Comprehensive Practice Exam + Initial Assessment

Which of these would not trigger full disclosure under TILA?

"Get a low 4.925% APR"

A Michigan landlord has set the monthly rent for a residential unit at $700. What's the maximum amount the landlord can require for a security deposit

$1,050 (the amount can't exceed one and a half month's rent)

A buyer in Michigan is purchasing a property for $158,500. What state transfer tax will apply?

$1,188.75 The state's rate is $7.50 per $1,000 in sales price. Multiply $7.50 by 185.5 and the state transfer tax will be $1,188.75

The daily property tax rate is $1.23 and closing is August 31. Assuming the buyer owns the property on closing day, and the seller hasn't made any payments, what will the seller owe at closing using the calendar year proration method? Round to the nearest whole dollar.

$298 242 days x $1.23 = 297.66

John and Amy purchased a builder's home warranty when they bought their home. They have found structural damage that could be a detriment to their home. On average, how many years does a home warranty cover structural damage?

10 years

Glenn is purchasing a home for $400,000. The property appraised at $415,000 and Glenn is financing $300,000. What's the loan-to-value ratio?

75% Lenders use the lesser of the sales price or appraised value. This results in an LTV ratio of 75% ($300,000 ÷ $400,000).

Which of the statements best represents what happens if a federal fair housing complaint is made?

A fair housing specialist will review it .

Home Warranty Insurance

A home warranty covers things the inspection didn't address, like appliances, as well as structural issues that occur.

An example of this type of leasehold estate is a month-to-month lease.

A periodic estate automatically renews at the end of its lease term, such as at the end of a given month.

The lender will charge a one-and-a-half-point origination fee and two loan discount points. What will be the total due for points on a $115,000 loan?

A point is 1% of the loan amount. Three-and-a-half points (one-and-a-half and two) is 3.5% of $115,000, or $115,000 x .035 = $4,025.

In which of these transactions must a Michigan real estate licensee provide an agency disclosure?

A prospective buyer is seeking to purchase a vacant lot zoned for single-family residential properties.

To which of the following borrowers might a lender be most likely to recommend an FHA loan?

A young couple with only a few thousand dollars saved for a down payment and relatively low credit scores

When Dashiell received the purchase offer for his bungalow, he was surprised to see a page added to the contract requesting that an attorney review the contract. What is Dashiell looking at?

Addendum An addendum is a separate form that becomes part of the sales contract.

Which of the following individuals meets the eligibility requirements for a Michigan real estate broker license?

Amelia has a law degree and three years' real estate related experience.

Which of the following would require a real estate license in Michigan?

An individual engaged in property management activities

Jeanetta leases an apartment from Quad City Leasing. Jeanetta has filed a complaint with the state real estate licensing division stating that Marissa, Quad City's property manager, breached her fiduciary duty of loyalty to Jeanetta. Which of these statements about this situation is true?

As a property manager, Marissa owes fiduciary duties to her client and the apartment community.

Desmond has a signed listing agreement with his clients, the Harpers. In exchange for helping the Harpers list, market, and sell their home, the Harpers have agreed to pay Desmond a commission. What type of agreement do Desmond and the Harpers have?

Bilateral A contract involving an exchange of promises or other consideration between two parties is a bilateral contract.

Which of these statements about a conventional mortgage loan is true?

Borrowers with larger down payments and higher credit scores are most likely to select a conventional mortgage.

Coral is preparing a report pursuant to the terms of a property management agreement. This report shows actual results from operating the property versus what had been projected. What report is she preparing?

Budget comparison statement

Chrissy lives in Lake Ridge Estates, a neighborhood in which vinyl siding may not be used on homes. This HOA regulation is what kind of private land control?

CC&R

Carson lives within one mile of a farm in Michigan. Which statement most accurately describes Carson's disclosure obligations when selling his home?

Carson must disclose that there's a farm in the vicinity on the seller's disclosure statement. He can also voluntarily provide a notice about the farm's protection under the Michigan's right to farm act.

Alice owned a double lot on the waterfront. She sold the lot to Ronesha and included a deed restriction prohibiting construction of any building taller than one story. Ronesha wants a three-story house. What should she do?

