examsmart SC Real Estate exam

A home sold for $23,000. The buyers paid closing costs of 6% and taxes and insurance of $299. Upon what price was the commission rate computed?

$23,000 The commission is usually figured as a percentage of the sale price.

An easement giving a person the right of ingress and egress would be BEST classified as an: 1. appurtenance 2. emblements 3. license 4. encroachment

1. appurtenance An "appurtenant" easement gives a neighboring property owner the right to go in and out (ingress and egress). "Emblements" (2) are growing crops that belong to the person who planted and tended them. "License" (3) is permission to use the property of another but can be revoked at any time (unlike an easement). An "encroachment" (4) is an improvement that extends across the property line (such as a fence or tree limb).

Under the Federal Fair Housing Law, which of the following items qualifies as a handicap? 1. A person unable to raise enough money for the rent 2. A person who is mentally or physically handicapped 3. A borrower who was unable to get a loan 4. a person you takes illegal substances

2. A person who is mentally or physically handicapped Mental or physical handicaps (2) qualify. (1) & (3) make life difficult but are not handicaps as defined by the fair housing law. Illegal drug use (4) is specifically defined under the law as NOT being a handicap.

The best way to estimate value for a residential property is with 1. the owners opinion 2. an appraisal 3. what the owner originally paid factoring in a multiplier 4. an estoppel certificate

2. an appraisal (2) An appraisal is used to estimate the value of property. (1) The owner`s opinion is typically inflated. (3) What the owner originally paid does not have any bearing on the current market value. (4) An estoppel certificate is used to state the current loan balance.

A condominium development with a long standing established homes association would be governed by the: 1. long established tenants 2. association of unit owners 3. developer of condominium 4. state licensing agent

2. association of unit owners (2) The unit owners govern themselves through a homes association. (1) There are no tenants in a condominium. (3) The developer establishes the homes association to oversee the condominium. (4) The state licensing agencies don`t govern condominiums.

A buyer's agent presents an offer to a seller. The buyer's agent is not acting as a dual agent. In relation to the buyer's agent, the seller would be a(n): 1. client 2. customer 3. principal 4. prospect

2. customer (2) Since the buyer`s agent represents the buyer only and not the seller, the buyer would be the client and the seller would be the customer (one an agent works with but does NOT represent). (1) A client and (3) principal mean the same thing. Here, the buyer would be the client as the agent represents the buyer. (4) The word prospect is a general term and does not really apply.

When an owner takes the original cost of real property and takes tax deductions over the life of the property, this is referred to as: 1. appreciation 2. depreciation 3. physical life 4. economic life

2. depreciation An owner can depreciate for tax purposes real property investments based on the cost of the property (2). Property going up in value refers to appreciation (1). The physical life of a property is the number of years an item is physically sound (3). The economic life of a property is the number of years of profitability (4).

A property that contains asbestos insulation wrapped around pipes would be best remedied by 1. removing the pipes 2. encapsulation 3. replacing the pipes 4. installing a water filtering system

2. encapsulation (B) The best way to solve pipes wrapped with asbestos (which may be a health hazard) is to encapsulate, i.e., seal or enclose the insulation. (A) Removing the insulation might make things worse as the asbestos particles could become friable or airborne. (C) Replacing the pipes would once again disturb the asbestos. (D) A water filtering system would not deal with the issue at hand.

The reason a lender charges discount points is to: 1. cover the costs of initiating the loan 2. increase the effective yield to the lender 3. offset selling the loan at a premium 4. account for the time value of money

2. increase the effective yield to the lender (2) Discount points do increase the effective yield to the lender in that the loan is more valuable with discount points included. (1) A loan origination fee is charged to cover the costs of initiating the loan. (3) Discount points do help cover loans being sold at a discount, not a premium. (4) The time value of money has nothing to do with discount points.

A deed restriction would apply to the 1. current owner only 2. present and future owners 3. original developer 4. home association

2. present and future owners (2) A deed restriction is recorded on the public record and is binding on all current and future owners. (1) The restriction would not be for the present owner only. (3) The original developer normally establishes the deed restrictions. (4) The homes association normally can bring an action asking for enforcement of the deed restrictions.

Water rights are generally covered under federal guidelines. Some states cover water rights under riparian and littoral laws. In the absence of specific guidelines, water rights are generally governed by: 1. eminent domain 2. prior appropriation 3. express reservation 4. police power

2. prior appropriation (2) Prior appropriation is a water law that says first in time is first in rights; the owner has an exclusive right to divert water for specific uses. (1) Eminent domain is the right of the government to take property for public good. (3) Express reservation is not a valid term. (4) Police power deals with keeping things in order, such as zoning.

A buyer obtained a $60,000 loan at 11% interest for 30 years, with monthly principal and interest payments of $571.39. What was the total amount of interest paid over the 30 year term? 1. $60,000 2. $145,700 3. $198,000 4. $205,702

2. $145,700 $571.39 (P&I/mo) X 12 months X 30 years = $205,700.40 (P&I paid over 30 years); $205,700.40 (P&I) - $60,000 (principal paid back) = $145,700.40 (interest paid)

What is the purpose of an appraisal? 1. This is a scientific inexact way of determining value 2. To give an average value derived from various sources 3. to give a determination of value 4. to give an estimate of value

4. to give an estimate of value (4) An appraisal is used to estimate value only. (1) An appraisal is not an inexact science and does not determine value, only estimates. (2) An appraiser does not usually average items together to come up with a value; an appraiser normally does analysis of comparable properties lending more weight to some than others. (3) Buyers determine value - appraisers estimate value.

