Real estate mock exam 4

A property produces a 12% rate or return. The property's net income is $10,500 per month. Using the capitalization method, what is the property's market value?

10,500x12=126,000 126,000/.12=$1,050,000

A property sells for $100,000. The commission is 6%. The selling brokerage and listing brokerage split the commission 60/40 respectively. Each of the brokerages then splits its share of the commission evenly with its affiliated licensee. How much is the individual listing agent's share of the commission?

100,000x.06=6000 6000x.6=3600 6000x.4=2400 2400/2=$1200

A property's net operating income is $12,000 per year. If an investor wants 12% rate of return, how much is the property worth to him?

12,000/.12=$100,000

A metes and bounds description reads as follows: "Start at the intersection of Route 120 and wells Lane: Proceed due south 1,815 feet, then due east 1,200 feet. Proceed due north 1,815 feet, then return west to point of beginning." How many acres in this property?

1815x1200=2,178,000 2178000/43560=50 acres

In what order would these steps be performed when using the income approach to value? 1: Apply the cap rate to the net income. 2. Estimate the potential gross income. 3. Determine the net operating income. 4. Calculate the effective gross income

2,4,3,1

A mortgage company charges three points on a $250,000 loan. How much is the charge?

250,000x.03=$7,500

The capitalized value of a property is $280,000, the capitalization rate is 10%, and the operating expenses are 76% of the annual gross income. What is the gross income?

280,000x10%=28000 (100-76=24%) 28000/24=$116,667

A property is sold for $340,000. there is a remaining mortgage balance of $68,000, and other closing costs will be $6,400. The seller also must pay a brokerage fee of 6.5%. What will the seller net?

340,000x.065=22,100 340,000-22,100=317900 68,000+6400=74,400 317900-74400=243500

A property is listed for $400,000. The sellers owe $200,000 to the bank on the mortgage, and have agreed to pay a 6% comission. They will also owe $4,000 in other closing costs. If the property sells for full price, what will their net proceeds be?

400,000x.06=24,000 400000-200000-24000-4000=$172,000

A property sold for $410,000. The seller has a mortgage outstanding, with a balance of $170,000 that will need to be paid off. The seller owes his real estate agent a 6% commission. The seller also agreed to pay 3% in discount points as a buydown, to help the buyer receive a loan with a 95% LTV. Finally, the seller must pay another $8,000 in closing costs. After all costs are paid, how much will the seller net?

410,000X.06=24600 410000-170000=240,000 240,000-24600=215,400 410000X.95X.03=11,685 215400-11685=203715 203715-8000=195,715

A mortgage includes a prepayment penalty of 3% of the loan's principal balance at the time of payoff, if the owner pays off the entire principal before a specified date. Monthly amortized principal and interest payments are $1,484.40, with a 5% annual interest rate. The borrower's balance after making the January 1st payment was $44,731.15. On February 1st, he made the next payment as scheduled, and then after that, paid off the entire remaining balance. What would be prepayment penalty be?

44731.15x.05=2236.56 2236.56/12=186.38 1484.40-186.38=1298.02 44731.15-1298.02=43,433.13 43,433.13x.03=1302.99

A one-story house had original dimensions of 60' by 30'. However, a new addition, measuring 24' by 20', was recently added by the owners. The house's total square footage now:

60x30=1800 24x20=480 1800+480=2280

A warehouse is listed at 60 feet long by 90 feet wide, with 15-foot ceilings. The building rents for five cents per cubic foot per month. What is the amount of the money rental payment?

60x90x15=81,000 81,000x.05=$4040

The maximum amount that a bank will lend to a borrower is twice the borrower's annual income. If a borrower's annual income is $76,200, and she wants to buy a house for $247,000, how large a downpayment will she need to come up with?

76200x2=152,400 247000-152400=$94,600

An investor bought four adjacent lots for $88,000 each, and then combined them and divided them into five lots of equal size. These five lots were then sold for $72,000 each. What is the investor's percentage of gross profit?

88,000x4=352,000 72000x5=360,000 360,000-352000=8000 8000/352000=.0227=2.27%

Which of the following would be subject to real property taxes?

A house and the land it's on

What principle underlies competitive market analysis?

A property's selling price can be estimated using selling prices of comparable properties

Which of the following describes a violation of the Americans with disabilities Act?

A shopping center without wheelchair accessible restrooms

Which of the following persons could be eligible to receive a VA loan?

