Questions I got wrong on practice test Unit 2
Many investors like the real estate market for its ____________, with the potential or bottom-line yields of 20% or more. A. High yields B. Leveraging opportunities C. Personal control D. Tax flexibility
A High yields The high yields of real estate investment are an advantage of taking the high risk.
Your client hates the fact that out of her $1,027 monthly payment, more than $900 is going toward interest. What do you tell her? A. "That's amortization for you." B. "That's highway robbery! Who's your lender?" C. "There must be some mistake." D. "You should refinance."
A. "That's amortization for you." That's how amortization works: A larger percentage of each monthly payment is applied toward interest in the beginning, with the principal being paid off in increasing amounts over time.
Cara, a licensee, is preparing a sales contract on behalf of her buyers. She finds that the contract doesn't quite meet all of her clients' needs. What should she do? A. Add an addendum to the contract that meets her clients' needs. B. Draft a contract that will meet her clients' needs. C. Strike through major sections of the contract, write "See attached," and attach a codicil. D. Try to talk her clients out of the terms that don't fit with the agreement.
A. Add an addendum to the contract that meets her clients' needs. If the sales contract doesn't cover the necessary terms, licensees can add standard addenda using standard language. Any deviations from standards should be reviewed or drafted by an attorney before obtaining signatures.
What form must earnest money take in South Carolina? A. Any legal tender B. Cash, money order, or certified check C. Cash or certified check D. Certified check or money order
A. Any legal tender Earnest money in South Carolina can be paid using a personal check, cash, or through other means.
Investors who maintain strong relationships with local ________ will have a source of information about trends in commercial property values and net operating incomes. A. Appraisers B. Financial analysts C. Government officials D. Real estate investment bloggers
A. Appraisers Appraisers who work with commercial properties have a current understanding of trends in income and property values.
The Hendersons are having a very difficult time finding a property that meets their needs. What is a way they can find off-market listings? A. Ask a real estate agent to poll her sphere of influence B. Ask a real estate agent to search the MLS C. Search homebuying websites D. Visit real estate brokerages to see what properties they are advertising
A. Ask a real estate agent to poll her sphere of influence Off-market listings are also known as pocket listings. Only the seller, the listing agent, and individuals the seller and listing agent have informed know the property is for sale. It is not posted on the MLS, brokerage websites, or homebuying websites.
At a showing, Bitsy commented to her buyer clients, "That would be a great place to build a small guest house. With this size lot, your options are wide open." Six months after closing, the buyers filed a complaint against Bitsy: They'd spent $60,000 to build that guest house, then found out it violated zoning and city codes. Based on the NAR Code of Ethics, in this case, __________. A. Bitsy should not have suggested, even candidly, that they could build a guest house without knowledge of city and zoning codes. She is likely at fault. B. If the buyers had directly asked her if they could build a guest house, she would have been required to find out. Since this was a comment spoken in passing, she is not at fault. C. REALTORS® can say whatever they need to say to close the deal; buyer beware. D. The buyers should have looked into the building codes themselves. Bitsy is not at fault.
A. Bitsy should not have suggested, even candidly, that they could build a guest house without knowledge of city and zoning codes. She is likely at fault. Case interpretations of Article 2 of the NAR Code of Ethics consistently rule against agents guessing at future property uses or improperly portraying the property in any way.
Investor Bob owns a commercial property. He receives $100,000 in income from the property but is only taxed on $75,000. What might explain this? A. Bob may have an income shelter. B. Bob's accountant miscalculated his taxes. C. Bob took a capital gain exclusion. D. Some of Bob's income is portfolio income and not taxable.
A. Bob may have an income shelter. This could be an example of an income shelter, as Bob is taxed on an amount lower than his income.
According to the NAR Code of Ethics and Standards of Practice preamble, if you believe another REALTOR® is violating the code, you should ______. A. Bring the matter to the appropriate REALTOR board or association B. Mediate the issue privately yourself, as an industry companion C. Proclaim the violation publicly to alert the consumer to the REALTOR's transgression D. Protect your fellow REALTOR's privacy and confidentiality.
A. Bring the matter to the appropriate REALTOR board or association. The preamble specifically states that REALTORS® who have direct personal knowledge of conduct that may violate the Code of Ethics should bring the matter to the local board's attention
According to the IRS, how much can active investors deduct from their active taxable income? A. Up to $25,000 B. Up to $30,000 C. Up to $40,000 D. Up to $50,000
A. Up to $25,000 If the IRS classifies someone as an active investor they can deduct up to $25,000 from active taxable income.
Which of the following statements accurately represents a major difference between a preapproval letter and a pre-qualification letter? A. Buyers receive a pre-approval letter only after the lender has verified at least some information the buyer provided. B. Pre-approval letters mean that the buyer has received final approval for a loan after going through the entire loan process. C. Pre-qualification letters are more difficult to get than pre-approval letters. D. Unlike a pre-approval letter, a pre-qualification letter ensures that the lender has verified information the buyer provided.
