CE Shop Practice Sales Exam Questions
A small duplex sold for $550,000. Each unit can gross $2,500 in monthly rent for the owner, and there are no additional income sources from the property. What's the GRM?
110 To find the GRM, divide the sales price by the gross monthly rent, remembering that there are two units, so a total monthly rent of $5,000. So, $550,000 ÷ $5,000 = 110.
Tess has $385 in monthly non-housing debt obligations, and her anticipated mortgage payment is $1,103. Her gross income is $7,598, and her net income is $5,815. What's her total DTI (debt- to-income ratio)?
19.58% Total DTI includes housing and other monthly debt obligations and is calculated using gross income. The DTI formula is: monthly debt ÷ monthly gross income.
An installment sales contract is also known as _______.
A contract for deed An installment sales contract, also known as an installment land contract or a contract for deed, allows the buyer to pay the seller for the property over time.
What is slab on grade?
A foundation Slab on grade is a type of foundation. Other types include a crawl space or a full or partial basement.
The value principle of ______ is the basis of the income approach to appraisal.
Anticipation Income approaches to appraisal are based on defining the present value of future income.
If a seller asks a buyer to waive the inspection contingency, how could the transaction process transpire and still protect the buyer?
Buyer has inspection, buyer makes offer, seller accepts offer If the seller won't accept an offer with an inspection contingency, a buyer could have a professional inspection done before submitting the offer and waive the inspection contingency if the buyer still wanted to make an offer.
Another term for a valuation is ______.
Formal appraisal Another term for a valuation is a formal appraisal. This is a professional appraiser's unbiased opinion of value.
Douglas is the buyer's agent for a transaction in which May (from a different brokerage) listed her seller client George's property. From whom will Douglas receive his compensation?
From his own broker Licensees may receive compensation for real estate services only through their broker.
When structuring an offer, if a seller's need is related to obtaining a specific price, what can a buyer offer to meet the seller's need?
Full price or more than full price If a seller is most concerned with obtaining a certain price, an offer at or above full price meets the need. A buyer could ask the seller to pay some of the buyer's closing costs.
A poor floor plan is an example of which type of depreciation?
Functional obsolescence Functional obsolescence is a form of depreciation or loss in value caused by defects in design.
Dry rot in wood is caused by ______.
Fungi Unlike other wood-damaging organisms, dry rot is caused by fungi, not insects. These fungi like to feed on the cellulose and lignin in the wood-the parts that make it strong and rigid.
______ chemicals remain in public water supplies after water treatment.
Many Many chemicals remain in the water supply even after water treatment.
Which of these actions by real estate licensees would violate Delaware's Consumer Fraud Act?
Representing a listing as having all new appliances, even though the newest one is two years old. The Consumer Fraud Act prohibits any sale, lease, or advertising that deceives or misrepresents a product. Staging a home doesn't misrepresent, nor does speculating about a garden, but describing old appliances as new does.
Any agreement between competing firms that restricts trade, discourages competition, or _______ is a violation of antitrust law.
Restricts choices for consumers Any agreement that restricts trade, discourages competition, or restricts choices for the consumer is a violation of antitrust law.
The gross income multiplier for an area is 12x. If the estimated annual rent is $10,000, what's the property's estimated value?
$120,000 If the subject property's gross market rent is $10,000 and the multiplier extracted from the local market is 12x, the estimated value of the subject is $120,000. GIM x gross annual income = value
Giant Industries has a $674,232 gross operating income, operating expenses of $329,129, and other expenses totaling $38,719. What is the net operating income?
$345,103 The formula for finding net operating income is: gross income - operating expenses = net operating income. So, $674,232 - $329,129 = $345,103. Other expenses like loan interest and debt repayment aren't included in this calculation.
What's the longest sentence someone can serve in prison for an antitrust violation?
10 years Penalties can include prison sentences up to 10 years for severe violations.
Daniel is leasing a property and has negotiated a purchase price for the property with his landlord, John. John is applying a portion of Daniel's rent payments toward the purchase price of the property. What kind of financing is this?
