Unit 1
"I understand why you want a buyer representation agreement," your buyer tells you. "But what's in it for me?" You answer: "It's required by law." "Without it, I owe you no duties." "Without it, I won't work very hard for you." "Without it, you're unrepresented."
"Without it, you're unrepresented." Without a buyer representation agreement, a buyer is unrepresented. This means the buyer won't receive all the fiduciary duties of a client, just those due to a customer.
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 he'll pay over the life of the loan? $1,108,292.40 $500,000 $608,292.40 $750,000
$1,108,292.40 To find the total amount paid back, multiply the monthly payment by the total number of payments: $3,078.59 x 360 = $1,108,292.40.
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. What's the total amount the borrower will pay back over the life of the loan? $250,000.00 $30,640.65 $367,687.80 $735,375.60
$367,687.80 First, multiply the monthly payment ($2,042.71) by the total number of payments (180 = 12 payments/year for 15 years). The total paid back is $367,687.80. Then subtract the original loan value: $367,687.80 ‒ $250,000 = $117,687.80.
What is the calculation used to determine the LTVR? (100 ÷ property value) x loan amount (Loan amount ÷ property value) x 100 (Loan amount ÷ sales price) x 100 (Property value ÷ loan amount) x 100
(Loan amount ÷ property value) x 100 The LTVR equals the loan amount divided by the property value, times 100.
A three-unit income-producing property has a sales price of $600,000. Monthly gross rent is estimated at $6,000. What's the gross rent multiplier? 100x 10x 83x 8.3x
100x Gross rent multiplier is sales price divided by monthly gross rent ($600,000 ÷ $6,000 = 100). Improperly calculating GRM could lead an investor to purchase a property that turns out to be a poor investment.
Another term for a CMA is ______. A broker price opinion A competitive market value An appraisal An automated valuation method
A broker price opinion Only licensed appraisers are allowed to perform real estate appraisals.
Which of the following statements about material facts is true? All material facts are related to physical conditions. All parties considering a property would regard each material fact in the same way. A material fact may have more or less effect on a buyer based on the buyer's needs and values. Material facts are only those that can be easily seen or discovered.
A material fact may have more or less effect on a buyer based on the buyer's needs and values. Information is material if it affects a buyer's decision to buy a given property. Different information will be weighed differently based on the buyer.
What is gross rent multiplier? A method to analyze the potential value of smaller residential investment properties A number that helps set the list price of an investment property A process to estimate the income a large investment property will produce A way to determine the value of commercial properties
A method to analyze the potential value of smaller residential investment properties When you're working with investors who will have tenants in smaller residential properties, the gross rent multiplier (GRM) is one method among several that should be used to analyze the potential value of a given real estate investment.
Determine which of the following statements regarding agency is true. Accounting is considered a fiduciary duty. Dual agency is practiced in every state. Implied agreements involve written agreements. You owe customers and clients the same duties.
Accounting is considered a fiduciary duty.
If the comparable is inferior to the subject house, _______. Adjust the sales price downward for the comparable Adjust the sales price downward for the subject property Adjust the sales price upward for the comparable Adjust the sales price upward for the subject property
Adjust the sales price upward for the comparable Only the comparable sales price is adjusted. If it is inferior, adjust upward. If it's superior, adjust downward.
Risk monitoring is an ongoing part of risk management. Which of these tasks does the broker complete as part of this step? Analyze the effectiveness of the risk management plan. Choose how to handle identified risks. Estimate the likelihood of occurrence for each risk. Identify all possible risks to the firm.
Analyze the effectiveness of the risk management plan. Monitoring risks involves analyzing your progress and effectiveness in each real estate transaction to determine if there are flaws in the process or missed opportunities that need correction.
How many comparables should be used for a CMA? At least four At least six At least three At least two
At least three
If a lender wanted a quick valuation of a property, what would be the best method? Appraisal Automated Valuation Model Broker Price Opinion Comparative Market Analysis
Automated Valuation Model The AVM uses technology to produce general valuation information in a matter of minutes.
