Q&A CRAM EXAM 2

An investor purchased an office building for $655,000, with acquisition costs of $42,300. If the building represents 80% of the cost, what is the annual IRS depreciable allowance? a. $14,303.59 b. $16,794.87 c. $23,818.18 d. $25,356.36

a. $14,303.59

Failure to pay property taxes will lead to the sale of tax certificates. In order to force the sale of the property, how many years must the investor wait? a. 2 b. 3 c. 5 d. 7

a. 2

A property manager of an office building leases 2,500 square feet of space to a doctor's office, which is 12.5% of the total space. What is the total square footage of the building? a. 20,000 b. 40,000 c. 100,000 d. 200,000

a. 20,000

What method can be used to depreciate residential real estate purchased after 1986? a. 27.5 years straight-line b. 39 years straight-line c. 27.5 years double declining d. 39 years double declining

a. 27.5 years straight-line

What must a sales associate do to be eligible to take the broker examination? a. Be employed by one or more actively licensed brokers for at least 24 months within the preceding five years b. Work for one broker for at least 12 months as an active sales associate c. Have a total of one year as an active sales associate with a broker or owner-developer within the last five years d. Prove that they have been actively engaged in the selling of real estate within the last five years

a. Be employed by one or more actively licensed brokers for at least 24 months within the preceding five years

Which items would be optional on a branch office sign? a. Branch office name b. The words, "Licensed Real Estate Broker" c. The name of the business entity d. The name of an individual broker

a. Branch office name

Who can assess property for tax purposes? a. County property appraiser b. County commission c. School board d. Special taxing district

a. County property appraiser

How would a purchase money mortgage appear on a closing statement? a. Credit the buyer and debit the seller b. Credit the seller and debit the buyer c. Debit the seller and debit the buyer d. Credit the seller and credit the buyer

a. Credit the buyer and debit the seller

Which estate or tenancy is the most comprehensive? a. Fee simple b. Life estate c. Estate for years d. Free sample estate

a. Fee simple

What must a person do in order to qualify for the homestead tax exemption? a. File for the exemption each year b. File for the exemption only once c. Live in the house all year d. Live in the house at least six months of the year

a. File for the exemption each year

Jack has an income of $85,000 per year, and Patricia, his wife, has an income of $75,000. They have car payments of $540 per month each, credit card payments of $600 and student loan payments of $1,000 per month. The loan they are applying for would have a monthly payment of $3,400. What is the housing expense ratio? a. 53% b. 45% c. 38% d. 26%

d. 26%

What is a contract for deed, or land contract? a. A type of ownership or tenancy b. A legal document that conveys title c. A purchase and sale contract for unimproved land d. A form of owner financing

d. A form of owner financing

. What is required for a person who represents themselves as a business broker? a. A business sales associate's license b. A business broker's license c. An appraiser's license d. A real estate license

d. A real estate license

Robert, a sales associate, has been working with an investor that is looking for single-family properties for income. In order to get preferential treatment, the investor offers a $1,000 finder's fee directly to Robert for each suitable property he finds. This arrangement would be: a. A violation of the civil rights laws b. Acceptable since it is a finder's fee, not a commission c. A violation since finder's fees cannot exceed $50 d. A violation of F.S. 475, because it is not paid through his broker

d. A violation of F.S. 475, because it is not paid through his broker

When do property taxes in Florida become delinquent? a. April 15 of the following year b. January 1 of the tax year c. April 1 of the tax year d. April 1 of the following year

d. April 1 of the following year

Which term refers to the tangible and intangible resources of a business? a. Liabilities b. Net worth c. Owner's equity d. Assets

d. Assets

The requirements for obtaining a Florida real estate license include all of the following, EXCEPT: a. Passing two exams b. Having a high school diploma or equivalency c. Completing a pre-licensing course d. Being a Florida resident

d. Being a Florida resident

Who may be compensated, directly by an owner, for performing any of the eight services of real estate? a. Broker b. Sales associate, if employed by an owner-developer c. Principal d. Both a and b

d. Both a and b

All of the following are basic types of depreciation, EXCEPT: a. Physical deterioration b. Functional obsolescence c. External obsolescence d. Component depreciation