A lease with option to buy This is a lease with option to buy.
What is the schedule of exceptions?
A list of items title insurance won't cover The schedule of exceptions on a title insurance policy lists the items that the insurer will not cover.
What's a trio?
A report that shows the parcel map, owner of record, and property profile The trio report contains information about the property, a parcel (assessor's map), and the deed with a legal description. It can be used to determine whether the seller has legal title, and whether other owners must agree to the sale.
Which of the following real estate transfers is exempt from the requirement to provide the Seller's Disclosure of Real Property Condition Report in Delaware?
A single-family home transferred to or from a government entity Some residential property transfers are exempt from the requirement to provide the property condition disclosure form. Exemptions include transfers to/from a government entity, transfers between co- owners, and transfers between spouses.
If the comparable is inferior to the subject house, _______.
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.
Which offers must a licensee present to a seller client?
All offers Licensees must present and explain all offers. The only exception is when clients ask you to not present offers that don't meet specific criteria. But get those instructions in writing to protect yourself.
The appraisal on Jean's property came in at $22,000 less than the agreed-upon sales price, so the buyer, Thomas, wants to renegotiate the terms. If they can come up with a new price that is satisfactory to both parties, what will they use to document this?
Amendment A change to an existing sales contract is called an amendment, which changes one or more of the contract's original terms.
Which act sets guidelines for public and common use areas at housing developments?
Americans with Disabilities Act The Americans with Disabilities Act generally applies to commercial facilities and facilities with public accommodation, but does cover public and common spaces in residential housing.
Amy, who's represented by Brian, is purchasing a house in Delaware from Claude, who's represented by Davis. Which of these people must sign the Delaware purchase agreement?
Amy and Claude Both parties to a Delaware purchase contract-the buyer and seller-must sign that contract.
What is a special flood hazard area?
An area where flood insurance is mandatory This is an area in which the National Flood Insurance Program's floodplain management regulations must be enforced and where the purchase of flood insurance is mandatory.
A CMA or a BPO is an example of ______.
An informal estimate of market value A CMA or a BPO is an example of an informal estimate of market value. Remember, it's good practice to never call anything you'll produce as a real estate professional an "appraisal."
Millicent, a buyer, and Marvin, a seller, agreed to all terms of their sales contract on March 5. Marvin will move out April 10, and Millicent will move in April 15 but will be renting for two weeks until the property officially transfers hands on April 30. What is the closing date?
April 30 The closing date is the date that the seller transfers the property to the buyer. It's often, but not always, the same day as the buyer possession.
What should you do after an offer is received on your seller client's property?
Assist the seller with a response to the offer, including a counter-offer, if necessary. When an offer is received, your task is to help your seller client review the offer and prepare a response.
Margie is a building inspector. She will issue a ______________________, but only after she has completed her final inspection of a newly constructed building and approved it.
Certificate of occupancy A certificate of occupancy allows the building to be occupied.
Who typically performs an appraisal?
Certified appraiser Only certified appraisers do appraisals. It's extremely important that real estate licensees don't refer to a CMA or BPO as an appraisal.
A licensee has several tasks to perform for seller clients. What's one of those tasks?
Communicate all offers and counter-offers to the sellers. One of a licensee's tasks is to communicate all offers and counter-offers to the seller, which upholds the licensee's duties of disclosure, accounting, and reasonable skill and care.
You've just received a trio from a title company. Along with an assessor's map and property profile, what other document is included?
Deed A trio contains a property profile (which has ownership, parcel, and tax information), an assessor's map, and a deed, which show the owner of record, how title is vested, and the date of recording.
Which provision of the Delaware residential sales contract specifies that the buyers' earnest money may only be disbursed under certain named conditions?
Disbursement of Deposits Under the Delaware sales contract, the earnest money deposit may only be disbursed under the following conditions: settlement or closing, mutual, signed release, or court order.
Dorcas is a Delaware licensee, so she's not allowed to _______ as a statutory agent.
