National Practice exam
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."
A buyer with a 20-year, $419,000 loan at a 4.25% interest rate has a monthly principal and interest payment totaling $2,594.59. If $1,483.95 is interest, how much is applied toward principal for that payment?
$1,110.64
A buyer has a 15-year, $250,000 loan with a 5.5% interest rate. How much of the first monthly payment is interest?
$1,145.83 (($250,000 x 0.055) ÷ 12 = $1,145.83)
What's the estimated value by cost approach for a property if the site value is $25,000, the new cost of improvements is $100,000, and the total depreciation estimate is $15,000?
$110,000
A property has a market rental income potential of $20,000 per month. The vacancy and loss rate is 5%. Operating expenses are expected to be 45% of the property's total income potential. The owner's monthly mortgage payment is $5,000. What is the annual net operating income that would be reported on the operating budget?
$120,000 (The owner's mortgage payment isn't a factor in net operating income on the operating budget. Instead, focus on property income, expenses, and the vacancy and loss rate. Net operating income = Operating income - Vacancy and loss rate - Operating expenses. Operating income is $240,000 ($20,000 x 12). Vacancy and loss rate is $12,000 ($240,000 x .05). Operating expenses are $108,000 ($240,000 x .45). Net operating income is $120,000 ($240,000 - $12,000 - $108,000).)
Helen is purchasing a home for $150,000 and provides a $2,500 earnest money check to the seller, which will be applied to her down payment. She's financing the transaction, and her closing costs and down payment total $4,800. How much should Helen bring to the closing?
$2,300
Your buyer client Heather just signed a purchase agreement for a $520,000 home. The LTVR is 60%. How much is Heather putting down on the purchase? Topic: Real estate calculations Subtopic: Basic math concepts
$208,000
Your clients sold their property for $500,000. Your commission rate is 5%. What's your commission (before splits or sharing with the cooperating agent)? Topic: Real estate calculations Subtopic: Calculations for transactions
$25,000
Joaquin sold his house for $327,600. He bought it several years ago for $139,900 with a $100,000 loan. The loan balance when he sold it was $73,400. What was Joaquin's equity?
$254,200 (Joaquin's equity was $254,200. Subtract the loan balance from the market value of the home to find the equity ($327,600 - $73,400).)
Henry submits an offer on a condo and includes an earnest money check for 10% of his offer, which the seller accepts. Later on at closing, he brings a cashier's check for $34,450 (comprising the remaining half of his 20% down payment and $7,950 in closing costs). What's the condo's purchase price in whole dollars?Topic: Real estate calculations Subtopic: Basic math concepts
$265,000
Sandra is purchasing a home for $200,000 and provides a $3,000 earnest money check to the seller. Her closing costs and down payment total $7,000. Assuming that Sandra is financing the purchase, how much should she bring to the closing?
$4,000
Ezra's listing sold for $100,000. His commission rate was 4%, and the property appraised at $95,000. What's Ezra's commission before splits or sharing with the cooperating agent? Topic: Real estate calculations Subtopic: Calculations for transactions
$4,000 (Commissions are based on sales price, not appraised value or list price, and 4% of $100,000 is $4,000.)
The lender will charge a one-and-a-half-point origination fee and two loan discount points. What will be the total due for points on a $115,000 loan?
$4,025
Dale and Barbara, your buyer clients, aren't thrilled about the current interest rates on home loans. They opt to pay two discount points to their lender to bring down their monthly payment. They're financing $235,000 on their new $400,000 home, so how much can they expect to pay for points at closing?
$4,700 (A point is 1% of the loan amount. Dale and Barbara's loan is $235,000, and they're paying two points (2%) at closing, which comes to $4,700 ($235,000 × 0.02).)
A local buyer is purchasing a property for $120,000. What will the seller pay in transfer tax if the rate is $.37 per $100?
$444
The Walton family got a great deal on their new home. They bought it for $101,295, and it appraised at $187,000 in a region where assessed value is a percentage of appraised value. Using an assessment ratio of 25%, what is the assessed value of their new home?
$46,750
Lenore makes a 95% offer on a townhouse that's listed at $285,000 and includes an earnest money deposit for 10% of her offer, which the seller accepts. She brings to closing a cashier's check for $35,025 comprising the balance of her 20% down payment and closing costs. What's the amount of her total down payment?
$54,150 (Lenore's offer is $270,750 which is 95% of the list price ($285,000 x .95 = $270,750 ). Her total down payment is 20% of her accepted offer of $270,750, which is $54,150 (or $270,750 x .2))
Grant and Adela arrange a $150,000 loan at 4.5% annual interest with their lender. What's their monthly interest amount?
$562.50
Alison and Brent are financing their house purchase of $232,500 with an FHA loan. Their credit score qualifies them for the minimum down payment. What do they need to put down?
$8,137.50 (The minimum down payment for an FHA loan is 3.5%, so Alison and Brent's down payment needs to be $8,137.50 ($232,500 x 0.035).)
A four-bedroom, four-bath, 4,875-square-foot house was listed at $445,000. Andreas, the seller, accepted an offer that was 95% of the listing price. What price per square foot did he get for the house?
$86.72
Buyer Ed is reviewing the Loan Estimate he received from the lender he's working with. He notices the loan terms include a prepayment penalty. Because he's a savvy consumer, which of the following does Ed do?
Ask the lender if there are other options available that would not involve a prepayment penalty.
The presence of an environmental hazard would decrease the property's utility and restrict its use until the hazard is cleaned up, decreasing value.
Constructive notice to the public of real property ownership occurs when the deed is recorded. (Recording and possession give the public constructive notice that ownership has changed hands. It also protects the buyer from others' claims on the property.)
Which of these is a violation of the RRP Rule?
Contractors perform renovations that disturb lead-based paint without holding proper certification. (The federal Lead Renovation, Repair, and Painting (RRP) Rule requires firms that do renovation or repair work in homes built prior to 1978 to be properly certified in using lead-safe work practices, but it doesn't prohibit DIY work.)
Which of the following is defined as what it would take to recreate a property if it disappeared off the face of the earth today? Topic: Valuation and market analysis Subtopic: Estimating value
Cost
With the cost approach to value, what is the reproduction cost?
Cost to build an exact replica of the subject, with the same materials and deficiencies (The reproduction cost is the cost to build an exact replica of the subject with the same materials and deficiencies, as opposed to the replacement cost, which is the cost to build a functionally equivalent improvement.)
Sue is selling her house for $265,000. Closing is set for June 19, and Sue owns the day of closing. She has a loan balance of $78,000 at a 4.2% rate, and she's current on her payments. She prepaid the property taxes ($1,350) and insurance ($925). Using a calendar-year proration method for calculations, how will these amounts appear on Sue's closing statement? Topic: Real estate calculations Subtopic: Calculations for transactions
Credit of $721.50 (Since she already prepaid the property taxes, first determine the tax daily rate: $1,350 ÷ 365 = $3.70. Next, determine how many days from closing until the end of the year, which is 195 days. Next, multiply the daily rate you calculated in the first step, $3.70, by how many days from closing, 195: $3.70 X 195 = a $721.50 seller credit. Any prepaid seller's homeowners insurance will be refunded to the seller outside of closing, so this doesn't appear on the closing statements.)
