Practice Exam

Which of the following costs in a South Carolina purchase transaction is considered a buyer's transaction cost?

Appraisal cost

Your seller client is very attached to her home and has not agreed with any price ranges you've presented. She insists on pricing the home at 15% above the current market, claiming the home has a certain air about it that is priceless (but 15% higher is a start). How should you advise this seller?

Be kind but firm. Advise the seller that the home's value is dictated by the market, not her perception. (Review)

You're showing your buyer clients a vacant house. All furniture and kitchen appliances have been removed, but the washer and dryer are still in the laundry room. The listing doesn't mention whether any appliances convey. Your buyers ask if the washer and dryer stay, and you tell them that they must since everything else is already gone. What should you have said instead?

"I'll check with the listing agent to see if the sellers intend to come back for them."

Your client wants to include multiple contingencies in his offer. But you know several buyers are interested in the property, and it's going to be a competitive bidding situation. You say to your client, ______.

"Let's evaluate which contingencies matter most to you and consider omitting the rest."

What's the annual interest on a $20,000 loan on which the interest rate is 6.5%?

$1300

The lender will charge a one-and-a-half-point origination fee and two loan discount points. What will be the total due for points on a $115,000 loan?

$4025

NAR ethics complaints must be filed with the local board or REALTOR® association within ______ days.

180

Your client, a builder, is considering buying three adjacent lots. They each have the same depth: 275 feet. Lot A is 35,750 s.f., Lot B 53,900 s.f., and Lot C is 33,000 s.f. If your client buys all three lots, what total street frontage will he have?

446 feet

A house sells for $135,000 and the seller pays Entity Brokerage $8,000 in commission. What is the commission rate?

5.9%

How many acres are there in a square mile?

640 (Review)

What is 40% of 200?

80

Carla's evaluating the real estate code of ethics. It has minimum ethical standards. This means that Carla should ______.

Apply the golden rule when interacting with consumers.

Which of the following would a home inspector note as a defect in a report due to its link to lung cancer?

Asbestos tiles in a basement

Jerome is working with buyer clients when he shows them a house in an up-and-coming neighborhood that'd be perfect for his sister. Which of the following actions is the best way to handle this situation?

Ask how they feel about this home and tell them about the upward trend in neighborhood market value.

Which of the following calculators would be best used for performing the functions of addition, subtraction, division, and multiplication?

Basic

When it comes to real estate investments, "commercial" is ______.

Both an investment strategy and a property type (Review)

Harvey is a respondent in an NAR ethics complaint. He is ______.

Considered innocent until proven guilty

Ariana's seller clients have photos of the entire family on display in the grand stairway of their home. Ariana advises her clients to remove the photos. Which step in the preparation phase is Ariana addressing?

De-personalize

Darrell lives in a very rural area where price levels have remained low for several years. What does this indicate about demand for housing in the area?

Demand is low.

Connie tailors her marketing plan to each property she represents. This is because ______.

Different properties have different market

What must a licensee do regarding property the licensee holds directly or indirectly if it becomes the subject of a real estate transaction?

Disclose the interest to all parties to the transaction.

Which of the following properties requires a lead disclosure?

Duplex built in 1959

Economic, tax, and market changes are types of _______ risk.

Dynamic

In addition to providing a disclosure of any lead-based paint hazards in homes built before 1978, what must a seller's agent provide to prospective buyers?

EPA lead safety pamphlet

After determining that an ethical dilemma exists, what's the next step you should take?

Evaluate the situation.

Not jumping to conclusions and considering the facts of the situation best describes which step for handling ethical dilemmas?

Evaluate the situation. (Review)

Sara is your buyer customer. She doesn't want to sign a buyer agency agreement. What duty do you owe her?

Honesty and fairness

In what type of market is a buyer cautioned against asking for personal items?

Hot market (Review)

The appraisal can be a sticky wicket on the way to closing. Which of the following is a true statement about appraisals and closings?

If the appraisal comes in lower than the sales price, the buyer may be able to negotiate a lower price.

De-personalizing a home allows buyers to _______.

Imagine themselves in the home

Which of the following is portfolio income?

Income realized from capital gains, interest and dividends

When buyers contact you for the first time, why is it important to ask how they found you?

It can help you determine what additional questions to ask.

What is an advantage to using mediation as a problem-solving tool in a contract dispute?

It offers a win-win solution because both parties come out with satisfactory results.

Why must a property's legal description be provided in the South Carolina residential sales contract?

It's required for legal purposes (Review)

Which statement about lead-related health problems is true?

Lead may cause behavioral problems, learning disabilities, seizures, and, in extreme cases, death.

Cara is involved in a dispute with another REALTOR®, Sue. Cara prefers _______ because she wants to preserve her working relationship with Sue.

