Real Estate test practice

April's mother is getting older, lives alone, and needs care. April's house is too small for both of them. She has a solid amount of equity in the home but isn't in a position to move. Instead, she decides to take out a loan to build an 800-square-foot addition onto the existing home for her mom. What type of loan might April likely consider to finance the addition?

A home equity loan A home equity loan is based on the amount of equity the homeowners have in their home. These funds are received in one lump sum and are frequently used for large expenses, such as home renovations.

Which of the following options might exclude an applicant for eligibility for an Arizona real estate salesperson license?

A license revocation within the last year

In Arizona, what is a public report?

A report that provides information about the water supply, soil, and other information that subdivision occupants need.

The Arizona law governing timeshares is the ___

Arizona Timeshare Owners' Association and Management Act

Prior to signing the closing documents, what should the parties have already done?

Assured themselves that the conditions and contingencies of the purchase agreement have been met.

If the buyer owed taxes for 95 days, the seller owed for 270 days, and annual taxes were $4,000, what would the buyer's prorated tax expense be?

$1,041.20

Simi is a buyer's agent, and she'll receive a split of the commission paid from the sale of Tanner's listing. The property sold for $425,000. The total commission paid from the sale is 6% split evenly between the buyer's and seller's brokerages. Simi has an agreement to give her broker 20% of the commission she receives. How much will Simi be paid from this sale?

$10,200 The total commission paid is $25,500 ($425,000 × .06). Half of this is paid to Simi's brokerage ($12,750). Of that, Simi gets 80% ($10,200).

A homeowner must hire a licensed contractor to perform construction projects if a permit is required or if the cost of the project exceeds _

$1000

What is the maximum civil penalty that can be imposed per license law violation in Arizona?

$1000

The gross income multiplier for an area is 12x. If the estimated annual rent is $10,000, what's the property's estimated value?

$120,000

We know that the original loan was for $17,000 with an interest rate of 9.5%. How much interest would be charged if the loan is paid off in 11 months?

$1480

A buyer's broker earned a $6,375 commission on a sale where the cooperating broker's split was 50%. If the commission rate were 6.5%, what was the sales price of the house?

$196,154 Sales price = commission ÷ rate First you need to double the agent's commission, since the cooperating broker received half of the total commission. That makes your calculation $12,750 ÷ 0.065 = $196,154.

Kelly bought Mason's home for $255,500. Mason had prepaid the annual property taxes of $2,650. If closing costs are calculated on a 360-day year, and the transaction closes on March 5, how much will Kelly owe Mason for property taxes? Carry numbers out four decimal places, but round to two decimal places for your final answer. The proration is calculated up to the day of closing, meaning that the buyer owns the day of closing.

$2,347.32 Divide $2,650 by 360 to get property tax costs per day: $7.3611. Multiply this by the number of days of ownership (296 days) = $2,178.88.

Your clients sold their property for $500,000. Your commission rate is 5%. What's your commission (before splits or sharing with the cooperating agent)?

$25,000

An 800-square-foot rectangular building sells for $75,000. What's the cost per square foot?

$93.75

What is 800 divided by 30%?

2,666.66

Which range of credit scores represents subprime borrowers?

580-669

Which one of these situations represents the illegal practice of redlining?

Based on the neighborhood's demographics, Hunter, a mortgage broker, refused to underwrite mortgage applications from applicants who want to buy in specific neighborhoods.

Which of these best describes boot and it's tax treatment?

Boot refers to any cash received by an investor from the sale proceeds in a 1031 exchange. Boot is taxable

Under which of the following types of leases does a tenant rent property with an unfinished interior and agree to complete the construction?

Building shell lease A building shell lease is a type of commercial lease in which a tenant rents a property that has an unfinished interior. The tenant is responsible for finishing the building's construction and making any needed improvements to it.

If a seller asks a buyer to waive the inspection contingency, how could the transaction process transpire and still protect the buyer?

Buyer has inspection, buyer makes offer, seller accepts offer If the seller won't accept an offer with an inspection contingency, a buyer could have a professional inspection done before submitting the offer and waive the inspection contingency if the buyer still wanted to make an offer.

Which of the following is an example of an escalator offer?

