Real Estate Test #2

If your clients are in a competitive bidding situation and want to include multiple contingencies in their offer, what should you say to them?

"Let's evaluate which contingencies matter most to you and consider omitting the rest."

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

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

Which one of these would NOT be an element of comparison an appraiser would use when applying the sales comparison approach to a property valuation?

-Income generated -The sales comparison approach doesn't factor in any income a property may have generated; that's an aspect of the income approach.

Kuhn received notice that he defaulted on his Minnesota contract for deed arrangement when he missed last month's payment. Since receiving the notice, Kuhn has paid past due amounts, costs associated with the notice, and attorney's fees. What else must Kuhn do to avoid termination?

-Pay 2% interest on the amount past due. -To maintain possession, Kuhn needs to correct the default, catch up on all past due payments, pay the costs associated with serving the notice, pay 2% interest on amounts past due (not including the final balloon payment), and pay reasonable attorney's fe

Which of the following is a reason all licensees should have errors and omissions insurance?

-inherent risks -E&O insurance is necessary for all licensees because risk is an inherent part of real estate activities.

Armitage Bank is placing the Kellermans in default for failure to pay their homeowners insurance. The lender is concerned about property damage and ______.

-judgement leans -The lender is vulnerable when homeowners insurance is allowed to lapse. A continued lapse can lead to default because lenders don't like it when their assets are not protected. Two major areas of vulnerability are property damage and judgment liens.

A property is 21,780 square feet. How many acres is this?

1/2 acre -One acre is 43,560 square feet. The property's size is half of that amount.

If the buyer defaults on a contract for deed, the seller may terminate the contract. The seller must serve a notice to the buyer specifying the conditions in which default has occurred. The buyer has ......... days to meet those conditions.

60 days

Which of the following properties requires a lead disclosure?

A lead disclosure is required for residential properties built before 1978 because paint manufacturers used lead-based paint before it was banned that year.

Which of the following is an unacceptable term to use in real estate advertising?

Able-bodied

The value principle of ______ is the basis of the income approach to appraisal.

Anticipation

Shane's buyers learned during the inspection that there was water damage around the fireplace and that the chimney needed new flashing and to be repointed. To whom must Shane disclose that information?

Any party to the transaction

Maurice is meeting with a buyer who is also selling his current home. Which question should Maurice ask to pre-qualify the buyer?

Are you currently working with any other agents? -Questions would include whether the buyer is working with another agent, how the buyer got Maurice's name, how long the buyer has been looking, whether the buyer has been pre-qualified, etc.

Luther has a buyer client who is purchasing a duplex built in 1969 and located in the heart of Minnesota. The buyer's purchase is contingent upon getting a mortgage loan. Which document must Luther ensure that his client receives from the seller?

Because the dwelling was built before 1978, Luther must ensure that his client receives a copy of the federal Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards disclosure, along with a copy of the EPA lead-based paint pamphlet.

As part of a deficiency judgment sought by a lender, a ______ may be placed on any current and future property the borrower owns until the lender recovers all losses.

Blanket lien -A blanket lien may be placed on the borrower's property until the lender can recover all losses resulting from the foreclosure process.

Which of the following is a characteristic of a U.S. Department of Veterans Affairs loan?

Borrower flexibility, No Down Payment 2. No Private Mortgage Insurance 3. Competitive Interest Rates 4. Relaxed Credit Requirements 5. Closing Cost Limits 6. Lifetime Benefit

Joseph needed help with his daily activities, so his niece, Brenda, did his cooking, shopping, and cleaning. Joseph told her he would leave some money to her in his will. Brenda thanked him. But when her Uncle Joseph died, he only left Brenda his antique tea set. Why didn't Brenda get any money?

Brenda and Joseph had a verbal contract, but nothing was committed to in writing. Verbal contacts are difficult to prove and enforce in a court of law, especially if one of the parties isn't there to confirm it.

The Equal Credit Opportunity Act is regulated by the ______.

Consumer Financial Protection Bureau

Which one of the following could indicate a problem with the chimney flue or ventilation?

Drafts near the fireplace

When you're using the sales comparison approach to value a property, which of the following is considered a category of adjustment?

Financing terms and cash equivalency -Categories of adjustment include financing terms and cash equivalency, conditions of sale, market conditions at time of contract and closing, location, and physical characteristics.

What's another term for a valuation that's an unbiased opinion of value?

Formal appraisal

Whoa—this market is hot, hot, HOT! You've had five offers come in since you listed your seller client's home yesterday. Of the options listed, which is the best strategy?