Mediation

Lena's buyer client Mindy is making an offer on Joe's house. Which party decides how much earnest money to offer?

Mindy

What's interest?

Money paid for the use of money. (Review)

Janelle, a buyer of a previously occupied South Carolina home, is making her purchase contingent on a satisfactory wood inspection report. Who must order and pay for that report?

Negotiable

Sara is a real estate salesperson. She's showing her client a property, when the client asks about some spots on the ceiling and wonders if they're an indication of a roof leak. Sara suggests that the buyers contact a roofing expert to make a determination. Did Sara do anything wrong?

No, she appropriately suggested the buyers contact an expert to make the determination about the roof.

With certain types of off-market listings only the listing agent, the seller, and individuals the seller and listing agent have informed know the property is for sale. What's another term these listings are also known as?

Pocket listings

If an item is prepaid by the seller, then at closing the buyer's share of that expense is credited to the ______

Seller

Luke, a REALTOR®, is in a dispute with Jill, who's a licensed real estate professional but not an NAR member. What does this mean for Jill?

She isn't subject to the NAR Code of Ethics.

When faced with an ethical dilemma, which of the following is true?

The Golden Rule always points the way to the most ethical action (Review)

A prospective buyer is curious why a previous owner is selling such a perfect home. The licensee knows that the previous owner recently died due to complications from AIDS. How should the licensee respond to the prospective buyer's inquiry?

The licensee can't disclose that a previous owner had HIV or AIDS.

When performing a market analysis, given the adjusted sales prices of three comparables, which comparable would you weigh most heavily?

The one that required less adjustment

If special assessments apply to a property involved in a South Carolina sales transaction, who's responsible for paying the assessment?

The seller, if the assessment is applied prior to closing

Keira makes it a point to always include comparable active listings when she prepares a market analysis. Why?

They show sellers the current competition.

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

You're the agent for the Brewmans, who have listed their house for $425,000 and agreed to a commission rate of 5%. They're eager to sell, so even though the house is listed at $425,000, the Brewmans want to accept the first offer of $395,000. How much less will the Brewmans pay your broker in commission if they accept this offer?

$1,500

Simi is a buyer's agent, and she'll receive a split of the commission paid from the sale of Tanner's listing. The property sold for $425,000. The total commission paid from the sale is 6% split evenly between the buyer's and seller's brokerages. Simi has an agreement to give her broker 20% of the commission she receives. How much will Simi be paid from this sale?

$10200

Your clients have been in their home for seven years, have made $12,000 of improvements, and have $130,000 left on their mortgage. The home recently appraised for $283,000. Using these figures, how much equity do they have in the property?

$165,000

When using the farming approach, turnover is a key factor when identifying a neighborhood. Which statement best describes turnover?

An area with a fair amount of listings—not too many, not too few (Review)

What does "cash-on-cash return" mean?

A comparison of before-tax cash flow to cash invested

What is static risk?

An insurable business risk that includes insuring for accident liability, fire, theft, and vandalism

How may licensees market office exclusive listings?

Announcements to other licensees affiliated with the same brokerage firm

If an appraisal contingency is in place, what happens when a property appraises higher than the agreed-upon sales price?

The transaction continues (Review)

Which of the following people are parties to a real estate sales contract?

The buyer and seller (not brokers) (Review)

When a seller counters the buyers' original offer, what options do buyers have?

They can accept, counter, or reject the offer.

What's the purpose of a sales contract?

To document the agreement between a buyer and seller in a real estate sales transaction (Review)

What's the purpose of the alternative minimum tax?

To keep the highly wealthy from avoiding paying any taxes (Review)

Boy, have these last 18 years flown by. The Martins remember the day their son was born like it was yesterday. And here he is today, preparing to head off to college. Now that he'll be out of the house soon, the Martins really don't need a house this large. What type of buyer are the Martins?

Trade-down buyers

The Elliotts have lived in their current house for five years. Space got a little tight after their first child was born. Now that they're expecting their second child, they've decided they really need a new house with more space in a good school district. What type of buyers are the Elliotts?

Trade-up buyers

What do investors need to determine before they can calculate their taxable income?

What their net operating income is

Your clients sold their property for $500,000. Your commission rate is 5%. What's your commission (before splits or sharing with the cooperating agent)?

$25,000

The real estate cycle is affected primarily by _________________.

Availability and affordability

The IRS taxes three types of income related to owning, buying, and selling investment properties. Which of the following is NOT one of these types of taxable incomes?

Business income (Review)

When performing a market analysis, to what are all adjustments made?

The sales price of the comparable properties

What's one purpose of the final walk-through?

To confirm the property is in the expected condition.

Why might a brokerage firm choose to create its own set of ethical guidelines?

