Exam Questions
A real estate professional sells property listed by another brokerage firm in the multiple listing service. The real estate professional has been working with the buyer for many months but does not have an agency contract with him. This real estate professional has fiduciary obligations to
A) no one. B) the buyer. C) the seller. D) the public.
An unrepresented buyer who is viewing a house asks the broker if the seller has ever had water in the basement. Since the broker does not know, he should respond by recommending that the buyer
A) obtain a property inspection C) sign an agency agreement
A real estate salesperson who has listed a friend's house knows that the basement leaks every spring. The salesperson
A) should help his friend paint the basement to cover the water marks. B) may have the seller sign a nondisclosure waiver. C) must disclose the leaky basement to potential buyers. D) can require that the problem be repaired before showing the property.
If a buyer-client wishes to have an earnest money deposit held by a third party,
A) the broker will be prohibited from handling the transaction. B) the broker must deposit the money with the third party within two banking days after acceptance of the offer by all parties. C) license law requires the third party to establish a noninterest-bearing trust account. D) the third party must be approved by the Department.
A court will issue an injunction against a defendant under the Michigan Environmental Protection Act when
A) the defendant's conduct is likely to harm the air or water quality. B) the Michigan Department of Environmental Quality has granted a permit. C) there is no feasible or prudent alternative to the defendant's conduct. D) the defendant cannot pay the criminal fines assessed.
A loan fee charged by a lender to increase the lender's yield on a loan is
A) the yield. B) a discount point. C) the interest. D) the principal.
To avoid the unauthorized practice of law, a real estate licensee should not
A) use forms that contain language required by state statutes. B) complete blanks in preprinted forms. C) charge a separate fee for preparation of real estate documents. D) ask an attorney to review the forms used by the company.
If a broker took a listing and later discovered that the client had been declared legally incompetent before signing the listing, the listing is now considered
A) void. B) valid. C) voidable by the broker. D) voidable by the incompetent client.
A suburban home with four bedrooms and only one bathroom suffers from what condition?
Functional obsolescence
Which approach to estimating value would be most useful to an appraiser asked to estimate the value of an existing strip shopping center?
Income approach
Which of the following principles would affect the value of smaller homes in a neighborhood that also contains large houses?
Progression
The law states that a broker must maintain a place of business in the state of Michigan. Which of the following is sufficient?
A desk in the corner of a living room in Michigan's upper peninsula
A prospective homebuyer with four children inquires about a listing in an area of predominately single and married couples without children. What should the broker say to this prospect?
A) "I'll be pleased to show you houses in any area that you're interested in." B) "I'd be happy to show you homes in other areas where there are more children." C) "You wouldn't want to live in this area because the neighbors don't like children and may be disrespectful to your family." D) "The residents here have expressed a desire to keep the area quiet and without children."
A licensee must complete a minimum of
A) 40 hours of CE. B) 6 hours of CE each year. C) 2 hours of CE each year. D) 18 hours of CE in a four-year license cycle.
If the borrower paid $189.06 interest last month on a $27,500 loan, what is the interest rate?
A) 8¼% B) 7% C) 7¾% D) 8%
A lease agreement is signed by a lessee who is 16 years of age. Which of the following is TRUE?
A) A 16-year-old person cannot sign a lease. B) The lease agreement is void. C) The lease agreement is voidable. D) The lease agreement is valid provided the security deposit is increased.
Which of the following, by law, requires prior approval by a buyer and seller?
A) A broker's use of a title company to draft the closing statements B) A salesperson's use of a personal assistant C) Use of an independent contractor agreement between the broker and salesperson D) Use of digital signatures to sign the closing documents
Which of the following statements is TRUE under the Michigan Right to Farm Act?
A) A farm that engages in generally accepted agricultural practices, but nevertheless creates unpleasant odors, can be fined. B) A farm that was not considered to be a nuisance in the past can be found to be a nuisance once the land uses around it change to residential. C) In a nuisance action where the complainant prevails against the farm, the complainant can collect costs and attorney's fees from the farmer. D) A complainant who brings more than three unverified complaints against the same farm within three years can be ordered to pay the full cost of investigation on any subsequent unverified complaints.