Conform to the deed restriction.

Nico is buying a home for $625,000. His earnest money deposit is 8%. He wants to avoid private mortgage insurance (PMI) on his conventional loan, and he owes 5% of the purchase price in closing costs. How much money should he bring to closing?

Conventional loans often require 20% down to avoid PMI ($125,000), and Nico has paid a $50,000 deposit ($625,000 x .08). Closing costs are $31,250 ($625,000 x .05). He needs $106,250 to close ([$125,000 - $50,000] + $31,250). The answer is: $106,250

Which of these situations represents the illegal practice of blockbusting?

Corbin tells homeowners in Five Points that an impending influx of Asian immigrants will reduce property values.

A real estate transaction has a closing date of May 20. The seller, who's responsible for closing costs up to but not including the day of the closing, has already paid annual property taxes of $1,949. How will the closing statement reflect the proration for the seller?

Credited $1,207 The seller is required to cover the property taxes for January 1 through May 19, which is 139 days. The seller will be credited $1,207 because $1,949/365 days is $5.34 and $5.34 x 226 days (the number of days the buyer will own the property and have to cover property taxes) = $1,026.84 which is rounded to $1,207.

Mario lives in a state that requires an abstract of title for property conveyance. The chain of title is broken approximately 50 years prior to the current date. Which of these properly identifies the status of Mario's title?

Depending on his state's laws, Mario may have marketable title.

Devon is a real estate salesperson in Michigan. A week ago, he submitted a transfer application with the department to affiliate with a new broker. Which of the following statements is true?

Devon can continue performing real estate activities. His pocket card provides proof of licensure for 45 days, while the department processes the application.

What must sellers provide prospective buyers of homes built prior to 1978, in addition to the federally required disclosure form?

EPA lead safety pamphlet

A seller received $800,000 for a 5.5 acre rectangular parcel alongside a road frontage. The property is 400' deep. What was the price per front foot of the property?

First, find the square footage (5.5 x 43,560' = 239,580). You're given one dimension of the rectangle, so find the other: 239,580 ÷ 400' = 598.95 front feet. To find the price per front foot, $800,000 ÷ 598.95' = $1,335.67 per front foot.

Diana wants to purchase some property up north. She engages Michigan licensee milo to act as her buyer's agent. After the two sign the service provision agreement, what must milo do next?

Give a copy of the signed agreement to Diana.

Related to reasonable accommodation of being allowed to have an assistance animal, which statement is true?

If the disability for which the tenant is making the request is obvious, the landlord may not ask why it is needed.

Ashish is purchasing a bank-owned property. His real estate agent tells him the bank is offering insurable, not marketable, title. What does this mean to Ashish?

Insurable title is one that may have known defects but is still insurable. Ashish should carefully review the title policy.

Which offer would be the most appealing to a seller?

It depends on the seller's needs and motivations.

What happens to an initial offer from the buyer after a seller counters?

It's no longer in play.

Jim represents Joel in the sale of Joel's country acreage and house. Jim's business partner, Rolly, informed Jim that he wants to put an offer in to purchase the property, with the intention to subdivide it. Which statement best represents the disclosure requirements regarding this transaction?

Jim must disclose that Rolly is his partner and that Rolly intends to subdivide the property.

Siblings Julia and Gene are co-owners of a small retail building in which a tanning salon is currently operating. Gene really wants to leave his ownership interest to his son when he dies, but the way in which they own the property doesn't allow him to do so. What type of ownership do they have?

Joint tenancy (does not include the right of inheritance; ownership interest passes to the remaining tenants once a tenant dies.)

Which of the following is an example of sub-agency?

Kayla is a licensee with ABC Realty and lists a property for seller Devon. Maurice is a salesperson with XYZ Realty Group and brings a buyer to the table, but owes fiduciary duties to the seller.

Topher is a Michigan real estate salesperson representing his client, Amy who is purchasing a property. Topher's broker Laura is conducting the closing. Amy has been provided with a complete and detailed closing statement. Whose signature must appear on the statement?

Laura's (brokers/associate brokers provide the closing statement & must sign it.)

