National Exam Practice Test

Which one of Gerry's statements to a client crosses the line into unauthorized practice of law?

"Most couples take ownership of property as joint tenants, so that's what I'd advise."

A vacant lot that was purchased for $18,000 three years ago has appreciated 15%. What would its value be today?

$20,700

Using the capitalization formula, what is the value if the net operating income is $20,000 and the rate of capitalization is 10%?

$200,000 The formula is value = income divided by rate of capitalization or $20,000 / .10 = $200,000.

Henry submits an offer on a condo and includes an earnest money check for 10% of his offer, which the seller accepts. Later on at closing, he brings a cashier's check for $34,450 (comprising the remaining half of his 20% down payment and $7,950 in closing costs). What's the condo's purchase price in whole dollars?

$265,000

Rachel just sold her home and paid $18,427 in closing costs. Her brokerage fee, which is included in that figure, was 6%. She netted $230,063. What were her non-brokerage fee-related closing costs? Round to the nearest dollar.

$3,518

The lender will charge a one-and-a-half-point origination fee and two loan discount points. What will be the total due for points on a $115,000 loan?

$4,025

Your client Frank is interested in selling a 54,450-square-foot lot. A comparable property in the vicinity sold for $3,500 per acre. What would be reasonable list price for Frank's property?

$4,375

A local buyer is purchasing a property for $120,000. What will the seller pay in transfer tax if the rate is $.37 per $100?

$444

A homeowner has $80,000 of principal left to pay on her mortgage. Her home was recently appraised at $156,000, which is $13,000 more than what she purchased it for. How much equity does she have in her home?

$76,000

For conventional loans in which the loan-to-value ratio is in excess of a certain percentage, lenders generally require private mortgage insurance. What's this percentage?

80%

Based on federal housing law, which of the following would be protected?

A 35-year-old single Jewish man.

Which of the following is the best definition of a township?

A 36-square-mile square formed when using the rectangular survey system

Rhonda is an unrepresented buyer who's purchasing Tony's townhome. Gary represents Tony in the sale of his property. What's Rhonda's relationship to Gary?

A customer

Which of these is an example of a licensee's duty of confidentiality?

A licensee may not share confidential information about a client even after the transaction closes.

Which of the following statements about the promissory note is true?

A promissory note is a negotiable instrument and can be transferred to a secondary holder who has the right to enforce the note's terms. The promissory note is evidence of the debt that specifies the borrower's financial obligations. Collateral for the note is typically the property on which the loan is made. It's a negotiable instrument.

The subject property is a five-bedroom, three-bath, 3,500-square-foot house on a half-acre lot. Which one of the following options describes the best comparable?

A six-bedroom, four-bath, 4,000-square-foot house on an acre lot that's located 0.25 miles from the subject

Which of the following is an example of the duty of reasonable skill and care?

Advising clients to seek expert advice on matters outside of your expertise

Which of these is an example of agency coupled with interest?

An agent foregoes buyer agent commission, provided the purchasing developer gives the agent the listings on the developed lots.

Which one of the following provides the best example of single agency?

An agent from one firm acts as the agent for the buyer.

What is an appraisal?

An opinion or estimate of a property's value as of a specific date

In which of the following situations does a new tenant take the place of a departing tenant?

Assignment

In the sales comparison approach, using comparables that are five and 15 years old when appraising a subject that is 10 years old is an example of what?

Bracketing

Breanna signed a purchase offer stating she'd buy Kathy's home for $150,000. Kathy rejected that offer but said she'd sell it to Breanna for $200,000. Breanna agreed to these terms, and they added their signatures. Which of the following statements is correct?

Breanna accepted the offer Kathy made.

Chrissy lives in Lake Ridge Estates, a neighborhood in which vinyl siding may not be used on homes. This HOA regulation is what kind of private land control?

CC&R

In a fiduciary relationship, a ______ is also known as a principal.

Client

What's the term for someone who has agency representation with the licensee?

Client

What does CAN-SPAM Act stand for?

Controlling the Assault of Non-Solicited Pornography and Marketing Act

In an amortized mortgage, the monthly payment is the same each month. The part used to pay the principal increases each month, while the amount going toward interest ______.

Decreases

Buyers Tony and Sylvia know the postal address of the property they're purchasing but are wondering about the legal description of the property. Where is the most likely place to find the legal description?

Deed

If Carol and Doug Shields died intestate, their estate would be conveyed to their heirs through which method of alienation?

Descent

You're a real estate broker supervising 24 licensees. What's the most effective way for you to protect your firm from lawsuits?

Develop, implement, and train firm members on policies and procedures.

Fewer buyers in a higher price range would create what kind of pressure on housing prices?

Downward

Which one of the following tasks must licensees perform for seller clients?

