Real estate exam 1

25. Of the following documents, which is the only one signed by the sellers alone? A. First right of refusal B. Warranty deed C. Listing agreement D. Purchase and sale agreement

B Explanation: To be valid, a deed must be signed by a competent grantor. It isn't necessary for it to be signed by the grantee. The other options are all contracts that require the signatures of the seller and the other party (the buyer or, in the case of a listing agreement, the brokerage).

16. Once a lender issues a veteran a VA-guaranteed loan, the veteran: Your Answer: A; Correct Answer: C A. can never receive another VA loan B. cannot prepay the principal on the loan C. immediately becomes liable for the guaranteed amount D. must purchase private mortgage insurance

C Explanation: A VA loan borrower who later defaults may be liable to the VA in some situations; in all situations, his guaranty entitlement (which he could use to obtain another VA loan) won't be restored until he reimburses the VA.

36. Vandelay Industries sells its office building to Howard Holding Co. in order to raise some cash, but leases it back from them, so they won't have to move. Once this transaction closes, what kind of interest does Vandelay have in the property? A. Fee simple defeasible B. Freehold estate C. Life estate D. Non-freehold estate

D Explanation: The selling party in a sale-leaseback transaction will have a leasehold interest (in other words, a non-freehold interest) in the property once the transaction is completed.

50. A tenancy at will: A. is created by a testator under the terms of a will B. expires on a certain date C. is created when a life tenant dies D. is created with the consent of the landlord

D Explanation: A tenancy at will depends on the consent of the property owner.

127. If a brokerage firm wants to maintain a satellite office in a new subdivision but does not want to appoint a managing broker as manager of that office, what is the farthest number of miles that the subdivision can be from the firm's nearest branch office? A. 10 B. 15 C. 25 D. 35

D Explanation: If the subdivision is within 35 miles of the nearest branch office, it doesn't have to be designated as a branch office.

130. The following are all goals of Washington Center for Real Estate Research, except: A. recommending changes to state statutes regarding licensing B. promoting growth and development in Washington C. determining low-income vacancy rates D. writing real estate exam questions

D Explanation: The Center for Real Estate Research does not write real estate exam questions; this is the job of the Real Estate Commission.

90. Interest on a loan for a home purchase is which type of interest? A. Annually paid B. Compound C. Complex D. Simple

D Explanation: The interest paid on real estate loans is simple interest.

57. Mineral rights associated with real property are always: Your Answer: A; Correct Answer: B A. conveyed along with the surface rights to the property B. separable and divisible C. sold separately from the property D. an interest in personal property

B Explanation: Mineral rights may be sold separately from the land. However, they are appurtenant to the land and will be conveyed with the land unless there is an agreement otherwise.

103. A buyer would be protected from risk of loss due to a failed heating system through: A. an agency disclosure statement B. a home protection plan C. mortgage insurance D. title insurance

B Explanation: A home protection plan is a short-term warranty that a home buyer may purchase at closing. The buyer will be reimbursed for expenses related to the failure of covered systems or appliances, usually only during the first few years of ownership.

91. Which of the following is a primary market lender? A. Federal Housing Administration B. Mortgage banking company C. Mortgage broker D. Veterans Administration

B Explanation: A mortgage banker is a primary market lender, meaning that it originates loans directly to property buyers. Under the traditional distinction between a mortgage banker and a mortgage broker, a mortgage broker negotiates loans, bringing borrowers and lenders together for a fee, but (unlike a mortgage banker) is not a lender.

134. In Washington, a person licensed to act on behalf of a real estate brokerage is called a/an: A. independent licensee B. affiliated licensee C. associate licensee D. designated licensee

B Explanation: A person licensed to act on behalf of a real estate brokerage is called an affiliated licensee.

34. A parcel occupies the NW 1/4 of the SE 1/4, and the S 1/2 of the SW 1/4 of the NE 1/4 of Section 4. How many acres is this parcel? A. 40 B. 60 C. 80 D. 100

B Explanation: A section is 640 acres, so a quarter-section is 160 acres (640 ÷ 4 = 160) and a quarter-quarter section, like the NW 1/4 of the SE 1/4, is 40 acres (160 ÷ 4 = 40). Half of a quarter-quarter section, like the S 1/2 of the SW 1/4 of the NE 1/4, is 20 acres (40 ÷ 2 = 20). Add the two parts together to find the parcel is 60 acres (40 + 20 = 60). Diagramming this kind of problem helps; see a similar illustration in Fundamentals in Figure 1.9 (on p. 12).

77. A seller complains that the seller's agent is showing other properties to buyers that compete with the seller's property. Which of the following is true? A. Seller's agent is breaching duty of loyalty to seller B. Seller's agent is not breaching the duty of loyalty C. Seller's agent has created a conflict of interest D. Seller's agent may do so, but only with the seller's express permission

B Explanation: A seller's agent has a duty of loyalty to the seller. However, a real estate licensee will most likely have other clients as well, so even if a dual agency doesn't exist, the duty of loyalty to one client must still be balanced against the need to work for the best interests of other clients as well.

54. By what right would a railroad company acquire private land necessary for a new railway line? A. Partition action B. Eminent domain C. Suit in federal court D. Condemnation

B Explanation: A state government may delegate the power of eminent domain to local governments, and to private entities that serve the public, such as utility companies and railroads. Eminent domain is the right; condemnation is the process.

49. A buyer who records a deed is giving: A. constructive notice B. actual notice C. pending notice D. statutory notice

A Explanation: A buyer who records a deed is giving constructive notice of his interest in the property. Anyone who later acquires an interest in the property is held to know about all previously recorded interests, even if she didn't check the records.

117. Which of the following qualifications is required for a licensee to be eligible to be a designated broker? A. Control over the firm's operational and financial decisions B. General partner in a partnership C. Five years as a managing broker D. Five years as a broker

A Explanation: A designated broker must hold a managing broker's license and must have the ability to control the operational and financial decisions of the firm.

95. Which of the following is a requirement for a valid lease? A. Lease expiration B. Pet exclusion policy C. Service agreement D. Witness

A Explanation: A lease generally needs an expiration date, either the date an estate for years will end, or the date a periodic estate will renew unless proper notice of termination has been given.

118. Under the Washington real estate license law, someone must have a license in order to: A. cold call listing prospects and offer to perform brokerage services B. distribute property information packets C. install display signs D. perform property maintenance tasks

A Explanation: A person must have a real estate license to solicit members of the public and offer to perform real estate brokerage services on their behalf.

58. A real estate agent lists Harold's home, which he owns as a life estate. Harold's children hold the remainder interest. Which of the following is true? A. Anyone who buys Harold's life estate receives only the interest held by Harold B. Harold's children need to sign the listing agreement C. The buyer will automatically receive a fee simple absolute interest D. Since a life estate cannot be sold, the listing is invalid

A Explanation: A purchaser wouldn't be buying a fee simple absolute interest in the property, only the life estate held by the seller. The property would pass to the life tenant's children at the end of the life estate's measuring life.

30. For income tax purposes, a homeowner can deduct: A. property taxes B. principal payments on a mortgage C. capital expenditures D. the adjusted basis

A Explanation: A real property owner can deduct the property taxes she pays.

37. A mortgage, and the associated mortgage note, are both examples of: A. contracts B. deeds C. non-negotiable instruments D. option agreements

A Explanation: A security instrument (such as a mortgage) and a promissory note are both contracts between borrower and lender. The promissory note is a promise to repay money, and the mortgage pledges the subject property as security for the loan.

118. Which of the following is TRUE about the holder of an inactive license? This person: A. may not perform any acts that require a real estate license B. is technically licensed, and may perform certain acts that require a real estate license C. can keep the license on inactive status for a maximum of three years D. must obtain 30 clock hours of real estate instruction prior to each inactive license renewal

A Explanation: An inactive licensee may not perform any act that requires a license, because she is deemed to be unlicensed.

99. Bartholomew leases several acres from Stan so he can grow strawberries. However, when Bartholomew arrives at the property to plant his strawberries, he realizes that Stan is already farming the acreage. Bartholomew does not have to pay rent to Stan because of the: A. covenant of quiet enjoyment B. covenant of right to convey C. covenant of seisin D. warranty of habitability

A Explanation: Every lease includes an implied covenant of quiet enjoyment. This is the promise that the tenant's possession will not be disturbed, either by the landlord or by a third party with a lawful claim to the property. A breach of the implied covenant of quiet enjoyment may be considered constructive eviction, releasing the tenant from the duty to pay rent as agreed.

72. Each of the following is a typical subdivision rule or regulation, except: A. the property cannot be sold and used as a waste disposal site B. a tree house cannot be built on the property C. the walls and fences shall not exceed four feet in height D. no structure of a temporary character shall be constructed on any lot

A Explanation: Regulation of whether a property can be used for waste disposal is likely to occur through laws or ordinances. The other options, however, are common rules imposed by homeowners associations.

130. Q falls behind on his child support payments. The matter is forwarded to the Director of the Department of Licensing. What action is available to the Director? She can: A. suspend Q's license B. revoke Q's license C. fine Q up to $5,000 D. issue a cease and desist order

A Explanation: The Director can suspend Q's license until satisfactory arrangements are made to correct the delinquency.

135. When a licensee is terminated, the date of termination is the: A. postmark date or the date the license is hand-delivered to the Department of Licensing B. moment the termination is understood and agreed upon by both the designated broker and the affiliate C. date the termination notice is tendered by either the designated broker or the agent D. date the terminated license is received by the Department of Licensing

A Explanation: The termination date is the postmark date or the date the license is hand-delivered to the Department of Licensing.

42. Agent Ralph represents the sellers in a transaction. At the time he takes the listing, which of the following should he disclose to the sellers? A. Current market conditions B. Neighborhood's racial demographics C. Presence of asbestos in a neighboring house D. Presence of sex offender in the neighborhood

A Explanation: When taking a listing, a seller's agent would need to disclose current market conditions to the seller to give them a better sense of what price might be appropriate. Note that the other options involve disclosure to the buyers, not the sellers (although presence of asbestos in a neighboring house would not be a latent defect affecting the property in any case).

29. Tina is representing the buyers in a transaction; she described the property's boundaries to her clients without clarifying that she was not sure that the boundaries were exactly precise. The buyers, upon taking possession, built a fence along the boundaries that she described, but the neighbors then filed suit because the fence didn't follow the actual boundaries and encroached on their land. Can Tina be held liable for misrepresentation? A. Yes, because any offer must include a photocopied legal description of the property B. Yes, because she reasonably knew that the described boundaries might not have been correct C. No, because the description was not in writing D. No, because the buyers were duty-bound to perform their own survey

B Explanation: An agent's duty of honesty and good faith requires her to avoid inaccuracies in statements to all parties to a transaction. This includes even unintentional misrepresentation, which could be considered constructive fraud.

75. A developer lists 20 different properties in a subdivision, with four different licensees. Each licensee gets her own model unit to work from. Which of the following is true? A. Each licensee must mention the other licensees' offerings to all visitors B. Each model must display the Fair Housing logo C. Each model must display the licensee's license D. Each visitor must receive a copy of the Condominium Buyer's Handbook

B Explanation: HUD regulations require the display of a Fair Housing poster with the Equal Housing Opportunity logo in any place of business where the business involves the selling or renting of dwellings.

50. A veteran's guaranty benefits may be restored by a: A. simple loan assumption B. substitution of eligibility/entitlement by another veteran assuming the loan C. wraparound mortgage D. refinance to a lower rate

B Explanation: If another veteran substitutes his eligibility, a veteran's guaranty may be restored.

67. ABC Lending Company holds title to Peter's mortgaged land. Peter lives in a: A. lien-theory state B. title-theory state C. dower state D. debt modification state

B Explanation: In some states, known as title-theory states, the execution of a mortgage or deed of trust is still regarded as a transfer of legal title to the lender or trustee.

1. Milo is filing his federal income tax return. He can deduct: A. capital improvements he's made to his home B. the interest paid on his mortgage C. the principal paid on his mortgage D. maintenance expenses for his home

B Explanation: Interest paid on a mortgage or deed of trust is deductible. Principal payments (also known as debt service) are not. Capital improvements can be factored into the property's adjusted basis when the property is sold, but are not deducted from a taxpayer's annual income.

131. J passes the license exam on March 20. How much time does J have to apply for his license, before being required to retake the license examination? A. Six months B. 12 months C. 18 months D. Two years

B Explanation: J has 12 months. If the license fee is not paid and the license placed on an active or inactive status within that time, the applicant will have to retake the exam and meet any additional licensing requirements that have been adopted in the interim.

