Real Estate National Exam #3

A tract of land measures 100 feet along the North side, 200 feet along the East and West sides and 100 feet along the South side. How many acres are in this tract of land? A. 0.459 acres B. 0.625 acres C. 0.918 acres D. 3.787 acres

A. 0.459 acres Explanation The area of a lot is determined by taking the length X width. It is important to remember that there are 43,560 sqft in an acre (4 blue haired ladies, going 35, in a 60). Area: 100 feet X 200 feet = 20,000 sqft Acre: 20,000 ÷ 43,560 = 0.459

All the following statements regarding marketing regulations are correct, EXCEPT: A. A broker cannot send unsolicited emails without a prominent opt-out under the Do Not Fax rules. B. A broker cannot market payment or down payment without disclosing certain financing terms under Truth-in-Lending's Regulation Z. C. A broker should restrict advertising to facts about the property rather than potential buyers to avoid violating Federal Fair Housing laws. D. A brokerage can set the rate of commission it will charge to a buyer or seller for providing services.

A. A broker cannot send unsolicited emails without a prominent opt-out under the Do Not Fax rules. Explanation Do Not Fax rules relate to faxes and not emails; it does require a prominent opt-out for faxing. Can-Spam applies to email restrictions where a prominent opt-out must be included in the email. Regulation Z requires the disclosure of payment, down payment, interest rate, APR, and other disclosures when it has been triggered by disclosure of specific lending numbers. The use of general terms like "great financing available" or "low down payment" are not considered triggers of Regulation Z. Federal Fair Housing lists protected classes where a broker and potentially a seller are not permitted to discriminate in a real estate transaction. Advertising can be deemed to be a violation of Federal Fair Housing when it lists a preference for or against a protected class. The Sherman Antitrust Act does not permit group boycotting of service providers or collusion to fix commission to be charged. A firm can set the rate of commission they will charge to a buyer or seller, however cannot collude with other brokerages to fix the fee.

An agent, with a large real estate office, lists a property for sale. The agent informs his office that the seller of the property is in poor health and will sell for much lower than the list price if he can close quickly. A. All agents in the office should keep this information quiet unless the seller allows for its distribution B. The listing agent has violated his fiduciary obligations to his seller by sharing this information with his office C. Because the seller has a health crisis which could affect his ownership of the property, this should be treated as a material fact D. All agents in the office should pass this information on to their buyer clients who are interested in this particular property to ensure a quick sale

A. All agents in the office should keep this information quiet unless the seller allows for its distribution Explanation All agents should keep this information confidential from prospective buyers. While passing the information along may help the house sell quicker, it could affect other terms. The sellers health would not be material unless it prevented him from delivering marketable title. Interestingly, the listing agent did nothing wrong because all agents of the firm are agents of the seller and obligated to protect this info once they heard i

Which of the following is TRUE about property valuation? A. An appraisal is best defined as an estimate of market value prepared by a licensed appraiser and is good for that date. B. A licensed appraiser calculates a BPO and commonly reports a probable sales price range. C. A CMA is the best indication of what a property will sell for as it is prepared by a licensed appraiser. D. The Income Approach is the recommended approach when valuing residential property.

A. An appraisal is best defined as an estimate of market value prepared by a licensed appraiser and is good for that date. Explanation CMA's and BPO's are prepared by salespeople or brokers, not appraisers. A BPO or Broker Price Opinion is commonly prepared for a lender that may be foreclosing on a property or deciding if they should agree to a short sale. A CMA or Comparative Market Analysis is the same report as a BPO but is typically performed for a buyer or seller. A licensee calculates the probable sales price of a home and it is typically presented as a range. The appraiser calculates an estimate of the market value of the home that is good for that date. The market price is the amount that the property sold for. An appraiser performs an appraisal. A broker performs BPOs and CMAs. The Sales Comparison Approach is the best option when determining the estimate of market value or probable sales price for a residential property.

Willie owns a construction and development firm which has received approval for a 50 home subdivision. He has met all of the requirements and made dedication for the roads to be publicly maintained. Willie obtained one loan for the property. When each lot is sold, the bank will release its lien for the lot upon the payment of an agreed-upon amount. What type of loan does Willie have? A. Blanket Mortgage B. Package Mortgage C. Take Out Commitment D. Construction Loan

A. Blanket Mortgage Explanation A blanket mortgage is used to finance multiple parcels or properties into one loan. The lender typically agrees to partial payments and in return releases the lien on that individual lot or property. Construction loans are short-term loans to build a property which are often interest-only (aka. straight mortgage). Take-out commitments convert construction loans to permanent financing. Package loans cover real and personal property.

An agency relationship between a listing agent and a seller could be terminated by which of the following? A. Death of the seller B. Death of the listing agent C. Mutual agreement between the seller and listing agent D. Buyer breach of contract

A. Death of the seller Explanation Agency is terminated by mutual agreement between the firm and client, death of the firm or client, expiration of the relationship, successful closing of a transaction, and outside influences such as destruction of property and eminent domain. NOTE: The firm owns the agency agreements (listing, buyer agency, property management, etc.). The affiliated listing agent cannot terminate the listing.

Which of the following best describes the formula for determining net operating income? A. Effective Gross Income - Expenses B. Effective Gross Income - Expenses and Debt Service C. Potential Gross Income - Vacancy D. Occupancy - Expenses

A. Effective Gross Income - Expenses Explanation Effective Gross (the amount of money collected) - Operating Expenses = Net Operating Income.Gross Income - Vacancy & Collection = Effective Gross Income (Total Anticipated Revenue)Effective Gross Income - Operating Expenses = Net Operating IncomeNet Operating Income - Debt Service = Before Tax Cash Flow

Which of the following is true of a short sale? A. In a short sale, a lender or lenders opt to accept less than they are owed so that the property can be conveyed with clear title B. Short sales are easier to obtain when multiple lenders can share the loss C. In a short sale, the seller will bring equity from another property to cover the shortage in the subject property D. A listing agent who is listing a short sale should not disclose this information to avoid encouraging low-ball offers

A. In a short sale, a lender or lenders opt to accept less than they are owed so that the property can be conveyed with clear title Explanation A short sale is where a lienholder chooses to accept less than they are owed to get the bad debt off of the books. A short sale is a material fact that must be disclosed to buyer. If a seller has equity in another property sufficient to cover the amount that he is underwater, that would not constitute a short sale since all lienholders are paid. Short sales are actually more difficult when there are multiple lienholders

The seller of a property removes the fridge and stove prior to the settlement meeting. No mention of either item is made in the offer to purchase and contact. The stove and refrigerator were not "built-in" or secured to the property. Is the seller liable to the buyer to replace these items? A. No. The refrigerator and stove should have been specifically addressed in the contract if the buyer wanted them to remain. B. No. The buyer is obligated to purchase these items from the seller by using a bill of sale. C. Yes. The refrigerator and stove are considered fixtures and are required to transfer. D. Yes. To obtain a loan to purchase a property, the lender must be assured that the property has a stove and refrigerator.

A. No. The refrigerator and stove should have been specifically addressed in the contract if the buyer wanted them to remain. Explanation On the national exam, a fixture is an item of personal property affixed to real property. A stove and/or refrigerator is not always considered a fixture unless it is "built-in" and/or secured to the property. Check your state to see how certain items are treated, which could impact the state portion of the exam. For example, in North Carolina, the stove is considered a fixture as it has been specified in the contract. A bill of sale is often used to convey personal property that is not commonly transferred in a real estate transaction (boats, cars, campers, etc.).

Tina, Mike and Joey purchased a piece of property on the same day. Their ownership shares are equal and they have undivided possession. Further, they acquired the property at the same time. This type of ownership is best described as: A. Tenants in Common B. Tenants by the Entirety C. Ownership in Severalty D. Joint Tenancy

A. Tenants in Common Explanation Tenancy in common is the default type of ownership for unmarried persons who acquire property together. Note that the question gives all of the unities of joint tenancy but does not specifically state the right of survivorship. To have joint tenancy, the parties must ask for joint tenancy.

