BF Practice test 3
If the capitalization rate is 8% and the yearly net income is $100,000, what is the selling price?
$100,000 net income divided by a cap rate of 8% equals a value of $1,250,000. The correct answer is: $1,250,000
Under a net lease, which of the following is the tenant NOT required to pay?
Mortgage
Using a gross rent multiplier of 120, what is the value of a property that produces $12,000 annual income?
The gross rent multiplier refers to the relationship between MONTHLY income and the selling price or value of the property. If the annual income is $12,000 then the monthly income is $1,000. The monthly rent is then multiplied by the multiplier (120) to arrive at the value. $1,000 X 120 = $120,000 The correct answer is: $120,000.
Which mortgage clause allows a lender to regain their investment ifa borrower does not pay his payment?
a. Acceleration clause
The 1988 Amendment to the Federal Fair Housing Act, Title VIII, declared it unlawful to discriminate:
a. Against households with children under 18 years of age.
The HUD information booklet must be given to which of the following?
a. Every person who submits a loan application to a lender over which RESPA has jurisdiction.
The owner of a condominium apartment holds which of the following interests in his or her individual living unit?
a. Fee simple title in his unit.
An agent may discriminate against a potential buyer on the basis of:
a. Inability to pay.
A broker and salesperson owe all EXCEPT which of the following to the purchaser/customer?
a. Negotiation of the lowest possible price.
The vendee is:
a. One who buys or offers to buy.
When a property is sold with an existing lease:
a. The entire lease interest is transferred.
According to the 1988 Fair Housing law, which of the following is NOT considered to be handicapped?
b. A person addicted to a controlled substance.
Which of the following best describes a condominium?
b. Air lot.
Which of the following is NOT essential to the validity of a mortgage?
b. Attorney.
A salesperson represents the:
b. Broker
Once a property has been appraised, then exposed to the market for a reasonable length of time and finally sells, who has determined the value of the property?
b. Buyer.
What type of foreclosure does a lien theory state provide?
b. Judicial
A contract for the sale of land in which the buyer makes regular payments, takes possession, but does not receive title is known as a(n):
b. Land contract.
A listing agreement will automatically terminate:
b. On the date specified in the listing agreement
The order of priority of liens would most likely be:
b. Tax, mortgage, mechanic's.
Which of the following is used to estimate value using a comparison between gross monthly rents and the selling price?
b. The gross rent multiplier
The buyer in a purchase agreement is known as a/an:
b. Vendee.
A new residential development requires that all single family houses have a 20' X 22' attached garage. This requirement is an example of:
c. A restrictive covenant
Which of the following is NOT an example of a real estate contract?
c. Bill of sale.
Encouraging a homeowner to sell his or her property because minority group families are moving into the neighborhood is:
c. Blockbusting.
Which of the following statements, included in an advertisement, would constitute a Fair Housing violation?
c. Catholics preferred.
In agency representation, the employer is called the:
c. Client.
Someone sells real estate for another for a fee without a license. What could the GREC do in this case?
c. Issue a cease and desist order and impose a fine up to $1,000 a day
A real estate broker wishes to deposit an earnest money check in his business operating account until settlement, so the purchaser can earn a higher rate of interest on his funds. Can he legally do this?
c. No, these funds must be placed in a separate escrow account
A seller had a house listed with a broker for $86,000. The broker was working with a buyer who told the broker that the buyer would start by offering $85,000 but would pay $86,000 for the property. What should the broker do?
c. Present the offer as is and inform the seller of the possible increase
When necessary, who forecloses in a trust deed state?
c. The Trustee
Which of the following contracts will provide instruction for the distribution and proration of escrow and impound funds?
c. The sales contract.
The minimum balance that must be maintained in the real estate education, research, and recovery fund is:
d. $1,000,000.
Agnes has an interest in property and by virtue of her interest she may place a deed restriction on the property that will apply to any future owner. Her interest in the property would be:
d. A fee simple estate.
Which of the following would cause what appears to be an otherwise valid contract to be declared invalid?
d. Any of the above.
A citizen phoned the GREC with a complaint on a licensee. The GREC sent him a form to fill out. However, he never followed up the complaint in writing. What would the GREC do?
d. Even though he did not put it in writing, the GREC may investigate anyway at their own discretion
Georgia's law that is focused on deceptive advertising is:
d. FBPA.
