The CE Shop MLO Final Exam 1
The VA guarantees 25% of the home loan amount.
Which of the following is true about VA loans?
Disclose the information
If the seller discloses a latent defect to the licensee and asks the licensee not to share this information, what should the licensee do?
He must remind the sellers to disclose the possible presence of lead-based paint to a buyer if the home was built prior to 1978.
Jamal is a real estate licensee. What's his responsibility regarding household lead hazards?
Amount financed/Down payment
James is obtaining an 80/20 loan. What does 80/20 signify?
FHEO (Fair Housing and Equal Opportunity)
Which agency enforces federal fair housing laws?
The Clean Air Act of 1970
Which law requires the EPA to establish air quality standards?
Water that pools after a heavy rain and is present more than 24 hours later
Which of the following can indicate drainage problems?
Avulsion
A late spring snow melt caused a river to swell past its bank. The flooding led to many landowners losing portions of their properties. What is the process called that caused this land loss?
Assessed value
Which of the following is a percentage of market value, and is also the amount of property value to which the tax rate is applied?
Option agreements usually don't include a termination date. Because option agreements leave a seller hanging without the opportunity to sell the property to anyone else, they usually have a defined ending date.
A lease with option to buy is a good home buying solution for some buyers. Which of these statements about a lease with option to buy is FALSE?
Crystal, because she recorded first
James purchased a property from Kip on October 1. He had his deed recorded on April 15 of the following year. Crystal purchased the same property from Kip on April 1, and had her deed recorded on April 10. Who can most easily prove legal ownership of the property?
2,000
A contract shows that a fee is "$200" in one location and "two thousand" in another. What should one presume the correct fee to be?
Save the down payment amount
To prepare for financing, buyers should ______.
Of legal capacity and legal age The testator must be of legal capacity (of sound mind) and of legal age.
For a will to be valid, the testator who is signing the will must be _________________.
Police power, eminent domain, taxation, and escheat
For the public's benefit, the government imposes its powers over public and private land use through ____________.
Evaluate the value of income-producing property
Gross rent multiplier (GRM) and gross income multiplier (GIM) are used to ______.
By obtaining informed consent in writing from both parties
How can an agent offer dual agency legally?
They send two different applicants whose only difference is status within a protected class, and test whether the applicants are treated differently.
How do discrimination testers work?
43,560 square feet
How large is an acre?
THREE
How many approaches to value do appraisers generally use?
90 days
How much time does a contractor have after providing supplies for a home owner's project to file a mechanic's lien?
Whether she'll incur a pre-payment penalty
If Rina wants to pay off her mortgage early, what might she consider before doing so?
Invest money where it will earn interest
If you want to capitalize on the time value of money concept, you should ______.
The Michigan Department of Environmental Quality
In Michigan, which entity makes the final determination of whether or not an area is a wetland?
Investment Value
Investors are generally interested in a property's _________________.
Her loan is 90% of the value of the real estate used as collateral and she is putting 10% down.
Jillian has a loan-to-value ratio of 90/100. This means __________.
Marisa
Joe signed a listing agreement with Marisa. A week later, Marisa's co-worker, Tina, showed Joe a property that he's interested in buying once his home sells. A week after that, Ross submitted an offer on Joe's property on behalf of his buyer client. Who is Joe's agent?
Undivided Loyalty
Jorge is a dual agent. He owes his clients all of the following fiduciary duties except ______.
Help prevent mold
Keeping an area dry and keeping the air circulating can ______.
TWO Michigan recognizes two protected classes in addition to the seven federally protected classes: age and marital status.
Michigan real estate licensees should be aware that, in addition to the federally protected classes, the state's fair housing laws also prohibit discrimination based on how many additional protected classes?
Suspicious
Minimizing risk in part means avoiding public networks, unsecure sites, and ______ sites.
Sales price
Net to seller equals the ______ multiplied by the percent to seller.
Independent contractor
Pam is a new real estate licensee who must receive a high level of supervision. Even with the supervisory requirement, the Internal Revenue Service allows Pam to be classified as an ______.
Legal description
Plat of Block 28, Woodmen Heights Tract, recorded in Map Book 27, page 68, at the Eldor County Records Office is an example of which essential element of a deed?
Method of attachment, agreement, and adaptation
The courts use three primary tests to determine whether something is personal property or real property. What are the names of the three tests?
the information is known from other sources.
The duty of confidentiality survives agency unless the former client is found guilty of fraud or ______.
Escheat
The power of the state to claim property when the owner dies without a will and without locatable heirs or creditors is also known as ______.
FNMA, GNMA, FHLMC, and lending institutions that buy loans from other lenders
The secondary mortgage market is comprised of _________________________.
A program that helps homeowners in flood hazard areas obtain insurance Because insurers were traditionally hesitant to provide flood insurance in flood plains, a program called the National Flood Insurance Program, administered by FEMA, helps homeowners in flood hazard areas obtain insurance.
What's the National Flood Insurance Program?