Buyer offers $650,000 with clause that buyer will beat all competing offers by $3,000 up to $675,000. An escalator offer will contain a clause similar to this: "Buyer to beat all competing offers by $XX up to a price of $XXX,XXX. Seller to provide copies of competing offer to buyer on acceptance."

Which law source is actually a legal interpretation of other sources of law?

Case law The clue here is legal interpretation—on a case-by-case basis. Case law is actually a legal interpretation of other sources of law.

Which party is responsible for explaining each document to the parties as it's presented for signatures during the closing?

Closing agent

The WQARF uses notices, plans, and an advisory board for each cleanup site to encourage ______.

Community involvement in cleanups The ADEQ highly encourages community involvement for cleanup sites. To promote more community participation, the WQARF uses notices, plans, and a community advisory board for each cleanup site.

Shira bought a condominium in a planned unit development. The development has a small playground, tennis and basketball courts, and a putting green. Who owns these recreational facilities?

Condo Owners

Which source of law regulates governmental action?

Constitutional

0 ______ allow Arizona licensees to pay commissions to and receive commissions from out-of-state brokers.

Cooperation agreements A licensed broker in this state may pay compensation to and receive compensation from an out-of-state broker if the licensed broker and the out-of-state broker enter into a written cooperation agreement.

Javier represents Marcus, who's selling his rental property to Ben. Ben is represented by another real estate licensee, Francis. What is Ben's relationship to Javier?

Customer Ben is both a principal (as a party to the transaction) and Javier's customer. Ben isn't Javier's client.

Which of these entities is responsible for enforcing real estate license law in Arizona?

Department of Real Estate In Arizona, the Department of Real Estate enforces real estate license law and regulations governing licensees' activities.

In order to maintain their licenses, employing brokers must appoint and maintain a(n) ___

Designated Broker

A buyer client is suing Jaime for an inadvertent mistake she made in a real estate transaction. What insurance policy covers this type of situation?

Errors and omissions insurance

Which special lease clause stipulates increased rental rates at specific times during the lease term, or requires tenants to pay a proportionate amount of the overall increased utility expense, in addition to their base rent?

Escalation

The state's claim to property when a property owner dies, leaving no will, heirs or creditors, is the power of

Escheat

Which of the following describes an estate for an unknown period of time, with either party permitted to terminate the lease by giving notice to the other?

Estate at will

Terry has a costume shop in a commercial building. He has a one-year lease that automatically renews for another year unless either Terry or the landlord terminates. What type of leasehold estate is this?

Estate from period-to-period

What is another word for contract rent?

Face rent Contract rent, also known as face rent, is the amount of rent named in the lease agreement.

The ______ permits anyone who's not a licensed contractor in Arizona to perform minor repairs that cost less than $1,000 in total.

Handyman exemption

You're a developer. In which of the following situations do you NOT have to receive an Assured Water Supply certificate?

If you develop your project in an area that's outside of an AMA Developers who are building in areas outside of AMAs don't need to receive an Assured Water Supply certificate (many of these areas do require an Adequate Water Supply certificate, though).

Which of the following is the cost of replacing a building in the case of total loss?

Insured value

What must be done for a fee to be considered acceptable under RESPA?

It must be Disclosed to client

Carlton listed his property with an agreement end date of August 31. The property went under contract on May 12 and closed on July 2. When did Carlton's listing agreement officially terminate?

July 2nd

Property manager Jack just took on a new client. In order to build a good relationship, Jack should _

Keep the property owner informed

To whom/which entity should a licensee who's been threatened with violence after refusing to violate fair housing law report the threat?

Law Enforcement

Payment history, age of accounts, credit usage rate, and inquiries are factors considered in calculating a credit score. Which of the following is also considered?

Length of credit history

Which of the following is true about Arizona real estate licenses?

Licensees may only hold one license at any given time.

Life insurance companies are more concerned with long-term stability of investments than they are ___

Liquidity

Residential property managers spend most of their time

Managing tenants

Liam is a contractor who discloses his right to place a lien on the properties where he works in the event of non-payment. What type of lien is this?

Mechanic A mechanic's lien is a specific lien that can be placed against the property that received the benefit of workmanship. It protects contractors in the event the homeowner does not pay them for their work.

