CE Shop Course 1 Final

The Davises pay the annual property tax of $1,825 on their lake house every January. On a whim, they sell the lake house to the Bennets to buy a Winnebago and travel the country. Closing is set for July 31, and the buyers own the day of closing (pay prorated expenses through the day of closing). Using the calendar year proration method (assume that it's not a Leap year), how much of the pre-paid property tax was the Davises' responsibility?

$1,055 The daily tax rate is $5 ($1,825 ÷ 365). The Davises owe taxes for January 1 through July 31 (212 days), minus the closing day (paid by buyers). Therefore, the Davises owe for 211 days, which is $1,055 ($5 x 211).

Gunther's gross monthly income is $3,800, and he has no monthly debt payments. The lender's qualifying ratios are 28% for the housing ratio and 36% for the total DTI ratio. What's the maximum housing payment Gunther can afford?

$1,064 Calculate the debt and housing ratios that buyers need to meet both lending ratios. While Gunther qualifies for a payment of $1,368 under the total DTI, he only qualifies for $1,064 under the housing ratio ($3,800 x 28%).

A buyer with a 20-year, $419,000 loan at a 4.25% interest rate has a monthly principal and interest payment totaling $2,594.59. If $1,483.95 is interest, how much is applied toward principal for that payment?

$1,110.64 If $1,483.95 of the total payment is interest, that leaves $1,110.64 to be applied toward principal.

What is the maximum civil penalty that can be imposed for a license law violation in Minnesota?

$10,000

Seller Adelaide and buyer Colin close on a transaction for two rental condos on March 15. They live in a state where the seller is considered the owner of the property on the day of closing. The combined rental income per month is $4,000. How much rental income can Colin expect to earn in March?

$2,064.48 In many states, the seller is considered the property owner on closing date. Divide the monthly income by the days in March ($4,000 ÷ 31 = $129.03) for daily rent, then multiply that by the 16 days Colin will own the property for the total of $2064.48.

Jaime purchased a property in Becker County for $350,000. She put down $70,000 and financed the remaining $280,000. How much mortgage registry tax did she owe for the purchase?

$644 Remember, MRT is the amount financed multiplied by .0023. So, $280,000 x .0023.

A homestead property owner has failed to pay their taxes by May 15th. What penalty will be assessed on July 1?

1% The first day of the month following the due date, an additional penalty of 2% for homestead property is assessed. The first day of each subsequent month through December, an additional penalty of 1% is assessed (to both homestead and nonhomestead properties).

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?

105,263.16 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.

A homestead property owner has failed to pay their taxes by May 15th. What penalty will be assessed during the month of May?

2% Upon the due date, a penalty of 2% for homestead property (4% for nonhomestead property) is assessed.

Bradley is acting as a finder for Emma. He's introducing her to Rachel, the other party in the transaction. Which fiduciary duties does Bradley owe Emma?

A finder doesn't owe any fiduciary duties. Finders aren't agents, and don't owe fiduciary duties to either party in the transaction.

What is a watershed?

A land formation that directs water from higher elevations into lakes and other bodies of water

Which of the following describes a subdivision plat?

A record in the county clerk's office that can serve as the legal description on a deed

What is a ground lease?

A residential lease or sublease for a specific term that is renewable forever, subject to the payment of ground rent A ground lease is a residential lease or sublease for a specific term—up to a maximum of 99 years—that is renewable forever, subject to the payment of ground rent.

Assuming all of the following individuals are performing these activities for another and for a fee, who must hold a Minnesota real estate license in order to legally perform the activity?

A son selling his parent's house Generally, anyone performing real estate services for another and for compensation must hold a real estate license. There are exceptions for burial plot sales, trustees, public officers or employees performing official duties.

To which of the following borrowers might a lender be most likely to recommend an FHA loan?

A young couple with only a few thousand dollars saved for a down payment and relatively low credit scores

If a private individual tries to lay claim to someone else's property because he has been living on and using the property as his own for an extended period of time, the individual may acquire the property through _______.

Adverse possession The method by which trespassers may take legal title to a property is called adverse possession. It requires open, notorious, and hostile use for a statutory period of time.

The act of transferring ownership of a property is known as _______.

Alienation Alienation is the act of transferring ownership of a property. It may be voluntary (with the owner's consent) or involuntary (without the owner's consent).

Which statement most accurately describes a licensee's responsibility related to written offers on a listing, according to the NAR Code of Ethics and Standards of Practice?

