Brokers Exam Attempt 2 (70%)
Which of the following would be considered a trigger item under Regulation Z? A) "A steal at only $175,000!" B) "Low monthly payments." C) "Only $10,000 down." D) "FHA financing available."
The answer is "Only $10,000 down." Specific credit terms, such as a down payment, monthly payment, dollar amount of the finance charge, or term of the loan, are referred to as trigger items. If such items are included in any advertisement, the advertisement must include additional information required by the regulation.
A buyer offer of $295,000 was accepted, and a loan was negotiated for 80% at 7% for 25 years. The closing took place on January 5, and the buyer's first PITI payment is due March 1. Using a 365-day year, with the seller having the day of closing, how much interest would the buyer be debited on the closing statement?
The answer is $1,176.77. Step 1, determine the loan amount $295,000 × .80 = $236,000. Step 2, determine the interest $236,000 × 7% (.07) $16,520. Step 3, determine what the buyer owes. The buyer will owe 26 days for January (31 - 5 = 26 days) and none for February as the March payment will pay the interest in arrears for February. Total amount due ÷ Total days × Days owed, $16,520 ÷ 365 × 26 = $1,176.77.
A property is now worth $117,978. If it has appreciated 6% each year for the past 2 years, what was the original investment?
The answer is $105,000. Year 1 $117,978 ÷ 106% (100% + 6%) (1.06) = $111,300 Year 2 $111,300 ÷ 106% (1.06) = $105,000
Two years ago, a buyer paid $175,000 for a house. Since that time, the property has depreciated 3% each year. What is the value of the property today?
The answer is $164,658. $175,000 - 3% (.03) - 3% (.03) = $164,657.50 round up to $164,658
Four units are renting for $450 each per month. There is a 5% vacancy factor and annual expenses are $3,547. The owner wants an 8% return on his investment, and the property has additional monthly income of $464. What is the effective gross income of the property?
The answer is $25,810. 4 × $450 × 12 = $21,600 $464 × 12 = $5,568 AI $21,600 + 5,568 = $27,168 PGI $27,168 - $1,358.40 (5% VR) = $25,809.60 round to $25,810
A salesperson sells a $150,000 home listed with another brokerage. The listing commission is 6.5% of the selling price, with 35% going to the listing broker, and 60% belonging to the cooperating broker. The salesperson and his broker agreed that she would receive 55% of any commission that she generated for the brokerage firm. For this transaction, the salesperson is entitled to receive
The answer is $3,217.50. $150,000 (sales price) × 6.5% (.065) = $9,750 (listing commission) $9,750 × 60% (.60) = $5,850 (cooperating broker's commission) $5,850 × 55% (.55) = $3,217.50 (the salesperson's commission)
A real estate brokerage firm used a third-party email service to send an unsolicited email to announce a reduced price on a listed property. A person who received the email chose to opt-out from receiving additional emails from the licensee. The opt-out request must be honored within
The answer is 10 days. The CAN-SPAM Act requires that requests to opt-out of unsolicited emails must be honored within 10 business days. The Act also requires that the method to opt-out must be prominent within the email, and that the receiver must be able to opt-out from receiving future emails for at least 30 days after the message is sent.
A loan fee charged by a lender to increase the lender's yield on a loan is
The answer is a discount point. Discount points are used to increase the lender's yield on its investment. The yield is the profit the lender makes on a loan, the spread between the cost of acquiring the funds lent to the borrower, and the interest rate charged to the borrower. Interest is the sum paid or accrued in return for the use of a lender's money. The principal is the balanced owed on the original loan amount.
A homeowner has equity in their property and would like to consolidate some of his debt. Which of the following loans would be the best for the homeowner? A) A home equity loan B) A reverse mortgage C) A new term loan D) An ARM loan
The answer is a home equity loan. This loan is designed to allow the homeowner to tap into equity to pay off bills. A reverse mortgage may only be used by those over 62 and would not consolidate debt. A term and an ARM loan would not be used in this situation.
All of the following documents would create an agency relationship EXCEPT A) a listing contract. B) a property management contract. C) a buyer agency contract. D) a sales contract.
The answer is a sales contract. A sales contract is a contract between an owner and a buyer to purchase a property. It does not create a relationship in which a person acts on behalf of another. The other contracts create agency relationships establishing the duties of a brokerage firm on behalf of a principal.
