Broker Quick Quiz

A property owner who does NOT reside on the property and who often relies on a professional property management company to manage the investment is

an absentee owner. Explanation An absentee owner is a property owner who does not reside on the property and who often relies on a professional property manager to manage the owner's investment. Reference: Real Estate Principles and Practices Sections > The Real Estate Business

The broker agreed to pay his sales associate 45% of the total commission. The property sold for $320,000 and the commission rate was 7%. The property was sold "in house." What was the broker's share of the commission?

$12,320 Explanation (14) $320,000 sale price × .07 rate = $22,400 total commission; 100% - .45 sales associate split = .55 broker's split; $22,400 × .55 = $12,320 broker's commission Reference: Math Problems

A landlord owns an 1,800-square-foot rental house that rents for $.70 per square foot per month. If the GRM (monthly) for that property is 120, what is the market value of the property?

$151,200 (16) 1,800 sq. ft. × $.70 = $1,260 monthly rent; $1,260 rent × 120 GRM = $151,200 market value Reference: Math Problems

An appraiser has assigned the following weights to three adjusted sale prices: Comparable 1: $319,900 45% weight Comparable 2: $312,500 35% weight Comparable 3: $308,500 20% weight What is the reconciled estimated market value of the subject property?

$315,030 (16) $319,900 × .45 = $143,955 $312,500 × .35 = $109,375 $308,500 × .20 = $61,700 $143,955 + $109,375 + $61,700 = $315,030 Reference: Math Problems

A buyer applied for a 30-year, fixed-rate $105,000 mortgage. The lender will grant the loan if the buyer will pay interest at the rate of 4.5% plus three points and a 1% loan origination fee. What are the total loan charges if the buyer decides to take the loan offer?

$4,200 Explanation (12) $105,000 mortgage × .03 points = $3,150 cost of points; $105,000 mortgage × .01 = $1,050 loan origination fee; $3,150 + $1,050 = $4,200 total loan charges Reference: Math Problems

While working for a broker, a sales associate acquired a listing for $294,900 at a 6% commission rate. A second sales associate, who works for another brokerage office, found the buyer for the property. The listing and selling brokers agree to a 50-50 split between the two offices. The property sold for $289,000. The selling broker kept 45% of the commission received by the selling office. How much did the selling office's sales associate receive?

$4,768.50 Explanation (14) $289,000 × .06 rate = $17,340 total commission; $17,340 × .50 = $8,670 selling office split; $8,670 × .55 = $4,768.50 selling sales associate's commission Reference: Math Problems

A married couple purchased a home for $287,500, made a down payment of 25%, and secured a new conventional mortgage loan for the balance. Calculate the intangible taxes due.

$431.25 Explanation (12,14) $287,500 × .75 LTV ratio = $215,625 mortgage loan; $215,625 × .002 rate = $431.25 intangible tax Reference: Math Problems

The maximum Save Our Home benefit that may be transferred to a new homestead is

$500,000. Explanation Homestead property owners are able to transfer up to $500,000 of their Save Our Home tax benefit. Reference: Real Estate Principles and Practices Sections > Taxes Affecting Real Estate

Monthly mortgage payments of $450 have been paid for 15 years. The original mortgage amount was $45,000. After 15 years, 50% of the loan has been paid. What is the total amount of interest paid to date?

$58,500 Explanation (13) 15 years × 12 payments a year = 180 payments to date: $450 × 180 = $81,000 total paid to date; $45,000 mortgage × .50 paid = $22,500 principal paid; $81,000 - $22,500 = $58,500 interest paid to date Reference: Math Problems

A retail tenant pays an annual base rent of $120,000 plus 2% of gross annual sales. Above what annual sales level would the tenant have to pay additional rent?

$6,000,000 Explanation $120,000 ÷ 2% = $6,000,000. The tenant would have to pay additional rent above the minimum once the gross sales exceed $6,000,000. Reference: Specialties Sections > Investment Real Estate Reference: Real Estate Principles and Practices Sections > Real Estate Markets and Analysis

A broker applicant has received a master's degree in real estate. What MUST the applicant complete?