Ensure that the buyers earnest money is deposited

Cedric is opening a model railroad shop, but he knows that he'll only run the store until his partner finishes law school. He signed a three-year lease, after which the lease will terminate. What kind of leasehold is this?

Estate for years. An estate for years is a lease with a fixed termination date. It may be for one month, three months, or three years, but at the end of the lease period it automatically terminates.

Which type of leasehold lasts for a defined period of time and automatically terminates when that period ends?

Estate for years. An estate for years may last for any specified period of time, not necessarily just for "years."

Which of these statements accurately describes an environmental site assessment or an environmental impact statement?

Federally funded construction projects require an environmental impact statement. The environmental site assessment is recommended for commercial and industrial property purchases. Performed in four phases, the assessment identifies site contamination and implements required corrective actions. The impact statement, performed for federally-funded projects, outlines the impact of a construction project.

Frances collected an earnest money check from her client, but didn't have an opportunity to deliver it to the escrow agent before close of business on Friday. For safekeeping, she deposited it into her personal checking account over the weekend and wrote the escrow agent a new check on Monday morning. Which of these statements is true?

Frances is guilty of commingling.

Gina is buying a home. Her home inspector performed a radon test and discovered a radon level of six picocuries. Which of these statements is true?

Gina and the seller can negotiate installation of a mitigation system. The EPA recommends mitigation if radon levels exceed four picocuries. Gina can negotiate with the seller to install a mitigation system.

Nick and Chris tine own a Taco Bell franchise. They built the restaurant on land they've leased from the Fargood Foundation. What type of lease do they have?

Ground lease

Chad, a landlord, made a pass at one of his tenants. She refused his advances, and her rent increased the following month. The other tenants didn't receive a rent increase. How did Chad violate fair housing law?

He created special terms for a tenant based on sex.

Amira's seller Tom just received the news that his buyers are walking away from the sale. They weren't willing to proceed after they saw the inspection report. Neither Amira nor Tom has requested a copy of the report. What's the most likely reason for that?

If they see the report, they'll be required to disclose any adverse findings.

Hannah wasn't able to get the financing to open her boutique, so her mother became a silent partner and provided additional cash. Hannah and her mother have an agreement that states Hannah's mother can't be held financially or legally liable if there are any problems with the store. What type of contract clause is this?

Indemnification. Indemnifying one of the contract parties releases that party from all liability or loss.

Which of the following is considered unauthorized practice of law?

Interpreting the legal consequences of a client's actions

What type of value may consumers be interested in if they are looking for the potential rate of return?

Investment value

How does title insurance affect the lender?

It protects the lender against any future default in the buyer's payment.

Camille has a listing for a townhome, and appoints Ivy as her sub-agent. Ivy brings a buyer customer to the transaction, and the buyer purchases Camille's listing. What's true about the agency relationships in this situation?

Ivy is Camille's sub-agent and owes loyalty to the seller.

Krening Realty has been found guilty of running deceptive ads. Which of these statements about the potential penalty is NOT true?

Krening's broker may face jail time. Violations of a cease-and-desist order may result in penalties of up to $43,792 for each day a deceptive ad runs; civil penalties may be in the millions, depending on the violation. Violators may be required to run corrective or informational ads.

Which of these situations represents reproduction cost in the cost approach to value?

Kristina's antebellum mansion in New Orleans was severely damaged by a hurricane. She spends several years repurposing materials from other similar homes to rebuild it exactly as it was before the hurricane. The reproduction cost approach determines the cost to build an exact replica of the property with the same materials and deficiencies.

What's the relationship between the Loan Estimate and the Closing Disclosure?

Lenders issue the Loan Estimate within three days of receiving an application, and Closing Disclosure figures should be similar to the Loan Estimate.

Harmony is looking at the legal description on her purchase contract. It mentions that the plat of her property is recorded in Map Book 12, page 14, at the county courthouse. What type of legal description is this?

Lot and block

Which of the following is the price a lender believes the property will bring at a foreclosure sale?

Mortgage value

Your client is purchasing a single-family home with a conventional loan. The listing price is $150,000. Does this situation require a licensed or certified appraiser?

No, since the sales price is less than $400,000. Federal law exempts this property from the certified appraisal requirement because the sales price is less than $400,000.

Because there were no deadlines specified in the contract, Myron didn't think there was a problem if he waited to apply for a loan to help purchase the property. He was therefore a little surprised and not very happy when the seller sued him for breach of contract, stating that the delay was impacting the seller's ability to purchase a new home. What did Myron fail to do?

Perform his contractual obligations within a reasonable time.

Which of the following statements related to the power of taxation is true?

Property tax liens take priority over any and all other liens on the property in most states.

Which legal description method is regulated by the U.S. Department of the Interior's Bureau of Land Management?

Rectangular government survey

When questions arise that are outside of your scope of expertise, what should you do?

Refer clients and customers to a competent professional in that field.