In a real estate transaction, which two parties are owed the same duties?
Customers and other parties (Other parties in the transaction are owed the same duties as customers. Only clients receive the full offering of your duties.)
Darren and Natalie are first-time buyers who have decided to purchase a newly built townhouse. Their agent, Jenner, tells them that the builder must provide a one-year home warranty. Which of the following conditions is most likely true?
Darren and Natalie are using an FHA-insured loan.
Which mortgage clause requires the lender to discharge the mortgage lien once the borrower has paid in full?
Defeasance (The defeasance clause means that the lender is prevented from trying to pursue additional payment because the loan has been paid in full.)
What must sellers provide prospective buyers of homes built prior to 1978, in addition to the federally required disclosure form?
EPA lead safety pamphlet
Without this easement—usually involving access to a road—the owner requiring the right of passage would be landlocked. Topic: Property ownership Subtopic: Encumbrances and effects on property ownership
Easement by necessity (This describes an easement by necessity. One way to remember this type of easement is by thinking of the importance of getting access to a road.)
Which of the following is a tactic used by a predatory lender?
Encouraging debt
The state's claim to property when a property owner dies, leaving no will, heirs or creditors, is the power of ______.
Escheat
Which of the following statements about escrow accounts is correct?
Escrow accounts are managed by escrow agents, and are used to hold funds belonging to others, such as earnest money deposits. (Escrow accounts are most widely used in real estate to hold earnest money deposits. These accounts may be opened and managed by the brokerage firm, a title insurance representative who's serving as a closing officer, or an attorney.)
Ricky Nubbins is three months behind in his rent and has received several reminders from the landlord that the rent is past due. As a result, the landlord has begun working through proper channels to legally end Ricky's lease before the contract end date. The landlord is terminating his lease through ______.
Eviction
Janice wanted to sell her townhome, and her neighbor was considering buying it. She wanted to put it on the market while she waited to find out if her neighbor was going to buy. In order to receive the best possible representation but avoid paying a commission if her neighbor buys the property, which type of listing agreement would best suit Janice's needs?
Exclusive agency (It's easy to confuse exclusive agency and exclusive right to sell. With exclusive agency, the seller retains the right to find a buyer and avoid paying the commission, but the seller's listing will likely receive more attention from the agent than it would with an open listing.)
When working with a seller, you signed a listing agreement that ensured you'd receive a commission, provided the property sold during the listing term. What type of listing agreement did you sign?
Exclusive right to sell
Jarod bought a home in which he has all the rights of ownership, including the right to sell and to convey the property to heirs at his death. What type of fee simple estate is this?
Fee simple absolute
Which statement accurately describes an abstract of title?
Few states require an abstract of title when conveying property. (The abstract of title process is costly and lengthy; only a few states require this process when conveying property.)
After purchasing a property, what can Jeremiah do to clear a possible future claim on the property's title?
File a suit to quiet title.
Which of these would most likely be an implied contractual condition in a real estate sales contract?
Freedom from fraud and misrepresentation (Contracts should specifically define the purchase price, the property being sold/purchased, and buyer and seller names. It likely won't spell out that the contract should be free from fraud or misrepresentation as this is implied under contract law.)
The cost approach method Burt used before investing in his new community was highly dependent on his depreciation estimates. As they begin building the homes they realize the guest bedroom in each has a point of entry that prospective buyers do not like in the layout of the house. The depreciation of this design defect is ______.
Functional obsolescence
Jerome is developing an ad for three properties he has listed in an upscale community. He wants to keep it short and simple. Which of these would NOT trigger full disclosure under TILA?
Get a low 4.925% APR
Marion gave her granddaughter Sheila the deed to a brand new home, on the condition that Sheila complete her PhD in astronautics. When Sheila dropped out of school and got a job as a greeter at a big box store instead, Marion ______ to regain ownership of the property.
Had to take legal action
What economic principle is related to a property's most profitable use that is both legal and economically feasible?
Highest and best use
Thad received multiple offers on his property and is reviewing them with his agent Nora. All of the offers have at least one contingency. Nora recommends that they reject the second offer, because it has a contingency that's generally the most risky. Which contingency is that?
Home sale (Home sale contingencies are typically thought of as the riskiest. By accepting a home sale contingency, sellers essentially remove their home from the market and wait for the buyer's current home to sell before their transaction can close.)
You represent Ember as her listing agent. Ashley is the buyer, and Trinity represents her. What duties do you owe Trinity?
Honesty and fairness
Which act states that communities and facilities that meet certain criteria for providing housing to older persons are legally exempt from familial status discrimination?
Housing for Older Persons Act of 1995 (Under the Housing for Older Persons Act of 1995, housing must have one person who is 55 or older residing in at least 80% of its occupied units to be exempt from charges of familial status discrimination by age preference.)
To meet the requirements of the statute of frauds, an agreement must clearly identify the contract's subject matter, present the contract's essential terms and conditions, and ______ to be enforceable.
Identify the contracting parties (The statute of frauds requires that the contracting parties be identified in the agreement, and that both parties sign the agreement to make it legally enforceable.)
Kristin has been unable to make her mortgage payments. Her property went to auction but the lender didn't accept the high bid. What stage of the foreclosure process is this property now in?
If a foreclosed property goes to auction and doesn't sell, title goes back to the lender, and the property is considered real estate-owned by that lender.
When is a cease and desist order effective?
Immediately upon issuance
Christy found a property that was for sale by owner and made an offer. The seller accepted Christy's offer, but neither of them knew how to proceed. Licensee Zelda helped Christy complete the necessary purchase documents and walked her through the process. What kind of agency exists?
Implied agency
Which clause in a contract states that one or more parties won't be held liable if there are losses or expenses related to the contract?
Indemnification clause
Jason is the seller's agent. His seller has a leaky roof he'd rather keep secret from buyers. What should Jason do?
Inform the seller that the roof leak is a material fact that he is obligated to disclose to buyers.
Ashish is purchasing a bank-owned property. His real estate agent tells him the bank is offering insurable, not marketable, title. What does this mean to Ashish?
Insurable title is one that may have known defects but is still insurable. Ashish should carefully review the title policy.
Mr. Schroeder installed built-in bookcases that he intended to remain as part of the home forever. This refers to which part of IRMA? Topic: Property ownership Subtopic: Real versus personal property; conveyances
Intent of the parties placing the item on the property
Kevin is having an appraisal performed on a piece of property he's interested in buying. He's especially interested in hearing about the estimated rate of return the property could pull. What type of value is he interested in?
Investment value
Why might a licensee want a buyer to sign a buyer representation agreement?
It helps ensure buyer loyalty.
What's one benefit of a rural development loan? Topic: Financing Subtopic: Types of loans
Its optional longer term means a lower monthly payment. (The longer payback period of these loans reduces the monthly payment.)