Truth in Lending laws would apply to the financing of which of the following properties? A. The financing of a single-family home where the loan is secured by the residence B. The purchase of an apartment complex to be used for low-income housing C. The purchase of a working farm where the property secures the loan D. The purchase of a commercial property that is collateralized by an equity line against the owner's home

A. The financing of a single-family home where the loan is secured by the residence Explanation Truth in Lending laws apply to consumer transactions, including when a loan is made on a consumer property for the purchase of a commercial property.Commercial transactions, farms greater than 25-acres, apartment complexes are exempt.

Which of the following statements regarding TRID (Truth in Lending, Real Estate Settlement Procedures Act, Integrated Disclosure) is TRUE? A. The lender must provide the Closing Disclosure at least 3 business days prior to the date of settlement, when delivered electronically. B. The lender must provide the Loan Estimate within 3 calendar days from loan application. C. The lender must provide the Closing Disclosure at least 3 business days prior to the date of mortgage application, when delivered electronically. D. The lender must provide the Loan Estimate within 3 banking days from loan approval.

A. The lender must provide the Closing Disclosure at least 3 business days prior to the date of settlement, when delivered electronically. Explanation It is important to read the problem carefully and understand when you are counting calendar, business, or banking days. Calendar days are consecutive days including weekends and holidays. Business days are commonly Monday through Friday. Banking days are the actual days that the bank is open. Most banks are closed on Sunday and for certain holidays. The Loan Estimate must be provided within 3 business days from mortgage application, not mortgage approval. The Closing Disclosure must be provided at least 3 business days prior to the date of settlement.

An MLS listing included the washer and dryer as part of the property to be conveyed. When the offer was drafted, it was silent in regard to the washer and dryer. Which of the following best describes the status of the washer and dryer, assuming that a contract is ultimately formed? A. The washer and dryer are considered real property since they are typically "built in." B. The washer and dryer should be conveyed as they were listed as part of the property in the MLS. C. The buyer could sue the seller for specific performance if the washer and dryer are removed. D. The washer and dryer are personal property and the seller will be under no obligation to convey them.

A. The washer and dryer are personal property and the seller will be under no obligation to convey them. Explanation Washers and dryers are personal property that will not convey unless specifically addressed in the contract. The seller offered the washer and dryer in the MLS. The buyer must accept that offer by asking for them in the offer to purchase. The buyer would not have the right to sue for specific performance as the seller is not in breach of contract.NOTE: Under the Parole Evidence Rule, the written contract is the final expression between the parties. If the washer and dryer are not addressed in the contract, then they are considered personal property of the seller.

A salesperson is using the income approach to calculate an estimate of a property's probable sales price. Effective gross income is calculated: A. by subtracting operating expense from gross income. B. by dividing the sales price by annual gross income. C. by subtracting vacancy and collection losses from gross income. D. by dividing net operating income by the capitalization rate.

A. by subtracting vacancy and collection losses from gross income. Explanation Effective gross income is calculated by subtracting vacancy and collection losses from gross income. It may also be referred to as total anticipated revenue. Net operating income is calculated by taking effective gross income and subtracting operating expenses. The value of a property is calculated under the income approach by taking net operating income and dividing by the capitalization rate. The gross income multiplier is calculated by taking the sales price and dividing by the annual gross income.

A broker that is writing up an offer to purchase for a buyer customer owes: A. disclosure of material facts. B. obedience. C. confidentiality of personal information. D. loyalty.

A. disclosure of material facts. Explanation A customer is a person that you do not have an agency relationship, so you treat them as a 3rd party. You owe the customer HFD - Honesty, Fairness and Disclosure of material facts. A salesperson / broker owes a client OLD CAR - Obedience, Loyalty, Disclosure, Confidentiality, Accounting and Reasonable skill, care and diligence.

A borrower needs to reduce the stated rate on the mortgage note in order to qualify for the mortgage. The buyer will pay: A. discount points. B. yield fees. C. a higher origination fee. D. a percentage of equity.

A. discount points. Explanation Discount points are prepaid interest that are used to increase the yield to the lender and are often used to lower the payment so a buyer can qualify for the mortgage. Discount points are a sunk cost, meaning that if the borrower pays the debt off early or refinances, they lose the money paid to the bank.

A recent survey revealed a seller's neighbors of 10 years have their fence 5 feet over the property boundary line into the seller's yard. This is an example of: A. how encroachments are found B. how adverse possession happens C. how easements are made D. how the seller has been over taxed for land she no longer owns

A. how encroachments are found Explanation Easements happen as a result of express agreement, implication by necessity, or operation of law through meeting prescription. An easement is the legal ability to use someone else's property. Adverse possession is when someone wants to take and own another person's property and this is accomplished through OCEAN - open, continuous, exclusive, actual, and notorious. The period for prescription and adverse possession is a minimum of 20 years. Tax value is determined by a tax assessor from the local municipality. Surveys discover encroachments, map the physical location of structures, identify property boundaries, and more.

A salesperson affiliated with ABC Realty takes a listing on a 10-acre tract of land. While the property is active on the market and not under contract, the salesperson quits and affiliates with XYZ Realty. The salesperson: A. is not permitted to solicit the listing from ABC until the listing expires. B. is permitted to withdraw the listing with ABC and list the property with XYZ as the property is not under contract. C. is entitled to compensation when ABC sells the property. D. is permitted to ask the seller to terminate the listing with ABC and transfer the listing to XYZ.

A. is not permitted to solicit the listing from ABC until the listing expires. Explanation The listing agreement is between the brokerage and client, with the listing agent appointed to fulfill the brokerage duties. If a salesperson leaves one firm for another, it does not terminate the listing agreement with the original firm (ABC). The salesperson cannot interfere with the contract without risking civil court action for interference with a contract and if a REALTOR a violation of the REALTOR Code of Ethics. When the listing expires, the salesperson can compete with ABC for the listing.

Which of the following is an example of a listing contract a licensee could use to establish agency with a seller? A. open B. closed C. oral D. exclusive net

A. open Explanation The 3 types of listing agreements are Open, Exclusive Agency, and Exclusive Right to Sell. Listing agency can never be oral in NC. Oral listing agreements are not permissible. Closed and exclusive net are not real forms of listing agreements.

All of the following transactions must comply with TRID, EXCEPT: A. reverse annuity mortgages B. new construction loans C. resale purchase loans D. vacant lot loans

A. reverse annuity mortgages Explanation Reverse mortgages are exempt from TRID. TRID applies to closed-ended transactions where money is extended once for a specific amount over a specific time-period. Reverse mortgages are the opposite of this. Other TRID exemptions include loan assumptions and some seller financing.

When agents encourage minority consumers to rent or purchase property in one area over another because the agent indicated there are more "people like you", the agent is probably guilty of: A. steering. B. panic peddling. C. redlining. D. blockbusting.

A. steering. Explanation Panic peddling and blockbusting are synonyms for a fair housing violation where agents scare homeowners into selling for fear if they don't that their property values will dramatically drop due to a protected class member moving into the area. Redlining is commonly associated with illegal financing practices where certain areas are not issued loans because of the presence of protected class members. Steering is a practice where agents showing, or withhold showing, certain properties based on the potential buyer's membership of a protected class. All four answer choices are violations of fair housing laws.

An investor purchases a property with a 20% down payment by obtaining an 80% LTV mortgage. This is an example of: A. using leverage. B. building equity. C. highest and best use. D. the economic characteristics of land.