14 hours of continuing education every two years after the initial renewal Explanation A broker applicant who has a four-year degree or higher in real estate is exempt from pre-licensing and post-licensing education. The broker applicant must have an approved application and successfully pass the Florida real estate broker exam. The broker applicant, once licensed, must take 14 hours of continuing education every two years following the initial license renewal. Reference: Getting Started in the Real Estate Business Sections > Becoming a Licensed Real Estate Broker Reference: Real Estate Principles and Practices Sections > The Real Estate Business

If both buyer and seller claim the earnest money deposit in a broker's escrow account, how much time does the broker have to notify the FREC in writing?

15 business days Explanation If a broker receives conflicting demands on escrowed property, the broker must notify the FREC, in writing, within 15 business days of the party's last demand. Reference: Real Estate Law, Florida Real Estate License Law Sections > Real Estate Brokerage Activities and Procedures

What is the cancellation period for the purchase of a three-year-old residential condominium unit from a private party?

3 business days Explanation The contract for resale of a residential condominium unit must include a clause that states that the buyer acknowledges receipt of the condo documents and that the buyer may cancel the contract within three business days after the execution of the contract and receipt of the condo documents. Reference: General Real Estate Law Sections > Property Rights: Estates and Tenancies, Condominiums, Cooperatives, and Time Sharing

A couple used FHA financing to purchase their new home. The couple's total monthly housing payment is $924 and their total monthly obligations for all debt is $1,250. The couple has a gross monthly income of $4,150. What is their total obligations ratio?

30% Explanation Total obligations ratio = total obligations ÷ gross monthly income; $1,250 (total obligations) ÷ $4,150 (gross monthly income) = .30 or 30% Reference: Listing and Selling Real Property Sections > Financing Real Estate Reference: Real Estate Principles and Practices Sections > Residential Mortgages

Which valuation must conform to the USPAP?

Appraisal for an FHA loan Explanation Appraisals associated with an FHA mortgage loan must conform to USPAP. Reference: Real Estate Principles and Practices Sections > Real Estate Appraisal

Which statement describes a planned unit development?

Clustering homes together on smaller lots to allow for open green spaces Explanation Both a legal and a development design concept, a planned unit development permits a mix of land uses along with a high density of residential units resulting from clustering homes together and the creation of open green spaces. Reference: General Real Estate Law Sections > Planning, Zoning, and Environmental Hazards

Regarding property taxes, calculate the property tax prorations for a property closing August 12, 2XXX, in the amount of $2,345 and indicate which party will be charged a debit and which party will receive a credit. The day of closing is charged to the buyer. Use the 365-day method.

Debit seller $1,432.70; credit buyer $1,432.70 Explanation For seller days January 1-August 11: $2,345 ÷ 365 × 223 = $1,432.70. Reference: Listing and Selling Real Property Sections > Closing Real Estate Transactions Reference: Real Estate Principles and Practices Sections > Types of Mortgages and Sources of Financing

Which characteristic is a disadvantage of real estate investments?

Degree of risk Explanation One disadvantage of real estate as an investment is the relatively high risk. Reference: Real Estate Principles and Practices Sections > Real Estate Investments and Business Opportunity Brokerage

With which government agency do developers of subdivisions with 100 or more lots have to register?

Department of Housing and Urban Development Explanation The Interstate Land Sales Full Disclosure Act requires developers of subdivisions of 100 or more lots to register with the Consumer Financial Protection Bureau. Reference: General Real Estate Law Sections > Federal and State Laws Pertaining to Real Estate

A seller and a buyer negotiated the sale and purchase of the seller's condominium over a two-week period. Finally, they reached a meeting of the minds regarding the purchase price and terms of the sale. What type of contract exists at this point?

Express contract Explanation An express contract is an agreement wherein the terms are specifically stated by the parties, either orally, in writing, or a combination of the two. Reference: General Real Estate Law Sections > Real Estate Contracts

Which FREC power is part of the FREC's quasi-judicial responsibilities?