Which one of these situations represents the illegal practice of redlining? Arlo, a licensee, distributed a flyer in several neighborhoods warning of impending commercial developments that would negatively impact property values. Based on the neighborhood's demographics, Hunter, a mortgage broker, refused to underwrite mortgage applications from applicants who want to buy in specific neighborhoods. Eunice refused to allow her listing broker to show her house to families with children. Jaime was working with Korean clients, so he focused on showing them homes in Korean communities because he thought they would be more comfortable there.
Based on the neighborhood's demographics, Hunter, a mortgage broker, refused to underwrite mortgage applications from applicants who want to buy in specific neighborhoods. Redlining is the practice of selecting geographical areas in which no mortgage loans will be written (based on demographics instead of creditworthiness).
Licensee Marshall takes advantage of a substantial demographic shift in a nearby area to exploit homeowners' fears and get them to list with him. What action is he engaging in? Blockbusting Manipulation Redlining Steering
Blockbusting Blockbusting can occur when an agent uses a substantial demographic shift within a specific area to exploit homeowners' fears.
In Georgia, what's true about working with a buyer as a customer? Brokers are entitled to a commission if they identify the property that the buyer customer purchases. Licensees can offer any real estate advice to buyer customers, but they can't negotiate for buyer customers. Licensees may negotiate for buyer customers on inspection concerns but not the purchase price. No written agreement for customers exists.
Brokers are entitled to a commission if they identify the property that the buyer customer purchases. Georgia REALTORS® offers a sample written customer agreement, which details the ministerial tasks licensees may provide. Brokers are entitled to a commission if they identify the property that the buyer customer purchases.
What's the primary purpose of the buyer presentation? Build trust Close the sale Prove your experience Prove your professionalism
Build trust
With the cost approach to value, what is the replacement cost? Cost of the materials used in construction Cost to build a functionally equivalent improvement Cost to build an exact replica of the subject, with the same materials and deficiencies Cost to buy the property
Cost to build a functionally equivalent improvement The replacement cost reflects the cost to build a functionally equivalent improvement, as opposed to the reproduction cost, which is the cost to build an exact replica of the subject, with the same materials and deficiencies.
Which fiduciary duties do customers receive? Customers don't receive fiduciary duties because they're not clients. They only receive reasonable skill and care. They receive all fiduciary duties except loyalty. They receive the same six fiduciary duties as clients receive.
Customers don't receive fiduciary duties because they're not clients. Clients, those with whom you have a representation agreement, receive full fiduciary duties. Customers receive certain duties, too, although they aren't fiduciary duties because customers aren't clients.
When you're working with clients, which of the following is a good practice to follow? Convince your clients to take your advice on all matters Demonstrate flexibility Focus on your own goals Prove your superior knowledge
Demonstrate flexibility Maintaining a positive intention is essential. You also need to demonstrate flexibility and a willingness to see another person's model of the world.
Which of the following would NOT be a benefit of a pre-listing appointment? Asking the seller about maintenance and repair issues Determining how the home compares to tax records Determining list price Investing the seller in using you as a listing broker
Determining list price All of these are appropriate uses of the pre-listing appointment except determining list price, which would require further research.
What do you do to determine debt coverage ratio? Divide debt service by gross income Divide net income by debt service Subtract expenses from income Subtract income from expenses
Divide net income by debt service Divide net income by debt service to get the debt coverage ratio.
Your seller client learned of a material defect after completing the property condition disclosure statement. The property is now under contract. What can she do to rectify the situation? Contact the buyer and the buyer's agent with the new information Draft an addendum or amendment Hide the issue with cheap cover-up work Leave a note for the buyer in the home after the sale closes
Draft an addendum or amendment When sellers need to correct any sort of inaccuracies in the property condition statement, they can provide an addendum or amendment to the statement.