A. using leverage. Explanation The use of "other people's money" when purchasing an asset such as real estate is known as leverage. With a small down payment an investor gains control of an entire property. Equity is calculated by taking the fair market value and subtracting the amount owed. Equity increases when the debt is paid down, appreciation or by making improvements that increase the fair market value of the property. Highest and best use refers to the use of a property that provides the greatest return for the owner. This can change over time as property may shift from farm use to residential houses or industrial use. The economic characteristics of land can be recalled with the acronym S.L.I.P. - Scarcity, Location, Improvements and Permanence of Investment. Another word for location is situs.

A borrower would like to pay off his home loan on the 23rd of October (360 day year). His balance as of October 1st was $169,233 and his interest rate was 4%. What is the total loan payoff for this property? A. $169,233 B. $169,665 C. $170,000 D. $170,500

B. $169,665 Explanation Daily Interest: $169,233 x 4% / 360 = $18.8036/dayAccrued Interest: $18.8036 x 23 = $432.48Payoff: $432.48 + 169,233 = 169,665

A provisional broker is contacted to list a property where the seller desires to net $100,000 from the sale of the property. The current mortgage balance is $175,000, commission of 6%, deed preparation of $125 and other seller closing costs of $1,000. The closing attorney fee was $800. What must the property sell for in order for the seller to cover all expenses and net the desired amount, rounded to the nearest dollar? A. $292,693 B. $293,750 C. $294,601 D. $297,693

B. $293,750 Explanation In order to calculate the sales price needed to achieve the seller's goals, you must first add the seller's known expenses, mortgage balance, and desired net. The seller typically pays commission, deed prep and excise tax. Seller known: $100,000 + $175,000 + $125 + $1,000 = $276,125. The commission is based on the sales price and we do not yet know what the sales price is. The sales price (100%) - commission rate (6%) = 94%. If you took the sales price and multiplied it by 94% you would get $276,125. To calculate the sales price take $276,125 / 94% = $293,750

A buyer is paying $225,000 for a property, putting 15% down, paying 1% origination, 2 discount point and $3,000 in other buyer closing costs. The buyer paid $5,000 as an earnest money deposit. How much money will the buyer need to pay at closing? A. $25,012.50 B. $37,487.50 C. $42,487.50 D. $194,987.50

B. $37,487.50 Explanation When a buyer makes a 15% down payment, that means they are obtaining an 85% LTV loan (100% - 15% = 85%). Each discount points equates to 1% of the loan amount, so the payment of 2 discount points equates to 2% of the loan amount.Loan Amount: $225,000 X 85% = $191,250. Origination fee: $191,250 X 1% = $1,912.50. Discount Points: $191,250 X 2% = $3,825. Cash Needed to Close: SP $225,000 - Loan $191,250 + Orig $1,912.50 + Disc $3,825 + Other CC $3,000 - EMD $5,000 = $37,487.50

A buyer purchases a property for $220,000, closing on November 13, and receives a loan at 80% LTV. The lender charges 1% for discount points and $875 in loan origination fee for the borrower's 4% mortgage loan. At closing, the attorney charges a $950 fee for closing the transaction, a $35 recording fee, and $250 for deed preparation. The taxes on the property are $1,200 for the year and have been paid. Insurance of $600 will be paid for the first year and collected at closing. The attorney will also collect interim interest, a 6% commission, 2 months of taxes and insurance for the escrow account, and excise tax. The buyer has paid $2,000 as earnest money. How much should the buyer's agent prepare the buyer to bring to closing? A. $45,029 B. $47,029 C. $47,049 D. $47,329

B. $47,029 Explanation The first step to answering correctly is to determine if you are calculating what the buyer needs to bring to closing or how much the seller will net. Unless the problem states otherwise, the seller pays commission, deed prep and excise tax (CD&E). Either way you start with the sales price then add or subtract items. In this instance we are calculating for the buyer - so ask does this increase or decrease the amount of money the buyer needs to bring to closing.SP $220,000 - Loan $176,000 + Discount Point $1,760 + Origination $875 + Attorney Fee $950 + Recording Fee $35 + Tax $156.67 + Insurance $600 + Interim Interest $352 + Escrow Insurance $100 + Escrow Tax $200 - Earnest Money $2,000 = $47,028.67Loan: $220,000 X 80% = $176,000Discount Points: $176,000 X 1% = $1,760Property Tax Proration: $1200 / 360 X 47 days = $156.67 Debit Buyer / Credit SellerProperty Tax Days - Buyer: N (17) + D (30) = 47 daysInterim Interest Proration: $176,000 X 4% / 360 X 18 days = $352Interim Interest Days: 30 - 13 + 1 = 18 days

Which of the following could be taken into consideration when appraisers use the cost approach of valuation? A. Adjustments for size B. Economic obsolescence C. Transferability D. Gross rent multipliers

B. Economic obsolescence Explanation Economic obsolescence refers to events surrounding the property which depreciate its value. Examples include new roads changing traffic patterns or rezoning. Adjustments are used in the sales comparison approach. Gross rent multipliers are associated with the direct income capitalization approach. Transferability refers to one of the four characteristics of value.

A tenant rents a house for an initial term of 18 months starting April 20, 2018 through September 20, 2019 for $950 per month. This lease requires a 60-day notice to vacate. The tenant most likely has which type of leasehold interest? A. Estate for Years B. Estate from Period to Period C. Estate at Sufferance D. Estate at Will

B. Estate from Period to Period Explanation Most apartment/house leases are estates from period to period because they are characterized by the auto-renewal and do not terminate unless notice to vacate is provided. And estate for years is like a vacation rental with a firm start and end date and no auto-renewing. An estate at will is for an indefinite time period while an estate at sufferance occurs when a PREVIOUS leasehold expired and the tenant refuses to leave despite the owner demnading them to leave.

Which of the following is a characteristic of the concept of value? A. A broken window from storm damage B. High demand for single-story houses C. 1970s burnt orange appliances in the kitchen D. The only coffee shop nearby closed

B. High demand for single-story houses Explanation When something is in high demand it will generally increase the value. The four characteristics of value are demand, utility, scarcity, and transferability. A broken window is an example of physical deterioration. Outdated colors are an example of functional obsolescence. Amenities in the surrounding area are an example of economic obsolescence. Physical deterioration, functional obsolescence, and economic obsolescence are components of the breakdown method for depreciating property and are influences on value.

A freehold estate that is not inheritable is known as a(n) A. Fee Simple Absolute B. Life Estate C. An estate for years D. Fee Simple Determinable

B. Life Estate Explanation A Life Estate is not inheritable by the life tenant's heirs, nor may it pass through the will of the Life Tenant. The grantor has predetermined who the property would go to at the death of the Life Tenant. Fee simple absolute is freehold AND inheritable. Fee simple determinable (even though the determinable has a condition, the estate is freehold and inheritable as long as the condition is not broken). An estate for years is not a freehold estate; it is a leasehold estate.

Under the Federal Fair Housing Act of 1968 and its amendments, which of the following is NOT a protected class? A. Families B. Married couples C.Foreign born individuals D. Individuals with AIDS

B. Married couples Explanation Marital status is not a protected class under Federal Fair Housing laws. One way to recall the protected classes under the Federal Fair Housing Act is F.R.E.S.H. C.O.R.N. A broker or seller that has hired a broker cannot discriminate based upon Familial status, Race, Sex, Handicap or disability, Color, Religion or National origin. Familial status refers to families with children under the age of 18 or pregnant/expectant mothers. Persons with HIV or AIDS are protected under the handicap or disability protection. A seller that does not hire a broker to market the property has limited ability to discriminate so long as they do not market that they won't rent to a protected class or tell the person that they are discriminating against them. There are limits on the number of transactions that the seller can be a part of, where they cannot sell more than one unit every 2 years and cannot own more than 3 units at one time. An owner can discriminate when renting out units in an owner-occupied building under the same restrictions above.