No commission is earned if the seller locates the buyer with exclusive agency.
What's the difference between an exclusive right-to-sell and an exclusive agency agreement?
To paint a true picture of a property's condition
What's the purpose of a home inspection?
Annexation
What's the term used in real estate to describe when personal property is attached to real property, thereby making it a fixture?
Circuit court
When a complaint is filed against a licensee, the office of the attorney general may petition the ___________ to subpoena individuals for the contested case hearing.
Before the fact, or as the situation arises
When may informed consent for dual agency be obtained?
Do Not Call Implementation Act, CAN-SPAM Act, and Junk Fax Prevention Act
When prospecting and soliciting for new business, licensees should be familiar with which federal acts?
Federal Trade Commission Act (1914)
Which act encourages fair, truthful, non-deceptive, and evidence-supported claims in advertising?
All cooperatives have specific criteria for residents. Cooperatives often have strict application requirements.
Which of the following is a true statement about cooperatives?
Condos are single-family dwellings without yards to maintain.
Which of the following is true about condominium ownership?
Payback terms longer than 30 years
Which of the following items is something a lender is prohibited from doing if the lender wants to write qualified mortgages?
An opinion regarding the listing price
Which of the following opinions can a real estate licensee provide?
Suing for specific performance
Archie signed a contract to buy Pam's home. The deal eventually closed, but Pam failed to hand over the home's keys to Archie. A week passed, and Archie filed a lawsuit in an attempt to force Pam to give him the keys. This is an example of ______.
$896.88 Monthly payment - interest paid = principal amount paid. If $1,145.83 of the total payment is interest, that leaves $896.88 to be applied to the principal ($2,042.71 - $1,145.83 = $896.88).
A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. If $1,145.83 is interest, how much is applied to principal?
Periodic Estate
A month-to-month lease agreement is considered to be this type of leasehold estate, in which the interest is automatically renewed at the end of each period specified in the lease.
$286 The state receives $7.50 per $1,000 and the county where the property is located receives $1.10 per $1,000. So state will be 7.50x260= 1950 And county will be 1.10x260= 286 for county tax transaction
A property in Michigan sold for $260,000. What county transfer tax will apply to this transaction?
Define the results he wants Bart to achieve, but not direct how Bart does his work
Bart is an independent contractor. Which of these does his managing broker have the right to do?
10,200 Commission = sales price × commission rate (425000x0.06)=25500; 25500/2= 12750; 80% of 12750= 10,200 that Benji will be paid from this sale
Benji is a buyer's agent, and he'll receive a split of the commission paid from the sale of Harriet's listing. The property sold for $425,000. The total commission paid from the sale is 6%, split evenly between the buyer and seller brokerages. Benji has an agreement with his broker that he earns 80% of the commission received. How much will Benji be paid from this sale?
$2,817.50 A discount point is 1% of the loan amount. Bob and Mary are paying three-and-a-half points (or 3.5% of $80,500 or 80500x0.035), which is $2,817.50.
Bob and Mary are financing $80,500 for a new home. Their lender will approve an interest rate of 6.5% if Bob and Mary pay three-and-a-half discount points at closing. How much is this?
It lacks a lawful objective.
Broker Hal enters into a listing agreement with seller Jane. Jane insists that the agreement state that only native-born U.S. citizens be allowed to buy the home. For what reason will this agreement be considered void?
Yes, but certain terms of the agreement may still be binding upon Ben.
Cameron had a listing agreement with a client named Ben. Ben got mad at Cameron and said he was terminating the agreement. Can Ben do this?
$480,000 Carson is obtaining an 80/20 loan. First part is a mortgage that covers 80% of the home purchase price. The second part is either a home equity loan or a home equity line of credit that covers the remaining 20%. That means 80% of $600000 or 600000x0.80), which is $480,000.
Carson is purchasing a $600,000 property by obtaining an 80/20 loan. How much is Carson financing?
No
Chance and Lucky have an option agreement between them in which no consideration is provided. Is this enforceable?
Emblements
Cultivated crops are considered personal property even though they're part of the soil, and they're known as _______.
Down payment
Earnest money is sometimes referred to as a "down payment on the ______."
Easements are often established by a written agreement between the parties. Easements come in many forms, are of varying duration, and may be established with or without the owner's permission. They're often established by a written agreement between the parties.
Easements are a type of encumbrance that can affect a property. Which of the following is true about easements?
The sale of a property at an amount less than is owed, not including closing costs
Edgar is in the process of selling his home in a short sale. What's a short sale?
Sadie
Ellen and Sadie signed an agreement to list Sadie's condo for sale. After the contract was signed, Sadie's father, Grant, offered to pay Ellen's commission as a housewarming present. Sadie's Mom and stepdad, Linda and Rick also chipped in. Who is Ellen's client?
Zoning
Ensuring land is put to the use for which it is best suited while also protecting livability of a community and property values is achieved through ______.
