RE Practices Study Questions
Which of the following is an example of puffery?
"This condo has the best view this side of the river!" ("I love this house, and I know it will appreciate better than the average house its size!")
A good question to ask an investor to determine the type of services they may want from you is:
"What's your end goal?" ("Who's on your team?)
In addition to fines, individuals who violate antitrust laws may face imprisonment for up to what length of time?
10 years (One year)
Also included in Prop 13 is a maximum ______ % annual inflation factor, based on the Consumer Price Index (CPI).
2 (3)
A parking structure has 1,510 total parking spaces. How many of these spaces must be accessible?
25 If a facility has more than 1,000 total spaces, there must be at least 20 accessible spaces, plus one additional space for every 100 spaces above 1,000. (30)
What is a convertible mortgage?
A mortgage that gives the lender the option to convert the outstanding balance owed into a specified percentage of ownership in the property A convertible mortgage gives the lender the option to convert the outstanding balance owed into a specified percentage of ownership in the property. (A mortgage that gives borrowers the option to cash in their equity and purchase an additional property)
What makes a non-exclusive buyer representation agreement different from an exclusive buyer representation agreement?
A non-exclusive agreement is used with buyers who do not agree to compensate brokers who do not act on their behalf. (A non-exclusive agreement allows the broker to present a listing to multiple buyers.)
An area 60 inches wide and located adjacent to accessible parking spaces is called a(n) ________.
Access aisle Access aisles must be at least 60 inches wide. One aisle can accommodate multiple accessible spaces. (Clearance)
Della has a new listing for a duplex. To fulfill her obligations as the seller's agent, she performs her diligent and reasonably competent inspection of the property, using the _________ to record her observations.
Agent Visual Inspection Disclosure The Agent Visual Inspection Disclosure is a C.A.R. form that can be used by agents to document their required visual inspection of the property. (Seller Property Questionnaire)
Just because several brokerages have the same commission rates, it doesn't mean a price fixing violation is occurring. What must exist for a violation to occur?
Agreement (Contract)
What is one advantage of joining a real estate team within a brokerage?
Allows you to specialize (Gives you broad experience)
How do you find the Return on Investment (ROI)
Annual Cash Flow/Initial Cash Investment
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 that is likely to mislead consumers acting reasonably under the circumstances)
You're working on a deal and escrow did not close. When will you receive commission owed to you?
As mutually agreed between the client and broker Brokers are paid upon close of escrow or, if escrow doesn't close, as otherwise specified in the agreement between the broker and client. (Never; if escrow doesn't close, the agent earns nothing)
When is the mortgage loan commitment or title insurance contract signed?
At the closing The mortgage loan commitment and title insurance contract are both signed at the closing. (The day prior to closing)
The risk that the required return on investor capital will not be met is called ______ risk.
Business Many investors put their money into a property with the hopes of seeing a certain return. Business risk is the risk that this return will not be met. (Financial)
Joaquim analyzed a potential opportunity and determined that if he invested $250,000 in the commercial property, he'd likely see a return of 12% on this investment. After several years, Joaquim is seeing a measly 2% return. What type of risk did he fall victim to?
Business risk Many investors put their money into a property with the hopes of seeing a certain return. Business risk is the risk that this return will not be met. (Capital risk)
A buyer representation agreement establishes an agency relationship between which parties?
Buyer and broker (Buyer and salesperson)
Gregory has been bombarded with emails from a local real estate licensee. He keeps opting out of these emails, but they just keep coming. What federal law is the licensee possibly violating?
CAN-SPAM Act of 2003
Which federal act protects consumers from unwanted email solicitations?
CAN-SPAM Act of 2003 (Anti-Spam Act of 2000)
Which of these standard forms is used to document an agreement between a seller and a listing broker to cease marketing a property?
Cancellation of Listing (Modification of Terms)
Jason is planning to invest in a new commercial development. He'd like to invest $400,000 and secure another $100,000 through financing. After shopping around, Jason could not find financing at an affordable rate. Of what type of risk is Jason the victim?