A veteran or a decreased veteran's unremarried surviving spouse

ABC, a brokerage firm, is entitled to a commission of $10,000 from a client. The commission will come out of its trust account for that client. ABC has an advertising bill in the amount of $10,500. The designated broker deposits $500 of the firm's money into the trust account and then writes a check for $10,500 out of the trust account o the advertiser. Which of the following is TRUE?

ABC is subject to disciplinary action for commingling

Under Title VIII of the Civil Rights Act of 1968, certain transaction are exempt. Which one of the situations below would be exempted and not a violation of the act?

An unlisted home that is for sale by owner, where the only advertising is a sign in front of the property that reads simply "For Sale" and the owner owns only one other home

What is the final mortgage payment that is larger than all of the other payments called?

Ballon

A buyer and seller agree upon an option to purchase, with a 60-day option period. When should the parties agree upon the purchase price?

Before signing the option agreement

Which of the following entities would participate in the primary market for mortgage lending?

Commerical bank

An affiliated licensee owns a wholly owned S corporation, A Realty. He instructs an escrow agent to issue a commission check directly to A Realty. How was he violated the real estate license law?

Commissions can be paid to licensees ony via their firm

Agent Ralph represents the sellers in a transaction. At the time he takes the listing, which of the following should be disclose to the sellers?

Current market conditions

The listing agreement states that a property is 5.1 acres. The purchase and sale agreement states that it's 5.12 acres. The mortgage notes that the property is 5.22 acres, while the deed states that the lot's size is 5.21 acres. If there is a dispute, which of the documents will take precedence?

Deed

In spite of Delia's objections, the city took a portion of her lot as part of a street widening project. Which of the following is true about eminent domain?

Delia's property was taken through the process of condemnation

Which of the following is an example of commingling?

Depositing an employee's paycheck in a trust account

Who issues rules and regulations that govern the activities of real estate licensees?

Director

Cho is representing a buyer who decides to purchase a home listed by another agent who works for the same real estate firm as Cho. What type of an agency has been created?

Dual

If a designated broker wishes to terminate an affiliated licensee, or an affiliated licensee wants to terminate employment with a brokerage, which of the following statements is true?

Either party may act unilaterally to end the relationship

A real estate agent sold a home for $275,000. Prior to closing, the agent's license was revoked on grounds of moral turpitude. With respect to his eligibility for the commission, which of the following statements is true?

He is eligible for the commission because he was duly licensed when sale was made

A real estate agent completed a listing agreement form, which the sellers signed. At what point should the agent give the sellers a copy of the form?

Immediately after they sign the listing form

An appraiser is trying to estimate depreciation when valuing an older residential rental property, but is finding it difficult because no comparables have sold recently. However, the appraiser can find sufficient data on rental rates in the same market, and a capitalization rate can be supported. Which approach to value should the appraiser use?

Income

Which of the following actions would most likely create the largest increase in the value of a property?

Installing a second bathroom in a house with four bedrooms and only one bath

Which of the following is true about a building designated a historical landmark?

It may not be willfully destroyed without a permit

Marla and Jerry bought property together. They set it up so that the following would happen: if Maria died, Jerry would own the entire property, and if Jerry died, Marla would own the entire property. They own the property in which manner?

Joint tenancy

A seller asks an appraiser to help determine a realistic listing price for her single-family, owner-occupied house. Which approach to value would the appraiser rely on when making this decision?

Market data approach

A property manager of a ten-unit building shows an apartment to a woman who uses a wheelchair. The woman says that she would need to make some modifications, such as adding grab bars in the shower and removing some carpeting in the bedroom. The landlord:

Must allow the tenant to make the modifications at her own expense, but can require her to restore the property at the end of the lease

Which of the following will terminate a lease?

Mutual agreement

A licensee, with permission from his designated broker, sets up his own subsection S corporation, which he calls M Realty. He then rents a billboard and advertises a listing on it, using only the M Realty name. Is this legal?

No, because ads must give the name of the firm

Buyer Bob and Seller Sam decide to wait until Sam's listing agreement with XYZ Real Estate Agency has expired, to avoid paying a commission. Does the firm(and, by extension, the individual listing agent)have any legal recourse?

No, the listing agent has no further recourse

Carrie owns an apartment building and is discussing marketing strategy with her property manager, Isabel. Isabel suggests that Carrie advertise in the local weekly alternative newspaper, but Carrie refuses to, because it's published by a former business with whom she's fallen out. Isabel argues that she's had great results advertising other properties in this publication, but Carrie still refuses. What should Isabel do?

Not advertise in it, because the property manager is an agent who must obey a principal's instructions

Two parties enter into an option agreement, scheduled to end in December. However, in October the optionee decides he doesn't want to buy the property.What should the parties do in order to terminate the option?

