National Real Estate Exam PSI
Seller Jason is giving listing agent Rebecca a tour of his house and pointing out all the features, even the spot in the attic where a previous owner's ghost likes to come back and visit. Jason asks Rebecca if buyers should be told about this. Which response is best? -"All states require sellers to disclose any undesirable feature of a house, which includes ghosts." -"The presence of spirits stigmatizes the property. Many states don't consider this a material fact requiring disclosure, but this is my first ghost encounter, so I'll check our laws." -"We can tell prospective buyers that the property comes with a roommate." -"You can't mention this, because it would be a fair housing violation."
"The presence of spirits stigmatizes the property. Many states don't consider this a material fact requiring disclosure, but this is my first ghost encounter, so I'll check our laws."
Phoebe's gross monthly income is $4,200, and she has $360 in monthly non-housing debt payments. The lender's qualifying ratios are 28% for the housing ratio and 36% for the total DTI ratio. What's the maximum housing payment she can afford? -$1,075 -$1,152 -$1,176 -$1,512
$1,176 **The maximum house payment is the lesser of the amounts calculated using both ratios. DTI: $4,200 x .36 = $1,512. $1,512 - $360 = $1,152. Housing ratio: $4,200 x .28 = $1,176. Phoebe's maximum payment is $1,152.
A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What is the total amount of interest the borrower will pay over the course of the loan? -$117,687.80 -$250,000.00 -$367,687.80 -$735,375.60
$117,687.80 **First, multiply the monthly payment ($2,042.71) by the total number of payments (180 = 12 payments/year for 15 years). The total paid back is $367,687.80. Then subtract the original loan value: $367,687.80 ‒ $250,000 = $117,687.80.
Clint is interested in making an offer on a house with hardwood floors that will need to be replaced. The hallway is 18' x 6'. The kitchen is 20' x 30'. The living room is 25' x 45'. Two bedrooms are 12' x 16', and the master bedroom is 14' x 20'. If the cost of the flooring is $5.48 per square foot, and the cost of installation is $1.49 per square foot, how much can Clint plan to spend to replace the floors? -$13,683.56 -$16,065.85 -$16,309.80 -$17,404.09
$17,404.09 **First, find the area of each room and add them together to get the total square footage. 108 + 600 + 1125 + 192 + 192 + 280 = 2,497 square feet. The total cost of the flooring per sq. ft. is $5.48 + $1.49 = $6.97. 2,497 x $6.97 = $17, 404.09.
Your buyer client Heather just signed a purchase agreement for a $520,000 home. The LTVR is 60%. How much is Heather putting down on the purchase? -$208,000 -$220,000 -$300,000 -$312,000
$208,000 **A 60% LTVR means that Heather is financing 60% of her purchase and putting down 40%. Forty percent of $520,000 is $208,000 ($520,000 x 0.40).
Joaquin sold his house for $327,600. He bought it several years ago for $139,900 with a $100,000 loan. The loan balance when he sold it was $73,400. What was Joaquin's equity? -$114,300 -$187,700 -$214,300 -$254,200
$254,200 **Joaquin's equity was $254,200. Subtract the loan balance from the market value of the home to find the equity ($327,600 - $73,400).
Juan purchased a property for $420,000 and financed $336,000 of it. The assessed value of the property is $387,000. The property appraisal came in at $432,000. Which of these amounts is used in calculating the property tax? -$336,000 -$387,000 -$420,000 -$432,000
$387,000 **The property tax will be calculated based on the home's assessed value ($387,000).
Grant and Adela arrange a $150,000 loan at 4.5% annual interest with their lender. What's their monthly interest amount? -$550.25 -$562.50 -$570 -$575.75
$562.50 **Grant and Adela's annual interest amount is $6,750 ($150,000 x 0.045). To get the monthly amount, divide $6,750 by 12. Their monthly interest amount is $562.50.
Buyer Maria and seller Doug are closing on June 1. Maria's mortgage loan is $927.86, and $871.86 will go to interest in the first month. Maria will have to pre-pay interest for June using the 360-day proration method. If Doug owns the closing day, what Maria's prepaid interest cost be at closing? -$842.74 -$871.80 -$896.97 -$927.90
$842.74 **Calculate the daily interest rate for 30 days ($871.86 ÷ 30 = $29.06). Because Doug owns the closing day, Maria will pre-pay interest for 29 days, June 2 - 30, so $842.74 ($29.06 x 29).
If a property's income value is $200,000 and it's earning a net operating income of $40,000, what is the cap rate? -20% -25% -40% -5%
20% **The cap rate is 20%. To calculate cap rate, divide the income by the property value. The formula for this is rate = income / value. Retake this Exam Return to Course Home View Exam Results
A buyer anticipates a house payment of $1,000 per month, with monthly homeowner association fees of $150. The buyer also has a car payment of $400 per month. If the buyer earns a monthly gross income of $5,000, what's the housing ratio? -20% -23% -28% -31%
23% **The housing ratio is 23%: ($1,000 + $150) / $5,000 = .23 x 100 = 23%.
Which of the following is the best example of a tie-in arrangement? -A business offers add-on services for its best customers. -A business requires its clients to also purchase services from another business. -Competing businesses agree to similar pricing strategies. -Competing companies agree to not do business with a third.
