Real Estate Practice Exam

Bill has a gross monthly income of $4,000. If the lender he is working with uses the traditional rule-of-thumb formula, what is the total housing expense (principal, interest, taxes, and insurance PITI) Bill can bear?

$1,120.

For what type of loan is the lender likely to charge the lowest interest rate?

15 year fixed rate with a 80% LVR.

What is the capital gains tax exclusion available to homeowners who file their income tax as single filers?

250,000.

After a completed loan application is submitted, the application must be accepted or rejected within how many days?

30 days.

An owner wants to know how to determine the best listing price. How does a comparative market analysis (CMA) compare to an appraisal?

A CMA contains a compilation of similar properties indicating trends and prices buyers are willing to pay.

In their offer to purchase a home, the buyers stated, "If we cannot obtain a mortgage loan for 3.5 percent or less, we will not purchase the property and the earnest money will be returned." This clause is an example of what?

A contingency.

By Pennsylvania law, all of the following must receive the Consumer Notice EXCEPT who?

A corporation that is selling a property.

Every listing agreement should include what?

A description of the premises.

Before the agreement of sale is signed by both parties, real estate licensees must disclose all of the following EXCEPT what?

A murder was committed on the property.

Regulation Z generally applies when a credit transaction is secured by what?

A residence.

Which of the following gives the BEST evidence of the buyer's intention to carry out the terms of the real estate purchase contract?

A significant earnest money deposit.

Which of these meets the HUD definition of a family as a protected class?

A single parent with a foster child age 12 and a son age 19.

What should a broker who is the agent of the buyer do?

Advise the buyer if the listing price of the seller's house is unrealistic.

Under the Real Estate Seller Disclosure Act, the real estate licensee is responsible for what?

Advising the seller of the duty to disclose defects.

The buyers paid cash for their new home. At the same time, they purchased flood insurance. At what time will the flood insurance be effective?

After 30 days.

A discriminiation suit may be filed in federal court by the who?

Aggrieved person because of racial discrimination.

The amount of earnest money deposit is determined by the what?

Agreement between the parties.

The National Association of REALTORS Code of Ethics is binding on who?

All real estate licensees.

After the buyer and the seller entered into contract, they negotiated the sale of the side lot at the same time as the transfer of the home. What is this second document called?

An addendum.

An agreement between a buyer and a broker is most accurately described as what?

An employment contract.

An owner enters into an agreement not to sell a property to other interested parties for a specified time in exchange for some consideration, additionally granting a right in the agreement for the property to be purchased on or before the end of that time for a specified price. This agreement is called what?

An option.

The buyer is in front of a house for sale, and with a cell phone, calls the listing agent. What disclosures, if any, must the listing agent make to this buyer?

Any information that you gibe me at this time is not considered to be confidential.

At what time should a real estate licensee present the Consumer Notice to a prospective buyer?

At the first substantive meeting.

"I hear they're moving in. There goes the neighborhood! Better put your house on the market before values drop!" This is an example of what illegal practice?

Blockbusting.

Which of the following is a similarity between an exclusive agency listing and an exclusive right-to-sell listing?

Both give the responsibility of representing the seller to one broker only.

A man owned his home for five years and when he married, he added his wife's name to the deed. Now they are preparing to sell the home they lived in for the last 25 years. Who must sign the listing agreement?

Both husband and wife.

A listing taken by a real estate salesperson belongs to the who?

Broker.

Which of the following may obligate a buyer client to owe a fee to the real estate broker?

Buyer signed a written agency agreement.

Complaints relating to the Civil Rights Act of 1866 are dealt with how?

By taking them directly to a federal court.

A real estate licensee was representing a buyer. At their first meeting, the buyer explained that he planned to operate a dog-grooming business out of any house he bought. The licensee did not check the local zoning ordinances to determine in which parts of town such a business could be conducted. Which fiduciary duty did the licensee violate?

Care.

A woman owns a two-unit apartment building and lives in the downstairs apartment. She wants to rent the second floor. She refused the first applicant, an African American male, stating that she did not want to rent to men. A few days later, this man noticed that a white male was moving into the building. The African American male may allege that the woman was discriminating against him under what act?

Civil Rights Act of 1866.

Most homeowners' insurance policies contain which of the following clauses?

