PRACTICE QUESTIONS

The Alabama commission has received a complaint against broker Carla Savage and has decided to investigate. What's the next step in the process?

Issue a notice of complaint and rights to Carla.

It's not a good idea to post photos of your clients' expensive belongings. Why is that?

It can attract the attention of thieves

Keenan signed a lease agreement that contains a right of first refusal. What does this clause do for Keenan and his landlord?

It gives Keenan the option to buy the property he's leasing before the property is sold to someone else.

Co-ownership without inheritance rights is what kind of real property ownership?

Joint tenancy. Joint tenancy does NOT have inheritance rights, when one of the owners die their share immediately goes to the remaining owners. Tenancy in common DOES have inheritance rights, when one of the owners die their share can be conveyed to someone else.

What type of emails are prohibited by the CAN-SPAM Act?

Junk emails

Which of the following statements describes laws and ethics?

Laws are made by the government, and ethics are dependent on conscience and values.

What may be found in paint in homes built before 1978?

Lead

In full seller disclosure states, whose responsibility is it to notify the seller of the seller's duty to disclose all known material defects?

Licensee representing the seller

Which document provides an estimate of the costs a buyer is likely to pay at settlement?

Loan estimate.

Roger just discovered that his loan includes a hidden balloon payment, so now he must ________.

Make one large final payment to pay off the principal

A real estate licensee must conduct marketing campaigns in a way that ______.

Makes the property available to all buyers without limits or restrictions

Joe signed a listing agreement with Marisa. A week later, Marisa's co-worker, Tina, showed Joe a property that he's interested in buying once his home sells. A week after that, Ross submitted an offer on Joe's property on behalf of his buyer client. Who is Joe's agent?

Marisa

Gia is acting as a seller agent. Which of these is a duty she must perform?

Market and sell the property

One of a seller's agent's duties is to ______.

Market and sell the property

Remembering the acronym PITI can help borrowers recall what makes up their ______.

Mortgage payment

What are mortgage-backed securities?

Mortgages that are pooled together and sold to investors

What activity does require a real estate license? What does not?

Negotiating with or aiding any person in locating or obtaining for purchase, lease, or acquisition an interest in real estate for a fee. Does NOT: Negotiating (free of charge) the lease price of the home your parents will rent, Renting out a room in your own house, selling your own house for a profit

In which of the following situations would an agent be representing a customer in a real estate purchase?

Never If someone is working with an agent then they are a client, not a customer

Certain properties are exempt from fair housing law requirements. What is a property that would be required to adhere to fair housing laws when a real estate licensee is involved in the transaction?

Owner-occupied buildings with fewer than four units. The exemption that normally applies to owners of one- to four-family dwellings is moot when a licensee is involved. That's because the law presumes agents are professionally trained and are aware that housing discrimination is against the law.

Which of these describes a deed?

Ownership document

Of all the preventive risk measures a broker takes, which is the most important?

Policies and procedures manual

Which of the following is one of your duties as a listing agent?

Promote your client's interests throughout the entire transaction.

Which liens take priority over all other liens?

Property tax

Which of the following actions does the secondary mortgage market commonly take?

Purchases loans from lending institutions.

What is the title of the person who is required to oversee the transactions of all licensees at a brokerage and ensure that they comply with Alabama license law?

Qualifying broker

Which choice correctly identifies the seven protected classes according to the Fair Housing Act?

Race, national origin, color, religion, gender, disabilities, familial status

When banks have lots of funds available for lending, what tends to happen to interest rates?

Rates decrease

Based on the duty of reasonable skill and care, if clients ask agents for advice in areas outside of an agent's scope of expertise, what should agents do?

Refer their clients to a competent professional in that field.

When a lower-quality property is adjacent to a higher-quality property, it can diminish the value of the higher-quality property. What economic principle is this?

Regression When a less nice house on a street's value is brought up because all of the houses around it are making renovations/updates, it is called progression.

The Real Estate Settlement Procedures Act is a consumer protection statute that ______.

Requires lenders to provide the consumer with certain disclosures for residential real estate transactions and prohibits kickbacks among settlement service providers

Dominique purchased a timeshare that conveys the right to occupy the property for two weeks each year, continuing for 20 years. However, the timeshare does not convey ownership. This is an example of a ______ timeshare.

Right-to-use

Cracks, holes, or rotten areas on a soffit are common ______ issues.

Roof

When an appraiser relies on comparable properties to estimate the adjusted market price of a property, the appraiser is using the _______ approach.

Sales comparison

How many hours of pre-licensing coursework are Alabama reciprocal licensee applicants required to complete?