Draft legal forms presenting offers and counter-offers on behalf of her clients Dorcas isn't allowed to draft legal forms, which would be the unauthorized practice of law. She can help parties prepare offers and counter-offers using forms drafted by attorneys, and she can advise the parties to seek legal counsel prior to signing.
When presenting a CMA, if you take the time to explain the CMA process, help the prospective sellers understand what's behind the numbers, and ultimately leave the decision of the list price up to them, what characteristic have you demonstrated?
Effective communication These actions demonstrate effective communication skills. Licensees should also demonstrate diligence, competence, and the ability to document properly when preparing and presenting CMAs.
Which agency enforces fair housing law?
FHEO The Office of Fair Housing and Equal Opportunity provides administration and enforcement of federal fair housing laws.
What type of discrimination is occurring when a policy prohibits children from living in rental housing and places conditions on a tenant's residency based on the ability to find alternate accommodations for underage children?
Familial status
Phil is a property manager, which means he serves as a ______ agent to his landlord/client.
General
What do laws use as their guiding principles?
Generally accepted ethics Laws use generally accepted ethics as their guiding principles.
An investor is analyzing a three-unit property by looking at its ability to produce future income. Which of the following would most likely be used to determine this value?
Gross rent multiplier GRM is used for income-producing properties of four or fewer units. Properties with five or more units use GIM.
What's something you should do to avoid fair housing violations?
Have someone review your qualification process. It's a best practice to have someone with experience review your qualification process. Testing every property is unnecessary, and advertising should simply describe the property, not the buyer.
Brandon is interested in purchasing a piece of property, but before doing so, he'd like to verify the accuracy of the legal description. Which of these options will accomplish this?
Having a survey conducted A survey is a professional, on-site measurement of the lot lines and dimensions of a property, including the location of any improvements, encroachments, and easements of public record.
Your client, Octavia, needs to sell quickly. She paid $250,000 for her condo, and her neighbor's condo sold two years ago for $300,000. A similar condo across town, however, recently sold for $400,000. Which factor should impact your list price strategy?
How soon Octavia needs to sell Pricing strategy shouldn't be influenced by the sales price on non-comparable properties, nor on what the seller paid. The seller's timing needs, however, may impact pricing strategy.
Jerrold reviews the floor plan of the house he's going to sell. It's 3,800 square feet. In his advertising, he bumps that number up to 4,000 square feet to better justify its asking price. What has Jerrold done?
Intentional misrepresentation This is an example of intentional misrepresentation.
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. If a buyer finds your number on a yard sign for a house you've listed, you could end up with a dual agency situation since you represent the seller already.
What role does the Brownfields Law play in the assessment and clean-up of unused commercial/industrial sites that may contain hazardous waste?
It provides funds. The Brownfields Law was enacted in 2002 to provide funds that help assess and clean up brownfields.
Which of the following is a characteristic of the primary mortgage market?
It works directly with borrowers to fund loans. The primary mortgage market is the direct-to-borrower pipeline for real estate funding. It generates income for lenders in a variety of ways, including origination fees, discount points, and interest charged on loans.
Which of the following statements is true about groundwater?
It's a source of drinking water. Groundwater is accessible under the earth's surface and forms the water table. Groundwater can be adversely affected by severe weather, such as droughts and floods. Once it's contaminated, decontamination is difficult.
Which of the following best indicates that Harold is Kelsey's seller client?
Kelsey and Harold have a signed agency agreement. The only foolproof method of ensuring that an agency relationship exists and is understood by all parties is to have a signed agency agreement in place.
Leigh is holding an open house for her listing. She talks to several visitors. To which of these visitors should she present the CIS?
Kyle, who asks, "Who do I see about making an offer?" Kyle has expressed an interest in purchasing the property, so Leigh's required to personally present Kyle with the CIS. The other attendees don't need the CIS because they're asking only for general facts.
Which body of law contains the rules governing the relationship between a real estate professional and the person being represented?
Law of agency Law of agency covers items such as an agent's duties to the client, handling of trust funds, etc.
Which party to the loan approval process is responsible for providing the Loan Estimate?
Lender Lenders must provide prospective borrowers with the Loan Estimate within three business days of making the loan application.