In a contract for deed, when does the buyer receive the deed to the property? 1. when the contract is signed 2. when the deed is recorded 3. When the contract is recorded 4. when the payment obligation is paid in full

4. when the payment obligation is paid in full (4) In a contract for deed, the buyer only receives the deed to the property after the entire contract sale price has been fully paid. (1) When the contract is signed, the buyer receives an equitable title. (2) Recording of the deed provides the public with constructive notice. (3) The recording of the contract for deed is to protect both buyer and seller as the public has been served notice of this transaction.

What does a person have who can sign legal papers for another person?

power of attorney Power of attorney is what a person "has" who can sign legal documents for another person and is called an attorney in fact (1). Ostensible (3) is a form of apparent agency. Executor (4) carries out a will.

If a salesperson showed several houses to a buyer and told the buyer one home in particular was the best buy, what type of agency might have been created? 1. implied 2. expressed 3. general 4. universal

1. implied By telling a buyer that a property is better, the agent may have "implied" to the buyer that the agent was working for the buyer. It would take an actual agreement to have an expressed (2) agency. Universal (4)/general (3) are types of agents and deals with the scope of their authority.

A violation of the federal fair housing laws 1. may be a criminal act 2. must involve damages 3. is permissible under certain circumstances 4. must be filed with HUD within three years of the act

1. may be a criminal act (1) Violation of the federal fair housing laws may be a criminal act if a person engages in threats or intimidation. (2) A violation may occur even if actual damages are not an issue. (3) A violation of federal fair housing laws is never permissible. (4) A complaint filed with HUD must be within 1 year of the act.

Three properties all built side by side and identical to each other were for sale. Assuming constant demand, which one would sell for the lowest price? 1. the one sold first 2. the one sold second 3. the one sold last 4. here is not enough information to determine the answer

1. the one sold first (1) The principal of substitution says a property is only worth what I can get another for just like it. In other words, all things being equal, the lowest priced property would sell first. (2) The one sold second or (3) last must have been at a higher price, not lower. (4) The answer will never be something like this - not enough information.

A person sold a property for $125,000 which represented an increase of 25% over the original cost. What was the original cost? 1. $93,750 2. $100,000 3. $105,500 4. $112.00

2. $100,000 $125,000 divided by 125% = $100,000 for original cost.

A person sold a property for $125,000 which represented an increase of 25% over the original cost. What was the original cost? 1. $93,750 2. $100,000 3. $105,500 4. $112.000

2. $100,000 $125,000 divided by 125% = $100,000 for original cost.

Carpeting costs were $19.95 per square yard plus an extra $5.00 per square yard for padding. If a room measured 22.5' by 15', what would be the total cost to install the carpet?

2. $935.63 22.5` x 15' = 337.50 square feet / 9 = 37.50 square yards x $24.95 = $935.63

A property purchased for $115,000 had a capitalization rate of 12%. What would be the monthly net income on this property? 1. $ 1,150 2. $ 3,550 3. $ 6,220 4. $13,800

1. $ 1,150 $115,000 x 12% = $13,800 annual net income / 12 months = $1,150 monthly

A property was purchased for $43,950 with an assessed value of $39,950. If the tax rate was $3 per $1000, what were the annual taxes? 1. $119.85 2. $131.85 3. $157.98 4. $180.00

1. $119.85 Assessed value of $39,950 / $1,000 = 39.95 thousands x $3 per $1,000 = $119.85.

A handicapped person asked the landlord for permission to alter the apartment. Which of the following is true regarding the costs of changing the apartment back after the termination of the lease? 1. The landlord can require that it be restored as it was before the alteration 2. The landlord may raise the security deposit to cover renovation costs 3. The landlord can require the tenant to move out if not comfortable 4. The federal government will reimburse the landlord for any renovation costs if the landlord is unable to re-rent it to another handicapped person

1. The landlord can require that it be restored as it was before the alteration The landlord must allow the handicapped person (at their own expense) to make reasonable alterations. But, they are required to return the unit to its original condition (at their expense) at the end (usually). Security deposits (2) cannot be increased to cover the renovation.

Which of the following elements must be in a contract to have a valid contract? 1. a clear description of the land 2. earnest money 3. A clear description of the land, house and improvements 4. good faith estimate of closing costs

1. a clear description of the land The land must be clearly described in order for the contract to be valid. There may not even be any improvements (2) so it is not necessary for the validity of a contract. Earnest money (3) is not required. Note that earnest money is NOT the consideration for the contract. A good faith estimate (4) is given by a lender to a borrower when loan application is made.

What is the main difference between a freehold estate and a non-freehold estate? 1. a freehold estate always involves ownership 2. A freehold estate ends when a life estate terminates 3. A freehold estate is always inheritable 4. A freehold estate is for a fixed period of time

1. a freehold estate always involves ownership (1) The word freehold means ownership of some kind. A non-freehold estate is a leasing situation. (2) A life estate is a type of freehold estate. The freehold estate, however, doesn`t end with the termination of the life estate. (3) A freehold estate is not always inheritable, such as a life estate is a freehold estate but is non-inheritable. (4) A freehold estate is not for a fixed period of time - a leasehold estate is, however.

CERCLA would normally apply to which of the following situations? 1. a residential property with a buried oil tank 2. A buyer who was discriminated against based on race in obtaining a loan from a lender 3. A person was discriminated against in buying property based on national origin 4. A lender was loaning money to a borrower with an excessive high interest rate

1. a residential property with a buried oil tank (A) CERCLA (Comprehensive Environmental Response, Compensation and Liability Act) deals with prohibiting of dumping hazardous waste on property, such as a buried oil tank. (B) The Equal Credit Opportunity Act (ECOA) deals with credit discrimination. (C) Fair Housing laws deal with discrimination in buying a property. (D) Usury laws deal with making loans at excessively high rates.