Nothing; the option will expire automatically

Sheila obtained a home loan from a commerical lender, and paid for a mortgagee's title policy. Who would this policy protect?

Only the lender

Of the following types of contracts, which one is a unilateral contract?

Option

M tells her next-door neighbor, P, that she will pay him a commission if he can help sell her home. P, an unemployed bartender, locates a buyer and a sale results. M changes her mind and refuses to pay P his promised commission. Which of the following is TRUE?

P is not entitled to a commission, because he is unlicensed

A real estate agent shows a listing to two different buyers. One buyer decides in the early morning to make an offer on the property for less than the listed price. The agent writes up the offer and plans to meet with the seller later in the day. The other buyer then contacts the agent and says that she'd like to make a full price offer.What should the agent do?

Present both offers to the seller at the same time

A federal law requires lenders to give a booklet about shopping for a home loan to all prospective borrowers within three business days of loan application. What was is this?

RESPA

Marian needs to rent out her basement to make ends meet. She doesn't place any ads for a tenant or ask to any help from a real estate-she merely asks some of her friends if they know of any potential tenants. She carefully screens all the prospects, and decides to rent only to a religious, non-smoking, white female. On which basis is it illegal for her to discriminate?

Race

Real estate license fees are put into the:

Real Estate Commission Account

A firm's managing broker requires agents to recommend a particular lender to buyers. However, the managing broker has a financial interest in this lender. What should an agent do about this?

Recommend this lender after disclosing the broker's interest, and recommend other lenders as well

A seller partially finances the buyer's purchase of her property. What should the seller do if she wants to give public notice of her interest in the property?

Record the mortgage

A buyer's agent has repeatedly seen sales collapse at the last minute because the buyers weren't able to obtain financing. How could he best limit this in the future?

Require prospects to be approved first

A prospective tenant asks a licensee to show him only properties that do not allow children. How should the licensee respond?

Say that only bona fide retirement communitites may exclude children

Under which of the following circumstances would a listing be terminated?

Seller dies

A seller complains that the seller's agent is showing other properties to buyers that compete with the seller's property. Which of the following is true?

Seller's agent is not breaching the duty of loyalty

Price fixing (including setting commission rates in a community) is prohibited by the:

Sherman Antitrust Act and state antitrust laws

Of the following, which would have the greatest effect on the supply of real estate in a particular market?

Size of labor forece

To be enforceable, a contract for the sale of real estate must be in writing and signed by the parties. This is true because of which law?

Statute of Frauds

Under normal circumstances, a real estate agent may do which of the following on behalf of a principal?

Submit all written offers

T represents J, a buyer. A week after J purchases a home, he decides to resell it. What role can T play in the resale transaction?

T could act as dual agent for the two parties, or represent either of them

Alien begins providing construction services on May 2 and records a construction lien on May 5. Bart begins providing services on May 3 and records a construction lien on May 4. On may 10, a judgement lien agianst the property is recorded. The property's owner also receives notice on May 10 that he is in arrears on his property tax payments. Which lien has lien priority?

Tax lien

Which of the following is an absolute requirement of a selling agent in every real estate transaction?

The agent must conduct himself in accordance with the agency disclosure made

A real estate agent is working with buyers who are interested in a house in a new rural subdivision She tells the buyers that the developer will pave the streets. However, she didn't verify this statement, she assumed that was the case, based on the developer's previous subdivisions. If the buyers rely on this statement and decide to buy the house, and the streets never get paved, who is potentially liable?

The agent, for engaging in misrepresentation through an unverified statement

The deed restrictions in a subdivision prohibit homeowners from building fences. However, the city where the subdivision is located permits the construction of fences. Which of the following is true?

The deed restrictions would take precedence, because they are more restrictive

Who is responsible for the earnest money deposit?

The firm to which the check is made payable

Which of the following statements by a seller's agent to a buyer would be a violation of the agent's fiduciary duties toward his principal?

The owner is eager to sell and willing to accept an offer lower than the listing price

Which of the following would have the greatest negative effect on a residential subdivision property's value?

The property is located next to a busy freeway

A property management agreement must contain which of the following?

The property manager's scope of authority

When a licensee appeals the Director's disciplinary decision to the superior court, which of the following is true?

The sanctions imposed by the Director remain in effect throughout the appeals process

An apartment building building was built in 1960. An apartment is being rented to a couple with no children. Which of the following is true?

The tenants should sign the lead-based paint disclosure and receive a pamphlet on lead-based paint

As a result of Federal Reserve action, interest rates for residential loans go down. Which of the following is most likely to occur as a result?