A buyer submits an offer to a seller including a request for the washer and dryer to be included in the sale of the house. The seller counters with a price $10,000 above the original offer and concedes the washer and dryer. The buyer counters once more reducing the seller's proposed purchase price by $5,000 and no mention of the washer and dryer. The seller signs this counteroffer and provides a copy of the newly formed contract to the buyer. Two months after closing the buyer walks into the house discovering the washer and dryer are gone. The buyer calls the selling agent to complain only to learn the seller is not in breach of contract. Which common law doctrine explains why the seller was allowed to take the washer and dryer? A. Statute of Frauds B. Parole Evidence Rule C. Statute of Limitations D. Reality of Consent

B. Parole Evidence Rule Explanation The Parole Evidence Rule states that the written agreement indicate the final agreed upon terms regardless of what terms were discussed in prior negotiations. Since the buyer made no mention of the washer and dryer in the final offer, the seller is not obligated to leave the washer and dryer stay. Reality of Consent is a concept about contract formation and whether a valid or voidable contract is formed. The Statute of Limitations is one example of how the operation of law may terminate a contract. The Statute of Frauds requires certain contracts and certain documents be in writing.

For a seller to deliver marketable title, five criteria must be met. Which of the following is one of those criteria for a marketable title? A. Serious defects with the title are disclosed to and consented by the buyer B. Protect a buyer from threat to quiet enjoyment of the property C. All liens and encumbrances must be corrected or removed prior to settlement D. Be free of doubtful ownership for the immediately preceding 10 years

B. Protect a buyer from threat to quiet enjoyment of the property Explanation Typically, real estate sales contracts require sellers to deliver free and clear marketable title which has 5 criteria. 1) No significant liens or encumbrances are present. There will always be at least an ad valorem tax lien present. The word "all" in "All liens and encumbrances must be corrected or removed prior to settlement" is false because property taxes cannot be removed. A new ad valorem lien is created each year. 2) Disclose no serious defects. Even if a buyer is aware of a defect and willing to accept whatever fallout may ensue, that does not make the seller's title marketable. 3) Be free of doubtful ownership. A broken chain of title is said to exist where there are gaps in records of ownership. The length of time an unbroken chain must exist varies from state to state which makes "for the immediately preceding 10 years" an incorrect detail. 4) Protect a purchaser from threat to quiet enjoyment of the property, and 5) convince a reasonable person the property can in fact be sold or mortgaged at fair market value.

A buyer, under contract for a property, loses his job and is unable to obtain a loan to complete the transaction. Which of the following is TRUE? A. The buyer's agent could be considered negligent for failure to adequately qualify the buyer. B. The buyer can terminate the contract but may be liable for damages to the seller. C. The buyer's failure to qualify for a loan is always a contingency, so the buyer would receive a refund of all monies invested up to that point. D. The seller can sue the buyer for specific performance.

B. The buyer can terminate the contract but may be liable for damages to the seller. Explanation The buyer will terminate or be in breach of the contract and would be subject to any damages spelled out in the contract. There would be no need for the seller to sue for specific performance since the buyer has no means to pay. The buyer's agent would not likely be liable in this case since the buyer lost his job. Buyer's loan is not "always" a contingency such as in NC where the buyer has a due diligence period in which to get the loan or get out of the contract.

A seller enters into a contract with a minor regarding the purchase of a $50,000 investment home. Which of the following statements is TRUE? A. The contract is void and unenforceable. B. The contract is voidable on behalf of the minor. C. This is an example of an executed contract. D. The contract is unenforceable against the seller.

B. The contract is voidable on behalf of the minor. Explanation A minor does not have legal capacity to enter into a contract to purchase real estate. The agreement is enforceable against the adult, however unenforceable against the minor. The minor can complete the purchase and may still be able to back out of the contract subsequent to closing. An executed contract has closed while an executory contract has not closed (pending but not completed).

A buyer offers $130,000 on a listed property. The seller states that he will accept that price and that the buyer should have his agent write it up at those terms. The next day, the seller gets a better offer and refuses to sell to the first buyer. Which of the following is TRUE? A. Verbal contracts for real property could be valid between parties if the parties' intent was to be bound B. The first buyer has no remedy since the parties were never under contract C. The buyer can sue for specific performance because the seller has breached the contract D. The agent should advise the buyer to file a lis pendens against the sellers property so that the seller cannot complete the sale to the second buyer

B. The first buyer has no remedy since the parties were never under contract Explanation The buyer has no remedy as this "contract" was never in writing and would not comply with Statute of Frauds that real estate contracts must be in writing to be enforceable. There would be no suit for specific performance since it never went under contract. An agent would not advise as to whether to file a lis pendens. The agent should advise the buyer to talk with an attorney about what actions can be taken.

Which of the following statements about title insurance is CORRECT? A. The mortgagor policy must be renewed on an annual basis to remain in effect for the purchase price. B. The mortgagee policy will end when the loan has been paid in full. C. The mortgagee policy covers defects that the settlement agent discovered prior to closing. D. The mortgagor policy will cover losses discovered after closing that would have been discovered if the buyer ordered a survey.

B. The mortgagee policy will end when the loan has been paid in full. Explanation The mortgagee is the lender (lender has ee's, so they are the mortgagee). The lender policy will cover the outstanding loan balance, so upon final payment of the debt, the lender policy will end. Title insurance covers losses that were not known at the time of closing that relate to past events. An insurance company is not going to insure against a loss that has already occurred. Both the mortgagee and mortgagor policy premium is paid one at closing. The mortgagor policy covers the purchase price of the property and does not decline as payments are made. The title insurer will not cover losses that would have been discovered had the buyer obtained a new survey.

Toxic mold is caused by: A. insulation that becomes airborne and can be lodged in the lung causing cancer. B. excessive moisture. C. foam insulation. D. the breakdown of uranium in the soil.

B. excessive moisture. Explanation Mold is caused by excessive moisture. Testing needs to be performed by a qualified environmental specialist to determine if mold is toxic. The breakdown of uranium causes the release of radon gas. Asbestos is dangerous when it becomes friable (airborne) and causes lung cancer, mesothelioma. Urea foam and pressure-treated wood can cause respiratory issues such as asthma.

A tenant has failed to make the rental payment by the due date. The property manager has issued a 10-day notice to pay or quit. In the event that the tenant does not pay the bill, the property manager should: A. remove tenant's property. B. file for summary ejectment. C. change the locks. D. turn off the utilities.

B. file for summary ejectment. Explanation The landlord and property manager must use judicial means to evict a tenant from the property. They will file for summary ejectment and a magistrate will hear the case. The landlord or property manager cannot use "self-help" by turning off the utilities, changing the locks or removing the tenant's property

An appraiser is trying to calculate the estimated market value of a property based upon the following information: Subject Comp 1 Comp 2 Comp 3 Sales Price $300,000 $315,000 $295,000 Bedrooms 3 3 3 3 Bathrooms 2 3 2 2 SQFT 2,000 1,900 2,100 1,900 What is the indicated estimate of market value, rounded to the nearest thousand? A. $295,000 B. $303,000 C. $305,000 D. $313,000

C. $305,000 Explanation Step 1: Calculate the value of a bathroom by comparing Comp 1 and Comp 3. The number of bathrooms is the only difference between the comparables. Contribution of a Bathroom: $300,000 - $295,000 = $5,000 Step 2: Calculate the value of square footage by comparing Comp 2 and Comp 3. Contribuition of square footage: $315,000 - $295,000 = $20,000 / 200 sqft = $100 per sqft Step 3: Make Adjustments - recall comp superior = subract / comp inferior = increase Comp1: $300,000 - $5,000 + $10,000 = $305,000 The comp was superior, so we subtracted $5,000 for the extra bathroom. The comp was inferior, so we increased by $10,000 for sqft (100 X $100). Comp2: $315,000 - $10,000 = $305,000 No adjustment for bathrooms as they are the same. The comp was superior, so we subtracted $10,000 for sqft (100 X $100). Comp3: $295,000 + $10,000 = $305,000 No adjustment for bathrooms as they are the same. The comp was inferior, so we increased by $10,000 for sqft (100 X $100).