Make determination of violations Explanation FREC's quasi-judicial responsibilities include the power to grant or deny license applications, to determine license law violations, and to administer penalties. Reference: Real Estate Law, Florida Real Estate License Law Sections > Real Estate License Law and Commission Rules

A buyer is assuming the seller's existing mortgage. Which agreement relieves the seller of liability for the assumed mortgage?

Novation Explanation A novation makes the buyer solely responsible for a default by releasing the seller as a party to the mortgage. Reference: Real Estate Principles and Practices Sections > Residential Mortgages

Which type of mortgage loan requires a balloon payment at the end of the loan term?

Partially amortized Explanation With a partially amortized mortgage, the buyer makes regular payments smaller than what is required to completely pay off the loan. A final large balloon payment of accrued interest and unpaid principal is due on loan maturity. Reference: Real Estate Principles and Practices Sections > Types of Mortgages and Sources of Financing

What type of special land use allows clustered homes and mixed-use zoning?

Planned unit development Explanation A planned unit development is a type of land use allowed by local zoning ordinances that offers clustered homes and/or mixed land use. Reference: Specialties Sections > Zoning and Planning, Subdividing of Land, and Special Issues Reference: Real Estate Principles and Practices Sections > Real Estate Appraisal

Under the Comprehensive Environmental Response Compensation and Liability Act of 1980, who would NOT be classified as a potentially responsible person?

Potential buyer of the contaminated site Explanation Potentially responsible persons (PRPs) include current owners and operators of the contaminated site; persons who owned or operated the site at the time hazardous substances were located on site; generators of hazardous substances; and transporters of hazardous substances to the site. If the potential buyer purchases the property without exercising due diligence to discover any contamination of the property (through performing an environmental site assessment), the buyer, upon purchase, would become a PRP. Reference: Specialties Sections > Environmental Concerns Affecting Real Estate Transactions Reference: Real Estate Principles and Practices Sections > Real Estate Investments and Business Opportunity Brokerage

A property owner defaulted on the mortgage. Prior to foreclosure, the owner paid the lender the missed mortgage payments, plus the expenses incurred by the lender as a result of the default. Which mortgage provision allows the borrower to make mortgage payments as specified in the promissory note?

Right to reinstate Explanation The right to reinstate is the mortgagor's right to reinstate the original repayment terms in the note after the lender initiated the acceleration clause. Reference: Real Estate Principles and Practices Sections > Residential Mortgages

Which tenancy occurs when the tenant remains in the property after the tenancy has ended and without first getting the owner's approval?

Tenancy at sufferance Explanation A tenancy at sufferance occurs when a tenant remains in the property without the owner's permission after the lease has expired. Reference: Specialties Sections > Property Management Reference: Real Estate Principles and Practices Sections > Taxes Affecting Real Estate

Which tenancy has the right of survivorship and requires that all parties on the deed sign before the property can be transferred?

Tenancy by the entireties Explanation Tenancy by the entirety is an estate that is owned by a married couple treated as one owner. Reference: Listing and Selling Real Property Sections > Contracts Reference: General Real Estate Law Sections > Real Estate Contracts

A broker hired a bookkeeper for his real estate company. The bookkeeper is responsible for maintaining the brokerage's account ledgers. The bookkeeper also prepares and signs all checks disbursed from the escrow and operating accounts. Which statement is TRUE of this situation?

The broker must be an authorized signatory on the escrow account. Explanation The FREC requires the broker to be a signatory on all escrow accounts. The broker can designate another person to sign check on the account in the ordinary course of business. Reference: Getting Started in the Real Estate Business Sections > Escrow Management Reference: Real Estate Law, Florida Real Estate License Law Sections > Authorized Relationships, Duties, and Disclosure

A sales associate disputes the material facts and allegations in a formal complaint. Which statement is TRUE regarding this situation?

