Real Estate Exam #1

76. The amount of an earnest money deposit: A. is always equal to 5% of the purchase price B. may never exceed $5,000 C. represents two months' salary from the buyer D. depends on the circumstances

D.

63. An agent representing the seller cannot disclose any confidential information from or about the seller: A. even after the representation ends B. unless it will not harm the seller C. either of the above D. unless instructed by her designated broker A seller's agent owes the seller the duty of confidentiality, and cannot disclose any confidential information about the seller, even after the agency ends.

A.

11. Which party to a purchase and sale agreement usually benefits from a contingency? A. Buyer B. Seller C. Designated broker D. Second buyer

A. Buyer A contingency in a purchase and sale agreement usually benefits the buyer, by protecting the buyer from having to complete the purchase if something doesn't work out.

90. Which of these closing expenses is customarily split evenly by the two parties? A. Escrow fee B. Recording fees C. Attorney's fees D. Appraisal fee

A. Escrow Fee An appraisal fee is usually paid by the buyer. Any recording and attorney's fees are paid by the party benefiting from the services. The escrow fee is usually split between the parties.

6. Under which type of listing will an agent receive a commission only if he is the procuring cause of the sale? A. Open listing B. Exclusive agency C. Exclusive right to sell D. Net listing

A. Open listing Under an open listing, the seller pays a commission only if the agent is the person responsible for bringing about the agreement between buyer and seller. No commission is owed if another agent or the seller is responsible for the sale.

9. Which document should be prepared if the buyer plans to take possession before the closing date? A. Rental agreement B. Sale of buyer's home contingency C. Bump notice D. Backup offer

A. Rental agreement If the parties plan to transfer possession of the property either before or after the closing date, they should sign a rental agreement that includes the rental terms and the amount of rent.

82. A typical listing agreement does NOT authorize the listing agent to: A. accept an offer to purchase the property B. submit offers to purchase the property C. accept earnest money deposits from prospective buyers on behalf of the seller D. act as the seller's agent

A. accept an offer to purchase the property Under a typical listing agreement, the listing agent may present offers to purchase to the seller, but only the seller can accept an offer.

2. A counteroffer: A. acts as a rejection of the current offer B. is used to rescind a previously existing contract C. is used only to make an offer contingent on a particular event D. is used when a buyer wants to make an offer where the seller has already accepted an offer

A. acts as a rejection of the current offer A counteroffer is a rejection of the previous offer. Either a buyer or seller may make a counteroffer, in response to either the initial offer or a previous counteroffer.

79. Which of the following responsibilities is NOT part of the duty of accounting? A. disclosing the terms of the listing agent's compensation B. reporting to clients on the status of trust funds C. accounting for all money and valuables held by the brokerage on the client's behalf D. avoiding commingling trust funds and operating funds

A. disclosing the terms of the listing agent's compensation Under the duty of accounting, an agent must avoid commingling, account for funds and valuables held in trust, and report to clients on the status of such trust funds

12. All trust fund deposits of $10,000 or less that will be placed in a brokerage's account must be put in the: A. pooled trust account B. operations account C. designated broker's personal account D. trust account set up specifically for the individual client

A. pooled trust account Trust fund deposits of $10,000 or less must be held in the brokerage's pooled trust account, with interest on the account paid to the state. Alternatively, earnest money deposits may also be passed directly to the escrow agent.

78. The law requiring a purchase and sale agreement to be in writing is the: A. statute of frauds B. license law C. Federal Fair Housing Act D. RESPA

A. statute of frauds Explanation: The statute of frauds requires contracts involving the sale of real property to be in writing.

7. All of the following should be taken into account in choosing a closing date, except: A. the due date of the next installment of property taxes B. how long the seller needs to make any necessary repairs C. whether the buyer needs to sell her current home D. the time needed to clear away any liens

A. the due date of the next installment of property taxes In choosing a closing date, it's important to consider how long it will take for the seller to make any necessary repairs, for the buyer to sell her current home, and for any liens to clear. The property tax due date is irrelevant, since this expense is prorated between the parties at closing.

