SC Advanced Real Estate Principles

In South Carolina, which of the following parties must coordinate a residential real estate purchase and closing?

An attorney

Which of the following statements about enforcing a firm's code of ethics is true?

There should be consequences for violating the firm's code of ethics, and these consequences should be communicated and documented.

A property is generating $100,000 in income and has expenses of $25,000. The investor pays $3,000 toward mortgage principal each year and $32,000 toward interest, plus another $4,000 in income taxes. What is the before-tax cash flow?

$40,000

A buyer is purchasing a property for $500,000. He has a down payment of $50,000 and is financing the rest. What's the amount of the loan origination fee if the lender charges one-and-a-half points?

$6,750

A 30-unit income-producing property has a sales price of $6 million. Annual gross income is estimated at $500,000. What's the gross income multiplier?

12x

Samuel wants to do a 1031 exchange. He sold his investment property and has identified the property he'd like to buy next. Within how many days must he close on this property in order for it to qualify as part of the exchange?

180

What is 800 divided by 30%?

2,666.66

What is 5/8 ÷ 1/4?

5/2

"In this market, I can sell this house in two days!" Michele said to her seller client. What does this type of statement likely represent?

An exaggeration of Michele's ability to sell the property.

Vacant land is land that has no _______.

Buildings

Which party tends to benefit in a cold market?

Buyer

If you are charged with violating Article 10 of the NAR Code of Ethics, what's the best defense you can provide for yourself?

Clear records that prove you treat all clients the same, regardless of protected class

Daniel has several properties listed around town. He receives a call from a prospective buyer who is very interested in one of the properties and wants to schedule a showing. What should Daniel do?

Disclose his agency relationship with the seller to the prospective buyer

Your buyer clients Jen and Tony really like the patio set and bedroom furniture in the house you've just shown them. Because the market is hot, what would you advise they do?

Don't include those items in their offer.

A neighborhood you work in frequently is going through a demographic shift, with many new minority residents purchasing homes. You can use this information to __________.

Evaluate your marketing and ensure that you're not inadvertently discriminating against clients who may be interested in the neighborhood

In a sales transaction, what provides proof that the lender will actually fund the loan?

Final loan approval

Sellers are typically in a power position in ______ markets.

Hot

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?

Involuntary conversion

What effect does a pre-approval letter have on an offer?

It assures the seller that the buyer's financial information has been verified

What does income shelter mean?

It means that the income received is sheltered from taxation.

What is an advantage to using mediation as a problem-solving tool in a contract dispute?

It offers a win-win solution because both parties come out with satisfactory results.

Why would a code of ethics provide minimum ethical expectations?

It sets a baseline for ethical standards.

In addition to physical possibility, financial feasibility, and maximum profitability, which one of the following is a consideration when determining highest and best use?

Legal Permissability

A South Carolina sales contract is ____________.

Legally binding when signed by the parties

What's meant by "minimum ethical standards"?

Licensees should strive to act at least at that level, and more if possible.

Which of the following scenarios best describes a net listing?

Maeve wants to get at least $350,000 when she sells her property and tells her listing agent, Stan, that he can keep anything above that amount.

What is interest?

Money paid consistently at a particular rate for the use of borrowed money.

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?

Obtain a pre-qualification letter.

What type of listing agreement provides the sellers with the opportunity to enter into listing contracts with multiple agents and still reserve the right to sell the property themselves, owing no commission?

Open listing

Financing of vacant land in rural areas is ____________.

Possible using a Section 502 loan

The main difference between loan pre-qualification and loan pre-approval is that loan ______ doesn't include lender verification of buyer-provided data.

Pre-qualification

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 ________.

Progression

In a South Carolina sales contract, the parties generally agree upon a/an ________ procedure unless a Due Diligence Addendum is agreed to and made part of the contract.

Repair

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.

Repair Procedure, Inspection/Reinspection

The NAR board has called Clara as a witness to an ethics investigation. She should be prepared to ______.

Respond to questions by professional standards panel members

This type of buyer lives on a fixed income and is looking for a smaller property that requires little to no maintenance. Accessibility is an appealing feature this buyer type.

