Online Practice 2
The Department of Housing and Urban Development estimates that most private homes built before 1978 contain potentially dangerous levels of lead. Because of this, some Federal agencies, such as FHA, 1. will no longer lend or guarantee loans on these older properties. 2. require evidence of testing for and disclosure of any type of lead contamination before they will lend or guarantee loans on such properties. 3. require funds to be escrowed for lead abatement as a condition of lending or guaranteeing loans on such properties. 4. require the buyer to acknowledge disclosure of the presence of any known lead paint.
4. require the buyer to acknowledge disclosure of the presence of any known lead paint.
All of the following are methods to calculate the reproduction or replacement cost of a building EXCEPT the 1. quantity survey method. 2. unit-in-place method. 3. square foot method. 4. straight-line method.
4. straight-line method.
MOST closed real estate transactions should be reported to the IRS. REQUIRED information includes seller name(s) and social security number(s) and 1. buyer name(s) and social security number(s). 2. the property financing. 3. the mortgage lender's name and address. 4. the sale price.
4. the sale price.
A buyer made an offer on a property that was listed at $350,000. She wanted to put $35,000 down and make payments to the seller, allowing the seller to retain title until the principal was paid off. The seller accepted, and the buyer became a 1. grantor. 2. grantee. 3. vendor. 4. vendee.
4. vendee.
A competitive market analysis takes into consideration 1. square footage of the subject property. 2. neighborhood nuisances. 3. unemployment levels in the community. 4. age of the sellers.
1. square footage of the subject property.
A loan which requires the borrower to pay interest only until the maturity date (or due date), and then to pay the entire principal on the maturity date, is called a 1. term loan. 2. wraparound loan. 3. shared-equity loan. 4. partially amortized loan.
1. term loan.
A couple bought a rental house for $195,000. Its assessed value was $180,000. If the tax rate is $1.50 per $100 of assessed value, what is the monthly contribution the lender will REQUIRE for taxes? Round to the nearest cent. 1. $225.00 2. $162.50 3. $150.00 4. $112.50
1. $225.00
A broker supplies the financing for a project to build condominiums with the stipulation that he has the exclusive right to sell the completed condos. Which of the following BEST describes this relationship? 1. Agency coupled with an interest. 2. Specific agency. 3. General agency. 4. Exclusive agency.
1. Agency coupled with an interest.
The buyer is assuming a mortgage presently on the property in the amount of $110,000. What is the adjustment made at closing? 1. Credit buyer $110,000; debit seller $110,000. 2. Credit seller $110,000; debit buyer $110,000. 3. Credit buyer $110,000; no adjustment to seller. 4. Credit seller $110,000; no adjustment to buyer.
1. Credit buyer $110,000; debit seller $110,000.
Which of the following BEST illustrates the concept and intent of a buffer zone? 1. Garden apartments located between a single-family residential neighborhood and a shopping center. 2. A warehouse located between a single-family residential neighborhood and a park. 3. A single-family residential neighborhood located between a high-rise apartment building and office buildings. 4. An office park located between two residential developments.
1. Garden apartments located between a single-family residential neighborhood and a shopping center.
For Federal income tax purposes, which of the following are costs of homeownership that may be deducted from gross income? 1. Mortgage loan interest, local property taxes, mortgage loan origination fees. 2. Mortgage loan interest, homeowner's insurance premium, local property taxes. 3. Cost of essential repairs, mortgage loan origination fees, local property taxes. 4. Homeowner's insurance premium, mortgage loan origination fees, mortgage loan interest.
1. Mortgage loan interest, local property taxes, mortgage loan origination fees.
In an exclusive right-to-sell listing, an owner lists the property for sale with how many brokers? 1. One. 2. Two. 3. Three. 4. Any number.
1. One.
A seller mentions to his agent that the previous owners of his property may have dumped hazardous waste on the site. Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), who is liable for damages from the dumping prior to the sale of the property? 1. Seller. 2. Agent. 3. Company that manufactured the waste. 4. Federal government.
1. Seller.
Which of the following is NOT usually prorated at closing? 1. Special tax assessments. 2. Homeowners association fees. 3. Property taxes. 4. Transferred homeowner's insurance.
1. Special tax assessments.
Which of the following statements about discount points is FALSE? 1. They are computed as a percentage of the selling price. 2. They are used to buy down interest rate. 3. They are a function of the marketplace. 4. They are paid by either the buyer or the seller.