39. The capitalized value of a property is $280,000, the capitalization rate is 10%, and the operating expenses are 76% of the annual gross income. What is the gross income? A. $110,544 B. $116,667 C. $121,503 D. $128,888

B Explanation: Multiply the property value by the capitalization rate to get the net income ($280,000 × 10% = $28,000). If the operating expenses are 76% of the gross income, then the net income ($28,000) is the remaining 24% of the gross. Divide $28,000 by 24% to get the gross income ($28,000 ÷ 24% = $116,667).

17. A licensee represents the seller in a transaction. Which of the following fiduciary duties does she owe to the buyer? A. Confidentiality B. Honesty C. Loyalty D. Recommend expert advice

B Explanation: One of the duties owed to all parties, whether a principal or not, is the duty of honesty and good faith. Confidentiality, loyalty, and seeking expert advice are duties owed only to a principal.

107. Real estate license fees are put into the: A. Director's personal account B. Real Estate Commission Account C. Real Estate Education Fund D. Washington Association of Realtors trust account

B Explanation: Real estate license fees (application fees, renewal fees, etc.) are placed in the Real Estate Commission Account in the state treasury.

10. A local bank refuses to make residential loans in a particular section of town, because of the ethnic background of its residents. This is a discriminatory practice called: Your Answer: A; A. blockbusting B. redlining C. steering D. collusion

B Explanation: Refusing to make loans for discriminatory reasons is redlining, which is illegal.

136. J is selling real estate without a license. J is guilty of a: A. misdemeanor B. gross misdemeanor C. second degree felony D. first degree felony

B Explanation: Selling real estate without a license is a gross misdemeanor, which in terms of seriousness is somewhere between a misdemeanor and a felony.

103. A property manager of a ten-unit building shows an apartment to a woman who uses a wheelchair. The woman says that she would need to make some modifications, such as adding grab bars in the shower and removing some carpeting in the bedroom. The landlord: A. can refuse to rent to the tenant because of the tenant's proposals B. must allow the tenant to make the modifications at her own expense, but can require her to restore the property at the end of the lease C. must allow the tenant to make the modifications at her own expense, and cannot require the tenant to restore the property at the end of the lease D. must make the modifications and pay for the expenses himself

B Explanation: The Fair Housing Act says that a disabled tenant may make reasonable modifications to a leased property at her own expense. The tenant can be required to restore the premises at the end of the tenancy.

29. The requirements of the Truth in Lending Act would apply to a: A. construction loan used by a builder to build a model home B. loan for the purchase of a mobile home and lot for use as a principal residence C. loan to purchase space in a mini-mall D. loan to renovate a gas station

B Explanation: The Truth in Lending Act applies to consumer loans (for family, personal, or household purposes), including the purchase of mobile homes and the land they're on. It does not apply to commercial loans, such as a construction loan for a developer.

7. An agent is ready to list a farm that was previously owned by a deceased woman with four adult children. Two of the children asked the agent to take the listing. Before taking the listing, the agent should: A. insist that all four children sign quitclaim deeds B. check the public records to see who owns the property C. have the two children sign a lien release D. examine the deceased woman's will

B Explanation: The agent will want to investigate, at the county recorder's office, who owns the property. The agent will want all owners of the property, not just the two children who contacted her, to sign the listing agreement.

46. An appraiser determines the most probable price that a buyer would be willing to pay for a property. This type of value is known as: A. subjective or fair market value B. objective or fair market value C. liquidation value D. assessed value

B Explanation: The most probable price a buyer would be willing to pay describes the property's market value, an objective measure.

137. Who is ultimately responsible for the delivery of the earnest money? A. Purchaser B. Designated broker C. Listing licensee D. Licensee who receives funds

B Explanation: While the licensee who receives the funds has initial responsibility for handling the deposit in compliance with the license law, as with all brokerage activities, the designated broker has ultimate responsibility.

39. Which of the following is true, regarding a sublease? A. The lessee is no longer liable to the lessor B. The lessee is still liable to the lessor if the sublessee defaults on the rent C. The sublessee is liable to the lessor during the sublease period D. The sublessee takes possession for the entire remainder of the rental period Explanation: With a sublease, the lessee is the one who remains liable to the lessor for rental payments. The sublessee (the new tenant) is responsible for making payments to the lessee (the original tenant), who will then pay the landlord.

B Explanation: With a sublease, the lessee is the one who remains liable to the lessor for rental payments. The sublessee (the new tenant) is responsible for making payments to the lessee (the original tenant), who will then pay the landlord.

72. A buyer purchases a rental home that is fully furnished. The document used to transfer title to the furniture is a: A. quitclaim deed B. bill of sale C. special warranty deed D. general warranty deed

B. Explanation: Deeds transfer title to real estate; a bill of sale is used to transfer title to personal property.

99. Once a contract for deed is signed by the parties, the buyer immediately receives: A. a life estate B. legal title C. equitable title D. the right to lease the property

C Explanation: A buyer receives equitable title to the property once the land contract (or contract for deed) has been signed. The seller retains legal title. The seller transfers legal title once the buyer finishes paying off the contract/purchase price.

109. A licensee writes a successful transaction while working for Designated Broker X. Before the transaction closes, though, the licensee starts working for Designated Broker B. How is the licensee's commission handled? A. Designated Broker X will pay the licensee, even though she is working for another designated broker B. Designated Broker X will keep the commission C. Designated Broker X will pay the commission to Designated Broker B, who will pay the licensee D. Designated Broker X must forfeit the commission

C Explanation: A licensee can accept compensation only from the designated broker for whom she currently works. So if a licensee moves from one firm to another with a transaction pending, the licensee's new designated broker would accept the compensation from the old designated broker and then pay the licensee.

52. A mortgage company charges three points on a $250,000 loan. How much is the charge? A. $750 B. $2,250 C. $7,500 D. $22,500

C Explanation: A point equals one percent of the loan amount. Three percent of $250,000 is $7,500 ($250,000 × 0.03 = $7,500).

91. Which of the following persons could be eligible to receive a VA loan? A. A veteran or a deceased veteran's children B. A veteran or a deceased veteran's children or unremarried spouse C. A veteran or a deceased veteran's unremarried surviving spouse D. Only a veteran him or herself

C Explanation: A veteran's surviving spouse may be eligible for a VA loan if he or she has not remarried, and the veteran was killed in action or died of service-related injuries.

117. All advertising placed by a real estate licensee (except ads for a licensee's own property) must: A. meet the requirements for a blind ad B. be paid for with trust funds C. include the brokerage's name, as it appears on its license D. include the Washington Fair Housing logo

C Explanation: All advertising placed by a real estate licensee must include the brokerage firm's name, as it appears on its license. (There is an exception if the licensee is advertising her own property—then only the fact that the seller is licensed must be noted.)

125. S's real estate license is inactive. This is because: A. her application has not yet been received by the Department of Licensing B. she has not gotten a listing in over six months C. her license has been delivered to the Director of the Department of Licensing D. she failed to renew her license before the expiration date

C Explanation: Any time a license is surrendered to the Director of the Department of Licensing, it becomes inactive.

96. When part of the land is removed, but generally the boundaries of a property stay the same, it is known as: A. accretion B. adverse possession C. avulsion D. partition

C Explanation: Avulsion is a form of accession, which is involuntary alienation of property due to natural causes. In the case of avulsion, an owner may lose title to land that has been torn away by flowing water and deposited elsewhere.

105. A warehouse is listed at 60 feet long by 90 feet wide, with 15-foot ceilings. The building rents for five cents per cubic foot per month. What is the amount of the monthly rental payment? A. $270 B. $2,700 C. $4,050 D. $405,000

C Explanation: First, calculate the building's volume (60 x 90 x 15 = 81,000 cubic feet). Multiply that by the monthly rent rate to find the amount of the monthly payment (81,000 x $0.05 = $4,050).

115. A licensee fails to attend a scheduled disciplinary hearing. What happens? A. The licensee's license is automatically revoked B. The hearing is automatically delayed for up to 20 days C. The hearing is held without the licensee present D. The proceeding is referred to superior court

C Explanation: If a licensee does not show up for a disciplinary hearing, the hearing proceeds without the licensee present.

18. A ten-year-old home cost $120,000 to build and the land it's on cost $20,000. If an appraiser finds that depreciation has averaged 1.5% per year, what is the total amount of depreciation on the property? A. $1,800 B. $2,100 C. $18,000 D. $21,000

C Explanation: Only the building itself is depreciated, rather than the land, which cannot lose value due to depreciation. Multiply 1.5% by 10 years (since the question says "an average of" 1.5% per year, rather than saying it depreciated 1.5% each year), which is 15%. 15% of $120,000 is $18,000.

88. Price fixing (including setting commission rates in a community) is prohibited by the: A. state Usury Act B. federal Regulation Z C. Sherman Antitrust Act and state antitrust laws D. federal Real Estate Settlement Procedures Act

C Explanation: The Sherman Antitrust Act and state antitrust laws prohibit price fixing, group boycotts, market allocation, and tie-in arrangements.

120. Which of the following is an absolute requirement of a selling agent in every real estate transaction? A. The agent must disclose that he is the agent for the buyer B. The agent must disclose that he is the agent for the seller C. The agent must conduct himself in accordance with the agency disclosure made D. The agent must disclose that his fiduciary responsibilities rest with the party that is paying the commission

C Explanation: The agent's conduct must be consistent with the agency disclosure made. This means that whoever he claims to be representing must be the person he actually represents.

4. Maria has a lease that begins on June 1 and ends on December 1 of that same year. Maria has a: A. periodic estate B. tenancy at will C. term tenancy D. joint tenancy

C. Explanation: A term tenancy, also known as an estate for years, is a tenancy for any fixed period of time (even for less than one year).

69. If a buyer wants to protect herself against unrecorded encumbrances, she should: A. assume the seller's standard policy of title insurance B. order a survey C. request a title insurance policy that has the fewest exceptions D. have her attorney prepare an abstract of title

C. Explanation: To protect against unrecorded encumbrances, a buyer would need something that goes beyond a standard title insurance policy, which is limited to certain defects in title. The buyer would probably want a homeowner's policy, which provides the greatest protection. (Note that a survey doesn't address encumbrances; it only addresses encroachments.)

94. Adjusted basis is initial basis: A. less capital expenditures, plus depreciation B. less repair expenses, plus capital expenditures C. plus capital expenditures, plus repair expenses D. plus capital expenditures, less depreciation

D Explanation: A taxpayer's adjusted basis in a property is the initial basis, plus capital expenditures, less allowable depreciation.

80. Ajax Realty lists a property for a seller at a commission rate of 8%. The multiple listing service provides that a listing brokerage will split commissions at a 50-50 rate. Baron Realty, a cooperating brokerage, finds a buyer for the property, at a price of $300,000. How much will the seller owe Ajax Realty at closing? A. $0 B. $12,000 C. $18,000 D. $24,000

D Explanation: Under the terms of the listing agreement, the seller will pay the listing firm (Ajax) 8% of the sales price ($300,000 × .08 = $24,000). The seller is not a party to the MLS commission split agreement. It's up to Ajax to share half of the money with Baron Realty in fulfillment of the commission split agreement; the seller owes Ajax the full commission amount, not half.

78. Gerald engages a licensee to find a buyer for his listed property. In this context, the licensee is acting as a: A. general agent B. power of attorney C. property manager D. special agent

D Explanation: When a licensee represents a seller in a single transaction, and is authorized to perform typical duties associated with listing a property, she acts as a special agent.

80. Legally, how much earnest money must be submitted with a valid purchase and sale agreement? A. 1% of the purchase price B. 3% of the purchase price C. 5% of the purchase price; but the amount over 3% cannot be retained as liquidated damages D. No earnest money is required

D Explanation: While almost all buyers will include an earnest money deposit along with the purchase and sale agreement, that is because of tradition (and because sellers are unlikely to consider offers without earnest money). There is no contractual or legal requirement of a particular amount, or any earnest money at all.

108. If an agent fails to renew a license within one year after expiration, the license is considered: A. inactive B. suspended C. revoked D. canceled

D Explanation: If a license isn't renewed within one year after it expires, the license is canceled. (A canceled license may still be reinstated within two years of cancellation, if certain conditions are met.)