General real estate property taxes are also known as
The answer is ad valorem taxes. General real estate property taxes are based on the value of the property being taxed and are known as ad valorem taxes. They are specific, involuntary liens. Special assessments are taxes levied on real estate to fund public improvements beneficial to the property. Real estate property taxes are not appropriation funds taken from local or state revenues. Real estate property taxes are specific, involuntary liens. Voluntary liens, such as mortgages, are placed on real property with the consent of the owner.
A legally enforceable contract in which two parties exchange promises to do something for each other is known as a(n)
The answer is bilateral contract. A bilateral contract is one in which both parties make a promise to the other. A unilateral contract is a one-sided contract in which one party makes a promise to induce a second party to do something. A void contract lacks one or all of the essential elements of a contract. An option contract is a unilateral contract in which only one party makes a promise to perform, in this case to hold open the right for a buyer to purchase a property in the future.
Abandoned factories, former dry cleaning properties, and vacant gas stations that may contain environmental hazards are classified as
The answer is brownfields. A brownfield site is real property that is affected by the presence or potential presence of a hazardous substance. Brownfields that are not corrected may be prevented from redevelopment and can cause decreased property values in a neighborhood. Wetlands are land areas with significant groundwater at or near the surface that produces a wetland plant community. Wetlands are often subject to federal, state, or local conservation controls.
In determining whether a prospective buyer can afford a mortgage, a lender will typically use percentages based upon the A) buyer's gross monthly income and projected housing expenses. B) buyer's gross monthly income and most recent federal taxes. C) buyer's gross monthly income, total housing expense, and debt expenses. D) buyer's gross monthly income and debt expenses.
The answer is buyer's gross monthly income, total housing expense, and debt expenses. In addition to reviewing a borrower's credit score, loan underwriters and automated underwriting programs use a formula allowing a maximum percentage of the buyer's gross monthly income for the monthly cost of buying and maintaining a home (for example, 28%). That cost includes mortgage principal and interest, plus amounts for taxes and property insurance. In addition, the formula sets a maximum percentage of the buyer's gross monthly income allowed for long-term debts such as car payments, credit cards, student loans, and other mortgages (for example , 36%).
The income approach as used by an appraiser makes use of which of the following? A) Appreciation B) Depreciation C) Equalization D) Capitalization
The answer is capitalization. Capitalization is a method of estimating today the future value of an income stream. Depreciation is the loss of value for any reason. Appreciation is an increase of value. Equalization is used by tax assessors and is a process of adjusting the assessed rate in a taxing district to achieve more conformity with other tax districts.
When a property is misrepresented because defects are not disclosed to a buyer, the buyer may be able to rescind a sales contract or receive A) incidental damages that occur in every real estate transaction. B) a return of any earnest money paid to the seller. C) compensatory damages for repair of the defect. D) special damages due to the inconvenience to the buyer.
The answer is compensatory damages for repair of the defect. Compensatory damages are a monetary payment for the repair of the defect. In some cases, a court may award other payments to the buyer for flagrant misrepresentation.
A lender offers to take over the title of a property that is in foreclosure without going through the foreclosure process. This is called a(n)
The answer is deed in lieu of foreclosure. A deed in lieu of foreclosure is an alternative to foreclosure and is carried out by mutual agreement between the lender and the borrower rather than by a lawsuit. A reconveyance deed is used by a trustee under a deed of trust to return title to the trustor. In an assumption, a buyer purchases a property by assuming the seller's debt and becoming personally obligated for the payment of the entire debt. A subordination agreement moves a first mortgage lien to a secondary position by mutual agreement of the two lenders.
A condominium form of ownership is officially established when the A) developer records a declaration in the public record. B) condominium owners' association is established. C) unit owners all file their documents in the public record. D) construction of the improvements is completed.
The answer is developer records a declaration in the public record. When a developer declares in the public record the existence of a condominium, the condominium is officially established. The declaration includes survey, legal description, bylaws, restrictive covenants, and architect drawings. Construction of improvements, the establishment of an owners' association, and sale of individual units follow the establishment of the condominium.
An annual crop that is considered personal property is called a(n)
The answer is emblement. Annually cultivated crops such as fruit, vegetables, and grains are known as emblements and are considered personal property. A fixture is an item that was once personal property, but that has been attached or affixed to real estate and has become real property. A fixture is tangible and transfers with the property unless detached from the property prior to its sale. An appurtenance is anything that attaches to and runs with the land such as improvements, rights and fixtures.