Six hours

Karen is an active temporary licensee in Alabama. How long does she have to complete her post-licensing requirement to remain on active status?

Six months

Why would a buyer want to know whether any additions or alterations were made to a property?

So the buyer can determine if permits were pulled

In most transactions involving a buyer or seller, real estate agents have limited authority to act on behalf of their clients. Therefore, which type of agency relationship are they in?

Special

Whose responsibility is it to keep track of all buyer contingency deadlines and ensure they're not missed?

The buyer and the buyer's agent

The cost approach to finding an appraised value measures _______.

The cost to acquire land and construct a reproduction

Disclosing which of the following facts would be considered a fair housing violation? What would not?

The current owner has HIV. NOT:The kitchen was remodeled five years ago, the roof was replaced last year, the house has been treated for pests

What must occur to effect a transfer of title?

The grantor must deliver a valid deed to the grantee.

The duty of confidentiality survives agency unless the former client is found guilty of fraud or ______.

The information is known from other sources

Who can obtain a copy of a CLUE report for a given property?

The property owner. Property owners are entitled to a free CLUE report once per year.

Why is it so important to be able to properly identify trust funds?

They must be handled differently than non-trust funds

Under what name must sole proprietors conduct business?

They must use their own name or their own name in combination with a registered business name.

From a real estate professional's point of view, what's the purpose of qualifying buyers?

To determine the buyer's readiness to buy

The ease with which the property can be conveyed to another describes which factor that influences value?

Transferability

Which of these responsibilities would NOT be required of a shareholder in a cooperative?

Use escrow funds to pay property taxes on the unit.

Which term refers to a permitted deviation from current zoning restrictions that allows an owner to use land for a purpose that's otherwise prohibited, and requires the owner to prove the zoning creates an unnecessary hardship?

Use variance Use variance-you have to prove that there is a hardship Special use permit-you do not have to drive that there is a hardship

What effect will a property's utility have on the value if it's currently uninhabitable?

Value will be pushed downward.

In Alabama, when must the estimated closing statement be provided to a buyer?

When an offer is signed. Estimated closing statements must be provided to buyer clients when an offer is signed, and to seller clients when an offer is presented.

If Rina wants to pay off her mortgage early, what might she consider before doing so?

Whether she will incur a pre-payment penalty

Which of the following actions would violate Alabama rules related to offers?

Withholding an offer from a seller because it's well below list price and is likely to be rejected by the seller.

Mary is preparing a purchase offer for her buyer client. It's a pretty standard offer: a little less than list price, with the seller paying a little toward the buyer's closing costs. Mary fills in the blanks on a standard form used in her brokerage firm based on the current situation. Is this okay?

Yes, Mary can use the standard forms that her brokerage uses (assuming these forms were originally created or approved by an attorney).

Which of the following best describes the fiduciary duty of confidentiality?

You must not share your client's confidential information.

What's your responsibility regarding contingencies when representing a buyer?

You should use contingencies judiciously to protect your client and the deal.

Your client, Bruno, is an investor. He is in the process of selling a fourplex and mentions to you that he hates the idea of the capital gains tax he'll be subject to. What should you tell him?

"You might consider a 1031 tax-deferred exchange"

A buyer has a 15-year, $250,000 loan with a 5.5% interest rate. How much of the monthly payment is interest?

$1,145.83

Benji is a buyer's agent, and he'll receive a split of the commission paid from the sale of Harriet's listing. The property sold for $425,000. The total commission paid from the sale is 6%, split evenly between the buyer and seller brokerages. Benji has an agreement with his broker that he earns 80% of the commission received. How much will Benji be paid from this sale?

$10,200

Bob and Mary are financing $80,500 for a new home. Their lender will approve an interest rate of 6.5% if Bob and Mary pay three-and-a-half discount points at closing. How much is this?

$2,817.50

A lot with a front footage measuring 450 feet sold for $150,000. What was the cost per front foot? Round to the nearest dollar.

$333 per front foot

A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. If $1,145.83 is interest, how much is applied to principal?

$896.88

What's the typical useful life of an underground storage tank?

15 years

If a rectangular building were 40 feet by 20 feet, the area would be ______.

800 square feet

What is an example of usury?

A lender charges a borrower an interest rate that is excessively high.

A fee a lender charges for processing a loan is called _______.

A loan origination fee

Which of the following is a violation of federal fair housing law?

A private homeowner advertises a private house share using the phrase: "No minorities." Although this is not a protected class, this would be discriminatory advertising.

What's a contract clause?