15. An apartment building is right where a new city park is going to be built. The city condemns it. Can the city terminate the leases of the building's tenants? A. No; this is a violation of the federal Fair Housing Act B. No; if the government forces a landlord to breach a contract with a tenant, it is violating the Landlord-Tenant Act C. Yes, if notice is provided to the tenants, and they receive relocation assistance D. Yes, if the tenants receive just compensation from the city

D Explanation: In a condemnation proceeding, anyone with an interest in the condemned property is entitled to just compensation, including tenants as well as owners. Many leases contain a "condemnation clause" that discusses how any condemnation award will be allocated between landlord and tenant.

104. To avoid tenant problems, a landlord is best off using a standardized lease form that includes: A. a copy of the Uniform Landlord Tenant Act B. a warranty of quiet enjoyment C. a tenancy at will provision D. specific rules and regulations

D Explanation: Including the rules that govern the tenancy in the lease itself helps prevent disputes between landlord and tenant.

84. The Real Estate Settlement Procedures Act (RESPA) applies to: A. contracts for deed B. seller-financed transactions C. commercial and residential mortgages D. residential first mortgages

D Explanation: RESPA applies to mortgages secured by a dwelling with up to four units. It does not apply to commercial transactions or seller financing. (A contract for deed, which is the same thing as a land contract, can only be used in a seller-financed transaction.)

138. If Licensee D works out of a home office, for how long is she required to maintain records of closed transactions? A. 1 year B. 3 years C. 7 years D. Affiliated licensees are not required to maintain records of closed transactions

D Explanation: Real estate firms must maintain records of closed transactions for at least three years. The firm is responsible for the custody and accuracy of the required records, and they should be kept at a main office or branch office.

45. Of the following, which is true? A. TILA applies to all seller financing B. TILA applies to loans made to corporations as well as to individuals C. TILA requires lenders to provide a good faith estimate of closing costs (GFE) D. TILA requires the disclosure of credit costs to borrowers and regulates the advertising of consumer loans

D Explanation: TILA is a federal consumer protection law that requires the disclosure of credit costs to borrowers and regulates the advertising of consumer loans.

51. Who benefits the most from recording a warranty deed? A. Beneficiary B. Notary public C. Grantor D. Grantee

D Explanation: The grantee is the one who has acquired an interest in the land, and she is the one who benefits the most from recording the deed to provide constructive (legal) notice of that interest.

97. In an option: A. no consideration is required B. the seller is the optionee and the buyer is the optionor C. the seller must apply the option money to the purchase price if the optionee exercises her option D. the option agreement must clearly state all the terms and conditions of the sale

D Explanation: The option agreement also serves as the sale contract once the option is exercised, so all terms and conditions of the sale need to be included in the option agreement.

85. Meridians and base lines relate to the: A. lot and block method B. metes and bounds method C. recorded map method D. rectangular survey method

D Explanation: The rectangular survey system, also known as the government survey system, divides the land into a series of grids, identified by meridians and base lines.

18. A property's real estate taxes are $250 per month, paid at the end of the year. The property is sold and the closing date is May 15. Which of the following options is closest to what the seller's share of the taxes would be? A. $750 B. $875 C. $1,000 D. $1,125

D Explanation: The seller is responsible for the taxes for the first four and a half months of the year (January, February, March, April, and half of May). $250 × 4.5 = $1,125.

48. A tenancy in which the tenant is in possession with the permission of the landlord, but there is no definite rental period or duration of possession, is called a/an: A. estate in remainder B. estate for years C. periodic estate D. estate at will

D Explanation: This is the definition of an estate at will (tenancy at will).

128. What is the minimum balance that the law allows a brokerage to maintain in a trust account? A. $0 B. $1 C. $10 D. $100

A Explanation: There could be times when the trust account is empty; for instance, when the only pending transaction has closed. The brokerage usually has both its trust account(s) and general business account at the same bank, so if there's a service fee associated with the trust account(s), it's generally paid directly out of the business account. (Note: Banks often require a minimum balance; however, this question is asking about what the law allows brokerages to do, not what banks require.)

106. At what minimum point must an inactive licensee take a 30 clock-hour course in order to reactivate her license? A. Six months B. One year C. Three years D. Five years

C Explanation: A licensee must take a 30 clock-hour continuing education course in order to reactivate a license that has been inactive for more than three years.

75. A recorded notice of a pending legal action is called a/an: A. abstract of judgment B. petition for alienation C. writ of execution D. lis pendens

D Explanation: A lis pendens is a recorded notice stating that there is a lawsuit pending that may affect title to the defendant's real estate.

14. Which of the following people might bring a suit for specific performance? A. A buyer in a real estate transaction in which the seller backed out one day before closing B. A homeowner unhappy about a neighbor who painted her house purple in violation of the subdivision CC&Rs C. A real estate broker who didn't receive the commission she was promised D. A seller who was overcharged during escrow

A

43. Of the following, which is the best definition of a fee simple estate? A. Title and ownership without limitations B. An estate for years C. A leasehold interest in property that is supported by consideration D. The greatest interest one can own in land

D A fee simple estate is the highest and most complete form of land ownership. A fee simple estate may still be subject to other limitations, like liens or encumbrances.

33. Mark and Kim's two-year lease on their apartment expires. Unhappy that the couple doesn't plan to renew the lease, the property manager charges them one month's rent for failure to give notice. If the lease is silent regarding this issue, in this case: A. no notice is required and no additional fee must be paid B. Mark and Kim owe one month's additional rent C. Mark and Kim owe one month's additional rent plus a nonrenewal fee D. Mark and Kim will lose the full amount of their security deposit

A Explanation: The tenants had an estate for years: a lease for a specific period of time. Unless the parties renew the lease, or unless the lease itself provides otherwise, an estate for years simply terminates at the end of the agreed period. No notice is necessary, and the tenants can't be charged a penalty for failing to give notice.

92. Which of the following is true about surveys? A. They determine placement of improvements on a property B. They identify setback lines from property boundaries C. They protect against easements by prescription D. They reveal encroachments not of public record

D Explanation: A survey may reveal matters that are not part of the public record that would only be discovered through a personal inspection, such as encroachments. That is why a survey is often performed as part of obtaining an extended coverage title insurance policy.

56. Brenda must choose between a mortgage or deed of trust to finance the purchase of her house. A mortgage and deed of trust are both: A. security instruments B. debt-transfer documents C. required by the mortgagor to secure its interest D. nonnegotiable

A A mortgage and deed of trust are security documents used by the lender (or mortgagee, in the case of a mortgage) to secure its interest in the borrower's property.

47. A commercial tenant leases retail space for $1,500 per month. A few months later, the owner of the complex adds new counters and increases the rent to $1,750 per month. At the end of the lease term, the commercial tenant: A. cannot take the counters with her, because the owner installed them B. can take the counters with her if she reimburses the owner for the fair market value of the counters C. can take the counters with her if she reimburses the owner for any damage caused by removal D. can take the counters with her without any charge

A Explanation: A commercial tenant may take trade fixtures—equipment the tenant installed for use in her business—with her when she moves out at the end of the lease. In this case, however, the counters were added by the owner, not the tenant, so they would not be considered trade fixtures.

34. A property's market value is described as the: A. present worth of future benefits B. ad valorem value C. price paid by a purchaser D. price accepted by the seller

A Explanation: A concise definition of market value is "the present worth of future benefits." The price paid and accepted is considered the property's market value only if the sale took place under normal conditions. (For instance, if the buyers were not acting prudently and knowledgeably, the price they paid may be higher than the true market value.)

124. A dual-state brokerage firm doing business in Washington must: A. maintain a trust account in Washington if holding any funds in trust B. keep its transaction records on file with the Department of Licensing C. only hire out-of-state licensees D. maintain an office in Washington

A Explanation: A dual-state brokerage must maintain a trust account in a Washington depository institution if holding funds in trust for Washington clients.

56. Maya and Andrew are real estate agents who work for competing brokerages. They don't like a new discount broker and decide together not to show any of the new broker's listings. This is a violation of the Sherman Act because it's: A. a group boycott B. a tie-in arrangement C. market allocation D. price fixing

A Explanation: A group boycott would include an agreement between two competitors to exclude other companies from fair participation in real estate activities.

69. A person who uses a wheelchair moved into an apartment. At his own expense, the tenant lowered the light switches, removed carpeting from a hallway, installed handrails, and widened doorways. When the lease ends, the tenant will least likely have to restore which of the following to its original condition? A. Doorways B. Handrails C. Carpeting D. Light switches

A Explanation: A landlord may require disabled tenants who make modifications to a property to restore the premises at the end of the tenancy. But it seems unlikely that a landlord would have a tenant undo structural changes, such as changes to the width of doorways.

97. To be valid, a listing agreement may be signed by: A. an attorney in fact B. the buyer C. the designated broker only, with the owner's authorization via telephone D. the licensee only

A Explanation: A listing agreement needs to be signed both by the listing agent, on the listing firm's behalf, and by the seller. An attorney in fact, someone the seller has appointed in a power of attorney and granted the authority to convey the property, may sign the listing agreement on the seller's behalf.

41. Three friends own an old lakefront house together. One friend found a developer who would like to buy and redevelop the property, but the other two friends don't agree. What can the friend who'd like to sell do? A. File a partition suit in the hope that the court will order the sale of the property and division of the proceeds B. Request a court order for the eviction of the friends C. Sell his interest in the property, but let the friends continue to live there as tenants D. Unilaterally sell the property to the developer, and divide the proceeds with his friends

A Explanation: A partition suit is filed when co-owners cannot resolve a dispute regarding their property and one or more of them wants to end the co-ownership. The court will decide how to divide the property. If physical division is impossible or impractical, the court will order the sale of the property and division of the proceeds.

13. A property management agreement is amended to take into account some changing circumstances. The amendment must be signed by the owner and: Your Answer: A (CORRECT) A. the designated broker for the firm providing management services B. anyone who works for the brokerage company C. the tenant D. the tenant and the real estate licensee

A Explanation: A property management agreement is a contract between a property owner and the real estate firm that provides the management services. It is not a contract between the property owner and an individual licensee, although in some cases a licensee may sign on behalf of his brokerage.

18. A real estate agent is helping a young couple buy a home. The husband's sister will be living with them, and the couple would like to take title so that if either the husband or wife died, the remaining spouse and the sister would own the home together. The agent should: A. tell them to consult an attorney B. refer them to another agent who specializes in titles C. suggest they take title as joint tenants D. suggest they take title as tenants in common

A Explanation: A real estate agent should never give advice on matters in a transaction that are beyond the agent's expertise. For issues such as how to take title, a lawyer should be involved.

90. A survey has been completed, and stakes have been placed marking off the property. The survey can be used to: A. construct fences and driveways B. measure soil stability C. perform a percolation test D. verify known liens

A Explanation: A survey may be used to determine where exactly a property's boundary lines fall. This would be an important consideration in the placement of fences and driveways, to avoid encroaching on a neighbor's property.

82. A buyer enters into a buyer agency agreement with a real estate licensee to negotiate the purchase of a particular FSBO property. The buyer then enters into a purchase and sale agreement, but the property he agreed to buy is subsequently condemned. Which of the following is true? A. The agency is terminated B. They can immediately look for another property C. The agent may sue the buyer for damages, if any were incurred D. This creates a dual agency

A Explanation: An agency is terminated by operation of law based on the extinction of the subject matter, such as the condemnation of the subject property. The buyer and agent can look for another property, but would need to form another agency relationship first. Practically speaking, that's not very difficult (especially in states where an agency relationship can be formed simply by beginning to provide brokerage services to someone).

91. Erin entered into a lease that begins on February 1, and is set to end on January 31 three years later. This leasehold is a/an: A. estate for years B. tenancy at sufferance C. periodic tenancy D. estate from year to year

A Explanation: An estate for years begins on a certain date and ends on a certain date.

81. Which of the following is true regarding an oral agreement for the sale of real property? It is: A. unenforceable; it violates the statute of frauds B. void; it violates the statute of frauds C. voidable; it violates the statute of frauds D. valid; assuming both parties are above the age of majority

A Explanation: An oral agreement for the sale of real property fails to fulfill the requirements of the statute of frauds. Such a contract is unenforceable, except in rare instances. (For example, under certain circumstances a court might enforce an oral real estate contract for a party who presents evidence establishing that she fully performed her contractual obligations.)

112. Q makes a full-time living selling real estate, even though Q does not have a real estate license. Q's activities are legal if Q: A. sells his own property B. sells raw land only C. is an employee of a developer D. is a salaried employee of a real estate brokerage firm

A Explanation: Anyone acting as a principal (in this case the seller) can buy and sell without a license. It is when you are acting on behalf of someone else that you need a license.

