Practice Questions:
a ranch house with a double garage is being valued. the house next door, which is similar except that it lacks a garage and has an outside deck, was sold last month for $138,000. experience in that area shows that that a two car garage is probably worth $10,000 to buyers. while in general, they will pay only $500 extra for a deck. the ranch house is most likely to sell for around:
$147,500
a developer has a 100 acre tract to develop. two percent of the land will be used for recreational areas and 10% will be used for roads and utlities. acre lots are selling for $32,000, what is the potential gross income from sale of this development?
$2,816,000
a buyer wants to purchase a home for $160,000 with a 15% down payment. The lender charges 2 points. How much money does the buyer need up front to make the purchase?
$26,720
brad and john downing purchase a home for $150,000 that appraised for $152,500. their earnest money deposit is $1,000, they will make a 20% down payment, loan costs are $1,750, title insurance is $560, homeowners insurance is $685, recording fees $60, and closing fee $318, how much money do the Downings need to bring to closing?
$32,373
Jon sells a property for $800,000 and earns a 3% commission. jon obtained the sale for this transaction based on a co-brokerage agreement referral for a 50/50 split. jon works under a managing broker who is owed 40%.
$4,800
a city has determined that next fiscal year they will need to raise $1,240,000 in real estate tax revenue. the assessed value of all real estate within the city is $310 million, so the city establishes a mill rate of $0.004. a property owners home in the city is assessed for tax purposes at $210,000. next fiscal year, what will this property owner pay in property taxes?
$840
a managing broker must keep closing statements for:
5 years
in what type of title insurance does the coverage amount decrease as the mortgage balance decreases?
A lenders or loan policy
a buyer has specified in writing an interest in purchasing a property without any legal obligation and without defining a specific project. This is referred to as:
A letter of Intent
a sellers broker is negotiating to convince a lender to accept less than the balance due as complete satisfaction of the sellers debt. if the lender agrees the transaction would be considered:
A short sale
for the borrower, the major advantage of private mortgage insurance (PMI) for a home mortgage loan is that the:
A smaller down payment is required
an investor has come to the broker because he may be interested in selling one of his residential income properties. his family has owned the 8 unit building for several years and have kept accurate records of income and expenses. the investor brings out a file of lavish improvements that he has completed inside of each of the units, including granite counters, top of the line appliances and marble floors. he has no idea what the property is worth and has asked the broker to tell him what his potential profit will be before he agrees to list it.
Advise that he is not an appraiser, but would would be happy to complete a sales comparison te develop an opinion of value and add the cost of his improvements to calculate
a buyer has made a decision to purchase property that was formerly occupied by a dry cleaning establishment. because of the possibility that the site could be contaminated because of its previous use, which of the following is the best course of action for the licensee representing the buyer?
Advise the buyer that an environmental site assessment might be required by lenders, and would constitute due diligence in the purchase of such a property even if not required
you are a broker at a large firm. one of your licensees is a new licensee who is aggressive and specializes in high end properties. she listed a house, but 3 weeks later the sellers asked her to remove the yard sign and take the house off the market because they wanted to remodel, she agreed to remove the sign, a week later a prospective buyer contacts the licensee wanting to review the property
Advise the seller of the potential purchaser and ask for their direction as to the showing
neighbor A has a property adjoining to neighbor B, neighbor A has been driving across the yard of neighbor B for the past 8 years to access his property even though there is direct access to his property. the common principle created is:
An easement by prescription
a real estate agent uses inappropriate comparable properties for purposes of valuation in a comparative market analysis to help her buyer client determine a reasonable offer. which outcome below would expose the agent to liability?
An inflated appraised value
a broker receives an offer to purchase on one of her listings while on vacation out of the country. the broker must:
Appoint the branch manager to present the offer
a prospective seller has arrived to discuss a listing with a broker for a 3 bedroom, 1 bath house with a swimming pool and 2 car detached garage. she explains to the broker that her mother had the property in a trust and she has two sisters that have an equal share of their mothers estate. the house faces the freeway and the prospective seller says she has been at the house during rush hour and hasn't noticed any noise. there is also some kind of work going on in a vacant lot next to the house, what should the broker do next?
Ask to see her identification, a copy of trust and review the preliminary report before she does anything further with the sale
federal rules require a closing disclosure document provided by the lender, the broker should council the borrower to review this document, and compare it with the loan estimate document, the closing disclosure should be received by the borrower
At least 3 days prior to the loan consummation
a licensed broker, acting as a real estate appraiser, accepts an appraisal assignment based on a predetermined value. the broker may:
Be subject to license revocation or suspension
when must a sellers residential real estate sales disclosure form first be submitted to a buyer?