A. Buyers receive a pre-approval letter only after the lender has verified at least some information the buyer provided. To receive a pre-approval letter, buyers must have provided a certain amount of information to the lender, and the lender must have verified that information. Pre-qualification letters are usually issued with little or no information verification.
What's stipulated in the Broker's Compensation section of a South Carolina sales contract? A. Closing proceeds may be used to pay the brokers' commission. B. Earnest money may be retained to pay broker commission C. If broker commission is in dispute, the parties must resolve the situation within 30 days D. In the event of a dispute between the parties, the brokers waive their commission
A. Closing proceeds may be used to pay the brokers' commission In this section, the parties direct the closing attorney to use proceeds of the sale to pay broker commission.
Janice wanted to sell her townhome, and her neighbor was considering buying it. She wanted to put it on the market while she waited to find out if her neighbor was going to buy. In order to receive the best possible representation but avoid paying a commission if her neighbor buys the property, which type of listing agreement would best suit Janice's needs? A. Exclusive agency B. Exclusive right to sell C. Net D. Open
A. Exclusive agency It's easy to confuse exclusive agency and exclusive right to sell. With exclusive agency, the seller retains the right to find a buyer and avoid paying the commission, but the seller's listing will likely receive more attention from the agent than it would with an open listing.
Which of the following contributed to the 2007 financial crisis? A. Falling home prices B. Falling interest rates C. More home sales D. Rising home prices
A. Falling home prices Falling home prices were a contributing factor to the 2007 financial crisis
Which of the following statements best describes good funds? A. Funds that are immediately available for use or disbursement B. Funds that are provided by a lender that's insured by the FDIC C. Funds that are provided to hold a transaction, i.e., earnest money D. Funds that can be immediately converted to cash
A. Funds that are immediately available for use or disbursement The term refers to funds that are immediately available for use or disbursement and not subject to conditions, such as short checks, bankruptcy holds, or seller recall.
Avery obtained a home loan from Happy-to-Lend Bank. He can no longer afford to pay his mortgage, but he wants to avoid foreclosure, so he listed it with Campbell Realty to help him sell it for less than he owes. He receives an offer from a buyer. Whose consent does Avery need to complete the sale? A. Happy-to-Lend Bank B. His broker's C. The buyer's agent D. The foreclosure court
A. Happy-to-Lend Bank Because the sales proceeds from a short sale won't be sufficient to pay off the seller's loan obligations, the lien holder must consent to accepting the sale proceeds as payoff for the mortgage loan and release the lien against the property.
Why should you know when the seller can vacate the property? A. If a buyer wants to close before the seller can vacate, the seller may need to rent it back from the buyer. B. You'll need to know when you can have the property staged. C. You'll want the house empty for showings. D. You'll want to schedule the closing during the seller's occupancy.
A. If a buyer wants to close before the seller can vacate, the seller may need to rent it back from the buyer. The timing of vacating an occupied property is important when marketing to buyers who may want to move in before the seller's ready to move out.
______ describes a unique characteristic of real property (differentiating it from other asset classes). Because of it, location plays a key role in value. A. Immobility B. Indestructibility C. Slowness of response to market conditions D. Uniqueness
A. Immobility Immobility of is one characteristic that makes the real estate market unique. If changes take place in the surrounding area, this impacts the value of local real estate.
Which of the following is true regarding the federal gift tax? A. It applies even if the donor didn't intend it to be a gift. B. It only applies when gifts are monetary in nature. C. Provided some value was received in return, even if not full value, the gift is not subject to a gift tax. D. There are no exemptions to gift taxes.
A. It applies even if the donor didn't intend it to be a gift. The gift subject to a gift tax may be in the form of money, real estate or other item of value. A gift tax applies whether the donor intended the transfer to be a gift or not.
Which of the following is a true statement about the seller's property condition disclosure statement in South Carolina? A. It must be completed by the seller unless both parties waive the requirement B. It's not required by law, but if the buyer requests it, the seller must provide it C. Only the seller or the seller's broker may complete it D. The seller may complete it, but both the seller and the seller's broker are liable for its accuracy.
A. It must be completed by the seller unless both parties waive the requirement The property condition disclosure statement is required by law, but it may be waived by the parties. It must be completed by the seller, and brokers aren't liable for the information provided.
Janelle, a buyer of a previously occupied South Carolina home, is making her purchase contingent on a satisfactory wood inspection report. Who must order and pay for that report? A. It's negotiable B. Janelle C. The lender D. The seller
A. It's negotiable The buyer of a previously occupied South Carolina home may make the purchase contingent on a satisfactory wood inspection report. Either the buyer or seller may pay for the report.