All formal written offers received by the licensee must be presented to the owner until closing or execution of a lease, unless the client waives this obligation in writing. Licensees should continue to present offers and counter-offers until the closing or execution of the lease. The owner/landlord can waive this obligation, but this should be done in writing.

What's a quiet title action?

An action to locate and notify all who may have some claim on the title, and determine the validity of all claims A quiet title action involves locating a person who may have some claim on the title and determining the validity of any claims on title.

If an appraiser in Minnesota doesn't receive anything from the licensing unit after submitting a renewal application, the appraiser should consider that the renewal has been ________.

Approved Appraisers may consider their renewal application approved unless they hear otherwise.

Which of the following refers to rights that come with the land?

Appurtenance Appurtenance conveys a sense of attachment and belonging. It includes the inherent or automatic rights that are the natural consequences of property ownership and that go with the land when the property is transferred.

Allen and Lewis are friends who each recently purchased real estate. Allen purchased a patio home in a small town an hour from the city, while Lewis purchased a condo in a really hot area near the city center. Although they paid similar amounts for their properties, Lewis' condo is worth much more two years later. Which economic characteristic does this demonstrate?

Area preference

The client owes the agent the primary duties of compensation, information, indemnification, and ______.

Availability The fourth duty the client owes the agent is availability.

Tracy is looking in the MLS and sees a listing marked "REO." Which of these statements regarding REOs is correct?

Banks acquire REOs through failed foreclosure sales or deed in lieu of foreclosure actions. Failed foreclosure sales and deed in lieu of foreclosure actions result in lenders taking title to properties they previously had mortgage loans on. These properties are called real estate-owned, or REO.

The Lake Superior Condominium Association was formed in June 1990. Which statement best describes their participation in the Minnesota Common Interest Ownership Act?

Based on the type of association, participation is automatically required. Common interest ownership associations created after June 1, 1994 are automatically required to participate in this act. The same goes for condos, regardless of when they were formed. Single-family or townhome associations created before June 1, 1994 must opt in.

Your new home listing has some minor condition issues, most of which the seller Barry disclosed properly when filling out the disclosure form. However, you noticed that he didn't disclose the test results that showed E. coli bacteria in his well water. You don't say anything, since it's not your role to fill out the disclosure form. If the buyer discovers issues with the well after closing, who is legally liable for this omission?

Both you and Barry Licensees are responsible for disclosing known environmental issues. To not disclose something that you know about leaves you, as well as the seller, open to a lawsuit.

What agency/act is designed to "preserve, protect, develop, and where possible, to restore or enhance the resources of the nation's coastal zone"?

Coastal Zone Management Act The Coastal Zone Management Act, established in 1972, was designed to "preserve, protect, develop, and where possible, to restore or enhance the resources of the nation's coastal zone."

In which method of involuntary alienation does a court decide how the proceeds from the sale of land owned by tenants in common will be distributed?

Court-ordered partition of property If the tenants in common cannot agree about how the property should be divided, the courts may step in and order the sale of the property.

Which of the following is an included covenant(s) in a warranty deed?

Covenant of right to convey

Through which method of voluntary alienation does the grantor convey real property and transfer title to the grantee?

Deed The person who conveys title through means of a deed is the grantor, and the person who receives title is the grantee. Conveyance by deed can be made by sale or gift of the property.

Over which of the following areas do local authorities have no police power?

Deed restrictions Police power is a form of public land use control. Deed restrictions are private land use controls.

Which of these is NOT one of the ways in which an agency relationship may be terminated without penalty for either the agent or the principal?

Delaney signed a buyer's representation agreement with Martha. After Delaney made an offer on a house, she changed her mind and terminated the agency agreement. Unless Martha agrees to terminate the agency agreement with Delaney, Delaney may still owe Martha the agreed-upon compensation for breaching this agreement.

Select the statement that accurately depicts property ownership income tax implications.

During the ownership stage, both investors and homeowners may be able to deduct mortgage interest paid. Eligibility for deductions related to property ownership depend on circumstances, and tax questions should always be directed to a qualified expert. In general, homeowners and investors may be eligible to deduct mortgage interest.

Dwight tells his buyer Jamie that a nearby stream could possibly flood the basement, though it's never happened to him. After signing the contract, Jamie's home inspector shows proof that the basement flooded last year, when Dwight was still living in the home. What's true about this situation?

Dwight has committed fraud, which has invalidated Jamie's consent.

Elvin owns 150 acres of prime hunting land. Every year, he gets requests from private groups that would like to use his land for a day or two during hunting season. He sometimes grants these requests, but this year, he's decided to only use it himself with his friends. Which right in the bundle of rights says that he can say no to these requests?