In Michigan, which of the following requires a real estate license?
A) A licensed Michigan builder selling a previously owned home for a new buyer. B) A licensed attorney acting under a court order to convey real estate. C) A partnership selling a building owned by the partners. D) An existing tenant of rental property accepting a consideration of one-half month's rent or less for the referral of prospective tenants.
A broker who is found to be in violation of the Occupational Code for commingling funds may be subject to which of the following disciplinary actions by the Department?
A) An order to pay 125% of the amount to the consumer B) A requirement that financial statements certified by a CPA be filed with the Department on a quarterly basis C) A criminal fine of up to $1,000 D) Imprisonment for up to one year-this one I think
A real estate professional who is the agent of the buyer should do which of the following?
A) Disclose to the seller the maximum price the buyer is willing to pay B) Present to the seller only offers that are acceptable C) Advise the buyer if the listing price of the seller's house is unrealistic D) Disclose to the seller that the buyer is a member of a protected class
Henrietta has owned her house for over 50 years. It has fallen into disrepair, but because she lives on a fixed income, she does not have the money to make the needed repairs. She has a considerable amount of equity in the house. What type of loan would BEST provide Henrietta the funds to make the necessary repairs?
A) Home equity loan B) Reverse mortgage C) Blanket loan D) Open-end loan
Which of the following statements is TRUE regarding the Michigan State Housing Development Authority (MSHDA)?
A) It is a family assistance program, so landlords and developers do not qualify for assistance. B) Mortgage funds are allocated on a region-by-region basis. C) Loans are originated through participating lenders. D) The program is funded by income tax revenue.
A large chain has built a new restaurant. The chain would like to open an additional restaurant in the next city. What is the best approach the chain can use to raise money for its new location?
A) Keep the building but convert it into retail space B) Keep the building and move the business to the new location C) Sell the business to a competitor who will run the restaurant under a new name D) Sell the building to an investor who leases it back to the chain to operate the business
A recorded subdivision plat is used in the
lot and block system
Penelope has made an offer to the seller who has countered and given Penelope 24 hours to accept the counter. In this case the original offer is considered to be
terminated
A designated agent can disclose confidential information concerning the client to
the supervisory broker for purposes of seeking advice or assistance for the benefit of the client.
The current property taxes on a parcel are $1,743.25 and have not been paid. If the sale is to be closed on August 12, what is the approximate tax proration that will be charged to the seller based on a 360-day year?
$1,074
On January 1, George paid the $2,345 in taxes for the current year. If he sold the property on June 23 of that same year, how much would he be credited at closing? (Use a 360-day year.)
$1,218.10
According to a broker's comparative market analysis (CMA), a property is worth $225,000. The homeowner bought the property for $190,000 and added $50,000 in improvements, for a total of $240,000. The property sold for $222,500. Which amount represents the property's market price?
$225,000 A CMA provides an estimate of market value based on an analysis of comparable sales.Market price is the amount for which a property actually sells
Assuming that the listing broker and the selling broker in a transaction split their commission equally, what was the sales price of the property if the commission rate was 6.5% and the listing broker received $12,593.50?
$387,492
What would it cost to put new carpeting in a room measuring 15 feet by 20 feet if the carpet costs $16.95 per square yard, plus a $250 installation charge?
$815 Calculate for the area of the carpet by multiplying the dimensions given. Area = Length x width Area = (15 ft) x (20 ft) = 300 ft² Then, convert the calculated area to yard² with the conversion factor of 1 yard = 3 ft. (300 ft²) x (1 yard/ 3 ft)² = 33.33 yd² Then, multiply this area in square yards with the cost per yd². C = (33.33 yd²)($16.95/yd²) C = $565 Lastly, add the installation cost to the calculate initial cost. total cost = $565 + $250 total cost = $815
To net an owner $900,000 after paying a 6% commission, the list price would be
$954,050.