The loan type and the amount of down payment impact ______. A. The closing costs the seller may contribute B. The closing date C. The loan origination fee charged D. The seller's net proceeds
A. The closing costs the seller may contribute The amount that a seller may contribute toward closing costs is based on the loan type and the amount of the down payment.
Where can a licensee find out if liens have been filed against a property? A. Building department B. County courthouse C. Police records D. Tax records
B. County courthouse The county courthouse will have a record of publicly filed liens.
The current value of a property is $105,000. What was the original cost of the property if there has been a 30% loss in value? A. $105,000 B. $150,000 C. $31,500 D. $350,000
B. $150,000 Take the current value of the property divided by the total depreciation: 100% 30% = 70%, then $105,000 ÷ 0.70.
The IRS will only allow _______ of passive losses to be deducted against active taxable income. A. $2,000 B. $3,000 C. $4,000 D. $5,000
B. $3,000 The IRS only allows $3,000 of passive losses to be deducted against active taxable income.
George has $625 in monthly debt obligations, and his anticipated mortgage payment is $1,828. His gross income is $9,869, and his net income is $7,895. What's his housing ratio? A. 15.23% B. 18.52% C. 23.15% D. 30.71%
B. 18.52% The housing ratio doesn't include debt obligations and is calculated using gross income.
Which of the following may be the result of building delays on a new construction? A. A change in the price B. A delay in closing C. An increase in the number of construction defects D. An issue with the title
B. A delay in closing Because suppliers and subcontractors can cause building delays, closing dates may be delayed.
When using the farming approach, affinity is a key factor when identifying a neighborhood. Which statement best describes affinity? A. An area that is not currently farmed by another licensee B. An area that the licensee likes C. An area with a fair amount of listings not too many, not too few D. An area with a variety or home styles, sizes, features, price points, amenities, buyers, etc.
B. An area that the licensee likes Affinity is important when choosing a neighborhood. A licensee should genuinely like the area where she intends to work.
The risk that an investor cannot secure financing at an affordable rate is called ______ risk. A. Business B. Capital C. Financial D. Leverage
B. Capital A purchase can be put in jeopardy if an investor cannot secure the financing needed at an affordable rate. This capital risk could make the purchase unattractive or more expensive than first analyzed and no longer a pursuable investment opportunity.
Jason is planning to invest in a new commercial development. He'd like to invest $400,000 and secure another $100,000 through financing. After shopping around, Jason could not find financing at an affordable rate. Of what type of risk is Jason the victim? A. Business risk B. Capital risk C. Financial risk D. Leverage risk
B. Capital risk A purchase can be put in jeopardy if an investor cannot secure the financing needed at an affordable rate. This capital risk could make the purchase unattractive or more expensive than first analyzed and no longer a pursuable investment opportunity.
Don and Becky realized too late that the contract they signed for the sale of their home didn't include any language about a rent-back if the home they're building isn't ready in time. What can their listing agent do? A. Create a contract addendum with the required language. B. Create a contract amendment with the required language. C. Create a counter-offer to present to the buyers. D. Terminate the contract on Becky and Don's behalf.
B. Create a contract amendment with the required language. Once a contract is signed, the document to use to alter the terms is a contract amendment.
Asking yourself if there's a conflict with your duties as a real estate professional is which step in the process of handling ethical dilemmas? A. Decide what action to take. B. Determine whether an ethical dilemma exists. C. Evaluate the situation D. Explore the ethical choices
B. Determine whether an ethical dilemma exists This question, and asking whether there's a conflict of interest and values, can help you determine whether an ethical dilemma exists.
Brock, a South Carolina real estate licensee, is meeting with prospective buyer clients, Jesse and John Stone, for the first time. Before Brock and the Stones enter into a buyer agency relationship, what is Brock required to do? A. Ask the Stones to provide two forms of identification each B. Discuss the South Carolina Disclosure of Real Estate Brokerage Relationships form with the Stones C. Have the Stones sign and date a non-disclosure form D. Obtain the Stones' written consent to have Brock's broker act as their facilitator
B. Discuss the South Carolina Disclosure of Real Estate Brokerage Relationships form with the Stones Brock must present the Stones with the South Carolina Disclosure of Real Estate Brokerage Relationships form, and discuss it with them.
Which of the following properties requires a lead disclosure? A. Commercial building built in 1960 B. Duplex built in 1959 C. Duplex built in 1979 D. Single-family home built in 1999
B. Duplex built in 1959 A lead disclosure is required for residential properties built before 1978 because paint manufacturers used lead-based paint before it was banned that year.
A rehabilitation loan is a loan that ______. A. Borrowers can take to stall foreclosure B. Encompasses repair or remodeling costs C. Is available to borrowers who've recently cleaned up their credit D. Pays off a junior mortgage
B. Encompasses repair or remodeling costs Owner-occupied buyers may be able to obtain a Federal Housing Administration 203(k) rehabilitation loan (also called a renovation loan) for properties they wish to purchase that require major work.