Exclusion The right of exclusion gives Elvin the right to refuse others the use of his own property.

Monique rents an apartment in Minnesota. Her building is being converted to condominiums and she's interested in buying her unit. What must she do?

Exercise her option to buy within 60 days of receiving the owner's notice about the conversion. If a building is being converted to condominiums, the building owner must notify existing tenants. Residents are given 60 days from the date the notice is delivered to exercise the option to buy their units or to continue as tenants until the vacate date.

The part of the floodplain associated with moving water is considered the most dangerous area. In Minnesota, this area is known as the ____________.

Floodway The most dangerous part of the floodplain is the floodway, which is associated with moving water. Development is generally prohibited in these areas.

A lender initiated a(n) ______ action against a borrower to recover money owed on the mortgage.

Foreclosure Mortgage loan default is one of the reasons a foreclosure may occur, but it's not the only one. Any lien holder may foreclose to recover money owed on the mortgage.

Which of these situations represents an illegal tie-in arrangement?

Grayson tells his seller client, Geneva, that he'll reduce the listing commission if Geneva uses MBS Title Services to close her transaction. A tie-in arrangement includes making use of one service dependent on the client obtaining another specific service; or agreeing to provide some service only if the client refrains from doing business with another third-party vendor.

Channing is a licensed corporate officer at a brokerage with multiple locations. What does Channing need to do to be in compliance with the law on supervision?

He must designate a supervisory broker at each location. Each location of a multi-office corporate brokerage needs a supervisory broker of its own.

Not wanting to delay closing, Alice, the seller's agent, didn't disclose when the seller informed her a week before closing that the water heater needed to be replaced. Which fiduciary duty to the customer is Alice violating?

Honesty and fair dealing

Which type of contract is the opposite of an express contract?

Implied An express contract is an agreement between parties where the terms are specifically outlined in words (either written or oral). An implied contract is an agreement that's understood but not specifically stated verbally.

With a straight mortgage, what type of payments are made up until the end of the loan term?

Interest

Which of the following statements about an easement appurtenant is TRUE?

It's a permanent right that runs with the land. An easement appurtenant involves adjoining property, and it's a permanent right that runs with the land. The encumbrance is on the servient property.

Regular home financing is not available for this type of dwelling.

Manufactured home Mobile homes are considered motor vehicles, not real property; therefore, traditional home financing is not generally available.

Which of the following statements best describes "module training" related to Minnesota continuing education requirements?

Licensees must take 3.5 or 7.5 hours of module training every license year. The commission requires 3.75 or 7.5 hours of module training every license year within the two-year renewal period. Every year the commission will determine the modules and the number of hours that are required.

Which of the following license holders in Minnesota may only perform real estate transactions as a principal?

Limited broker A limited broker can perform transactions, but only if he or she is the principal.

Which practice involves talking the consumer into refinancing over and over so a lender can charge fees?

Loan flipping

Which entity typically enforces the code restrictions and licensing and insurance requirements for contractors, thereby enforcing the building code?

Local building department While builders and developers self-regulate to some degree, they're not responsible for enforcing the building code. This is the local building department's responsibility.

Tim and Tina Wells bought a home with absolutely beautiful perennial gardens in the back. The plantings were designed to bring birds, bees, and butterflies and to provide color for most of the year. When they did the final walkthrough, they were dismayed to see that many of the shrubs and flowering plants had been removed. They expected these plantings to be considered part of the real property because of the ______.

Method of annexation

Which type of lease is one in which the tenant pays the rent and some expenses related to the property (e.g., maintenance) separately?

Net A net lease is one in which the tenant pays some extra expenses—such as taxes, maintenance, or insurance—for the property.

Property taxes generate approximately ______ of local government revenue.

One third

Paige is a Minnesota property owner. The entire amount of her property tax bill is due on May 15. What can we reasonably assume based on this fact?

Paige's tax bill was less than $100. Property taxes are due in equal installments on May 15 and October 15. If the total tax bill is less than $100, the full amount is due on May 15.

Which phase of the environmental site assessment involves addressing any on-going or potential issues?

Phase IV: Management Monitoring for any potential ongoing issues takes place during the management phase of the environmental site assessment.

A consumer is moving to a new area and uses social media to try to line up a real estate professional to help him find a new home. He asks how much he'll need to pay his licensee. One firm he contacts tells him that all licensees in the area charge at least 2%. What antitrust violation does this imply?