Sophie is trying to calculate the amount she would save in monthly payment by choosing a 30-year loan versus a 15-year loan. The purchase price is $380,000 with 90% LTV conventional loan. The 15-year loan is at a rate of 5.5% and the 30-year loan is at a rate of 6%. Using the amortization chart, what is the difference in monthly payment? AMORTIZATION CHART: Loan Term 15-Years 25-Years 30-Years Interest Rate: 5 7.91 5.85 5.37 5 1/2 8.18 6.15 5.68 6 8.44 6.44 6.00 6 1/2 8.71 6.75 6.32 A. $420.66 B. $467.40 C. $745.56 D. $961.02

C. $745.56 Explanation Loan Amount: $380,000 X 90% = $342,000. Using the amortization chart a 15-year mortgage at 5.5% amortizes at 8.18 and a 30-year mortgage at 6% amortized at 6.00. 15-Year Payment: $342,000 / 1,000 X 8.18 = $2,797.56 30-Year Payment: $342,000 / 1,000 X 6.00 = $2,052 Payment Difference: $2,797.56 - $2,052 = $745.56

The calculation of the probable sale price of a property performed by a licensed real estate agent for a bank is best known as a(an): A. Appraisal. B. Property Valuation. C. Broker Price Opinion. D. Comparative Market Analysis.

C. Broker Price Opinion. Explanation A broker price opinion (BPO) is typically prepared for a lender before listing a foreclosed property for sale or before a lender decidies to consent to a short sale. Property valuation and appraisals are performed by licensed appraisers where the appraiser determines an estimate of market value for that given date. A CMA is prepared for a buyer or seller that is represented by a real estate agent prior to listing a property for sale or making an offer to purchase. A BPO is commonly prepared for a bank. The work product of a CMA & BPO are essentially the same.

Which act requires that lending institutions use credit information only for the purpose for which it was obtained, provides a mechanism for dispute resolution of inaccurate information? A. RESPA B. Truth in Lending C. Fair Credit reporting Act D. Equal Credit Opportunity Act

C. Fair Credit reporting Act Explanation Fair credit report protects consumers in the ways mentioned in the question as well as a list of other consumer protections aimed at protecting the consumers' credit profile. Equal Opportunity Credit Act protects against discrimination of certain protected classes of persons in providing credit. Truth in Lending requires that lenders disclose the true cost of a consumer loan. RESPA requires disclosure of cost associated with the closing process and eliminates kickbacks between settlement service providers.

arget housing for the possible presence of lead-based paint includes which of the following? A. Houses built after 1978 B. Houses built before 1992 C. Houses built before 1978 E. House built after 1992

C. Houses built before 1978 Explanation Residential use of lead-based paint became prohibited in 1978 and requirements for disclosure of the possible presence of lead-based paint took effect in 1992 with final regulations requiring disclosure issued in 1996 from EPA and HUD. Target housing refers to houses constructed before 1978. Houses constructed after 1978 are not a part of the target housing.

Two legal principles of security instruments are Lien Theory and Title Theory. Which of the following best describes how receipt of title conveys in each theory? A. In Lien Theory the borrower receives equitable title at closing, and in Title Theory the borrower receives legal title to the property at closing. B. In Lien Theory the borrower receives equitable title, while the lender retains legal title to the property at closing. In Title Theory the borrower receives the deed at closing. C. In Lien Theory the borrower receives title to the property at closing, and in Title Theory the borrower receives equitable title at closing. D. In Lien Theory the lender establishes a lien against the property at closing. In Title Theory the borrower receives just legal title at closing.

C. In Lien Theory the borrower receives title to the property at closing, and in Title Theory the borrower receives equitable title at closing. Explanation In lien theory states borrowers receive legal title and lenders place a lien against the property, while in title theory borrowers grant legal title to a trustee and retain equitable title in the property via a document called a Deed of Trust.

A developer requires all builders within the subdivision to build to a certain standard and no home may be built smaller than 4,000 square feet. The developer's requirement is known as which of the following and how will the developer enforce this requirement? A. Building codes with enforcement through the state and city building councils. B. Zoning with enforcement through the zoning board. C. Private deed restriction with enforcement through a court of law. D. Building permits with enforcement through the city or county in which the property is located.

C. Private deed restriction with enforcement through a court of law. Explanation Restrictive covenants are private restrictions on land use. Beware of any question that leads you to believe that a "private" restriction can be enforced by a "public" official. Private restrictions are enforced through a complaint to the homeowners association or through court action (injunction).

A local city is planning to install curbs and gutters in a newly annexed neighborhood. How will the cost of the curbs and gutters be handled? A. The city will bill each homeowner directly based upon the assessed value of their property. B. The city will increase the tax rate for all real property located within the current city limits. C. The city will place a special assessment tax on the homes in the neighborhood receiving curbs and gutters. D. Real property taxes will be raised for the neighborhood that is benefiting from the curbs and gutters.

C. The city will place a special assessment tax on the homes in the neighborhood receiving curbs and gutters. Explanation Special assessments are often used for this purpose. Special assessments are a tax levy for a one-time improvement and are levied only on those who benefit for the amenity (not the taxpayers as a whole). Curbs, sidewalks, paving, etc. are often billed to the property owner based upon the amount of road frontage owned, and calculated by the linear footage.

Which of the following would terminate an agency agreement? A. A buyer signing agency agreements with multiple "exclusive" agents B. The death of a buyer's agent, who is in a large firm C. The death of a seller who has signed an Exclusive Right to Sell listing agreement D. The termination of an Offer to Purchase on a property during the due diligence period

C. The death of a seller who has signed an Exclusive Right to Sell listing agreement Explanation Agency agreements are personal services agreements, so if a seller dies during an agency agreement, the contract terminates because the person being served no longer exists. The death of the agent does not terminate an agency agreement if the property is listed with a multi-agent office.

Automatic termination of a buyer agency agreement will be caused by which of the following actions? A. The termination of a sales contract during the due diligence period B. The buyer working with another agent C. The death of the buyer D. The death of the buyer agent

C. The death of the buyer Explanation Because agency agreements are personal service contracts, the death of the buyer client would terminate the agency agreement. A buyer working with another agent would not automatically terminate the agreement, but it may cause the buyer to pay two commissions. The death of a buyer agent would not terminate the agency agreement if it were a multiagent office. Termination of a sales contract would have no effect on agency agreement assuming there was some remaining term in the buyer agency

After 15 showings this past weekend and no offers received, a listing agent suggested her seller-client could submit an offer to one of the buyers. The seller made an offer with the listing agent's help who faxed the offer to a buyer's agent. The buyer's agent hand delivered the offer to his buyer-client. The buyer-client made a change to the offer price, signed the document, and returned it to the buyer's agent who called the listing agent with the revised terms. The listing agent called the seller who accepted the new terms over the phone. The listing agent emailed the buyer's agent who called the buyer with the good news. Assuming all signatures are in place and copies are delivered to the correct parties, at what point was a binding contract formed? A. When the seller accepted the revised terms over the phone and told his agent. B. When the buyer's agent called the listing agent with the signed documents noting the price change. C. When the listing agent emailed the buyer's agent. D. When the buyer was notified by the buyer's agent in a phone call that the seller accepted the revised terms.

C. When the listing agent emailed the buyer's agent. Explanation Contract formation happens after the last acceptance (signature) is communicated to a party on the other side. In the case of exclusive agency, someone from the listing side of the transaction must communicate to the buying side of the transaction for contract formation to take place. When the listing agent emailed the buyer's agent about the seller's acceptance a contract was formed. The seller telling his own agent he accepts is not contract formation. The buyer does not have be notified directly for contract formation to happen. E-mail is an acceptable method for communicating acceptance.