A title insurance policy lists: 1. all recorded defects against the title 2. all owners 3. any transaction the affected the title 4. any mortgage ever against the property

1. all recorded defects against the title (1) A title insurance policy does list any defects against title that have been recorded. (2) All owners, (3) any transaction that affects title and (4) any mortgage ever against the property are all incorrect as these items may never have been recorded. A title policy just covers issues that have been recorded.

At the end of the loan term, an amortized note left a loan balance to be paid off. Which of the following terms BEST describes this type of note? 1. balloon 2. fully amortized note 3. open-end mortgage 4. construction loan

1. balloon A balloon payment is the final, larger payment which pays off the loan. A fully amortized loan (2) is paid in equal payments (i.e. no balloon required). An open end (3) loan allows a borrower to "reborrow" money after paying part of the loan back. Construction loans (4) are used to pay for the cost of building.

Three agents made listing proposals to a seller. The first agent did a market analysis and came up with a price of $179,000. The second agent did a market analysis and came up with a price of $181,000. The third agent did not do a market analysis and told the seller it should sell for around $198,000. The third agent did get the listing, but the property sold for $174,000. The third agent violated the duty of: 1. care 2. loyalty 3. notice 4. accounting

1. care (1) The duty of care is using knowledge and skill. By not doing a market analysis, the agent hurt the seller. (2) Loyalty is doing what is best overall for a client. (3) Notice is keeping the client informed. (4) Accounting is for actions and earnest money, etc. Although all are fairly similar, the issue of care (knowledge and skill) was the most violated as an agent should know to do a market analysis to protect the seller.

A foreclosure on a property is taken by: 1. court action 2. adverse possession 3. a creditor 4. an executor

1. court action (1) A foreclosure is ordered through the court system. (2) Adverse possession deals with squatters rights in legally stealing rights to property. (3) A creditor cannot simply take property, but rather must go through court for relief. (4) An executor is a person named in a will to carry out the wishes of the deceased.

A developer would like to restrict the usage of the land in a particular development. He would do this through a: 1. covenant in a deed 2. city restriction c. deed of trust d. mortgage

1. covenant in a deed (1) A deed covenant or deed restriction is used by private parties to restrict certain land uses, such as certain types of fences. (2) A city restriction would normally be a zoning ordinance. (3) A deed of trust and (4) mortgage are documents used for security of debts.

An appraiser considers the conditions of a neighborhood to determine: 1. economic obsolescence 2. functional obsolescence 3. curable obsolescence 4. physical obsolescence

1. economic obsolescence Economic (1) obsolescence refers to factors OUTSIDE the property lines that lower the value (hence the neighborhood). Functional (2) refers to factors INSIDE the property lines. Physical (4) refers to lowering of value due to wear and tear. Curable (3) is not a type of obsolescence.

A property manager's two main objectives are to maintain the value of the property and: 1. generate and produce income from the property 2. minimize expenses 3. avoid lawsuits for the owner 4. get good tenants to occupy the space

1. generate and produce income from the property (1) A property manager`s job is to produce the best income for the property being managed. While (2) minimizing expenses, (3) avoiding lawsuits and (4) getting good tenants are good ideas, it is not the manager's main job.

Which of the following would be a good example of a person being protected under the federal fair housing laws? 1. A minority person being steered to minority neighborhoods only 2. A blind person with a seeing eye dog being able to rent an apartment that has a no pets policy 3. A property manager refusing to rent to a person with small children 4. A lender refusing to make loans in questionable areas

2. A blind person with a seeing eye dog being able to rent an apartment that has a no pets policy (2) Allowing a blind person a seeing eye dog when a no pets policy is in place is an example of a protection of fair housing laws. The other answers are violations of fair housing laws; (1) steering is illegal, (3) refusing rent based on children violates familial status category and (4) lenders refusing to make loans would be an example of redlining.

A purchase agreement was accepted with earnest money given as part of the contract. The broker deposited the earnest money in the broker's escrow account. How would the earnest money appear on the closing statement? 1. Debit buyer, no entry for seller 2. Credit buyer, no entry for seller 3. Debit buyer and credit seller 4. Credit seller, no entry for the buyer

2. Credit buyer, no entry for seller (2) The earnest money is a credit to the buyer only and does not appear on the seller`s statement. The seller gets credited for the full sale price of the property. This credit to the buyer simply shows the buyer receives the earnest money and is applying this amount to the purchase price.

Which of the following would be true regarding special assessment taxes? 1. they are also called ad valorem taxes 2. If not paid, the property could be sold at a foreclosure sale 3. they are paid one time at closing 4. They are generally for the good of the entire community in raising money for police and fire protection

2. If not paid, the property could be sold at a foreclosure sale (2) A special assessment tax is a real estate tax and if not paid, the property could be auctioned off. (2) Ad valorem (based on value) taxes are for the general assessment tax, not a special assessment tax. (3) Special assessment taxes are normally paid each year for a certain number of years by the owners of the properties that have been improved. (4) Special assessment taxes are normally to cover the cost of sewers and sidewalks whereby general assessment taxes are to cover public good items such as police and fire protection.