The matter must be heard in a formal hearing before an administrative law judge. Explanation If a licensee disputes the alleged facts that are made in an administrative complaint (also known as a formal complaint), the case must be heard by an administrative law judge in a formal hearing. Reference: Real Estate Law, Florida Real Estate License Law Sections > Violations of License Law, Penalties, and Procedures

An owner-developer employs five licensed sales associates and pays each sales associate a commission for sales of the owner-developer's lots. Which is TRUE of the owner-developer?

The owner-developer must register with the DBPR but does not have to be licensed. Explanation The owner-developer does not have to hold a real estate license to sell the owner-developer's lots, but if the owner-developer employs licensed sales associates, the owner-developer must register with the DBPR. This creates a "pseudo number" under which the sales associates can register. Reference: Real Estate Law, Florida Real Estate License Law Sections > Real Estate License Law and Commission Rules

Which statement is TRUE regarding sole proprietor real estate broker entrance signs?

The sign must include the name of the broker as registered with the Commission. Explanation The name of the broker as registered with the Commission must be on the sign. Reference: Getting Started in the Real Estate Business Sections > Opening a Real Estate Office Reference: Real Estate Law, Florida Real Estate License Law Sections > Real Estate License Law and Qualifications for Licensure

A buyer assumed an existing recorded $82,000 mortgage as part of a real estate purchase. This action will necessitate

a new promissory note. Explanation In an assumption, the buyer signs a new promissory note. Reference: Real Estate Principles and Practices Sections > Residential Mortgages

Freddie Mac is

a secondary market. Explanation Freddie Mac provides a secondary market for conventional mortgage loans. Reference: Real Estate Principles and Practices Sections > Types of Mortgages and Sources of Financing

A broker represents all buyers and sellers as a transaction broker. After a buyer views the listed property, the buyer makes an offer $15,000 below the list price. The buyer indicates to the sales associate that she very much wants to purchase the property and she will pay the list price if necessary. The sales associate MUST

avoid telling the seller that the buyer will pay up to the list price. Explanation The duty to exercise limited confidentiality prevents disclosure to the seller that the buyer will pay a price greater than the amount in an offer, unless the limited confidentiality is waived in writing by the buyer. Reference: Listing and Selling Real Property Sections > Brokerage Relationships and Disclosure Requirements Reference: Real Estate Principles and Practices Sections > Legal Descriptions

The total amount of spendable income generated from an investment is

cash flow. Explanation Cash flow is the total amount of money remaining after all expenditures have been paid. Reference: Real Estate Principles and Practices Sections > Real Estate Investments and Business Opportunity Brokerage

Commingling occurs when a broker

deposits earnest money in a business operating account. Explanation Commingling of funds is the illegal practice of mixing a buyer's or seller's funds with the broker's own money or of mixing escrow money with the broker's personal funds or business funds. Conversion is stealing. Conversion, for example, occurs if a broker withdraws money from an escrow account to pay the broker's personal or business expenses. Reference: Real Estate Law, Florida Real Estate License Law Sections > Real Estate Brokerage Activities and Procedures

When measuring the square footage of a house, an appraiser uses

exterior dimensions. Explanation Exterior dimensions are used to calculate gross living area. Reference: Real Estate Principles and Practices Sections > Real Estate Appraisal

When the estimate of value is adjusted because of an outdated kitchen, it is called

functional obsolescence. Explanation Anything that is inferior due to operational inadequacies, poor design, or changing tastes and preferences is classified as functional obsolescence. Functional obsolescence can be curable or incurable. Reference: Real Estate Principles and Practices Sections > Real Estate Appraisal

A borrower pledges real property as collateral for repayment of a loan without surrendering possession of the property. This process is called

hypothecation. Explanation Hypothecation describes the pledging of property as collateral for a loan without giving up possession of the property. Reference: Real Estate Principles and Practices Sections > Residential Mortgages