When you're using the sales comparison approach to value a property, which of the following is considered a category of adjustment? Area demographics Financing terms and cash equivalency Seller motivation Types of obsolescence
Financing terms and cash equivalency Categories of adjustment include financing terms and cash equivalency, conditions of sale, market conditions at time of contract and closing, location, and physical characteristics.
A way of looking at things from a different perspective or finding the positive intention of a behavior is called ________. Contingency Etiquette Framing Outlining
Framing This method of avoiding conflict focuses on putting a different frame around an event or experience. For example: "Not losing a daughter but gaining a son."
To ensure win-win results in your real estate practice, you must know your desired outcome, keep your senses aware, and ______. Define your goals precisely Have a choice of responses Have a clear idea of your goals Program your brain to seek out and notice the possibilities
Have a choice of responses To ensure win-win results in your real estate practice, you must know your desired outcome, keep your senses aware (acuity), and have a choice of responses (flexibility).
Marco, a buyer in Atlanta, wants to terminate his buyer's representation agreement with his agent. What is TRUE about this situation? He can not terminate the agreement under any circumstances. He can only terminate after the protected period has ended. He may or may not owe an amount under the terms of the agreement. He's not allowed to terminate until the terms of the contract have been performed.
He may or may not owe an amount under the terms of the agreement. Termination of the agreement may or may not relieve the buyer of any amount owed under the terms of the agreement; this will be up to the parties to determine.
Which of the following may be a result of sluggish real estate market conditions? Higher-than-normal average DOM Inaccurate competitive market analysis numbers Low number of expired listings Rising housing prices
Higher-than-normal average DOM A sluggish market will likely result in lower housing prices, a higher number of expired and terminated listings, and higher average DOM.
What's another term for front-end ratio? Housing Loan-to-value Payment Total debt
Housing The housing ratio is also known as a front-end ratio.
What's the term for when a contract requires one or both of the parties to break the law? Duress Illegality Incompetence Mistake
Illegality An illegality means a contract requires one or both parties to break the law. Such contracts are void since courts cannot enforce such contracts.
The 203(k) loan can be used to ______. Buy investment property in blighted areas Include the cost of a solar water heater into a home loan Purchase a rental that you plan to make more energy efficient Refinance a vacation home
Include the cost of a solar water heater into a home loan The FHA has an energy-efficient mortgage program that packages the allows the buyer to add the cost of energy-efficient home improvements to the loan on a 203(k) rehabilitation loan, with the full amount insured by FHA.
Which of the following could be different from the amount on the initial Loan Estimate and can impact the monthly payment? Closing costs Interest rate Loan amount Prepayment penalty
Interest rate
Applying a capitalization rate to the net operating income is one way to determine a property's ______ value. Assessed Depreciated Investment Market
Investment Applying a cap rate to the NOI is one way to determine a property's investment value.
Which of the following is true about a drive-by BPO? It doesn't consider public records. It doesn't require a visit to the property. It includes verification of room size and count. It provides general information about property condition.
It provides general information about property condition. Because a drive-by BPO doesn't include an interior review, it provides general information about property style, age, exterior condition, apparent occupancy status, estimated number and size of rooms, and a rough comparison to other similar properties.
How does a 5/1 ARM work? It's fixed for an initial rate period of five years, and then it resets each year to be fixed at the going interest rate that's in place on January 1 of each year. It's fixed for five years and adjusts for the remaining 25 years. It's fixed for one year, adjusts for five years, and then repeats the cycle over the life of the loan. The interest rate changes every five years.
It's fixed for five years and adjusts for the remaining 25 years. A 5/1 ARM is fixed for five years, and then begins to adjust for the remaining 25 years.
Which of the following types of risk stems from the misuse or misappropriation of content, potential violations of trademarks and copyrights, and potential violations of agency relationships and fiduciary responsibilities? Ethical risk Legal risk Practical risk Regulatory risk
Legal risk Legal risk stems from the misuse or misappropriation of content, potential violations of trademarks and copyrights, and potential violations of agency relationships and fiduciary responsibilities.