A developer is likely to get the best return for investment if the project is completed during the _________ phase of the real estate market cycle A. Contraction B. Expansion C. Over-supply D. Recovery
B. Expansion During the expansion phase of the market cycle, demand exceeds supply and prices will be climbing, leading to a better return for the developer's investment.
A boundary line is 880 yards long. How many furlongs is this equal to? A. Five B. Four C. Three D. Two
B. Four There are 220 yards in one furlong. Divide 880 by 220 to find this answer.
Your cousin asks you to explain one difference between vacant and improved land, beyond the fact that there are no buildings on it. You answer, "Vacant land is ______." A. Easier to find for sale B. Harder to finance C. Less expensive to finance D. More expensive overall
B. Harder to finance Lenders take more risk with land loans because the collateral-the land-isn't put to immediate use for housing, and therefore it's much easier for the borrower to walk away. Terms and interest rates are therefore less favorable for vacant land.
Whoa-this market is hot, hot, HOT! You've had five offers come in since you listed your seller client's home yesterday. Of the options listed, which is the best strategy? A. Accept a middle-of-the-road offer, but on the condition that no home inspection repairs will be performed. B. Have all buyers submit their "highest and best" offer, then help the seller decide which offer is most appealing. C. Leave it on the market for another three days to allow time for even more offers to come in. D. Reject the offers and put the home back on the market for the amount of the highest offer.
B. Have all buyers submit their "highest and best" offer, then help the seller decide which offer is most appealing. If you've got multiple offers, in most markets, it's best to work with the strongest offer that's acceptable to the seller. Another option in a very hot market is to ask all buyers to submit their highest and best offer.
Why might you opt out of working with a buyer unless you're working under an agency agreement? A. An agency agreement is required by law. B. Having an agency agreement allows you to represent the buyer's interests. C. It commits the buyer to a two-year contract. D. It would be dual agency.
B. Having an agency agreement allows you to represent the buyer's interests. Buyer agency agreements helps to ensure buyer loyalty for the term of the agreement and allow the agent to represent the buyer's interests.
What exemption to the "every two years" rule concerning the capital gains exclusion allows a seller to claim a partial exclusion when the seller is forced to sell early? A. Capital gains exclusion B. Involuntary conversion C. Necessary exclusion D. Partial conversion
B. Involuntary conversion The exemption is known as an involuntary conversion. An example would be a divorcing couple who purchased a home only a year ago and were forced to sell their home in their divorce settlement.
Physical possibility, financial feasibility, maximum profitability, and ______ are all considerations when determining highest and best use. A. Ability to be leveraged B. Legal permissibility C. Liquidity D. Rebuilding cost
B. Legal permissibility To determine highest and best use, appraisers or investors will consider legal permissibility, physical possibility, financial feasibility, and maximum profitability.
Because real estate offers __________, investors can sometimes make a 100% return on their investment. A. Appreciation B. Leveraging opportunities C. Personal control D. Tax flexibility
B. Leveraging opportunities By leveraging other people's cash, savvy real estate investors may be able to make money without actually using any of their own capital
Your buyer client, Percy, wants to start searching for his dream house and knows he needs to obtain financing to accomplish that. What's his first step? A. Complete a loan application. B. Obtain a pre-qualification letter. C. Sign a purchase agreement. D. Write an offer.
B. Obtain a pre-qualification letter Before Percy even begins looking for properties, he should get pre-qualified. He may also consider getting pre-approved.
Which of these actions would cause a property to become an REO? A. A rental property was deemed not up to code, and was sold to a developer. B. The bank doesn't get an acceptable bid at a foreclosure sale and takes ownership of the property. C. The lender stops waiting for payments and forces the sale of the property. D. Under duress, the borrower short sells the property
B. The bank doesn't get an acceptable bid at a foreclosure sale and takes ownership of the property. An REO, or real estate-owned property, is a property that a bank or lender owns because it failed to receive an acceptable bid at a foreclosure sale.
What needs to happen for a code of ethics to be effective? A. Employees should be required to memorize the code. B. The code needs to enforced through consequences C. The code needs to have monetary reinforcement D. The code should be posted on the firm's website
B. The code needs to be enforced through consequences For a code of ethics to function, it needs to be enforced through consequences for violating standards.
Tess has $385 in monthly non-housing debt obligations, and her anticipated mortgage payment is $1,103. Her gross income is $7,598, and her net income is $5,815. What's her total DTI? A. 14.51% B. 18.96% C. 19.58% D. 25.58%
C. 19.58% Total DTI includes housing and other monthly debt obligations and is calculated using gross income.
What percentage of loss would the seller have if he paid $18,000 for a vacant lot, built a home on the lot that cost $145,000, and then sold the property for $153,000? Round your answer to the nearest percent. A. 0.06% B. 12% C. 6% D. 95%
C. 6% Add the cost of the lot and the cost of the house together to get the total cost ($163,000). Next, subtract the sales price from the total cost to get the amount of loss ($10,000) he took. Finally, divide the total cost by the loss amount ($10,000 ÷ $163,000).