To be compliant with CAN-SPAM laws, all marketing emails must contain which of the following? A. written permission from the recipient B. an opt-in button or link C. a physical business address D. images and text in the body of the email

C. a physical business address Explanation A physical business address must be included in all unsolicited emails sent. Written permission is not required but encouraged. An opt-out link or button, not opt-in, must be included. Email can be text, graphic, or both text and graphic (images and visuals).

To make modifications to a contract, an agent would use: A. an addendum. B. a contingency clause. C. an amendment. D. an indemnification clause.

C. an amendment. Explanation Once a legally binding contract is formed, an amendment is used to change the terms of the contract. An addendum is a provision that is added at the time of contract negotiation to add a contingency or additional language. Indemnification is an agreement to hold another party harmless in the event of a lawsuit by being responsible for the potential loss. Under an option contract, all terms of sale are agreed to upfront. This includes the purchase price, steps to exercise the option, the period of time the optionee has to decide to "opt-in" to purchase the property, etc. The seller is obligated to the sell, but the buyer is not obligated to buy.

Americans with Disability Act (ADA) is a federal law impacting local land use. The goal is to create safe places for people with disabilities to access and use public spaces. Which of the following is not an example of an ADA compliant modification to public spaces? A. wider doors B. ramps C. mailbox color restrictions D. safety rails

C. mailbox color restrictions Explanation Restrictions on approved colors for a mailbox could either result from protective covenants (private restrictions), or aesthetic zoning (public restrictions) but in either case does not impact people with disabilities from accessing public areas or having mobility. Ramps, wider doors, and safety rails are examples of how public access and accommodations could be modified to meet the needs of those with either physical or mental disabilities.

The principal and interest payments in an adjustable-rate mortgage with a payment cap may reflect which type of loan amortization? Review Later A. rapidly amortized B. partially amortized C. negatively amortized D. long term amortized

C. negatively amortized Explanation A negatively amortized loan has insufficient debt service payment to reduce the remaining balance and instead the principal increases. A fully amortized loan has monthly debt service payments that reduce the principal balance to zero upon the final payment. Fixed rate loans are examples of full amortization. An example of a partially amortized loan is seller-financing where the seller wants to be "cashed out" after a few years of borrower payments and receive the remaining balance owed in one lump sum. Long-term amortization in financing situations refers to the relationship between term, rate, and payment. The longer the repayment period, the lower the payment and the higher the total interest paid over the life of the loan. Borrowers typically choose a longer-term loan as the monthly payments are lower, making the purchase more afforadable. Long-term loans typically have a higher interest rate when compared to a short-term loans.

A recent ad stated a 4 bedroom, 3 bathroom home listed for $288,000 is available for as low as 5.2% APR with nominal monthly payments over a typical term as long as a potential buyer pays an application fee within the next 48 hours. What trigger term was used in this ad? A. 48 hours B. 5.2% APR C. no trigger terms were used D. $288,000 price

C. no trigger terms were used Explanation Regulation Z is a component of the Truth in Lending Act (TILA). Trigger terms include specifically, with numbers, advertising the monthly payment, down payment, term, and dollar amount of the finance charge. Vague phrases do not trigger the need to disclose more conditions under Regulation Z. APR is not considered a trigger term.

An Exclusive Right to Sell listing agreement differs from an Exclusive Agency listing in that: A. a REALTOR is prohibited by federal law to enter into an Exclusive Agency agreement. B. compensation under an Exclusive Agency Agreement is a net listing while the Exclusive Right to Sell is based on a percentage of the sales price. C. the seller is not obligated to pay commission to the listing agent when the seller finds the buyer under an Exclusive Agency agreement, however would be obligated to pay under an Exclusive Right to Sell. D. the seller is required to pay the compensation no matter how the buyer is introduced to the property under an Exclusive Agency Agreement and would not be obligated to pay if the seller finds the buyer under an Exclusive Right to Sell.

C. the seller is not obligated to pay commission to the listing agent when the seller finds the buyer under an Exclusive Agency agreement, however would be obligated to pay under an Exclusive Right to Sell. Explanation A seller is required to pay compensation to the listing agent no matter how the buyer is introduced to the property under an Exclusive Right to Sell Listing Agreement. The seller is only required to pay compensation to the listing agent under an Exclusive Agency agreement when the listing agent finds the buyer. Under a Net Listing the listing brokerage is not entitled to compensation unless the property sells for more than the amount that the seller wants to net. The listing brokerage would be entitled to keep the amount paid in excess.

The Sherman Antitrust Act prohibits all the following, EXCEPT: A. price-fixing. B. market allocation. C. vendor kickbacks. D. group boycotts.

C. vendor kickbacks. Explanation Sherman Antitrust Act prohibits price-fixing and boycotting. RESPA does not permit vendor kickbacks among settlement service providers. It is common for the exam to mix two laws and for students to be able to distinguish between the two laws.

An investor wants a 6.75 yield on a loan product. The lender is offering this loan to a borrower at 6.25% and is charging 1% for the origination fee. How much will the borrower pay in loan fees if the loan amount is $195,000? A. $1,950 B. $2,925 C. $7,800 D. $9,750

D. $9,750 Explanation The only way the lender can offer a loan at 6.25% given the investor wants 6.75% is if the buyer pays 4 discount points to reduce the interest rate by a total of 0.5%. The buyer will pay 1% of the loan for each discount point; for this example, the buyer will pay 4 discount points. Each discount point equals a 1/8 or .125% change in the interest rate. The loan origination fee is being charged at 1% of the loan and covers the expenses of the lender making the loan. The borrower needs to pay a total of 5% of the loan to cover the loan fees. $195,000 X 5% = $9,750 The choice of $2,925 mistakenly charges 1.5%, 1 from the origination fee and mistakenly looked at the 0.5% reduction as half a discount point. The choice of $1,950 only charges the point from the origination fee. The choice of $7,800 only charges the points from reducing the annual interest rate to the exclusion of included the origination fee.

The purpose of a protection agreement is best described as which of the following? A. Ensures a listing agent from a different MLS will still pay the cooperating selling broker's commission B...Prevents a client from purposefully waiting until the agency agreement expires before entering into a sales contract to avoid paying agent compensation C. Prevents the seller from avoiding compensation payment to the listing agent regardless of how the buyer is procured D. Ensures a For Sale By Owner will pay the buyer agent's compensation.

D. Ensures a For Sale By Owner will pay the buyer agent's compensation. Explanation A protection agreement is used by buyer agents with FSBOs to ensure the seller will pay the commission. A protection period - also called an extender clause or an override clause - prevents clients from waiting until agency expires before entering into a transaction. If the prior clients enters into agency with someone else, the active agency kills the protection period. The document used by out of area brokers to confirm compensation from a listing agent in another MLS is the confirmation of compensation form. An exclusive right to sell listing agreement is the document ensuring a seller pays the listing agent compensation regardless of how a buyer is procured.

Which of the following protected classes were added to the Federal Fair Housing act in 1988? A. Religion B. Race C. Sex D. Familial Status

D. Familial Status Explanation The Federal Fair Housing Act was amended to add familial status and handicap in 1988. Sex was added to the act in 1974 as a protected class. The remainder were included in the original act which became law in 1968.

An owner purchased property in a subdivision that is subject to protective covenants. Which of the following is the most appropriate actions to be taken if a neighbor is in violation of the covenants? A. File a complaint with the local housing authority. B. File a suit to quiet title against the neighbor. C. File a complaint with the sheriff's department. D. File a complaint with the homeowner association.

D. File a complaint with the homeowner association. Explanation The best course of action is to file a complaint against the neighbor with the HOA. Another allowed course of action is filing a suit for injunction to stop the neighbor from breaking the HOA rules (while allowed, the courts prefer that you try to settle the issue through the HOA first). The local housing authority and the sheriff's department are not responsible for private use restrictions. The covenants are appurtenant and "run with the land" so subsequent owners are bound to follow the rules.