There will be an increase in sale prices for homes

Buyers who are looking at a variety of properties should only be shown homes that:

They are qualified to purchase, based on preapproval or qualification

Which of the following is true about surveys?

They reveal encroachments not of public record

Tina is representing the buyers in a transaction, she described the property's boundaries to her clients without clarifying that she was not sure that the boundaries were exactly precise. The buyers, upon taking possession, built a fence along the boundaries that she described, but the neighbors then filed suit because the fence didn't follow the actual boundaries and encroached on their land. Can Tina be held liable for misrepresentation?

Yes, because she reasonably knew that the described boundaries might not have been correct

A seller asks an agent to list her property "as is." After signing the listing agreement and completing the disclosure statement, she also orders an inspection that finds black mold behind some insulation in the attic. The seller tells the agent about the inspection results, but neither the seller nor the agent gets around to telling the buyer. Can the buyer sure if he finds the mold at a later date?

Yes, because the seller and agent did not disclose the mold

A homeowner has an unpaid hospital bill for $20,000. The hospital files suit and wins judgement for the full amount. Is the homeowner's home(which he owns free and clear) at risk?

Yes, but he may be partly or fully protected by state homestead aws

A loan's interest is best defined as:

a charge paid by a borrower in exchange for use of the lender's money

A buyer discovered. after purchasing a property, that there was major foundation damage that would cost $13,500 to repair. It was later discovered that agent representing the seller knew of this damage yet failed to disclose it to the buyer. The agent could be subject to:

a fine up to $5,000

A brokerage manages a property. The property management records must be kept in:

a location where the firm is licensed to have an office

The best description of the boundary lines for a property found in a subdivision would be found:

a plat map

A quarterly summary statement given by a property manager to her client would contain all of the following, EXCEPT:

a recent appraisal of the property

A property owner has riparian rights. This suggests that her property is next to:

a river or stream

The process of acquiring title to property through open, notorious, hostile, and continuous use is known as:

adverse possession

In washington, a person licensed to act on behalf of a real estate brokerage is called a/an:

affiliated licensee

A real estate licensee would automatically enter into a buyer agency relationship when she:

agrees to show the buyer another agent's listing

To be valid, a listing agreement may be signed by:

an attorney in fact

In a disciplinary action, the Director of the Department of Licensing can do any of the following, EXCEPT:

award damages to individuals defrauded by real estate licensees

When a borrower makes payments on a fully amortized loan, her debt service payments will cover:

both principal and interest on the loan

Any person employed, either directly or indirectly, by a real estate brokerage--or any person who represents a real estate brokerage--in any capacity that requires a real estate license, is a/an:

broker

A broker can serve as a closing agent for a fee in the state of Washington, if the:

broker is a licensed escrow officer

The protected class of "familial status" in the federal Fair Housing Act refers to the presence of:

children under the age of 18 living on the property

The result of an unreleased lien is a/an:

cloud on the title

M passes her real estate license examination on August 16. Three months later she accepts employment from ABC Realty. No later than two years following the activation of her license, she must at a minimum:

complete a 30 clock-hour advanced real estate practices course, a 30 clock-hour law course, plus an additional 30 hours of continuing education, and pay the stipulated renewal fee

A real estate contract, in order to be valid, must include:

consideration

S's license is temporarily suspended by the Director for a violation of the license law. S is also fined $500. The money collected as a result of the fine is:

deposited in the real estate education account, to be used solely for education for the benefit of licensees

A buyer makes an offer that's accompanied by a deposit. The deposit is sometimes called:

earnest money

A Tenant farmer had a heart attack, and he had to terminate his lease and retire. However, his last crop was still growing in the file and he wanted the right to come back and harvest it when it was ripe. The crops are considered to be:

emblements, which belong to the tenant farmer

A neighbor's fence mistakenly extends onto a property. This would be considered a/an:

encroachment

Erin entered into a lease that begins on February 1, and is set to end on January 31 three years later. This leasehold is a/an:

estate for years

J is selling real estate without a license. J is guilty of a:

gross misdemeanor

A brokerage firm's trust accounts must be opened

in the firm's name, and must be designated as trust accounts

If is not necessary to complete 30 hours of continuing education in order to renew a/an:

inactive license

All advertising placed by a real estate licensee (except ads for a licensee's own property) must:

include the brokerage's name, as it appears on its license

Darren and Martin are agents for a large brokerage firm. They decide that Darren will specialize in listing and selling houses on the north side of the river and Martin will specialize in listing and selling houses on the south side of the river. Such a practice is:

legal, because the prohibition against market allocation does not apply to agents for the same firm