At which level of government are building codes generally enforced?
Local Although codes can be established at the local, state, and federal level, they're generally enforced by local or county authorities.
Marcus, a listing agent, told a potential buyer that his seller client's property had no flooding issues, though the seller had mentioned water in the basement a few years back when there was a particularly heavy rainy season. Which of these statements is true?
Marcus committed intentional misrepresentation because he knew his statement was false. This is intentional misrepresentation because Marcus knew his statement was false.
Rupert is a licensee preparing for a listing appointment. He'll use an analysis of ______ to create a strategy when setting a list price.
Market indicators
What type of fair housing discrimination has occurred when applicants of Middle Eastern and South Asian descent are denied a place to live and told the units have been rented when they have not?
National origin This is discrimination based on national origin.
Which of the following Delaware residential sales contract provisions says, in part, that anything the parties agree to in writing becomes part of the purchase agreement?
Notice/Delivery of Documents The Notice/Delivery of Documents provision of the sales contract says that anything the buyers agree to in writing with the sellers becomes part of this agreement, and that all agreements must be in writing to be enforceable.
What is an open listing agreement?
One in which only the person who finds the buyer gets paid In an open listing agreement, only the licensee who locates the buyer will be paid. If the seller locates the buyer, no commission is owed.
When does partial performance of a contract occur?
One or both parties have completed only a portion of the terms agreed to in the contract. Partial performance occurs when one or both parties have completed only a portion of the terms agreed to in the contract. The other party can determine whether to accept partial performance or not.
What is true regarding credit scores and credit reports?
One provides a number; the other provides an explanation for that number. A credit score is a number; a credit report is the explanation of how the credit bureau assigning that number arrived at its score.
Your seller client has listed a beautiful piece of land on the water. You know this property would be a great investment if it were subdivided and developed, but you don't mention the potential investment value to the seller because you want the property for yourself. You also don't market it or present any offers. After several months, you buy the property at a deep discount. You're guilty of ______.
Passive fraud You not only should have known better, but you did know better and intentionally remained silent, so you're guilty of passive fraud.
Which of the following is true regarding loan pre-qualification and pre-approval?
Pre-approval is preferred over pre-qualification because it's stronger proof that a buyer is qualified to purchase the property. The pre-approval carries more weight because the lender has verified the buyer-provided information, such as employment, income, the source of the buyer's down payment, and other aspects of the buyer's financial situation.
Licensee Jonathan signed a listing agreement with a new client. Which of these actions should Jonathan plan to perform next, before he publishes the listing on the MLS?
Prepare a features list. Jonathan needs to prepare a features list before he can publish the listing. The comparative market analysis should already have been done, and the open house and repair work, if any, come later.
The smallest property on the block is also priced lower than any others, but the higher-priced properties that surround it help to drive the property's market value up. What economic principle is at work here?
Progression Progression is the bump in value that a lower-value property gets by being near a higher-value property.
The Golden Rule ______.
Provides a guideline for all personal and professional ethical situations The Golden Rule is a good guideline for real estate practice as well as personal interactions.
Which of the following is a framing member?
Rafters Studs, joists, and rafters are all framing members.
How common are interest-only loans today?
Rare Interest-only loans are rare. They were more common before the housing crisis, but because a large number of borrowers defaulted on interest-only loans, they've fallen out of use, and have only recently become available again on a very limited basis. When they're used, the borrower pays only the interest for a specific period of time, usually five to seven years.
Early in its history, the Federal Housing Administration officially supported keeping "incompatible" racial groups out of the newly developed white suburbs. This practice is known as ______.
Redlining Although redlining is now an illegal practice, the FHA initially supported it.
Judy is in her 70s and has just listed her two-story home on a quarter-acre lot. Although she loves her home, it's getting harder to go upstairs and to manage all the yard work that her land requires. She's going to make an offer on a small, one-story condo where she can walk to the market. What type of buyer is she?
Retiree Little to no maintenance and accessibility are key factors for retirees, who may have a fixed incomes, but have access to large down payments from selling their previous homes.