An agent listed a property and before he/she can put it in the MLS the seller dies. What is the status of the listing? A. If the seller is married, the agreement would be binding upon the surviving spouse B. The local MLS determines whether the listing remains active or not. C. It is still in effect and binding on the seller's heirs. D. It is terminated and you should stop all work on the listing.

D. It is terminated and you should stop all work on the listing. Explanation The death of the principal would terminate an agency agreement. It would not be binding upon the surviving spouse. A new listing agreement would need to be signed. If the property were under contract, the purchase contract would be binding upon the seller's heirs. The local MLS does not determine if a listing agreement is legally binding or valid.

Which of the following terms, used in the advertisement for a rental property, would be a violation of the Federal Fair Housing Act? A. Applicants must have income of a minimum of 3 times the monthly rent to be considered B. Landlord will give preference to Hispanic tenant for the lease of restaurant space in this location C. Applicants must have a minimum FICO credit score of 600 to qualify D. Landlord seeking professional couple for 2-year lease on upscale, downtown, loft condo. Great views from this 9th story unit

D. Landlord seeking professional couple for 2-year lease on upscale, downtown, loft condo. Great views from this 9th story unit Explanation Although the words "professional couple" may not sound like a violation, they can have a "chilling effect" on a small family (single parent with one child) who might otherwise be interested, thus minimizing the housing choices of that family. Income and credit scores are legitimate vetting processes, as long as they are used neutrally. Note that the answer about a Hispanic tenant was for commercial space and would not be covered by Federal Fair Housing laws.

A couple separates and the divorce will finalize in six months. The couple would like to resolve the interest in the marital home by conveying the property to the wife. Which deed would most likely be used to accomplish this? A. Special Purpose Deed B. Limited warranty deed C. Trustee's Deed D. Nonwarranty Deed

D. Nonwarranty Deed Explanation Nonwarranty deeds are often referred to as "Quitclaim" deeds and would be the most likely solution for this case. Trustee's deeds are often used to convey foreclosures as it is the trustee who is delivering the deed, for the lender, not the actual title holder. Special warranty deeds are often used in commercial transactions or sale of "real estate owned" by the bank, where the title owner. Special or limited warranty deeds warrant only the period of time that they have owned the property. Special purpose deeds are often used when a property is being transferred by a public official performing a function of the office; for example a Sheriff's Deed.

Regarding mortgages, what is the name of the document used to release the lien and acknowledge the loan has been paid in full? A. Deed of trust release B. Defeasance clause C. Habendum clause D. Satisfaction of mortgage

D. Satisfaction of mortgage Explanation The instrument that is recorded to release a lien against a property is called a satisfaction of mortgage. The defeasance clause in the mortgage note requires the bank to record the document upon the borrower's "defeat" of the mortgage, meaning final payment has been made. Deed of trust release sounds like a probable answer, however recall that a deed of trust is signed in title theory states, not in lien theory states. The habendum clause contained in a deed defines the level of ownership or the types of interest and rights that the buyer/grantee will be entitled to.

The Real Estate Settlement Procedures Act requires which of the following: A. Borrower shall have a three day right of rescission when obtaining a mortgage B. Borrowers should receive a loan estimate within 3 days of loan application regarding the closing costs on a particular transaction. C. Borrowers may not receive a commission refund or "kickback" from an agent or lender. D. That lenders provide form disclosing the cost of the financing

D. That lenders provide form disclosing the cost of the financing Explanation RESPA requires that borrowers be informed of their closing costs with 3 days of loan application (which is defined in the law). The purpose is so that consumers can compare the costs of different loans and lenders (Know before you owe). While Truth in Lending does allow a 3-day rescission period on equity lines, there is no rescission period when obtaining a mortgage loan to purchase a property. The cost of the financing, for example, the finance charge and APR are related to TIL, not RESPA. RESPA does eliminate kickbacks between service providers but does not prevent a service provider giving money to the borrower.

A limited services listing agent failed to discover and disclose an obvious discrepancy in square footage that was placed into a multiple listing service. The buyer learned of the mistake after closing. Which of the following statements is TRUE? A. Listing agents are required, by rule, to measure homes B. The agent has done nothing wrong as he disclaimed that there may be errors in the MLS C. The seller is guilty of a negligent omission for not recognizing the mistake D. The agent is guilty of a negligent misrepresentation

D. The agent is guilty of a negligent misrepresentation Explanation This is certainly a misrepresentation, likely a negligent one, because the agent did not do enough diligence to be minimally competent. Disclaimers are not a defense against misrepresentations. Sellers owe nothing to buyers. Agents are not required to measure homes (although it is highly suggested).NOTE: It is important to know the difference between a misrepresentation (a lie), omission (withholding information) and false promises (making promises to induce the sale that are not kept).

An agent lists a property as having 5,200 square feet. The property goes under contract and the appraisal identifies that the square footage is only 4,200 square feet. Which of the following could be correct given these facts? A. The listing agent could be disciplined for a negligent omission B. Neither agent could be disciplined in this situation if the property is in a caveat emptor state C. The listing agent will not be liable if s/he hired an appraiser to measure the property D. The buyer agent could be disciplined for a negligent misrepresentation

D. The buyer agent could be disciplined for a negligent misrepresentation Explanation The buyer agent could be disciplined for this misrepresentation because the mistake was so large that the buyer agent should have been able to recognize the mistake. The listing agent can be disciplined for a misrepresentation (not omission) for putting the wrong number in the MLS. Hiring an appraiser is good advice, but the agent will still be responsible for his/her misrepresentations. Caveat emptor means, "buyer beware" but does not absolve agents of their responsibility to disclose accurate info

A contract contains a financing contingency. Which of the following statements is TRUE? A. The buyer is entitled to a refund of the earnest money deposit when the buyer terminates by the contingency date. B. The buyer is not entitled to a refund of earnest money paid unless the seller agrees in writing. C. The buyer can terminate the contract for any reason or no reason at all. D. The buyer is entitled to a refund of the earnest money deposit when the buyer terminates by the continency date when the denial is in writing.

D. The buyer is entitled to a refund of the earnest money deposit when the buyer terminates by the contingency date when the denial is in writing. Explanation The buyer will not be obligated to purchase the property if the loan is denied during the financing contingency date. Denial must be in writing. The buyer will receive a refund of the earnest money deposit when termination occurs by the contingency date. The seller is not obligated to grant an extension of time if the buyer has not heard back from the lender. The seller MAY amend the time period to grant the buyer additional time.

A buyer's agent completes a contract form incorrectly so that the contract reflects a purchase price of $1,000,000 rather than $100,000. The seller has signed the form and communicated acceptance to the agent. Which of the following statements is true? A. This contract is binding, and the buyer will be in breach if they fail to complete the purchase at the contract price of $1 million. B. The contract would not be binding, but the seller would be entitled to the earnest money due to the agent's negligence. C. The seller can sue the buyer for specific performance. D. The contract would not be binding as there is an apparent mutual mistake of fact.

D. The contract would not be binding as there is an apparent mutual mistake of fact. Explanation This contract would not be binding because of the mutual mistake of fact. Since the contract is not binding, there would be no breach. Neither party can sue for damages or specific performance. Specific performance is used to enforce a legally binding contract by asking the courts to force the sale.

An exclusive buyers agent represents a buyer through ABC Realty, Inc. The buyer and her agent walk through the property but fail to note the efflorescence or white mineral build-up that indicates standing water on the foundation block. The listing agent failed to disclose this issue on the MLS or in other print media. Which of the following statements is TRUE? A. The buyer's agent is guilty of willful misrepresentation. B. The listing agent is guilty of willful omission. C. The buyer's agent is guilty of negligent omission. D. The listing agent and buyer's agent are not responsible as the buyer toured the property.