Andrea and Jim were planning to list their home with Cheryl, but just let her know they no longer wish to work with her. When Cheryl mentioned that listing agreements are legally binding, Andrea and Jim reminded her that their agreement is not legally binding. What would be the reason for this?
Jim didn't sign it.
Jim represents Joel in the sale of Joel's country acreage and house. Jim's business partner, Rolly, informed Jim that he wants to put an offer in to purchase the property, with the intention to subdivide it. Which statement best represents the disclosure requirements regarding this transaction?
Jim must disclose that Rolly is his partner and that Rolly intends to subdivide the property.
Which of these is an example of severability?
Jules and Katrina are under contract for the purchase of Katrina's house. A dispute arises over some contract terms, and they end up in court. The court rules one of the terms invalid but leaves the remainder of the contract in force.
Kevin listed his house with you but isn't offering a cooperating agent's commission. Ji-eun represents the buyer, Marta, and Marta's parents, Jean and Tom, are paying Ji-eun's commission. On which of these factors is your agency relationship based?
Kevin signed a listing agreement with you.
Which of these is an example of puffery?
Kevin's MLS remarks note that the condo has the city's "most beautiful twilight view of downtown and the bay."
Steven owns 114 acres of wooded, rural land. The abundance of wildlife on his property means that his friends are always asking for permission to hunt on it during various game seasons. If Steven gives a friend permission to hunt on his land, it can be said that he has given his friend a ______.
License (A license is permission to do something on another's land without actually possessing any interest or ownership in the land.)
Which of the following strategies would help to make a "Choose Your Neighbor" marketing letter non-discriminatory in its effect?
Listing the property on the MLS (If the "Choose Your Neighbor" letter is used as one part of a complete marketing campaign, its effect is not restrictive.)
All of the following are typically common property manager duties EXCEPT ______. Accepting rental applications Re-keying a property Showing vacant units
Making mortgage payments
)Which of these circumstances does NOT require agent disclosure? (As part of his corporation, Sean, a licensee, owns several investment properties. He's selling one. Gary represents the buyer. He's a shareholder in the title insurance company the buyer has selected. Megan has listed her brother's townhome for sale.)
Marty is representing Dwayne in both the sale of his current home and the purchase of his new home. (A licensee must disclose any situation that presents a conflict of interest. There's no inherent conflict of interest with one licensee representing a client in both the sale and purchase of property.)
The Bransons have a conventional loan for which they were required to obtain private mortgage insurance. Their local real estate market has been going like gangbusters, and their house is now appraised at twice their loan balance! Will their PMI be cancelled?
Maybe, but they'll have to petition their lender (Cancellation of PMI happens once the borrower reaches a 22% equity position. This is determined by loan-to-value ratio at the time of the purchase. Unless loan-to-value ratio is now 78% or lower, the Bransons would have to petition to get PMI cancelled.)
Which of the following is an example of commingling?
Mixing earnest money with personal funds
Mardee represented condo owner Carol, and they signed an exclusive agency listing agreement. If Carol found her own buyer, would she owe Mardee a commission?
No, because Carol procured the buyer. (It's easy to confuse the types of listing agreements. With exclusive agency, the seller retains the right to sell the property and not pay a commission. Exclusive right to sell agreements guarantee payment to the listing agent no matter who brings the buyer.)
Zack represents a seller and receives an offer through another agent. The offer is higher than the listing price. The property is already listed at a very high price, and no other offers have been received. Is Zack obligated by his duties to the other party to disclose that the offer is too high?
No, his fiduciary duty is to his own client. The buyer's agent must be responsible for advising on a fair price for the property.
Shari's clients want her to post that there are "no showings on weekends" on the MLS. Shari knows that will significantly cut down on their market exposure. Her duty of reasonable skill and care is in conflict with her duty of ______.
Obedience (Frequently, obedience will conflict with reasonable skill and care. When it does, it's time to have a chat with your clients. In the end, you must obey their wishes, or if the matter is serious enough, refuse to work with them.)
Brynn's listing agent told potential buyers that all offers on Brynn's property would be considered at 5 p.m. on May 3. By that date and time, four offers had been made. The persons making these offers are the ______.
Offerors (The party making an offer is known as the offeror.)
Which agency is charged with enforcing fair housing laws and holding all parties accountable for compliance with these laws and regulations?
Office of Fair Housing and Equal Opportunity
Joshua just got a copy of the preliminary report from his title company and is surprised to see that there's a mechanic's lien against his property. What does he have to do to clear this lien? Topic: Transfer of title Subtopic: Title insurance
Pay the bill that resulted in the mechanic's lien.
Three brokers meet and agree that all of their listing contracts will have one-year terms. Of which type of antitrust violation is this an example?
Price fixing (Besides commissions and discounts, price fixing may also apply to contract terms.)
When questions arise that are outside of your scope of expertise, what should you do?
Refer clients and customers to a competent professional in that field.
The Uniform Electronic Transaction Act (UETA) makes it legal and binding for contracts to be ______.
Signed electronically
Adamsburg, a bedroom community outside the city, is growing by leaps and bounds. There's been a boom in the number of children under age 12. Mia wants to open an in-home daycare, but she lives in a neighborhood that isn't zoned for home occupations. She applied for a/n _________ and, after a public hearing, was granted one to operate the daycare.
Special use permit (A special use permit, also called a conditional use permit, requires a public hearing and may be granted as long as the use is in harmony with zoning ordinances and doesn't adversely affect the community.)
Latrell purchased an old warehouse with the intent to create shared studio space for artists. However, he didn't perform due diligence before the purchase, and it turns out that there are hazardous materials that need to be cleaned up first. Latrell took the prior owners to court, and the court ruled that Latrell is responsible for the costs of cleanup. What kind of liability is this?
Strict liability (In strict liability, the owner is responsible for cleanup, regardless of who created the initial problem.)
In many areas of the country, Marcellus Shale has become a hot commodity. This type of rock produces gas, which can be mined, stored, and sold. Abe learned that his family farmstead sat over a rich deposit of Marcellus Shale. What type of rights does Abe have relative to this shale? Topic: Property ownership Subtopic: Land characteristics and legal descriptions
Sub-surface rights (Sub-surface rights are the rights to use underground resources, such as shale. These are also called mineral rights.)
DeeAnna thought she purchased an investment property, but the seller refused to deliver the title to her. DeeAnna met all of her obligations per the written contract she and the seller signed. She decided to take the seller to court in an effort to force him to hand over the title. This is an example of ______.
Suing for specific performance
What does the "T" in PITI stand for?
Taxes
Eva, Stella, and Lynn owned a vacation home two blocks from the beach. Sadly, Stella passed away over the winter, so when summer arrived, Eva and Lynn shared the home with Stella's nephew Drew, to whom Stella willed her share of the property. What type of ownership is this?
Tenancy in common
Marla's excited about closing on a cute lakefront cottage. But when she reads the report from the home inspection, she learns that the chimney leaks and that there is water damage in several places. This wasn't on any of the seller's disclosures. Which of these is the best option for Marla? Topic: Property disclosures Subtopic: Property condition
Terminate the agreement and ask for a refund of her earnest money.