Your brokerage consistently seeks out young real estate licensees without families, since they have extremely flexible hours and don't mind working most evenings. This is _________. A. A good way to make sure your brokerage doesn't discriminate against working families with children by providing constant access to agents B. A standard way to ensure your brokerage continues to grow C. A violation of the NAR Code of Ethics for selecting employees based on their protected class D. Possibly a violation of state laws on equal employment, but not a violation of the NAR Code of Ethics
C. A violation of the NAR Code of Ethics for selecting employees based on their protected class Brokerages cannot seek out employees or contractors based on their protected class.
Which of the following is the purpose of most calculations that real estate professionals make for their clients? A. To act as clients' financial advisor B. To advise the client about the tax implications of a purchase C. To provide information the client can use to help them make strategic decisions D. To qualify the client for a mortgage
C. C. To provide information the client can use to help them make strategic decisions As a real estate professional, you aren't expected-or permitted-to advise your client on financial or tax matters, but your ability to make calculations that provide your clients with relevant information can help them make strategic decisions.
For which of these properties would gross rent multiplier be calculated? A. Apartment building with 50 units B. Condominium building with 20 units C. Duplex used as a rental property D. Single-family, owner-occupied home
C. Duplex used as a rental property Remember, rent has four letters. Gross rent multiplier is used for income-producing properties with four or fewer units. Properties with five or more units use gross income multiplier.
Which one of the following tasks must licensees perform for seller clients? A. Dictate the listing price of the property. B. Drive the sellers around to show them other properties that are for sale in their neighborhood. C. Ensure the collection of the earnest money deposit from the buyer. D. Show the sellers how they can market their property.
C. Ensure the collection of the earnest money deposit from the buyer. A licensee must ensure the collection of the earnest money deposit from the buyer. Earnest money may be used as liquidated damages by the seller in the event of buyer default, so it's in the seller's best interest to ensure it's been deposited.
What is the calculation used to determine the estimated annual interest amount a borrow will pay on a loan? A. Appraised value x interest rate B. Interest rate x months in loan term C. Loan balance x interest rate D. Sales price x interest rate
C. Loan balance x interest rate To calculate the estimated annual interest on a loan, multiply the loan balance by the interest rate.
What's the formula used to calculate monthly simple interest on a loan? A. Amortization factor x interest rate ÷ number of payments annually B. Loan balance x interest rate ÷ number of payments C. Loan balance x interest rate ÷ number of payments annually D. Sales price x interest rate ÷ number of payments annually
C. Loan balance x interest rate ÷ number of payments annually Calculate monthly simple interest by multiplying the principal by the interest rate and dividing by 12.
Brokerage fees, commissions, and service income are all examples of ______. A. Commingled funds B. Converted funds C. Non-trust funds D. Trust funds
C. Non-trust funds Non-trust funds include commissions, brokerage fees, service income, business capital, payments on notes held by the broker, and rent payments or security deposits for broker-owned properties.
Which of the following items does the IRS consider personal tangible property? A. A building B. A swimming pool C. Office equipment D. Paved parking areas
C. Office equipment With the exception of office equipment, which the IRS considers personal tangible property, the other items are all examples of non-qualifying property.
Charlize is monitoring market indicators in a particular area for her client who wants to buy an oceanfront home. Which market indicator will tell her how much prices have fluctuated in the area over the past two years? A. Inventory rates B. New building permits C. Price levels D. Sales volume
C. Price levels Price levels provide this information. It's important, when using price levels as a market indicator, to look at price levels within a given market, and not the market as a whole.
A neighborhood that has been disintegrating for some time is undergoing a rejuvenation, with several properties on one block being heavily renovated or entirely rebuilt. As a result, even the properties that are still old and shabby increase somewhat in value. This is the principle of ________. A. Anticipation B. Conformity C. Progression D. Regression
C. Progression The principle of progression says that that a lower-value property gets a bump in value by being near a higher-value property.
When a property's value is dropping because the neighboring property's yard is filled with trash, it's an example of ______. A. Depreciation B. Progression C. Regression D. Substitution
C. Regression When the value of a higher-quality property is reduced by an adjacent lower-quality property, this is called regression.
You blogged about a new development site across town, and someone posted this public comment: "Don't buy in this development! They'll cheat you out of everything and you'll never see your money again!" As the blog's owner, you ________. A. Can choose to delete or keep the comment, depending on whether or not you want to encourage people to buy properties in the development B. Hold no responsibility for what someone else posts online C. Should delete the comment D. Should post a disclaimer immediately beneath the comment that says you do not support or agree with the comment
C. Should delete the comment You must remove false or misleading information if someone else posts it on your site. An inflammatory comment like this may have some element of truth, but at the very least it's exaggerated, and therefore misleading.