To obtain lot split approval under the Land Division Act, a parcel's depth-to-width ratio cannot exceed
4:1—the depth cannot exceed four times the width.
Anita is assigned to appraise a house in an area with very few sales over the past year. One of the comparable properties she chooses is a home similar to the subject property. The house recently sold as a foreclosure property. When writing her appraisal report, what action will Anita take as a result of the foreclosed sale?
A) Make a positive adjustment to the value of the subject property B) Make a negative adjustment to the sales price of the foreclosed home C) Make a negative adjustment to the value of the subject property D) Make a positive adjustment to the sales price of the foreclosed home
An active member of the armed forces is deployed to Michigan. Her husband, Juan, who is a licensed broker in Texas, moves to Michigan to join her. If Juan wants to continue his career selling real estate in Michigan, the Department can
A) allow Juan to use his Texas license in Michigan. B) grant Juan a six-month temporary license. C) require Juan to post a surety bond. D) waive Juan's Michigan licensing fees.
The owner of a house wants to fence the yard for her dog. When the fence is erected, the fencing materials are converted to real estate by
A) annexation. B) severance. C) indestructibility. D) immobility.
The seller-client can authorize the broker to share the commission with a cooperating broker that is representing the buyer
A) by the agreement of the brokers that belong to the multiple listing service. B) according to the terms of the buyer representation agreement. C) by law, according to the requirements of the Occupational Code. D) according to the terms of the seller's service provision agreement.
A building is valued at $100,000 using a capitalization rate of 8%. If an investor demands a capitalization rate of 10%, the value of the building will
A) decrease more than $10,000. B) increase by 20%. C) increase by less than 20%. D) decrease less than $10,000.
A real estate broker may engage in the sale of a business opportunity
A) even where the sale does not include the building in which the opportunity is located. even where the commission is based on a tying agreement
Taxes levied on a property owner to pay for installation of sidewalks or sewers are called
A) general property taxes. B) ad valorem taxes. C) special assessments. D) special excise taxes.
When a salesperson receives an earnest money deposit from a buyer, the salesperson must
A) give the deposit to the seller within two banking days of receipt. B) deposit the money into the broker's property management account. C) deliver the deposit to a title insurance company. D) deliver the deposit to the broker.
All trust account records must
A) have no more than $5,000 in the account. B) be maintained for a minimum of five years. C) be interest-bearing. D) have two record systems.
Jamal and Tina bought a store building and took title as joint tenants. Tina died testate. Jamal now owns the store
A) in trust. B) in severalty. C) as a tenant in common with the dead woman's heirs. D) as a joint tenant with rights of survivorship.
A buyer's signature on an agency disclosure form
A) indicates that agency options and duties have been discussed. B) creates an agency relationship between the buyer and the broker. C) allows the broker to collect a commission from the buyer. D) prohibits the buyer from working with other agents.
When an associate broker wishes to sell a 14-unit apartment building that she personally owns, she must
A) notify the local municipality before offering the property to the public. B) advertise it in the name of the company and include the company address. C) clearly indicate that she is a broker in her advertising. D) file a property report with the Department.
A broker has earned her commission
A) once the multiple listing service has removed the property from its inventory. B) at the closing of the real estate transaction. C) after the escrow officer has disbursed the real estate commission check. D) when she finds a buyer who is ready, willing, and able to purchase property on the seller's terms.
A subagency occurs when
A) one agent represents the principal-buyer B) one agent represents the principal-seller. C) two agents represent one principal. D) one agent represents two principals.
A broker does not have to prove that she was the procuring cause in order to collect a commission if her seller sells the property without her help because she has an
A) open listing. B) exclusive agency listing. C) exclusive right to sell listing. D) option listing.
Fair housing laws allow exceptions for all of the following EXCEPT
A) private clubs. B) racial discrimination. C) retirement communities. D) religious organizations.
At the time a buyer was negotiating the purchase of a lot on which to build a new home, the seller represented that the soil was firm enough to support the construction of a building when, in fact, he knew it was not. This contract is
A) void. B) voidable by the seller because of the mistake. C) voidable by the buyer because of fraud. D) voidable by neither party because no harm was done yet.