Two brokers from two different companies get together and decided to charge the same commission rate. This may be a violation of the: 1. federal fair housing law 2. Sherman Anti-Trust law 3. Equal Credit Opportunity Act 4. Truth-in-Lending Laws

2. Sherman Anti-Trust law (2) The Sherman Anti-Trust laws prohibit price fixing, which is what the brokers are doing here. (1) The federal fair housing laws prohibit discrimination on things such as race and religion. (3) The Equal Credit Opportunity Act prohibits lenders from discriminating on things such as race and religion. (4) The Truth-In-Lending laws (Regulation Z) require lenders to disclose all loan costs.

In a life estate situation, what happens to ownership of the property when the life tenant dies? 1. The life tenant's heirs would get the property 2. The current title holder or heirs would get the property 3. The state government would get the property 4. Whoever had the mortgage on the property would get the property

2. The current title holder or heirs would get the property (2) When a life tenant dies, the property goes to the current title holder; either back to the original grantor or a third party remainderman. If the original grantor or remainderman are no longer living, then the heirs would get the property. (1) The tenant`s heirs do not get the property as a life estate is non-inheritable. (3) The state government only gets the property when a person dies with no will and no heirs (escheat). (4) The mortgage holder only has a mortgage against the life estate.

A person builds a building on ground that is leased from a land owner. Which of the following statements would be correct concerning this situation? 1. this is not allowed under federal law 2. when the lease expires, the land owner would own the building 3. It would be easier to get financing this way rather than the land owner and building owner being the same person 4. The land owner would have to notify the building owner if the land was to be sold

2. When the lease expires, the land owner would own the building (2) A person can build a building on leased ground, however, when the lease expires, any improvements made would now belong to the land owner. (1) Ground leases are allowed by law. (3) Financing would be easier if the land owner and building owner were the same person. (4) Any new purchaser would have to honor the current ground lease. Therefore, the land owner is not under legal obligation to notify the building owner.

A single mother with two elementary children wants to lease a space in a condominium. The condominium rents primarily to the elderly and does not lease space to people with children. Ninety percent of the units are occupied by persons 55 years of age or older. Would the condominium be allowed to deny the space to this family? 1. Yes, as the condominium had not previously leased to people with children 2. Yes, as the condominium was protected under the 80% of the units occupied by persons 55 or over fair housing law exception 3. No, as families with children under 18 are a protected class under the federal fair housing laws 4. No, as condominiums must allow all persons available space with the exception of illegal drug addicts

2. Yes, as the condominium was protected under the 80% of the units occupied by persons 55 or over fair housing law exception (2) Under the 1988 Amendments to the Federal Fair Housing Laws, familial status (children under 18) is a protected class. There is an exception for complexes where 80% of the units are occupied by persons 55 years of age or older; in this case, the complex can disallow families with children. (1) Previous lease patterns have no bearing. (3) Familial status is a protected class, but retirement communities can be exempt. (4) Illegal drug addicts are not the only exception under fair housing laws.

Condominium ownership would NOT be used on which of the following? 1. an apartment building 2. a cooperative apartment 3. a townhome 4. an office park

2. a cooperative apartment (2) A cooperative and a condominium are two different things. In a cooperative, the tenants in the apartment own stock in the property and have a proprietary lease. (1) An apartment building could be converted to condominium ownership. (3) Townhouses and (4) an office park could also be condominiums. Owning your own space and sharing common areas is a typical idea of a condominium.

What document would be a condensed history of all records that affect the title? 1. a survey 2. an abstract 3. an affidavit of title 4. a chain of title

2. a survey (2) An abstract is a history of all recorded documents that affect the title. (1) A survey is used to find boundaries and check for encroachments. (3) An affidavit of title is a sworn statement concerning the title. (4) A chain of title is just a list of the owners.

A seller and buyer enter into a sales contract on a property. The seller breaches the agreement causing the buyer to sue for specific performance. If the buyer wins this lawsuit, the seller will have to 1. pay for damages 2. follow through with original contract 3. return the earnest money to the buyer 4. rescind the contract

2. follow through with the original contract (2) Specific performance is court action to force completion. If the court orders this, the seller must complete the original agreement. (1) Damage awards are different than specific performance. (3) Returning the earnest money to the buyer would be normal given the fact that the seller breached the contract. (4) Rescinding the contract is returning the parties to the status quo, or the way they were before the contract was signed.

A seller of a property could NOT transfer marketable unencumbered title. What should the broker do with any earnest money involved in the transaction? 1. give to the seller 2. give it to the buyer 3. Pay the broker's commission and give the balance to the selle 4. Pay for any expenses and give the balance to the buyer

2. give it to the buyer (2) If the seller cannot transfer title, then the seller is in default and any earnest money should be returned to the buyer. (1) The seller is not entitled to the money as the seller is in default. (3) The broker is not entitled to any commission money and the seller is not due the balance. (4) The earnest money is not to pay for any expenses as the seller is in default.

A land contract is also referred to as a(n) 1. right of refusal 2. installment contract 3. option contract 4. listing contract

2. installment contract (2) A land contract is also called an installment contract as well as a contract for deed. (1) A right of first refusal gives a person the first opportunity to buy if a property is put up for sale. (3) An option contract gives a person the right to buy at a set price for a definite time period in the future. (4) A listing contract is between a seller and broker allowing the broker to try and sell the property.

Which of the following deeds would give the seller the LEAST amount of liability? 1. bargain and sale 2. quitclaim 3. special warranty 4. general warranty

2. quitclaim (2) There are no promises made whatsoever with a quitclaim deed; therefore, the seller has the least amount of liability. (1) A seller makes the one promise of ownership with a bargain and sale deed. (3) With a special warranty deed, the seller makes promises to the buyer only covering the time frame the seller has owned the property. (4) A general warranty deed gives the seller the most liability as the seller makes promises to the buyer covering items during and prior to the seller`s ownership period.