Before an offer is accepted
which of the following is the best example of the protection offered by fair housing laws to a person with a disability?
Blind man with a dog
a seller has a valid listing in force with broker H. broker m induces the seller to cancel this listing and list the property with broker m. which of the following statements about this situation is correct?
Broker M's license may be suspended or revoked
when using the cost approach to develop an estimate of property value, which step would not be part of the process?
Capitalize the net operating income utilizing the current LIBOR rates
a recently widowed farm owner has called the agent to list a one-acre building site in order to raise the money to pay the property taxes. how should the agent proceed?
Contact the municipality to determine if this is possible, then have a surveyor prepare the description
a real estate broker enters into an agreement to represent a buyer who is seeking a property to purchase, and remains a single agent throughout the transaction. a seller with whom this broker negotiates is this brokers:
Customer
which of the following formulas is used to determine the number of acres in a parcel of land?
Divide square footage by 43,560
under normal circumstances, the purpose of a protection clause in a listing agreement is:
Entitles broker to commission
a loan applicant has no funds for a down payment but has income in the form of public assistance sufficient to repay the loan. what law prevents discrimination by the lender towards the loan applicant due to the source of her income?
Equal credit opportunity act
the broker has been asked to write up a purchase agreement for a shopping center, the transaction will be very complex and detailed if accepted, so the first step is:
For the broker to write up a letter of intent or a binder
fred is the holder of a right of first refusal on a piece of property. the owner has decided not to sell. what action may fred take?
Fred has no recourse but to wait as the owner now under no obligation to sell the property
a brokers license has a tenant client who wishes to minimize any future increase in expenses for the office space she is interested in leasing. what type of lease should the broker recommend?
Gross Lease
a property is not considered psychologically affected if it:
Has been the site of criminal gang activity
to participate in a referral service, a broker company must:
Have a written agreement with the cooperating broker
a buyer client has been approved for a loan of $325,000 on his purchase of a new home. the lender has verified his income and his credit score. over the weekend he tells the broker he has just purchased a new car because his old one is failing, what is the likely impact on his real estate transaction?
He is legally required to inform the lender of this material change in his financial position.
a broker has listed a property for $225,000. An offer of $210,000 contingent upon inspection comes in the first week and the seller accepts it. Another offer of $205,000 comes in the second week. The seller accepts it as a secondary offer contingent upon the termination of of the first offer. The first offeror demands the seller spend $5,000 in repairs before going through with the purchase. the seller may do all of the following except:
Ignore the demand and sell the property to the second offeror
agent receives a $3,000 cash deposit from a buyer for a condominium. the agent gives it to the broker late on a friday afternoon. the broker has a party that evening. he deposits the money in his business account, planning to move it on monday, this is:
Illegal because it is commingling
in which of the following cases will a formal appraisal always be required?
In order to obtain an FHA insured loan
the effect of loan discount points on the yield is to:
Increase yield to lender
broker x is meeting with seller y to list her family home of 60 years, seller y's sight is failing and she does not want to fill out the sellers residential real estate sales disclosure form, broker x is obligated to:
Inform seller Y that it is her responsibility to complete the form
a selling managing broker receives a promissory note as earnest money on an offer. the selling managing broker should
Inform the seller prior to acceptance that the earnest money deposit is other than cash
two days after closing, the seller gives a $500 bonus check to the selling agent. the agent should:
Instruct sellers that bonuses are illegal
which of the following is a feature of a quitclaim deed?
It need not contain warranties
a home warranty for a previously owned home would usually cover which of the following items?
Major appliances and home systems such as electric, heating and plumbing
a property is listed at $450,000, and the prequalified buyer believes no additional financing will be needed. the buyer is then notified the property is encumbered with a $30,000 mortgage. the buyers agent advises his buyer to assume equity by paying the $30,000 mortgage. the sales contract is accepted with no mention of existing mortgage terms. the closing statement reflects the price of the property at $450,000 with a credit for $30,000 mortgage. the deed to the buyer was exempt and the loan did not fund. when the mortgage debt was not paid, the mortgage foreclosed. who is liable for the foreclosure?
Mortgagee
any display, classified advertising, sign, internet advertising, or business card carrying a licensees name:
Must contain the broker company name and the name must be clearly visible
a broker is asked to compute the capitalization rate for an investment property valued at $750,000. which of the following formulas should the broker use?