3. A licensee hears that a religious group will be opening a commune in a neighborhood. He begins contacting neighbors and telling them about this, encouraging them to list their properties with him before property values decline. This would be: Your Answer: B; A. blockbusting B. redlining C. steering D. legal

A Explanation: Blockbusting occurs when a licensee tries to induce homeowners to list their properties by predicting that persons from a protected class (usually on the basis of race, but also potentially on the basis of religion) will be moving into the neighborhood and that there will be undesirable consequences.

60. Which of the following entities would participate in the primary market for mortgage lending? A. Commercial bank B. Federal Home Loan Mortgage Corporation C. Federal Housing Administration D. Federal National Mortgage Association

A Explanation: Commercial banks, savings and loans, mortgage companies, and other entities that make loans to consumers are all part of the primary mortgage market. The Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae) are part of the secondary market instead.

82. A buyer is unfamiliar with the concept of discount points and asks a licensee to explain. The licensee responds "Discount points are used to replace funds that are being held by the Federal Reserve, so that more funds are available to lend." Is this description correct? A. No, discount points are used to increase the yield for lenders who will sell the loans on the secondary market B. No, discount points are used to pay brokers' commissions C. Yes, banks hold discount points in escrow until sufficient funds have been accumulated to make more loans D. Yes, discount points lower interest rates, which make loans more affordable for everyone

A Explanation: Discount points are paid to a lender in order to increase the lender's upfront yield on a loan. Typically, the lender will compensate for this by charging a below-market interest rate.

128. The pamphlet on agency law: A. must be given to parties before a written agreement is signed B. must be given to the seller before completing the Seller Disclosure Form C. must be available at open houses D. is not relevant in commercial transactions

A Explanation: Each party must receive the agency law pamphlet before either party signs an agency agreement, signs an offer, consents to a dual agency, or waives any a

108. Under Washington license law, a licensee's license may be suspended if she hasn't: A. made timely payments on a federally guaranteed educational loan B. obtained a valid driver's license C. paid her business and occupation taxes D. paid her Workers' Compensation premiums

A Explanation: Washington law permits the Director of the Department of Licensing to suspend the license of any licensee who is not in compliance with payment requirements for a guaranteed student loan.

8. Which is true regarding a standard 203(b) FHA loan? Your Answer: C; A. An FHA appraisal is required B. No downpayment is required C. Secondary financing from an institutional lender may be used for the downpayment D. The maximum loan term is 20 years

A Explanation: FHA loans require an appraisal by an appraiser who has met the educational and certification requirements for inclusion on the FHA's roster of approved appraisers. Secondary financing provided by a close family member is allowed, but secondary financing from an institutional lender is not allowed.

56. A property sold for $410,000. The seller has a mortgage outstanding, with a balance of $170,000 that will need to be paid off. The seller owes his real estate agent a 6% commission. The seller also agreed to pay 3% in discount points as a buydown, to help the buyer receive a loan with a 95% LTV. Finally, the seller must pay another $8,000 in closing costs. After all costs are paid, how much will the seller net? A. $195,715 B. $195,820 C. $200,920 D. $208,939

A Explanation: First, calculate the commission amount ($410,000 × .06 = $24,600). Next, calculate the amount remaining after the mortgage balance is deducted (the property's equity) ($410,000 - $170,000 = $240,000). Subtract the commission amount from the property's equity ($240,000 - $24,600 = $215,400). Calculate the buydown amount ($410,000 × .95 × .03 = $11,685) and subtract that ($215,400 - $11,685 = $203,715). Finally, subtract the other closing costs ($203,715 - $8,000 = $195,715).

16. When is an enforceable purchase and sale agreement formed? A. When the buyer knows of the seller's written acceptance of the offer B. When the seller has orally informed the buyer of her acceptance C. When the seller has received the earnest money D. When the transaction has closed

A Explanation: Formation of a contract occurs when the offeree communicates acceptance to the offeror in an acceptable method and within the proper time period. For a real estate contract to be enforceable, the agreement must be in writing.

66. Marla and Jerry bought property together. They set it up so that the following would happen: if Marla died, Jerry would own the entire property, and if Jerry died, Marla would own the entire property. They own the property in which manner? A. Joint tenancy B. Severalty C. Tenancy in common D. An estate for years

A Explanation: In a joint tenancy, each joint tenant has the right of survivorship. Upon the death of a joint tenant, her interest passes automatically to the other joint tenant.

113. Which of the following would NOT be grounds for disciplinary action against a licensee? A. An agent gives a copy of the sales agreement to the purchaser when it has been signed only by the offeror B. Conversion of funds C. A licensee acts as a dual agent without disclosure to both buyer and seller D. A licensee acts as a fee broker

A Explanation: In regard to a purchase and sale agreement, the purchaser and the offeror are the same person. Thus, giving a copy of the agreement to the purchaser when it has been signed only by the offeror (i.e., the purchaser) is something the agent MUST do. Obviously, that would not be a license law violation.

111. ABC, a brokerage firm, is entitled to a commission of $10,000 from a client. The commission will come out of its trust account for that client. ABC has an advertising bill in the amount of $10,500. The designated broker deposits $500 of the firm's money into the trust account and then writes a check for $10,500 out of the trust account to the advertiser. Which of the following is TRUE? A. ABC is subject to disciplinary action for commingling B. This is permissible, since ABC was entitled to the money for the commission C. This is lawful, but confusing for the advertiser, who receives a trust fund check D. As long as ABC kept accurate records, its actions were legal

A Explanation: It is never permissible to mix trust funds and personal funds together. The designated broker should have transferred the commission into the firm's business account first, and then paid the advertising bill from the business account.

124. A buyer discovered, after purchasing a property, that there was major foundation damage that would cost $13,500 to repair. It was later discovered that the agent representing the seller knew of this damage yet failed to disclose it to the buyer. The agent could be subject to: A. a fine of up to $5,000 B. a fine of up to $10,000 C. a fine of up to $13,500 D. prosecution for conversion

A Explanation: Licensees may be fined up to $5,000 per violation of the license law, regardless of the amount of actual damages caused by the licensees' actions. Of course, the licensee may still be subject to civil liability for part or all of the $13,500 in actual damages, but the buyer would need to file a lawsuit to recover that amount. Conversion is not involved here.

32. A real estate agent completed a listing agreement form, which the sellers signed. At what point should the agent give the sellers a copy of the form? A. Immediately after they sign the listing form B. Only after a buyer has made an offer C. Once the listing has been entered into the local MLS database D. When the sellers finish filling out the seller disclosure statement

A Explanation: Real estate agents should give copies of documents to all parties, as soon as possible after they sign.

107. L owns a bookstore and the lot it sits on. He hires M, a high school English teacher, to find a buyer for the business and property. He agrees to pay her $5,000. M finds a buyer and L pays her $5,000. Has M violated the real estate license law? A. Yes, because selling a business opportunity that includes real estate for pay requires a license B. Yes, because she entered into an oral listing agreement C. No, because L came to her with the idea of selling his bookstore D. No, because business opportunities aren't classified as real estate

A Explanation: Selling a business opportunity that includes real estate for compensation requires a real estate license. (An oral listing agreement does not violate the license law. It simply isn't enforceable if the seller refuses to pay the brokerage commission.)

126. Z, a real estate licensee, has been certified by the Department of Social and Health Services as not in compliance with his court-ordered child support payments. What disciplinary action is available to the Director of the Department of Licensing? A. Suspend Z's license B. Revoke Z's license C. File a cease and desist order D. File a criminal complaint in superior court

A Explanation: The Director can suspend Z's license until Z has repaid the delinquency or otherwise complied with the order. The Director's authority to revoke a license or issue a cease and desist order doesn't extend to cases of failure to pay child support.

140. In a disciplinary action, the Director of the Department of Licensing can do any of the following, EXCEPT: A. award damages to individuals defrauded by real estate licensees B. revoke a license C. deny a license D. refer criminal violations to the prosecuting attorney in the county where the offense was committed

A Explanation: The Director cannot award damages to victims of real estate fraud. Many states have what is called a "recovery fund" from which victims of real estate fraud can recover at least part of their losses. Washington doesn't have such a remedy for the consumer, however.

45. The manager of a 6-story, 18-unit apartment building, carefully screens tenant applications to make sure that tenants who use wheelchairs are assigned to the first floor. This: A. is allowed if there's no elevator to the upper floors B. is an example of a property manager making reasonable accommodations C. violates the Fair Housing Act D. violates of the Civil Rights Act of 1866

A Explanation: The Fair Housing Act has wheelchair-accessibility requirements for apartment complexes built since 1991. However, apartments on the second floor or above in multi-story buildings do not have to be wheelchair-accessible if there is no elevator in the building.

38. A minority buyer with a disabled daughter makes a full-price offer on a property. The home doesn't have any grab bars in the bathroom and the front door isn't wide enough for a wheelchair. The seller informs the buyer's agent that the property wouldn't be suitable for the daughter, so he is going to refuse the offer. The buyer's agent should: A. explain the situation to the buyer, and advise her to consult an attorney and/or file a complaint with HUD B. instruct the seller to make those modifications at his own expense C. not say anything to the buyer about the circumstances, but help her find a more suitable property D. not say anything to the buyer, since a seller can choose who to sell his home to

A Explanation: The Fair Housing Act prohibits the seller from refusing to sell his property because of a disability of the buyer or a family member of the buyer. The buyer's agent should let the buyer know about her options for legal recourse.

52. A builder plans to construct a single-family home on spec, which he will then sell himself. He needs to borrow $60,000 to do so, and he approaches the local bank for a construction loan. Is this loan subject to Truth in Lending Act disclosure laws? A. No, because no disclosure is required for business loans B. No, because TILA applies to loans of $51,800 or less C. Yes, because the loan concerns a single-family residence D. Yes, because TILA applies to loans of $51,800 or more

A Explanation: The Truth in Lending Act applies to consumer loans (those made for personal, family, or household purposes); it would not apply to a business loan, even if it will be used to construct a single-family residence.

60. With the closing date fast approaching, the buyer's real estate agent learns that the seller's sister may have an ownership interest in the property. The parties have already signed the purchase and sale agreement. The buyer's agent should: A. ask the listing agent to suggest that the seller see a lawyer about obtaining a quitclaim deed from the sister B. ask the buyer to sue the seller for specific performance C. inform both buyer and seller that the transaction is void D. postpone the closing date

A Explanation: The agent's best bet is to suggest that the sellers get legal advice about obtaining a quitclaim deed from the relative who may have a claim. The agent should not presume that the transaction will have to be scrapped. Only the parties, not the escrow agent or a real estate licensee, can change the closing date.

57. A tenant farmer had a heart attack, and he had to terminate his lease and retire. However, his last crop was still growing in the field and he wanted the right to come back and harvest it when it was ripe. The crops are considered to be: A. emblements, which belong to the tenant farmer B. fixtures, which belong to the property owner C. real property, which belongs to the property owner D. trade fixtures, which belong to the farmer

A Explanation: The doctrine of emblements applies to crops planted by tenant farmers. If a tenancy is terminated through no fault of the tenant before crops are ready to harvest, the tenant may re-enter the land and harvest the first crop after the tenancy ends.

114. H quits a broker position with XYZ Realty. When must H's designated broker return her license to the Director? A. Immediately B. Within 24 hours C. Within ten working days D. Immediately, once H satisfies any outstanding debts that may exist between H and H's brokerage firm

A Explanation: The license must be returned to the Director immediately, without conditions.

139. Unless the purchase agreement or other contract states differently, an earnest money check given to a real estate licensee shall be made out to the: A. licensee's firm, as licensed B. closing or escrow agent C. seller D. appropriate multiple listing association

A Explanation: The question and answer correctly state the law; however, it is common practice for the buyer to name an escrow agent in the offer and make out the check to that person.

26. A property owner dies without a will or any known heirs. The property passes to the state, under its: A. escheat power B. police power C. power of eminent domain D. taxation power

A Explanation: The state's power of escheat means that property with no known owner, such as cases where an owner dies intestate and with no heirs, passes to the state.

51. John leases a commercial property. In the lease, he agrees to pay part of the utilities and taxes, as well as a fixed monthly rent amount. This is a: A. net lease B. percentage lease C. ground lease D. graduated lease

A Explanation: The tenant's payments under a net lease include a share of the property's operating expenses, such as maintenance costs, taxes, and insurance.