Which is true about a net listing?
d. It is illegal in Georgia
A person who had been convicted of a felony 10 years ago was turned down for license. If he still desired a license, what is his next course of action?
d. Request a hearing before the Real Estate Commission
If a prospective buyer (who is of a minority group) asks an agent to show her properties, the agent should:
d. Show her any property for which she is financially qualified.
A corporation buying real property would take title under:
d. Tenancy in severalty.
According to a community association management agreement, the duties of a property manager include all of the following except?
d. The agreement must be made by a CAM licensee.
John, an adult, entered into a contract with Paul, who is 16 years old. When John learned that Paul was a minor he decided to terminate the contract. Which of the following statements is true?
d. The contract is valid and binding only on John.
Broker Falk had a listing. Broker Carr found a buyer for Broker Falk's listing. A salesperson could close the transaction if:
d. a salesperson can NOT close a transaction, only attorneys can close them
A broker's contract for selling a building called for a fee of 6% of the first $100,000 and 2 1/2% of all over that amount. The broker's fee on the sale was $7,600. What was the sales price?
$100,000 X 6% = $6,000 commission on first $100,000. $7,600 - $6,000 = $1,600 commission on amount above first $100,000. We know that the amount of the sales over $100,000 X 2 1/2% is going to give us $1,600 in commission. Therefore, if we divide the commission by 2 1/2%, we will know the amount of the sales. $1,600 divided by 2 1/2% = $64,000 amt of sale over 1st $100,000. Don't forget that we have to add the two amounts together. $100,000 + $64,000 = $164,000 total sale price. The correct answer is: $164,000.
A salesperson comments to a prospective buyer, "In my opinion, this is the best place in town to live." The salesperson is guilty of:
Puffery
Two brothers who each own their own real estate companies agree to divide commissions received equally. Broker A pays for three-fourths of the advertising costs and finds the buyer. Broker B pays one-fourth of the advertising costs. If the total commission on the sale is $4,500, how much does Broker B get?
Since the brokers agreed to divide the commission equally, each gets $2,250 regardless of what the expenses of each may be. You may have tried to make this more complicated than it is. The correct answer is: $2,250.
During the period of time after a real estate contract is ratified, but before title actually passes to the buyer, the status of the contract is:
c. Executory
A broker takes a listing from a seller who later tells the broker that the house should not be shown to a minority person. The broker should:
c. Explain that he/she cannot comply because this violates Federal law.
Outdated bathroom fixtures are an example of:
c. Functional obsolescence - curable
Mr. Gregory has a home for sale with a sign, FOR SALE BY OWNER, in the front yard. Salesperson Gary calls, identifies himself and asks for the key to show the property. Mr. Gregory agrees. Which of the following best describes any agency relationship that may exist?
c. Gary's broker is the agent of Mr. Gregory for a reasonable time.
Nate rents a vacant lot from Zach for 30 years. Nate plans to erect a building on the land at his own expense. This type of lease is a:
c. Ground lease
The Fair Housing laws do Act does NOT provide protection on the basis of:
c. Homosexuality
Which of the following activities would be associated with riparian rights?
c. Irrigation
Sam sold a property to Emma for $225,000. Sam's loan balance was $44,500 with an interest rate of 7%. Emma's conventional loan was at 8% with a 90% loan to value ratio. The taxes for the year were $1250 and the home owner's insurance was $495. Closing took place on October 30th. Based on this information, answer the following question. If Emma paid PMI all at closing, how much did she pay?
d. $4,050.00
An office building producing a gross annual income of $45,000 is purchased for $225,000. If the only expense is an 11.5% interest payment on a $200,000 term loan, what is the owner's rate of return on equity?
$200,000 * .115 = $23,000 annual interest expense. $45,000 (income) - $23,000 (expense) = $22,000 net income. $225,000 (value) - $200,000 (debt) = $25,000 equity. $22,000 (income) / $25,000 equity = 0.88 or 88% return on equity. The correct answer is: 88.0%.
A term loan is 75% of the property appraisal. The annual interest rate on the loan is 8% and the interest for the first year is $3,870. What was the amount of the appraisal?