Which of the following clauses gives a lender the right to demand the entire loan balance to be due upon the buyer's default?
Acceleration clause
Which of the following characterizes the broker-salesperson relationship?
All salespeople must be licensed under a broker
Which of the following best defines reconciliation?
Analyzing and weighing the findings obtained by the different approaches to arrive at a final estimate of value
A man leases a store space to open a restaurant. He installs ovens, booths, counters, and other equipment. When would these items become real property?
At lease expiration, if the man does not remove them
A nonprincipal associate broker
Is not an owner, partner, officer or member
Which of the following best defines common law concepts, such as agency?
It is part of a body of law established by tradition and court decisions
A seller has a roof leak, so he hires a roofer to repair the damage and repaints the room. Believing that the repair corrected the problem, the seller informs his broker the roof does not leak. When the buyer moves in, he finds the roof leaks. Which statement is most correct?
The leak is a latent defect.
Which of the following statements is TRUE when a salesperson who has listed a house on behalf of a seller-client decides to purchase the house for his family?
The salesperson would be in violation of the license law if he tried to buy a house he had listed
The mixing of trust funds with a broker's personal funds is
commingling
A real estate professional shows properties listed for sale with her company to a prospective buyer. The buyer has refused buyer representation. The buyer is the real estate professional's
customer
Michigan agency law does NOT allow a broker to practice
dual agency without full disclosure
The process by which government can acquire ownership of private land for public use is
eminent domain
The main purpose of police power is to
ensure the health, safety, and welfare of the community.
Capitalization uses annual net operating income in order to
estimate present value
Jeff and Susan enter a real estate office asking to see a property listed with another brokerage office. A real estate salesperson calls the listing agent and makes an appointment to show the couple the property. Without having the couple sign a written buyer agency contract, the salesperson drives Jeff and Susan to the house, and even recommends that before they buy the house they secure an independent property inspection. He also confides to the couple that he knows the owners are getting a divorce and want to sell the house quickly. In this case, the salesperson has created a(n)
implied agency relationship with the buyers
While drafting an offer to purchase a residential property, the buyer's broker learns that her client intends to operate a beauty salon from the house. The broker knows that the use will be a violation of the zoning ordinance. The broker should
inform the buyer that local zoning does not permit such a use.
In a purchase agreement, the buyer and seller agreed to liquidated damages as a remedy for default. If the buyer does default, the seller
keeps only the buyer's earnest money
Owen tells his next door neighbor that she can store her camper in his yard for a few weeks until he needs the space. Owen does not charge the neighbor any rent for the use of his yard. Owen has given his neighbor a(n)
license
An amount that is stipulated in the contract that serves to compensate a seller in the event of a buyer default is called
liquidated damages
All of the following are subject to real property ownership rights EXCEPT
navigable rivers running through the land
Louisa has operated a neighborhood grocery store for the last 25 years. Her store is the only retail property in the area that is zoned residential. The store is an example of a(n)
nonconforming use
Franklin bought acreage in a distant county, but never went to see the acreage and did not use the land. After the purchase, Susan moved her mobile home onto the land, drilled a well, and lived on the property for 20 years. Susan may become the owner of the land if she has complied with the law regarding
prescriptive easements
A real estate professional is a licensed real estate salesperson who has a written contract with his broker that specifies that he will not be treated as an employee. The real estate professional's entire income is from sales commissions rather than an hourly wage. Based on these facts, the real estate professional will be treated by the IRS as
self-employed.
The term improvements, when referring to real estate, includes
sidewalks.
The terms of a residential lease require the landlord to maintain the water heater. If a tenant is unable to get hot water to her apartment because of a faulty water heater that the landlord has failed to repair after repeated notifications, the tenant could do all of the following EXCEPT
sue the landlord for damages
A suit to quiet title refers to
the removal of a cloud on the title by court action.