Capital risk A purchase can be put in jeopardy if an investor cannot secure the financing needed at an affordable rate. This capital risk could make the purchase unattractive or more expensive than first analyzed and no longer a pursuable investment opportunity. (Leverage risk)
The _____ is the name of California's antitrust law.
Cartwright Act (Sherman Act)
A sloping hearth is a common _____ issue.
Chimney/fireplace (foundation)
Where can an agent report an antitrust violation?
Citizens Complaint Center of the Antitrust Division (FBI)
In what type of market is pricing a home below market value an especially good strategy?
Cold market (Hot market)
Evan has his home and cell number on the Do Not Call Registry. He received an unwanted solicitation call from a new real estate licensee in the city. He told the licensee his number is on the Do Not Call Registry and that he does not wish to do business with the licensee. A few days later, he got another unwanted call from the licensee. What federal act is the licensee possibly violating?
Do Not Call Implementation Act of 2003 (Can-SPAM Act of 2003)
Janice wants to sell her townhome, and her neighbor is considering purchasing it from her. While she's waiting to find out if her neighbor is serious, she wants to market it and receive the best representation possible. What type of listing agreement will save Janice the cost of a commission if her neighbor does ultimately decide to buy Janice's townhome?
Exclusive agency (Open)
Which section of the sample purchase agreement you reviewed explains how and when the balance of the buyer's down payment is to be made?
Finance Terms section
The risk that is directly related to leverage is called ______ risk.
Financial The more money an investor leverages (or borrows), the greater the financial risk. (Leverage)
Brandy is going to purchase a strip mall. She is trying to determine exactly how much to borrow for this purchase. She understands that the more she borrows, the greater her risk. What type of risk is she evaluating?
Financial risk The more money an investor leverages (or borrows), the greater the financial risk. (Business risk)
For how long must a licensee retain a signed agency disclosure?
For three years (Until the agency relationship ends)
Connie is a new licensee and has just entered into an agency relationship after obtaining a signed agency disclosure from her new client. What must Connie do now?
Give a copy to her client and retain the form for three years (Have the form notarized and provide a copy to her client)
It's the licensee's responsibility to know how and when taxes and real estate ___________.
Interact (Are paid for)
Which of the following is an unauthorized practice of law?
Interpreting the legal consequences of a client's actions Interpreting legal consequences should be left to someone who practices law (an attorney). If a licensee does this, it's an unauthorized practice of law. (Using standard language for addenda)
Which of the following is true of developing a market niche based on any legal category (e.g., farming or prospecting a specific area)?
It's permissible. (It's an example of market allocation and is an antitrust violation.)
Which federal act makes it illegal to send unsolicited commercial solicitations via fax without the recipient's permission or an established relationship?
Junk Fax Prevention Act of 2005 (CAN-SPAM Act of 2003)
Investors seek to __________ funds to gain maximum return from their investment.
Leverage borrowed (Reinvest)
Involvement in community organizations is most strongly tied to:
Long-term residents (Home ownership)
An agent stating that property is "guaranteed to increase in value over the next five years" is an example of ___________.
Misrepresentation (Puffery)
When this value is negative, it is a sign that the investment property cannot bring in enough money to cover its costs to maintain.
Net operating income A negative net operating income means that the operating expenses are greater than the effective gross income. (Operating Expenses)
Stacy is selling her home in a nice neighborhood. She no longer wants to live there because a gruesome murder occurred next door. Would Stacy need to disclose that this is why she is selling?
No, she is not required to disclose a death that did not occur on her property. Because the murder did not occur on Stacy's property, it is not stigmatized. Stacy's reasons for moving are confidential. (No, but she should disclose that the neighbors were the victims of a violent crime.)
Your buyer client, Percy, needs to obtain financing to buy his dream house. What's his first step?
Obtain a pre-qualification letter (Complete a loan application)
Kamut met with Amy, a buyer, and showed her his new listing. If Amy is unrepresented, did Kamut err by not providing Amy with an agency disclosure?