d. Component depreciation

A real estate closing for a duplex is scheduled for September 7, with the day of closing charged to the buyer. Monthly rent is $1,300 per unit. Which closing statement entry is correct? a. Debit the buyer $520.00 b. Credit the buyer $520.00 c. Debit the buyer $2,080.00 d. Credit the buyer $2,080.00

d. Credit the buyer $2,080.00

What would the Federal Reserve do when it wants to increase the supply of loanable funds? a. Sell government securities b. Increase the reserve requirement c. Increase the discount rate d. Decrease the reserve requirement

d. Decrease the reserve requirement

What may the lender request the court to grant when there is a foreclosure and the auction sale does not provide enough proceeds to pay the entire mortgage debt? a. Estoppel judgment b. Novation judgment c. Satisfaction judgment d. Deficiency judgment

d. Deficiency judgment

Which term refers to the interest that is charged when banks borrow from the Federal Reserve? a. Prime rate b. Discount points c. Usury rate d. Discount rate

d. Discount rate

What results in a decrease of land mass? a. Accretion b. Littoral c. Riparian d. Erosion

d. Erosion

Which asset is the most difficult to set a dollar value on for a business? a. A leasehold estate b. Existing equipment c. Corporate stock d. Goodwill

d. Goodwill

Jeff is the owner of a building that is leased to Craig. If Jeff sells the building, what is the status of the lease? a. It becomes a tenancy at will b. It must be renewed c. It is terminated d. It is binding on the new owner

d. It is binding on the new owner

Owner A and friend B meet on the street. A says, "I would like to sell my house." B takes the information and says, "I'll find you a buyer; I've done it several times for our friends." B finds a buyer for A's house, and the transaction is closed. Based on the above facts, which of the following applies? a. A has violated F.S. 475 b. B has violated F.S. 475 c. Both A and B have violated F.S. 475 d. Neither have violated F.S. 475

d. Neither have violated F.S. 475

A convenience store existed at a location prior to zoning law changes that would have disallowed it. Under which type of exception can the store remain? a. Hardship exception b. Special use exception c. Variance d. Nonconforming use

d. Nonconforming use

Which action would cause an applicant's request for licensure be denied without prejudice? a. Cheating on the state exam b. Having been convicted of fraud c. Having been disbarred from the legal profession d. Omitting one or more answers to questions on the application

d. Omitting one or more answers to questions on the application

John has the opportunity to invest in a property with a 9% return. He can borrow the money at an interest rate of 7%. Which investment characteristic exists? a. Liquidity b. Negative leverage c. Neutral leverage d. Positive leverage

d. Positive leverage

What is the name for the annual income that an investment property could make with no vacancies or collection losses? a. Annuity gross income b. Effective gross income c. Net operating income d. Potential gross income

d. Potential gross income

Which type of mortgage is known as seller financing? a. Package mortgage b. Term mortgage c. Second mortgage d. Purchase money mortgage

d. Purchase money mortgage

All of the following are characteristics of real estate, EXCEPT: a. The market is local in nature. b. The market is slow to respond to changes in supply and demand. c. There is no central control over the market. d. The market is homogenous.

d. The market is homogenous.

Which statement is correct in a lien-theory state such as Florida? a. The borrower will obtain title only after the loan is paid. b. Foreclosure will take place much quicker than in title theory states. c. The borrower conveys title to the lender using a deed of trust. d. The mortgage serves as a lien against the property.

d. The mortgage serves as a lien against the property.

An owner of a service station who holds an inactive sales associate's license has been appointed by the court to appraise another service station. Which statement is most correct? a. Since they have registration status, that person may be compensated for this service of real estate. b. They must have an active license to be compensated. c. They may be compensated by a licensed broker. d. They may be compensated directly for this service.

d. They may be compensated directly for this service.