129. In the course of business, a firm earns property management fees that are to be paid out of the trust account. The fees must be taken out of the account: A. monthly B. quarterly C. semi-annually D. annually

A Explanation: They must be removed from the trust account at least on a monthly basis.

111. Under Washington's real estate agency law, an agency relationship begins when a: A. licensee undertakes to provide real estate brokerage services to a principal B. purchase and sale agreement is signed C. transaction closes D. licensee first meets a prospective client

A Explanation: Under the real estate agency statute, an agency relationship with a seller is created when a listing agreement is signed. An agency relationship with a buyer is created when the licensee performs any real estate brokerage services for the buyer, unless there is a written agreement to the contrary (for example, the licensee has already entered into a listing agreement with the seller).

118. When a licensee appeals the Director's disciplinary decision to the superior court, which of the following is true? A. The sanctions imposed by the Director remain in effect throughout the appeals process B. The sanctions imposed by the Director are stayed until the appeals process is complete C. The results of the Director's disciplinary hearing are set aside D. The licensee has no right of appeal

A Explanation: Whatever disciplinary measure was imposed by the Director remains in effect throughout the appeals process.

2. A buyer is looking at a house in a neighborhood with newly installed sidewalks. When the buyer asks about taxes, the seller assures her that the home isn't subject to any special assessments. The buyer's agent should: A. advise the buyer that the property may be subject to special assessments and recommend that the buyer look into it B. check the county records to see if the property has any special assessments pending against it C. contact an attorney to begin an investigation of the matter D. say nothing and take the seller's word for it

A. Explanation: As part of the fiduciary duty of loyalty, a buyer's agent is required to promote the buyer's interests; so it's appropriate for the buyer's agent to recommend that the buyer investigate the question of a special assessment instead of relying on the seller's assurances. (State law may specify that the agent is under no duty to investigate the matter himself, unless he specifically agreed to do so.)

67. Which law prohibits discrimination in real estate transactions based on race, with no exceptions? A. Civil Rights Act of 1866 B. Civil Rights Act of 1964 C. Civil Rights Act of 1968 D. Fair Housing Act

A. Explanation: The Civil Rights Act of 1866 prevents discrimination based on race or color in any real estate transaction, without exception. The 1964 Act is limited to programs where the federal government offers financial assistance, while the Fair Housing Act (a part of the 1968 Act) is limited to residential transactions and has several exemptions.

68. Josephine, a real estate agent, is showing a house to a buyer. The buyer loves the house, but wants certain appliances and pieces of furniture to stay with the house. Josephine should advise the buyer: A. to make an offer that includes the appliances and furniture (which would be reflected in a higher purchase price) B. that the furniture and appliances are fixtures and will automatically transfer to the buyer along with the house C. that it's illegal to say anything about the appliances and furniture in an offer for real property D. to refuse to make an offer unless the seller agrees to throw in the appliances and furniture for free

A. Explanation: The buyer and seller can agree in the purchase and sale agreement that certain items of personal property will be included in the sale. Because the furniture is personal property, though, a separate document in addition to the deed, known as a bill of sale, will be necessary to transfer the personal property.

73. Ben receives a life estate in a property, with his nephew Will designated as the remainderman. When Ben dies, what kind of interest does Will receive? A. Fee simple estate B. Life estate C. Remainder interest D. Reversionary interest

A. Explanation: The interest that passes to a designated person upon the death of the life tenant (or other measuring life) is a fee simple estate. Will has a remainder interest only up until the moment Ben dies. Once Ben is dead, Will's interest immediately becomes a fee simple interest.

59. A quitclaim deed conveys: A. unencumbered title B. the grantor's interest in a given property, if any C. an estate for years D. fee simple title, including a covenant of quiet enjoyment

B

138. Addenda to a purchase and sale agreement must be: A. kept in the broker's home office B. kept in the brokerage's transaction file C. kept in the firm's trust account D. signed by the broker

B Explanation: A transaction file should include all modifications or addenda to any agreement. The transaction file should be kept where the firm is licensed to have an office, not in a broker's home office. The addenda will be signed by the buyer and seller, not the broker.

128. Which of the following statements about a blind ad is true? A. It is misleading because it fails to state the asking price B. It fails to identify the advertiser as a real estate agent C. It doesn't indicate the location of the property D. It's an ad directed at low-income buyers

B Explanation: A blind ad fails to identify the advertiser by including the name of the real estate firm as licensed (or its assumed name).

35. Cluster zoning, which allows smaller lot sizes and reduced frontages, is suitable if a development: A. includes both commercial and residential uses B. still has a density ratio consistent with the general plan C. abuts a wetland or other sensitive site D. abuts state- or city-owned land

B Explanation: Cluster zoning is an approach to zoning that allows developments in suburban or rural areas to have smaller lot sizes and higher density, but also more shared green space. A development cannot exceed the general plan's limits on density, though.

117. A broker arranges a transaction while working for ABC Realty. Before the transaction closes, the broker's license becomes inactive. What happens to the broker's commission? A. ABC Realty returns the commission to the seller B. ABC Realty pays the commission to the broker C. ABC Realty pays the commission to the licensee who took over the transaction for the now-inactive broker D. ABC Realty will keep the commission

B Explanation: A broker may receive a commission as long as she was properly licensed at the time she procured a promise for the payment of compensation.

62. A woman owns a large house in a subdivision that is zoned strictly residential. She would like to operate a preschool out of her house. She should seek to obtain a/an: A. HOA release B. conditional use permit C. nonconforming use D. variance

B Explanation: A conditional use permit will allow certain beneficial uses (like schools and churches) to operate in residential neighborhoods despite zoning laws.

134. An affiliated licensee rarely works in the firm's main office. The records for the licensee's transactions must be kept in: A. the licensee's personal files B. the firm's office C. both the licensee's personal files and the firm's office D. in the licensee's personal files until closing, then at the firm's office

B Explanation: A firm must keep all records at its main office or a branch office. While it may be advantageous for a licensee who is rarely in the office to keep copies of the records for personal reference, the law makes the firm ultimately responsible for the custody and accuracy of all required records.

25. What would cause a judgment lien to be imposed on a landowner's property? A. Foreclosure B. Lawsuit C. Unpaid construction project D. Unpaid property taxes

B Explanation: A judgment lien may attach to the property of someone who loses a lawsuit and is ordered to pay damages. (This person is referred to as the judgment debtor.) If the judgment debtor doesn't pay off the lien, the court can issue a writ of execution ordering the sale of the property.

134. A licensee hires an unlicensed assistant. While the licensee is on a two-week vacation, the assistant helps negotiate contract addenda. The licensee could be disciplined under Uniform Regulation of Business and Professions Act for: A. unlicensed practice B. aiding and abetting unlicensed practice C. incompetence, negligence, or malpractice D. misrepresentation

B Explanation: A licensee may be disciplined under the license law for aiding or abetting an unlicensed person to perform real estate activities that require a license.

131. A licensee is a defendant in a civil suit stemming from real estate activities. When must the licensee notify the Real Estate Program Manager? A. Immediately B. Within 20 days of a verdict or judgment against her C. Within 20 days of service of process D. Within 90 days of the lawsuit being filed

B Explanation: A licensee must notify the Department of Licensing within 20 days of learning of any civil court order, verdict, or judgment entered against the licensee, if it involves real estate or business activities.

138. A licensee is criminally charged for stealing prescription drugs on July 2. He tells his designated broker about the charges on July 5. Who must notify the Real Estate Program Manager? A. The licensee must provide notice within 20 days of conviction B. The licensee must provide notice by July 22 C. The licensee must provide notice by July 25 D. The designated broker must provide notice by July 25

B Explanation: A licensee must notify the Real Estate Program Manager within 20 days of learning of any criminal complaint or indictment in which the licensee is named as a defendant. (A conviction has yet to occur in this situation; if the licensee is eventually convicted, he will also have to notify the DOL of the conviction within 20 days.)

112. An Internet website operated by a licensee displays the properties he has listed. The site must give the: A. physical location of the properties B. brokerage's licensed name C. brokerage's email address D. physical location of the real estate firm's office

B Explanation: A licensee should fully disclose his licensed status in all Internet communications. This includes providing the name of his brokerage firm as registered with the Department of Licensing. The city and state where the firm's office is located is also required, but its physical location--a specific address--is not. Addresses of listed properties and an email address for the firm are also not required.

34. A seller finds that he cannot provide marketable title because of a cloud on the title. To clear the title, he must file a/an: A. adverse possession claim B. quiet title action C. quitclaim deed D. partition suit

B Explanation: A quiet title action is a lawsuit that is used to remove a cloud on the title to property, by settling questions about the property's ownership or the legitimacy of other claims against it. A quitclaim deed will also clear a cloud, but it requires the cooperation of whoever would need to sign the deed. Thus, a quiet title action is a more complete answer for this question.

59. A quitclaim deed conveys: A. unencumbered title B. the grantor's interest in a given property, if any C. an estate for years D. fee simple title, including a covenant of quiet enjoyment

B Explanation: A quitclaim deed conveys any interest in a property that the grantor has at the time the deed is executed, without warranties.

96. A real estate agent shows a listing to two different buyers. One buyer decides in the early morning to make an offer on the property for less than the listed price. The agent writes up the offer and plans to meet with the seller later in the day. The other buyer then contacts the agent and says that she'd like to make a full price offer. What should the agent do? A. Meet with the sellers but present only the first offer, and then present the second offer only if the first offer is rejected B. Present both offers to the seller at the same time C. Tell the second buyer that her offer is invalid because there is already an offer on the property D. Tell the second buyer that he can only present the first offer to the seller, but he'll present her offer if the first one is rejected

B Explanation: A real estate agent has the duty to present all written communications to and from all parties in a timely manner. Failing to inform a party of any offer would be a breach of this duty. This is the law no matter who the agent is representing.

127. According to Washington license law, a licensee who is acting as a property manager must give the owner a summary statement for all of the following, except: A. rent receipts B. property condition C. outstanding balances D. owner's contributions

B Explanation: A summary statement is a brief report showing the property's financial status over a certain period of time, such as one month or one quarter. It would not include a report on the managed property's physical condition.

69. An appraiser makes projections about how the population of a metropolitan area will grow and how much residents' income will increase, using data about both basic and non-basic industries. This is known as: A. anticipation B. economic-base analysis C. economic-life analysis D. highest and best use

B Explanation: Economic-base analysis looks at economic activity in both basic industries (those that drive a local economy) and non-basic industries (those that support the basic industries), in order to predict employment and other economic trends.

89. Alex owns 35 acres of vacant land that he would like to deed to a local wildlife conservancy. However, a title search reveals that timber rights and an easement to use the property were sold to Giant Lumber Company in 1963. Since this lumber company went out of business in 1987, Alex should: A. cancel the transaction, because the lumber company went bankrupt B. seek advice from an attorney, since the easement may still be valid C. claim a prescriptive easement, since the requisite number of years has passed D. cancel the transaction, because the easement will still be valid

B Explanation: Even though the original easement holder no longer exists, a commercial easement in gross can be assigned. So the easement rights may have been transferred to another company, and it would be prudent to ask an attorney to investigate.

48. XYZ Realty has the exclusive right to represent a new subdivision. An agent working for the subdivision office, and named on the listing agreement, shows a property to the Meyers, who are not working with their own agent. When the Meyers decide to buy, they have XYZ's agent help them prepare an offer. Which of the following is true? A. The agent owes the buyers the duty of loyalty B. The buyers are not represented by an agent C. The buyers are represented by this agent D. This has created a dual agency

B Explanation: Generally, providing any brokerage services creates an agency. However, there's an important exception to this rule: if the agent is already representing another party under a written agreement (usually, a listing agreement), then providing minimal services does not create an agency. In this question, the buyers would be proceeding without representation. Most listing agents would strongly encourage the buyers to find representation rather than merely helping them with their offer.

94. Which of the following is true about a building designated a historical landmark? A. All lead paint must be removed immediately B. It may not be willfully destroyed without a permit C. It may only be sold to family members D. It must comply with all local ordinances

B Explanation: Historical preservation ordinances may protect existing buildings of historical value, and prohibit their destruction or modification without approval from an appropriate local authority.

121. A managing broker asks his brokerage firm to release his license and listings so he can form his own firm. The firm must: A. surrender the license and listings immediately B. surrender the license immediately, but not the listings C. surrender the license only after the current listings have expired D. surrender the license once the licensee has repaid all debts owed to the firm

B Explanation: If a licensee terminates a relationship with a brokerage firm, the firm must surrender the license immediately. The listings, however, belong to the firm and not to the individual licensee, so they will stay with the firm.