A document that protects against hidden risks such as forgeries and loss due to defects in the title, subject to specific exceptions, is called
title insurance policy
If a lender charges a rate of interest in excess of that permitted by state law, the lender may be guilty of
usury
Which of the following statements regarding Occupational Code enforcement is NOT true?
The attorney general may file a criminal action.
Two sales associates working for the same broker obtained offers on a property listed with their firm. The first offer was obtained early in the day. A second offer for a higher purchase price was obtained later in the afternoon. The broker presented the first offer to the seller that evening. The broker did not inform the seller about the second offer so that the seller could make an informed decision about the first offer. Which of the following is TRUE?
The broker has no authority to withhold any offers from the seller
All the following clauses in a loan agreement enable the lender to demand the entire remaining debt be paid immediately EXCEPT
a defeasance clause
A real estate professional specializes in helping both buyers and sellers with the necessary paperwork involved in transferring property. Although not an agent of either party, the real estate professional may not disclose either party's confidential information to the other. The real estate professional is BEST described as
a transactional broker.
A broker's newest sales associate lists a unit in a condominium building for sale. In this transaction, the sales associate
acts on behalf of the broker
The seller conveyed a quitclaim deed to the buyer. Upon receipt of the deed, the buyer may be certain that
all of the seller's interest in the property, if any, belongs to the buyer.
If Harold does not want to be obligated to purchase a property but would like to have the right to purchase a property within 60 days for $300,000, Harold should try to negotiate
an option
Because a couple no longer needs their large house, they decide to sell it and move into a cooperative apartment building. In a cooperative, they will
become shareholders in a corporation.
The practice of channeling families with young children into a specific apartment building where other families with children reside is
blockbusting
Stephen, a listing agent, is frustrated that a property has been on the market for over two months, and he wants to sell the home quickly. Stephen shares with a nonrepresented buyer that the home has been on the market for a long time, so the seller would welcome any offer on the home. The buyer makes an offer at a price lower than he had expected to offer. Has Stephen violated any duties to the seller?
A) No, because Stephen has served the seller's interest by producing a ready, willing, and able buyer B) No, because Stephen is not required to disclose that information to any party in the transaction. C) Yes, Stephen has violated his fiduciary duty because license law prohibits any discussion of how long a property has been on the market. D) Yes, Stephen has violated his fiduciary duty by disclosing a fact that could benefit the buyer.
A salesperson who would like to get as many people as possible to view his open house may use which of the following sales promotions to induce sales traffic?
A) Offer a free refrigerator magnet to each person who walks through the house B) Offer everyone who walks through the chance to buy a ticket to a lottery of the house if it does not sell in 30 days C) Give the fifth and the fiftieth customers a gift certificate D) Sell raffle tickets for a chance to win a plasma television set
A salesperson has broadcasted several property descriptions on the internet. Which of the following descriptions could be considered puffing?
A) Sandy-bottom stream safe for swimming B) Perfect size lot for your large dog C) 100 feet of rolling river frontage D) Beautiful, wooded, 2-acre lot
A person who thinks he has been denied housing based on his age may file a complaint with which of the following agencies?
A) The Michigan Department of Treasury B) The Michigan Department of Health, Safety, and Welfare C) The Michigan State Housing Development Authority D) The Michigan Civil Rights Commission
Which statement regarding property tax proration is TRUE?
A) The broker does not need to prorate taxes because that is the assessor's responsibility. B) The method used for tax proration at the closing is determined by the purchase agreement. C) In areas that prorate taxes in arrears, the seller gets a refund at the closing. D) If the purchase agreement is silent, there will be no tax proration at the closing.
A buyer gave an earnest money deposit to the broker at the time she made an offer on a seller's house. What will happen to the deposit if the seller rejects the buyer's offer?
A) The broker will hold it until the buyer makes an offer on another house. B) The broker will immediately return it to the buyer. C) The broker will keep it as liquidated damages. D) The broker will use it to offset the commission the buyer owes the company.