Select the statement that best describes a licensee's responsibility related to disclosing material facts. Licensees aren't permitted to disclose material facts if disclosure conflicts with the fiduciary duty of loyalty. Licensees must disclose only material facts specific to the physical condition of a property. Licensees must disclose to all parties any known material facts about a transaction. Licensees should determine what their state requires them to disclose.
Licensees should determine what their state requires them to disclose. Laws regulating licensee disclosure of material facts differ from one state to the next. Licensees should thoroughly understand their state's disclosure laws.
Lauren, a real estate professional, carelessly gives a client a false statement in response to a question, because she was only half listening. This an example of what? Erroneous misrepresentation Inadvertent misrepresentation Innocent misrepresentation Negligent misrepresentation
Negligent misrepresentation Negligent misrepresentation involves a careless or inadvertent false statement in circumstances where care should have been taken.
The majority of what we communicate is conveyed through our ________. Clothing styles Etiquette Nonverbal cues Word choice
Nonverbal cues
Caleb, an appraiser, has not yet completed his appraisal, but MLS figures and public records indicate that the property will "make value." If the lender asks Caleb for an opinion on that matter, Caleb may ________. Not answer the question Provide a preliminary appraisal report based on available date Provide his opinion as long as he warns the lender that the appraisal is not yet complete Refer the lender to the early data, and state that it supports the contract price
Not answer the question Appraisers may not give estimates except under their licensed duties, and only after completing the appraisal.
A beneficiary, trustor, and trustee are the parties involved when the finance instrument is a ______________. Note with deed of trust Note with mortgage Promissory note Security deed
Note with deed of trust The beneficiary is the lender, the trustor is the borrower, and the trustee is the third party who reconveys title when the loan is paid off.
Regarding buyer representation agreements, Georgia REALTORS® ______. Offers several forms, but only to association members Offers several sample agreements that a brokerage can use as is or adapt Offers some guidance but no actual forms Provides the the Exclusive Buyer Brokerage Agreement, which brokerages are required to use
Offers several sample agreements that a brokerage can use as is or adapt Georgia REALTORS® provides several sample buyer representation agreements that a brokerage can use as is or adapt.
Where do most errors related to contracts occur? Commissions Contingencies Omissions Referral fees
Omissions Most errors pertaining to contracts involve omissions.
The premium for title insurance is paid ________. Annually for as long as the property is owned Monthly for as long as the property is owned Once Only if a title issue arises
Once The premium for title insurance is a one-time, non-recurring fee. The title policy is subject to certain exclusions and exceptions.
Your client's offer asks that the seller replace the roof, in addition to other requests. The seller agrees to some of the other requests, but not the roof, which is a big deal to your client. You should do which of the following? Ask your client to immediately decide whether or not the roof is necessary before looking through the rest of the offer Instruct your client to accept the offer without further changes Send the counteroffer back without showing it to your client Skip the roof issue for now and gain your client's approval on the rest of the offer
Skip the roof issue for now and gain your client's approval on the rest of the offer When negotiating, gain approval on as many items as possible and return to the points of contention later.
What's an order of specific performance that requires a seller to sell the home to the buyer generally based on? Mutual assent The assumption that each piece of real estate is unique The elements of a valid contract The statute of frauds
The assumption that each piece of real estate is unique An order of specific performance for a seller to sell the home to the buyer is based on the assumption that each piece of real estate is unique and that money alone may not adequately compensate the buyer for loss of the desired property.
Whose responsibility is it to review the preliminary title report? The buyer and the buyer's agent The lender The title insurance representative The transaction coordinator for the lender
The buyer and the buyer's agent The buyer and buyer's agent must review and approve the preliminary title report after the closing or the escrow agent orders it.