$3,870 divided by 8% = $48,375 loan. $48,375 divided by 75% = $64,500 appraised value. The correct answer is: $64,500.
An agent was to receive 5% commission on a piece of property that listed for $30,000. How much commission would he receive if the owner reduced the selling price by 15%?
$30,000 X 15% = $4,500 amount reduced $30,000 - $4,500 = $25,500 new listed price. $25,500 X 5% = $1,275 commission. The correct answer is: $1,275.
The purchase price of the property was $200,000. The purchaser obtained an 80% loan. What is the amount of the intangibles tax due?
$480.00 The Intangibles Tax is paid on the New Loan Amount at the rate of $1.50 per increment of 500 or any portion of 500. The loan amount of $160,000 / 500 = 320 x $1.50 = $480.00 The correct answer is: $480
Sam sold a property to Emma for $225,000. Sam's loan balance was $44,500 with an interest rate of 7%. Emma's conventional loan was at 8% with a 90% loan to value ratio. The taxes for the year were $1250 and the home owner's insurance was $495. Closing took place on October 30th. Based on this information, answer the following question. How much was the accrued interest and to whom was it paid?
(A) &Seller's Lending Institution $259.58 along with loan balance to pay off loan. $ 44,500 x 7% = $ 3,115 / 360 = 8.6527 x 30 days = $ 259.5833 = $259.58 (Accrued interest is paid for the due date through and including the day of closing.) The correct answer is: Lending Institution $259.58
The sales price of the property is $185,000. The new loan is $145,000. How much will the transfer tax be?
(B) $185.00 The Transfer Tax is paid on the taxable amount at 10 cents per hundred or any portion of 100. Sale Price - Loan Assumption = Taxable Amount $185,000 = $185,000 / 100 = 1850 x .10 = $185.00 The correct answer is: $185
Sam sold a property to Emma for $225,000. Sam's loan balance was $44,500 with an interest rate of 7%. Emma's conventional loan was at 8% with a 90% loan to value ratio. The taxes for the year were $1250 and the home owner's insurance was $495. Closing took place on October 30th. Based on this information, answer the following question. How much was the transfer tax?
(B) $225.00: The Transfer tax is paid on the taxable amount. Since there is no loan being assumed, the taxable amount is the Sale price of $225,000 / 100 = 2250 x .10 = $225.00. The correct answer is: $225.00
A parcel of land is divided into two lots. Each lot is 432 feet X 522 feet. What is the total acreage in the two lots combined?
432 ft. X 522 ft. = 225,504 sq. ft. in each lot 225,504 divided by 43,560 sq. ft. per acre = 5.177 acres in each lot 5.177 X 2 lots = 10.35 total acres. The correct answer is: 10.35 acres.
Sam sold a property to Emma for $225,000. Sam's loan balance was $44,500 with an interest rate of 7%. Emma's conventional loan was at 8% with a 90% loan to value ratio. The taxes for the year were $1250 and the home owner's insurance was $495. Closing took place on October 30th. Based on this information, answer the following question. What was the amount of the property tax proration?
A) 212.33 is the amount that will be paid by the buyer to the seller at closing. Since the closing was after July 1st, the taxes had been paid in full. The Seller will be credited with 62 days, the day after closing through the end of the year. Annual tax bill $ 1,250 / 365 = $ 3.4246 per day x 62 days = $ 212. 3287 = $ 212.33 The correct answer is: $212.33
A salesperson received 1.5% commission on all sales and listings sold. What was the total value of the real estate handled last year if the agent's income was $33,000?
If 1% (.015) X Total value = $33,000, then $33,000 / .015 = Total Value. Total value handled = $2,200,000. The correct answer is: $2,200,000
A property is sold and closing is on August 15th. The annual taxes of $1,042 have been paid for this calendar year. What is the settlement sheet entry?
The stem tells us that the taxes had been paid. Therefore, the seller is entitled to a refund, which will be a credit. $1,042 (annual taxes) divided by 12 = $86.83 monthly taxes. $86.83 / 30 (days per month) = $2.89 daily taxes. From August 15 to August 30 = 15 days @ 2.89 = $43.42. From Sept. 1 to Dec. 31 = 4 months @ 86.83 = $347.32. Total Taxes $390.74. The correct answer is: $390.74 debit to buyer; $390.74 credit to seller.
