Comprehensive Practice Exam 4

Charlie represents Sue, a buyer, in a transaction. A licensee from another firm represents the seller, Claude. Claude will pay a 6% commission to his listing firm, and that firm will split the commission with Charlie's firm. Charlie will be compensated through his brokerage. What's true about this situation?

In this transaction, Charlie only represents Sue, and the other licensee only represents Claude.

Which clause in a contract states that one or more parties won't be held liable if there are losses or expenses related to the contract?

Indemnification clause

Estelle is representing seller Margaret. Which of the following tasks is one that Estelle is required to perform as Margaret's agent?

Inform Margaret about required property condition disclosures

Mr. Schroeder installed built-in bookcases that he intended to remain as part of the home forever. This refers to which part of IRMA?

Intent of the parties placing the item on the property

When a borrower first obtains a mortgage, which portion of PITI receives most of the mortgage payment?

Interest

An agent's client requested a recommendation for a mortgage broker. The agent gave the name of the best mortgage broker. Later, the agent received a referral check from the mortgage broker. Is this legal or illegal under the Real Estate Settlement Procedures Act?

It is illegal under RESPA because it's considered a kickback between settlement service providers.

Why do many property managers have separate operating and trust accounts?

It previews the misuse of tenant funds for operating expenses

How does title insurance affect the lender?

It protects the lender from loss due to defective titles.

Everything in your office is potentially at risk from thieves and other criminals. Because of this, what should you never do?

Leave clients unattended in the office.

Leo's client is looking for a property with at least 2,500 finished square feet. Leo finds a 2,200-square-foot property with all the other features the client is looking for, and purposely doesn't mention the square footage to his client. His client agrees to look at the property, falls in love with it, and wants to make an offer, but does not realize it doesn't contain his desired square footage. Which of these statements accurately represents Leo's level of misrepresentation in this situation?

Leo knew about the square footage and intentionally didn't mention it. He's guilty of intentional misrepresentation.

Which of the following scenarios best describes a net listing?

Maeve wants to get at least $350,000 when she sells her property and tells her listing agent, Stan, that he can keep anything above that amount

What's the price at which a willing buyer and a willing seller would strike a deal given normal market conditions?

Market value

Which option is of the most concern to licensees and advertising when it comes to the Federal Trade Commission?

Misleading ads

Fair housing laws give homeseekers a legal right to which of the following?

No discriminatory limitations on communities or locations of housing

When market conditions indicate top-of-the-market pricing, is it always in your client's best interest to price it there?

No, it still has to appraise

Francine moved out of the Georgia property she was renting, and she left it in pristine condition when she returned the keys. How long after she moves out does the property manager have to return her security deposit?

One month

A seller decides to terminate her listing agreement and rent the property out instead of selling it after it's been on the market for several months with no offers. Assuming that her listing agent has fulfilled all of his responsibilities under the contract, can the seller terminate the contract before its expiration date?

Only if the seller and the listing agent mutually agree to terminate the agreement

Which of the following tasks is a closing attorney's responsibility?

Order title work

In what way is a townhome similar to a single-family detached home?

Ownership includes both the structure and the land.

Gene, a real estate licensee, prefers to use electronic documents and signatures because it means he doesn't have to track people down to deliver documents or have them signed. Which of these statements is true?

Parties to the contract decide whether or not to accept the use of electronic signatures and documents

Nevina may be creating an implied agency agreement if she does which of these?

Performs a CMA for an acquaintance and provides advice on setting a listing price based on other comparable properties in the area

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

Duke's client has asked him for advice on a legal matter. Based on the duty of reasonable skill and care, what should Duke do?

Refer his client to an attorney

A homeowner has converted two rooms in his home to a rental unit. What does the "Mrs. Murphy" exemption permit him to do?

Refuse to rent to a female tenant

A property's value is dropping because the neighboring property's yard is filled with trash. What's this an example of?