In a hot market, when all other sellers are listing at or above market rate, what pricing strategy will likely induce a bidding war? A. Pricing far above market value B. Pricing in line with comparable properties C. Pricing just above market value D. Pricing just below market value
D. Pricing just below market value In a hot market, when all other sellers are listing at or above market rate, pricing below market may incite bidding wars, fetching far more than pricing it at market rate. Bidding wars can occur in a hot market no matter the pricing strategy, however.
Why should you have a conversation about financing for the property with the seller before you sign the listing agreement? A. Financing information must be documented on the listing agreement B. It's important to understand the financing that sellers will have available when they purchase their next property C. Some sellers can't accept, or won't qualify to accept, certain types of financing-such as FHA or VA loans-so you should know that up front. D. You should only worry about financing if you're a dual agent also representing a buyer.
C. Some sellers can't accept, or won't qualify to accept, certain types of financing-such as FHA or VA loans-so you should know that up front. If your seller can only accept certain types of financing, you should know that so you can be clear about those restrictions when marketing the property.
Which of the following statements best describes the 200% rule as it relates to tax-deferred exchanges? A. The capital gains realized from the property sale can't be more than 200% of the original purchase price. B. The capital gains realized from the property sale can't be more than 200% of the sale price. C. The combined fair market value of the property (or properties) selected can't be more than 200% of the relinquished property. D. The fair market value of the relinquished property must be 200% more than the property (or properties) selected.
C. The combined fair market value of the property (or properties) selected can't be more than 200% of the relinquished property. The combined fair market value of the property (or properties) selected can't be more than 200% of the relinquished property.
Who completes the property condition disclosure statement, and who is liable for the information provided? A. The seller and the seller's broker complete it, and both are liable for its contents. B. The seller completes it, and, the seller and the seller's broker are liable for its contents. C. The seller completes it, and the seller is liable for the contents. D. The seller's broker completes it, and the seller is liable for its contents.
C. The seller completes it, and the seller is liable for the contents. The property condition disclosure statement must be completed by the seller, and the brokers aren't liable for the information provided.
What's the purpose of the Non-Reliance clause in a South Carolina sales contract? A. For brokers to disclaim responsibility B. For sellers to disclaim responsibility C. To affirm that only terms in the contract are being relied upon D. To affirm that sellers' property condition disclosures don't take the place of a home inspection
C. To affirm that only terms in the contract are being relied upon The Non-Reliance clause of the sales contract is similar to the Entire and Binding Agreement clause, stating that the parties aren't relaying on any other information or agreement other than what's in the sales contract.
When using the farming approach to find listings, what factors are important when identifying an area? A. Average home price, population density, turnover B. Diversity, affinity, amenities C. Turnover, affinity, diversity D. Turnover, density, affordability
C. Turnover, affinity, diversity With the farming approach, three factors to consider when choosing an area in which to concentrate are turnover, affinity, and diversity.
A property has 10 units and is 90% occupied. Rent is $500 per month. Total vacancy and collection loss equals 10%. What's the potential gross income? A. $4,500 B. $5,000 C. $54,000 D. $60,000
D. $60,000 Potential gross income is the income the property would realize if it were fully rented. 10 units x $500 = $5,000 per month x 12 months = $60,000.
A parcel of land measures one half mile by 3,000 feet. If price per acre is $4,200, what's the list price for this parcel? A. $1,527,273 B. $752,066 C. $756,000 D. $763,560
D. $763,560 Area = length x width. One mile = 5,280 feet. The area of this parcel is 7,920,000 s.f. ([5,280 ÷ 2] x 3,000). One acre = 43,560 s.f. The parcel is 181.8 acres (7,920,000 ÷ 43,560). So, the list price is $763,560 ($4,200 x 181.8).
The Smithwicks, your buyer clients, obtained a 90% loan on their new $400,000 home. At closing, they paid $6,150 for points at closing. How many points did they pay? A. .017 B. .02 C. 1.7 D. 1.71
D. 1.71 A point is 1% of the loan amount. The Smithwicks' loan is $360,000 ($400,000 x .90), and they paid $6,150 for points at closing. Divide the cost in points by the loan amount to get the number of points they paid: ($6,150 ÷ 360,000 = 0.0170833, or 1.71).
Which of the following is an example of a cloud on a title? A. An unbroken chain of ownership B. A paid-off mortgage C. A property with a city easement that prohibits the owners from installing a pool D. A third party has staked a claim on a property
D. A third party has staked a claim on a property A title cloud is anything that could call into question or invalidate ownership of a property, such as a third party claiming to own a property.
Stan's local board of REALTORS® requires that disputes go to mediation first rather than arbitration. What does this mean for Stan? A. He can appeal to his national board B. He can appeal to his state board C. He can still elect to arbitrate instead D. He's obligated to abide by the requirement
D. He's obligated to abide by the requirement If your local board of REALTORS® requires that disputes go to mediation first rather than arbitration, you must abide by this requirement.