A buyer and a seller have entered into a binding contract for the sale of real estate. During this phase and until closing, the buyer has which type of title?
The answer is equitable. The buyer has equitable title, which recognizes that he has an interest but has not received legal title. Legal title will pass at closing when the seller gives the buyer the deed.
A contract entered into without duress, menace, misrepresentation, or fraud means that it meets the legal requirement of the
The answer is full consent. Full consent means a contract was entered into without duress, menace, misrepresentation, or fraud.
The clause in the deed that conveys the rights and privileges of ownership is called the
The answer is granting clause. The granting clause states the grantor's intention to convey the property at the present time. An exception and reservations clause notes any encumbrances, reservations, or limitations affecting the title. The convent of seisin is the grantor's promise of ownership and ability to convey title in a general warranty deed. The acknowledgement is a formal declaration under oath that the person signing the deed does so voluntarily and that the signature is genuine. The signature is not required to make a deed valid but is often required to record the deed.
The primary purpose of a profit and loss statement is to analyze A) how the property was managed and make projections for the new year. B) how the operating budget was calculated and budget projections for the new year. C) the ratio of the rate of return to the debt service. D) the ratio of the operating expenses to the operating income.
The answer is how the property was managed and make projections for the new year. The purpose of a profit and loss statement is to analyze how the property was managed, what changes should be made, and projections for the new year. How budgets are calculated and ratios for expenses or rates of return are not part of the profit and loss statement.
The holder of a reversionary interest in a qualified fee estate might be able to obtain title to the property A) if the holder of the qualified fee estate sells the property. B) if the conditions changed and the owner was unable to meet the requirements. C) only if the remainderman died first. D) if the holder of the qualified fee estate breaks the deed condition.
The answer is if the holder of the qualified fee estate breaks the deed condition. The holder of a reversionary interest retains the right to repossess a property if a deed condition is not met or broken. If the condition is broken, the holder of the reversionary interest can go to court to try and obtain ownership of the property. If a remainderman dies, the remainder interest in a life estate passes to the heirs. The holder of a reversionary interest does not have the right to change the conditions of a qualified fee estate. A holder of a qualified fee estate may sell the property so long as the conditions or limitations of the qualified fee estate continue.
Under which type of lien are both the real property and the personal property of the debtor sold to pay the debt?
The answer is judgment lien. A judgment is a general, involuntary, equitable lien on both real and personal property owned by the debtor. A mechanic's lien is a specific lien against real property filed by a contractor, subcontractor, or supplier when an owner or contractor has not paid for work or supplies for improvements on a property. A real estate tax lien is a statutory lien against real property for nonpayment of taxes. An assessment lien is a special assessment levied on real property to fund public improvements to property.
Mortgagee title insurance policies protects who?
The answer is lenders. A mortgagee title insurance policy protects the mortgagee—the lender. An owner's policy protects the owner, heirs, and devisees.
The system of legal description that defines a parcel of land by tracing its perimeter is known as
The answer is metes and bounds. A metes-and-bounds description traces a parcel's perimeter by starting at a POB (point of beginning) and always ending back at the POB, so that the described tract is completely enclosed. The rectangular survey system divides land into rectangles and describes those rectangles with principal meridians and base lines. The lot and block system uses lot and block numbers in a plat map to describe property and is often used in urban areas. A street address is not a legal description.
The provision in a listing contract that gives additional authority to the broker and obligates the broker to distribute the listing to other brokers is a(n)
The answer is multiple listing clause. Listing agreements usually include clauses that give authority to a broker to distribute the listing to other brokers. A multiple listing service (MLS) is a marketing organization whose broker members make their own exclusive listings available through other brokers. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states. An open listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property.
According to TRID disclosure rules, when must the Loan Estimate form be provided to consumers?
The answer is no later than three business days after the loan application is received by the lender. A business day includes Saturdays the lender is open for business.
Rent is usually A) prorated at closing between the lessor and lessee. B) paid in advance. C) prorated at closing between the tenant and the owner. D) paid in arrears.
The answer is paid in advance. Rent is paid in advance by the tenant. Rent will always be prorated between the seller and new buyer, with the seller owing the buyer for the portion of the month the buyer owns the property but does not have possession, which belongs to the tenant who paid rent.