Retiree

Which of the following actions should be taken when holding an open house?

Schedule the open house soon after the property hits the market

Rowena, a South Carolina licensee, is about to sign a listing agreement—her very first! "Just sign here," she says, handing the listing agreement to the Smythes. Rewind, Rowena. What should she have had the Smythes sign first?

South Carolina Disclosure of Real Estate Brokerage Relationships form

Which of the following elements of the NAR Code of Ethics support, interpret, and amplify the articles?

Standards of practice

Because 123 Main Street, which sold recently, is a comparable property, its sales price should be a good indicator of the value of 456 Elm. Which economic principle does this demonstrate?

Substitution

Samantha is a real estate licensee. She's showing her client a property. The client asks about some spots on the ceiling and wonders if they're an indication of a roof leak. What should Samantha do?

Suggest that her client contact a roofing expert to make a determination.

When faced with an ethical dilemma, which of the following is true?

The Golden Rule always points the way to the most ethical action.

When a licensee represents a seller, which one of the following statements is true about the licensee's ability to list other properties that are for sale?

The licensee is permitted to list other properties for sale, even if they're competing properties.

Licensee Randy has a written listing agreement with Brent, a seller. The buyer is Tim. Who is Randy's client?

The seller (Brent)

REALTORS® protect and promote the interests of ______.

Their clients

If buyer customers initially contact you because they saw your number on a yard sign, what could this mean?

This could end up being a dual agency situation.

What's one purpose of the final walk-through?

To confirm the property is in the expected condition

Which of these dangers might buyer's agents see from clients in a cold market?

Waiting too long and missing the market

To safeguard against potential conflicts of interest, Elizabeth always relies on ______.

Written disclosures

Your seller client Clayton has found a house he'd like to purchase, but he needs to sell his current house before he can make an offer. Should his desire for another property impact pricing strategy?

Yes, if his desire for the other property outweighs his need to get top dollar for his house.

What's the best way to explain to sellers why you won't lower your commission rate?

"My fee is based on the services I provide"

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?

$150,000

In what type of market is pricing a home below market value an especially good strategy, as buyers are scarce and unlikely to consider at or above-market homes?

Cold market

Taxes, construction codes, and development regulations are all ways that ______ can influence a real estate investment and potentially increase or decrease the investment's value.

Government

A property is 21,780 square feet. How many acres is this?

Half and acre

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 ______."

Harder to finance

Short-term capital gains are taxed at ______.

The taxpayer's marginal tax rate

What type of professional must an investor use to conduct a tax-deferred exchange?

A qualified intermediary

Emily received Gerty's name from a previous client whose home she sold. This is an example of ______.

A referral

What is a gift tax?

A tax on property received by one person when nothing of value was given in return

Which of the following is an example of a cloud on a title?

A third party has staked a claim on a property

For which of these properties would gross income multiplier be calculated?

An apartment building with 50 units

When working with a seller, you signed a listing agreement that ensured you'd receive a commission, provided the property sold during the listing term. What type of listing agreement did you sign?

Exclusive right to sell

Which items should sellers put into storage to help de-personalize their home?

Refrigerator magnets and children's artwork

______ tend to benefit most in a hot market.

Sellers

In addition to serving as the listing agent for several clients, your own house is also on the market. You receive a call from another licensee who wants to show her buyer client your house. What must you immediately disclose to the buyer's agent and buyer?

You own the property.

Besides market value, licensees consider other factors when determining a list price range, such as market dynamics, amount of competition, and _______.

seller motivation

You're assisting Jim, who's selling his South Carolina home. He asks you who's typically responsible for paying the deed recording costs. You tell him __________.

"The seller typically pays this."

South Carolina broker-in-charge Brady is working with a new licensee. What does he tell him about the residential sales contract?

"While there's not one standard sales contract form in South Carolina, our firm has one we use exclusively."

Bradley listed a house at an 8% commission rate, and it just sold for $723,500. His firm and the buyer's agent's firm split the commission equally between them. Then Bradley, who has a 50/50 commission split with his broker, took his check to the bank. How much did Bradley earn from this transaction?