Honey is the seller in an installment sale of a residential property. She is paying her capital gains tax through installment sale deferment, and her installment obligations at the end of the tax year will be less than $5 million. Given her situation, which of the following statements is true? A. Honey is a dealer B. Honey may be subject to tax gains at the ordinary income rate at the time of sale C. Honey must pay the capital gains tax in full at sales time D. Honey will only pay taxes proportionate to the gain collected each year.
D. Honey will only pay taxes proportionate to the gain collected each year. Through installment sale deferment, Honey will pay taxes proportionate to the gain collected each year. Her installment obligations will be less than $5 million, so she won't be subject to taxes on gains at the ordinary income rate at the time of sale.
What's so important about the effective date of a contract? A. It determines the closing date B. It determines the inspection period C. It determines when earnest money is no longer refundable to the buyer D. It's used to determine key deadlines
D. It's used to determine key deadlines The effective date on which key contract deadlines are based occurs when both parties have signed off on all terms.
What's interest? A. Amount of payment that will be applied toward the loan balance B. Amount to be sent for payment C. Loan balance after the payment is applied D. Money paid for the use of money
D. Money paid for the use of money Interest is money paid for the use of money.
Patsy's home had been on the market for five weeks, and two brokers had buyers who were ready to make offers. If Patsy accepted one of those offers, the corresponding broker would be the only one to earn a commission. What type of listing does this describe? A. Exclusive agency B. Exclusive right to sell C. Net listing D. Open listing
D. Open listing With an open listing, only the broker who brings the buyer earns a commission.
In the South Carolina sales contract, the ________ section is where buyers can request repairs to specific systems in the property, and the _______ section gives the buyers the right to inspect the property. A. Inspection, Due Diligence B. Inspection, Repair/Reinspection C. Maintenance, Due Diligence D. Repair Procedure, Inspection/Reinspection
D. Repair Procedure, Inspection/Reinspection In the South Carolina sales contract, the Repair Procedure section is where buyers can request repairs to specific systems in the property, and the Inspection/Reinspection section gives the buyers the right to inspect the property themselves and/or with inspectors.
Which investment cycle is an investor in when there is depreciated basis and tax-deferral through 1031 exchanges? A.Acquisition B. Depreciation C. Ownership D. Reversion
D. Reversion This is the reversion investment cycle.
As a South Carolina real estate licensee, how would you explain who's responsible for paying the transaction costs associated with the property purchase to your buyer client? A. It's the buyer's responsibility. B. It's the seller's responsibility. C. The buyer and the seller split the costs. D. The party who pays the transaction costs is negotiable.
D. The party who pays the transaction costs is negotiable. Under the terms of the South Carolina contract, certain provisions, such as who pays the transaction costs and whether or not the seller agrees to pay the buyer's transaction costs, are negotiable.
When performing a market analysis, all adjustments are made to ______. A. The appraised value of the comparable properties B. The appraised value of the subject property C. The list price of the subject property D. The sales price of the comparable properties
D. The sales price of the comparable properties Adjustments to comparable properties' sales prices account for differences between the comparables and the subject property. Value is added when the feature is missing, and deducted when it's a feature the subject property lacks.
Without a buyer agency agreement in place, which party does the agent who's assisting the buyer represent? A. No one B. The agent C. The buyer D. The seller
D. The seller If there is no agency agreement in place, the agent who's assisting the buyer represents the seller.
A South Carolina home under contract received serious damage prior to closing. If the parties decide not to terminate, how will repairs be paid for? A. The buyer and seller will split the costs of the repairs. B. The buyer's title insurance will cover the cost of the repairs. C. The sales price will be reduced by the cost of repairs, and the buyer will make the repairs. D. The seller or the seller's insurance company will pay for the repairs.
D. The seller or the seller's insurance company will pay for the repairs. If the parties choose not to terminate a contract after a fire or other property damage has occurred, the contract can complete, but the seller is responsible for paying for or having the seller's insurance company pay to repair any damages.
The closing date is the date that _________. A. The buyer takes possession B. The parties agree to all terms of the contract. C. The seller moves out D. The seller transfers the property to the buyer.
D. The seller transfer the property to the buyer. The closing date is the date that the seller transfers the property to the buyer. It's often, but not always, the same day as the buyer possession.
Which of the following statements best describes the 95% rule as it relates to tax-deferred exchanges? A. The combined fair market value of the property (or properties) selected as exchanges can't be more than 95% of the relinquished property. B. The fair market value of the relinquished property must be 95% more than the property (or properties) selected as exchanges. C. The total value of the property being sold must be at least 95% of the value of the profit to be made on the property (or properties) selected as exchanges. D. The total value of the property (or properties) selected as exchanges must be at least 95% of the value of the property being sold
D. The total value of the property (or properties) selected as exchanges must be at least 95% of the value of the property being sold. The 95% rule says that an investor can identify multiple properties with no regard to their value if the exchange they're moving into has a total value of at least 95% of the value of the property they're selling.