Which of these Delaware transactions requires a notice in the contract warning the buyer to confirm the ability to obtain a water supply and install a sewer system?
Ross is purchasing 12 acres of unimproved land to build a custom home. Delaware statute requires the agreement of sale for unimproved land, such as Ross's 12 acres, to include a notice warning the buyer to confirm the ability to obtain a water supply and install a sewer system.
Jared is buying a condo from Luke. Sally is Jared's lender, and Thomas is Jared's agent. Meredith is Luke's agent. Who is responsible for providing the Loan Estimate?
Sally, Jared's lender Lenders must provide prospective borrowers with the Loan Estimate within three business days of receiving the loan application.
What's the best way property managers can help ensure that the owner's units are filled with paying tenants?
Screening and qualifying potential tenants By screening and qualifying tenants, property managers can keep the owner's units are filled with paying tenants, which helps to ensure a steady stream of income.
Delaware seller Frank has refused reasonable offers from four prospective buyers. Which one of these rejected buyers could make a complaint of a fair housing violation against Frank?
Serena and Mary, whom Frank rejected because they openly presented themselves as a lesbian couple. Phew, Frank is a piece of work! He's within his rights to reject most of these buyers for the reasons stated, but he's violating Delaware fair housing law when he rejects Serena and Mary on the basis of their sexual orientation.
Which of the following would be an MLS violation?
Stating that a property is in a certain neighborhood when it's actually located a couple of miles outside that neighborhood Members must post promptly and update regularly. If compensation is offered to cooperating brokers, it must be stated. Locations must be accurate.
How can volatile organic compounds be reduced in the home?
Stick to natural scents and fibers. VOCs can be reduced in the home by increasing air circulation and using natural scents and fibers.
Which amendment to CERCLA says that "innocent landowners" aren't responsible for clean-up of hazardous contamination?
Superfunds Amendments and Reauthorization Act The Superfund Amendments and Reauthorization Act, or SARA, says that innocent landowners aren't responsible for clean-up of hazardous contamination.
Delaware licensee Shane is representing John and Tiffany Smith, who are looking to buy their first home. When Shane presents their offer to the seller's agent, he gets a funny feeling about the situation. When the seller rejects the Smith's extremely reasonable offer without even countering, Shane feels certain there's an element of discrimination involved based on race. Who should the Smiths and Shane go to with their suspicions?
The Delaware State Human Relations Commission The state's Human Relations Commission has the authority to investigate charges of housing discrimination.
A client terminates a listing agreement before its expiration date. What happens now?
The client may owe a commission anyway. The listing agreement may not be cancelled by only one party. It's possible the client will owe the agent the commission.
In completing a CMA, finding a comparable property that had a quick sale may indicate which of the following?
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.
Chloe is buying a Delaware home from the Sampsons. She wasn't able to come up with enough money to cover the entire purchase price, but luckily the Sampsons are willing to finance the remaining portion at a reasonable interest rate. What's NOT true about the purchase agreement Chloe and the Sampsons have?
The purchase price listed in the contract includes the sale price plus the full amount of interest resulting from the seller financing. In a purchase agreement involving seller financing, an amortization schedule must be included and signed by the parties. The purchase price listed in the contract must not include any interest from financing.
Jan's Equifax credit score is 680. Based on this, what can she expect of her credit score with TransUnion and Experian to be?
The scores will likely be slightly different. Each of the three agencies uses a slightly different method of scoring, so most consumers see slight differences between the score each agency generates.
When state and federal laws differ, as they sometimes do with fair housing and/or human rights, which of these statements is true?
The state law may not remove rights granted to citizens under the federal law.
Jasmine should include active listings in a market analysis for what important reason?
They show what the current competition is. Active listings show sellers the current competition for buyers.
Which of the following is a true statement about brokerage agreements?
They're between the sponsoring broker (not the licensee) and the principal. Brokerage agreements are between the broker and the principal (buyer/seller or landlord/tenant), not the licensee and principal.
Which of the following is a true statement regarding common law agency relationships in Delaware?