1. They are computed as a percentage of the selling price.
A major reason for buying and owning a condominium rather than a detached single-family home is that 1. a condominium tends to be more affordable. 2. a condominium requires no maintenance. 3. a condominium is easier to resell. 4. condominium ownership has more tax advantages.
1. a condominium tends to be more affordable.
An agency relationship between a property owner and a property manager is usually created by 1. a management agreement. 2. payment of a management fee. 3. an exclusive agency agreement. 4. an independent contractor agreement.
1. a management agreement.
New sidewalks installed only on one particular street will probably be paid for by 1. a special assessment. 2. an ad valorem tax. 3. an equalization factor. 4. an attachment.
1. a special assessment.
When one of the parties to an agreement fails to perform one of its conditions, that contract is deemed to be 1. breached. 2. void. 3. executed. 4. canceled.
1. breached.
The day after a broker's listing on a house expired, it was listed with another broker and offered in the MLS. Several days later, a third licensee called the first broker and asked for the key to show the home. The broker should inform the caller that 1. he is no longer the listing agent. 2. he will set up an appointment for showing the home. 3. he will leave the key under the door mat. 4. the house is currently off the market.
1. he is no longer the listing agent.
Earnest money should be deposited into a trust account 1. in a timely manner, according to state laws. 2. upon removal of all contingencies. 3. at the broker's discretion. 4. according to MLS rules.
1. in a timely manner, according to state laws.
When a property owner uses his home as collateral for a loan and creates a lien in favor of the lender, title is held by the 1. mortgagor. 2. lender. 3. mortgagee. 4. beneficiary.
1. mortgagor.
Too much leverage may result in 1. negative cash flow. 2. decreased buying power. 3. lack of liquidity. 4. accelerated depreciation.
1. negative cash flow.
An environmental impact statement typically describes the effects of a proposed project on factors such as 1. public health and safety. 2. zoning regulations. 3. highest and best use of the land. 4. mapping requirements.
1. public health and safety.
The economic characteristics of land are 1. scarcity, location, and durability. 2. immovability, indestructibility, and uniqueness. 3. latitude and longitude. 4. wooded, barren, and water bearing.
1. scarcity, location, and durability.
Real property can be converted to personal property by 1. annexation. 2. severance. 3. accession. 4. extension.
2. severance.
A realty firm has just entered into an agreement to represent a home builder in the sale of a new subdivision. The firm has located several potential buyers and five homes have been sold to purchasers that the firm's agents have contacted. The realty firm has an agency relationship with 1. the builder. 2. the buyers. 3. the builder and the buyers. 4. neither the builder nor the buyers.
1. the builder.
Errors and Omissions insurance covers the broker for 1. title defects. 2. intentional misrepresentations. 3. unintentional misrepresentations. 4. commission losses.
1. title defects.
A company agrees to lease a property to be used as a gambling casino. State laws prohibit gambling. This particular contract would be legally defined as 1. void. 2. voidable. 3. valid. 4. unenforceable.
1. void.
An appraiser MUST be licensed or certified to handle Federally related work on residential property valued at more than 1. $100,000. 2. $250,000. 3. $500,000. 4. $1,000,000.
2. $250,000.
A buyer is getting a fully amortized loan for $220,000. The bank will give the buyer the loan for 15 years at 5 1/2% or for 30 years at 6 1/2%. To the nearest cent, what is the difference between the monthly payments for these two loans? (BE SURE TO USE THE AMORTIZATION TABLE.) 1. $309.20. 2. $409.20. 3. $550.80. 4. None of the above.
2. $409.20.
The sellers have agreed to give the buyers an allowance to recarpet the living room. They will allow $22.95 per square yard for carpet plus $6.00 per square yard for pad and installation. If the living room is 21 feet x 12 feet, how much will it cost the sellers (to the nearest cent)? 1. $642.60. 2. $810.60. 3. $1,927.80. 4. None of the above.
2. $810.60.
Timeshare ownership programs MOST often use which of the following ownership forms? 1. Joint tenancy. 2. Tenancy in common. 3. Tenancy by entirety. 4. Cooperative ownership.
2. Tenancy in common.
An owner hired a construction company to build a swimming pool at a new home. The owner failed to pay the bill once the work was completed and the construction company filed a lien to obtain payment of the debt. The encumbrance created is called 1. an equitable lien. 2. a mechanic's lien. 3. a lien by default. 4. a workman's lien.
2. a mechanic's lien.
A managing broker can be held responsible for 1 all actions of associated salespersons. 2. all real estate activities of salespersons. 3. only those real estate activities the broker is aware of. 4. no activities of independent contractors.