A prospective homebuyer signs a brokerage agreement under which the real estate professional will help this client find a three-bedroom house in the $185,000 to $200,000 price range. A seller comes into the real estate professional's office and signs a listing agreement in which the real estate professional will act as the seller's agent to sell a two-bedroom condominium for $170,000. Based on these facts, which statement is TRUE?
A) The buyer is the real estate professional's customer; the seller is the real estate professional's client. B) Because both the buyer and the seller are the real estate professional's clients, the real estate professional owes the fiduciary duties of an agent to both. C) The buyer is the real estate professional's client; the seller is the real estate professional's customer. D) While both the buyer and the seller are clients, the real estate professional owes the fiduciary duties of an agent only to the seller.
Which of the following statements about the covenant of quiet enjoyment is TRUE?
A) The grantor guarantees that if the title fails in the future, he or she will compensate the grantee. B) The grantor warrants that he or she is the owner and has the right to convey title to the property. C) The grantor ensures that the title will be good against the title claims of third parties. D) The grantor promises to obtain and deliver any instrument needed to make the title good.
A seller signed a 90-day listing agreement with a professional. Two weeks later, before any offers could be presented, the seller was killed in an accident. What is the present status of the listing?
A) The listing agreement was terminated automatically when the seller died. B) Because the seller's intention to sell was clearly defined, the listing agreement is still in effect, and the real estate professional may proceed to market the property on behalf of the seller's estate. C) The listing agreement is binding on the seller's estate only if the real estate professional can produce an offer to purchase the property within the remainder of the listing period. D) The listing agreement is binding on the seller's estate for the remainder of the 90 days.
Olivia conveys property to Nicholas with a deed. Nicholas then recorded the deed. When did title to the property actually transfer to Nicholas?
A) Upon delivery and acceptance of the deed B) Upon the delivery of consideration C) Upon recording of the deed D) Upon delivery and acceptance of the contract
Which of the following is a duty charged to the Board of Real Estate Brokers and Salespersons under the Occupational Code?
A) Verifying compliance with environmental laws B) Investigating fair housing complaints C) Overseeing real estate closings D) Assessing penalties
A real estate professional who represents the seller is showing a house to a prospective buyer-customer. The real estate professional knows that the house has water problems in the basement. Which of the following is TRUE?
A) Withholding the information prevents the buyer from making an informed decision. B) Disclosing the information could create a fiduciary relationship with the buyer. C) Withholding the information properly protects the confidence of the seller. D) Disclosing the information violates the real estate professional's fiduciary duty to the seller.
When the broker's license of the principal associate broker, who is the sole principal associate broker for the company, is revoked,
A) all of the salespeople in the company have 30 days to wrap up their real estate activities and find a new broker. B) all licensees in the company are placed on probation. C) the licenses of all salespeople and associate brokers are automatically suspended. this one D) the salespeople and associate brokers must attend an informal conference.
Under which of the following types of leases must a lessee pay some or all of the landlord's property expenses?
Net lease
When appraisers use the GRM (gross rent multiplier), they would consider which of the following?
Rental income and market price
Which of the following BEST defines the law of agency?
Rules of law that apply to the responsibilities of a person who acts as agent for another
A man's house has been listed for sale for more than one year and he is very anxious to move into a retirement community. A real estate professional, who is a subagent of the seller, tells a prospective buyer to make a low offer because she is sure that the seller will accept it. Regarding the real estate professional's conduct, which of the following i is FALSE
She acted appropriately to sell the seller's property
Which of the following types of loans require interest-only payments with a lump sum balloon payment at the end?
Straight
A real estate professional is selling a home to a buyer and told her that the foundation was "solid as a rock" when he knew for a fact that it was slowly sinking into the landfill on which it was built. Now that the sale is completed, which of the following is LEAST likely to happen to the real estate professional?
Successful defense against all charges based on loyalty to his client-seller
For land to be taken by the government under its right of eminent domain, which of the following must apply?
The taking must be for a public purpose
Which of the following is FALSE about contingencies?
They create a contract that is unenforceable
Which of the following laws requires all advertisements that reference mortgage financing terms to contain certain disclosures?
Truth in Lending Act