Have all buyers submit their "highest and best" offer, then help the seller decide which offer is most appealing.

While market value is an opinion of a property's worth on the fair market, which of the following best describes market price?

How much a buyer has paid and a seller has accepted for the property.

Which one of the following statements about investors and tax depreciation is true?

Investors can depreciate an appreciating asset. -Depreciation of investment properties allows investors to depreciate an appreciating asset and use the depreciation as a business deduction. Depreciation is limited to investment properties. Improvements can be depreciated; land itself cannot.

What's the purpose of the Disclosure of Notices section in the Minnesota Purchase Agreement form?

It indicates that what the seller has revealed about the property is true. -The Disclosure of Notices section basically reiterates the contract thus far; that everything the seller's told us is true, and that there aren't any outstanding violations or impending legal proceedings against the property.

If two parties enter into a contractual agreement with each other to perform an illegal act, which of the following statements is true of the contract?

It is void because it is not for a lawful purpose. -A contract for an illegal purpose is void, and a void contract has no legal force or effect.

What's the purpose of the Equal Credit Opportunity Act?

It requires lenders to make credit equally available to all creditworthy applicants, regardless of the applicant's protected class status.

In non-full-disclosure states, whose responsibility is it to notify sellers of their duty to disclose required items?

Licensee representing the seller

Regarding information that licensees must disclose, what does the pneumonic MAAP stand for?

Material, Adverse, Actual, Physical

How can liens, such as those created by non-payment of federal income tax, result in mortgage default?

New liens can threaten the lender's position as primary lienholder. Default can occur for this reason. -Additional liens on property can threaten the lender's position as primary lienholder on the property. Lenders want to remain the primary lienholder to be paid first in the event of a foreclosure sale.

Last year, Dana purchased a home in Minnesota with a flat backyard, perfect for her dream pool. When she breaks ground to start installing it, she discovers an abandoned—and more importantly, undisclosed—concrete septic system. Is she out of luck?

No, for up to two years after closing, the seller is liable for both the costs of sealing the system and reasonable attorney's collection fees for failing to disclose the known presence of the system.

Real estate licensees are seldom guilty of blatant discrimination, but unintentional discrimination does exist. What's one example of unintentional discrimination?

Not showing homes in neighborhoods where the client may become a victim of racial bias -Not showing homes based on a client's identification with a protected class, even if you mean well, is still discriminatory.

Which element of a valid contract is established by getting the signatures of a

Offer and acceptance

A licensee has several tasks to perform for seller clients. What's one of those tasks?

One of a licensee's tasks is to communicate all offers and counter-offers to the seller, which upholds the licensee's duties of disclosure, accounting, and reasonable skill and care.

Patsy's home had been on the market for five weeks, and two brokers had buyers who were ready to make offers. If Patsy accepted one of those offers, the corresponding broker would be the only one to earn a commission. What type of listing does this describe?

Open listing

Which of the following is a top priority for a buy-and-hold investor?

Positive cash flow

Which of the following is a legitimate reason to counter an offer?

Price -should be related to a significant term, such as price, closing date, or earnest money, not on minor, cosmetic, or low-cost items.

In a hot market, when all other sellers are listing at or above market rate, what pricing strategy will likely induce a bidding war?

Pricing just below market value

What does the lump sum payment at the end of an interest-only mortgage loan consist of?

Principal only

What does PITI stand for?

Principal, interest, taxes, insurance -PITI is an acronym for the components of the monthly mortgage payment: principal, interest, taxes, and insurance. These are generally bundled together in a mortgage payment.

he owner's covenants and an insurance provision are included in which of the following documents?

Property management agreement

Shelly is meeting with prospective buyer clients Larry and Vanessa Bryant for the first time. Before Shelly and the Bryants enter into a buyer agency relationship, what does Minnesota law require Shelly to do?

Provide the Bryants with information about agency relationships.

Rachel loves convenience. As you can imagine, she was thrilled when she was able to finance her mortgage through the same institution where she deposits her payroll checks. Which of these most likely financed Rachel's mortgage?

Savings and loan -Thrifts, or savings and loan associations, specialize in taking in savings deposits and then lending money out to consumers through mortgages and other loans.

Which of these statements accurately describes finance- and housing-related legislation?

The Fair Housing Act of 1968 prohibited discrimination in the sale, rental, and financing of housing based on race, color, religion, or national origin.

Sandy and Jared will be charged a prepayment penalty on their home loan because it's not a prime loan, and they are paying it off after only three years. Which of the following is a true statement?