2. all real estate activities of salespersons.
One common method for controlling the problems created by conflict of interest in dual representation is 1. prohibiting dual representation altogether. 2. allowing a broker to designate separate salespeople within the company as legal representatives of each of the clients. 3. requiring that disclosures of dual representation include a strong warning to buyers that no listing broker can represent them effectively because of the broker's prior commitment to the seller. 4. permitting brokers, for the first time, to enter into brokerage agreements with buyers.
2. allowing a broker to designate separate salespeople within the company as legal representatives of each of the clients.
An agreement to purchase that has NOT yet closed is 1. an executed agreement. 2. an executory contract. 3. a unilateral contract. 4. voidable.
2. an executory contract.
A contract has been drawn which obliges the sellers to convey title to their land to the buyers if the buyers come up with $22,000 on or before December 31st. This is called 1. a buy-sell agreement. 2. an option contract. 3. an installment contract. 4. a vendor's lien interest.
2. an option contract.
Even if a loan applicant's current income seems adequate to qualify for a certain loan, the Equal Credit Opportunity Act allows a lender to refuse the loan as a high risk if the applicant's main source of income is 1. alimony. 2. commission sales. 3. pension fund. 4. child support payments.
2. commission sales.
A borrower has defaulted on the mortgage. The mortgage contains an acceleration clause. This permits the lender to 1. confiscate the borrower's personal assets. 2. demand immediate payment of the entire note. 3. report the borrower to the Federal Housing Administration. 4. force the borrower to vacate the premises.
2. demand immediate payment of the entire note.
If an older building cannot be air-conditioned, it is an example of 1. economic obsolescence. 2. functional obsolescence. 3. physical deterioration. 4. external deterioration.
2. functional obsolescence.
The real estate contract for a specific property for use as an unlicensed whiskey sales operation was forced to terminate. The termination was the result of 1. operation of law. 2. impossibility of performance. 3. novation. 4. breach of contract.
2. impossibility of performance.
Without checking the facts, a broker who is the seller's agent tells a buyer that the property taxes in a particular neighborhood are among the lowest in the area. The buyer relies on the broker's statement and makes an offer on a house in the neighborhood. Before closing, it is determined that the taxes are actually among the highest in the area. The buyer could seek to rescind the contract on the basis of 1. puffing. 2. misrepresentation. 3. lack of care and diligence. 4. nothing; property taxes are a matter of public record and it was the buyer's responsibility to check them.
2. misrepresentation.
A deed restriction is applicable to the activities of 1. the current owner only. 2. present and future owners. 3. future owners only. 4. mortgagors.
2. present and future owners.
Although states make specific laws governing water rights and the rights in land that borders water, most states generally follow one of two basic doctrines regarding water rights. In many states, the common law doctrine of riparian and littoral rights dictates that water rights are automatically conveyed with property. In others, all water rights are controlled by the state under the doctrine of 1. eminent domain. 2. prior appropriation. 3. express reservation. 4. avulsion.
2. prior appropriation.
In MOST states, foreclosed property is sold through 1. sealed bids. 2. public auction. 3. deficiency judgment. 4. right of redemption.
2. public auction.
The buyer wants to make the purchase offer contingent on a complex mortgage arrangement. The buyer's agent who is drawing up the contract should 1. include the provision for the mortgage as the buyer requests. 2. suggest the buyer ask a lawyer to furnish the wording. 3. consult the supervising broker for advice. 4. refer the matter to the seller's agent.
2. suggest the buyer ask a lawyer to furnish the wording.
A seller tells the listing agent that her home was treated for termites 10 years ago, so there are no termites now. Before listing the property, the agent should 1. tell the seller not to disclose, because the statute of limitations has run out. 2. tell the seller to disclose the termite treatment on the property disclosure. 3. talk to neighbors to see if there are termites in the neighborhood. 4. talk to the planning and zoning department for local termite eradication ordinance.
2. tell the seller to disclose the termite treatment on the property disclosure.
The real estate broker who is listing a house for sale should personally verify 1. whether radon is present in the basement. 2. the number of square feet in the building. 3. that the electrical wiring is up to code. 4. how much the seller originally paid for the property.
2. the number of square feet in the building.
A prospective buyer made an offer to purchase a property. The owner responded with a counteroffer. While the buyer was reviewing the counteroffer, the owner received a better offer. The owner can accept the second offer if 1. it satisfies or exceeds all terms included in the counteroffer. 2. the owner withdraws the counteroffer before it is accepted. 3. the owner gives the first buyer notice that another offer was received and an opportunity to revise the bid. 4. the first buyer is informed, in writing, of the owner's intent to accept another offer.