A business requires its clients to also purchase services from another business. **Tie-in arrangements are antitrust violations that involve predicating one service on the consumer purchasing another from another company.
Lamar closes on his new home next week. It's a 37-year-old split level, so his agent asked if he's interested in purchasing a home warranty. "Why would I need a warranty?" he wondered. "Didn't the home inspection identify all of the issues?" What's the agent's best response to Lamar's question? -A home warranty covers things the inspection didn't address, like appliances, as well as structural issues that occur within the first year. -Buying a home warranty almost guarantees you won't have any issues! -If you purchase a home warranty and something breaks, you can sue the seller. -The inspection is only as good as the inspector, and there is no guarantee that the inspector found all potential issues.
A home warranty covers things the inspection didn't address, like appliances, as well as structural issues that occur within the first year.
Millie is a buyer who has given her agent an earnest money check for $10,000 with an offer to purchase. When will the check be deposited? -After Millie receives loan approval for the purchase -After the seller accepts the purchase offer -At least 10 days prior to closing on the sale -Immediately upon receipt by her agent
After the seller accepts the purchase offer **Earnest money funds are typically deposited after the seller accepts the buyer's offer.
Which of these is an example of agency coupled with interest? -A listing agent agrees to accept a commission of 2.5% upon sale of the property. -A listing agent agrees to split the commission on the sale of a property with a cooperating agent who brings the buyer to the table. -An agent foregoes buyer agent commission, provided the purchasing developer gives the agent the listings on the developed lots. -An agent is interested a property the agent has listed.
An agent foregoes buyer agent commission, provided the purchasing developer gives the agent the listings on the developed lots. **Agency coupled with interest means the agent holds an estate (or interest) in a property that is the subject of the agency relationship. Forgoing commission now in turn for listings down the road is an example.
Demographics impact the housing market. Which of the following is a true statement? -An increase in the number of retirees in a given population would negatively impact the demand for large, single-family homes. -An increase in the number of retirees in a given population would positively impact the demand for large, single-family homes. -An influx of higher wage earners to a given area would create a price decrease for lower-valued homes. -An influx of higher wage earners to a given area would decrease the demand for higher-priced housing.
An increase in the number of retirees in a given population would negatively impact the demand for large, single-family homes. **Downsizing retirees usually look for smaller homes or condos.
What does the Federal Trade Commission consider to be an unfair ad? -Any ad or business practice that causes or is likely to cause injury -Any ad that is likely to mislead consumers acting reasonably under the circumstances -Any ad that makes a health claim -Any ad with a claim that's difficult to evaluate
Any ad or business practice that causes or is likely to cause injury **Any ad or business practice that causes or is likely to cause injury is considered an unfair ad, according to the FTC's Unfairness Policy Statement.
Ray purchased a new home and soon discovered an issue with one of the windows. He filed a claim with the warranty provider, but it was denied. After mediation, the issue still remains unresolved. What is the most common next step? -Arbitration -A second round of mediation -Condemnation -Litigation
Arbitration **Warranties will detail the course of action if a claim is disputed. Most often, mediation occurs first, then arbitration. The arbitration decision is generally binding and final. The disputed claim process seeks to avoid or limit litigation.
Will was sued for damages related to a car accident in which he was involved last year. As part of the proceedings, the court placed a lien against his primary residence. What type of lien is this? -Attachment -General -Mechanic's -Voluntary
Attachment **An attachment lien is when the courts place on encumbrance on the property of a defendant in a lawsuit for monetary damages.
Belinda is a licensee whose client asked her to draft an addendum containing complicated terms that even Belinda doesn't fully understand. Belinda should ______. -Avoid unauthorized practice of law -Hire an attorney -Refuse to work with this client -Use legalese
Avoid unauthorized practice of law **Licensees must avoid unauthorized practice of law. Drafting contractual paperwork with uncertain terms would be a violation.
Tracy is looking in the MLS and sees a listing marked "REO." Which of these statements regarding REOs is correct? -An REO property is one that the lender is trying to help the owner sell before beginning foreclosure proceedings. -Banks acquire REOs through failed foreclosure sales or deed in lieu of foreclosure actions. -REOs are properties that the lender has given permission to sell for less than the loan amount. -REOs refer to investment properties a bank owns.
Banks acquire REOs through failed foreclosure sales or deed in lieu of foreclosure actions. **Failed foreclosure sales and deed in lieu of foreclosure actions result in lenders taking title to properties they previously had mortgage loans on. These properties are called real estate owned, or REOs.
Desmond has a signed listing agreement with his clients, the Harpers. In exchange for helping the Harpers list, market, and sell their home, the Harpers have agreed to pay Desmond a commission. What type of agreement do Desmond and the Harpers have? -Bilateral -Executed -Mutual -Unilateral
Bilateral **A contract involving an exchange of promises or other consideration between two parties is a bilateral contract.
You represent the buyer in one transaction and the seller in a different transaction. What type of agency relationship do you have with the buyer? -Buyer agency -Dual-licensee dual agency -Seller agency -Single-licensee dual agency
Buyer agency **You have a buyer agency relationship with the buyer in one transaction and a seller agency relationship with the seller in the other transaction.