19. An optionee's rights can be assigned under all of the following circumstances, except when the: A. option money is $10 or less B. option money is in the form of a promissory note C. optionor has died D. optionee has died

B Explanation: If the option money is in the form of a promissory note, the optionee cannot assign it (nor can his estate, if the optionee is dead).

127. A real estate licensee would enter into a buyer agency relationship when she: A. agrees to show the buyer her listings B. agrees to show the buyer another agent's listings C. signs a subagency agreement with the seller D. None of the above

B Explanation: In Washington, a buyer agency relationship is formed as soon as a licensee agrees to perform real estate brokerage services for a buyer. However, there's an exception to this rule: if the licensee already has an agreement to represent someone else, then no buyer agency is created.

139. When a broker attempts to renew his license, he intentionally lists a 3-hour course twice in order to reach 30 hours. The Director can: A. grant a 45-day interim license until the course is completed B. suspend the license and charge him with misrepresentation in obtaining or reinstating a license C. audit the school administrator D. refer the case to the Attorney General for prosecution

B Explanation: It is a violation of the license law, and grounds for disciplinary action, for a licensee to engage in misrepresentation or concealment of a material fact when obtaining or reinstating a license.

41. A seller has entered into a listing agreement with an expiration date of April 30. Under which of these circumstances would the listing NOT terminate on the date mentioned in the answer option? A. The house burns down on April 25 B. The licensee who took the listing is legally declared incompetent on April 26 C. The seller revokes the listing on April 27 D. The property has still not sold on April 30

B Explanation: It wouldn't matter, for the purposes of agency law, whether the individual licensee who took the listing becomes incompetent or not. The situation in B is the only one in which the listing does not terminate on the date mentioned in the answer option. So only B is correct. The listing agreement is between the seller and the brokerage firm, not an individual. Agency relationships can terminate because of seller revocation, expiration of term, or destruction of the subject property.

28. Mortgage interest rates are primarily influenced by the: A. assessed value of the property B. condition of the money market C. credit history of the borrower D. value of similar mortgaged properties in the area

B Explanation: Mortgage interest rates are primarily influenced by the supply of and demand for funds in the money market. This is determined by many factors, including actions taken by the Federal Reserve.

106. An applicant passes the broker's examination and takes the notice to the designated broker where she plans to work. At what point can she legally begin selling real estate? A. When the license is hung on the wall B. When the application is mailed to the Department of Licensing C. When the license is received back from the Department of Licensing D. 45 days after the application is mailed to the Department of Licensing

B Explanation: Once an applicant has been notified that she has passed the state exam, she may begin working on the date she mails or hand delivers the signed, dated, and completed application form and license fee to the Department of Licensing. The completed form serves as an interim license for up to 45 days after the postmark or hand delivery date.

23. The owner of property located along a stream or river may have which type of water right? A. Alluvion B. Riparian C. Appropriation D. Littoral

B Explanation: Riparian rights are water rights that belong to owners of property that borders a stream or river. (Littoral rights refer to water rights associated with property that borders stationary water, such as a lake.)

40. A buyer and seller were inspecting a property, prior to the buyer making an offer. The property was occupied by a tenant at the time of inspection. The seller told the buyer that the garden furniture would be included in the sale. However, the buyer discovers upon possession that the garden furniture belonged to the tenant, not the seller. Is the buyer entitled to the garden furniture? A. No, because the garden furniture was the tenant's real property B. No, because the seller didn't have the right to include the tenant's personal property in the deal C. Yes, because garden furniture is a fixture included with the sale of real property D. Yes, because the buyer relied on the seller's representation

B Explanation: Since the furniture belongs to the tenant, the seller cannot promise it to the buyer. The buyer is not entitled to receive the furniture, but the seller might be liable to the buyer for damages for the misrepresentation, if the buyer relied on the seller's promise.

127. Which of the following is NOT a purpose of the Center for Real Estate Research? A. Provide scholarly information about real estate to the public B. Establish listing prices for properties C. Recommend changes to real estate education courses D. Perform real estate economic studies

B Explanation: The Center for Real Estate Research studies local economic conditions and proposes changes to real estate education curricula. It does not have a role in establishing listing prices.

135. The Real Estate Commission does all of the following except: A. prepare licensing exam questions B. set real estate transaction fees C. advise the Director regarding new regulations D. hold educational conferences for the benefit of the real estate industry

B Explanation: The Commission does not set transaction fees. Fees are set by agreement between the agent and principal in each transaction.

7. A developer wants to subdivide a parcel and market it to potential buyers in other states. The property is divided into 135 vacant lots. He must register with the Office of Interstate Land Sales, which is administered by: A. FNMA B. HUD C. state real estate office in developer's home state D. state real estate office in state in which property is located

B Explanation: The Interstate Land Sales Full Disclosure Act requires the developers of subdivisions with more than 100 vacant lots who will market the lots through interstate commerce to register with the Office of Interstate Land Sales, a division of the Department of Housing and Urban Development. (Note: As of July 2011, responsibility for administration of ILSA has been transferred from HUD to the federal Consumer Financial Protection Bureau, but you may still encounter a question similar to this on the state exam.)

95. W, age 17, enters into an installment contract to purchase a five-year-old car from S, an adult. From a legal point of view, the contract is: A. void B. voidable by W only C. voidable by S only D. voidable by either S or W

B Explanation: The contract is voidable by the minor, but not by the other party.

88. A legal action brought in court to compel a party to fulfill the terms of a contract because the land is unique and money damages would not adequately compensate the party victimized by a breach is called a/an: A. partition action B. suit for specific performance C. quiet title action D. injunction

B Explanation: The legal premise that no two properties are alike is the basis for a suit for specific performance, which asks the court to order someone who has breached to actually perform the contract as agreed (deliver the deed to the buyer), rather than simply pay money damages.

17. Sheila obtained a home loan from a commercial lender, and paid for a mortgagee's title policy. Who would this policy protect? A. Sheila (the buyer) B. Only the lender C. Both Sheila and the lender D. The seller

B Explanation: The mortgagee is the lender, and the mortgagee's title insurance policy (extended coverage policy) protects the mortgagee (the lender).

79. A licensee locates what seems like a ready, willing, and able buyer. However, the deal falls through at closing because the buyer can't obtain necessary financing. At the same time, though, the seller turns out to be unable to provide marketable title. Does the seller still owe a commission to the listing agent in this case? A. No, because the sale didn't close B. No, because there was no ready, willing, and able buyer C. Yes, because the licensee saw the transaction through to the closing date D. Yes, because the seller has an absolute duty to provide marketable title at closing

B Explanation: The most important rule in determining whether a seller is obligated to pay a commission is whether a ready, willing, and able buyer was found during the listing period. This would take precedence over the seller's failure to provide marketable title. A buyer who does not have the financial ability to complete the purchase does not qualify as "able."

87. An owner sells a property, and the buyer is going to make a 20% downpayment. The lender requires the buyer to pay two discount points, which turn out to be $1,000. What was the purchase price? A. $50,000 B. $62,500 C. $75,000 D. $200,000

B Explanation: The purchase price was $62,500. This question is simply two separate percentage problems. First, find the loan amount. Two discount points is 2% of the loan amount, so divide the value of the discount points by 2% to determine that this was a $50,000 loan ($1,000 ÷ .02 = $50,000). The 20% downpayment means this is an 80% loan. Now you can use the loan amount and the loan-to-value ratio to find the purchase price. To calculate the purchase price, divide the loan amount by 80% ($50,000 ÷ .80 = $62,500).

119. After a licensee's first renewal is complete, in order to renew the license again, the licensee must furnish proof that she has successfully completed how many clock hours in approved real estate courses? A. 15 B. 30 C. 60 D. 90

B Explanation: The requirement is 30 clock hours for the second renewal and for each subsequent renewal. Of course, when the licensee renews for the first time, she must complete 90 clock hours: 30 hours in advanced real estate practices, 30 hours in real estate law, and another 30 hours in elective courses.

21. A tenant has already paid his $1,200 rent for the month for a single-family property. The property's owner sells it to a new buyer, with closing occurring on the 15th of June. The parties decide the seller is entitled to rent for the closing date. On the settlement statement, the prorated rent will appear as a: A. $600 debit for the buyer and a $600 credit for the seller B. $600 debit for the seller and a $600 credit for the buyer C. $1,200 credit for the buyer D. $1,200 credit for the seller

B Explanation: The tenant's prepaid rent has already been received by the seller, so the seller needs to give the buyer a share of that rent at closing. The buyer's prorated share will be a debit for the seller and a credit for the buyer on the settlement statement. The seller's share is for the 1st through the 15th (15 days), and the buyer's share is for the 16th through the 30th (also 15 days), so the $1,200 can be divided in half. The settlement statement will show a $600 debit for the seller and a $600 credit for the buyer.

122. Any person employed, either directly or indirectly, by a real estate brokerage—or any person who represents a real estate brokerage—in any capacity that requires a real estate license, is a/an: A. associate licensee B. broker C. business opportunities broker D. designated broker

B Explanation: This is the definition of a real estate broker.

The closing date is August 16. The property's fair market value is $180,000. In this community, property is assessed at 50% of its market value, and taxes are applied at 55 mills per dollar of assessed value. Using a 365-day calendar year and assuming the buyer is responsible for the closing day, what would the buyer's prorated share of the annual property taxes be? A. $1,856.25 B. $1,871.28 C. $3,078.72 D. $3,743.01

B Explanation: This problem requires two steps: finding the annual property taxes, and then prorating them. Begin with the tax assessment problem. The assessed value is 50% of the market value ($180,000 × .5 = $90,000). The tax is calculated using mills, which are equivalent to one-tenth of a cent, so 55 mills equals 5.5 cents on the dollar ($90,000 × .055 = $4,950). Next, prorate the annual tax amount. First, find the per diem amount using a 365-day year ($4,950 ÷ 365 = $13.56). Calculate the number of days for which the buyer is responsible (16 in August, including the closing date, 30 in September, 31 in October, 30 in November, and 31 in December = 138 days). Multiply the number of days by the per diem rate to find the amount the buyer must pay at closing, to cover the remainder of the year's taxes ($13.56 × 138 = $1,871.28).

74. Which of the following statements regarding the Real Estate Settlement Procedures Act (RESPA) is true? A. It applies to residential and commercial transactions B. The borrower is entitled to a good faith estimate of the settlement costs within three days of submitting an application C. It covers all financed residential transactions, including seller financing D. It sets the maximum interest rate that the lender can charge

B Explanation: Under RESPA, a lender is required to give a prospective borrower a good faith estimate of the settlement costs (closing costs) within three days after a written loan application is submitted. Neither commercial transactions nor seller-financed transactions are covered by RESPA, and RESPA does not limit the interest rate lenders can charge.

83. A small house is situated on a large lot in a mixed-use neighborhood. The city decides that the area will, in the future, be zoned commercial. What will most likely happen to the property's value? A. It will decrease, because of fears of new businesses being built nearby B. It will increase, in anticipation of the changing uses C. No effect, since the house is a nonconforming use D. No effect, until the change actually occurs

B Explanation: Under the principle of anticipation, a property's value is based on expectations of what will happen to the property in the future.

101. An agent is performing a competitive market analysis for a potential client, working with four comparables. Which of the following comparables would require an upward adjustment in its sales price? A. Comparable W: is on a larger lot size than the subject property B. Comparable X: lacks a garage, which the subject property has C. Comparable Y: has a swimming pool, which the subject property lacks D. Comparable Z: is in a superior neighborhood compared to the subject property

B Explanation: When performing a CMA (or applying the sales comparison approach in an appraisal), you adjust a comparable's sales price upward if it does not have a feature that the subject property has. The object is to make each comparable as similar as possible to the subject property. In this case you would increase Comparable X's sales price to what it would have been if Comparable X (like the subject property) had a garage. All of the other comparables listed would require a downward adjustment rather than an upward adjustment.

129. The selling agent must NOT accept a promissory note as an earnest money deposit: A. unless the agent knows that the buyer has an excellent credit history B. unless the purchase and sale agreement discloses that the deposit is a note C. unless the seller agreed during negotiation discussion to accept a promissory note D. under any circumstances

B Explanation: When preparing the buyer's offer to purchase, the selling agent must disclose on the purchase and sale agreement form that the deposit is in the form of a promissory note (or any other form that is not the equivalent of cash). The seller can then take this into account in deciding whether or not to accept the buyer's offer.