According to BRRETA, a licensee is responsible, under certain circumstances, for disclosing facts known about the area surrounding a property. What is the extent, in miles, that this disclosure encompasses?
a. 1
Amalia owns property and gladly allows her friend Sophie to use the land, reserving for herself the right to periodic inspections. In order to maintain her interest, Amalia should give Sophie:
a. A license.
A lender transfers a mortgage loan to another lender for servicing. Such action is an example of:
a. Assignment.
A homeowner sells his principal residence for a profit. Under which of the following circumstances may the homeowner avoid paying taxes on the profit realized from the sale?
a. By using the tax exempt $250,000 exclusion for a principal residence.
Which can an unlicensed secretary in a broker's office do?
a. Collect rents submitted to her at her desk
A client is obligated to her agent for:
a. Indemnification against loss not caused by the agent.
If an option to purchase real estate expires 7/15 without the optionee exercising his option, what must the owner do to release the property from option?
a. Nothing.
The covenant whereby one warrants that he is the possessor and owner of property being conveyed is the covenant of:
a. Seizen.
A person who is licensed in another state applies for a license in Georgia. The GREC learned that the applicant Did NOT have a high school diploma nor a GED. Which of the following is true regarding the issuance of a license?
a. The applicant could NOT get a license because of the lack of a high school diploma or a GED
If the closing occurs on January 31 (and we assume taxes have not been paid) which party will owe taxes at closing?
a. The seller
The GREC, in investigating a licensee, may:
a. issue subpoenas for all records relevant to the complaint
A lender's policy requires that the monthly payment for principal and interest cannot exceed 33-1/3% of the borrower's gross monthly income. If the monthly loan payment is to be $1,000, what is the minimum income required to support this payment?
b. $3,000 per month.
If your friend told you that he had just purchased a home with no money down, he probably obtained:
b. A VA guaranteed loan.
After taking the pre-license class and passing the state exam, in applying for license, what type of documentation would be required?
b. A photo ID
Jean transfers a fee simple interest in her property to her daughter Lisa, but reserves for herself a life estate in the property. The interest that Lisa holds during Jean's life time is considered to be:
b. A remainder interest.
Real estate taxes are based upon?
b. Assessed value.
Joe gives Bill a quitclaim deed to 5 acres of land. A year later a court determines that Joe did not have any interest in the property. Which of the following is true with respect to Bill's interest in the land?
b. Bill has no interest in the land
When a mortgagor has paid his debt in full, he is said to have defeated the mortgage. Which legal document is used to record the fact that the mortgage has been paid?
b. Deed of release.
An action to oust someone who is not legally in possession of real property is called:
b. Ejectment.
Which of the following criteria is NOT a requirement of an applicant for a salesperson's license?
b. Furnish evidence of completion of at least 60 hours in a salesperson's course or courses of study approved by the commission
A seller's listing expired on August 31st. On August 10th, another broker contacted the seller about listing the property when the current listing expired. Is this legal?
b. No, because the broker contacted the seller prior to the expiration date
Which of the following would NOT be a proper exercise of police power by a county?
b. Restricting occupancy to single women only.
The right of a landlord to reenter or regain possession of the premises upon expiration of a lease is known as:
b. Reversion.
The client in a listing agreement would be the:
b. Seller of the listed property
A broker decides to lower the prices of her listings after the properties have been on the market for 120 days. She finds that more buyers are now calling on these listings. Which of the following is true about such a practice?
b. She can do this only with the owner's approval
In which of the following can a lender refuse to give a loan?
b. The borrowers do not have the required down payment.
If a subdivision deed restriction states that the owner cannot convey the property, this restriction is:
b. Void and unenforceable
An agent showed a property. After writing an offer and presenting it, the seller accepted it. What date must be listed on the contract?
b. When any signatures or initials are obtained
A buyer wrote an offer to purchase for a $130,000 house. The buyer asked the salesperson if they could use the title to a speed boat as an earnest deposit. Would this be acceptable as an earnest deposit?
b. Yes, as long as it is agreeable with the seller
A salesperson pre-qualified a buyer and took personal information at that time. The salesperson then showed the buyer several homes. Prior to showing the homes the salesperson had the buyer sign an agency disclosure form. Did the salesperson do anything wrong?
b. Yes, the salesperson should have disclosed their agency prior to taking personal information
A lady wants to build a porch on the back of her house. The new construction will extend beyond the rear setback restriction. In order for her to add the porch, she would be required to obtain a:
b. Zoning variance
All of the following are requirements for licensure of a salesperson EXCEPT:
b. a credit report no more than 30 days old
A buyer's agent was showing a buyer a property that was listed for sale. No dual agency existed on this transaction. The seller would be considered a:
b. customer of the buyer's agent
Under BRRETA, an agent's liability for disclosure:
b. is limited to only information he knows to be true.