Which legislative act prohibits certain types of electronic communication? -CAN-SPAM -NO-SPAM -SPAM-CAN -SPAM-JAM
CAN-SPAM **The Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM) prohibits junk email and requires an "unsubscribe" option in any email marketing messages.
To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which one of these elements listed has the highest priority? -Conditions of sale -Location -Market conditions -Physical characteristics
Conditions of sale **The elements appraisers consider in the sales comparison approach are applied in a specific order: financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location, and physical characteristics.
With the cost approach to value, what is the replacement cost? -Cost of the materials used in construction -Cost to build a functionally equivalent improvement -Cost to build an exact replica of the subject, with the same materials and deficiencies -Cost to buy the property
Cost to build a functionally equivalent improvement **The replacement cost reflects the cost to build a functionally equivalent improvement, as opposed to the reproduction cost, which is the cost to build an exact replica of the subject, with the same materials and deficiencies.
Sue is selling her house for $265,000. Closing is set for June 19, and Sue owns the day of closing. She has a loan balance of $78,000 at a 4.2% rate, and she's current on her payments. She prepaid the property taxes ($1,350) and insurance ($925). Using a calendar-year proration method for calculations, how will these amounts appear on Sue's closing statement? -Credit of $1,059.10 -Credit of $1,350 and debit of $484.04 -Credit of $721.50 -Debit of $1,214.85
Credit of $721.50 **Tax daily rate: ($1,350 ÷ 365 = $3.70) 195 days (days from closing until year end) = a $721.50 seller credit. Any prepaid seller's homeowners insurance will be refunded to the seller outside closing, so this doesn't appear on the closing statements.
A real estate transaction has a closing date of May 20. The seller, who's responsible for closing costs up to but not including the day of settlement, has already paid annual property taxes of $1,949. Using calendar year proration, the seller will be ______ on the closing statement (round to the nearest dollar). -Credited $1,207 -Credited $742 -Debited $1,207 -Debited $742
Credited $1,207 **The seller is required to pay the for January 1 through May 19. The seller will be credited $1,207, because $1,949 ÷ 365 = $5.34, and $5.34 × 226 days (the number of days the buyer is required to pay) = $1,206.84. That's $1,207 if rounded to the nearest whole dollar.
A ______ is a method of conveying real property from one party to another. -Deed -Power of attorney -Promissory note -Recordation
Deed **A deed is a method of conveying real property from one party to another. A deed should be recorded to protect the parties' interests.
Shirley's lender discharged the mortgage lien on Shirley's property after processing her final payment. Which clause requires the lender to take this action? -Acceleration -Alienation -Defeasance -Due-on-sale
Defeasance **The defeasance clause means the lender may not pursue the borrower for additional funds when the loan balance is paid in full.
Kurt bought a vacant lot in a development that was 85% completed. When he started working with the builder to lay out where the house and driveway would lie, it was determined that he would need an easement because his driveway would spill over onto the adjacent lot by a few feet. What type of easement is this? -Easement appurtenant -Easement by necessity -Easement by prescription -Easement in gross
Easement appurtenant **An easement appurtenant is attached to a parcel of land and transfers with the land. It grants the right to use adjoining land.
Gene and Alex bought a property that backed up to a neighborhood park. The previous owner mentioned that ever since the park was built eight years ago, the next door neighbor who works at the park has cut through the yard to get to the park rather than going around via the streets, which saves about half a mile. What kind of easement is this? -Easement by prescription -Easement in gross -Express easement -Visible easement
Easement by prescription **Easements by prescription are created through continuous, exclusive, and long-term use of another's property without actual permission.
What are the two categories of comparison when evaluating comparables to a subject property in the market comparison approach? Broad and specific Components and measures Elements and units General and detailed
Elements and units **There are two categories of comparison: elements, which look at physical and locational characteristics, and units, which look at the numbers.
The doctrine of laches refers to the _______ of restrictive covenants/deed restrictions. -Creation -Enforcement -History -Types
Enforcement
Derrick was thrilled to find out that the land he purchased includes several small caves. He's been spelunking for about three years and looks forward to exploring the caves on weekends. Which real property right allows him to do so? -Disposition -Enjoyment -Exclusion -Possession
Enjoyment
The state's claim to property when a property owner dies, leaving no will, heirs or creditors, is the power of ______. -Condemnation -Eminent domain -Escheat -Taking
Escheat **The power of escheat allows the state to claim property when the deceased has no heirs or creditors.
Jerry and Lewis have entered into a sales contract. They're about three weeks into the transaction, with several terms of the agreement yet to be met. What type of contract do Jerry and Lewis have? -Executed -Executory -Option -Unilateral
Executory **A valid contract that is in progress is an executory contract, which means that one or more terms of the agreement remain undone.
Which entity services rural development loans? -FNMA -FSA -GNMA -HUD
FSA **The Farm Service Agency, an agency of the USDA, administers this program.
Joe gave land to a school, but still wanted to have some control over its use, so a deed was prepared that gave the school title as long as the land is used for educational purposes. What type of interest does the school have? Fee simple conditional Fee simple determinable Fee simple subject to a condition subsequent Legal life estate
Fee simple determinable **A fee simple determinable has limitations as to what can or can't be done with a property. It uses phrases such as "so long as," "while," or "during" to describe the required condition.