2. the owner withdraws the counteroffer before it is accepted.
A broker has brought a ready, willing, and able buyer to a seller. In MOST listing contracts, the broker has earned his commission when 1. any offer is delivered to the seller. 2. the seller accepts the offer. 3. all contingencies are removed. 4. the sale closes.
2. the seller accepts the offer.
A buyer wants to purchase a home for $60,000 with a 15% down payment. The lender charges 2 points. How much money does the buyer need up front to make the purchase? 1. $1,020. 2. $9,510. 3. $10,020. 4. None of the above.
3. $10,020.
A salesperson qualified a minority couple with two children and defined their price range as between $110,000 and $120,000 for the three-bedroom house they wanted. They asked to look at two listings in a nonminority neighborhood. The salesperson did not show them the properties because they were priced under $90,000 and had only two small bedrooms. Did the salesperson act appropriately and why or why not? 1. Yes, because they were overqualified for the homes they had requested to see. 2. Yes, because it is the salesperson's job to tailor the properties shown to the needs of the buyer. 3. No, because it is appropriate to show any property for which the buyer is qualified. 4. No, because the presence of children requires granting occupancy if they desire it.
3. No, because it is appropriate to show any property for which the buyer is qualified.
When preparing a market data estimate of value, which of the following categories of adjustment is NOT essential? 1. The amount of square footage. 2. The location of the property. 3. The original cost of the building. 4. The date of sale of the comparables.
3. The original cost of the building.
A written agreement in which a purchaser agrees to buy and a seller agrees to sell is called 1. an agency. 2. an assessment. 3. a contract. 4. a fiduciary obligation.
3. a contract.
A lawsuit for inverse condemnation may be brought by 1. the police. 2. the city. 3. a homeowner. 4. the zoning board.
3. a homeowner.
A broker says, while showing a rural property, "This property has the world's purest well water." This would be an example of 1. a verbal water quality report. 2. an assurance that the property is not on the public water system. 3. an expression of opinion, or puffing, which could lead to misrepresentation. 4. a licensee's disclosure of the qualities of the property.
3. an expression of opinion, or puffing, which could lead to misrepresentation.
Ownership of common stock in a corporation gives 1. co-ownership in any real property held by that corporation. 2. the right to order the sale of any corporate real estate. 3. an interest that is classified as personal property. 4. assurance that a decline in land values will not affect the value of the stock.
3. an interest that is classified as personal property.
A homeowner has negotiated with a neighbor to obtain the permanent right to pass over the northern part of the neighbor's land to gain access to the river. He pays the neighbor $9,000 for the right of access and receives a deed. This is an easement 1. in gross. 2. by necessity. 3. appurtenant. 4. by prescription.
3. appurtenant.
A judgment has been properly recorded. Any subsequent purchasers, whether they have actually examined the record or not, have been given 1. actual notice. 2. prescriptive notice. 3. constructive notice. 4. exculpatory notice.
3. constructive notice.
The relationship in which the agent is placed in the position of trust and confidence to the principal is known by the term 1. disclosure. 2. brokerage. 3. fiduciary. 4. implied agreement.
3. fiduciary.
A formal appraisal will ALWAYS be REQUIRED when the 1. seller wants to be sure of the home's value. 2. buyer wants to obtain private mortgage insurance. 3. lender wants to sell the mortgage to the secondary market. 4. agent cannot locate enough comparables to complete a CMA.
3. lender wants to sell the mortgage to the secondary market.
The purpose of requiring an earnest money deposit in a real estate sales contract is to 1. ensure that the broker will receive some compensation if either party defaults. 2. ensure that the seller will not be bothered by offers from buyers who are unable to qualify for appropriate financing. 3. provide evidence of the buyer's intention to carry out the contract. 4. set aside funds to cover the buyer's closing costs and mortgage insurance premiums.
3. provide evidence of the buyer's intention to carry out the contract.
A real estate brokerage company has developed standardized policies regarding the inventory of properties to be shown to prospective buyers, the company's standards for qualifying buyers, and documentation of all conversations and showings. These policies can help the firm defend itself in the event of an accusation of discrimination, but only if the policies 1. are posted conspicuously in the brokerage firm's office. 2. appear in all contract forms the firm uses for listings and offers. 3. require every licensee in the firm to follow them consistently. 4. are approved in advance by the state fair housing agency.
3. require every licensee in the firm to follow them consistently.
