30 hour credit final
South Carolina broker-in-charge Brady is working with a new licensee. What does he tell him about the residential sales contract?
"While there's not one standard sales contract form in South Carolina, our firm has one we use exclusively."
A buyer is purchasing a property for $500,000. His lender's loan-to-value ratio is 90%. How much is the buyer financing?
A 90% LTV ratio means the buyer is financing 90% of the purchase price. This equates to $450,000.
What do you call someone "with whom the REALTOR® or a REALTOR®'s firm has an agency or legally recognized non-agency relationship"?
A client
What's an income shelter?
A deductible allowance from net income
Which of the following may be the result of building delays on a new construction?
A delay in closing
The Smithwicks, your buyer clients, obtained a 90% loan on their new $400,000 home. At closing, they paid $6,150 for points at closing. How many points did they pay?
A point is 1% of the loan amount. The Smithwicks' loan is $360,000 ($400,000 x .90), and they paid $6,150 for points at closing. Divide the cost in points by the loan amount to get the number of points they paid: ($6,150 ÷ 360,000 = 0.0170833, or 1.71).
What type of professional must an investor use to conduct a tax-deferred exchange?
A qualified intermediary
Martina is buying five acres of unimproved land on which to build a home. The property was part of a large family farm for the last 150 years. Which of the following is true?
A substantially larger down payment will be required than if there were structures on the land.
Which buyer type would most likely be in the market for newly built home on an acre in the country?
Affluent
Which of the following could apply to closing costs for an investment property?
Amortized over the life of the loan
Dynamic and static risk are considered ________ risks.
Business
Marcie bought a duplex, lived in one half, and rented out the other half. This is an example of what type of investing?
Buy and hold
If a seller asks a buyer to waive the inspection contingency, how could the transaction process transpire and still protect the buyer?
Buyer has inspection, buyer makes offer, seller accepts offer
When you're putting together a listing presentation, which of these is a key point to address?
Buyers won't pay more for a home than the market dictates.
Charley's loan amount is $212,000, his appraised value is $275,000, and his interest rate is 4.375%. What is his annual interest?
Calculate the annual interest owed by multiplying the total loan amount by the interest rate. In this case, $212,000 x .04375 = $9,275.
Your client, Tad, is buying a home. At closing, he must pay the purchase price in one of three ways. What are these three ways?
Cash, proceeds from a loan, or a combination of the two
What date is used for adjustments to closing costs between the parties to a South Carolina sales contract?
Closing date
The Broker's Compensation section of a South Carolina sales contract says that ______________.
Closing proceeds may be used to pay the brokers' commission
Which of the following statements about component depreciation is true?
Components that can be separated out as tangible personal property qualify for component depreciation.
Which of these principles of value is related to how a change to a portion of a property impacts the value as a whole?
Contribution
Where can a licensee find out if liens have been filed against a property?
County courthouse
The increase a property's value beyond what the investor originally invested as a down payment is called _______.
Equity build-up
A developer is likely to get the best return for investment if the project is completed during the _________ phase of the real estate market cycle.
Expansion
Which of the following contributed to the 2007 financial crisis?
Falling home prices
When showing properties to buyers, how many properties should you limit them to in a single day?
Five to six
If you have the right ______, most real estate calculations are simple arithmetic.
Formula
Estate tax is calculated by first computing ______ , which is the total of the fair market value of all items owned by the deceased.
Gross estate value
A three-unit income-producing property has a sales price of $600,000. Monthly gross rent is estimated at $6,000. What's the gross rent multiplier?
Gross rent multiplier is sales price divided by monthly gross rent ($600,000 / $6,000 = 100). Improperly calculating GRM could lead an investor to purchase a property that turns out to be a poor investment.
Dan just listed a property two days ago and already has offers pouring in. It's a hot market and properties are moving quickly. Which of these options is the best strategy?
Have buyers submit their "highest and best" offers and then help his seller decide which offer is most appealing.
Robert, a developer, prefers to invest in unimproved land. This is likely because _______.
He doesn't want to retrofit an existing structure
Honey is the seller in an installment sale of a residential property. She is paying her capital gains tax through installment sale deferment, and her installment obligations at the end of the tax year will be less than $5 million. Given her situation, which of the following statements is true?
Honey will only pay taxes proportionate to the gain collected each year.
Why should you know when the seller can vacate the property?
If a buyer wants to close before the seller can vacate, the seller may need to rent it back from the buyer.
Which of the following is a true statement about the Entire Agreement section of a South Carolina sales contract?
Illegal provisions in the contract may be separated from the contract without affecting the other provisions.