In general, a person in a position of loyalty and trust is a(n) ______. -Attorney-in-fact -Client -Fiduciary -Mortgage lender
Fiduciary **A fiduciary is someone has been placed in a position of loyalty and trust. A real estate licensee who's working with a client is a fiduciary; mortgage lenders and attorneys-in-fact are also fiduciaries.
To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which element is applied first? -Conditions of sale -Financing terms and cash equivalency -Market conditions -Physical characteristics
Financing terms and cash equivalency **When using the sales comparison approach, appraisers consider elements in a specific order: financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location, and physical characteristics.
Another term for a valuation is ______. -Assessment -Comparative market analysis -Evaluation -Formal appraisal
Formal appraisal **Another term for a valuation is a formal appraisal. This is a professional appraiser's unbiased opinion of value.
Which of the following is an example of an agent exercising the duties owed to customers and other parties? -Ari didn't present the buyer's offer to the seller, since it was a lowball offer. -Francine disclosed information about the flooding basement to the buyer and buyer's agent. -Mark complied with the buyer's agent's instructions to change the available times for showings so the potential buyer could see the property. -With her client's permission, Missy shared the entire inspection report with the seller's agent.
Francine disclosed information about the flooding basement to the buyer and buyer's agent. **The duties licensees owe to customers and other parties include disclosure of material facts, honesty, and fairness.
Thad received multiple offers on his property and is reviewing them with his agent Nora. All of the offers have at least one contingency. Nora recommends that they reject the second offer, because it has a _______ contingency, which is generally the most risky. -Appraisal -Financing -Home sale -Inspection
Home sale **Home sale contingencies are typically thought of as the riskiest. By accepting a home sale contingency, sellers essentially remove their home from the market and wait for the buyer's current home to sell before their transaction can close.
Prior to the _______, there was no legal protection for women who endured sexual harassment from landlords and sellers when they attempted to obtain housing. -Civil Rights Act of 1866 -Fair Housing Amendments Act of 1988 -Federal Fair Housing Act of 1968 -Housing and Community Development Act of 1974
Housing and Community Development Act of 1974 **The Housing and Community Development Act of 1974 included gender or a person's sex in the list of protected classes.
Which of these situations represents the illegal practice of redlining? -Arlo, a licensee, distributed a flyer in several neighborhoods warning of impending commercial developments that would negatively impact property values. -Eunice refuses to allow her agent to show her house to families with children. -Hunter, a mortgage broker, refuses to underwrite mortgage applications from applicants who are buying in specific neighborhoods. -Jaime is working with Korean clients. He's focusing on homes in Korean communities because he thinks his clients will be more comfortable there.
Hunter, a mortgage broker, refuses to underwrite mortgage applications from applicants who are buying in specific neighborhoods. **Redlining is the practice of selecting geographical areas in which no mortgage loans will be written (based on demographics instead of creditworthiness).
When is a cease and desist order effective? -30 days after issuance -90 days after issuance and for 120 days total -Immediately upon issuance -Retroactive from the first date of the prohibited activity A cease and desist order is effective immediately.
Immediately upon issuance **A cease and desist order is effective immediately.
Juan has decided to invest his small inheritance in real estate. He is drawn to the fact that he can add a building where there wasn't one previously and immediately increase the value of his investment. Which economic characteristic of real property is this? -Area preference -Improvements -Permanence -Scarcity
Improvements **The economic characteristic of improvements says that a land's value can be influenced by changes that are made to it.
Which one of these would NOT be an element of comparison an appraiser would use when applying the sales comparison approach to a property valuation? -Financing terms and cash equivalency -Income generated -Market conditions at time of sale -Physical characteristics of the property
Income generated **The sales comparison approach doesn't factor in any income a property may have generated; that's an aspect of the income approach.
What is done to a landfill that is put out of commission? -It is capped. -It is converted to a special purpose landfill. -It is no longer tested. -Ventilation pipes are removed.
It is capped **When a landfill is put out of commission, it is capped.
Which of these statements about a deed's habendum clause is true? -It describes any easements or liens against the property. -It's a description of the act of conveyance. -It's required in all deeds. -It's the full legal property description
It's a description of the act of conveyance. **The habendum clause, if used, describes the type of conveyance. It's typically used if title being conveyed is less than fee simple.
Your buyers love the 1891 Victorian they have under contract, but they want to get both the water and the paint tested as soon as possible. What are they testing for in both water and paint? -Asbestos -Lead -Mold -Radon
Lead **Both pipes (and thus water) and paint can be a source of lead, as well as dust and soil surrounding the home.
When negotiating the purchase of a property that's subject to an existing lease, it's critical for your client to clearly understand the lease terms, including the property management responsibilities, rent amount, renewal/purchase options, and the ______.