They're only allowed for one- to four-family properties when they're established in writing, and only with brokerages that exclusively practice single agency. They're only allowed for one- to four-family properties when they are established in writing, and only with brokerages that exclusively practice single agency.
Your buyer clients have been pre-approved for a $325,000 mortgage. Which of the following must be true?
They've submitted a loan application, and the lender has verified their financial information. Pre-approval means that the buyer has completed the loan application, and the lender has verified the provided data.
Georgia and Stan are savvy house hunters who have been pre-approved for a $250,000 mortgage. Which of the following must be true?
They've submitted a loan application, and the lender has verified their financial information. Pre-approval means that the buyer has completed the loan application, the lender has verified the data provided, and has pre-approved the loan based on current information.
A landlord with a strict "no pets" policy won't rent to a woman who uses a service animal to assist with her epilepsy. Which of the following is a true statement about this situation?
This is discrimination based on disability. Service animals assisting any disabled individual must be allowed in any housing or residential situation. They're not classified as pets, so even if there's a "no pets" policy, it wouldn't apply.
When pricing a property, which of the following is a reason a licensee would consider expired listings?
To determine the price at which a property won't sell Knowing the prices at which similar properties didn't sell can help a licensee show sellers what might be an unreasonable sales price expectation.
A person who facilitates the paperwork, but doesn't actually represent either party to the transaction, may be a ______.
Transactional broker A transactional broker, also called a non-agent, facilitates transaction paperwork but doesn't act in a fiduciary capacity, provide representation, or advocate for the interests of either party.
Charli has chosen to purchase only liability insurance on the office building she owns. Which of the following combinations of risk handling is she using?
Transfer and acceptance Charli has transferred a portion of her risk by purchasing liability insurance and has accepted the financial risk of potential damage to the building.
While walking around the exterior of a rural home she's inspecting, Juanita noticed a metal vent pipe sticking out of the ground 25 feet from the house. She documents this because it may be a sign of what potential environmental hazard?
Underground storage tank A pipe or a vent sticking out of the ground, or a metal cap plate, are clues that there may be an underground storage tank on the property.
It's January, and the pool at Roger's listing has been prepped for winter for several weeks. The homeowner assures Roger that it's in good working order. Roger has no reason to disbelieve the homeowner, so he tells prospective buyers that the pool is fine. The property sells, spring comes, and the new owners call to complain that the pump doesn't work, and the pool drain appears to be clogged. What did Roger commit?
Unintentional misrepresentation Roger took his client's word as the truth and ended up committing unintentional misrepresentation, which isn't fraud-but it isn't good!
In part, the Rental/Lease provision of the Delaware sales contract is where the parties indicate which of the following?
Whether the property is subject to any leases In the Rental/Lease provision of the Delaware sales contract, the parties must indicate whether the property is currently being leased by tenants, or if there are any current oil, gas, or security system leases on the property.
Unauthorized practice of law and acting outside the scope of one's expertise are similar issues. Which of the following circumstances specifically relates to the unauthorized practice of law?
Writing contract addenda or additional provisions that cover unfamiliar circumstances All of these actions are outside the scope of a real estate license. Writing contract addenda or additional provisions that cover unusual circumstances falls into the category of unauthorized practice of law, since a licensed attorney should do that.
Victor bought a property from Yolanda for $200,000. Under the terms of a land contract, Victor agreed to pay Yolanda in monthly installments of $4,000 over the course of 50 months. Until Victor pays Yolanda the $200,000, who retains the title?
Yolanda The seller retains the title in a land contract. When the loan balance is paid in full, the seller gives the buyer title.
You're researching properties to show your buyer clients, Vince and Tamara. Which of the following is a true statement?
You should view the home or pictures of the home ahead of time. You should do your research and view the home or pictures of it before showing it, and never base showings on ethnicity.
Unlike the Delaware residential sales contract for improved land, the unimproved land sales contract contains a provision regarding ______.
Zoning While the Delaware residential sales contract for improved land and unimproved land are very similar, the unimproved land contract has several unique provisions, including flood zone/wetlands disclosure and zoning/permitted use of the property.