What is the purpose of building codes? a. To set standards for the amount of land a building can cover b. To specify the style of building that may be built c. To regulate government properties d. To establish minimum standards of building design and construction

d. To establish minimum standards of building design and construction

When is intermediation in financial institutions most likely to occur? a. When demand and supply of funds are both decreasing b. When demand and supply of funds are both increasing c. When supply of funds is decreasing, and the demand is increasing d. When supply of funds is increasing, and the demand is decreasing

d. When supply of funds is increasing, and the demand is decreasing

Local planning agencies have the final authority for all of the following, EXCEPT: a. Subdivision plat approval b. Site plan approval c. Sign control d. Zoning variances

d. Zoning variances

Jerry was notified that he passed the state sales associate license exam. For which type of employer does his license allow him to perform real estate services? a. A broker b. An owner-developer c. A real estate brokerage corporation d. a, b, or c

d. a, b, or c

Aaron Applicant has passed the state examination for becoming a sales associate. An hour later, Aaron has the opportunity to list his neighbor's house. Aaron may: a. List the house as long as he has an employing broker and both Aaron and the employing broker are properly registered on the records of the DBPR b. Not list the property until he has sent a copy of his pass slip and a copy of his employing broker's business tax receipt number to the Division of Real Estate for certification c. List the property as long as he has been properly preregistered with his new owner-developer, and the pass slip is physically in his possession d. Not list the property until he has joined and paid the required fees to the local Association of REALTORS

a. List the house as long as he has an employing broker and both Aaron and the employing broker are properly registered on the records of the DBPR

Where are the interest rate, payment, and other terms of a loan found? a. Note b. Lease c. Satisfaction d. Mortgage

a. Note

Which governmental power authorizes a city to make zoning laws? a. Police power b. Eminent domain c. Escheat d. Riparian doctrine

a. Police power

Which term refers to the government's right to limit or control the actions of citizens in the form of such things as zoning codes and building codes? a. Police power b. Eminent domain c. Escheat d. Taxation

a. Police power

The primary purpose of the Federal Home Loan Bank System is to provide support for which of the following? a. Savings associations b. Federal commercial banks c. Mortgage brokers d. Insurance companies

a. Savings associations

Which of the following is a characteristic of an amortized or level payment mortgage? a. The early payments are mostly interest. b. The early payments are mostly principal. c. Each monthly payment increases and the balance decreases. d. With each monthly payment, the interest increases and the balance decreases.

a. The early payments are mostly interest.

If an owner felt that a zoning rule was causing an economic hardship, not of their own making, they may seek relief by requesting a(an): a. Variance b. Site plan exemption c. Special use exemption d. Nonconforming use exemption

a. Variance

Closing date is June 8 with the day of closing belonging to the buyer. Annual real estate taxes are $2,730. Using the 365-day method, what prorated amount of taxes will be debited to the seller? a. $957.37 b. $1,181.75 c. $1,548.25 d. $1,772.63

b. $1,181.75

An investment property has a potential gross income of $300,000, a vacancy rate of 5% and operating expenses including $13,000 of reserves for replacement totaling $140,000. What is the net operating income? a. $132,000 b. $145,000 c. $155,000 d. $160,000

b. $145,000

What amount of the second monthly payment would be applied to principal on a $180,000 loan with an annual interest rate of 6.5% for 30 years, with payments of $1,137.72? a. $162.72 b. $163.60 c. $974.12 d. $975.00

b. $163.60

A lawn service company sold for $125,000. The tangible assets amounted to the lawn equipment valued at $48,000. The intangible assets were the customer base and the company's good reputation. What is the value of the intangible assets? a. $173,000 b. $77,000 c. $48,000 d. $38,500

b. $77,000

What is the monthly gross rent multiplier for a house that sold for $269,500, and was rented for $2,000 per month? a. 11.23 b. 134.75 c. 145.25 d. 156.10

b. 134.75

James, a potential buyer, is told by the lender that he can have a loan at an interest rate of 6%. When he goes to the closing, he notices that the truth-in-lending statement says the APR is 6.5%. Using the rule of thumb calculation, how many points were most likely charged? a. 3 b. 4 c. 5 d. 6

b. 4

Sandy is purchasing a home for $570,000, with a down payment of $114,000. If she finances the difference, what is the loan-to-value ratio? a. 85% b. 80% c. 65% d. 60%

b. 80%

Which term refers to the process of sand deposits building up over time, causing an increase in land? a. Reliction b. Accretion c. Erosion d. Alluvion