Coinsurance clause.

A customer may expect all of the following EXCEPT what?

Confidential information.

In Pennsylvania, what document must real estate licensees present to all prospective sellers?

Consumer Notice.

What document must be provided to the buyer prior to entering into a working relationship with them?

Consumer Notice.

A broker did not have enough money in the business account to pay two salespeople, do he wrote two checks out of an escrow account. After the next closing, the broker put the money back into the account. This is an example of what?

Conversion.

The agency responsible for the enforcement of the Fair Housing Act is the what?

Department of Housing and Urban Development.

All of the following are categories of the uses of real property EXCEPT what?

Developmental.

The purpose of the Real Estate Settlement Procedures Act (RESPA) is to do what?

Ensure that buyers and sellers know their settlement costs.

A system of rules and standards that goes beyond the letter of the law is called what?

Ethics.

In what type of buyer agency, if ever, is the broker entitled to compensation even if the buyer buys directly from a seller?

Exclusive buyer agency contract.

The relationship of a broker to a client is that of a what?

Fiduciary.

A basic homeowners' insurance policy would protect against all of the following EXCEPT what?

Flooding.

An errors and omissions insurance policy would most likely offer protection against an allegation of what?

Forgetting to turn on the burglar alarm after showing the property.

The Pennsylvania Human Relations Act applies to what?

Housing accommodations and commercial property.

Under what situation, if any, may a lender consider age when making a lending decision?

If the applicant's income will drop due to retirement.

A world-reknown company plans to open a new large manufacturing plant. In this area, housing prices are likely to do what?

Increase due to increased demand.

Under a typical installment contract, the seller retains what?

Legal title.

The authority to install a For Sale sign on property is usually included in the what?

Listing agreement.

What should the Seller's Property Disclosure Statement reveal?

Material defects.

In order to offset expenses, a highrise condominium community rents out the ground floor to a convenience store. The building is an example of what?

Mixed use.

What is the largest trade associate that serves real estate licensees?

National Association of REALTORS (NAR).

Which of the following has formulated a Code of Ethics for real estate licensees?

National Association of REALTORS.

A couple bought their house in 1972 for $30,000. Today, their neighborhood has become very fashionable and they plan to sell the house for $450,000. How much of the gain is taxable on the couple's joint return this year?

None.

The buyers want to be represented as clients by several different agents looking at various properties. This is an example of what?

Nonexclusive buyer agency.

What is the effect of an option?

Obligates the optionor to complete the purchase according to the terms of the agreement.

The Americans with Disabilities Act (ADA) has the greatest impact on what?

Office buildings.

What is the maximum term of an exclusive listing, if any, in Pennsylvania?

One year.

Which of the following is a unilateral contract?

Option.

In a cooperating broker transaction involving subagency, the cooperating (selling) broker does what?

Owes fiduciary duties to the seller.

It is illegal for a lending institution to refuse to make a residential real estate loan in a particular area only because of the what?

Physical location of the property.

Which of the following affect demand?

Population.

In Pennsylvania, how can a salesperson guide the seller to an appropriate listing price?

Present a current comparative market analysis (CMA).

The buyers are concerned that they might overpay for the property. What information may their buyer agent provide to ensure that they make the BEST investment?

Prices of recently sold similar properties in the area.

When the supply of a commodity decreases, what happens?

Prices tend to rise.

The home was built in 1955 and has been owned continuously since then by one couple. Now they are planning to sell it. What must they provide their buyers?

Protect Your Family from Lead in Your Home pamphlet.

The basic responsibility of a property manager is to do what?

Protect the owner's investment.

The Civil Rights Act of 1866 prohibits discrimination in housing based on what factor?

Race.

Federal income tax regulations allow homeowners to reduce their taxable income by amounts paid for what?

Real estate taxes.

What action is required by the Americans with Disabilities Act?

Reasonable accommodations must be provided to people with disabilities.

A lender's refusal to lend money to potential homeowners attempting to purchase property located in predominantly minority neighborhoods is called?

Redlining.

If, upon the receipt of an offer to purchase his property under certain conditions, the seller makes a counteroffer, the prospective buyer is what?

Relieved of his original offer.

Which of the following actions would be considered legal?