You may not advertise real estate services or listed properties in any medium without disclosing the name of your firm ______.
In a reasonable and readily apparent manner
Which of the following scenarios accurately describes the similarities between an open listing and an exclusive agency listing?
In both types of listings, the seller who finds the buyer won't owe a commission.
"Effective gross income" most closely means ______.
Income after losses from vacancies and credit losses are deducted from potential gross income
What's the definition of "potential gross income"?
Income that a property could bring if fully leased
What exemption to the "every two years" rule concerning the capital gains exclusion allows a seller to claim a partial exclusion when the seller is forced to sell early?
Involuntary conversion
You have an investor client who's interested in learning more about the advantages of a 1031 tax-deferred exchange. What might you tell him?
It allows investors to defer capital gains taxes when selling a property, provided they buy a like-kind property within a set amount of time.
Why is tax-free refinancing so attractive to investors?
It allows investors to refinance repeatedly, generating tax-free cash with which to make additional investments.
What is an open listing agreement?
One in which only the person who finds the buyer gets paid
In a South Carolina sales transaction, what signifies "notice"?
One party notifying the other party of an event or decision
During the "choosing" step of solving a word problem, what should you be doing?
Picking the correct formula to use
Which of the following is income that comes from investments, which includes capital gains, interest, and dividends?
Portfolio
A property has 10 units and is 90% occupied. Rent is $500 per month. Total vacancy and collection loss equals 10%. What's the potential gross income?
Potential gross income is the income the property would realize if it were fully rented. 10 units x $500 = $5,000 per month x 12 months = $60,000.
The buyer of a/an_________ South Carolina home may make the purchase contingent on a satisfactory wood inspection report.
Previously occupied
Charlize is monitoring market indicators in a particular area for her client who wants to buy an oceanfront home. Which market indicator will tell her how much prices have fluctuated in the area over the past two years?
Price levels
What's an effective pricing strategy when listing a home in a cold market?
Price the home below market value.
In a hot market, when all other sellers are listing at or above market rate, what pricing strategy will likely induce a bidding war?
Pricing just below market value
Your client Glenn wants to sell his home in the Capitol Heights neighborhood. Built in 2000, it has an updated kitchen and a three-car garage, is 2,350 square feet, and sits on a 6,000-square-foot lot. Which of the following properties would you consider potential comparables to Glenn's home? Unless stated otherwise, assume all features match the Glenn's property.
Property C is a 2,500-square-foot home in a neighborhood adjacent to Capitol Heights that sold three months ago.
What's another name for the sales contract?
Purchase agreement
________ have a fixed income, but they may have large down payments from selling prior homes. Accessible properties with little to no maintenance tend to be attractive to these buyers.
Retirees
Which type of business risk is insurable?
Static
You represent a buyer who wants to make an offer on a property. The listing agreement only offers 1.5% commission to cooperating brokers, which is a bit less than you usually work for. What can you do?
Submit the offer and accept the terms of compensation according to the listing agreement.
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.
The current value of a property is $105,000. What was the original cost of the property if there has been a 30% loss in value?
Take the current value of the property divided by the total depreciation: 100% ‒ 30% = 70%, then $105,000 ÷ 0.70.
Richard recently inherited a substantial sum of money. He decided to invest the bulk of it in real estate because he can deduct certain costs from his profits. What's Richard's primary goal for this investment?
Tax shelter
The loan type and the amount of down payment impact _______.
The closing costs the seller may contribute
The Bensons are looking at buying a $650,000 property with a 30-year loan at a 3.125% interest rate. How much would their monthly principal and interest amount be? Use 4.80738 as the factor for a 30-year loan at a 3.125% interest rate.
The estimated payment is $3,124.78. Remember that $650,000 ÷ 1,000 = 650. Then multiply the factor for a 30-year loan at a 3.125% interest rate (which is 4.80738) by 650.
A change was made on page two of the South Carolina sales contract. Which of the following is a true and complete statement about where the parties must initial?
The parties must initial and date the change and initial the page.
Which of these is the correct definition for market value?
The probable price at which a willing seller and a willing buyer, neither of whom are under undue pressure, would transact a sale in a competitive and open market
If a buyer wants to write an offer and asks for your help but doesn't want to sign an agency agreement with you, who do you represent?
The seller
In a South Carolina residential purchase transaction, which of the following parties is responsible for paying the deed preparation costs?
The seller
Without a buyer agency agreement in place, which party does the agent who's assisting the buyer represent?
The seller
Your seller wants to net $100,000 after the 5% commission is paid. Assuming no closing costs, at what price does the home need to sell for the seller to net this amount?