A man who died without leaving a will (intestate) owned two farms and a home. The court appointed a personal representative to dispose of the real property in the decedent's estate. The personal representative

is exempt from a real estate license. Explanation Pursuant to Section 475.011, F.S., persons acting within the limitations of their duties as designated by a will, proper court, or statutory authority to serve as a personal representative or trustee are specifically exempted from licensure. Reference: Real Estate Law, Florida Real Estate License Law Sections > Real Estate License Law and Qualifications for Licensure

A property manager

is responsible for leasing, managing, marketing, and overall maintenance of property. Explanation Property management is devoted to the leasing, managing, marketing, and overall maintenance of property for others. The scope of a property manager's functions goes far beyond rent collection, maintenance, and repair. Absentee ownership has increased (not decreased) demand for property managers. Reference: Real Estate Principles and Practices Sections > The Real Estate Business

The statute that requires an injured party to bring an action within a specific period of time after the injury is the statute of

limitations. Explanation The statute of limitations designates the period of time during which the terms of a contract may be enforced and protects people from being compelled to perform or otherwise be sued after a specific period of time has expired. Reference: General Real Estate Law Sections > Real Estate Contracts

A sales associate has hired a licensed personal assistant to help increase the sales associate's business. The licensed assistant will receive $12 an hour for administrative work and 35% of any commissions earned. The licensed assistant

may be paid by the sales associate for administrative work but must be paid by the broker for commissions earned. Explanation Sales associates may employ licensed personal assistants and pay the assistant for any administrative work. However, the licensed assistant must register with the sales associate's broker to perform any service of real estate and can only be paid for those services by the employing broker. Reference: Real Estate Law, Florida Real Estate License Law Sections > Real Estate Brokerage Activities and Procedures

FHA requires borrowers to pay

one-twelfth of the estimated property taxes with each monthly payment. Explanation FHA requires borrowers to escrow property taxes and hazard insurance. Funding fees are used to support the VA loan guarantees. Reference: Real Estate Principles and Practices Sections > Types of Mortgages and Sources of Financing

A broker wishes to be issued several broker licenses for business reasons. She may

request multiple licenses. Explanation A Florida broker may be issued, on request, additional Florida broker licenses whenever it is shown that the additional licenses are necessary to the conduct of business. A broker who holds more than one Florida broker license is said to hold multiple licenses. Reference: Real Estate Law, Florida Real Estate License Law Sections > Real Estate License Law and Commission Rules

A real estate broker, when working in a single agent relationship, is typically authorized by a principal to act as a

special agent. A special agent is authorized by the principal to handle only a specific business transaction or to perform only a specific act. A real estate broker, in a single agent relationship, typically is authorized by the buyer or seller to act as a special agent. Reference: Real Estate Law, Florida Real Estate License Law Sections > Authorized Relationships, Duties, and Disclosure

If a tenant legally subrogates or subordinates the rental space, it means that the tenant has

subleased the lease. Explanation A sublease is effected when the lessee assigns less than the entire property or assigns all of the property for less than the full remaining period. Subleasing is also called subrogation or subordination of space. Reference: General Real Estate Law Sections > Title, Deeds, and Ownership Restrictions

Three individuals purchased a parcel of real property. One of the owners died and the deceased owner's interest passed according to his will, to become part of his estate. The three owners held title as

tenants in common. Explanation Tenancy in common has the characteristics of inheritability. If one owner dies, that share is distributed according to the will. Reference: Listing and Selling Real Property Sections > Contracts Reference: General Real Estate Law Sections > Real Estate Contracts

A transaction broker may disclose, without exception

to the buyer, the listed price and physical characteristics of the home. Explanation Transaction brokers have a duty of limited confidentiality, unless waived in writing. This limited confidentiality will prevent disclosure that the seller will accept a price less than the asking or listing price, the motivation of any party for buying or selling property, any acceptable financing terms that have not been previously disclosed in writing, or any other information requested by a party to remain confidential. The licensee should inform the seller that to use race as a basis for making a decision whether or not to accept an offer is a violation of Fair Housing Laws. Reference: Real Estate Law, Florida Real Estate License Law Sections > Authorized Relationships, Duties, and Disclosure