Why might some agents work for buyers without ever having met them? A. It's the most effective use of their time. B. They believe they'll be able to get the buyer to commit to an agency agreement later. C. They don't particularly like people. D. They're afraid to turn down any business
D. They're afraid to turn down any business. Some agents are willing to work for buyers without an agency agreement and without ensuring buyer loyalty. This can be a waste of time.
The preamble to the NAR Code of Ethics and Standards of Practice notes that it's in both REALTORS®' and consumers' best interest when REALTORS® _____________. A. Avoid confrontation B. Compete aggressively C. Don't cooperate D. Try to eliminate unfair business practices
D. Try to eliminate unfair business practices The preamble advises that members stay informed, share their knowledge, and try to eliminate unfair and damaging business practices.
In a South Carolina sales contract, how long after the repair procedure inspection deadline does the buyer have to notify the seller of defects? A. Five days B. One day C. Three days D. Two days
D. Two days The buyer must deliver notice to the seller in writing of specific defects or deficiencies found no later than two business days after the repair procedure inspection completion date.
Lenders usually require ___________ in reserve funds for homeowner's insurance, taxes, and mortgage insurance. A. One month B. Six months C. Three months D. Two months
D. Two months Lenders usually require that buyers bring to closing reserves equal to two months' costs for insurance and taxes.
If a seller is concerned about an appraisal, what can a buyer do to address this need when structuring the offer? A. Allow an escalation clause B. Offer a quick close C. Offer full price or more than full price D. Waive the appraisal
D. Waive the appraisal A cash buyer may be able to waive the appraisal when making an offer, but if the buyer is financing, the lender will require an appraisal.
Your real estate investor client, Annalise, has an investment plan that includes purchasing several acres of property downtown, but the deal suddenly falls apart. Because she is an experienced, smart investor, Annalise knows the smart thing to do next is ______. A. Follow her gut instincts and chase the property B. Stick to her original investment plan, whatever it takes. C. Use any means necessary to find out the amount she needs to offer to make the deal happen D. Walk away from the property, and move onto another one.
D. Walk away from the property, and move onto another one. Even the investor who has a focus and a strategy can get caught up in winning a particular property. Smart investors, however, know that they can't let emotions get in the way of making the right investments.
Which of the following is a true statement about price ranges in a given market? A. Price usually moves with supply and opposite of demand. B. The list price of similar properties is a good indicator of market value. C. The price differential between list price and sales price can't be used as a market indicator. D. When studying price levels, you should look at how they rise or fall within a given price range, and not merely average sales price.
D. When studying price levels, you should look at how they rise or fall within a given price range, and not merely average sales price. Some price range categories fare better than others in certain markets.
Denise is the listing agent on a property that's next to a lake. When advertising the property for sale, she describes it as "waterfront." Is this okay? A. No, she didn't mention how much frontage the property has on the lake. B. No, the word "waterfront" is misleading. C. Yes, as long as she includes a photo. D. Yes, the house sits next to the lake.
D. Yes, the house sits next to the lake. Using "waterfront" to describe this property is acceptable. Now, if the only water in sight was a small man-made pond the sellers put in ... that'd be a different story.
June is a South Carolina homebuyer. Can she waive the right to receive the seller's property condition disclosure report? A. No, under no circumstances B. Yes, if the buyer won't be occupying the property C. Yes, if the property is valued at less than $250,000 D. Yes, under all circumstances
D. Yes, under all circumstances A buyer may waive this right, whether occupying the property or not, and no matter its value.
May a South Carolina buyer waive the right to receive the seller's property condition disclosure report? A. No, under no circumstances B. Yes, if the buyer won't be occupying the property. C. Yes, if the property is valued at less than $250,000 D. Yes, under all circumstances
D. Yes, under all circumstances A buyer may waiver this right, whether occupying the property or not, and no matter its value.
If your cousin Jack is contemplating his first home purchase and wants to use you as his agent, should you pre-qualify Jack before working with him? A. No, because you can't work with relatives. B. No, it's not necessary to pre-qualify relatives. C. Yes, because he's a relative, you can ask financial questions and pre-qualify him yourself. D. Yes, you should determine whether Jack is ready to buy.
D. Yes, you should determine whether Jack is ready to buy. Relative or not, don't waste your time on someone who isn't ready to buy.
What's your responsibility as a listing agent relative to the transaction as a whole? A. Your responsibility starts and ends with getting a buyer to sign a purchase agreement. B. Your role can be as broad or as narrow as you'd like. C. You should delegate the record keeping and documentation. D. You should manage the process from start to finish.
D. You should manage the process from start to finish. As a listing agent, your role is to manage the entire process.