Only if Amy asked for advice or offered confidential information (Yes, because any time you meet with a buyer, you must provide agency disclosure)
In an option contract, prior to the optionee exercising the option to buy, which parties are bound to carry out their contractual obligations?
Only the optionor (seller) An option contract is a unilateral contract in which only the optionor (seller) is bound to fulfill their contractual obligations. (Only the optionee (buyer))
Which of the following buildings requires disclosure of an airport in the vicinity?
Personal property mobile homes Disclosure is required for residential properties of one to four units, plus personal property mobile homes. (An apartment building)
Which type of facility may require a higher number of accessible spaces than other commercial spaces?
Physical therapy facility Certain types of facilities, especially medical-related, may require more accessible spaces than other types of non-residential facilities. (Sports arena)
One of the actions that landed the Consolidated Multiple Listing service of South Carolina in court was prohibiting members from offering home sellers the opportunity to avoid paying a broker's commission if the seller located a buyer on their own. What type of antitrust violation does this exemplify?
Price fixing (Group boycotting)
Having information about clients you're meeting allows them to be identified and tracked down in case something goes wrong. This is why you should do what?
Properly identify the person you're working with (Complete an agent itinerary form)
According to the sample purchase agreement you reviewed, what must the buyer or seller do before cancelling a sales contract for failure of the other party to close escrow?
Provide a demand to close escrow Before the buyer or seller can cancel the agreement for the other party's failure to close, a signed demand to close escrow form must be delivered. (Provide a notice to perform)
What does an equity Real Estate Investment Trust invest in?
Real estate property Equity REITs purchase properties. They make money primarily from their properties' rents. (Real estate debt)
The Natural Hazard Disclosure statement is used for _____________.
Residential transactions that also require the TDS The NHD is used in the same kinds of residential transactions where the TDS is required, that is, one- to four-unit dwellings, manufactured homes, and condos. (All residential transactions, regardless of type of transfer)
Other names for the __________________ are offer to purchase, sales agreement, contract of purchase and sale, purchase agreement, and earnest money agreement.
Sales contract These are other names for the sales contract. (Promissory Note)
Sometimes, the __________ of the property can have the burden of being responsible for paying sales tax.
Seller (Buyer)
Material facts that are required for disclosure can be captured on the _______ in addition to, but not as a substitute for, the Transfer Disclosure Statement.
Seller Property Questionnaire The Seller Property Questionnaire is not a required form, but it assists the seller in reviewing all aspects of a property's condition and disclosing material facts. (Seller Visual Inspection Disclosure)
What factor is a primary concern to the fix-and-flip investor?
Selling quickly for fair market value (Obtaining top dollar when selling)
What does the SSIA stand for in C.A.R. Form SSIA?
Short sale information and advisory (Short sale inspection advisory)
Why should you have a conversation about financing for the property with the seller before you sign the listing agreement?
Some sellers can't accept, or won't qualify to accept, certain types of financing—such as FHA or VA loans—so you should know that up front. (You should only worry about financing if you're a dual agent also representing a buyer.)
The two advisories listed in the other terms and conditions section of a C.A.R. buyer representation agreement are the buyer's inspection advisory and the _______________________.
Statewide buyer and seller advisory (REO advisory)
Although an independent contractor, this worker is defined as an employee by statute for certain employment tax purposes. An example would be a food delivery driver who is paid on commission.
Statutory employee (Statutory non-employee)
This statute allows a public agency to issue bonds for the improvement of subdivision street surfaces.
The Improvement Bond Act of 1915 (Vrooman Street Act)
When Tara is working with a client to sell his mountain cabin, she asks the client to complete the Seller Property Questionnaire and the TDS. The seller says, "But we haven't received any offers yet." What can Tara tell him about the timing required for providing the TDS?
The TDS should be submitted as soon as is practicable. The TDS must be completed as soon as is practicable, and before the execution of any sales contract or transfer of title. (The TDS is required to complete the agency agreement, and must be completed as soon as possible.)
Who is responsible for obtaining an appraisal?