Net operating income divided by property value equals capitalization rate
the buyer gave the broker an earnest money deposit of $5,000, as closing was approaching, the buyer discovered he needed $2,000 back in order to pay off a charge card and get his debt to income ratio where it needed to be to obtain the loan. the broker wrote him a check for $2,000 from the trust account. is this acceptable, and why or why not?
No, because the withdrawal of the $2,000 would have reduced the amount of deposit to less than the minimum required
a brokerage firm is holding an earnest money deposit in its trust account pending a closing that will not occur for at least a month. the broker/owner is short on funds and uses some of the earnest money deposit to cover his office rent. the broker knows he will have another closing in a week and can return the funds. are the brokers actions legal, and why?
No, this is illegal act of convergence and could result in loss of brokers license
when an unlicensed person refers to a prospect to a real estate firm, that person may:
Not receive any fee
the buyer is interested in opening a day care center in the city, a large vacant lot near the manufacturing district is available. the city is encouraging more day care and has stated they will happily grant a variance. the buyers agent should advise the buyer
Of the possibility of contamination and suggest the offer be written only subject to a satisfactory environmental report
in jurisdiction where the common law of agency governs real estate activities, a buyer is signing open buyer agency agreements with many brokers. he has been viewing multiple properties with multiple brokers. the buyer will be liable for:
One commission to the broker who locates the property that he purchases
a brokers license expired two days ago. in order to reinstate the license, the broker must
Pay all unpaid license fees along with the required reinstatement fee
a couples offer was accepted out of 12 other offers, which was surprising because they were only putting 3.5% down with an FHA insured loan. if the appraisal comes in $15,000 less than the agreed amount, which of the following would be acceptable to the FHA?
Paying the $15,000 difference between contract and appraisal value in escrow
a broker meets with his client, who owns a vacant retail store that is in demand by fast food stores. the area is growing rapidly, and occupants have a history of successfully growing their business. the owner has asked the broker to recommend the most beneficial type of lease to maximize his income. what kind of lease should the broker recommend?
Percentage lease
an owner has a freestanding cabinet that was custom built to fit an alcove of the living room. when the owner sells the home, the cabinet will be best described as:
Personal Property
an example of modular construction is:
Prefabricated housing
a successful contractor does beautiful finish work for an investment company. the investment company buys properties that need extensive work. they have been making a decent income by improving them and turning them over quickly. the market has recently slowed and the investors need to sell one of the properties in their portfolio. they have gotten behind in paying the contractor for his work and assume they will pay him from the proceeds of the sale. a week later the investors accept an offer and put it in escrow. considering the contractors professional relationship with the investment company, which of the following circumstances would be most likely to cause a delay in the close of escrow?
Recommend that they take title as join tenants or tenants by the entirety to ensure the desired outcome
an elderly couple is represented by a buyer broker who does not hold any professional license other than the broker license. the couple finds a home they want to purchase and ask their brokers advice about how to take title, explaining that they want to be sure that when one of them dies, the other will automatically become the sole owner of the home. it would be inappropriate for the broker to:
Recommend that they take title as joint tenants or tenants by the entirety & ensure the desired outcome
you are a broker with a large company. the company's relocation department has given you a referral for someone who is selling a home in another state and moving to your area... inspection of a dump site on the property indicates the clean up will cost approximately $30,000, which you believe to be somewhat highly priced. the prospective buyer accepts the cost and wants to close. which one of the following is most appropriate?
Recommended a second estimate from another vendor
a sellers agent is contacted by a potential buyer whose financial status is questionable. when asked to write an offer, the agent should:
Relay any reservations to the seller
the current real estate market has been booming for the last 5 years and there is still demand for properties, though the market has slowed for both rental and sales. recent analysis of the areas job market shows a rise in unemployment and stagnant wages, though living costs are still rising. for the last few years the area has welcomed a steady influx of new residents. but this has almost stopped as job opportunities decline. a real estate broker has been asked by a homeowner whether to sell now to wait to sell until the market goes higher in the next year or two. given the facts, what course of action would a prudent professional recommend to the seller?
Renting the property until the market peaks in a few years, then selling it
a new runway is needed for the local airport. there is not enough adjacent vacant land for the project, so some homes will eventually have to be condemned, although this is likely to happen a few years from now, not immediately. a homeowner in the path of this development has been transferred and must sell or rent his current home, the broker can explain to him that the condemnation process will:
Require that both state and local government condemn the properties
a seller has made a counteroffer to a buyer and has agreed to keep the offer open for a set period of time. meanwhile, a second buyer makes the seller a higher offer. which of the following statements is true?