Which type of pest may make mud tubes—tunnels that run along the walls—or shed tiny wings?
Termites
Katherine is purchasing a second home as an investment/vacation property. She has a large down payment, and the seller is financing the rest of the purchase. Which of these statements is true?
The Closing Disclosure and Loan Estimate aren't required in a seller-financed transaction. (In a seller-financed transaction, the Closing Disclosure and Loan Estimate aren't required. Some other form of statement may be prepared to show the buyer and the seller their respective closing figures.)
Trinity has applied for a home equity line of credit to perform some upgrades on her home. Within what timeframe must her lender provide the Closing Disclosure? Topic: Transfer of title Subtopic: Escrow or closing; tax aspects of transferring title to real property
The Closing Disclosure isn't required for a HELOC. (Home equity lines of credit aren't subject to TRID disclosures, so Trinity's lender isn't obligated to provide a Closing Disclosure, though other disclosure forms may be required.)
A seller tells his agent that he has to sell his house quickly because of a divorce proceeding, and that he's willing to accept less than his list price. His agent tells a buyer that the seller will accept as much as $10,000 less than the list price. Which of these is true?
The agent has breached his duty of confidentiality to his client. (The agent breached his duty of confidentiality to his client. Even if the client has given the agent permission to note the price is flexible, providing the reduction the seller is willing to make impacts his ability to negotiate for the best price.)
The Smith home has an assessed value of $64,120, and their tax rate is 3.2%. What is their annual tax bill? Topic: Real estate calculations Subtopic: Calculations for transactions
The annual tax bill the Smiths expect to pay is $2,051.84 ($64,120 × .032 = $2,051.84).
Which of the following is a potential disadvantage for a buyer who enters into a lease with an option to buy contract?
The buyer/lessee could lose any funds credited to the purchase price if he breaches the lease's terms. (Depending upon the contract's terms, a potential disadvantage for a buyer who enters into a lease with an option to buy is that he could lose any funds credited to the purchase price if he breaches the terms of the lease.)
Your 15-year-old son just signed a contract joining a health club, which costs $50 a month. Which of the following best describes this contract?
The contract is voidable. (While legal capacity includes whether or not all parties are of legal age, contracts signed by minors are voidable by the minor.)
If there's no state or local building code to cover a specific situation, what code must the builder abide by?
The federal building code
Which of these situations would be exempt from most provisions of the federal Fair Housing Act?
The local Elks club owns a property that's rented only to Elks club members.
When a property is found to contain an environmental hazard, what can generally be expected to happen to the property's value?
The presence of an environmental hazard would decrease the property's utility and restrict its use until the hazard is cleaned up, decreasing value.
The Shores are in the process of buying a beautiful 3,000-square-foot home from the Bishops. They've completed all the required paperwork on their loan application. Mary's analyzing the package to determine their ability to repay the loan. She examines the property's value, the property type, and the loan-to-value ratio, among other things. Her recommendation is that the Shores' loan application be approved. What is Mary's role?
The underwriter
Why would buyers want to know whether a property is currently experiencing a tax abatement?
Their taxes are likely to increase when the abatement period ends. (A tax abatement lowers property taxes for a period of time. If a buyer purchases a property in year nine of a 10-year abatement, the taxes will likely rise after year 10 and could rise significantly. This will impact home ownership affordability.)
Dave's company just did some renovation work on a free-standing hobby store in order to ensure that it's ADA compliant. As Dave is doing the final walk-through, he notes that the aisles are now wider, the restrooms each have an accessible stall, and the water fountain near the restrooms is lower and has more clearance. But he notices that one critical renovation hasn't been made. Which of these is key for ADA compliance?
There should be a ramp in addition to steps for wheelchair accessibility.
Why are galvanized pipes a problem in older homes?
They can rust and cause leaks and low water pressure.
Walt and Ginger were informed by their landlord that their option to purchase the bungalow they're renting has just been terminated. Which of the following things that can occur is likely to terminate an option to purchase?
They sublet the bungalow for a month without permission. (A violation of any of the lease terms could terminate the option to purchase. Of these four actions, the only one likely to violate the lease terms is subletting without permission, since most leases have a clause requiring lessor permission to sublet.)
When Stacy's clients ask her if she can recommend a mortgage broker, she promptly gives them the name of the best mortgage broker she knows, Gary Jones. Later, she always receives a check from Gary as payment for the referral. Is this legal or illegal under the Real Estate Settlement Procedures Act?
This is illegal under RESPA because it's considered a kickback between settlement service providers. (RESPA prohibits kickbacks between settlement service providers. Also, Stacy may suggest a few mortgage brokers, but the final decision is up to her clients.)
What's the minimum number of business days prior to closing that lenders have to provide borrowers with the Closing Disclosure form?
Three (Lenders must provide the Closing Disclosure form to borrowers a minimum of three business days before closing on the mortgage loan so that borrowers have time to compare the final terms and closing costs to the Loan Estimate they received at application.)
Which type of antitrust violation occurs when the providing of one service is made dependent on the customer or client obtaining another recommended service?
Tie-in arrangement (Tie-in arrangements are antitrust violations that involve predicating one service on the consumer purchasing another from a recommended company. These arrangements severely limit choices for consumers.)
Gail was supposed to close on her new home by the end of May, but she kept asking the sellers if they could push the closing date back. Soon the summer was over, and she still hadn't closed. Gail was guilty of not adhering to which aspect of the contract? Topic: Contracts Subtopic: Offers/purchase agreements
Time is of the essence (Timeliness is definitely part of performance. The phrase "time is of the essence" means that the parties will proceed according to the date(s) specified in the contract. Reasonable time is assumed if a specific performance date isn't mentioned.)
Which of the following clauses directs the parties to a real estate sales contract to proceed in good faith, and not unduly delay the process?
Time is of the essence clause
Charlene shares one wall with her neighbors to the side, but her home has three levels, and she has no upstairs or downstairs neighbors or neighbors on the other side. What type of dwelling does Charlene own?
Townhome
It's January, and the pool at Roger's listing has been prepped for winter for several weeks. The homeowner assures Roger that it's in good working order. Roger has no reason to disbelieve the homeowner, so he tells prospective buyers that the pool is fine. The property sells, spring comes, and the new owners call to complain that the pump doesn't work, and the pool drain appears to be clogged. What did Roger commit?
Unintentional misrepresentation
What's a good policy that a buyer's agent should employ regarding contingencies?
Use contingencies judiciously to protect the clients and the deal. (Contingencies should be used where warranted to protect the buyer, but shouldn't be overused. You don't want to kill the deal with too many contingencies.)
Blake is allowed to use his property in a way that's prohibited under current zoning ordinances, because those ordinances would cause undue hardship for him. What gives him this permission?
Use variance
Rex needs to handle some money he acquired during an "unsavory" business deal. He agrees to sign his boat over to his colleague, Ben, if Ben can launder the money and return it to Rex as part of a legal business deal. What kind of contract do Rex and Ben have?