To impose stricter guidelines than a national or state code

______ rely on their knowledge from previous homebuying experiences. This experience helps them to identify what they're looking for in a new property, which is often more space or a newer home with a good location and extra living space.

Trade-up buyers

When performing a market analysis, what do you do with the adjusted sales prices of comparables to determine market value of the subject property?

Weigh the comparable with the fewest adjustments to sales price most heavily.

How many feet are in a mile?

5,280

A property valued at $500,000 is returning a net annual income of $45,000. What is the cap rate for this investment?

9%

What's an income shelter?

A deductible allowance from net income

Lily is getting ready for an NAR ethics hearing. She should be prepared to ______.

Give a concise presentation

When property values remain at the same level and are at their highest monetary value, the neighborhood is in what stage of the neighborhood life cycle?

Equilibrium

A developer is likely to get the best return for investment if the project is completed during the _________ phase of the real estate market cycle.

Expansion (Review)

Jane is a new homebuyer in South Carolina. She's placed $5,000 down as an earnest money deposit. What section of the sales contract protects her earnest money in the event she can't obtain a loan?

Finance

Reggie has thoroughly reviewed the sales contract with his clients, the Arnolds, and has confirmed that they understand all of the terms and provisions. What should Reggie do next?

Recommend that the Arnolds review the sales contract with an attorney before signing it.

This type of buyer lives on a fixed income and is looking for a smaller property that requires little to no maintenance. Accessibility is an appealing feature this buyer type.

Retiree

Which of these choices is an example of a listing agent negotiating on a seller's behalf?

Reviewing offers and explaining any special requests or requirements

Ann is a South Carolina licensee. Which of the following statements most accurately describes her need to disclose that she's a principal to a real estate transaction?

She must disclose whenever she's a principal to the transaction.

After you've made a professional listing presentation and the seller has declined to use you as a listing agent, what's the best practice?

You should accept the outcome either way.

Which of the following is a true statement about the seller's property condition disclosure statement in South Carolina?

It must be completed by the seller unless both parties waive the requirement.

Getting the best price is always a factor for a seller, but the ______ at which it would actually sell must be another consideration.

Market price

In South Carolina, unless the parties otherwise agree in the contract, the ______ is responsible for doing having the property surveyed prior to closing.

Buyer

Clint is interested in making an offer on a house with hardwood floors that will need to be replaced. The hallway is 18 feet by 6 feet. The kitchen is 20 feet by 30 feet. The living room is 25 feet by 45 feet. There are two bedrooms, which measure 12 feet by 16 feet each, plus a master bedroom that is 14 feet by 20 feet. If the cost of the flooring is $5.48 per square foot, and the cost of installation is $1.49 per square foot, how much can Clint plan to spend to replace the floors?

$17,404.09

At a showing, Bitsy commented to her buyer clients, "That would be a great place to build a small guest house. With this size lot, your options are wide open." Six months after closing, the buyers filed a complaint against Bitsy: They'd spent $60,000 to build that guest house, then found out it violated zoning and city codes. Based on the NAR Code of Ethics, in this case, ______

Bitsy should not have suggested that they could build a guest house without knowledge of city and zoning codes. She is likely at fault.

Marcie bought a duplex, lived in one half, and rented out the other half. This is an example of what type of investing?

Buy and hold (Review)

Jason is planning to invest in a new commercial development. He'd like to invest $400,000 and secure another $100,000 through financing. After shopping around, Jason could not find financing at an affordable rate. Of what type of risk is Jason the victim?

Capital risk (Review)

In what type of market could the buyer's strategy be to offer 10% below list price?

Cold market

When finding listings, which statement describes the cold call approach?

Contacting homeowners to determine whether they or anyone they know is interested in selling

In a neutral market, what pricing strategy may generate interest in the property, possibly prompting multiple offers?

Pricing below market value

At what point must a South Carolina licensee explain the types of brokerage relationships buyers may have with real estate professionals?

Prior to closingPrior to entering into a real estate transactionPrior to evaluating a seller's counterofferPrior to providing an earnest money receipt to the buyers

Closing issues do occur. Which is a common closing issue?

The buyer doesn't bring a cashier's check to closing and fails to wire funds.

What must a South Carolina real estate licensee who's purchasing a property disclose on the contract?

The buyer is a South Carolina real estate licensee.

Which of the following statements best describes the 200% rule as it relates to tax-deferred exchanges?

The combined fair market value of the property (or properties) selected can't be more than 200% of the relinquished property.

When a licensee represents a seller, which one of the following statements is true about the licensee's ability to list other properties that are for sale?

The licensee is permitted to list other properties for sale, even if they're competing properties.

What's the purpose of the appraisal contingency in a sales contract?

The purpose is to protect the buyer. If the property doesn't appraise, the buyer may terminate and get their earnest money back.