Revoke the counteroffer to the first buyer before it is accepted
a listing broker has recently sold a house to an investor. prior to making an offer, the investor told the broker he planned to turn the large property into apartments. it was in an area that had many multi-family properties. the buyer has now discovered that the other properties are non-conforming, and that the area is zoned single family. the broker:
Should have advised the buyer to check the zoning in the area before purchasing property
a listing agent is holding an open house for his seller. at the open house, a potential buyer asks the listing agent what price the seller would accept for the property. the agent replies "they will take at least $5,000 less that the listing price, as the property has been on the market for a while and the sellers just bought a new home." all of the following are true about the agents actions except
Since the broker is working with both parties he is now a non agent and may disclose all knows facts about the seller
a buyer is purchasing a bank owned property. the broker explains the type of deed she will be receiving only promises that the bank has the right to sell the property and that they have not encumbered it. what type of deed will the buyer most likely receive?
Special warranty
a tenant with a disability may reasonably make reversible changes in the physical structure of an apartment to accommodate the tenants disability if the:
Tenant pays for the modifications
a broker believes that, as every agent is licensed and has had the required pre-license education in real estate law and practice, he does not need to provide any training. in addition, all of his agents are independent contractors. he provides only a handbook of company policies. one of the brokers agents commits a fraud, but claims that he did not understand the situation due to a lack of training, and blames the broker. the broker claims that it was the licensee's responsibility to ask for the brokers help if he was unsure about correct procedure. in this case, who will be subject to disciplinary action?
The agent and broker are both subject to discipline and will be subject to disciplinary action
the real estate agent believes the metes and bounds legal description to be incorrect, what action should be taken at this point?
The agent should contact a surveyor or title attorney for any corrections
the brokers clients are most concerned with opportunities for their children. so they are hoping to buy within the boundaries of the best school district in the area. they also want to be near a facility that provides access to professional tennis instruction. a few months ago, they attended an open house at 1801 campbell dr. although that home was out of their price range, they fell in love with the area. they have already been pre-approved for a conventional loan with 20% down up to a purchase price of $950,000. the country club is located on campbell drive and harla ave. ...tba
The agent should make an appointment to show 2707 York drive first, as it is the property that best satisfies all the buyers requirements
a listing broker presents an offer from a customer that meets every term asked for in the listing agreement. the seller decides not to sell. which of the following statements is most likely true?
The broker could collect a commission
a broker hires an inactive broker to conduct open houses. which of the following statements about this situation is correct?
The broker may face disciplinary action for incompetent practice
a broker has listed a home in a horse property area that is now surrounded by suburban residential subdivisions with much smaller lots. the listed property is immediately adjacent to a new subdivision and the city is demanding that the road separating the listing from the residential lots must be paved. there have already been neighborhood hearings regarding a proposed special assessment affecting both the horse property owners and the subdivision developer. condemnation of some land to provide enough space for the road plus sidewalks is also being considered. since there have been no formal actions on either of these proposals, the sellers instruct the broker not to disclose the meetings to any potential buyers. what are the brokers obligations?
The broker must inform the seller that she has a duty to disclose these material facts even if the seller prefer not to disclose
a limited agency may disclose which of the following facts?
The buyer will pay list price for the property
a potential buyer seems to be very knowledgeable about home purchases, and decides not to require an inspection, hoping that the lack of an inspection contingency will help to convince the seller that his offer is the best deal. the buyers broker has noticed a few things that have raised his concern about the condition of the house. what responsibility, if any, does the buyers agent have in this situation?
The buyers agent should go along with his clients strategy since the seller has to disclose any material defects
a buyers broker is aware that a lot adjacent to the home of the buyer is considering was occupied by a dry cleaning company for 15 years. what is the brokers responsibility regarding this knowledge?
The buyers broker must disclose to the buyer and should inform the listing broker
which of the following situations automatically terminates an offer to purchase real estate?
The impending death of the offeror or offeree
a tenant executes a 1 year lease on a residential property. four months later, the landlord sells the property to a third party, who wants to take immediate possession. if the lease is silent regarding this situation, which of the following best describes the status of the lease?
The lease is not terminated and the buyer does not take possession until lease expiration
a couple visits an open house and fall in love with the floor plan and location. they tell the host they would love to buy the house but do not know if they can afford it. in the conversation the broker learns that they are currently paying $1,750 per month for rent. would the principal and interest payments be within the amount of their current rent if the price is $249,000 with interest rates for a zero down, 30 year mortgage at 5% interest? be sure to use the amortization table.