60. Prior to acceptance, an offer may legally be terminated by: A. the offeree B. the offerer C. the agent D. the seller At any point up until the offer is accepted, the offeror is permitted to terminate the offer. This is true even if the offer has a stated termination date.

B.

8. Excise tax is usually paid by the: A. buyer B. seller C. lender D. borrower

B. Seller The excise tax is a tax imposed on the sale of real property. It is paid by the seller.

13. Which party is usually responsible for the costs of modifications or repairs made as a result of unsatisfactory inspection results? A. Buyer B. Seller C. Listing agent D. None of the above

B. Seller Typically, if a buyer deems an inspection report unsatisfactory, he will give the seller an opportunity to make repairs. If the seller chooses to make the repairs, the work is usually paid for by the seller.

85. When choosing a home inspector, a buyer should look for a firm that: A. does other business in addition to inspections B. belongs to the American Society of Home Inspectors C. will offer to make the changes recommended by the inspection D. has recently changed its name

B. belongs to the American Society of Home Inspectors Membership in the American Society of Home Inspectors requires experience, passing an exam, inspection reviews, and continuing education.

80. In order to disclose all material facts, a real estate licensee must: Your Answer: B (CORRECT) A. physically inspect the property B. disclose latent defects the licensee knows about C. actively search for material facts D. investigate both parties' financial positions

B. disclose latent defects the licensee knows about An agent is required to disclose any material facts of which she is aware, but she is not required to independently investigate the parties or the property.

59. A principal is not liable for the act of an agent or subagent unless: A. the agent acted without authority B. the act had serious financial consequences for the principal C. the principal participated in or authorized the act D. None of the above A principal usually won't be held liable for the act of an agent or subagent unless the principal authorized or participated in the act. Note that authorization can include implied authorization-failing to object to an agent's actions that weren't expressly authorized. The principal may also be held liable if she benefited from the agent's act and the injured party won't be able to obtain compensation from the agent.

C.

61. All of the following are characteristics of FHA-insured loans, except: A. mortgage insurance premiums B. owner-occupancy requirement C. no downpayment D. more lenient underwriting standards FHA-insured loans require a downpayment, although the borrower's contribution (minimum cash investment) can be as small as 3.5% of the sales price or appraised value. VA loans do not require a downpayment.

C.

62. If a seller does not want to sell to a member of a protected class, the agent should: A. take steps to accommodate the seller's wishes B. include this information in the Comments section of the listing C. explain the fair housing laws to the seller D. All of the above If a seller indicates an intent to discriminate, the agent should explain the fair housing laws and if necessary, decline to take the listing. Anything the agent does to accommodate discriminatory behavior by the seller may be construed as discriminatory behavior on the part of the agent.

C.

89. Which of the following is NOT a step in the inspection process? A. Ordering the inspection B. Approval or disapproval of the inspection report C. Appraisal of the property D. Reinspection of any required repairs

C. Appraisal of the property An inspection does not involve an appraisal of the property.

5. Under which type of listing will the seller owe a commission to the listing agent regardless of who is the procuring cause of the sale? A. Open listing B. Exclusive agency C. Exclusive right to sell D. Net listing

C. Exclusive right to sell Under an exclusive right to sell listing, the listing agent will earn a commission if the property sells during the listing period, even if another agent or the seller finds the buyer.

3. Which of the following practices would not be an illegal discriminatory action? A. Always assigning minority buyers to work with minority agents B. Referring all Spanish-speaking buyers to Spanish-speaking colleagues C. Referring a buyer to a Spanish-speaking colleague after the buyer expressed a preference to work with a Spanish-speaking agent D. Failing to transmit an offer from an Asian buyer to the seller of a property in an all-white neighborhood

C. Referring a buyer to a Spanish-speaking colleague after the buyer expressed a preference to work with a Spanish-speaking agent It is unlawful to treat certain types of buyers differently from others based on discriminatory reasons. However, there is nothing illegal about honoring a buyer's request to work with an agent of a particular ethnicity or national origin.