Lease duration
The Perfect Home brokerage firm was found guilty of running deceptive ads. The Federal Trade Commission might require all of the following EXCEPT ______. -Letters of apology to all affected consumers -New ads to correct previous misinformation -Notification to consumers about deceptive ad claims -Specific disclosures to consumers
Letters of apology to all affected consumers **The Federal Trade Commission may require The Perfect Home to run corrective ads, notify consumers of deceptive claims it made, include specific disclosures in future ads, or provide consumers with other information.
What is the overarching theme addressed by statutory duties in most states? -Licensees may not take any action that might be detrimental to the client's legal interests. -Licensees must maintain the client's confidentiality. -Licensees must make all required disclosures. -Licensees must properly account for all money and properties entrusted to them
Licensees may not take any action that might be detrimental to the client's legal interests. **The overarching theme of statutory duties is that licensees can't take any action that would adversely impact the client's legal interests.
Dean's new business venture is a software services firm where IT professionals handle programming and customer service tasks for a number of business clients. His employees all work at tables in an open office space. Dean most likely has a ________ lease for the office space. -Gross -Loft -Percentage -Triple net
Loft **A loft lease is usually for a large open space that may have few amenities.
Which of the following could be a sign of a plumbing problem? -Copper pipes -Cracks in the basement wall -Low water pressure -Rotting around the soffit
Low water pressure **Low water pressure can indicate a plumbing problem with the water line leading to the house or with the pipes in the house.
Marsha's title insurance policy was issued on closing day, June 18. The policy lists the standard exclusions as well as requirements for the company to issue the policy, such as paying off existing recorded liens. Which of these will NOT be addressed in the schedule of exceptions? -Karen has an unrecorded lease on the property. -Marsha's second mortgage on the property, which was properly recorded in January. -Smith and Martin Building and Rehab files a mechanic's lien on June 18. -The local cable company's easement through the property for underground wiring. Marsha disclosed this to the title company.
Marsha's second mortgage on the property, which was properly recorded in January. **Title insurance typically covers events or claims filed on the public record before the title insurance policy's effective date but excludes disclosed and undisclosed easements.
Which of these scenarios is a violation of federal fair housing laws? -Janae refuses to rent an apartment to a Greek couple whose credit history is sketchy. -Maureen, a buyer, selects a house in a neighborhood because of its demographic makeup. -Miguel follows his client's request to only show him properties where the neighborhood is mainly Hispanic. -Wanting to be closer to her Cuban community, Miranda asks her agent to show her properties in the West Palms area, so he focuses his search on that geographic area.
Miguel follows his client's request to only show him properties where the neighborhood is mainly Hispanic. **Buyers are free to select properties based on demographics as long as licensees don't use demographics as a basis for showing properties. Landlords may refuse to rent to individuals on the basis of creditworthiness.
Claire rents 1,100 square feet of office space in a new professional building. Her rent payment includes all utilities and property taxes, but she pays separately for custodial services. What kind of lease does Claire have? -Full-service lease -Modified gross lease -Percentage lease -Triple-net lease
Modified gross lease **A modified gross lease typically includes all the nets in the base rent, but not utilities and/or janitorial services.
New Day Corporation's application to build a new mixed-income housing development was denied, because the town of Springfield has halted all new development until after city elections. What did Springfield enact? -Area variance -Moratorium -Special use permit -Use variance
Moratorium
Which of these is an example of a sub-agency relationship? -Aldrich accepts a designated agency appointment from his broker so his firm can represent both the buyer and the seller. -Blaine represents the buyer in a transaction with an unrepresented seller. -Greta refers a buyer client to a more experienced colleague, asking for a referral fee from the colleague. -Morris, who's licensed independently, finds a buyer customer for Greg's listing with Marvel Homes and is obligated to act in the best interest of Marvel Homes' client.
Morris, who's licensed independently, finds a buyer customer for Greg's listing with Marvel Homes and is obligated to act in the best interest of Marvel Homes' client. **Sub-agency refers to a licensee from one firm who brings an unrepresented buyer for a property listed by another firm. The sub-agent represents the seller in this situation.
Which clause in the listing agreement gives the listing broker the authority and obligates the broker to market the property to other brokers? -Broadcast clause -Marketing clause -Multiple listing clause -Provisionary clause
Multiple listing clause
Mardee represented condo owner Carol, and they signed an exclusive agency listing agreement. If Carol found her own buyer, would she owe Mardee a commission? No, because Carol is not a real estate licensee. No, because Carol procured the buyer. Yes, because they have an exclusive agency listing agreement. Yes, but she only owes the listing commission.
No, because Carol procured the buyer. **It's easy to confuse the types of listing agreements. With exclusive agency, the seller retains the right to sell the property and not pay a commission. Exclusive right to sell agreements guarantee payment to the listing agent no matter who brings the buyer.
Bo's real estate ad states: "Custom homes for sale with scenic mountain views. Easy financing and low down payments." What else must be included in the ad in order for it to comply with TILA? -A full disclosure, including the APR and other loan terms -Nothing -The number of payments and APR -The specific down payment amount and APR
Nothing **Under TILA, ads that mention general financing terms, such as "low down payment" or "easy financing," do not require additional disclosure. If Bo had gotten more specific (e.g., "10-year loan with 0% down") he would need to include more information.