D. The listing agent and buyer's agent are not responsible as the buyer toured the property. Explanation It is important to note that the listing agent and buyer's agent are both guilty of negligent omission. Licensed real estate agents are responsible for disclosing what they know or what they reasonably should have known as they are supposed to possess reasonable skill, care and diligence. Willful vs negligent comes down to intent. Since the listing agent or buyer's agent were not intentionally lying or withholding material facts, it would be negligent. Misrepresentation vs omission comes down to whether something was said either in print or orally or whether nothing was said. In this instance, both the listing agent and buyer's agent failed to disclose so it would be omission.

A listing agent presented an offer to their seller client. The offer was low and the seller requested time to think about it. The next morning, the agent called the seller to notify him that another offer would be coming within the next week. The seller told his agent to notify the buyer who had made the low offer that the seller was rejecting the offer. In this case, which of the following is a correct statement regarding the listing agent's actions? A. The listing agent failed in their duties because they should have encouraged the seller to make a counter-offer and not to reject the offer. B. The listing agent may only present actual offers to sellers. Since the second offer may fail to materialize, the agent failed in their fiduciary duties by steering the seller to a non-existent offer. C. Per the Statute of Frauds, all offers for real property must be in writing. The agent should not have presented the second offer until it was reduced to writing. D. The listing agent fulfilled their fiduciary duties because even though the second offer had not been received the agent was obligated to notify the seller of the possibility of the second offer.

D. The listing agent fulfilled their fiduciary duties because even though the second offer had not been received the agent was obligated to notify the seller of the possibility of the second offer. Explanation Agents are responsible for keeping their clients fully informed. Therefore, the agent was correct in disclosing that a second offer was likely to materialize. While the Statute of Frauds does require contracts to be in writing to be enforceable, a verbal offer must be communicated to the seller.

A buyer financing the purchase of her property must pay for both a borrower title insurance policy and a lender title insurance policy. The lender title insurance policy offers protection up to what amount? A. The amount of the sales price B. The amount of the appraisal C. The amount of the equity D. The loan balance outstanding

D. The loan balance outstanding Explanation The lender's policy for title insurance purposes protects the interest a lender has in the property. This means the lender policy is limited to the loan amount and also has diminished liability so when the loan is paid off then the lender's policy coverage ends. The borrower's policy commonly is for an amount equal to the purchase price. Appraised value does not bear relevance for title insurance but is of importance when determining loan-to-value ratios. And the amount of equity refers only to how much of the property's value is owned outright by the borrower.

Which of the following is most likely to result in a terminated contract? A. Either party changes their mind B. The firm loses its license C. Death of either party D. The seller cannot convey clear title

D. The seller cannot convey clear title Explanation Death does not kill a contract, but it does kill an offer. Loss of firm licensure does not kill a sales contract, but it does kill agency. One party changing his/her mind does not terminate a contract (unless it is voidable which the question did not specify - be careful not to read beyond what is provided). Impossibility of performance does kill a contract - this includes the seller's inability to convey title for any reason and the buyer's inability to buy (note, this is not the same as the buyer's inability to get a loan because lender financing is just one way to buy).

Which of the following loan types allow the borrower the greatest leverage? A. Commercial B. Conventional C. FHA 203(b) D. VA

D. VA Explanation VA allows for the greatest leverage as VA allows for $0 down financing. Leverage means using other people's money so a borrower can't get much better leveraged than using 100% of someone else's money. Conventional loans typically allow a minimum of 5% down, FHA requires 3.5%, and commercial loans typically start at 20% down and go up from there

During recent offer negotiations, a seller told her listing agent she is willing to accept the buyer's offer price but would first like to counter for a higher price. The listing agent passes this counter along to the co-brokering subagent working with the buyer and informs the selling agent about what the seller said. The selling agent passes the counteroffer to the buyer who is irritated at the increased offer price. To prevent the deal from falling through, the selling agent shares with the buyer what she learned about the seller willing to accept the buyer's original offer price. The buyer in turn counters with the original set of terms to which the seller accepts. The selling agent: A. Acted in the best interest of the seller by sharing the price the seller was willing to accept because in so sharing, the selling agent saved the transaction. B. Violated agency because in a dual situation the agent must maintain both the seller's and buyer's confidences so as not to harm either client. Sharing the price the seller is willing to accept hurt the seller. C. Acted appropriately because the selling agent did not break the buyer's confidentiality and passed along information relevant to the buyer's decision making as agency duties require. D. Violated agency owed to the seller because the selling agent broke confidentiality by sharing the price the seller was willing to accept with the buyer.

D. Violated agency owed to the seller because the selling agent broke confidentiality by sharing the price the seller was willing to accept with the buyer. Explanation Seller subagents owe the same fiduciary duties to the seller-client as a listing agent. When the subagent told the buyer that the seller is willing to accept a lower price, the subagent harmed the seller-client's negotiating ability. While a contract ultimately was formed, it is not in the agent's scope of authority to decide what is best for a client and instead should have received permission from the seller to share the seller's willingness to accept a lower price if it meant "saving the deal."

Special hazard insurance covers structures, improvements, and personal property while meeting most lenders' requirement for minimum coverage. This type of insurance policy is referred to as an all-risk policy and may be referred to as: A. an HO-4 policy. B. an HO-5 policy. C. an HO-6 policy. D. an HO-3 policy.

D. an HO-3 policy. Explanation HO-3 homeowner hazard insurance covers loss and damage to real property and personal property while meeting most lenders' minimum coverage requirements and is the most commonly used residential policy today as a result. HO-4 is a tenant, or renter, policy. HO-5 covers real property, personal property, and provides liability coverage as well as medical payments coverage which makes this policy the broadest homeowner's form. HO-6 is a condo owner policy.

A buyer submitted an offer on a brick ranch house. The seller was thrilled with the proposed sales price and earnest money but needed settlement to happen on a different day for family reasons. The seller struck through the buyer's proposed settlement date, wrote in an alternative, initialed next to this change and dated it. Then the listing agent gave the form back to the buyer who figured this was such a small and understandable request from the seller that the buyer immediately signed and communicated to the seller. Now they're under contract. Which of the following best describes what the buyer signed? A. option B. contract C. offer D. conditional acceptance offer

D. conditional acceptance offer Explanation When a buyer or seller makes a change to any terms in an offer it may be referred to as a counteroffer or conditional acceptance offer. For an offer to become a contract, the offeree has to unconditionally accept the offer and communication of acceptance must be made to the offeror (or his/her agent). A legally binding contract was not formed when the offeree signs. The acceptance is lacking communication. An option is a specialized contract where a buyer has a contractual right to buy, or choose not to buy, at a future date. NOTE: The exam can use conditional acceptance offer or counteroffer.

When lenders determine the amount of loan they are willing to provide, they must consider the property's value compared to how much loan a borrower is seeking. Which of the following determines the property's value? A. contract or sales price B. contract price or appraised value, whichever is higher C. appraised value D. contract price or appraised value, whichever is lower

D. contract price or appraised value, whichever is lower Explanation Both the sales price and the appraised value are compared. The lower, not the higher, of the two values is used by the lender when calculating the loan-to-value ratio (LTV). Sometimes the lower number is the sales price, but other times the lower number is the appraised value. Lenders choose the lower value to reduce the risk of a borrower defaulting and to make the loan product a better or safer business endeavor for the bank.

An odorless, colorless gas that may cause lung cancer is known as: A. asbestos. B. EIFS. C. polychlorinated biphenyl. D. radon.

D. radon. Explanation Radon is a risk when the reading is at or above 4.0 pico cures per liter of air according to the EPA. Asbestos is a danger when it becomes friable - airborne where it is breathed into the lungs and the fibers cannot escape. Asbestos causes lung cancer. Polychlorinated biphenyl is a coolant in electrical equipment which causes cancer. EIFS - also known as exterior insulating finishing system or synthetic stucco is a material fact that must be disclosed in NC, even if it has been removed from the property.