Void
Warren signed a contract with the Samsons for the sale of property he didn't own. What type of contract is this?
Void (A party can't promise to do something impossible in a contract. Doing so makes the contract void.)
Buyer Susie's a little nervous about the $20,000 earnest money check she just deposited with the title company. When should she expect to see this money applied toward her purchase of the property?
When conditions are met at closing
Sondra thinks the new business contract she signed with her business partner is valid. Both parties are legally competent, the contract has a legal purpose, an offer was made and accepted, and a fee has been negotiated and documented. Which essential element of a valid contract has Sondra not yet considered?
Whether consent was voluntary (The only element Sondra hasn't considered is whether the consent to enter into the contract was voluntarily given. Only real estate contracts have to be in writing, and parties are legally competent to enter into contracts from the age of 18.)
Niko leased a unit in a residential building Jenna owned. Niko notified Jenna about a broken window and offered to repair it if it weren't fixed by a certain date. That date had come and gone, and Jenna hadn't fixed the window. Niko hired someone to make the repair and deducted the cost from his next rent payment. Can he do this (assuming the area where he lives has adopted the Uniform Residential Landlord Tenant Act)?
Yes, but Niko should submit the receipts along with his rent payment. (URLTA provides tenants with the remedy to make repairs and deduct the cost of those repairs from their rent. Written advance notice of an issue and reasonable time to correct must first be provided to the landlord.)
Your client is purchasing a single-family home with a conventional loan. The listing price is $410,000. Does this situation require a licensed or certified appraiser?
Yes, it's required.
You represent a seller as a listing agent. Do you owe any duties to buyer agents?
Yes, the duty to cooperate on showings
Paul and Blake are touring an open house when they notice that the glass on the sliding patio door is very foggy. Is this a concern, and if so, why?
Yes, this is a sign of a leaky seal which reduces efficiency.
Steve is preparing a comparative market analysis for the Joneses and has selected three comparable properties. How many adjustments should Steve make to the Joneses' property?
Zero (Steve won't adjust the subject property. Only the comparable's sales price is adjusted. If it is inferior, adjust upward. If it's superior, adjust downward.)
"I understand why you want a buyer representation agreement," your buyer tells you. "But what's in it for me?" You answer:
"Without it, you're unrepresented."
Your clients are looking at buying a $200,000 property with a 30-year loan at a 5% interest rate. If the amortization factor is 5.36822, how much would their principal and interest payment be per month? Remember: The monthly payment multiplier is per $1,000 of the mortgage.
$1,073.64
A borrower has a 30-year, $500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3,078.59. What's the total amount he'll pay over the life of the loan?
$1,108,292.40 (To find the total amount paid back, multiply the monthly payment by the total number of payments: $3,078.59 x 360 = $1,108,292.40.)
Stu's seller client, Gabi, wants to figure out how much equity she has in the home she's selling. Gabi paid $200,000 eight years ago and made several great renovations over the years. She still owes $125,000. Stu calculates that comparable home values in her area have risen about 15% since Gabi bought. Assuming Stu pulled appropriate comps, about how much equity does she have?
$105,000
Your clients are purchasing a $160,000 home. If they have a down payment of 25% and the bank charges two points at closing, how much are they paying in points?
$2,400
Stacy has gone into default on her mortgage. Her lender is demanding that the entire loan balance be paid in full. Which mortgage clause permits her lender to do this?
Acceleration
Kenneth entered into a contract to sell his home to Valerie, who put down a $5,000 earnest money deposit. At the last minute, Valerie backed out of the deal and Kenneth kept the earnest deposit. This is an example of ______.
Accepting liquidated damages (All of the answer options are actual remedies to breach of contract, but in this scenario, Kenneth kept the earnest money, which is known as accepting liquidated damages.)
After the closing, Donna ensures that her client has keys to the property and copies of all the transaction paperwork. Which fiduciary duty is Donna performing? Topic: General principles of agency Subtopic: Agent's duties to clients
Accounting (The duty of accounting refers to accounting for funds, property, and paperwork related to the transaction.)
Your client, Cassandra, asks you at what stage in her property ownership life cycle she'll be impacted by income tax issues. You tell her that it's likely that she'll be affected at ______.
Acquisition, ownership, and reversion
The appraisal on Jean's property came in at $22,000 less than the agreed-upon sales price, so the buyer, Thomas, wants to renegotiate the terms. If they can come up with a new price that is satisfactory to both parties, what will they use to document this?
Amendment
Which of the following is a true statement about FHA financing?
An FHA loan is usually more attractive to borrowers who have lower credit scores and down payments.
Which of the following statements regarding reasonable accommodations and modifications is true?
An individual can make a request for accommodation or modification at any time.
Which economic principle states that the value of property today is impacted by the current value of the total expected future benefits?
Anticipation
What does the Federal Trade Commission consider to be an unfair ad?
Any ad or business practice that causes or is likely to cause injury (Any ad or business practice that causes or is likely to cause injury is considered an unfair ad, according to the FTC's Unfairness Policy Statement.)
Even though the Federal Trade Commission is concerned with all ad claims, what sort of ads would most likely concern the commission?
Any ad that makes a health or safety claim or any claim that's difficult for the consumer to evaluate (The FTC is concerned with all ad claims, but it's most concerned by any ad that makes a health or safety claim or any claim that is difficult for the consumer to evaluate.)
Saul was unhappy after he and Janelle liquidated their business. Janelle sold some items for less than he'd initially agreed to, and he wanted the full price to be included in the profit split. He wanted to sue, but he was required to pursue other options. What contract clause kept Saul from being able to sue?
Arbitration (An arbitration clause in a contract specifies that any contract disputes will be settled through arbitration, rather than through the court system.)
Allen and Lewis are friends who each recently purchased real estate. Allen purchased a patio home in a small town an hour from the city, while Lewis purchased a condo in a really hot area near the city center. Although they paid similar amounts for their properties, Lewis' condo is worth much more two years later. Which economic characteristic does this demonstrate?
Area preference
Which of the following would make the "Choose Your Neighbor" flyer an allowable strategy for finding prospective buyers?
As part of a comprehensive marketing strategy that doesn't limit or restrict potential buyers
When real estate licensee Brian discovered that real estate licensee Arnold was using a "Choose Your Neighbor" letter to market a property without also listing the property in the MLS, in the local paper, or even putting a for sale sign in the yard, what charge could he bring against Arnold to the National Association of REALTORS®?
A charge of agreeing to discriminate by limiting access to the property
What is the best description of a deed?
A document to transfer ownership/interest in real estate
Your buyers step outside to view the backyard of a property they're touring, but then they can't get the back door closed again. You recognize that this could be a symptom of ____, and realize that if they are interested in this property, they will want to discuss this issue with a home inspector.
A foundation problem (Misaligned doors and windows, or cracked drywall, can indicate that there are settlement problems with the foundation.)
Which of these is an example of usury?
A lender charges a borrower an interest rate that is excessively high.
According to Article 7 of the NAR Code of Ethics, which of these statements is most accurate when accepting compensation from parties to a transaction?