Conrad just closed on the house he's buying to fix up. Why should he follow up to be sure the deed has been recorded? -He can't legally make any improvements to the property until the deed is recorded. -He doesn't legally own the house until that occurs. -Recording provides actual notice that he owns the property. -Recording provides constructive notice that he owns the property.
Recording provides constructive notice that he owns the property. **Ownership officially transfers when the grantor delivers the deed to the grantee, but recording provides constructive notice that Conrad owns the property, thereby permitting anyone who does a public records search to see the ownership information.
Which statement most accurately describes the type of notice provided by recording a change of ownership document? -Recording the deed provides actual notice of the property sale. -Recording the deed provides constructive notice of the property sale. -Recording the new owner's title policy serves as constructive notice of the sale. -Recording the promissory note provides constructive notice of the property sale.
Recording the deed provides constructive notice of the property sale. **Recording a document provides constructive notice; recording the deed provides constructive notice of property ownership.
Upon a life estate holder's death, the estate either reverts to the original owner or to another person the original owner has named, known as a ______. -Backup -Holder-in-waiting -Remainderman -Reversionary
Remainderman **With an ordinary life estate, the ownership rights to the property either revert to the original owner (reversion), or to another person that the original owner has named (remainderman).
Which of these statements about the homeowner's rights of redemption is true? -Homeowner right of redemption applies to foreclosures, short sales, and REOs. -Only foreclosures are subject to homeowner's redemption rights. -Right of redemption timelines are longer for foreclosures than they are for short sales. -Rights of redemption with REOs may be less of a problem than with other distressed properties
Rights of redemption with REOs may be less of a problem than with other distressed properties **Because of the length of time it takes to process a property after the foreclosure sale, the homeowner's redemption period may have expired before the lender puts the REO on the market.
Kyle owns six acres of land with 400 feet of river frontage. He wants to build a beach along the river bank to make it easier to swim in the river. He can do this because as the owner of river frontage, he has ________ rights. -Alluvial -Erosion -Littoral -Riparian
Riparian **Riparian rights are granted to property owners whose property is adjacent to flowing water, like a river.
Trina is a licensee at Midtown Homes. Which of these factors indicates that she's classified as an employee? -She's eligible to participate in the firms 401k retirement plan. -She's required to belong to the National Association of REALTORS®. -She works from both her home office and an office the firm provides. -The brokerage firm supervises her.
She's eligible to participate in the firms 401k retirement plan. **The one factor that applies only to employees is Marge's eligibility to participate in the firm's 401k retirement plan.
Rhonda purchased an existing pet store in her neighborhood, and she's so excited! Her animal-loving aunt is thrilled for Rhonda but disappointed that she won't be able to visit the store in her wheelchair, as the aisles are narrow and there isn't enough room to move around. What is true about Rhonda's responsibilities to her aunt and other people with disabilities? -At a minimum, Rhonda is required to add an accessible bathroom. -At a minimum, Rhonda is required to add an accessible entrance to the building. -Because Rhonda purchased a retail business, she must meet the same ADA requirements as new construction buildings. -Since Rhonda purchased an existing building and business, the ADA requirements aren't as strict as with new construction and vary by building.
Since Rhonda purchased an existing building and business, the ADA requirements aren't as strict as with new construction and vary by building. **There is no required minimum for existing buildings; instead, each business must make a reasonable effort to resolve usage barriers for people with disabilities.
A professional, on-site measurement of the lot lines and dimensions of a property is known as a(n) ______.
Survey
Marlon and Leah are interested in buying a home in a new homeowner opportunity area. The 100-year-old row house was renovated and is like new on the inside. The property taxes decreased by more than $5,000 last year. What's the likely reason for this? -Introductory rates -Seller error -Tax abatement -Tax reassessment
Tax abatement **A tax abatement program will lower the property taxes on a given property for a set amount of time. This is typically in response to some sort of improvement or rehabilitation, or for some new construction properties.
Ann Marie is a tenant with a triple net lease. Per her lease, she pays for which of the following expenses related to the property? -Insurance, utilities, maintenance -Maintenance, insurance, debt service -Taxes, debt service, lease payment -Taxes, maintenance, insurance
Taxes, maintenance, insurance **When you hear the term "triple net," think of three. There are three letters in the acronym TIM, which stands for taxes, insurance, maintenance.
Eva, Stella, and Lynn own a vacation home two blocks from the beach. Sadly, Stella passed away this winter, and so when summer arrives Eva and Lynn will be sharing the home with Stella's nephew Drew, to whom Stella willed her share of the property. What type of ownership is this? -Estate in severalty -Joint tenancy -Tenancy by the entirety -Tenancy in common
Tenancy in common **This is a form of shared ownership, but only tenancy in common provides for inheritability—the other forms share the rights of survivorship (the existing tenants assume the deceased's share of the property).
Which one of the following types of ownership termination allows each tenant to have a specific, divided portion (partition) of the property exclusively? -Termination by division -Termination of co-ownership by partition -Termination of estate in severalty -Termination of joint tenancies
Termination of co-ownership by partition **Termination of tenancy in common by partition allows each tenant to have a specific, divided portion of the property exclusively. If the property can't be divided, the court may rule that the property be sold and the proceeds divided by the tenants.
