A full commission

If an owner gives a listing to more than one broker, it would most likely be which type of listing? A. Net listing B. Open listing C. Exclusive agency D. Exclusive right-to-sell listing

(common types of agency agreements) Note that an open listing is also known as a general listing. If more than one listing is given, it would most likely be this type of listing. The correct answer is: Open listing

If a broker has an exclusive right-to-sell listing, which of the following statements is INCORRECT? A. There must be a definite termination date in the listing B. All money given to the broker must be accounted for C. The broker may cancel the listing if he chooses D. The broker is legally obligated to sell the property

(common types of agency agreements) The broker is NOT obligated to sell the property. He is only obligated to make a reasonable effort to sell the property. The correct answer is: The broker is legally obligated to sell the property

Broker John and Buyer Jenny enter into an exclusive buyer agreement. However, Jenny finds a suitable property on her own. After Jenny purchases the property, John demands his commission. Must Jenny pay John a commission? A. Yes, because John took steps to find a suitable property for Jenny B. Yes, so long as Jenny purchased property similar to the one described in the agreement C. No, because Jenny found the property on her own D. No, because John failed to find a property before Jenny

(common types of agency agreements) The exclusive buyer agreement obligates the buyer to compensate the agent if the buyer purchases property similar to that which was described in the contract. Under an exclusive buyer agreement, the agent is compensated regardless of whether the buyer discovers the property on her own or through another agent. This is the counterpart to the exclusive right-to-sell listing. We do not know whether John took sufficient steps to find property for Jenny, but it is irrelevant that Jenny found the property on her own if the property is similar to the one described in the agreement. The correct answer is: Yes, so long as Jenny purchased property similar to the one described in the agreement

Fred bought a new boat and hired a contractor to build a dock on his lakefront property. Fred did not pay the contractor. In an attempt to get paid, the contractor may file a: A. Mechanics lien against the boat B. Mechanics lien against the property C. General lien against Fred D. All of the above

(encumbrances) The contractor improved real property by building a dock, and is therefore entitled to file a mechanics lien against the improved property. He cannot file a mechanics lien on the boat because it is personal property. He cannot file a general lien because mechanics liens are specific. The correct answer is: Mechanics lien against the property

All of the following persons may act as escrow agents except: A. Brokers B. Neutral third persons C. Salespersons D. Attorneys

(escrow or closing) An escrow agent is a neutral third-party that is authorized to hold property or perform specified acts. Both brokers and attorneys can act as escrow agents. However, most states do not allow salespersons to be escrow agents, though they may accept money and documents for escrow on behalf of their employing broker. The correct answer is: Salespersons

Escrow may be used in which of the following situations? A. When property is purchased and secured by a deed of trust B. In an exchange of property C. With a contract for sale D. All of the above

(escrow or closing) Escrow is the holding of money, documents, etc. by a third party until the conditions of a contract have been satisfied by the principal parties. Escrow is commonly used in most real estate transactions, including the closing of mortgage loans and property exchanges. The correct answer is: All of the above

Which of the following practices would most likely deteriorate the economic status of a neighborhood? A. Redlining B. Steering C. Overdevelopment of property D. Bulk zoning

(fair housing law) The practice of redlining would most likely lead to an economic decline. Lenders refusing to make loans would greatly restrict the sale of the properties in the neighborhood; thus, tending to depress real estate value. The facts are insufficient to determine the effect of overdevelopment, as this may or may not deteriorate a neighborhood. The correct answer is: Redlining

A developer has been successful in the renovation and redevelopment of apartment projects. The developer has an excellent credit history, but has been denied a loan to renovate a project in a crime-ridden area of town. This is an example of: A. Redlining B. Blockbusting C. Steering D. Permissible business judgement

(fair housing laws) Based on the information given, this action by the lenders is redlining. It appears that the banks took the position that they will not loan money on property in THIS particular area of town. The decision was not based upon the borrower's creditworthiness. The correct answer is: Redlining