Homebuyer Nancy has made an offer to purchase a house and has plans to schedule a home inspection. How can her agent assist her in relation to the home inspection?

Review the inspection report with her and discuss options.

Chris is in the process of purchasing a property with 20 acres of farmland in a rural area of the state. Assuming his income meets the criteria of the program, what type of loan may Chris find the most desirable?

Rural development loan

Sam is an independent contractor licensee working for B & L Realty. Since Sam is an independent contractor, what supervisory responsibility does Sam's broker have?

Sam is considered an employee for licensing law purposes, but he's still an independent contractor for IRS purposes

What responsibility does the seller's agent have to the seller?

Seek a sale at the best price at terms that are acceptable to the seller.

Adamsburg, a bedroom community outside the city, is growing by leaps and bounds. There's been a boom in the number of children under age 12. Mia wants to open an in-home daycare, but she lives in a neighborhood that isn't zoned for home occupations. She applied for a/n _________ and, after a public hearing, was granted one to operate the daycare.

Special use permit

Offers to purchase may contain different clauses based on ______, but every offer to purchase includes certain important elements.

State requirements

The Clean Water Act regulates pollutants in U.S. waters and establishes quality standards for ______.

Surface waters.

A professional, on-site measurement of the lot lines and dimensions of a property is known as ______.

Survey

Select the statement that correctly exemplifies the covenant term.

The covenant of quiet enjoyment promises that the grantee won't be disturbed by a title defect the grantor passes on.

Henrietta is 17 years old. She wants to sell the property given to her by her grandmother. Which covenant provided by the general warranty deed may prevent her from doing so?

The covenant of the right to convey.

Debra's listing agent, Raj, just called to tell her that he'd received an offer on her house and an earnest money check for $4,500. "I'm on my way over to go through the offer with you. I think you'll like it!" Debra's excited, and she knows exactly what she wants to spend that $4,500 on. What's wrong with Debra's thought process?

The earnest money doesn't belong to Debra. It will be held in an escrow account.

Ken and Julia took out a five-year subprime loan that included a prepayment penalty clause. They're on track to pay it off after only three years. Which one of the following is a true statement?

The lender can only charge a prepayment penalty if it was disclosed to the borrower.

When performing a market analysis, to what are all adjustments made?

The sales price of the comparable properties

The Shores are in the process of buying a beautiful 3,000-square-foot home from the Bishops. They've completed all the required paperwork on their loan application. Mary's analyzing the package to determine their ability to repay the loan. She examines the property's value, the property type, and the loan-to-value ratio, among other things. Her recommendation is that the Shores' loan application be approved. What is Mary's role?

The underwriter

Assuming licensee Shannon has actual knowledge of all of the following property issues, which of these issues should she disclose to prospective buyers?

The upstairs bathroom has a leaky toilet.

Why would buyers want to know whether a property is currently experiencing a tax abatement?

Their taxes are likely to increase when the abatement period ends.

Zelda has fifteen acres of wetlands with a channel on the back edge of her property that leads to a waterway. She would like to clear the channel of gravel and sediment so she can get her fishing boat in and out more easily. Which of the following is a true statement?

This activity may require a permit since a wetland area is involved and special federal and state protections may be in place.

A landlord with a strict "no pets" policy won't rent to a woman who uses a service animal to assist with her epilepsy. Which of the following is a true statement about this situation?

This is discrimination based on disability.

An attorney receives a request to have an appraisal performed on a property inheritance that she is transferring from her deceased client's estate to his heir. Which of these statements is true?

This isn't a federally related transaction and under federal law an appraisal isn't required.

Harriet, an out-of-state licensee, is friends with Tonya, a licensee who works with Perfectly at Home. Harriet referred one of her buyer friends to Tonya, so Tonya plans to pay Harriet a referral fee. Which one of the following statements about this fee is true?

Tonya must pay the referral fee through her brokerage firm to Harriet's brokerage firm.

Darren set up a land trust so that his children could benefit from his real estate investments after he dies. He asked his financial advisor Tom to manage the trust. Darren is the ______.

Trustor. The trustor is the person who creates the trust. The trustee is the person who carries out the person's wishes.

Regarding documentation, which of the following actions can help a licensee avoid being accused of unauthorized practice of law?

Using approved fill-in-the-blank forms. As a licensee, one way you can avoid inadvertently being accused of unauthorized practice of law is to use approved, fill-in-the-blank contract forms, and to always include an attorney review clause.

Kevin and Regina sold their property to Vickey using a general warranty deed. Which one of these statements is true?

Vickey is the grantee.

Bernie represented Oscar in the sale of Oscar's home. They signed an exclusive right-to sell-listing agreement. If Oscar were able to find his own buyer, would he owe Bernie a commission?

Yes, because "exclusive right to sell" means Bernie gets paid no matter who finds the buyer.