Price fixing By stating that licensees won't work for less than 2%, the firm implies there's a price fixing agreement in place.

When competitors agree to eliminate discounts to certain types of customers, they are engaging in what practice?

Price fixing Price fixing may include an agreement to eliminate discounts.

Sophie only has 15% to put down on her new home. What might the lender require in order for Sophie to obtain conventional financing?

Private mortgage insurance

Which of the following is a legal term that can mean the right to take products out of the soil?

Profit Suppose your neighbor had gold in his soil, and you removed some. You would be infringing on your neighbor's right of profit.

Marshall is a Minnesota real estate broker. His listing agreement with Dolly included a six-month override clause. For the clause to be effective, what must Marshall do?

Provide Dolly with a protective list within 72 hours of the listing agreement's expiration. A protective list of the individuals who saw the property when it was listed by the broker is needed for an override clause to be enacted. The protective list must be provided within 72 hours of contract expiration.

Valerie is converting an existing building into a new condominium project. Under Minnesota law, she must ______.

Provide blueprints showing the size, boundaries, and location of each unit Owners of existing buildings or developers of new, unimproved land who want to create a condominium project are required by the Minnesota Uniform Condominium Act to provide blueprints showing the size, boundaries, and location of each unit.

The Hendersons don't have enough money to make the full 20% down payment their institutional lender requires. To close the sale, the seller is willing to finance a loan for the amount between the home's list price and what the institutional lender is willing to loan. What's this type of financing called?

Purchase money mortgage A purchase money mortgage is the term for seller financing that's typically used to bridge the gap between the home's list price and the institutional loan, though it can also be used to finance the entire purchase price.

Which consumer protection act enacted in 1974 prohibits kickbacks and referral fees and requires written lender disclosure of estimated and final settlement costs?

Real Estate Settlement Procedures Act Enacted in 1974, RESPA is designed in part to eliminate illegal kickbacks and referral fees among settlement service providers. It also requires lenders to disclose estimated and final loan costs to borrowers.

Drew and Hank were camping at Hank's riverfront cabin. Hank told Drew that he rarely used the cabin and was thinking of selling it. Drew said that he'd buy it from Hank for $80,000, which Hank agreed was a fair price. It's two months later, and Hank is upset that Drew now says he won't buy it. Why isn't this contract enforceable?

Real estate contracts must be in writing.

Which of the following is a primary focus of the statute of frauds as it relates to real estate transactions?

Real estate purchase and sale contracts must be in writing to be enforceable. Don't be swayed by the word "fraud." While all of the other options make good sense and are true, the statute of frauds is specific about how a contract and a loan should be made: in writing. Return To Course Home View Exam Results

Louise has been a licensed salesperson in Minnesota for several years. Which statement best describes her license renewal requirements?

She must complete 30 hours of continuing education in approved courses every 24-month period. All licensees must complete 30 hours of CE (either as a student or instructor) in approved courses during their initial license period, and every 24-month period after that.

If you represent the buyer and seller in the same transaction, what type of agency relationship do you have with your clients?

Single-licensed dual agency You are in a single-licensed dual agency relationship with your clients because you represent both the buyer and the seller.

A community that undertakes a comprehensive master plan is ______.

Taking the first step in urban planning

Jenna is licensed to appraise all property types in Indiana. She's involved in the purchase of a Minnesota manufacturing facility by a federal agency that intends to transform it into a training and testing facility. She's been asked to appraise the factory. What type of license should she apply for?

Temporary practice appraiser For federal transactions expected to be complete in fewer than 12 months, appraisers licensed in other states may apply for a temporary license in Minnesota.

Which type of ownership includes unity of time, title, interest, possession, and marriage?

Tenancy by the entirety This is tenancy by the entirety. It's similar to joint tenancy in that it has the right of survivorship and includes unity of time, title, interest, and possession, but with marriage added.

When a Minnesota buyer and seller consent to dual agency, which of the following items are they acknowledging?

That confidential information communicated to the broker which regards price, terms, or motivation to buy or sell will remain confidential unless seller(s) or buyer(s) instruct(s) broker in writing to disclose this information

Sam and Monique knew that the old industrial site that they purchased needed some environmental cleanup, but they don't have the cash and put cleanup on hold. The EPA hired its own crew to deal with groundwater issues because of industrial solvents and billed Sam and Monique $164,000 when the job was complete. If Sam and Monique don't pay the bill, which one of the following could happen?