Consistent with Fair Housing Laws, an owner of an apartment building rents exclusively to the elderly. Currently, 70% of his units are occupied and 30% are vacant. To continue renting exclusively to the elderly (without violating Fair Housing Laws), the owner may rent the next unit to all of the following persons, EXCEPT: Select one: A. A couple who are expecting a baby B. A 65 year old handicapped person C. A retired 53 year old widow D. Both A and C

(fair housing laws) Elderly housing is exempt from familial status protections if it falls into one of two categories: (i) all residents are 62 or older; or (ii) in at least 80% of units, at least one person is 55 or older. In this situation, because only 70% of the units are occupied, the landlord must rent the next unit to someone over age 55 if he hopes to retain the exemption. If the landlord rented to anyone younger, he would be further from satisfying either exemption category (all at 62yo, or 80% at 55yo). Therefore, the owner wouldn't want to rent to either an expecting couple or a retired 53 year old widow. The correct answer is: Both A and C

In an all elderly housing development, 90% of the units are occupied by persons over age 55. A single mother with 2 small children wants to rent one of the units. Which of the following statements is true according to the Fair Housing Law, as amended in 1988? A. The applicant can be denied a lease B. The applicant's right to rent is protected by familial status C. The landlord can deny rental because the applicant is a single mother, which is contrary to the composition of the community D. The landlord can refuse to lease on the basis of marital status

(fair housing laws) Elderly housing is exempt from familial status protections if it falls into one of two categories: (i) all residents are 62 or older; or (ii) in at least 80% of units, one of the residents is 55 or older. In this situation, since 90% of the units are occupied by someone 55 or older, the landlord can exclude the renter without violating the Fair Housing Law. Therefore, answer A is the best choice. The correct answer is: The applicant can be denied a lease

Who is required to comply with the Fair Housing Laws? A. Only real estate professionals B. Real estate professionals and lenders C. Real estate professionals, lenders, and insurance companies D. Everyone, unless specifically exempted by the law

(fair housing laws) Fair Housing Laws apply to ALL people. Real estate professionals, lenders, and insurance companies are just more directly involved by the nature of their business. The correct answer is: Everyone, unless specifically exempted by the law

How can a broker best demonstrate his compliance with Fair Housing Laws? Select one: A. Obtain the Equal Housing Opportunity Poster B. Document all transactions with all clients or customers C. Show all prospective buyers all listed properties D. All of the above

(fair housing laws) Of the answer choices, documenting all transactions with all customers is the best way to demonstrate compliance with Fair Housing Laws. You must do more than obtain the equal opportunity poster; you must display it. The law does not require that you show all listed properties to all buyers. For example, you do not have to show listings that priced above the client's financial qualifications. The correct answer is: Document all transactions with all clients or customers

According to the 1988 Fair Housing Law, which of the following persons would NOT be considered as handicapped? A. A person addicted to alcohol B. A person addicted to an illegal drug C. A person who, by their actions, is believed to be insane D. Both A and B

(fair housing laws) Persons addicted to illegal drugs are not handicapped under the Fair Housing Law. However, alcoholics and the mentally ill are protected. The correct answer is: A person addicted to an illegal drug

A private homeowner is selling his property, but refuses to enter into a contract because the offerors are a black couple. Has the homeowner violated the law and, if so, which law? A. Yes, Title VIII of the 1968 Federal Fair Housing Act B. Yes, the Civil Rights Act of 1964 C. Yes, the Civil Rights Act of 1866 D. No, the owner is exempt from the law because he is selling his own property in his own name

(fair housing laws) The 1968 Fair Housing Act grants an exemption to homeowners. However, no one is exempt from the 1866 Civil Rights Act, which prohibits racial discrimination. This is also supported by the 14th Amendment to the Constitution. Note than an action for this type of violation is filed in the Federal Courts, not with HUD. The correct answer is: Yes, the Civil Rights Act of 1866

The Federal Civil Rights Act of 1866 prohibits discrimination on the basis of: A. Sex B. Race C. Religion D. Marital status

(fair housing laws) The Civil Rights Act of 1866 prohibited discrimination, but this was based upon race. The other restrictions followed in subsequent laws except for marital status, which is not protected by Federal Fair Housing Law. The correct answer is: Race