An appraiser should lend most validity to the market data approach on which of the following properties? 1. oil refinery 2. vacant land 3. gas station 4. hotel

2. vacant land A market data approach looks at similar properties that have sold to determine value. It is used on vacant land (2) and residential homes. Oil refineries (1), gas stations (3) and hotels (4) would probably use the income approach.

A three year old property appraised for $98,000. If it depreciated an average of 10% per year, what was the original value of the property? 1. $68,600 2. $132,000 3. $140,000 4. $326,667

3. $140,000 $98,000 represents 70% of the original value (10% averaged over 3 years). $98,000 / 70% = $140,000.

A property had a list price of $164,000, an actual sale price of $158,000 and a $124,000 loan. If the transfer fee was $3 per $1,000, what was the fee? 1. $250 2. 372 3. $474 4. $492

3. $474 $158,000 / $1,000 = 158 x $3 = $474 The transfer fee is based on sale price

A person with a mental impairment would like to enter into a contract for the purchase of a piece of real estate. Which of the following statements would be true? 1. The person can sign the contract if a psychiatrist says okay 2. the state would have to provide housing for this person 3. A person appointed by the court as a guardian can sign the contract on behalf of the mentally impaired person 4. this person would never be able to purchase a property

3. A person appointed by the court as a guardian can sign the contract on behalf of the mentally impaired person (3) A person with a mental handicap is still a protected class and cannot be discriminated against in real estate transactions. However, a guardian would have to sign the contract. (1) A mentally impaired person has no legal capacity to contract. (2) The state does not have to provide housing. (4) This person can purchase property with a proper appointed guardian.

XYZ listed a property for sale and put the listing in the multiple listing service (MLS). ABC, working with a prospective buyer, cooperated through the MLS and showed the property. What is true? 1. XYZ represents the sellers and buyers 2. XYZ represents the buyers only 3. ABC is a subagent of XYZ 4. XYZ is a subagent of ABC

3. ABC is a subagent of XYZ (3) ABC (selling agent) is working as a subagent for XYZ (listing agent) and the seller. (1) & (2) Prospective buyer means customer, so no one is representing the buyer. (4) This answer is backwards, as ABC is actually a subagent of XYZ (listing company).

Who oversees and administers the provisions of the Real Estate Settlement Procedures Act (RESPA)? 1. fbi 2. cia 3. CFPB 4. sec

3. CFPB (3) The Consumer Financial Protection Bureau (CFPB) replaced Housing and Urban Development (HUD) for overseeing the RESPA guidelines. (1) The FBI and (2) CIA protect our country. (4) The SEC (Securities and Exchange Commission) oversees transaction involving securities, such as stocks and bonds.

A seller and buyer have agreed to a sales contract. The buyer backs out of the agreement. Which of the following could the seller NOT do? 1. sue for specific performance 2. rescind the agreement 3. File for a writ of execution 4. sue for compensatory damages

3. File for a writ of execution (3) A writ of execution is typically where the court orders a sheriff to seize property and sell it to satisfy a judgment. The seller could (1) sue for specific performance (court action to force completion), (2) rescind the agreement (return the parties to the status quo - the way they were before), or (4) sue for damages.

An agent took a listing in which the seller said to sell it in "as is" condition. The agent then found a major structural flaw in the property. Which of the following BEST describes what the agent should do? 1. tell the buyer the property is sold "as is" 2. NOT reveal the flaw unless asked to by the buyer 3. Inform the buyer of the flaw 4. NOT reveal the flaw as the agent is a fiduciary of the seller

3. Inform the buyer of the flaw A broker must disclose all material defects. Selling a property "as is" does not relieve the broker of the obligation to disclose material defects. The buyer has a right to know about the defects in order to determine whether to accept the property "as is".

Two persons own a property under tenancy in common. Which statement would be correct assuming one of the owners dies? 1. The probate court would have to make the final determination 2. The other owner would receive ownership under right of survivorship 3. The heirs of the deceased would inherit the property 4. The administrator would determine the rightful owner

3. The heirs of the deceased would inherit the property (3) Under tenancy in common, when one dies, the heirs receive the property. (1) Probate court makes a determination only if a person dies without a valid will. (2) Joint tenancy carries the right of survivorship, meaning if one dies, the ownership goes to the surviving owners. (4) The administrator is court appointed to oversee the distribution per the probate court judge.

What is the purpose of the federal anti-trust law? 1. to make sure consumers always pay the lowest price 2. To allow businesses to cooperate with each other in setting minimum prices that allow for a livable wage for employees 3. To ensure a fair and competitive business environment in the marketplace 4. to mandate maximum commissions that real estate agents can charge

3. To ensure a fair and competitive business environment in the marketplace (C) Federal anit-trust laws, such as not allowing companies to price fix, are intended to protect the consumer by ensuring a fair and competitive marketplace. Anti-trust laws are NOT in place to (A) make sure consumers pay the lowest price, (B) set minimum prices or (D) mandate maximum commissions that agents can charge.

The main difference between a cooperative and condominium is that 1. a cooperative owner obtains fee simple title to the unit 2. a cooperative owner pays their own taxes and mortgage on the unit 3. a condominium owner owns and finances their own unit 4. a condominium owner receives a proprietary lease

3. a condominium owner owns and finances their own unit (3) A condominium owner does own and finance their own space. (1) A condominium owner receives fee simple title to a unit, not a cooperative owner. (2) A condominium owner pays their own taxes and mortgage, not a cooperative owner. (4) A cooperative owner receives a proprietary lease, not a condominium owner.