The lender can only charge a prepayment penalty if it was disclosed at least twice to the borrower.

void vs voidable

The main difference between void and voidable contracts is that a void contract is invalid from the time it is created. A voidable contract, on the other hand, remains valid until the dissatisfied party cancels the contract if certain conditions are not met

Your buyer client Haley is making an offer on her first home Although she can afford the full listing price, you advise her to offer 10% below the list price. What's a good reason for doing so?

The market is cold.

What's the purpose of the financing contingency?

To protect the buyer in case the buyer cannot obtain financing

______ rely on their knowledge from previous homebuying experiences. This experience helps them to identify what they're looking for in a new property, which is often more space or a newer home with a good location and extra living space.

Trade-up buyers (Buyers looking for a newer or bigger property)

Melissa is applying for a loan that she qualifies for based on her military service. What type of loan is this?

VA loan

Ken signed a contract to purchase Debra's condo. Ken signed the contract two weeks prior to turning 18, which is the age of majority in his state. Debra found out about his age prior to the closing but honored the contract, and they closed on the condo a month after Ken's birthday. What was the status of the contract when Ken and Debra entered into it?

Voidable Because Ken was a minor when he entered into the contract, he had the option to cancel it (making it a voidable contract). However, the parties to a voidable contract may choose to execute it, which is what happened here.

What should licensees recommend their clients do before signing an offer to purchase?

What should licensees recommend their clients do before signing an offer to purchase?

Which should be included in an MLS policy for your firm?

When and if listing data should be submitted to you for approval

Tommy and Quinn are buying their first home together. All seems to have gone well, and they are conducting their final walk-through before closing. But wait ... nothing has been done to fix those electrical issues that the sellers agreed to fix. And the sellers removed the beautiful chandelier that was supposed to stay, per the contract. Can Tommy and Quinn walk away from the deal at this point?

Yes, the sellers have breached the contract, so Tommy and Quinn have the option of unilateral rescission. -The sellers are legally required to abide by the terms of the contract, so they have breached the agreement of sale. Tommy and Quinn can choose the remedy of unilateral rescission and walk away from the deal.

Your buyer clients Sylvie and Daryl reviewed their inspection report and decided that they would address small repairs themselves, but they want the seller to have regrading done to direct water away from the house. What is your responsibility at this point?

You need to communicate to the listing agent that the buyers are requesting regrading.

what does it mean when you receive a default notice?

a formal notice that a lender filed with courts to notify the borrower who has failed to make payments that the lender intends to conduct a sale foreclosure.

Monica received a promotion at work that requires her to relocate. Because of the timing of her promotion, she'll need to buy a new house in her new city before her current one is sold. So, she won't have any equity from her current home to make a down payment on the new house. What loan option would allow her to make the purchase before selling the old house?

bridge loan -Sometimes there is a delay between the sale of a property and the purchase of another, and the bridge loan gives the homeowner the ability to pay for two homes at the same time

Carol is buying a home and, contrary to common practice, would like the seller to pay all of the fees related to deed recordation. In which section of the Minnesota purchase agreement should this be stipulated?

closing cost -In the Closing Costs section, the parties may specify additional or non-traditional costs that they would like the parties to cover.

In what type of market could a buyer's strategy be to ask the seller to pay closing costs?

cold market

What two types of data does an appraiser gather?

general and specific

An investor is analyzing a property by looking at its ability to produce future income. The property is a 10-unit apartment building. Which of the following would be used to determine this value?

gross income multiplyer -Remember, rent has four letters. Gross rent multiplier is used for income-producing properties with four or fewer units. Properties with five or more units use gross income multiplier.

Income approaches to appraisal are based on what?

income approaches to appraisal are based on defining the present value of future income.

Because these types of properties have both specific physical and complex operational requirements, they are usually handled by more experienced real estate professionals.

industrial

Some groups of people are more vulnerable to lead poisoning and its effects than others. Of those listed, who is most vulnerable?

kids

To whom are licensees in Minnesota required to give information about agency relationships?

prospective clients and beyond

True or faulse: Once a counter-offer has been made, the prior offer is cancelled.

true

Starla, 35, and Gwen, 32, are going into business! Gwen is buying a share of Starla's franchise. Their attorneys drew up a contract that had Gwen providing $45,000 to Starla in return for 50% ownership. Gwen and Starla happily signed the contract, Gwen paid Starla the $45,000, and Starla presented Gwen with a notarized certificate showing Gwen's 50% ownership in the company. What type of contract is this?

valid

Are mobile home parks subject to fair housing laws?

yes. Because mobile home owners pay rent on the lot where they park their home, these parks are subject to fair housing laws, just as an apartment complex would be.