At the time of listing, the seller tells the listing agent they are moving because the neighbor has loud parties every weekend. The agent should 1. suggest talking to the neighbor about being quiet. 2. schedule only daytime showings. 3. tell potential buyers about the parties. 4. do not tell anyone about the parties.
3. tell potential buyers about the parties.
During the listing presentation, the seller questions the amount of commission to be paid and is told 1. the amount is set by law. 2. everyone charges the same amount. 3. the amount of commission is negotiable. 4. the agent that charges a lower commission will not do as good a job selling the property.
3. the amount of commission is negotiable.
Prospective buyers made an offer on a property. The seller did NOT accept, but made a counteroffer. The prospective buyers signed the counteroffer and the real estate agent delivered their acceptance to the seller. In the interim, the same buyers had found another house that they liked better and made an offer on it, which was accepted. Which of the following is TRUE? 1. The contract on the first house is not enforceable. 2. Neither contract is enforceable. 3. Only the first contract is valid. 4. Both contracts are valid.
4. Both contracts are valid.
At the closing on June 15, the buyer is assuming a mortgage presently on the property, on which the monthly interest charge is currently $600. The seller has made the payment due on June 1. Assuming a VA mortgage, what is the adjustment made at closing? 1. Credit seller $300; credit buyer $300. 2. Debit seller $300; debit buyer $300. 3. Credit seller $300; debit buyer $300. 4. Debit seller $300; credit buyer $300.
4. Debit seller $300; credit buyer $300.
Which rule-of-thumb version is being offered to an investor who is told that a house renting for $900 a month should sell for about $90,000? 1. CMA 2. IRV 3. NOI 4. GRM
4. GRM
A couple signed a lease on an apartment for a period of 1 year. The lease does NOT contain an automatic renewal clause. The couple plans to move out at the end of the lease rather than renew it. How much notice MUST they give to comply with the lease term? 1. 30 days. 2. 60 days. 3. 90 days. 4. No notice is required.
4. No notice is required.
An owner lists his home and agrees to pay a 6% commission provided he nets $10,000 after paying the commission and the balance of his mortgage, which is $75,000. To the nearest dollar, what should the selling price be to net the owner his $10,000? 1. $79,787. 2. $80,189. 3. $90,100. 4. None of the above.
4. None of the above.
If conditions for purchase are included in a deed and these conditions are violated, what is the penalty? 1. A court order enforcing compliance. 2. Penalty charges. 3. An injunction against further use of the property. 4. Return of the property to the original owner.
4. Return of the property to the original owner.
A tenant rented an apartment, signing a 15-month lease. After the lease expired, the tenant paid 1 month's rent and got a receipt. What kind of leasehold does the tenant have? 1. Gross lease. 2. Proprietary lease. 3. Tenancy at sufferance. 4. Tenancy at will.
4. Tenancy at will.
In every real estate transaction, a legal description of the real estate MUST appear in the transaction documents. What kind of legal description should be used in MOST transactions? 1. The lot-and-block numbers that appear in the recorded plat. 2. A metes-and-bounds description, verified by a surveyor. 3. A combination of at least two methods for greater accuracy. 4. The same one used in prior transfers of the parcel, verified by a surveyor.
4. The same one used in prior transfers of the parcel, verified by a surveyor.
The FHA functions MOST like 1. a bank or savings and loan association. 2. a mortgage company. 3. an investment group. 4. an insurance company.
4. an insurance company.
Usury laws were enacted to protect the 1. lender. 2. broker. 3. seller. 4. borrower.
4. borrower.
Another term for the owner of a property listed with your firm is the 1. customer. 2. prospect. 3. consumer. 4. client.
4. client.
A landlord may legally refuse to rent to a prospective tenant if the tenant 1. has a history of serious mental illness. 2. is unable to live alone without assistance. 3. has ever been convicted of using illegal drugs. 4. has ever been convicted of selling illegal drugs.
4. has ever been convicted of selling illegal drugs.
According to the Truth-in-Lending Act, if any "trigger terms" are used in an ad, all of the following disclosures MUST appear in the ad EXCEPT the 1. cash price or amount of the loan. 2. amount of down payment required. 3. number, amount, and frequency of payments. 4. prepayment penalties and rebates.
4. prepayment penalties and rebates.
Antitrust laws prohibit competing brokers from all of the following EXCEPT 1. boycotting other brokers in the marketplace. 2. dividing the market to restrict competition. 3. agreeing to set sales commissions and management rates. 4. receiving compensation from both the buyer and the seller.
4. receiving compensation from both the buyer and the seller.