When a change is needed in a contract, the best way to accomplish this would be with a(n): 1. verbal agreement 2. addendum 3. amendment 4. new contract

3. amendment (3) An amendment is used to change an item in a contract. (1) A verbal agreement would not protect the parties. (2) An addendum is used to add something to a contract, not change - an amendment is used for a change. (4) Rewriting a new contract is unnecessary.

Who does a salesperson owe loyalty to? 1. buyer 2. seller 3. broker 4. bank

3. broker The salesperson owes loyalty to the broker. The salesperson would then be operating as a sub-agent of either the seller or buyer, depending on which the broker is representing.

A developer wants to sell a lot in a tract of land owned by the developer. The current interest rates are 13%. The developer would like to pay extra money to the lender to allow the buyer to obtain a reduced interest rate. This type of arrangement would be known as a(n): 1. loan origination fee 2. secondary mortgage activity 3. buy down mortgage 4. tying contract

3. buydown mortgage (3) A buydown mortgage is where the seller pays extra money to buy down the interest rate on behalf of the buyer (similar to paying discount points). (1) A loan origination fee is for the paperwork costs of initiating the loan. (2) Selling already originated notes and mortgages is a secondary mortgage market activity. (4) A tying contract is tying two unrelated real estate transactions together, such as requiring a builder who buys a lot in an area to list the finished build job with a particular broker.

The main difference between joint tenancy and tenancy in common is that joint tenancy: 1. is inheritable to the heirs 2. has a right of transfer 3. carries the right of survivorship 4. has unity of possession

3. carries the right of survivorship (3) Joint tenancy does carry the right of survivorship which means if an owner dies, the surviving owners receive that person`s share. (1) Tenancy in common is inheritable to the heirs, not joint tenancy. (2) Both joint tenancy and tenancy in common allow for a right of transfer. (4) While joint tenancy does have a unity of possession, this is not the main difference.

A buyer made an offer on a property a broker had listed. The broker presented the offer to the seller. While the seller was still considering the offer, the buyer contacted and informed the broker that the buyer wanted to withdraw the offer. The broker should: 1. tell the buyer the offer cannot be withdrawn 2. tell the seller to accept the offer anyway 3. continue to market the property for the seller 4. tell the seller to sue the buyer for specific performance

3. continue to market the property for the seller An offer can always be withdrawn up until acceptance; therefore, the broker will continue to market the property for other possible buyers (3). The offer can be withdrawn by the buyer (1). The seller cannot accept the offer once the buyer has withdrawn (2). The seller cannot sue for specific performance as no contract had been agreed to by all parties (4).

Which of the following items would NOT always be part of a real estate purchase contract? 1. competent parties 2. offer and acceptance 3. earnest money 4. consideration

3. earnest money Earnest money is not required to have a contract. Remember that earnest money is not the consideration itself. The promise to pay the sale price is the consideration given by the buyer.

An agency agreement between a seller and broker is normally created with an: 1. implied agreement 2. offer and acceptance agreement 3. expressed agreement 4. option agreement

3. expressed agreement (3) An expressed contract is where both parties clearly state their intentions. A seller and broker normally agree in writing on a listing contract where all obligations by both parties are understood. (1) An implied contract is created by one`s actions. (2) An offer and acceptance agreement is normally between a seller and a buyer for the purchase of a property. (4) An option agreement gives a possible buyer the right to purchase at a later date for a set price.

A property manager generally does all EXCEPT: 1. marketing 2. keep records 3. give legal advice 4. pay taxes

3. give legal advice Only an attorney can give legal advice. (1), (2) & (4) are all property management functions.

A salesperson, in doing a competitive market analysis (CMA) for a seller, should NOT tell the seller: 1. what the property might sell for in price 2. the probable list price for the area 3. the maximum selling price 4. that this is a professional appraisal

4. that this is a professional appraisal (4) Only licensed appraisers give professional appraisals. A salesperson should disclose to a seller (1) what the property might bring in price, (2) a price range for the area and (3) a maximum selling price.

A seller's agent has a property listed. A buyer would like to make an offer on the property but wants to include an inspection contingency. In order to protect the seller, the listing agent should: 1. discourage these types of contingencies 2. refuse to take such an offer to the seller 3. make the inspection contingency for the shortest time frame possible 4. only allow contingencies based on financial issues

3. make the inspection contingency for the shortest time frame possible (3) A buyer wanting an inspection contingency is normal. However, it is reasonable to insist on a short time frame for the inspection. If the buyer backs out based on the inspection, the seller can put the property back on the market quickly. (1) Discouraging contingencies is not wise. (2) Refusing to take an offer to a seller is illegal. (4) Contingencies don`t have to be based on financial issues only.

A buyer was moving to a city. The buyer wanted to wait a little while and look around the city before purchasing a home. In the meantime, the buyer wanted to just rent. The best thing for this buyer would be 1. lease option 2. lease purchase 3. month-to-month lease 4. tenancy at sufferance

3. month-to-month lease (3) A month-to-month lease would give the buyer the most flexibility with a short term lease while looking for a house to buy. (1) A lease option would require the buyer to select a property immediately that the buyer might want to buy later. However, this minimizes the buyer as far as looking around the city for the best buy. (2) A lease purchase would immediately bind the buyer. (4) A tenancy at sufferance is where the tenant stays over on a lease without permission.