The EPA can seek damages in court for up to three times the actual cleanup costs. If property owners refuse to pay cleanup costs as billed by the EPA, the EPA can seek damages of up to three times the original costs.

What's one of the required elements of a valid option contract?

The amount of consideration the optionee is paying the optionor To be enforceable, there must be consideration (something of value—generally money) given in exchange for the promises made in the contract. The amount of consideration must be stated in the contract.

Which of these actions would cause a property to become an REO?

The bank doesn't get an acceptable bid at a foreclosure sale and takes ownership of the property. An REO, or real estate-owned property, is a property that a bank or lender owns because it failed to receive an acceptable bid at a foreclosure sale.

Who's responsible for any tax reserves required to pay property taxes?

The buyer Lenders require buyers to pay tax reserves to cover property taxes in case buyers miss a tax payment.

Lauren had a listing agreement with Florence, a Minnesota real estate broker. After Lauren's agreement with Florence ended, she re-listed her home with Jamal and sold the property within two months. Florence is seeking compensation from Lauren because the property sold to a buyer that showed interest when the property was listed with Florence. Which of the following could allow Florence to receive compensation?

The buyer's name was on the protected list provided to Lauren two days after contract expiration. The contract included a three-month override clause. Override clauses can last for up to six months (two years if a business was bought/sold) after contract expiration. In order to make the clause effective, the licensee must provide a protective list of names within 72 hours of contract expiration.

Which of the following is a potential disadvantage for a buyer who enters into a lease with an option to buy contract?

The buyer/lessee could lose any funds credited to the purchase price if he breaches the lease's terms. Depending upon the contract's terms, a potential disadvantage for a buyer who enters into a lease with an option to buy is that he could lose any funds credited to the purchase price if he breaches the terms of the lease.

What's Minnesota's mortgage registry tax based on?

The debt secured by a loan on the property The mortgage registry tax is based on the debt secured by a loan on property.

Licensee Kennie Mae's neighbor, Buzz, wants to sell his house but doesn't want to sign an agency agreement. Kennie Mae works with Buzz to list and show the property and negotiate offers. After the property sells, Buzz discovers that Kennie Mae didn't present all offers to him, and he sues Kennie Mae. Kennie Mae claims that because she didn't have an agency agreement with Buzz, she wasn't required to perform all fiduciary duties. What legal principle applies here?

The doctrine of estoppel keeps Kennie Mae from disavowing the agency relationship because she provided agency tasks for Buzz. The doctrine of estoppel prohibits an individual from making an assertion that's in opposition to actions or to a previous statement. Kennie Mae acted as if she were Buzz's agent, so she can't later disavow that behavior.

If a party to a contract lacks legal capacity but enters into a contract anyway, which party may void the contract?

The party lacking legal capacity

In a buyer agency relationship, what relationship does the seller have to the licensee?

The seller is the licensee's customer. When a licensee represents the buyer in a single agency relationship, the seller is the licensee's customer. Only clients receive representation.

Which of the following conditions will legally void a subdivision sales contract in Minnesota?

The subdivision was never properly registered.

A property owner stores commercially used petroleum in a tank on her property. The tank is registered with the Minnesota Pollution Control Agency. What can we reasonably conclude based on this?

The tank is underground and has a capacity of at least 110 gallons. Owners of underground tanks with a capacity of 110+ gallons or above-ground tanks with a capacity of 500+ gallons (used to store commercially used hazardous materials, such as petroleum) must register with the Minnesota Pollution Control Agency.

Before appraising a specific property, Minnesota appraisers must disclose whether they've evaluated the same property within the last _______ years.

Three Appraisers must disclose whether they've appraised the same property within the last three years.

What's the purpose of the financing contingency?

To protect the buyer in case the buyer cannot obtain financing

A quitclaim deed does which one of the following?

Transfers without warranty any interest or title the grantor has when conveying it. A quitclaim deed provides no warranties or covenants; it only guarantees that the grantor is transferring any interest or title he or she may have in the property.

How long is the appraiser licensing period in Minnesota?

Two years

Clay is interested in purchasing a condo about a mile from the city center. He went to the city records office to review everything that was filed by the condo developer. In the condominium declaration, he saw how ownership of the common areas is shared among the ______.

Unit owners Condominium ownership includes ownership of an individual unit as well as a share of the common areas.

You don't need a license to sell subdivided lands if your sole job is to sell timeshares, you're supervised by a limited broker, and ________.

Your limited broker maintains a roster of all staff selling timeshares The final condition is for the limited broker to maintain a roster of sales staff, including the date each individual began selling.