b. Accretion

Which financial statement shows the status of a business as of a specific date? a. Income statement b. Balance sheet c. Profit and loss statement d. IRS Form 1040

b. Balance sheet

What are the two most important financial summary statements of a business? a. Working capital and depreciation reports b. Balance sheet and income statement c. Cash flow and asset reports d. Tax returns and asset report

b. Balance sheet and income statement

The present value of a future cash flow is the basis for which appraisal technique? a. Cost depreciation b. Direct capitalization c. Market data d. Comparable sales

b. Direct capitalization

Which entity signs the certificates of the FREC meetings that reflect the actions of the Commission? a. Secretary of state b. FREC chairperson or vice chairperson c. Chief investigator of the DRE d. Any FREC commissioner

b. FREC chairperson or vice chairperson

The highest and best use of a parcel of land is the use that creates which of the following? a. Greatest density b. Greatest value for the land c. Greatest intensity d. Greatest tax base

b. Greatest value for the land

XYZ Development Corp. was developing a PUD (planned unit development) in Carol City. Sales associate Green, employed by XYZ Corp., was employed to sell vacant home sites. XYZ Corp. had a subsidiary company, the Sunshine Corp., in another city 200 miles away, developing another PUD. If sales associate Green is transferred to the Sunshine Corp., which statement is correct? a. He could apply for a multiple license and notify the FREC. b. He could apply for a group license and notify the FREC. c. This would be a violation of F.S. 475. d. As long as he notified XYZ Corp., this is legal.

b. He could apply for a group license and notify the FREC.

Jasper Judd is a salaried resident manager of the Golden Age Condominium complex. Adolph Ajax, an owner of one of the units in the condominium, has asked Jasper to lease his unit while he is away on an extended trip to Bulgaria. Jasper may: a. Lease out the unit for any period of time, as long as he is not compensated. b. Lease out the unit for Adolph for not more than one year, as long as he is not compensated in addition to his salary. c. Not lease out the unit since this would violate F.S. 475. d. Lease out the unit but may not be compensated more than $100.

b. Lease out the unit for Adolph for not more than one year, as long as he is not compensated in addition to his salary.

What are ad valorem taxes? a. Special assessment taxes b. Real estate property taxes c. Income taxes d. Quasi-taxes

b. Real estate property taxes

What term refers to the right of a mortgagor to stop a foreclosure process by paying the entire balance, interest and so on? a. Equity of estoppel b. Right of redemption c. Right of defeasance d. Equity of disposition

b. Right of redemption

Before the rules and regulations enacted by the FREC become effective, with which entity must they be filed? a. Attorney general b. Secretary of state c. Secretary of the senate d. Governor's office

b. Secretary of state

What is the description of the township located due east of T4N, R3W? a. T4N, R4W b. T4N, R2W c. T3N, R2W d. T5N, R4W

b. T4N, R2W

A resident of Canada that has been denied a license in the Province of Ontario subsequently moves to Florida and applies for a real estate sales associate's license. Which would most likely apply? a. The applicant will automatically be denied a license in Florida. b. The person will be granted a hearing, and the application will be pending based on the result of the hearing. c. The Canadian denial will have no bearing in Florida. d. The previous problem does not need to be noted on the application as it took place outside the country.

b. The person will be granted a hearing, and the application will be pending based on the result of the hearing.

What is the membership composition of the value adjustment board? a. Three school board members and two county commissioners b. Two county commissioners, one school board member and two private citizens c. Three county commissioners and the tax assessor d. Four county commissioners and three school board members

b. Two county commissioners, one school board member and two private citizens

Which is the best license status for practicing real estate? a. Valid b. Valid and current c. Current d. Valid and not current

b. Valid and current

An eight-year-old building looks only three years old because it has been well maintained. The reproduction cost the building is $400,500, and the economic life is 45 years. The land is valued at $80,000. What is building's approximate depreciation? a. $2,700 b. $7,200 c. $26,700 d. $71,200

c. $26,700

Sarah made an escrow deposit of $8,500 on her sales contract. The sale price is $200,000, and she has arranged for an 85% loan. If her closing costs are $6,000, how much additional cash must she bring to the closing? a. $21,500 b. $24,200 c. $27,500 d. $36,000