A farmer leased a property on an annual basis whereby the farmer or the owner could terminate the lease by giving the other party 90 days notice. One half of the crop value would be the annual rent. This type of lease would best be described as a:
b. periodic estate
An unlicensed secretary is the only one in the office as all the licensees are out to lunch. Broker Carr from another company calls requesting information on a property. The secretary may:
b. take his name and number to have a licensee return the call
A house sold for $140,000 with the buyer making a 20% down payment. The grantor's tax is charged at $1.00 per $1,000, what would the tax amount to:
c. $140.00 - based on the selling price.
Thelma, a widow, owns her home free and clear. She has a fixed income which does not meet her current financial needs. Thelma wants to borrow money on her house in order to supplement her income. What type of loan would Thelma most likely apply for?
c. A RAM (reverse annuity mortgage).
The use of a capitalization rate is most suitable for estimating the value of which type of property?
c. A building leased to a theater chain.
Which would require a license?
c. A property manager actively leasing and selling for a real estate company
If a buyer gives a note and a mortgage to a seller as part of the purchase price, the resulting mortgage is commonly referred to as:
c. A purchase money mortgage.
Negative amortization is a loan feature that?
c. Allows the principal balance to increase because payments are insufficient to pay the interest owed.
A developer is considering construction of a new subdivision in a rural area on a very hilly tract of land. What type of map will be most beneficial to the developer in making his decision to build?
c. Contour.
Title to real property passes when a deed is:
c. Delivered and accepted by the grantee.
A home that has severely peeling paint would be an example of which of the following?
c. Depreciation
Seller Carr instructed Agent Dole to inform buyers that the plumbing was in excellent shape. However, the plumbing was needing repair. Dole followed the owner's orders. What can happen in this case?
c. Dole is subject to license revocation
A seller wants to list her home with a broker but would like the option to sell it herself and not pay a commission. Which type of listing should she AVOID signing?
c. Exclusive right-to-sell listing.
If a listing broker tells a prospective buyer, ".. go ahead and make that offer, I'm sure the seller will accept it...", the broker may have created an agency relationship which would be described as:
c. Implied agency
Which legal instrument is used to convey a tenancy for years from one person to another?
c. Lease.
An agent was working with a buyer. The agent explained agency to the buyer and presented the buyer with an agency disclosure form as part of a sales contract for the buyer to sign. However, the buyer refused to sign. What should the agent do?
c. Make a note and give it to the broker to be kept in the files
Under Truth-In-Lending requirements, the mortgagee:
c. Must advise the borrower the total amount of interest that will be paid, if the loan is paid at the scheduled maturity date.
In order to claim depreciation on a property, the property:
c. Must be improved
An attorney who is not a real estate licensee gives referrals to a real estate company. Can the attorney receive a referral fee from the licensee?
c. No, as the attorney does not have a real estate license
An unlicensed person worked for a real estate company. The unlicensed person showed a friend a home listed by C the real estate company. The friend purchased the home and the unlicensed person is asking for a 2% real estate commission. Can the broker of the real estate company pay the 2% commission?
c. No, as the employee was unlicensed
An owner and tenant signed a one year lease agreement. The owner sold the property to a buyer 4 months later. The buyer wanted to move into the property immediately. The original lease contract signed by the seller and tenant was silent on this point. Can the buyer of the property move in immediately?
c. No, because the tenant can stay in the property for the duration of the original lease contract
Which of the following contracts is voidable?
c. One of the parties was drunk at the time the contract was signed
According to a property management agreement, the duties of the manager include all of the following except?
c. Prepare income taxes for the owner.
Which of the following controls a cash settlement?
c. RESPA.