14. Disclosure of and consent to a dual agency: A. are not required in a transaction where both agents work for the same brokerage B. must occur only after the parties sign the purchase and sale agreement C. must be in writing D. allow the agent to promote the interest of one party over that of another party

C. must be in writing Dual agency is legal in Washington only if it is disclosed and consented to in writing.

4. If a contingency is not fulfilled despite a good faith effort to fulfill it, what may the person who benefits from the contingency do? A. Terminate the agreement and have the earnest money deposit returned B. Waive the contingency and continue with the agreement C. Sue the other party for a breach of contract D. Either A or B

D. The party who benefits from a contingency may, if the contingency is not fulfilled, terminate the agreement or waive the contingency and complete the purchase anyway.

10. A conventional loan can be: A. an ARM B. a 15-year loan C. a 30-year loan D. All of the above

D. All of the above A conventional loan is one that is not insured or guaranteed by a government agency. A conventional loan does not have a set term and it may have an adjustable rate.

86. Subprime loans are made to borrowers who: A. want to make a smaller downpayment than prime lenders would allow B. have a very high debt-to-income ratio C. have poor or limited credit histories D. Any of the above

D. Any of the above Many subprime borrowers have poor or limited credit histories; others want to make smaller downpayments or carry more debt than prime lenders would allow.

At what point in a transaction must you disclose your agency status in writing? A. At closing B. When first meeting any potential party to the transaction C. Within 24 hours after a party signs an offer D. Before a party signs an offer

D. Before a party signs an offer You must disclose your agency status to each party in a transaction as soon as practicable. However, the initial disclosure may be oral--the law doesn't require written confirmation of the agency disclosure until each party is about to sign an offer.

83. Which of the following would be considered a design deficiency, at least in newer homes? A. More bathrooms than bedrooms B. Kitchen too close to garage C. Bedrooms not visible from living room D. There's no place in the kitchen for casual eating

D. There's no place in the kitchen for casual eating It's considered a design deficiency if a kitchen is too cramped to allow even a small area for eating. (Regarding answer A, it's become standard in anything but economy construction to have one bathroom per bedroom and at least one public-area bathroom such as in the front hall.)

88. The required agency disclosure may be made either: A. orally or in writing B. in the listing agreement or in the purchase and sale agreement, but nowhere else C. before or after the purchase and sale agreement is signed D. in a separate paragraph in the purchase and sale or listing agreement or in a separate document

D. in a separate paragraph in the purchase and sale or listing agreement or in a separate document The required agency disclosure may be included in the purchase and sale agreement, listing agreement, or buyer representation agreement in a separate paragraph). Or it may be made in a separate document.

81. A licensee who represents neither party in a transaction and acts as a neutral facilitator is a/an: Your Answer: D (CORRECT) A. dual agent B. subagent C. interagent D. non-agent

D. non-agent A non-agent represents neither party and owes no agency duties other than the general duties that a licensee owes to any party.

84. Under federal law, the seller of a home built before 1978 must: A. remove all lead-based paint from the property B. have the home inspected for lead-based paint C. repaint any areas where lead-based paint was used D. provide a copy of any report about lead-based paint in the home to a prospective buyer

D. provide a copy of any report about lead-based paint in the home to a prospective buyer The seller of a home built before 1978 is required to make certain disclosures to prospective buyers, including providing a copy of any report concerning lead-based paint in the home.

87. A loan has an LTV of 90% if the: A. sales price is at least 90% of the value B. sales price is 90% of the value or less C. private mortgage insurance covers at least 90% of the loan amount D. ratio of the loan amount to the sales price (which matched the appraisal) is 90%

D. ratio of the loan amount to the sales price The LTV refers to the ratio of the loan amount to the appraised value or selling price, whichever is less.