The mortgage option is a good option for the couple because the monthly payment is lower than $1750
a purchase contract required that the property be free of tenants when the property conveyance occurred, on the say of closing, the tenants were still living in the property. who is responsible for ensuring that the tenants vacated the property prior to closing?
The seller
buyer and seller enter into a clear contract. the buyer refuses to purchase for a reason not excused by a contingency. which statement is correct?
The seller has the right to terminate the contract and keep the earnest money deposit
the buyer was given a loan estimate at the time of the application for the mortgage and it now has three business days before the closing. the appraisal and the closing disclosure have been given to the buyer. the buyers broker meets her client at the property for a walk through and to review the documents. which of the following occurrences will result in the buyer having the right to an additional three days to review the documents?
There was an omission in the property disclosure of a recently discovered special assessment
why do lenders use the standardized forms issued by freddie mac and fannie mae?
They required of lenders who want to sell mortgages in the secondary mortgage market
borrowers applied for a loan on the home of their dreams and were approved for very specific terms based on their credit scores and income. at closing, the interest rate had doubled in the loan documents that were presented for their signatures. the borrowers were told that this was likely to be their only chance to receive any sort of loan an they must sign today. they were told if they did not sign that they would lose the house.
Unacceptable because the borrowers were pressured to take the loan
under which of the following circumstances is sub agency allowed?
Under no circumstances
a broker has an exclusive buyer agency agreement with Dr. M, a veterinarian with a thriving practice who wants to add a satellite office on the south side of town. He will consider an existing building but would prefer a vacant parcel on which he will build to his own specifications. he prefers a property of at least one acre, and will need a building of at least 2700 square feet. the broker has located two properties that may suit and has obtained the surveys on both. - how should the broker advise Dr. M with regards to offering for either property?
Urge him to include a zoning verification contingency
buyer jim signs a purchase contract at the asking price with no contingencies and the 30 day closing date as specified by the seller. seller tom changes the contract to reflect a closing date of 40 days and signs the contract. this contract, in its present form, is:
Valid with the 40-day closing date, since the 10-day extension is not considered material to the contract
a broker with a license in inactive status is permitted to do which of the following?
Waive requirements for continuing education
the lease agreement has terms specifically prohibiting pets. what information is crucial for a real estate professional to consider before denying the lease, if the prospective lessee is an elderly individual who owns a pet dog?
Whether the applicant's pet is a registered guide or service dog
at the weekly sales meeting, a broker encourages his sales persons to identify past contacts and call each one to solicit potential business, but cautions them to check two do not call lists, the firm has its own list of people who have asked specifically not to be called by anyone from the company, a consumer included only in the national do not call registry may still be solicited if he is someone:
Who listed property with the firm in the last year
a salesperson represents the seller of a commercial property. the salesperson tells the buyer a new highway exit ramp will be built within six months to give access to the property, although that is only one of several possibilities being considered by local planners. the exit ramp is subsequently located elsewhere. could the salesperson be liable to the buyer for the statement about the ramp?
Yes, the statement was material misrepresentation
a listing broker representing a seller does not inform an interested buyer of his existing agency relationship or provide any agency disclosure form. together, the broker and buyer looked at many properties, some listed by the broker and others entered into the MLS by other firms, and the broker began to advise the buyer. based on this advice, the buyer purchased one of the properties listed by another firm. there turned out to be many undisclosed defects, which would have been revealed with good due diligence. under the common law of agency, has the broker committed any improper act?
Yes; honestly and disclosure of material facts known to the broker are duties to any party in a transaction, and as a participant in the MLS the broker should have known about the defects in the property he was recommending
a real estate professional working with a buyer has disclosed the options for representation under state law, but has not signed a buyer representation agreement and considers the buyer a customer. while showing the buyer a property, which of the following statements by the professional could create implied agency in a jurisdiction where the common law of agency prevails?
You should offer $20,000 less than the asking price due to the repairs needed on this property
a developers ban on the use of a chain link fence in a residential development is an example of:
Zoning ordinance
which of the following would constitute an incompetent practice by a licensee?
failing to account for documents belonging to the client that have come into the licensee's possession
an executory contract is one that:
has not been completely performed by all parties.
what is the best way to discover most encroachments on a piece of property?
land survey
a buyer has specified in writing an interest in purchasing a property without any legal obligation and without defining a specific project, this is referred to as
letter of intent
price fixing occurs when:
whenever two or more competitors agree to take actions to raise, lower, maintain, or stabilize the price of any product or service