Novation
Sisters Sheila and Vickie entered into a contract together to buy a vacation property. The sisters get into a dispute, and Vickie no longer wants any part of the deal. Sheila is in agreement with this idea, and talks her younger brother Joe into replacing Vickie on the contract. Sheila, Joe, Vickie and the seller agree to the substitution. Of what is this an example?
Electrical
Switches that are warm to the touch, damaged panels, and lights that dim or flicker when other appliances are in use can be signs of what sort of problem?
Fee Simple
The Emery family, along with 20 other families, purchased a timeshare estate that will enable them to share a condominium in a resort community. A timeshare estate involves a ______ type of ownership.
City certification The city certification is provided after a satisfactory inspection by a local governmental authority confirming that the property meets the local building codes.
The ______ certifies that the property complies with local building codes.
Junk Fax Prevention Act of 2005
The ______ makes it illegal to send unsolicited commercial solicitations via fax without the recipient's permission or an established relationship.
If the listing broker agrees in writing to the termination
Under what circumstances may a seller legally terminate an exclusive right-to-sell listing agreement before its listing term has passed?
Life Estate
Wayne conveys a property to Robbie until Robbie's death, when the property is conveyed to Tiffany. What is this scenario an example of?
Three of the most common systems for providing legal descriptions are metes and bounds, lot and block, and rectangular government survey.
What are the three most common forms of legal descriptions?
Lead to mold growth
What can a wet environment with little air circulation do?
principal, interest, taxes, and insurance (PITI)
What does PITI stand for?
Legal occupancy is permitted. A Certificate of Occupancy allows the new development to be legally occupied. In some communities, a C of O is required for all properties, regardless of whether there has been new construction or renovation.
What does a Certificate of Occupancy certify?
Their ownership changes to tenants in common.
What happens when a married couple who owns a property as tenants by the entirety divorce?
They don't have to sign the agreement
What if potential sellers don't want to waive any of the services outlined in the limited service agreement?
A description of the land that specifies the boundaries and location of a specific piece of real property
What is a legal description?
Survey Surveys determine property boundaries and determine whether there are encroachments on the property.
What is typically used to prove there are no encroachments on the property?
Partial Performance
What occurs when one or both parties met some, but not all, of the terms of a contract?
Discrimination through blockbusting, steering, and redlining The Fair Housing Act in 1968 was the first step in reversing the process of blockbusting, steering and redlining—all of which are banned as part of the act.
What practice did the Fair Housing Act of 1968 attempt to eliminate?
Implied agency
What type of agency exists because of the actions and behavior of the parties?
An agreement or promise made between the parties
What's a covenant between a lessor and lessee?
A separate trust or custodial account
What's an acceptable account for depositing escrow funds?
An area with sufficient water quantity that can support vegetation or aquatic life To be considered a wetland, an area must maintain water in sufficient quantity, frequency, and duration to support wetland vegetation or aquatic life. You're likely most familiar with bogs, swamps, and marshes, which are examples of wetlands.
Which of the following options best describes a wetland area?
Neither assignment nor subleasing relieve the former tenant of liability. With subleasing, the original tenant pays the landlord. The assignor is liable because of the original contract; the assignee is liable because of possession of the premises.
Which of the following statements is true regarding assignments and subleasing?
Built-In
Which of the following terms best describes an item that is both a fixture and real property?
An ad stating families with small children need not apply Familial status is a protected class under the Fair Housing Act.
Which of the following would federal fair housing laws prohibit?
Director of professional licensing The Board of Real Estate Brokers and Salespersons is overseen by the director of professional licensing, who reports to the chief deputy director.
Which role in Michigan's Department of Licensing and Regulatory Affairs oversees the Board of Real Estate Brokers and Salespersons?
Acquisition, ownership, and reversion can all be affected by income tax issues.
Which stage of the property ownership life cycle can be affected by income tax issues?
Severance
Which term describes the process of real property becoming personal property by detaching it from the land?
To uncover hidden discrimination
Why does HUD test for housing discrimination?
Improves credit score Debt reduction improves credit scores. It also improves the debt-to-income ratio of the borrower.
Why is debt reduction recommended when preparing to obtain financing?
The formula to calculate the annual gross income is as follows: AGI = Property Value × Annual Cap Rate = $400,000 × 8% = $32,000 net operating income
You have a client who has an investment property valued at $400,000. Annual cap rates are 8%. What can your client expect in net operating income?
"You might consider a 1031 tax-deferred exchange." IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange.
Your client, Bruno, is an investor. He is in the process of selling a fourplex and mentions to you that he hates the idea of the capital gains tax he'll be subject to. What should you tell him?
Bracketing
______ is a process in which an appraiser determines a probable range of values for a property by comparing a group of comparable sales to the subject. The appraiser attempts to include both superior and inferior units of comparison, such as age, transaction price, etc.
Specific performance
______ is when one party didn't meet the terms of the contract in the specified timeframe, and is now being required to do exactly what was agreed to in the contract.