Regression

The legal description of the project, easements that run with the land, and street and traffic patterns are all under consideration when a local planning board ______.

Reviews a developer's project plat

Adrian doesn't have a real estate license. What real estate activity can he legally perform in Georgia?

Sell his dad's house under a power of attorney

Chloe, a licensee in Alabama who wants to be licensed in Georgia, may do so, provided she meets GREC's requirements. Which of these options best depicts GREC requirements?

She must provide proof of Alabama licensure, pay applicable fees, affiliate with a Georgia broker, provide a written statement that she'll abide by Georgia rules and regulations, and appoint the commission as a legal agent.

Jerry and Simon signed a contract giving Jerry the option to purchase all of Simon's restaurant equipment for a set price after Simon closes his restaurant next month. The contract contains a provision that states Jerry has one year from the purchase date to file a suit relative to the purchase. After the year is up, Jerry forfeits the right. What kind of contract clause is this?

Statute of limitations

Which of these statements accurately describes finance- and housing-related legislation?

The Fair Housing Act of 1968 prohibited discrimination in the sale, rental, and financing of housing based on race, color, religion, or national origin.

A fire destroyed Meredith's house. Meredith contacted her insurance company, and she was shocked to learn her insurance policy didn't fully cover what she paid for the property. How does the insurance company determine the replacement value of her home?

The amount it would cost to completely replace her home.

When a buyer is represented by a licensee, who is responsible for following up on issues identified in the inspection report to ensure that they are addressed?

The buyer's agent

Which fiduciary duty may continue even after the transaction closes?

The duty of accounting

What's the difference between the Georgia Non-Exclusive Buyer Brokerage Agreement and the Georgia Exclusive Brokerage Agreement?

The exclusivity

Marge works for Morgan Realty as a transaction coordinator. Which of these factors may cause the IRS to classify Marge as an employee?

The firm pays Marge a salary

In situations where a leased property is sold and the tenants' security deposits will be refunded, who's responsible for refunding those security deposits?

The original owner

Rental property owners are exempt from fair housing laws if which of the following conditions is met?

The owner occupies a building with not more than 4 families.

When a property is found to contain an environmental hazard, what can generally be expected to happen to the property's value?

The presence of an environmental hazard would decrease the property's utility and restrict its use until the hazard is cleaned up, decreasing value.

Your clients, Bill and Stacey, are interested in purchasing a piece of land that has several acres of wetlands. Which of the following is a true statement?

The presence of wetlands affects use of the property and should always be noted on appraisal reports.

Agency may be legally terminated in which of the following ways?

The principal broker becomes incapacitated.

Who are the parties to a property management agreement?

The property manager and property owner

What types of advertising fall under GREC's rule 520-01-.09?

The rule applies to advertising through any form of media

Which of the following is a requirement to obtain a Georgia broker's license?

The successful completion of 60 hours of brokerage coursework

Seller Jamison is closing on his property with buyer Conrad. Jamison paid the current year's property taxes already. Is this a prepaid or accrued expense, and how will it be represented on the settlement statement?

The taxes are a prepaid expense, and will appear as a buyer debit and a seller credit.

One difference between a judicial foreclosure and a non-judicial foreclosure is that with a non-judicial foreclosure, ______.

There is no statutory right of redemption

Shakira is attending an association meeting when, in a small group breakout, her group begins discussing how to deal with the new kid in town: a real estate firm that charges a flat $500 to list properties, then lets the sellers fend for themselves. Why should Shakira leave the discussion?

This conversation sounds like it might become an antitrust violation

An agent is trying to build up business for a friend's mortgage company. She requires all clients to use her friend's mortgage company for their financing. What's this an example of?

Tie-in arrangement

Your client, Ray, is worried about title issues that may arise after closing. Remind Ray of his secret protection: _____

Title insurance

Which type of broker performs ministerial acts for parties to a transaction but doesn't represent a client?

Transaction broker

Which physical characteristic of land addresses the concept that land isn't interchangeable, and one piece of land isn't exactly like another?