Who is an intermediary between a buyer and a seller?
c. Real estate broker.
A couple with good income and excellent credit want to buy and renovate an older home located in an economically distressed neighborhood. They have been turned down by 3 different lenders. This is an example of:
c. Redlining.
A salesperson told a buyer that the air conditioner would stay with the house. However, he had NOT checked it out with the seller. After closing, the seller took the air conditioner. Which would happen?
c. The GREC can take disciplinary action or dismiss a complaint if filed
The covenant in a deed which guarantees to the grantee that no one has any other interest in the property, that will disturb the grantee's possession of the property, is known as the:
c. The covenant of quiet enjoyment
The loan contingency contained in an offer to purchase will contain all of the following EXCEPT:
c. The name of the financial institution.
For answering some of the following questions, you may need to be sure of the number of days in each month. For those items, you should refer to the table below. Tax calculations assume that property taxes are due and payable on July 1. If a closing is before July 1, you are to assume the taxes have not been paid (unless told otherwise). If closing is July 1 or later, you are to assume taxes have been paid (unless told otherwise). The tax year will begin on January 1 and end on December 31 and is a 365 day year. Interest prorations will be based on a 360 day year unless told otherwise. Loan amounts will be lowered to the next lower $100 increment if not in even $100 amounts. Who pays the intangibles tax?
c. The seller and buyer may negotiate who is to pay the tax.
Which of the following statements is true regarding a licensed salesperson's selling the salesperson's own house "for sale by owner"?
c. The sign in the yard MUST say "For Sale By Owner-Seller holds a real estate license"
An insured loan, amortized over 25 years, in which payments would increase or decrease in accordance with some economic indicator would be an example of:
c. Variable rate mortgage.
Which of the following is not true about a deed to secure debt?
c. With a security deed, the lender holds equitable title.
A person finished the pre-license school on July 31, 2011. After taking and passing the state examination on December 15, the applicant applied for a license on January 20, 2012. Could this person receive a license?
c. Yes, because the applicant applied for the license within 12 months of passing the state examination
To supervise a branch office, you must be:
c. a Broker or Associate Broker
In order to sit for the Community Association Management (CAM) state licensing exam, an applicant must:
c. complete a 25 hour approved course of study.
A licensed salesperson is looking for a home for herself. She is interested in a home listed with another company. If she wishes to purchase the home, she must:
c. include in the offer the fact that the buyer is a licensed salesperson
The Georgia Real Estate Commission is comprised of:
c. six members.
Property was sold and closing was on May 15th. The taxes for the current year had NOT been paid. Annual taxes are $3,096. What is the settlement sheet entry to prorate the taxes between buyer and seller?
d. $1,161 credit to buyer; $1,161 debit to seller.
A husband and wife listed their home for sale with a real estate agent. The agent received two offers from two different buyers at the same time on the property. What is the best advice the agent can give to the seller regarding these two offers?
d. Accept or counter-offer only one offer or reject both offers
A valid written lease generally requires: a. Legal capacity of both parties. b. An offer and acceptance. c. Consideration.
d. All of these choices.
When a buyer obtains a loan for the purpose of financing the purchase of real property, how does the amount of the loan obtained appear on the settlement sheet?
d. As a credit to the buyer, only.
In which appraisal approach is a separate value established for the land?
d. Cost
If the landlord (owner) of property dies during the period of a valid lease, what effect would it have on the lease and the tenant?
d. It has no effect
A mortgage which includes both real and personal property would be referred to as a:
d. Package mortgage.
A restrictive covenant in a deed could:
d. Prevent the use of the property as a dance hall
A bill of sale would be used instead of a deed for all EXCEPT which of the following?
d. Real estate.
A handicap person wants to rent a home that has steps to the front door. What best describes the situation?
d. The tenant can, at their expense, install the ramp and must remove it at the end of the lease.
A broker listed a property for $87,500. While showing the property, a buyer remarked that $84,500 is what the buyer would like to offer for the property. The broker told the buyer that the seller will not accept anything less than $86,500. Did the broker do anything illegal under the Georgia License Law?
d. Yes, as the broker cannot disclose to the buyer that the seller will take anything less than the list price
In order to keep a license on inactive status, one must:
d. renew every four years and pay a renewal fee