70. An easement for ingress and egress that is created by a court of law where it is reasonably necessary for the enjoyment of the property is an easement: A. appurtenant B. by necessity C. by prescription D. in gross

B. Explanation: A court may find that an easement by necessity (or easement by implication) is created where it is reasonably necessary for enjoyment of the property, and there was apparent prior use. This may occur where a grantor divides a property into more than one lot, and forgets to grant or reserve an easement for the owner of the new lot. A court-created easement doesn't necessarily run with the land, meaning the easement might not be appurtenant.

71. A minor purchases a home right before he turns 18. Immediately after he reaches the age of majority, he contacts the seller and rescinds the contract, demanding his money back. Which is true? A. This is possible if the home was purchased with a mortgage, because of the right of rescission under Regulation Z B. This is possible because he is doing so within a reasonable amount of time after having reached the age of majority C. This isn't possible because buyers are subject to caveat emptor D. This isn't possible because a buyer can't rescind a voidable contract after closing

B. Explanation: A person can typically rescind a contract he entered into as a minor, as long as he acts fairly quickly. The key detail is what age the buyer was when he agreed to the deal, not the age when he tried to rescind. Here the buyer appears to have acted reasonably promptly.

80. When a borrower makes payments on a fully amortized loan, her debt service payments will cover: A. only principal on the loan B. only interest on the loan C. both principal and interest on the loan D. principal, interest, taxes, and insurance

C Explanation: A fully amortized loan is repaid through regular payments that include both a portion of the principal and interest. The final payment will pay off the principal balance, leaving no need for a balloon payment. (Most home purchase loans are budget mortgages, which include taxes and insurance in each payment, but this is not a characteristic of all fully amortized loans. Note also that the question refers to debt service payments only.)

107. Broker Linda obtains a listing from a seller that she has never previously worked with. However, when she tells Mel, her designated broker, about it, Mel says that he's had bad dealings with that seller before, and tells Linda to cancel the listing. Which of the following statements is true? A. Linda may keep working with the seller but under a heightened level of scrutiny from her managing broker B. Linda may keep working with the seller if she feels confident about doing so C. Linda must renounce the listing, because it belongs to the brokerage, not to her D. Linda must renounce the listing if the seller has previously been convicted of criminal fraud

C Explanation: A listing belongs to a brokerage firm, not to an individual broker. The firm's designated broker is the final authority on whether or not to renounce a listing with a troublesome seller, even if the broker wants to continue.

43. An increasingly common land use pattern allows for subdivisions with smaller lot sizes and little or no setback and sideyard requirements. These are known as: A. horizontal property divisions B. integrated zoning C. planned unit developments D. spot zoning

C Explanation: A planned unit development is a subdivision where lot sizes are smaller and dwellings are grouped closer together, and there are significant amounts of open space.

43. Carrie owns an apartment building and is discussing marketing strategy with her property manager, Isabel. Isabel suggests that Carrie advertise in the local weekly alternative newspaper, but Carrie refuses to, because it's published by a former business partner with whom she's fallen out. Isabel argues that she's had great results advertising other properties in this publication, but Carrie still refuses. What should Isabel do? A. Advertise in it, because the property manager is an independent contractor and has authority to make low-level administrative decisions B. Advertise in it, to avoid potential discrimination claims C. Not advertise in it, because the property manager is an agent who must obey a principal's instructions D. Not advertise in it, because the property manager, as a special agent, does not have authority to make such decisions

C Explanation: A property manager, as an agent, is bound by the duty of loyalty to follow the lawful instructions of a principal, in this case the property's owner.

12. Agent Amy has a listing on an investment property where she will get a $4,000 commission if it sells. She has another listing on an investment property where she'll get a $5,000 commission if it sells. If she arranges an exchange of the two properties, her commission would be: A. $4,000 B. $5,000 C. $9,000 D. None, because it was an exchange rather than a sale

C Explanation: A real estate agent who arranges a Section 1031 exchange (and who is often referred to as a 1031 facilitator) may receive compensation from both parties to the exchange.

95. Which of the following rental transactions would be covered by the Fair Housing Act if no real estate agent were involved? A. Owner-occupant rents a unit in a four-unit dwelling, using a nondiscriminatory ad B. Owner-occupant of a duplex rents to a neighbor's son without advertising the unit C. Rental of a unit in a triplex, using no discriminatory advertising D. Owner rents out one room in her residence, without using any advertising

C Explanation: A residential rental transaction can be exempt from the Fair Housing Act only if the property is a single-family home and the owner has no more than three such homes, or if the property has no more than four units and the owner is residing on the property. Option C does not indicate that the owner is occupying one of the units in the triplex, so the Fair Housing Act would apply to the transaction.

55. A broker would need to have a securities license to participate in: A. a sale of both real and personal property B. a sale of a commercial building that is showing a profit C. a transaction involving an investment contract D. listing a property owned by a corporation

C Explanation: A securities license is necessary in a transaction that involves the sale of a security such as an investment contract.

60. The entity that determines the maximum number of people who may legally live in a rental unit is the: A. Department of Housing and Urban Development B. state government C. local health department and zoning authority D. property owner

C Explanation: Among the many things that a local zoning authority might determine is the maximum occupancy of each dwelling in a particular area.

11. A seller wanting to get an estimate of the value of her property before settling on a listing price should obtain a/an: A. abstract of title B. assessment C. fee appraisal D. title search

C Explanation: An appraisal is an estimate of a property's value, as of a given date. A seller would obtain an appraisal from a fee appraiser, an independent appraiser hired to value a particular property for a fee.

83. A right held by one or more persons to use and possess property to the exclusion of others is a/an: A. covenant B. easement C. fee simple estate D. right of equity

C Explanation: An easement allows the use of property, but is not a possessory right. An estate, in contrast, is an interest in land that is or may become possessory. (A fee simple estate is the most common form of estate.)

100. A potential buyer gives a seller an offer that doesn't meet the seller's demands in the listing. What has the buyer given? A. Contract of sale B. Counteroffer C. Offer to purchase D. Option

C Explanation: An offer simply must express a willingness to contract, and be certain in its terms. It does not need to match the seller's terms.

22. A seller lists his house and sells it "as is" to a buyer. Shortly after the sale closes, the buyer finds a large hole in the ground next to the house. The hole, which has caused significant damage to the foundation, was almost certainly intentionally concealed with leaves and branches. Which of the following is correct? A. Only the licensee is liable B. Only the seller is liable C. Both the seller and the licensee may be liable D. Neither is liable, because the house was sold "as is"

C Explanation: Even when property is sold "as is," sellers and real estate agents have a duty to disclose any known latent defects or other material facts. Here, whoever concealed the hole—whether it was the seller, the licensee, or both of them—would be liable for misrepresentation. If only one of them covered up the hole, the other one could also be liable if he or she was aware of the deception and failed to say anything about it to the buyer. Also, even if the seller knew nothing about the problem, in many states the seller could be vicariously liable if it was the seller's agent who concealed the hole.

46. A 3,000 square foot retail property rents annually for $20 per square foot, plus 8% of the tenant's gross sales. The building's tenant pays $120,000 rent in one year. What were that year's gross sales? A. $75,000 B. $150,000 C. $750,000 D. $1,500,000

C Explanation: First, calculate the year's base rent, by multiplying the square footage by the rental rate (3,000 square feet × $20 per square ft. = $60,000). Next, subtract the amount attributable to the square footage from the total rent, to find the rent attributable to gross sales ($120,000 - $60,000 = $60,000). Finally, divide that portion of the rent by 8% to find the property's gross sales ($60,000 ÷ .08 = $750,000).

85. A homeowner bought his home for $150,000. Ten years later, he refinanced his mortgage and borrowed $100,000. Which of the following is true for this type of property? A. Interest on the difference between the original loan amount and the refinanced amount is not deductible B. Interest on only half of the difference between the original amount and refinanced amount is deductible C. Interest on loans such as this one for the purchase or refinance of a principal residence is deductible D. Interest deductibility will depend on the borrower's tax bracket

C Explanation: For a principal residence, interest on a purchase or refinance loan is fully deductible. Interest on a home equity loan of up to $100,000 is also deductible, regardless of the size of the purchase loan, and regardless of the taxpayer's income.

20. An older retail building has narrow hallways and window air conditioning units rather than central AC. These would be examples of: A. economic obsolescence B. external obsolescence C. functional obsolescence D. physical deterioration

C Explanation: Functional obsolescence includes both undesirable or out-of-date design elements (such as the narrow hallways) and undesirable or out-of-date fixtures or appliances (such as the window units).

100. A buyer's agent has repeatedly seen sales collapse at the last minute because the buyers weren't able to obtain financing. How could he best limit this in the future? A. Qualify all prospects himself B. Refer buyers to a specific lender C. Require prospects to be approved first D. Show lower-priced properties

C Explanation: Getting preapproved for a loan, before beginning the house hunting process, has become the standard procedure for buyers. This way, the buyer knows in advance the maximum amount he can spend on a house.

51. As a result of Federal Reserve action, interest rates for residential loans go down. Which of the following is most likely to occur as a result? A. Fewer buyers will qualify for loans B. There will be a decrease in sale prices for homes C. There will be an increase in sale prices for homes D. There will be more homes for sale

C Explanation: Home sales prices are likely to go up in the event of lower interest rates. Lower interest rates will enable more buyers to get more house for their money, motivating more buyers and increasing demand, which will in turn drive up sales prices.

24. Five people buy an investment property. They take title so that they each have equal ownership shares, and so that if one of them dies, his share will pass to his heirs. How did they take title? A. Community property B. Joint tenancy C. Tenancy in common D. Term tenancy

C Explanation: If co-owners are able to will their property to their heirs (instead of having it pass through right of survivorship), that means they hold title as tenants in common.

77. In a bilateral contract: A. a duty will be performed by one party only B. one party can restrict the performance of another party C. two parties have exchanged promises, and both parties are obligated to perform D. all parties have fully performed their duties

C Explanation: In a bilateral contract, two parties have exchanged promises and both parties are obligated to perform.

44. Buyer Perry would like to assume Seller Joan's loan with ABC Mortgage Company, in a way that would mean no further liability for Joan. To accomplish this, Perry and Joan should use a/an: A. acknowledgment of the agreement from ABC Mortgage B. purchase contract signed by the buyer and seller C. release of liability signed by ABC Mortgage D. release of liability signed by Joan

C Explanation: In a loan assumption, if the seller wants to be released from further liability, she must obtain a document called a release of liability from the lender.

31. An Asian-American buyer asks to be shown homes that are located in neighborhoods that he knows are primarily Asian. If a real estate agent complies with his wishes, this is: A. illegal, as it is blockbusting B. illegal, as it is steering C. legal, as it is done at the buyer's request D. legal, as the Fair Housing Act has an exception for single-family homes

C Explanation: It is legal for an agent to show a buyer homes in the neighborhoods that the buyer has chosen, even if the buyer chose the neighborhoods based on race. Nothing in the Fair Housing Act requires an agent to show buyers houses against their will.

89. A metes and bounds description reads as follows: "Start at the intersection of Route 120 and Wells Lane. Proceed due south 1,815 feet, then due east 1,200 feet. Proceed due north 1,815 feet, then return west to point of beginning." How many acres is this property? A. 5 B. 20 C. 50 D. 100

C Explanation: It may help to sketch the property being described; once you do, you will notice that it is rectangular, and you can simply use the Area = Length × Width formula. Multiply the length and width to find that it is 2,178,000 square feet (1,815 ft. × 1,200 ft. = 2,178,000 sq. ft.). Convert this amount to acreage by dividing by 43,560 (2,178,000 ÷ 43,560 = 50 acres).

66. A buyer's earnest money deposit can be kept by a seller in the event of a buyer's default only if the: A. seller breaches the contract B. seller can prove that she has suffered a financial loss C. purchase and sale agreement includes a forfeiture clause for liquidated damages D. purchase and sale agreement provides for specific performance

C Explanation: Liquidated damages are only available as a remedy for breach of contract if the contract contains a liquidated damages provision. Most purchase and sale agreements provide that the earnest money will be treated as liquidated damages if the buyer (not the seller) breaches the contract. The seller is allowed to keep the buyer's deposit, and generally is not required to prove that she has suffered a loss as a result of the buyer's breach.