Uniqueness

Which of the following is a violation of unfair trade practice law?

Using intentionally misleading advertising

Buyer Susie's a little nervous about the $20,000 earnest money check she just deposited with the title company. When should she expect to see this money applied toward her purchase of the property?

When conditions are met at closing

Can a listing agreement be terminated without penalty?

Yes, with both the listing broker and the seller's agreement in writing

Which of these is an example of legal single license dual agency?

You represent both the buyer and seller in a single transaction with appropriate consent from both.

Which of the following could be a sign of a plumbing problem?

low water pressure

New Day Corporation's application to build a new mixed-income housing development was denied, because the town of Springfield has halted all new development until after city elections. What did Springfield enact?

moratorium

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 (100% - 5% = 95% 100,000 / 95% = 105,263.16)

If Hal sold his client's listing for $230,000, but it appraised at $200,000 and the buyers agreed to put the extra $30,000 down, what will Hal's commission be if he charged 5%?

$11,500 (230,000 x 5% = 11,500)

The Slathertons are looking at buying a $300,000 property with a 20-year loan at a 6% interest rate. Using the amortization chart factor of 7.16431, how much would their monthly principal and interest payment amount be?

$2,149.30 (300,000 / 1,000 = 300 x 7.16431 = 2,149.293)

A property generates $30,000 in net operating income and has a 15% cap rate. Using the income approach, what is its value?

$200,000 (30,000 / 15% = 200,000)

Joaquin sold his house for $327,600. He bought it several years ago for $139,900 with a $100,000 loan. The loan balance when he sold it was $73,400. What was Joaquin's equity?

$254,200 (327,600 - 73,400 = 254,200)

The daily property tax rate is $1.23 and closing is August 31. Assuming the buyer owns the property on closing day, and the seller hasn't made any payments, what will the seller owe at closing using the calendar year proration method? Round to the nearest whole dollar.

$298 (The seller owes $298. The seller owned the property for 242 days of the year, and 242 x $1.23 = $297.66, or $298 if rounded to the nearest whole dollar.)

A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. The lender also charges a 1% loan origination fee. How much is the loan origination fee?

$3,200

A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. The lender also charges a one-point loan origination fee. How much is the loan origination fee?

$3,200 (400,000 x 80% = 320,000 x 1% = 3,200)

The Walton family got a great deal on their new home. They bought it for $101,295, and it appraised at $187,000 in a region where assessed value is a percentage of appraised value. Using an assessment ratio of 25%, what is the assessed value of their new home?

$46,750 (187,000 x 25% = 46,750)

A borrower has a 30-year, $500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3,078.59. What's the total amount of interest he'll pay over the course of the loan?

$608,292.40 (3,078.59 x 360 = 1,108,292.40 - 500,000 = 608,292.40

The assessed value for your buyer clients' new purchase is $209,000. They feel they got a great deal since they're purchasing the property for $175,000. They've asked you to estimate their monthly property taxes. You know the rate for their jurisdiction is .52%. What is the monthly tax amount your clients owe?

$90.57 (209,000 x 0.52% = 1,086.8 / 12 = 90.566)

A strip mall valued at $850,000 has a $67,500 annual net operating income. What is the capitalization rate for the strip mall?

7.9% (67,500 / 850,000 = 0.0794 x 100 = 7.94%)

Jane is purchasing a property for $310,000 and plans to finance $250,000. What is the loan-to-value ratio? (Round to the nearest percentage.)

81% (250,000 / 310,000 = 0.8064 x 100 = 80.6%)

How's interest defined as it's related to a mortgage loan payment?

A fee paid to lenders for the use of their money

Which of these areas would be included in the livable area calculation?

A pool house connected to the house by a hallway

Which of these is excluded on a title insurance policy on Martha's property because of the schedule of exceptions?

A verbal lease agreement Martha has with her neighbor who leases Martha's garage.