Property manager Duke failed to keep track of security deposits and rent checks. The property owner decided to sue him for

Mishandling Funds

One task a commercial property manager has that a residential property doesn't is ___

Negotiating leases

In Arizona, which of the following is considered a tenant's breach of a lease agreement?

Number of dogs

Kendra made an offer on Sam's property. Sam rejected Kendra's offer, but made a counter-offer. Kendra is now considering the counter. What role does Kendra currently have in this scenario?

Offeree

When you close on a condo, a title search, deed transfer, and recordation are _

Part of the process

Which of the following is an example of a fixture that is real property?

Photos and wall hangings Shelves attached with brackets would be considered real property, since they're permanently affixed to the wall.

Which one of the following is income that comes from investments, which includes capital gains, interest, and dividends?

Portfolio

Sandra and Dwight are neighbors who share a common driveway, but the driveway is on Dwight's property. What kind of ownership rights does Dwight have of the driveway?

Possessory

Which type of survey system is also known as the public land survey system (PLSS)?

Rectangular survey

Whether borrowers use a formal (shorter-term or bi-weekly mortgage) or an informal (making periodic additional principal payments) payment plan, they can significantly reduce the total amount paid back to the lender by taking which of the following actions?

Reducing the principal balance on the loan as quickly as possible Regardless of the method used, any reduction in principal beyond what's required in the amortization schedule will reduce the loan term and the total amount repaid to the lender.

Deed restrictions imposed by a developer who wants to maintain specific standards in a subdivision under development are often called _

Restrictive covenants

The legal description of the project, easements that run with the land, and street and traffic patterns are all under consideration when a local planning board __

Reviews a developer's project plat These factors are under consideration when a local planning board reviews a developer's project plat.

Trinity has been named executor of her uncle's will. What does this mean?

She's responsible for carrying out the will's provisions.

Arizona licensees owe both common law fiduciary and _____ duties to their clients.

Statutory

A building permit is required in Arizona when the ______ and/or electrical, gas, plumbing, or mechanical systems are affected.

Structure

If a landlord wants to notify a tenant that the leasehold interest in the property is subordinate to a mortgage, what clause would be included in the lease?

Subordination clause

After a few meetings, the Stinsons sign a listing agreement with broker Vera so she can sell their house. The house has already generated interest from a potential buyer named Sergei, who has spoken with Vera about the house's price and square footage. Which of the following is true about this situation?

The Stinsons and Vera have brokerage relationship agreement.

Alice listed a three-bedroom home for her client, but before she finds a buyer, the home burns to the ground. What happens to the agency agreement that Alice has with her client?

The agency agreement is terminated if the property is destroyed.

When would a lender require a mortgage insurance premium?

The borrower has an FHA mortgage. FHA loans require this insurance in order to cover the losses the FHA incurs if it has to pay the lender due to buyer default.

Select the choice that best translates this clause into plain English. "Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing."

The borrower is allowed to prepay the loan without penalty. This is an important clause for the borrower to look for. Most conventional residential loans don't allow the lender to charge a prepayment penalty.

How is a loan assumption documented?

The buyer and seller both sign an assumption agreement. If the lender agrees to let the buyer assume the loan, an assumption agreement between buyer and seller documents the change.

Fontaine and Charles are concerned about some items in the inspection report they just received. They elect to request that the seller repair the electrical panel and the HVAC system. Which of these statements is true?

The contract requires that agreed-upon corrections be made within the time noted in the contract. The inspection section of the contract provides several options. Buyers must provide inspection objections before the inspection period ends. If the seller agrees to make repairs, the contract stipulates the timing within which they must be made.

When a developer accepts earnest money or a down payment for the sale or lease of property, and puts it in an escrow account, he must inform the purchaser or lessor of the name of the title company and what else?

The name of the broker's trust account Both the name of the title company and the name of the broker's trust account must appear on the purchase contract.

Which of the following bits of data is crucial in a proration?

The number of days

To calculate anticipated annual rent for a property, a property manager should take into account two primary factors, which are

The per-unit rate and the occupancy/vacancy situation Rental calculations should take into account the per-unit rate (along with any anticipated increases) and the occupancy situation from the previous year to obtain anticipated annual rental income.