Requiring a person with a disability to establish an escrow account for the costs to restore a property after it has been modified.

The desirability of the location of a residence is influenced by all of the following EXCEPT what?

Retirement prospects.

A buyer agrees to buy a property for $230,000 and deposits $6,000 earnest money with the listing broker. However, the seller is unable to satisfy his obligations under the contract, and the buyer demands the return of his earnest money as provided in the purchase contract. The buyer should do what?

Return the entire amount to the buyer after securing releases from the parties.

A buyer makes an earnest money deposit of $1,500 on a $150,000 property and then withdraws her offer before the seller can accept it. The broker is responsible for disposing of the earnest money by what?

Returning it to the buyer.

Who is responsible for completing the Seller Property Disclosure Statement?

Seller.

At a minimum, for how long must a real estate licensee retain a copy of the signed Consumer Notice?

Six months.

The legal relationship between broker and seller is MOST frequently a what?

Special agency.

If a buyer defaulted some time ago on a written contract to purchase a seller's real estate, the seller can still sue for damages if the suit is filed within the time frame provided for in the what?

Statute of limitations.

A broker arrives to present a purchase offer to an elderly seller in a nursing home, and finds the seller's son and his wife present as well. In the broker's presence, the couple persistently urges the elderly woman to accept the offer, even though it is much lower than the price she has been asking for her home. If the seller accepts the offer, she may later claim what?

That she was under undue influence from her son and daughter-in-law and that, therefore, the contract is voidable.

Which of the following is an example of dual agency?

The broker acting for both the buyer and the seller in the same transaction.

Two salespeople working for the same broker obtained offers on a property listed with their firm. The first offer was obtained early in the day. A second offer for a higher purchase price was obtained later in the afternoon. The broker presented the first offer to the seller that evening. The broker did not inform the seller about the second offer so that the seller could make a decision about the first offer. Which of the following is TRUE?

The broker has no authority to withhold any offers from the seller and is in violation of his agency law duties.

What is the effect when the buyer and the seller both sign a valid purchase contract?

The buyer acquires an interest known as equitable title.

A broker has an exclusive-right-to-sell listing on a building. The owner is out of town when the buyer gets an offer from a buyer to purchase the building, provided the seller agrees to take a purchase-money mortgage. The buyer must have a commitment from the seller before the seller is scheduled to return to the city. Under these circumstances, what is required?

The buyer has no authority to bind the seller to a contract.

When a prospective buyer makes a written purchase offer that the seller accepts, then what?

The buyer receives equitable title to the property.

The salesperson has visited prospective sellers three times hoping to list their property. When should the salesperson present the Consumer Notice to these sellers?

The first time the licensee visits the home to discuss terms of the listing.

Which of the following should be included in the listing agreement?

The listing price.

Which of the following BEST describes earnest money?

The money deposited by the buyer at the time the offer is made.

When hired by a property management agreement, the broker represents which party?

The owner.

A buyer who is a client of the broker wants to purchase a house that the broker has listed for sale. Which of the following is TRUE?

The seller and the buyer must be informed and consent to having their broker represent both of them.

Unless some other written agreement has been made, the broker will usually receive the sales commission from the seller when what happens?

The transaction is closed.

At the time that the installment contract is signed, who has legal title to the property?

The vendor/seller.

A creditor is permitted to refuse to an applicant who is what?

Too young to legally sign a contract.

In Pennsylvania, the broker is providing communication and document preparation services and is assisting both parties transaction without advocating for either party. This broker is a what?

Transaction licensee.

The sellers listed their home with a broker for a$200,000. The broker tells a prospective buyer to submit a low offer because the seller is desperate to sell. The buyer offers $185,000, and the seller accepts it. In this situation, the broker has done what?

Violated his agency relationship with the seller.

In Pennsylvania, when is a written agreement between the broker and consumer required?

When the consumer may be obligated to compensate the broker for services.

Who does the real estate broker represent?

Whoever hired the broker.

Under the current tax law, MOST homeowners selling their owner-occupied residence and filling a joint return ... ?

Will not pay capital gains tax on the sale of their homes.

When preparing his annual income tax return, the homeowner may be able to deduct all of the following EXCEPT what?

Withdrawals from an IRA or a down-payment by a first-time homebuyer.