The buyer If financing is being used, the buyer's lender will require the buyer to obtain an appraisal. (The buyer's agent)
Who's generally responsible for ordering and reviewing a survey of the property?
The buyer It generally falls upon the buyer to ensure there aren't any encroachments and to determine the property's boundaries. (The title insurance rep)
Who reviews the loan estimate?
The buyer The buyer is responsible for reviewing the loan estimate provided by the lender. (The lender)
Who is the withholding agent under Foreign Investment in Real Property Tax Act?
The buyer (The seller's real estate broker)
Whose responsibility is it to determine instructions?
The buyer and seller Ultimately, it is the responsibility of the buyer and seller. The agents representing the parties are responsible for ensuring their clients' instructions are delivered. (The escrow agent)
Which of the following actions occurs prior to a closing?
The buyer obtains a binder for insurance coverage on the new home. A buyer should obtain homeowner's insurance before closing. (A number of contracts are signed by the parties in attendance at the closing, such as the sales agreement, the mortgage loan commitment, and the title insurance contract.)
Which of the following statements accurately describes the information needed to complete the property to be acquired section of a buyer representation agreement?
The characteristics of the property the buyers would like to purchase, such as price range.
Who generally takes responsibility for reporting required information on Form 1099-S after a real estate closing?
The closing agent Generally, the closing agent will notify the Internal Revenue Service; if not, the lender should. However, brokers and the parties to the transaction can also be held liable if the required report isn't filed. (The Seller)
What is basis?
The cost of the property Basis is the cost of a property and includes the sales price, acquisition costs, and capital improvement costs (such as renovations or additions).(The value of the property used for tax assessment purposes)
Wanda is a buyer and waited until the last day of her inspection period to try to schedule an inspector. She then had to ask for an extension of the inspection period, which the seller signed. On what part of the sales contract you reviewed did Wanda fail to deliver?
The requirement to not unduly delay Time is of the essence in carrying out the terms of the contract. Wanda should have scheduled the inspection at the first available opportunity. (As long as the addendum is signed, she did nothing wrong)
What is financial risk?
The risk that is directly related to leverage The more money an investor leverages (or borrows), the greater the financial risk. (The risk that the required return on investor capital will not be met)
Who is responsible for providing the title insurance company with an affidavit of title?
The seller The seller is responsible for proving an affidavit of title if requested by the title insurance company. (The title insurance rep)
Amy is explaining the broker and seller's duties section of a listing agreement to a new client. Which of these would be an accurate statement to make?
The seller and the broker agree to exercise reasonable effort and cooperation in the sale of the property. (The broker and seller each have a duty to disclose material facts.)
What responsibilities do licensees have regarding contingencies in a real estate transaction?
To track their deadlines (To minimize them)
In a real estate transaction in which you represent the seller, your duty to other parties is ______________________.
To treat them honestly and fairly (To be honest in all matters that do not affect your client's interests)
According to the California real estate commissioner's regulations, how many types of recordkeeping are acceptable for trust funds?
Two Commissioner's Regulations 2831 and 2831.1 specify only two types of recordkeeping as acceptable: columnar and records other than columnar as described in the commissioner's regulations. (There are no number of recordkeeping types specified)
When might an additional provision be needed in an agreement of sale?
When the buyer requests terms of sale for negotiation that are not part of the standard contract. Additional provisions are used to communicate terms of an offer that aren't part of the standard contract. (When the home inspector discovers defects that require repair and the seller agrees to pay for the repairs)
Which of the following is true about online rental scams?
You can reduce the risk by monitoring Internet activity on your listings. (They are also known as "phishing")
Jennifer is the owner of the single-family residence in which she resides. How long can she take to depreciate her property?
Zero years (personal residences cannot be depreciated) Depreciation is limited to investment properties—you can't depreciate a personal residence or vacation home. (27.5 Years)
Under the Morgan Bill, taxpayers were given a means to resolve questions and file __________.
appeals (complaints)
The Costa-Hawkins Rental Housing Act...
increases the rights of owners to increase rents.