The owners of the smaller model of houses in the neighborhood may find that the values of their homes are affected by what principle? A) Competition B) Progression C) Increasing returns D) Regression
The answer is progression. Under the principle of progression, the smaller homes in an area with larger homes will have their value increased. The principle of regression is the opposite of progression and states that the owners of larger homes in an area with smaller homes may find the values of their homes decrease. Competition is the interaction of supply and demand causing prices for property to rise or fall. Under the principle of contribution the law of increasing returns applies when money spent on improvements to a property produce an increase in income or value.
A broker is hired as a buyer's agent. The buyer confides he filed for bankruptcy two years ago. The buyer would like to find a seller who is willing to carry the loan. In this situation, a correct statement about the broker's responsibility regarding disclosure of the bankruptcy when presenting the offer to purchase is that the broker is A) not required to disclose the bankruptcy because the broker has no agency relationship with the seller. B) required to disclose the bankruptcy because it is a material fact-information important to the seller's evaluation of the offer. C) not required to disclose the bankruptcy because the seller might reject the offer. D) required to disclose the bankruptcy under ECOA.
The answer is required to disclose the bankruptcy because it is a material fact-information important to the seller's evaluation of the offer. The broker is obligated to disclose any material fact-something that might make a party to the transaction change their mind, regardless of the agency or non-agency relationship the broker has with the seller. The ECOA is a federal law prohibiting discrimination in the granting of credit and does not regulate disclosures required by in a real estate transaction.
All of the following are true of the government's police power EXCEPT A) set land use policy to demonstrate the authority of the state. B) take private land if the public will benefit from the taking. C) it is used to ensure the health, safety, and welfare of the community. D) set private controls in certain subdivisions on the types of floor plans, fencing, and house colors.
The answer is set private controls in certain subdivisions on the types of floor plans, fencing, and house colors. The government's right of police power is used to ensure health, safety, and welfare within a community along with setting land use policy and the right to take private land for public use or benefit. Government rights do not include the private right to control issues within only certain neighborhoods; these are known as deed restrictions and are usually set by the original developer.
When a grantor signs a deed, the basic purpose of acknowledgment before a notary public is to
The answer is show the grantor's signature was given voluntarily, without duress. An acknowledgment is a formal declaration that the person who signs a written document does so voluntarily and that the signature is genuine. The acknowledgement will not ensure the validity of the title, the identity of the grantee, or the lack of encumbrances.
The relationship between a broker and a seller is generally what type of agency? A) Universal agency B) Implied agency C) Special agency D) General agency
The answer is special agency. A special (or limited) agent is authorized to represent the principal in a specific act or business transaction, under detailed instructions from the principal. The relationship between a brokerage and seller is usually a special agency, as is the agency between a brokerage and a buyer client. A general agent may represent the principal in a broad range of matters. A property manager is typically a general agent for the owner. A universal agent is a person empowered to do anything the principal could do personally, as is authorized in a power of attorney. An implied agency is usually created unintentionally or accidentally by the actions of the parties.
The legal proceeding or legal action brought by either the buyer or the seller under a purchase contract to enforce the terms of the contract is known as
The answer is suit for specific performance. In a suit for specific performance, the court may force the buyer or seller to go through with the sale and convert the property as previously agreed. Lis pendens is a recorded legal document giving constructive notice of an action filed in court. An attachment is the legal process in which a defendant in a lawsuit seizes property by judicial order or levy, holding the property as security for satisfaction of a judgment. Liquidated damages is the seller's remedy if the buyer is in default, which is keeping the earnest money.
A tenant who holds possession of a landlord's property without a definite lease term but with the consent of the landlord has a A) tenancy at sufferance. B) holdover tenancy. C) tenancy in common. D) tenancy at will.
The answer is tenancy at will. An estate (tenancy) at will gives the tenant the right to possess property with the landlord's consent for an unspecified term. It continues until it is terminated by either party giving notice. A tenancy at sufferance arises when a tenant continues to possess the property without the landlord's consent after the tenant's rights expire. Tenancy in common is a form of co-ownership in which each owner holds an undivided interest in a property as if each were the sole owner. A holdover tenancy is created when a tenant with an estate for years holds on to a property after the lease term expires when no new lease has been signed.