A listing broker obtained a ready, willing, and able minority buyer to purchase at the listed price. However, the sellers refused the offer because of the buyer's race. The broker may legally take all of the following actions, EXCEPT: A. Sue the seller for his commission B. Advise the prospect of his right to complain to the HUD C. Warn the sellers that their refusal is a violation of the Fair Housing Laws D. Market the house only to non-minority customers

(fair housing laws) The broker should advise his clients that such conduct violates the Fair Housing Act. The broker is within his rights to sue for the commission. However, if the broker marketed the house according to the seller's wishes, he himself would be in violation of the Fair Housing Act. The correct answer is: Market the house only to non-minority customers

A Hispanic family asks to see homes in the $125,000 to $140,000 price range. The broker only showed them property in integrated areas of the community, though there were appropriately priced homes in all-white areas of town. The broker is guilty of: A. Steering B. Blockbusting C. Gentrification D. Nothing, because the family did not specifically request to see the homes in all-white areas

(fair housing laws) This is a prime example of STEERING. The broker should show all properties that meet the needs and wants of the buyer client. However, if the broker offered to show property in a predominately Caucasian area and the buyers refused to look, that would be another story. The correct answer is: Steering

John Doe is trying to rent a bedroom in his house. A Latin American applies and is told by the owner (Doe), "I will only rent to a Caucasian." Which law has John violated, if any? A. 1968 Fair Housing Law B. Civil Rights Act of 1988 C. Civil Rights Act of 1964 D. None of the above

(fair housing laws) While owner/sellers are exempt from the 1968 Federal Fair Housing Law, they may not make, print, or publish a discriminatory statement which indicates any preference or limitation. The correct answer is: 1968 Fair Housing Law

The Federal Fair Housing Law is intended to protect the public from all of the following actions, EXCEPT: Select one: A. Blockbusting B. Price fixing C. Steering D. Redlining

(fair housing laws; commission and fees) All of the listed choices are discriminatory practices which violate Federal Fair Housing, except price fixing. Price fixing is a violation of anti-trust laws, NOT the Fair Housing Act. The correct answer is: Price fixing

The Real Estate Settlement Procedures Act (RESPA) requires lending institutions to provide a Good Faith Estimate of closing costs: A. When the loan application is submitted B. Within 3 days of the loan application C. Within 3 days of closing D. Within 10 days of the loan application

(financing/credit laws) In certain situations, RESPA requires that a Good Faith Estimate be provided in place of the Loan Estimate form, and a Uniform Settlement Statement (HUD-1) be provided in place of the Closing Disclosure Form. When applicable, the Good Faith Estimate must be provided within 3 days of the loan application. The correct answer is: Within 3 days of the loan application

Under RESPA, the Mortgage Servicing Statement informs borrowers of: A. All the payments expected to be deposited into the escrow account B. The actual fees and services that will be provided C. Whether the lender expects someone else to service the loan D. Settlement service charges that the borrower will likely have to pay

(financing/credit laws) The Mortgage Servicing Statement must be provided to the borrower within three (3) business days for receiving a loan application. It informs borrowers of whether the lender expects someone else to service the loan (collect payments). The correct answer is: Whether the lender expects someone else to service the loan

RESPA does not apply to which of the following sales? Select one: A. A residential property with 100% seller assisted financing B. A residential condominium unit C. A townhouse in a new development with more than 25 units D. A single family dwelling

(financing/credit laws) The Real Estate Settlement Procedures Act (RESPA) only applies to federally regulated loans; therefore, a house sold with 100% seller assisted financing would NOT be subject to RESPA. The correct answer is: A residential property with 100% seller assisted financing

Bill the Buyer makes an offer to purchase and gives Broker Joan a $1,000 earnest money deposit. The next day, and before Joan has a chance to present the offer, Bill finds another property that he wishes to purchase instead. What should Bill do? A. Ask Joan to return his money B. Wait for acceptance, rejection, or a counteroffer because he is obligated by his offer C. Attempt to withdraw his offer D. Both A and C