Ad valorem taxes are based on what?

The property's assessed value

While there are a lot of disclosures in most purchase contracts, there are two very important ones that the Arizona Real Estate Commission wants purchasers of subdivided lots to know about. One is that they have a right to a copy of the public report. What is the other?

The purchaser takes on all risk if her earnest money or down payment will not be held in escrow.

Arizona law prohibits any city in Arizona from restricting the use of vacation rentals due to which of the following?

The rental's classification An Arizona city or town must not restrict the use of vacation rentals or short-term rentals based on their classification, occupancy, or use.

If you've shown Suzie three properties, and she decides to put an offer in on one of them but hasn't signed an agency agreement with you, who do you represent?

The seller

Which of the following statements about limited liability companies (LLCs) and limited liability partnerships (LLPs) is true?

They are taxed as partnerships.

Landlord William has sold an apartment complex to Christina. What happens to those tenants' security deposits?

They go to Christina, who is now responsible for them.

Both the buyer and the seller have to sign the purchase and sale agreement in order to demonstrate that __

They understand the terms The signatures of both parties demonstrate that they understand the terms of the agreement.

You're talking to a co-worker at lunch, and she mentions she has a box of baby clothes her kids have outgrown that she needs to get rid of. You have a baby on the way, so you offer to pay her $25, and she agrees to bring the box to work the next day and give it to you. Which of the following is true in this situation?

This is an express contract because you defined in words the specific terms of the agreement and consideration to be exchanged.

What's the purpose of a chain of title?

To establish history of past ownership A chain of title shows ownership records from as far back as the title search is conducted and records can be obtained.

What's the role of the primary mortgage market?

To work with borrowers in originating and funding mortgage loans The primary mortgage market is the part of the mortgage market that borrowers see. In this market, borrowers and lenders work together to process mortgage loans from application through funding and eventual payoff.

Tony is ready to make an offer on Bryce's house. Which of these statements about the Arizona offer and purchase contract is true?

Tony and Bryce can agree to use electronic documents and signatures for all parts of the sales transaction. In Arizona, parties can agree from the beginning to use electronic records and signatures, which are as legally enforceable as signed paper records and signatures.

A jewelry store is relocating from a mall to a free-standing building and is pulling all of its display cases out of the storefront. These cases belong to the jewelry store because they are ___

Trade Fixtures

How many parties does a mortgage involve?

Two: borrower and lender A mortgage involves two parties: the borrower and the lender. A trustee is only used with a deed of trust.

Littoral rights allow property owners to take which of these actions?

Use the water from the lake bordering the property.

Which of the following scenarios accurately represents your environmental disclosure responsibility as a real estate licensee?

You must disclose all known environmental hazards for both residential and commercial properties.

When using the MARIA acronym to test whether an item is a fixture, what do the two As stand for?

Adaptability of item to land's use and agreement of the parties

The major categories of water users in Arizona are ______, industrial, municipal, special users, and private water companies.

Agricultural

As an Arizona licensee, you can legally enter into an additional employment agreement with a represented party if that party signs the state-required acknowledgement and gets a liability release from the first licensee. What else is true about this situation?

Although it's legal, a civil suit is still possible. Although Arizona law doesn't forbid procuring additional employment agreements if these two requirements are met, the other licensee could still file suit and a civil suit and NAR may find the second licensee guilty of an ethics violation.

A CMA or a BPO is an example of _

An informal estimate of market value

What's the definition of an encroachment?

An intrusion onto another person's property

Under Amber's lease, the base rent is kept the same for the duration of the lease. What type of lease is this?

Fixed

Which type of distressed property transaction requires a cash purchase?

Foreclosure auction

The Housing and Community Development Act of 1974 added which protected class to federal fair housing law?

Gender

Which one of the following actions would result in the legal termination of an agency agreement?

The term specified in the agency agreement expired.

If individuals want to use their property in a way that's not permitted by a zoning ordinance, they must submit a request for a variance to which one of the following groups?

The zoning board of appeals

You're measuring the square footage of a single-family home you've just built. What national requirements apply to your measurements?

There are no national requirements.