The seller's percentage of a sale is 100% - 5% commission = 95% (or .95). Take the amount the seller wants to net and divide it by that amount ($100,000 ÷ .95 = $105,263.16). Conversely, for a sales price of $105,263.16: $105,263.16 × .95 = $100,000.
Short-term capital gains are taxed at ______.
The taxpayer's marginal tax rate
Which of the following statements best describes the 95% rule as it relates to tax-deferred exchanges?
The total value of the property (or properties) selected as exchanges must be at least 95% of the value of the property being sold.
If an appraisal contingency is in place, what happens when a property appraises higher than the agreed-upon sales price?
The transaction continues
xWhat's the purpose of the Non-Reliance clause in a South Carolina sales contract?
To affirm that only terms in the contract are being relied upon
What's the purpose of the sales contract?
To document the buyer's offer to the seller to purchase the property identified in the agreement
What's the purpose of a Section 502 loan?
To offer loans for low-income borrowers in rural areas
What is the correct calculation to figure out a commission rate?
Total commission ÷ sales price
When using the farming approach to find listings, what factors are important when identifying an area?
Turnover, affinity, diversity
Lenders usually require _______ in reserve funds for homeowner's insurance, taxes, and mortgage insurance.
Two months
Bessie's house is being sold as a short sale. She can expect to ______.
Walk away with nothing
When performing a market analysis, what do you do with the adjusted sales prices of comparables to determine market value of the subject property?
Weigh the comparable with the fewest adjustments to sales price most heavily.
Jamie, a South Carolina licensee, is representing a party in a real estate transaction. Her side must provide notice to the opposing side. When is notice effective?
When delivered
Under what circumstances are pocket listings more prevalent?
When inventory is low
What's stipulated in the Trust Account Interest/Charitable Contribution of the South Carolina sales contract?
Whether money entrusted to brokers in the transaction may be placed in an interest-bearing account
When using the farming approach, affinity is a key factor when identifying a neighborhood. Which statement best describes affinity?
An area that the licensee likes
Which of the following costs in a South Carolina purchase transaction is considered a buyer's transaction cost?
Appraisal cost
South Carolina real estate broker James is explaining the Broker Disclaimer portion of the sales contract to his buyers. He says, "____________."
As a broker, I give no warranty about zoning or property condition
In a South Carolina sales transaction, who typically pays the transaction costs?
As agreed by the parties
Which of the following is a way buyers can find pocket or off-market listings?
Ask a real estate agent to poll her sphere of influence.
Ned is selling a South Carolina property. Which transaction cost will he typically be expected to pay?
Deed preparation
In South Carolina, the parties agree in the sales contract to a repair procedure unless what document is attached?
Due Diligence Addendum
What effect does a pre-approval letter have on an offer?
It assures the seller that the buyer's financial information has been verified.
Why is it important to help estimate buyers' closing costs?
It helps buyers determine what they can afford and what a home purchase costs.
Which of the following describes a "buy and hold" investment strategy?
It's a more conservative investment method than a fix and flip.
Real estate is NOT considered a _______ investment because it may be more difficult to sell quickly without a loss of capital.
Liquid
Interpretation of and changes to the NAR Code of Ethics can only be made at what level?
National
Which option does a South Carolina seller have who's just learned that the property under contract appraised at less than the agreed upon sales price?
Negotiate with the buyer to pay the difference between appraised value and sales price
The Carlisles, who are selling their South Carolina property, have just learned that the appraisal returned a value of less than the sales price. They may ____________.
Reduce the sales price
The houses in one neighborhood are all of similar sizes and style. When the Smiths' house goes into foreclosure, what principle will affect the value of the next-door neighbors' house if they sell at the same time?
Regression
In the South Carolina sales contract, the ________ section is where buyers can request repairs to specific systems in the property, and the _______ section gives the buyers the right to inspect the property.
Repair Procedure, Inspection/Reinspection
Your client is buying a condo in South Carolina for $228,000. Can she use cash to pay for half of it and finance the rest?
Yes, a condominium buyer may finance up to half of the purchase.
Denise is the listing agent on a property that's next to a lake. When advertising the property for sale, she describes it as "waterfront." Is this okay?
Yes, the house sits next to the lake.
May a South Carolina buyer waive the right to receive the seller's property condition disclosure report?
Yes, under all circumstances
You make a listing presentation to a client, then learn she's meeting with a few more licensees before deciding which licensee gets her listing. You know these competitors. Which action best demonstrates good faith?
You tell the seller you hope she'll decide to work with you.
The more money an investor leverages (or borrows), the greater the
financial risk.