Rhonda hasn't paid her HOA dues in two years. Her attorney recently informed her that her state grants HOA-related liens a super lien status. What does this mean? -The HOA can collect twice the amount of the money that she owes. -The HOA lien takes priority over all other liens. -The HOA must involve an administrative law judge in order to collect. -The lien can be attached to both her real and personal property.
The HOA lien takes priority over all other liens. **Super lien status means that the lien is granted higher priority than all other liens, including mortgages, deeds of trust, or property taxes.
Two large local brokerage firms agreed to lower their commission rates to the same amount—approximately 1% less than any other firm in town. After extensive marketing of their new lower rate, these two firms began to see a big increase in the number of listings they received, costing their competitors substantial amounts of money. What about this situation makes it a per se antitrust violation? -The agreement between the two firms -The dollar amount the competitors lost -The marketing efforts the two firms used -The size of the two brokerage firms
The agreement between the two firms **The fact that the firms agreed to violate antitrust laws makes this a per se violation, meaning that authorities need to make no additional inquiry into how the violation impacted the market or the intentions of the participants to find the firms guilty.
A fire destroyed Meredith's house. Meredith contacted her insurance company, and she was shocked to learn her insurance policy didn't fully cover what she paid for the property. How does the insurance company determine the replacement value of her home? -Its current market value -The amount it appraised for -The amount it would cost to completely replace her home -The original sales price when it was first constructed
The amount it would cost to completely replace her home **Insurance companies reimburse based on a property's replacement cost, or what it would cost to recreate that property if it had to be completely rebuilt.
Who is responsible for following up on issues identified in the inspection report to ensure that they are addressed? -The buyers -The buyer's agent -The listing agent -The sellers
The buyer's agent **The licensee representing the buyers is responsible for tracking any issues the inspection uncovers and the sellers agree to repair, to ensure that they are repaired prior to closing.
Marketo Building Designs is selling the air rights above its office building. The lot is 450 feet by 350 feet. How would you determine the air lot height in order to calculate the area? -The area of an air lot can't be calculated because the height is unlimited. -The city or other governing authority establishes the air lot's height. -The height of all air lots is 500 feet above the existing structure. -The height of the air lot is equal to the height of the structure under it.
The city or other governing authority establishes the air lot's height. **Because of safety and other concerns, municipalities typically establish the height of air lots in their jurisdictions.
A client terminates a listing agreement before its expiration date. What happens now? -The agent must send the client a notice of release form. -The agent must sue. -The client may owe a commission anyway. -The listing is cancelled.
The client may owe a commission anyway. **The listing agreement may not be cancelled by only one party. It's possible the client will owe the agent the commission.
Reuben purchased a property from a seller who gave him a general warranty deed. What's true of Reuben's deed to this property? -Reuben's deed is a court-ordered deed. -Reuben's property was likely a foreclosure purchased through a lender. -The deed likely doesn't include a covenant of warranty. -The deed provides the greatest protection available from a grantor to a grantee.
The deed provides the greatest protection available from a grantor to a grantee. **A general warranty deed is the most desirable type of deed and, of all the deed types, provides the most protection for the buyer.
Licensee Kennie Mae's neighbor, Buzz, wants to sell his house but doesn't want to sign an agency agreement. Kennie Mae works with Buzz to list and show the property and negotiate offers. After the property sells, Buzz discovers that Kennie Mae didn't present all offers to him, and he sues Kennie Mae. Kennie Mae claims that because she didn't have an agency agreement with Buzz, she wasn't required to perform all fiduciary duties. What legal principle applies here? -Agency after the fact, because Kennie Mae continued to perform tasks for Buzz through the closing date. -Law of agency, because Kennie Mae defined her agency relationship with Buzz through the tasks she performed. -The doctrine of estoppel keeps Kennie Mae from disavowing the agency relationship because she provided agency tasks for Buzz. -The ratification doctrine states that Kennie Mae ratified her relationship with Buzz by signing the closing paperwork.
The doctrine of estoppel keeps Kennie Mae from disavowing the agency relationship because she provided agency tasks for Buzz. **The doctrine of estoppel prohibits an individual from making an assertion that's in opposition to actions or to a previous statement. Kennie Mae acted as if she was Buzz's agent, so she can't later disavow that behavior.
Which fiduciary duty may continue even after the transaction closes? -The duty of accounting -The duty of disclosure -The duty of obedience -The duty of reasonable skill and care
The duty of accounting **The duty of accounting continues even after the transaction closes. For instance, any money the agent holds after a transaction closes must be accounted for until it's delivered to the appropriate party.
Which of these would void a deed intended to convey property? -The grantee is not mentally competent. -The grantee's signature is not acknowledged. -The grantor is not mentally competent. -The transfer includes no monetary consideration.
The grantor is not mentally competent.
In which of the following scenarios can landlords enter a rental unit without notice? -The tenant in the unit below reports water coming through the ceiling from the apartment. -The tenant is a day late in paying rent. -To perform routine maintenance. -Whenever the lessee is not home.
The tenant in the unit below reports water coming through the ceiling from the apartment. **Landlords can enter property without notice to make emergency repairs.