c. $27,500

. If a lot measures 125 feet by 225 feet, and the street in front is scheduled to be paved at a cost of $100 per front foot, how much would one homeowner's special assessment be if the county is paying 30%? a. $1,875 b. $2,187 c. $4,375 d. $7,875

c. $4,375

A comparable property recently sold for $429,000. The comparable property is built of superior materials valued at $25,000 but has less square footage than the subject property, valued at $35,000. What is the adjusted sale price of the comparable property? a. $369,000 b. $419,000 c. $439,000 d. $489,000

c. $439,000

A property that listed for $400,000 sold for 93% of the listing price with a 5% commission. It was sold by another office. The commission is to be split 50% to the listing office and 50% to the selling office. If the sales associate is to receive 40% of the listing office share, how much will the listing broker receive? a. $4,000 b. $4,650 c. $5,580 d. $6,000

c. $5,580

Mr. Johnson owns an apartment building that produces an effective gross income of $85,000 per year. What would be the value, given operating expenses of $30,000, and an overall capitalization rate of 11%? a. $272,727 b. $300,000 c. $500,000 d. $772,727

c. $500,000

A developer purchased two adjacent lots of 200 front feet each for $35,000 each. He then divided them into three lots and sold them for $225 per front foot. What was the percentage of profit? a. 14.5% b. 22.0% c. 29.0% d. 57.0%

c. 29.0%

Carol is borrowing money to purchase her first home. The lender has agreed to a 5% loan with 2 discount points. What is the approximate yield on the loan? a. 3.00% b. 4.75% c. 5.25% d. 7.00%

c. 5.25%

What is the gross income multiplier for an investment property that has a gross income of $550,000 and a net income of $330,000 if the value is $4,125,000? a. 3.4 b. 4.7 c. 7.5 d. 12.5

c. 7.5

If a lender charges 8% interest plus 2 points, what is the approximate yield on the loan? a. 9.00% b. 8.50% c. 8.25% d. 8.13%

c. 8.25%

Which remedies are available when a seller breaches a contract? a. A suit for specific performance b. Buyer gets deposit returned c. A or b but not both d. Notifying FREC

c. A or b but not both

Which information is included in the public records? a. Real estate school test questions b. A licensee's test results c. A sales associate's application d. State exam answers

c. A sales associate's application

The subject property has a garage. The comparable property has no garage. If a garage has a value of $14,500, and the comparable property sold for $149,900, what adjustment should be made? a. Add a $14,500 adjustment to the subject property b. Subtract a $14,500 adjustment from the subject property c. Add a $14,500 adjustment to the comparable property d. Subtract a $14,500 adjustment from the comparable property

c. Add a $14,500 adjustment to the comparable property

A homesteaded property has an assessed value of $249,000. If the county tax rate is seven mills, the city is eight mills and the school board is nine mills, how much does the homestead exemption save the homeowner? a. $25,000 b. $6,000 c. $5,376 d. $975

d. $975

A sales associate went on vacation. While gone, the broker moved the office around the block. When the sales associate returned, there was an urgent message that two serious prospects had called. Also, a sale closed in his absence and the broker owes him a commission. What should the sales associate do first? a. Demand the commission b. Forget the commission since the sales associate wasn't there c. Call the two prospects immediately d. Immediately request a reissue of license from FREC

c. Call the two prospects immediately

What results from zoning laws? a. Safer building methods are adopted b. Plat maps must be approved by the local planning agency c. Communities are divided into districts based on use d. Standards are set for style and compatibility

c. Communities are divided into districts based on use

Which process is used by the government to take private land for public use? a. Escheat b. Encroachment c. Condemnation d. Acknowledgment

c. Condemnation

How would an escrow deposit typically appear on a closing statement? a. Credit to seller b. Debit to seller c. Credit to buyer d. Debit to buyer

c. Credit to buyer

A, B, and C bought 640 acres of land with equal and undivided interest. A and B were brokers, and C was not. A and B were frequent business partners but decided to let C handle the resale of the tract. C had very little experience but was able to find a buyer willing to pay a good price. Because of this, A and B decided to give C 40% of the profits and divide equally the balance of the profit. Which applies? a. C can do this if C is an attorney b. C can do this because A and B are brokers c. F.S. 475, has been violated d. Since C is selling C's own land, C does not have to be registered