An investor would like to invest in real estate, but without being involved in management or subjecting himself to any personal liability. He should invest in a:

limited partnership

The pamphlet on agency law:

must be given to parties before a written agreement is signed

If any criminal charge is filed against a licensee, he:

must report this to the Department of Licensing within 20 days

A contract gives a person the right to purchase property for a particular price within a certain timeframe. This contract is a/an:

option

A property manager usually:

oversees maintenance projects

A mortgage that uses both real and personal property to secure the borrower's debt is a:

package mortgage

Amortization is defined as:

paying both principal and interest on a loan on an installment basis

A type of lease that allows the lessor to share in the increasing sales generated by a retail property is a/an:

percentage lease

Chin, a home seller, is talking to his real estate agent. He mentions that he rents the backup generator, it doesn't belong to him. The generator would be considered:

personal property

A property has lost value because is maintence and upkeep have neglected. This would be an example:

physical deterioration

When performing a competitive market analysis, a real estate agent should:

pick comparables similar in age and quality to the subject property

When a licensee is terminated, the date of termination is the:

postmark date or the date the license is hand-delivered to the Department of Licensing

A real estate agent made a listing presentation to a property owner. The owner was impressed with the agent and signed a listing agreement. The owner told the agent that he was married, but his wife was in the hospital and could not sign the listing agreement. He asked the agent to proceed with the listing anyway, because they were in a hurry to sell the house.In these circumstances, the agent should:

refuse to take the listing, but tell the seller that as soon as the wife signs the listing they can proceed with trying to find a buyer

A buyer is about to purchase a vacant lot in a new subdivision. The development plans for the subdivision state that all lots must be a minimum size of one acre. If the buyer goes through with the purchase, his deed would be subject to a/an:

restriction

One of the economic characteristics of real estate is:

scarcity

Q makes a full-time living selling real estate, even thoughA does not have a real estate license. Q's activities are legal if Q:

sells his own property

One tax advantage of investing in real estate is:

sheltering of income

The best description of steering is:

showing buyers of a particular race only properties in neighborhoods with many residents of that race

A legal action brought in court to compel a party to fulfill the terms of a contract because the land is unique and money damages would not adequately compenestate the party victimized by a breach is called a/an:

suit for specific performance

Q falls behind on his child support payments. This matter is forwarded to the Director of the Department of Licensing. What action is available to the Director? She can:

suspend Q's license

A seller tells her agent that there have been leaks in a bathroom wall from some faulty plumbing , but the leaks were repaired and that there haven't been any other problems with those pipes. The seller tells the agent not to disclose this information to the buyers, since the problem has been fixed. The agent should:

tell the buyers about the leak and that the buyers are entitled to request an inspection

A real estate agent is helping a young couple buy a home. The husband's sister will be living with them, and the couple would like to take title so that if either the husband or wife died, the remaining spouse and the sister would own the home together. The agent should:

tell them to consult an attorney

Appointments to the Real Estate Commission are made by:

the Governor

Special assessments levied against a property for local improvements, such as streetlights and sidewalks, are computed on the basis of:

the benefit the property receives from the improvements

Milo is filing his federal income tax return. He can deduct:

the interest paid on his mortgage

A property is listed for $275,000. The buyers offer $265,000, and insist that the gourmet six-burner stove remain with the property. When the signed offer is presented to the sellers, the sellers accept the price, but want to take the stove with them. They cross out the item about the stove, sign the form, and return it to the buyers. Under these circumstances:

the original offer is terminated, and the sellers have made a counteroffer

Sara is interested in buying a home that is located next to a creek. Sara's agent should advise her to check whether:

the property is located in a flood plain

A borrower obtains a home equity loan on a property he already owns. The Truth in Lending Act allows the borrower to rescind the loan transaction within:

three days after signing the agreement of receiving the disclosure statement

A 30 clock-hour course must be completed no activate a license that has been inactive for more than:

three yeaers

A buyer would like protection against any unknown encumbrances on the property she plans to buy. The greatest protection would come from:

title insurance

The selling agent must NOT accept a promissory note as an earnest money deposit:

unless the purchase and sale agreement discloses that the deposit is a note

A test that a court might apply to determine whether an item is a fixture or personal property is:

use

Carl is housebound and never goes outside. Neighbor Salvador plants a vegetable garden on a corner of Carl's property that is not visible from the main house. After the required period of time, Salvador claims a prescriptive easement over this portion of Carl's land. This easement is:

valid, because the use was open, and Carl's knowledge of the use isn't considered