(general knowledge of contract law) A buyer can withdraw his offer anytime before the offer is accepted. If Bill withdraws his offer before acceptance, he is entitled to have his earnest money deposit returned. Therefore, if Bill wishes to purchase another property, Bill should attempt to withdraw his offer and request his earnest money to be returned. The correct answer is: Both A and C

A purchaser submits an offer to a seller, with the condition that the property be financed by a conventional loan at no more than 1% interest. If the seller agrees, but such financing cannot be obtained, which of the following is true? Select one: A. The purchaser loses his deposit, but is relieved of further liability B. The seller is obligated to return the deposit plus interest C. The seller is obligated to return the buyer's deposit D. The purchaser loses his deposit and the seller is entitled to specific performance

(general knowledge of contract law) A financing contingency is a condition in a sales contract which establishes that a buyer is not obligated to perform (buy the property) unless he can secure financing on the specified terms. Such conditions are valid so long as the parties agree upon the terms. Earnest money deposits are either applied to the sales price at closing, handed over to the seller as liquidated damages if the buyer breaches the sales contract, or returned to the buyer if the property fails to close without the buyer's fault. In this case, there is no breach by the buyer because the contingency was not satisfied. Therefore, the best answer is that the seller must return the buyer's earnest money deposit. There is no duty to pay interest on the deposit. The correct answer is: The seller is obligated to return the buyer's deposit

A buyer enters into a sales contract with a seller. Which of the following facts could make the sales contract voidable? A. The buyer provides no earnest money deposit B. The seller, being illiterate, signed the agreement with an "X" C. The seller was under the influence of alcohol when the contract was signed D. The seller dies after executing the contract, but before closing

(general knowledge of contract law) A voidable contract is one that appears valid, but could be declared as void under certain circumstances. An intoxicated person might have been incompetent at the time of signing. If true, he could declare the contract void or elect to let the contract stand. However, note that the seller's intoxication must be to a degree that he did not understand the nature and consequences of executing the contract. The correct answer is: The seller was under the influence of alcohol when the contract was signed

A person has the capacity to contract if he: A. Is mentally competent B. Has given consent C. Has agreed to the terms of the contract D. Is not subject to coercion

(general knowledge of contract law) Consent, agreement, and coercion do not establish whether one has the legal capacity (ability) to contract with another person. Mental competence, on the other hand, is relevant to whether one has the capacity to contract. That is, assuming no other problems, a person who is mentally competent has the capacity to contract. Compare this to minors who have a limited capacity to contract, and to the legally insane who do not have the capacity to contract. The correct answer is: Is mentally competent

A salesperson comments to a prospective buyer: "In my opinion, this is the greatest house in town." This statement most likely amounts to: A. Puffing B. Misrepresentation C. Fraud D. Good salesmanship

(general knowledge of contract law) The salesperson's statement is most likely to be puffery because the agent said "in my opinion." There was no apparent attempt to mislead or cheat the buyer, which would make the statement fraudulent or an instance of misrepresentation. The correct answer is: Puffing

If a tenant and a landlord enter into a 3-month lease that expires at the end of the year, which of the following is correct? A. The lease may be oral B. The tenant must give 30 days notice before terminating the lease C. The landlord must give 30 days notice before terminating the lease D. The lease will extend for another term if the parties fail to provide proper notice

The correct answer is: The lease may be oral

After delivery of the Closing Disclosure Form, RESPA requires an additional 3 day waiting period before settlement if: A. There is a typo on the disclosure form B. An expense increases by at least $20 C. The APR is lowered on the loan D. A prepayment penalty is added to the loan

The lender must provide a Closing Disclosure no later than 3 business days before settlement. However, an additional 3 day waiting period will be triggered if the lender changes the basic terms of the loan. This will include: (i) an increase to the APR; (ii) adding a prepayment penalty; or (iii) switching the type of loan product (ex. from fixed rate to adjustable rate loan). The correct answer is: A prepayment penalty is added to the loan

When should a buyer and seller receive copies of a contract? A. Immediately upon signing B. Immediately upon contract ratification C. Within five days of signing D. Three days prior to the scheduled closing date

It is not a contract until it is ratified (signed by both parties). Upon such ratification, both parties must receive copies of the contract agreement. The correct answer is: Immediately upon contract ratification