A licensee shall not accept compensation from more than one party to a transaction without the full knowledge and consent of all parties.
In which of these situations would a listing be most likely to terminate due to listing agreement expiration?
A market with high inventory and low demand
Appraiser Niles uses ______ to determine a range of values based on comparing a subject property to comparable sales. He makes sure to use some comparables that lack features of his subject property, and others that have even more desirable features, to balance out the comparison. Topic: Valuation and market analysis Subtopic: Estimating value
Bracketing (Bracketing determines a probable range of property values by comparing a group of comparable sales to the subject. The appraiser attempts to include both superior and inferior units of comparison such as age and transaction price.)
Who typically performs an appraisal?
Certified appraiser
Which task is NOT the responsibility of an escrow officer?
Determine how earnest money is to be distributed in case of a dispute. (The escrow officer is responsible for distributing the earnest money as outlined by the parties or the courts in case of dispute but doesn't have the authority to determine how it should be distributed.)
Morgan has agreed to sell his home to Dierks, and they've signed a contract. Which of these actions changes the contract from executory to executed?
Dierks' lender funded the loan, and closing took place.
The Amarals are purchasing the house of their dreams and have plans to stay in it for at least the next three decades while they pay back their conventional 30-year loan. Their primary focus, over the life of the loan, is to reduce their payments as much as possible. What is something that could help them achieve this?
Discount points
What happens when two fiduciary duties conflict? For instance, your clients ask you not to show their property on evenings and weekends, when most showings occur. To obey (a fiduciary duty) means to fail in reasonable skill and care (another fiduciary duty). What should you do?
Discuss the issue with your clients and let them decide.
Which of the following properties requires a lead disclosure?
Duplex built in 1959
Your clients, the Harpers, live in Area B that's adjacent to Area C; Area C was recently downzoned. If the Harpers believe the rezoning has harmed their property values, what can they do?
File a claim of inverse condemnation.
While working with a buyer client, Jeffrey filled in the blanks on the purchase agreement, drafted an early occupancy addendum, and assured his buyer that she was "fully protected" and would get her earnest money back if the sale didn't close. He encouraged her to hire an attorney to review the contract and addendum, and then invoiced her for a nominal $15 fee to prepare transaction documents. Which of the following tasks was Jeffrey legally permitted to do?
Fill in the contract blanks (Jeffrey did just about everything wrong! The only two tasks he performed that are NOT considered unauthorized practice of law are filling in the blanks on the purchase agreement and encouraging the buyer to seek legal advice.)
A borrower has a 30-year, $500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3,078.59. What's the total amount of interest he'll pay over the course of the loan? Topic: Real estate calculations Subtopic: Calculations for transactions
First, multiply the monthly payment by the total number of payments. Then subtract the original loan value: $3,078.59 x 360 = $1,108,292.40 ‒ $500,000 = $608,292.40.
Rico is an appraiser who is performing a valuation on a property. What's another term for what Rico is doing?
Formal appraisal (Another term for a valuation is a formal appraisal.)
What hazard do mining activities, landfills, or agricultural pesticides contribute to?
Groundwater contamination (Mining activities, landfills, or agricultural pesticides can contribute to groundwater contamination.)
What can brokerages do to ensure licensees use technology properly?
Have a solid policies and procedures manual in place.
Larry is assisting a buyer who's making an offer on his client's listing. If Larry is too helpful to the buyer, what might occur?
Implied agency and undisclosed dual agency
You're a new licensee who's thrilled to be working with five different buyer clients. Under what circumstances is it appropriate for you to determine the earnest money amount for your clients? (If the buyer is a first-time buyer If the buyer is buying a second home If the buyer seems confused)
In none of these circumstances
Which of these is essentially the same as fraud?
Intentional misrepresentation
Which of the following is an example of sub-agency?
Kayla is a licensee with ABC Realty and lists a property for seller Devon. Maurice is a salesperson with XYZ Realty Group and brings a buyer to the table, but owes fiduciary duties to the seller.
Your client, Eric, is interested in purchasing an industrial property to start a new business. You've recommended that soil, air, and water testing be done, but Eric is on a tight budget and doesn't feel these tests are necessary. What should you do?
Keep records of your recommendations and a written response from Eric.
Krening Realty has been found guilty of running deceptive ads. Which of these statements about the potential penalty is NOT true?
Krening's broker may face jail time.
Layla, a licensee, has had a few casual meetings with a potential client, Marcus. Marcus has told Layla the type of home and locations he's interested in. Layla has mentioned a few homes that she thinks Marcus might be interested in. Although Layla hasn't said that she will continue to look for homes for Marcus, Marcus believes she'll do just that. Which of these statements about this situation is correct?
Layla's actions may have created an implied agency agreement with Marcus.
Your buyers love the 1891 Victorian they have under contract, but they want to get both the water and the paint tested as soon as possible. What are they testing for in both water and paint?
Lead
Stan and Emile are arguing over their shared lot line, since Stan thinks that Emile planted a privet hedge on Stan's property. Stan filed a civil legal action against Emile. Which of these would the court use to determine the actual lot line? Topic: Property ownership Subtopic: Land characteristics and legal descriptions
Legal descriptions of both properties
The Perfect Home brokerage firm was found guilty of running deceptive ads. The Federal Trade Commission might require all of the following EXCEPT ______.
Letters of apology to all affected consumers (The Federal Trade Commission may require the Perfect Home to run corrective ads, notify consumers of deceptive claims it made, include specific disclosures in future ads, or provide consumers with other information.)
The Wells bought a home in Charlotte with absolutely beautiful perennial gardens in the back. The plantings were designed to bring birds, bees, and butterflies and to provide color for most of the year. When they did the final walkthrough, they were dismayed to see that many of the shrubs and flowering plants had been removed. Why did they expect these plantings to be considered part of the real property?
Method of annexation
Tim and Tina Wells bought a home with absolutely beautiful perennial gardens in the back. The plantings were designed to bring birds, bees, and butterflies and to provide color for most of the year. When they did the final walkthrough, they were dismayed to see that many of the shrubs and flowering plants had been removed. They expected these plantings to be considered part of the real property because of the ______.
Method of annexation
What are trust funds? (Topic: Leasing and property management Subtopic: Property manager's fiduciary responsibilities)
Money belonging to others held for a specific purpose in the course of a real estate transaction
Home inspector Maura was walking Thad through a property inspection. The frame house, on a slab foundation, had mulch piled up about 18 inches next to the house. Why was Maura noting this as a concern?
Mulch next to wood siding may lead to wood rot. (Too much dirt, mulch, or other material up against wood frame siding is problematic because it can hold moisture against the siding for long periods of time, leading to wood rot.)
When property with a pre-existing lease is sold, the new owner ______.
Must honor the lease terms unless the lease states otherwise
Nate represents Elena in the purchase of a house. Katherine represents the seller, Timothy. Which of the following statements accurately reflects the agency duties owed?
Nate owes Timothy the duty of disclosure.
All terms and conditions the client authorizes must be specified and included in an offer to sell or buy. When is it acceptable to offer the property under other terms?