Which of the following would NOT be an appurtenance? 1. garage apartment 2. easement on adjacent property 3. mortgage lien 4. pipeline on a property

3. mortgage lien (3) A mortgage lien is an encumbrance, not an appurtenance. An appurtenance is a right, privilege or improvement that runs with the land, such as (1) a garage apartment, (2) an easement and (4) a pipeline on a property.

A listing agent has received several offers on a listed property all at the same time. The listing agent should: 1. present the offers in the order recieved 2. present the best offer first 3. present all offers together at the same time 4. present only the offers with pre-approved buyers

3. present all offers together at the same time (3) An agent must present all offers together at the same time to allow the seller to choose which one is best. (1) An agent cannot present them in the order received; otherwise, seller might choose first one and not realize another one might be better. (2) An agent must present them all together, not the best one first or (4) only the offers with pre-approved buyers.

Private land uses are normally dictated by 1. title insurance 2. appraiser 3. private deed covenants 4. judges

3. private deed covenants (3) Deed restrictions or covenants are placed by private parties (normally developers) dictating uses of the property, e.g., certain types of roofs and fences. (1) Title insurance insures a person`s title rights in a property. (2) Appraisers are used to estimate the value of a property. (4) Judges don't dictate private land uses.

With the exception of real estate taxes, liens generally are repaid at a foreclosure sale based on the: 1. dollar amount of the lien 2. actual need of the creditors involved 3. recording date of the lien 4. original date of the agreement that led to the lien being filed

3. recording date of the lien (3) Liens are paid off in order of recording date with the exception of real taxes (taxes always take priority). (1) The dollar amount, (2) creditors need or (4) original date of agreement have nothing to do with the order of repayment.

From whom does a salesperson receive a commission? 1. owner 2. Multiple listing service (MLS) 3. the salesperson own broker 4. a cooperating broker

3. the salesperson own broker A salesperson can never receive payment from anyone other than the salesperson`s own broker.

Which of the following statements BEST describes the usual legal effect of a contract signed between an adult and a minor? 1. void on its face 2. binding by both parties 3. voidable by the minor 4. voidable by either party

3. voidable by the minor It is voidable by the injured party (minor). We assume the minor is extremely vulnerable to being taking advantage of by an adult. Therefore, although the adult is bound, the minor may void it. It is not automatically void (1) as it may be in the best interest of the minor to complete it.

A buyer purchased a house obtaining a new loan with a 70 to 30 loan to value ratio. The annual interest rate was 9 3/4%. The first month's interest was $583.33. What was the sale price of the house? 1. $ 43,520 2. $ 62,491 3. $ 71,794 4. $102,564

4. $102,564 $583.33 (int/mo) X 12 months = $6,999.96 (int/yr) / 9.75% = $71,794.46 (loan); $71,794.46 (loan) / 70% = $102,563.52

Which of the following would NOT be a protected class under the federal fair housing laws? 1. a person with children under 18 2. A person with a mental handicap 3. a person with different national origin 4. A person currently using illegal substances

4. A person currently using illegal substances (4) A person currently addicted to illegal substances is NOT a protected class under the federal fair housing laws. (1) A person with children, (2) a mental handicap, or (3) from a different national origin are all protected classes.

An exclusive right to sell listing is given by an owner to a broker. Which of the following would be required of the owner? 1. To convey the property if a buyer offers full list price 2. To put the listing in the multiple listing service 3. Pay the broker a commission only if the broker can prove procuring cause 4. Pay the broker a commission upon completion of the sale of property

4. Pay the broker a commission upon completion of the sale of property (4) With an exclusive right to sell listing, the listing broker is the sole person authorized to sell and would be due a commission upon the sale of the property. (1) The seller does NOT have to sell to a buyer who offers full price, as the seller has the right to reject any offer (seller is the offeree). (2) The owner must authorize the listing to go into the multiple listing service. (3) The broker does NOT have to prove procuring cause (found buyer) as the broker gets paid regardless under exclusive right to sell no matter who sells.

A mortgage contingency usually includes all of the following items EXCEPT: 1. the amount of the mortgage 2. commitment date 3. maximum interest rate 4. the name of the lending institute

4. the name of the lending institute A contingency allows a party to void a contract upon some event happening or failing to happen. The buyer usually writes the contract contingent upon a loan of a particular amount (1), by a particular date (2), at a particular interest rate (3). At the time of contract, the buyer usually does not know who the lender will be (4).

Under the federal fair housing laws, which of the following would NOT be discriminatory? 1. Refusing to rent to a person because of national origin 2. refusing to rent to a person with children 3. Refusing to show a minority buyer homes in a white neighborhood 4. Requiring a tenant to remove a ramp from the deck of an apartment at the end of a lease

4. Requiring a tenant to remove a ramp from the deck of an apartment at the end of a lease (4) One can require a tenant to put the property back in the original condition (the exception being a handicapped tenant can widen doorways without having to put them back narrow at the end of a lease). (1) Refusing to rent to a person based on national origin or (2) having children is discriminatory. (3) Refusing to show buyers certain areas is steering and is a violation.

Two brothers wanted to purchase a property for their parents to live in during their retirement years. The brothers wanted to take title in a manner that limited their tax liability. As an agent helping the brothers in this purchase, what would you recommend? 1. severalty 2. tenancy in common 3. joint tenancy 4. That the brothers seek advice from an attorney

4. That the brothers seek advice from an attorney (4) Any type of questions on how to take title should be referred to an attorney. (1) Severalty is ownership by one person or entity. (2) Tenancy in common allows the heirs to inherit the property upon an owners death. (3) Joint tenancy carries the right of survivorship stating that upon the death of an owner, the ownership goes to the surviving owners.