The town planning and zoning board is considering some new zoning regulations to ensure that one of the neighborhoods maintains its designation on the National Register of Historic Places. What type of zoning are they likely to enact?

Aesthetic zoning

The appraisal on Jean's property came in at $22,000 less than the agreed-upon sales price, so the buyer, Thomas, wants to renegotiate the terms. If they can come up with a new price that is satisfactory to both parties, what will they use to document this?

Amendment

How might the lengthy purchase process for a short sale or foreclosure impact a buyer's financing?

An existing interest rate lock may expire before the transaction is ready to close.

Saul was unhappy after he and Janelle liquidated their business. Janelle sold some items for less than he'd initially agreed to, and he wanted the full price to be included in the profit split. He wanted to sue, but he was required to pursue other options. What contract clause kept Saul from being able to sue?

Arbitration

REALTOR® Arnold was instructed by his client Sebastian to find a buyer who would "fit into the neighborhood." What is Arnold's responsibility in this situation?

Arnold must explain to his client the responsibilities for fair treatment that they both have under fair housing laws.

What are improvements with regard to property?

Artificial attachments to land that include items such as fencing, buildings, and walkways.

According to the Georgia marketable title acts, the statutory limit is 50 years. Marketable title legislation ______.

Automatically quiets any title claims after a certain amount of time.

When considering loan risk, which two items will lenders consider in equal measure?

Borrower and property

Many of an agent's fiduciary duties to the client end upon termination of an agency agreement. Which fiduciary duty never ends?

Confidently

Which of these situations represents the illegal practice of blockbusting?

Corbin tells homeowners in Five Points that an impending influx of Asian immigrants will reduce property values.

A property owner who wishes to convey property to a new owner will generally use a ______.

Deed

Private mortgage insurance protects the lender in case the borrower takes which of the following actions?

Defaults on the loan

Which fiduciary duty is missing: loyalty, reasonable skill and care, obedience, confidentiality, accounting, and ______?

Disclosure

Which one of the following is a common problem with roof shingles?

Discoloration or curling

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.

Gene and Alex bought a property that backed up to a neighborhood park. The previous owner mentioned that ever since the park was built eight years ago, the next door neighbor who works at the park has cut through the yard to get to the park rather than going around via the streets, which saves about half a mile. What kind of easement is this?

Easement by prescription

Donald and Martina decided to purchase a newly built home, and their agent, Ed, recommended that they get a professional home inspection done. The couple tells Ed that they thought inspections were only for older homes. How should Ed respond to that?

Ed should remind them that every dwelling, no matter the age or size, should have a home inspection

Property owner Craig likes to sunbathe in the nude in his nice, private backyard. What part of the bundle of rights allows him to do this legally?

Enjoyment

Which of the following statements about escrow accounts is correct?

Escrow accounts are managed by escrow agents, and are used to hold funds belonging to others, such as earnest money deposits.

The Graysons just closed on their new home. They move in tomorrow. What type of contract do the Graysons have?

Executed

Farm families financing the purchase of properties in rural areas may be able to obtain financing through this government agency if they meet certain criteria, such as income requirements.

Farm Service Agency

To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which element is applied first?

Financing terms and cash equivalency

Stu is buying Freddie's property. What must occur for the transfer of title to take place?

Freddie must intend to convey the property to Stu.

Which of the following is a true statement about Georgia's real estate education, research, and recovery fund?

Fund money may be invested and interest is deposited back into the fund

Angel's credit card company sued him in civil court for nonpayment. There was a judgment against him, and so now Angel has to sell his classic car and his primary residence to pay the credit card company. What type of lien did the company have?

General

What must Georgia's governor do in order to remove a commission member from GREC?

Give notice and a hearing opportunity to the member

What hazard do mining activities, landfills, or agricultural pesticides contribute to?

Groundwater contamination

Which act states that communities and facilities that meet certain criteria for providing housing to older persons are legally exempt from familial status discrimination?

Housing for Older Persons Act of 1995