Never
A property owner wants to achieve an annual return on investment (ROI) of at least 10%. He paid $500,000 for his rental property and experienced an annual cash flow of $45,000. Did he achieve his desired ROI?
No, the property owner experienced an ROI of 9%.
Tabitha listed her property for sale, but it's been on the market for several months with no offers. She decides to terminate her listing agreement and rent the property out instead of selling it. Assuming that her listing agent has fulfilled all of his responsibilities under the contract, can Tabitha terminate the contract before its expiration date?
Only if she and the listing agent mutually agree to terminate the agreement.
On what type of listing (or listings) may a net listing be used in states where they are legal?
Open, exclusive agency, or exclusive right-to-sell listings
Under which types of agency agreement may a buyer and agent operate?
Open, exclusive right to represent, and exclusive agency
Which of the following statements is true about conventional loans?
Originators usually package and sell the loans on the secondary market.
Henry is Monica's listing agent. As Monica's agent, Henry has a duty to account for and properly handle her funds and ______.
Paperwork
Brandon has a right-to-use timeshare. What can he NOT do with this type of timeshare?
Pass the timeshare on to an heir. (A right-to-use timeshare conveys the right of possession, but it isn't ownership and therefore can't be sold or passed on to another individual.)
Because there were no deadlines specified in the contract, Myron didn't think there was a problem if he waited to apply for a loan to help purchase the property. He was therefore a little surprised and not very happy when the seller sued him for breach of contract, stating that the delay was impacting the seller's ability to purchase a new home. What did Myron fail to do?
Perform his contractual obligations within a reasonable time.
Nevina may be creating an implied agency agreement if she does which of these?
Performs a CMA for an acquaintance and provides advice on setting a listing price based on other comparable properties in the area.
Jacob is a developer who purchased 78 acres and had it subdivided into half-acre lots. He decided to install sewer and underground electric for the entire subdivision, because he thinks that he will easily recoup his initial infrastructure investment. This is an example of which economic characteristic of real property?
Permanence of investment
Peter wants to set up a land trust so that his children can benefit from his real estate investments after he dies. He asked his financial advisor Tom to manage the trust, and Tom agreed. How is the trust created?
Peter conveys the real estate to Tom.
What might the government do if property owners fail to pay taxes on their property?
Place a lien on the property.
What does the lot and block system use to develop a property's legal description?
Plat references
Upon examination of his mortgage document, Jared finds a clause stating he will owe additional interest if he pays off his loan within one year of the loan origination date. What type of penalty does this describe?
Prepayment (The prepayment penalty clause puts the borrower on notice that if the loan is paid off before a specified period of time, the lender may be owed additional interest.)
Which of these terms can be defined as what a buyer has paid for a property and what the seller has accepted?
Price
The fewer properties on the market, the greater the scarcity. What's the effect on prices?
Prices are pushed upward.
Hal and Sara own a 212-acre farm. Their property is landlocked, but they have permitted water rights to use the stream located six miles away for irrigation purposes. What kind of water rights do they hold?
Prior appropriation (The doctrine of prior appropriation grants water rights based on need, not adjacency. Hal and Sara likely live in the western part of the U.S. where many states subscribe to this doctrine.)
Eileen is preparing a quarterly report pursuant to the terms of a property management agreement. This report shows the property owner whether this property operated at a surplus or deficit during the reporting period. What report is she preparing?
Profit and loss statement (The profit and loss statement can be prepared on a monthly, quarterly, semi-annual, or annual basis. The management agreement will dictate this. This report shows whether the property profited during the period or suffered a loss.)
The smallest property on the block is priced lower than any others, but the higher-priced properties that surround it help to drive the property's market value up. What economic principle is at work here?
Progression (Progression is the bump in value that a lower-value property gets by being near a higher-value property.)
Which of the following situations may result in inverse condemnation?
Property values decrease because adjacent property was rezoned.
When a buyer finances a newly built home with a Federal Housing Administration loan, what does the FHA require the builder to do?
Purchase a third-party home warranty to protect the buyer (The FHA requires builders of new homes to provide a third-party warranty to buyers.)
The Hendersons don't have enough money to make the full 20% down payment their institutional lender requires. To close the sale, the seller is willing to finance a loan for the amount between the home's list price and what the institutional lender is willing to loan. What's this type of financing called?
Purchase money mortgage (A purchase money mortgage is the term for seller financing that's typically used to bridge the gap between the home's list price and the institutional loan, though it can also be used to finance the entire purchase price.)
What can buyers do to protect themselves from title issues when purchasing property?
Purchase title insurance.
Patricia is meeting with James and Cindy, potential buyers of a listing. They are in the office to make an offer when James says, "The only thing that bothers me are those black spots on the ceiling in the bathroom. Do you think that could be the bad kind of mold? It's not dangerous, is it?" What should Patricia do?
Refer James and Cindy to a qualified mold professional.
Duke's client has asked him for advice on a legal matter. Based on the duty of reasonable skill and care, what should Duke do?
Refer his client to an attorney.
Jim is meeting with a client at a listing. Outside the basement window, there are wood shavings. The client asks Jim if they mean there are termites in the home. What would be an appropriate response?
Refer the client to a qualified pest professional.
Stan decides to not sell his property to Crandall, even after they've signed a legal sales contract. Crandall found a property he likes better, so they mutually agree to ______ the contract.
Rescind
Jayne was tired of waiting for her subcontractor to get his part of the deal done. The agreed-upon deadlines came and went, and Jayne lost money waiting for the subcontractor to come through. She decided that if the subcontractor weren't going to honor his commitments, neither was she, so Jayne consulted with her attorney and then terminated the contract. This is an example of ______.
Rescinding the contract unilaterally (In this example, Jayne rescinded the contract unilaterally as a means of remedying the breach of contract.)
Bob signed a contract to purchase Ingrid's apartment building. Bob decided he didn't want to be a landlord, and Ingrid decided she didn't want to sell and move to Maui. They mutually agreed to cancel the contract, and Ingrid returned Bob's earnest money. This is referred to as ______.
Rescission (A rescission is a definitive end of the parties' commitments under an agreement—one in which the parties are returned to their pre-contract status. Each party gives back anything received under the contract.)
Rusty received an acceleration letter from his mortgage lender. What is the most likely reason for receiving this letter?
Rusty is two or three months in default.
Which of the following is an example of a fixture that is real property?
Shelves attached to the wall with brackets
According to the process appraisers follow, what action is taken first upon being assigned a property for appraisal?
State the problem. (The first step of the appraisal process defined by the Uniform Standards of Professional Appraisal Practice (USPAP) is to state the problem.)
You know a property's effective gross income and its operating expenses. How would you calculate the net operating income?
Subtract operating expenses from effective gross income. (Net operating income is effective gross income, minus operating expenses.)
What is put at risk if a buyer misses a contingency deadline?
The buyer's earnest money
Which covenant requires the grantor to execute any necessary legal documents (within his power) necessary to fix title defects discovered after closing?
The covenant of further assurances
Which statement regarding fee simple defeasible estates is true?