c. F.S. 475, has been violated

Which law requires farmland near an urban area to be valued the same as more distant farmland for tax purposes? a. Statute of limitations b. Estoppel law c. Green belt law d. Zoning laws

c. Green belt law

George Portfolio is a stockbroker who does not hold a real estate license. He believes the stock of the Gasaway Corporation has high potential. Upon contacting the president of Gasaway to assist the corporation in listing its stock for sale, he learns that the success of the company hinges on the negotiation of an oil lease. George offers his assistance, and the company engages him to negotiate the lease with Slick Slacker, the owner. Upon closing the lease, the company employs George as its stockbroker. George subsequently sells the corporation's stock. The corporation pays George a commission on the stock sale and gives him five shares for handling the oil lease. George: a. Is exempt as a salaried employee b. Acted properly functioning as a stockbroker c. Has violated F.S. 475 d. Has not violated F.S. 475

c. Has violated F.S. 475

Which of the following best describes the purpose of the real estate license law? a. It teaches salesmanship b. It aids licensees in understanding the basic practice of law c. It puts forth the fundamental principles of law that every licensee must adhere to in order to protect the public d. Both a and b

c. It puts forth the fundamental principles of law that every licensee must adhere to in order to protect the public

What should a sales associate do if they consider a rule to be invalid? a. Notify the state legislators b. Notify the local board of REALTORS c. Notify FREC d. Ignore the rule

c. Notify FREC

In which market would there be a shortage of housing? a. Buyers' market b. Housing market c. Sellers' market d. Deficit market

c. Sellers' market

Mr. White referred his sister to a real estate broker, and she purchased a $200,000 home. What may the broker do to show his thanks? a. Take Mr. White to dinner b. Give Mr. White a bottle of wine c. Send a thank you note to Mr. White d. Pay a referral fee

c. Send a thank you note to Mr. White

The Johnsons have lived in their home for the last four years. Now they are selling and expect a profit of nearly $200,000. Which statement applies? a. $125,000 of the gain can be excluded from being taxable. b. The gain can be moved to another house of equal or greater value to delay the tax. c. The gain is exempt from tax. d. They must pay tax on 40% of the gain.

c. The gain is exempt from tax.

Mary does not have a real estate license and works for AAA Syndicate, which buys, sells, manages, and leases its own property. Mary was hired to lease and sell AAA's property; she is compensated by a salary. Which statement is correct? a. Mary needs a real estate license. b. This activity is okay only if Mary is paid 50% on sales and 50% on leasing. c. There is no violation of F.S. 475. d. This activity is okay only if no more than 50% of Mary's salary is fixed.

c. There is no violation of F.S. 475.

Which characteristic applies to the note documentary stamp tax? a. Paid by the seller b. $.70 per $100 c. .002 of the loan amount d. $.35 per $100

d. $.35 per $100

Calculate the total state taxes due in the following transaction: The sales price is $249,480. The buyer will assume the seller's first mortgage of $190,000. The seller has agreed to take back a new purchase money second mortgage for $25,000. a. $1,796.50 b. $2,176.50 c. $2,461.50 d. $2,549.00

d. $2,549.00

A ten-year-old home is being appraised. The square footage of gross living area is 3,680 and there is also a 420-square-foot garage. If the construction cost is $70 per square foot for living area and $35 for a garage, what is the reproduction cost of the structure? a. $128,800 b. $158,200 c. $257,600 d. $272,300

d. $272,300

A homeowner purchased a primary residence for $395,500 including $15,000 in closing costs and $60,000 for the lot. After the closing, hurricane shutters were installed at a cost of $12,600. What is the adjusted basis for tax purposes? a. $348,100 b. $423,100 c. $382,900 d. $408,100

d. $408,100

In November, the seller paid $1,375 for the annual property taxes. The closing date is December 14, and the day of closing belongs to the seller. Using the 365-day method, what prorated amount of taxes will be debited to the buyer? a. $1,310.96 b. $1,194.18 c. $180.82 d. $64.04

d. $64.04