Lenore makes a 95% offer on a townhouse that's listed at $285,000 and includes an earnest money deposit for 10% of her offer, which the seller accepts. She brings to closing a cashier's check for $35,025 comprising the balance of her 20% down payment and closing costs. What's the amount of her total down payment?

Lenore's offer is $270,750 which is 95% of the list price ($285,000 x .95 = $270,750 ). Her total down payment is 20% of her accepted offer of $270,750, which is $54,150 (or $270,750 x .2).

While hosting an open house, Liza speaks with prospective buyers. They're interested in the house, but think the listing price is a little high. They ask her what other incentives they could include in their offer to get the seller to come down on their price. If Liza helps them, what duty may she be breaching?

Loyalty Loyalty means putting the client's interests first, and sellers want to get the highest price possible for their property. Helping prospective buyers negotiate against your client's interests breaches the duty of loyalty.

Which of the following is a likely action of the Michigan State Housing Development Authority?

Making loans to low to moderate income families

Jared is interested in purchasing a property in Michigan. Janelle, the real estate salesperson acting as Jared's agent, is employed by broker Mitchell. Mitchell maintains trust accounts at first national bank. Jared is writing a deposit check as part of an offer for the property. To whom or what entity should he make the check payable?

Mitchell, the broker

Which of these is an example of conversion of funds?

Monica used funds from the firm's trust account to pay her firm's rent.

You're a Michigan licensee representing Abe and Ben in a dual agency situation. Abe tells you something that would give Ben a distinct advantage if he knew. Do you tell Ben?

No, because you can't share one client's confidential information with another client

Which of the following is a task the closing agent must complete after the closing?

Pay off the existing loan

Tyne entered a contract to buy Fred's home. Per the terms of the contract, Tyne agreed to pay $20,000 for the earnest money deposit by this coming Wednesday and have the property inspected within seven days. She submitted the earnest money deposit on time and had the property inspected within five days. What action does this scenario exemplify?

Performance of this part of the contract

On a closing statement _______ goes in the seller's credit column and the buyer's debit column.

Prepaids

Subdivision regulations imposed by developers in an effort to maintain control of the development of the subdivision are an example of ______.

Private land use control

Which of the following is a promise from the borrower to repay a certain sum of money to another party under specified terms?

Promissory note

What factors directly affect an adjustable rate mortgage?

Rate, index, and margin

Which statement most accurately describes the type of notice provided by recording a change of ownership document?

Recording the deed provides constructive notice of the property sale.

A homeowner has converted two rooms in his home to a rental unit. What does the "Mrs. Murphy" exemption permit him to do?

Refuse to rent to a female tenant.

Jayne was tired of waiting for her subcontractor to get his part of the deal done. The agreed-upon deadlines came and went, and Jayne lost money waiting for the subcontractor to come through. She decided that if the subcontractor wasn't going to honor his commitments, neither was she, so Jayne consulted with her attorney and then terminated the contract. This is an example of ______.

Rescinding the contract unilaterally

Which of these statements about the homeowner's right to redemption is true?

Rights of redemption window with REO may have expired.

Stan and Margo want to redevelop an old industrial site in order to create a microbrewery and event space. However, an environmental review found that hazardous chemicals were once used on site, and there is a possibility they will be released during redevelopment. Stan and Margo may not be liable for cleanup, under what federal law?

SARA, or the Superfund Amendments and Reauthorization Act, created an innocent landowner defense. Often, the courts will review a SARA case and determine liability.

Ari owned acreage in a rural area. He sold a small portion of it to a neighbor in an informal transaction but made no record of the sale or change of ownership. A developer offered Ari several million dollars for the entire acreage, and Ari eagerly accepted the offer. What covenant is Ari in danger of violating?

Seisin The covenant of seisin guarantees that the grantor owns the property that appears in the deed. Because the sale of property to ari's neighbor was never recorded, his deed still shows that he owns the entire parcel.

Eva, Stella, and Lynn own a vacation home two blocks from the beach. Sadly, Stella passed away this winter, and so when summer arrives Eva and Lynn will be sharing the home with Stella's nephew Drew, to whom Stella willed her share of the property. What type of ownership is this?

Tenancy in common

Price fixing violates what law?

The Sherman antitrust act of 1890

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.