The estate includes the full bundle of legal rights, but ownership is based on a condition.
Which of the following statements about the number of contingencies in a sales contract is true?
The inclusion of numerous contingencies makes it less likely that the buyer's offer will be accepted.
What is an example of a gross lease?
The owner pays all property taxes, maintenance, and insurance costs.
Danette hasn't paid the first quarter water bill on her property. It was due on April 1. She's closing with the buyer, Jason, on April 1. What type of expense is this and how will it appear on the settlement statement?
This is an accrued expense, and will appear as a seller debit and a buyer credit.
A ______ is a piece of real estate owned by multiple unrelated individuals who, in addition to their ownership rights, each hold the right to occupy the dwelling unit based on the specific terms of a timeshare agreement, usually in one- to two-week intervals during the year. Topic: Property ownership Subtopic: Types of ownership
Timeshare estate
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
What's usury?
When a loan's interest rate is higher than the maximum allowable rate
What type of police power allows cities to identify specific uses for an area?
Zoning
Bill is joining his inspector Hank for an inspection of the property he hopes to purchase. Hank notices that the dirt on the exterior of the home slopes toward the house. He explains that it should slope away from the home. When it doesn't, what problem might this create?
Basement leaks (Soil sloping toward a home means that rain runs off toward the home. This improper drainage can lead to leaks and moisture issues.)
Shannon doesn't understand why her agent wants her to add a contingency to her purchase offer. Her agent, Scott, explains that the property is in a transitional neighborhood, and it might be overpriced. What type of contingency is Scott recommending?
Appraisal
Marge is a licensee in a dual agency transaction with seller Steven and buyer Alda. In which of the following situations can Marge share what she knows with all parties without compromising her duty of loyalty? Topic: General principles of agency Subtopic: Agent's duties to clients
Alda tells Marge that she's hired an inspector to perform a property inspection.
Ray purchased a new home and soon discovered an issue with one of the windows. He filed a claim with the warranty provider, but it was denied. After mediation, the issue still remains unresolved. What is the most common next step?
Arbitration
Simon is looking for a facility for a large grocery distribution operation. He found two options, one of which is offering him a triple net lease, and the other an absolute net lease. Why is his attorney arguing against the latter?
An absolute net lease has no legal defenses if Simon fails to pay.
A fence that's placed two feet onto a neighbor's property line meets the legal definition of _______.
An encroachment
What's the penalty for violating federal do not call rules? Topic: Practice of real estate Subtopic: Advertising and technology
Anyone who violates do not call rules can be fined for each violation. The maximum fine more than $40,000.
Margie needs to know the square footage for the first floor of the condo her client is interested in buying. The kitchen is 10 feet by 15 feet, the living/dining combo is 20 feet by 25 feet, and the office and bedroom are each 10 feet by 10 feet. What's the total square footage?
850 square feet (Find the area of each room to get its square footage, then add the square footage of all four rooms. Kitchen = 150 sq. ft.; living/dining = 500 sq. ft.; office = 100 sq. ft.; and bedroom = 100 sq. ft. = 850 square feet.)
The Adams family is financing their loan through Acme Bank and their agent negotiated a great sales price on their new home. Smith Title Company processed the loan documents. The Adamses must purchase mortgage insurance. Who does the insurance protect?
Acme Bank (Private mortgage insurance is protection for the lender in the event of buyer default; it is used when the borrower does not have a large enough (usually 20%) down payment.)
Sondra, a buyer, signs all the required mortgage documentation, promising to make all payments to her lender. Unfortunately, Sondra falls on hard times and misses multiple payments, and the bank indicates that it's going to foreclose on her. The foreclosure proceedings are more difficult for the lender because Sondra holds the deed to the land. What kind of state does Sondra live in?
A lien theory state (In a lien theory state, the mortgage becomes a lien on the property, but deed remains with the buyer. Foreclosure proceedings in a lien theory state may be more difficult for the lender.)
Rhonda and her husband filed for bankruptcy five years ago. They want to purchase a new house but don't have the best credit score. They've decided to buy the home using an FHA loan. Which of these is a true statement?
A minimum down payment of 3.5% is required. (Borrowers with an FHA loan must pay a minimum down payment of 3.5% and have MIP. Private mortgage insurance (PMI) applies only to conventional loans.)
John and Amy purchased a builder's home warranty when they bought their home. They have found structural damage that could be a detriment to their home. On average, how many years does a home warranty cover structural damage?
10 years
As part of its penalty for violating antitrust law, Homes4Cheap, Inc. has been ordered to undergo court-ordered supervision. How long can this supervision last?
10 years (Court-ordered supervision may last as long as 10 years if a brokerage is guilty of violating antitrust law.)
In certain cases, antitrust violators may be subject to court-ordered supervision. How long can this supervision last?
10 years (Court-ordered supervision may last as long as 10 years if a brokerage is guilty of violating antitrust law. Topic: Practice of real estate Subtopic: Antitrust laws)
Traditionally, lenders' qualifying mortgage rules use a range of percentages to qualify for both the housing debt-to-income ratio and the total debt-to-income ratio. What are those ratio ranges?
25% to 28% for housing; 33% to 36% for total debt (All lenders have different underwriting standards. Although 25% to 28%, and 33% to 36% are often used, the qualifying mortgage rules set total debt-to-income ratio at no more than 43%. While this may seem generous, it's a hard and fast percentage that allows for little lender discretion.)
Jared has a 70/30 split with his brokerage firm, and his firm has a 50/50 split with cooperating brokerages. Last month, he was paid $12,239.50 in commissions from his home sales, which totaled $538,000. Assuming every transaction for the month was shared with a cooperating brokerage, what is Jared's brokerage's commission rate?
6.5%
A buyer is purchasing a home for $400,000 and is financing $300,000. What is the loan-to-value ratio?
75%
A property's projected monthly potential gross income is $20,000. The assumed vacancy and loss rate is 5% and operating expenses were expected to be 45% of the property's potential gross income. The property's actual income was $16,000 and expenses were 40% of that income. How did the property's actual net operating income compare to what was projected?
Actual net operating income was lower than projected.
The property management ______ cements the relationship between the property manager and the owner.
Agreement
Grace found herself in a breach of contract situation where the other party met some of the terms but not others. Grace thought it would cost a lot of time and money to sue, so she decided to accept the work that had been done and call it good. This is an example of ______.
Accepting partial performance
A former client has filed a formal complaint against Ajit, claiming he failed to properly disclose a material fact that the seller didn't disclose. Which of these statements about Ajit's liability is true?
Ajit may be liable if he operates in a state that requires licensees to make a reasonable effort to discover adverse material facts.
Which of the following is an example of an escalator offer?
Buyer offers $650,000 with clause that buyer will beat all competing offers by $3,000 up to $675,000.
You have a client who travels a lot and wants to feel safe and secure at home. Maintaining a house and yard isn't her idea of fun, and neither is fending off door-to-door solicitors. What type of homeownership would most likely fit her lifestyle?
Condo
Which of the following is an example of a universal agent?
Conservator