A broker had a piece of property listed for $90,000. A buyer submitted an $89,000 offer. Which of the following statements is correct regarding this situation? 1. The owner must accept or reject the offer in writing 2. The buyer cannot revoke the offer until it has been accepted or rejected 3. The broker should NOT present such a low offer 4. The buyer can revoke the offer until it is accepted

4. The buyer can revoke the offer until it is accepted An offeror can always revoke an offer before acceptance. The owner is not required to reject an offer in writing (they could tear it up, etc.). The broker must present all offers.

Which of the following properties would an appraiser NOT depreciate? 1. improvements on real property over 50 years old 2. Improvements on real property less than 10 years old 3. Rental property of less than 5 rental units 4. Vacant land to be used for commercial property

4. Vacant land to be used for commercial property Land does NOT depreciate due to passage of time; only improvements depreciate. Land value is estimated by what the current market will bring (4). Any improvements on land will depreciate due to passage of time (1), (2) and (3).

A loan where each payment makes contributions toward principal and interest is a(n): 1. straight loan 2. package loan 3. term loan 4. amortized loan

4. amortized loan An "amortized" loan has payments going to interest and principal. A "straight loan" (1) has payments only going to interest (principal paid in a balloon at end). A "package" mortgage (2) uses real and personal property as security. A "term" loan (3) is another name for a straight note.

With regards to water rights and prior appropriation concepts, which of the following terms might be applicable? 1. survey 2. estoppel certificate 3. covenant 4. avulsion

4. avulsion (4) An avulsion is a sudden change in a river or stream where the property boundaries do not change. (1) A survey measures property boundaries and identifies any encroachments. (2) An estoppel certificate states the current loan balance. (3) A covenant or deed restriction is placed by private parties in a deed to control the use of the property, e.g., certain types of fences. avulsion - Sudden transfer; e.g., stream changing channel. With an avulsion, the boundary lines for a property remain the same as they were before the sudden change.

A judgment against a seller has been recorded on the public record. A buyer is interested in purchasing the seller's property but does not know about the judgment. The buyer is said to have: 1. actual notice 2. preventive notice 3. corrective notice 4. constructive notice

4. constructive notice (4) Any item recorded on the public record provides constructive notice to the public; in other words, any member of the public has access to the information. (1) Actual notice is where a person personally is aware of an item. (2) Preventive notice and (3) corrective notice are nonsense terms.

A seller and buyer are awaiting closing on a real estate transaction. The listing agent learns that a zoning change has just taken place on the property. What should the listing agent do? 1. tell the seller only as the seller is the principal 2. Tell the seller and then see if the seller wants this information to be given to the buyer 3. dont tell anyone if the agent deems this information unnecessarily 4. disclose this to all parties in the transaction

4. disclose this to all parties in the transaction (4) This is a material fact and would have to be disclosed to all parties in the transaction, not (1) just the seller. (2) The seller does not make the decision on whether to disclose to the buyer - this must be done by the agent. (3) The agent must disclose all material facts.

Y offers X $60,000 for X's property. Which of the following terms BEST describes the role of X? 1. lessor 2. lessee 3. offeror 4. offeree

4. offeree Y (offeror) is making the offer to X (offeree). There is no lease (1) & (2).

An item in a house that is usually easy and inexpensive to remedy is: 1. a structural foundation issue 2. roof replacement 3. major water leaks in a basement 4. radon gas

4. radon gas (D) Radon gas mitigation is fairly easy and inexpensive to remedy. What is not easy and inexpensive to remedy is (A) a structural foundation problem, (B) a roof replacement or (C) major water leaks in a basement.

An agent is working with buyers wishing to purchase an older home in a deteriorating neighborhood. Both of the buyers have good incomes and are well qualified. The buyers have been turned down by three lenders for a loan on the property. The lenders may be guilty of: 1. steering 2. blockbusting 3. price fixing 4. redlining

4. redlining (4) Redlining is where lenders refuse to make loans in questionable areas. (1) Steering is directing buyers toward areas based on race, religion, etc. (2) Blockbusting is trying to scare persons into selling by saying people of a protected class are moving into the neighborhood. (3) Price fixing is a violation of the Sherman Anti-Trust laws.

What is the purpose of zoning regulations? 1. to allow for taxation on real estate 2. to allow the government to take private property for good 3. To determine the type of construction materials that can be used in a certain area 4. to implement the master land plan

4. to implement the master land plan (4) The master land plan is a plan for a cities future growth. The master land plan lays out areas for residential, commercial, etc., which is why there are zoning regulations to make sure this comes to reality. (1) Zoning and taxation are two separate issues. (2) Eminent domain allows the government to take private property for public good. (3) Building codes determine the type of construction materials that can be used. master land plan- plan for a cities future growth

Where would one look to find out what type of structure is allowed to be built on a certain piece of ground? 1. title policy 2. plat map 3. abstract 4. zoning ordinances

4. zoning ordinances (4) Zoning ordinances stipulate what type properties may be built on each piece of land. (1) A title policy insures against title defects. (2) A plat map records a subdivision on the public record. (3) An abstract is a detailed history of the property.

An investor investing in land needs to understand that this is: 1. a limited liquidity investment 2. an investment where the rate of return does not keep up with inflation 3. an investment that I hardly ever profitable 4. a very expensive investment

a. limited liquidity investment (1) Land investment is limited in liquidity (easily convertible to cash) as it normally takes some time to find a buyer. (2) Land investment can keep up with inflation in many instances. (3) Land investment is quite often profitable. (4) Land investment is not always an expensive investment.