$14,470

A property sells for $200,599, which is 15% more than the owner paid eight years ago. What did the owner originally pay for the property (round to the nearest cent)?

$174,433.91

Gabi owns one parcel measuring one square mile and another parcel measuring one mile by a half mile. She combined the parcels and sold them for $2.5 million. What price per acre did she receive for the land?

$2,604.17

Your buyer client Heather just signed a purchase agreement for a $520,000 home. The LTVR is 60%. How much is Heather putting down on the purchase?

$208,000

In South Carolina, how long must completed real estate forms be kept on file with the broker-in-charge?

Five Years

A boundary line is 880 yards long. How many furlongs is this equal to?

Four

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, ______.

Bitsy should not have suggested that they could build a guest house without knowledge of city and zoning codes. She is likely at fault.

When you're putting together a listing presentation, which of these is a key point to address?

Buyers won't pay more for a home than the market dictates.

Which of the following is a way a buyer's agent can find off-market listings?

Check out For Sale by Owner sites.

Camille is a young, ambitious professional who works downtown. Which of the following new construction properties would probably be of most interest to her?

City condo

Seller repairs, lengthy closing dates, and seller-paid closing costs are terms buyers may ask for in a ____________ market.

Cold

In South Carolina, what must a property seller who's not a resident of the state do?

Comply with income tax withholding requirements

Gary is preparing to place a lockbox on the property that his brokerage has recently listed. Which of the following is true?

He must get the seller's permission to place the lockbox.

Many investors like the real estate market for its ________, with the potential for bottom-line yields of 20% or more.

High yields

Sara is your buyer customer. She doesn't want to sign a buyer agency agreement. What duty do you owe her?

Honesty and fairness

Beverly decided to sell her income property, as the need for __________ wasn't what she wanted from an investment.

Constant management

Romi is making an offer on a home in Florence. Which of the following requirements of a South Carolina residential sales contract to describe the property

Legal description plus street address

Casey was found to be in violation of the NAR Code of Ethics. What penalties could the NAR hand down against him?

Mandatory education, NAR suspension, or reprimand

What's the price at which a willing buyer and a willing seller would strike a deal given normal market conditions?

Market value

When Scott buys Jennifer's South Carolina home, Jennifer has agreed to leave behind all of her furniture. How will the furniture be accounted for in the transactional paperwork?

On the sales contract or an addendum

If home warranty coverage is made a part of the sales contract in South Carolina, for how long must coverage remain in effect?

One year

Ashley is Will's listing agent. Will has already accepted an offer for his home when another offer comes in that's better than the one Will already accepted. What's Ashley's best course of action?

Present the offer to Will, but encourage him to speak with a lawyer if he's considering breaking his current contract.

In a hot market, what pricing strategy may incite bidding wars?

Pricing at or just below market value

In a hot market, when all other sellers are listing at or above market rate, what pricing strategy will likely induce a bidding war?

Pricing just below market value

A prior client referred her sister to you because she wants to finally buy a house instead of renting. When you meet with the sister, she shares that she's been looking for almost 18 months and "simply can't find anything suitable." What red flag does this indicate?

The buyer has unrealistic expectations and may never commit.

Which of the following statements best describes the 200% rule as it relates to tax-deferred exchanges?

The combined fair market value of the property (or properties) selected can't be more than 200% of the relinquished property.

Which of the following is a reason a brokerage may choose to implement its own code of ethics?

To impose stricter guidelines than national or state codes

Which one of the following can be depreciated by an investor?

Tools and equipment

It's impossible to generalize the impact events in other areas have on local real estate values. Which characteristic of the real estate market does this refer to?

Uniqueness

Which of the following is a true statement about price ranges in a given market?

When studying price levels, you should look at how they rise or fall within a given price range, and not merely average sales price.

The Martins hired Janice to be their buyer's agent. Leaving their first property showing, the trio notices a property down the street with a for sale sign in the yard. Since the Martins are already here, they'd like to see that house, too. What's the best action to take?

You should call the number on the sign to schedule a showing.