A recent homebuyer believes that she overpaid for a property because no one informed her that a nearby vacant lot was being rezoned for commercial use. A discount hotel is planned for the site. The broker said he did not think that information was relevant to the buyer. Which of the following must the homebuyer prove in order to make a misrepresentation claim against the broker?

The broker should have known the rezoning should be disclosed.

What is put at risk if a buyer misses a contingency deadline?

The buyer's earnest money Also, takes away the buyer's option to terminate &/or get a refund. The closing date & date of possession can be changed too.

In a residential real estate sale involving a federally related loan, what entity is required to provide real estate settlement procedures act disclosures to the consumer?

The consumer's lender

Which fiduciary duty may continue even after the transaction closes?

The duty of accounting continues even after the transaction closes. For instance, any money the agent holds after a transaction closes must be accounted for until it's delivered to the appropriate party.

Aidan accepted a contract for the sale of his home. The home inspection report reveals that certain aspects of the house don't meet the current building code. What's the most likely result?

The house is probably not required to meet the current code.

Which of the following statements about the number of contingencies in a sales contract is true?

The inclusion of numerous contingencies makes it less likely that the buyer's offer will be accepted.

To which of the following are most of the buyer's closing costs typically related?

The mortgage loan the buyer's obtaining

Your seller wants to net $100,000 after the 5% commission is paid. Assuming no closing costs, at what price does the home need to sell for the seller to net this amount?

The seller's percentage of a sale is 100% - 5% commission = 95% (or .95). Take the amount the seller wants to net and divide it by that amount ($100,000 ÷ .95 = $105,263.16). Conversely, for a sales price of $105,263.16: $105,263.16 × .95 = $100,000.

Seller Jamison is closing on his property with buyer Conrad. Jamison paid the current year's property taxes already. Is this a prepaid or accrued expense, and how will it be represented on the settlement statement?

The taxes are a prepaid expense, and will appear as a buyer debit and a seller credit.

Property managers owe fiduciary duties to:

Their clients & apartment community

What special concern do foreclosed properties often present?

There could be hidden title issues.

Which of the following statements is true regarding timeshare estates?

Timeshare estates can be sold or passed down to heirs.

What type of insurance is a form of indemnity insurance that can protect both the buyer and the buyer's lender?

Title insurance

What responsibility does a seller's agent have to the buyer?

To inform the buyer that the agent represents the seller.

In a real estate in which you represent the seller, your duty to the other parties is to ______.

Treat them honestly and fairly.

Sylvia, who's 15 years old, and neighbor Marge, who's 24, sign an agreement that Sylvia will babysit Marge's toddler for the summer for $10 an hour. What type of contract is this?

Voidable (because Sylvia is the minor, she can enforce the contract against marge, but marge cannot enforce against Sylvia.)

When is a Michigan broker or associate broker's duty to provide or to ensure the buyer and seller receive completed and detailed closing statements waived?

When a title company, an agent of the title company, or another authorized, licensed party is conducting the closing.

Chelsea's mother owns several rental properties and intends to keep them pass on to the family. Chelsea holds a special power of attorney to manage the rental properties, including working with the property manager to place and evict tenants as necessary. Which of these would violate the POA?

Without consulting her mother, Chelsea decides to completely refurbish one of the properties. An agent holding POA can only make decisions that reflects the principal's preferences and can't exceed the authority granted by the POA.

Which of these creates agency coupled with interest?

You agree to design the houses for this builder in return for getting the listings when the properties are finished.

Your buyer, Billy, wants to make an offer on the craftsman house he saw today, but he wants the sellers to start the paperwork for a tax reassessment before closing. This isn't part of the standard sales contract in your area. What will you use to accomplish this request?

addendum (the request to start the reassessment process isn't part of the standard contract, so to include that request language in the contract, you'll need to use an addendum.)

Buyer Daphne and seller Kurt signed a sales contract with a definite closing date of May 15. Daphne then learned that she needed to move the closing date to June 15. What document should she use to make this change?

amendment

Ashton, an appraiser, is estimating value using the sales comparison approach. He applies more weight to two comparables over several others he used. What process is he utilizing?

reconciliation