Adaptations of property specifications to suit tenant requirements are A) generally not a good idea. B) tenant improvements. C) tax-exempt improvements. D) prohibited by most nonresidential leases.
The answer is tenant improvements. Tenant improvements are more likely to occur in commercial rental spaces then in residential. Both the owner and the tenant benefit from improvements; they are not tax-exempt.
An appraiser has been employed to estimate the market value of a parcel of vacant land. The resulting appraisal report would NOT include reference to the A) most probable price the parcel will bring. B) physical dimensions of the parcel. C) highest and best use of the parcel. D) listed price of the parcel.
The answer is the listed price of the parcel. The listed price of the parcel is the price that the owner wants for the property. It may or may not be a realistic price or reflect the fair market value of the property. Highest and best use, the most probable price the parcel will bring, and the physical dimensions of the parcel are all applicable to the analysis by the appraiser in determining the market value of the parcel.
A real estate broker learns that her neighbor wishes to sell his house. The broker knows the property well and is able to persuade a buyer to make an offer for the property. The broker then asks the neighbor if she can present the offer, and the neighbor agrees. At this point, which statement is TRUE? A) The broker may not be considered the procuring cause without a written contract. B) The neighbor is obligated to pay the broker a commission for producing an offer to purchase. C) The neighbor is not obligated to pay the broker a commission. D) The buyer is obligated to pay the broker for locating the property.
The answer is the neighbor is not obligated to pay the broker a commission. The broker procured a buyer for the property on the basis of an oral agreement with her neighbor, the seller. State real estate commissions generally require a commission agreement to be in writing and signed by both parties, the broker and the client. The broker in this case has no written contract for her services with either the seller or the buyer and is not entitled to a commission from either even if she is the procuring cause of the sale.
A tenant has signed a two-year lease on a beach property. One year after the start of the lease the landlord dies and the ownership is transferred to his heirs who decide to sell the property. The tenant is sent notice of the intent to sell. In this case, what will be the status of the tenant's lease upon closing of the sale? A) The tenant will need to negotiate a new lease rate with the new owner. B) The lease was terminated upon the death of the owner. C) The lease is terminated and the tenant will need to move out by closing and will have the deposit returned within 30 days. D) The tenant will still have one year left on the lease but should be notified of who has the security deposit.
The answer is the tenant will still have one year left on the lease but should be notified of who has the security deposit. Estates for years do not terminate upon the death of the parties.
A person approaches an owner and says, "I'd like to buy your house." The owner says, "Sure," and they agree on a price. What kind of contract is this?
The answer is unenforceable. Until the parties put the agreement into writing it is unenforceable, since under the statute of frauds all transfers of real estate must be in writing.
A contract that exchanges a promise for performance is
The answer is unilateral. In a unilateral contract like an option the seller promises to sell if the buyer decides to buy (perform). Bilateral contracts have both parties promising to each other. An implied contract is created by actions and an executory contract is yet to be performed.
The physical characteristic of real estate that means that every parcel of land is different is known as...?
The answer is uniqueness. Uniqueness is the concept that no two parcels of property are exactly the same or in the same location. An individual parcel has no substitute because each is unique. Immobility means that the geographic location of a parcel of land can never be changed. Indestructibility means that land is durable and cannot be destroyed. Scarcity is an economic characteristic of land, meaning that when the supply of land is limited, the price of the land increases.
The status of a contract that meets all the essential elements and is enforceable is called a(n)
The answer is valid contract. When a contract meets all of the essential elements and is enforceable, it is a valid contract. Duress, fraud, misrepresentation, and minors always make contracts voidable. Void or unenforceable real estate contracts lack an essential element and do not exist in the eyes of the court for enforcement.
A contract for the sale of real estate that does not state the consideration and provides no basis on which the consideration could be determined is considered
The answer is void. Consideration is an essential element of a real estate contract along with competent parties, meeting of the minds, lawful objective, and in writing. Without all the elements a contract is void and cannot be voidable, executory, or enforceable.
To determine whether a location can be put to future use as a retail store, you would examine the
The answer is zoning ordinances or regulations. Zoning ordinances regulate how properties in various parts of a jurisdiction may be used. Nonconforming uses refer to uses existing prior to current zoning ordinances but now permitted by a jurisdiction. Building codes are ordinances that specify construction standards that must be met when constructing or repairing buildings.