For homebuyers, which of the following is a benefit of the property condition disclosure statement? The disclosure statement forces sellers to make home repairs with their own money. The disclosure statement hides material facts about the home, making it easier for the buyer to secure financing. The disclosure statement prevents the buyer from bringing legal action against the seller. The disclosure statement provides buyers with an insider's perspective into a home they know little about.
The disclosure statement provides buyers with an insider's perspective into a home they know little about. For homebuyers, the disclosure statement provides an insider's perspective into a home they know little about, adding transparency to the transaction, and making it less of a risk.
Why is 2.5 a better debt service ratio than 1.8? A debt coverage ration of less than two indicates negative cash flow. A debt service ratio of 1.8 indicates that there is only enough income available to pay 80% of the annual mortgage payments Lenders won't consider debt coverage rations of less than 2.0. The higher the debt service ratio, the more income the investor will have to cover the debt, and therefore, the less risk.
The higher the debt service ratio, the more income the investor will have to cover the debt, and therefore, the less risk. Higher debt service ratios are better, because they mean that the net operating income is higher when compared to the debt service.
When completing a CMA, what might be indicated if a comparable property had a quick sale? It's a buyer's market. The market for similar homes is good. The other agent was incompetent. The property was priced too high.
The market for similar homes is good. A quick sale of a comparable home usually indicates that the market for similar homes will be good.
The capitalization process uses a capitalization rate, which is based on what? Estimates of future sales Last year's sales The performance of comparable properties The stock market
The performance of comparable properties The capitalization rate is based on the performance of comparable properties. It's the expected rate of return on an investment and can be calculated using the formula of: NOI ÷ V = R, or net operating income ÷ value = rate.
When communicating with someone, keep in mind that ______ is the most important part. Professionalism The response Your posture Your vocabulary
The response The response you receive indicates whether or not you've communicated effectively.
How nearby should a comparable be to the subject property? Five miles Same state There is no firm proximity rule Two miles
There is no firm proximity rule There is no firm proximity rule for comparables. Proximity counts, but it is not the only factor.
Which of these has examples of antitrust violations common to real estate? Fraud, concealment, and misrepresentation Profiteering, racketeering, and domineering Puffery, hyperbole, and exaggeration Tie-in arrangements, market allocation agreements, and group boycotting
Tie-in arrangements, market allocation agreements, and group boycotting In addition to price fixing, antitrust violations include tie-in arrangements, market allocation agreements, and group boycotting.
What contract is considered binding unless a party successfully asserts a relevant defense, such as for breach of contract? Disposable Pending Void Voidable
Voidable Voidable contracts are binding unless or until a party successfully asserts a relevant defense/breach.
What is the most common way that asbestos enters the body? Asbestos coating in water pipes can contaminate drinking water, which is then ingested. Asbestos in paint can be released into the air as the paint peels, which is then inhaled or ingested. When asbestos fibers decay or are disturbed, the friable particles can be inhaled. When rocks and soil decay, asbestos gas is released, which is then inhaled.
When asbestos fibers decay or are disturbed, the friable particles can be inhaled. Asbestos is a fibrous material found in certain types of tile, insulation, and siding. The fiber particles become friable and can damage the lungs if inhaled.
A pre-listing appointment serves several purposes. Which of the following is NOT one of those purposes? The more time the seller spends with you, the higher the level of trust. You can eliminate the need to consult tax records regarding square footage. You can see the property firsthand and ask appropriate questions about its condition. You will be able to prepare a more accurate listing price.
You can eliminate the need to consult tax records regarding square footage.
Using preprinted purchase agreement forms is the standard, but ______. Most states allow licensees the option of using them or not. You can change the language of the form as it suits the situation You may write your own agreement when a preprinted form isn't appropriate You should know what to fill in the blanks
You should know what to fill in the blanks Using preprinted forms is the standard, but you should know what to fill in the blanks, what words or phrases should be ruled out because they don't apply, and what additional clauses or agreements should be added.