A section of a contract covering a specific topic

The Knolls are purchasing a property and are concerned about the title. They want to have a title search performed. Who can perform a title search?

A title insurance company

When a buyer hands over an earnest money check to you as the buyer's agent, what's your responsibility?

Account for all monies placed in your trust and follow proper procedures. Must be turned into broker as soon as possible to deposit into escrow account, which must be a federally insured state bank. If the funds are cash they must be deposited IMMEDIATELY.

Jenny and her friend Kali went out to lunch. Afterward, they paid the bill. Their agreement to pay for the food they were served is what type of contract?

An implied contract

Fiona signed an agreement to either buy or not buy Nick's vacant lot for $310,000 by a specific date. What's this agreement called?

An option

As a security precaution, when posting on social media, what should you do?

Assume that all information you post is public to all people and will be passed along.

When is a title search conducted?

Before a property is sold, to determine if there are any defects on the title

Which requirement in Alabama law is meant to ensure that licensees know the types of service agreements they may enter into with consumers?

Brokers must adopt a written agency disclosure office policy that specifies this information.

Rhonda is interested in putting money toward a timeshare estate, which would allow her to use a condominium for two weeks each year. Timeshare estates ______.

Can be sold or passed down to heirs

A set of guidelines for the ethical conduct of real estate licensees is called a ______.

Code of ethics

Depreciation for commercial and residential properties

Commercial income-producing properties are depreciated longer (39 years) than residential income-producing properties (27.5 years) are.

Mixing escrow funds with personal funds is illegal. What's this practice called?

Commingling

Jamie enters an agreement to buy Yolanda's home. Per the agreement, Jamie promises to provide a $5,000 earnest money deposit, whereas Yolanda promises to sell her home to Jamie. These promises represent forms of ________, which are required to make the contract valid.

Consideration

Which of the following is true about title to a property?

Constructive notice to the public of interest in a parcel of real estate occurs when the deed is recorded and physical possession of the property is taken.

You're obligated to preserve all the confidential information you receive from a seller client. This obligation ________.

Continues even after your fiduciary relationship with the client ends.

Broker Alex learns that his friend Joann is frustrated with the broker who listed her home. Alex encourages Joann to break her existing agency agreement and sign with him instead. This violation is an example of ______.

Contractural interference

What's the term for illegally using escrow funds, such as earnest money, for other than its intended purpose?

Conversion

What instrument is generally used to convey property?

Deed

Assigning a lower-density use zone to an area that previously allowed higher density and that may reduce property values is known as ______.

Downzoning

Easements are a type of encumbrance that can affect a property. Which of the following is true about easements?

Easements are often established by a written agreement between the parties. Easements come in many forms, are of varying duration, and may be established with or without the owner's permission. They're often established by a written agreement between the parties.

Maria's neighbor is building a shed in his backyard that appears to be about a foot over the property line into her yard. What term describes the placement of the shed on Maria's property?

Encroachment

A defect on a title that can be monetary or physical is called an ______.

Encumberance

What is the type of possession in which a tenant stays after the right to possess has terminated?

Estate at sufferance When this happens the tenant that stays is called a holdover tenant

Jasper has a new listing, and he appoints Esther as his sub-agent. Esther brings Julie, a buyer customer, to the transaction, and Julie buys Jasper's listing. What's true about the agency relationships in this situation?

Esther owes her loyalty to the seller.

What type of listing agreement provides the most protection for the listing agent's commission?

Exclusive right to sell

A lease with option to buy is a good home buying solution for some buyers. Which of these statements about a lease with option to buy is FALSE? What is true?

False: Option agreements usually don't include a termination date. True: In an option to buy, part of each month's lease payment may apply toward the purchase, Buyers usually pay a fee for an option, which may be lost if they decide not to exercise the option, An option to buy is an offer to allow a buyer to purchase property at a later date.

How does the Alabama Real Estate Recovery Fund account get funded?

Fees from licensee applications

Which of the following is an example of a deed restriction?

Fence height

Property ownership for an indeterminable length of time is an example of what form of estate?

Freehold (example of this is home ownership)

What's used to calculate the housing debt-to-income ratio and total debt-to-income ratio?

Gross income

The Clean Water Act makes it ________ for private landowners to fill or drain wetlands on their property without obtaining a permit from the Army Corps of Engineers.

Illegal

What type of agency exists because of the actions and behavior of the parties?

Implied agency

What's the term for a common mortgage fraud scheme that involves an appraiser intentionally submitting a misleading report to a lender that indicates an excessive property value?

Inflated appraisal