Shakira is attending an association meeting when, in a small group breakout, her group begins discussing how to deal with the new kid in town: a real estate firm that charges a flat $500 to list properties, then lets the sellers fend for themselves. Shakira should leave the discussion because _______. -She needs to get to work developing this model for herself -The group seems bent on creating a tie-in arrangement -This conversation seems to be turning into a discussion of market allocation -This conversation sounds like it might become an antitrust violation
This conversation sounds like it might become an antitrust violation **This conversation sounds like it could lead to group boycotting, an antitrust violation.
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. -This is discrimination based on familial status. -This isn't discriminatory because service animals are restricted to the vision-impaired. -This isn't discriminatory if the "no pets" policy is universally applied.
This is discrimination based on disability. **Service animals assisting any disabled individual must be allowed in any housing or residential situation. They're not classified as pets, so even if there's a "no pets" policy, it wouldn't apply.
Lawrence is a buyer closing on a home purchase for which he's obtaining financing. He receives a Loan Estimate from his lender. What's the purpose of this document? -To detail the amount Lawrence needs to bring to closing -To detail the estimated closing costs for Lawrence's loan -To disclose the interest rates available on this lender's various loan programs -To disclose the lender's source of loan funds
To detail the estimated closing costs for Lawrence's loan **The Loan Estimate, which the lender must provide within three days of loan application, provides an estimate of mortgage loan costs.
Which of the following is a reason a lender might charge a prepayment penalty? -Because the lender is a subprime lender -To cover the costs of processing an early payoff -To deter buyers from ever paying off their mortgage -To recover the money lost in anticipated interest
To recover the money lost in anticipated interest **Lenders expect to make a certain amount of interest when making loans. If the loan is paid off before the interest is paid, a lender may reserve the right to charge a prepayment penalty.
Which of the following is an example of price fixing? -A brokerage requires all licensees to offer a fair cooperative brokerage fee. -Three brokerages agree to purchase office supplies together to obtain a bulk discount. -Twelve brokerages discuss compensation of associated independent contractor licensees. -Two brokerages determine a standard commission rate.
Two brokerages determine a standard commission rate. **Collusion must occur on pricing for the public in order for price fixing to occur.
Which of the following is a typical accrued adjustment? -Heating oil in the tank -Prepaid taxes -Unpaid real estate taxes -Utilities billed and paid in advance
Unpaid real estate taxes **Accrued expenses are those that the seller owes at the day of closing but that the buyer will eventually pay, such as unpaid real estate taxes.
How long does the borrower have to pay private mortgage insurance? -12 years -20 years -Until 50% of the original loan is paid off -Until the borrower reaches a 22% equity position
Until the borrower reaches a 22% equity position **PMI is cancelled when a borrower reaches a 22% equity position. This is based on payments of principal made toward the original loan balance and not on current market value.
Blake is allowed to use his property in a way that's prohibited under current zoning ordinances, because those ordinances would cause undue hardship for him. What gives him this permission? -Area variance -Moratorium -Special use permit -Use variance
Use variance **This is a use variance. In contrast, an applicant for a special use permit doesn't have to show hardship. He must simply show that the proposed use meets the conditions already contained in the ordinance (e.g., change in setback).
What is the most common way that asbestos enters the body? -Asbestos coating in water pipes can contaminate drinking water, which is then ingested. -Asbestos in paint can be released into the air as the paint peels, which is then inhaled or ingested. -When asbestos fibers decay or are disturbed, the friable particles can be inhaled. -When rocks and soil decay, asbestos gas is released, which is then inhaled.
When asbestos fibers decay or are disturbed, the friable particles can be inhaled. **Asbestos is a fibrous material found in certain types of tile, insulation, and siding. The fiber particles become friable and can damage the lungs if inhaled.
Chelsea's mother owns several rental properties and intends to keep them to pass on to the family. Chelsea holds a special power of attorney to manage the rental properties, including working with the property manager to place and evict tenants as necessary. Which of these would violate the POA? -At the property manager's recommendation, Chelsea evicts a long-time tenant for failure to pay rent. -Chelsea instructs the property manager to prepare the quarterly financial reports. -Without consulting her mother, Chelsea decides to completely refurbish one of the properties. -Without consulting her mother, Chelsea hires a plumber to fix a major plumbing problem in one of the properties.
Without consulting her mother, Chelsea decides to completely refurbish one of the properties. **An agent holding a POA can only make decisions that reflect the principal's preferences and can't exceed the authority granted by the POA. Refurbishing a property doesn't fall within the scope of managing the property is her mother's absence.
Can police power ever be used in a way that restricts citizens' freedom? -No, that's beyond the scope of police power. -Yes, but only when the citizen has committed a crime. -Yes, if it's for the public good. -Yes, that's the purpose of police power.
Yes, if it's for the public good. **While it's not the intent of police power, personal rights are sometimes sacrificed in the name of the public good.
Roberto, a licensee, filled in the blanks on a standard form used in his brokerage firm. Is this okay? -No, because he's not an attorney, he shouldn't prepare contracts. -No, he should have his client complete any forms. -Yes, licensees can use standard forms originally created or approved by an attorney. -Yes, real estate licensees may draft contracts and fill in blanks on existing contracts.
Yes, licensees can use standard forms originally created or approved by an attorney.