52. A borrower takes out an $88,000 loan at 6% interest. The monthly principal and interest payment, amortized over 30 years, is $585. He also makes a $12,000 downpayment. The borrower will need to pay one discount point to the lender. How much is the cost of one discount point? A. $5.85 B. $88 C. $880 D. $1,000

C Explanation: One discount point is the equivalent of one percent of the loan amount. Multiply the loan amount by 1% to find the cost of the discount point ($88,000 × .01 = $880). The other numbers given can and should be ignored.

12. Which of the following items would a residential homeowner be able to deduct on her income taxes? A. Depreciation B. Maintenance expenses C. Points paid on the mortgage D. The downpayment at the time of purchase

C Explanation: Points paid in connection with a mortgage loan are considered by the IRS to be prepaid interest, and therefore are deductible on a homeowner's income taxes just as mortgage interest is.

119. Client trust funds must be placed in an interest-bearing trust account in all of the following cases EXCEPT: A. when a buyer makes an earnest money deposit in the amount of $1,000 B. when a buyer makes an earnest money deposit in the amount of $5,500 C. for property management accounts D. for commercial real estate trust accounts

C Explanation: Property management trust accounts don't have to be interest-bearing, nor are they subject to the pooled interest-bearing account requirements that apply to other real estate trust funds.

102. A federal law requires lenders to give the booklet "Shopping for Your Home Loan" to all prospective borrowers within three business days of loan application. What law is this? A. Regulation Z B. Home Loan Disclosure Act C. RESPA D. Truth in Lending Act

C Explanation: RESPA requires, among other things, that all lenders give prospective borrowers a copy of the booklet about settlement procedures, entitled "Shopping for Your Home Loan."

11. The comparable has a two-car garage and the subject property only has a one-car garage. The appraiser estimates that space for a second car contributes about $800 to the value of a home. To take this into account, the appraiser will: A. add $800 to the sales price of the subject property B. add $800 to the sales price of the comparable property C. subtract $800 from the sales price of the comparable property D. subtract $800 from the sales price of the subject property

C Explanation: Since the comparable has a feature the subject property lacks, the appraiser will subtract the value of that feature ($800) from the sales price of the comparable property. The resulting figure will suggest what the comparable might have been worth if it, like the subject property, only had a one-car garage. (Note that the sales price of the subject property is not an appropriate consideration in appraising its market value.)

73. Frank gives Stella an option to buy his house. Stella, as the optionee, is obligated to: A. exercise the option at the end of the option period B. apply for a zoning change, if one is necessary in order to use the property in the way Stella wants C. pay consideration for the option right D. record the option

C Explanation: Some consideration must pass from optionee to optionor. A mere statement of consideration is not adequate. Recording the option is advisable, but not required.

6. Special, general, and universal agency all: A. create a long-lasting relationship over multiple transactions B. give the agent authority to act on the principal's behalf in all financial matters C. originate with the principal D. terminate with the end of a particular transaction

C Explanation: Special, general, and universal agency have varying lengths, and give the agent varying levels of authority. The common thread is that they all are created when a principal delegates to an agent the right to perform certain actions on his behalf.

12. Which of the following describes a violation of the Americans with Disabilities Act? A. A recently built one-story apartment complex with doorways too narrow for wheelchair users B. A rental house that does not have a wheelchair ramp at its entrance C. A shopping center without wheelchair-accessible restrooms D. An older 40-unit apartment building without elevators

C Explanation: The Americans with Disabilities Act requires public accommodations to be accessible to the disabled. This would include a shopping center, as it is open to the public and affects commerce. The ADA does not apply to residential properties (although the Fair Housing Act does impose some restrictions on new apartment construction).

86. Under Title VIII of the Civil Rights Act of 1968, certain transactions are exempt. Which one of the situations below would be exempted and not a violation of the act? A. A church-owned apartment complex where language in the lease restricts tenancy to members of a specific national origin B. Members of a certain ethnic group are denied lodging in facilities operated by a private club for commercial purposes C. An unlisted home that is for sale by owner, where the only advertising is a sign in front of the property that reads simply "For Sale" D. An absentee owner who rents units in a four-plex without the help of a real estate agent

C Explanation: The Federal Fair Housing Act (Title VIII of the Civil Rights Act of 1968) does not apply to the sale or rental of a single-family home by its owner, provided that the owner doesn't own more than three such homes, no real estate agent is used, and no discriminatory advertising is used.

10. The primary purpose of the Truth in Lending Act (Regulation Z) is to require the lender to: A. provide the borrower with a statement showing its aggregate interest charge for similar properties in today's marketplace B. include in any advertisement about available financing the annual percentage rate, plus the applicable finance charges C. disclose the complete cost of credit to consumer loan applicants D. reveal the true cost of all real estate loans, except purchase money loans

C Explanation: The Truth in Lending Act requires lenders to disclose financing costs to applicants for consumer loans, including consumer loans secured by real estate.

9. A home is built on a hillside with underground springs that cause the ground to soften from time to time. The owner, who has had the property for three years with no problems, sells the house without mentioning the underground springs. The listing agent is also aware of the springs but says nothing. A year later, the buyer realizes that a corner of the house is sinking. She is entitled to sue: A. the listing agent B. the seller C. both the listing agent and the seller D. neither the listing agent nor the seller

C Explanation: The agent's failure to tell the buyer about the springs (a known material fact) amounted to misrepresentation by omission, and the agent may be liable to the buyer. If the seller knew about the springs, the seller could also be liable to the buyer for misrepresentation. And even if the seller did not know about the springs, in many states the seller could be held vicariously liable for his agent's misrepresentation.

45. Max would like to know if there's an encroachment on his boundary line. He should: A. examine the legal description B. order an appraisal C. order a spot survey D. do a title search

C Explanation: The best way to ascertain if a physical object encroaches on a boundary line would be through a survey.

30. A mortgage includes a prepayment penalty of 3% of the loan's principal balance at the time of payoff, if the owner pays off the entire principal before a specified date. Monthly amortized principal and interest payments are $1,484.40, with a 5% annual interest rate. The borrower's balance after making the January 1st payment was $44,731.15. On February 1st, he made the next payment as scheduled, and then after that, paid off the entire remaining balance. What would be prepayment penalty be? A. $290.30 B. $1,257.20 C. $1,302.99 D. $1,319.37

C Explanation: The first step is to calculate by how much the February 1st mortgage payment would reduce the principal balance. Start with the balance after the January payment and calculate how much annual interest the borrower would owe on that ($44,731.15 × .05 = $2,236.56 annual interest). Then divide that by 12, since this is a monthly payment ($2,236.56 ÷ 12 = $186.38 monthly interest). Subtract that interest from the total payment amount to find how much that payment will reduce the loan's principal ($1,484.40 - $186.38 = $1,298.02). Subtract that amount from the previous balance to find what the balance will be after making the February payment ($44,731.15 - $1,298.02 = $43,433.13). Multiply that balance by 3% to find the amount of the prepayment penalty ($43,433.13 × .03 = $1,302.99).

101. Which of the following is the proper method for determining the gross income multiplier? A. Divide monthly income by sales price B. Divide annual income by sales price C. Divide sales price by gross income D. Divide assessed value by gross income

C Explanation: The gross income multiplier method involves dividing a comparable's sales price by its gross income to determine the multiplier.

116. If, at the conclusion of a disciplinary hearing, the Director rules against a licensee and revokes her license, the licensee can appeal to the: A. district court B. municipal court C. superior court D. supreme court

C Explanation: The licensee has 30 days to appeal to superior court.

132. A property manager handling a vacant building fails, for several months, to keep out vagrants who damage the property. Who is liable? A. The management firm's designated broker alone B. The property manager alone C. The property manager as well as the designated broker (for failing to properly supervise the licensee) D. No one is liable

C Explanation: The property manager is liable for failing to exercise reasonable care in carrying out the duties she took on for her client. The property manager's designated broker may also be liable for failing to supervise the property manager adequately.

122. A real estate agent took a $3,000 cash earnest money deposit on Friday morning. She had another appointment on Friday afternoon and didn't want to misplace the money over the weekend, so she deposited it into her personal bank account. First thing on Monday morning, she transferred the money to her firm's trust account. She has: A. acted properly B. acted properly if her account was registered with the state as a temporary account C. commingled funds D. not violated the law because the deposit was only for several days

C Explanation: The real estate agent has violated state laws concerning trust fund handling, by commingling trust funds with her own personal funds.

116. Appointments to the Real Estate Commission are made by: A. general election B. the Director of the Department of Licensing C. the Governor D. the state legislature

C Explanation: The real estate commissioners are appointed by the Governor.

72. Art sold his house, which was not encumbered with a mortgage. Closing expenses were $5,264, and he paid a commission of 7% of the selling price. He received a check at closing for $372,316. What did the house sell for? A. $398,000 B. $404,260 C. $406,000 D. $411,100

C Explanation: This is a seller's net problem. The first step is to add the costs of the sale to the seller's net (which in this case is the actual net, not a desired net). $5,264 + $372,316 = $377,580. Divide that by the commission rate subtracted from 100 (100% - 7% = 93%). $377,580 ÷ 0.93 = $406,000.

23. When homes in a new development are sold, a $2,000 fee is charged to the buyers. This fee covers the homeowners association dues for the first year. HOA dues for each subsequent year are $1,000. In the development's first year, ten homes are sold. Ten more are sold the second year. Assuming that the HOA's account had no disbursements or expenses (and ignoring any possible contributions from the developer), what is the balance of the account after two years? A. $30,000 B. $40,000 C. $50,000 D. $60,000

C Explanation: To solve this problem, first calculate how much money is deposited in the first year. There are ten properties sold, and $2,000 is charged for each one (10 × $2,000 = $20,000). In the second year, ten additional properties are sold (10 × $2,000 = $20,000). The first ten properties each owe an additional $1,000 in the second year, though (10 × $1,000 = $10,000). Add $20,000, $20,000, and $10,000 to find a total of $50,000.

66. If a real estate agent receives a commission even if the sellers find the buyer, what type of listing agreement do they have? A. Open listing B. Exclusive agency listing C. Exclusive right to sell listing D. Net listing

C Explanation: Under the terms of an exclusive right to sell listing, the agent is entitled to a commission regardless of who finds the buyer.

128. An out-of-state real estate licensee (who is licensed in another state) may enter Washington to engage in which real estate activity? A. Residential property management B. Residential sales C. Commercial sales or leasing D. Contract collection

C Explanation: Washington law allows out-of-state licensees to perform duties that would require a license when engaged in commercial real estate transactions. The out-of-state licensee must have a written agreement to work in cooperation with a brokerage licensed in Washington.

120. Washington's Real Estate Brokerage Relationships Act: A. doesn't apply to leasing transactions B. doesn't require the disclosure of dual agency C. requires a pamphlet on agency relationships to be given to all parties before any written agreement D. requires agents to keep information confidential on behalf of all parties

C Explanation: Washington's real estate agency statute requires agents to give the pamphlet on agency relationships to all parties. The duty of confidentiality applies only to a principal, not to all parties.

22. In what order would these steps be performed when using the income approach to value? 1. Apply the cap rate to the net income. 2. Estimate the potential gross income. 3. Determine the net operating income. 4. Calculate the effective gross income. A. 3, 1, 4, 2 B. 1, 3, 2, 4 C. 2, 4, 3, 1 D. 2, 3, 1, 4

C Explanation: When one performs the income approach to value, the steps are to estimate potential gross income, calculate effective gross income, determine net operating income, and then apply the cap rate to the net income. (Note that selecting and applying the cap rate may be viewed either as one step or two separate steps.)

76. A property manager manages two large apartment buildings. They're older but well-maintained properties with a 96% occupancy rate. Based on analysis of market rates, the property manager should: A. lower rental rates to get to 100% occupancy B. maintain the status quo C. raise rents, if competitive market analysis confirms this D. refurbish the properties to improve desirability

C Explanation: When putting together a management plan, a property manager should perform a market analysis, examining rents at competing properties. This will help determine appropriate rents for her own property.

26. Maria buys a home in a subdivision that is subject to restrictive covenants. The city Maria lives in allows fences, but the subdivision's restrictive covenants don't. Of the following, which is true? A. Restrictive covenants only limit lot size; they don't limit fencing B. The city is a government entity, so its rules take precedence over private restrictions C. The deed's restrictive covenants take precedence over the city because they are more restrictive D. Maria owns the property, so she has a legal right to build a fence regardless of the deed's restricTIONS

C Explanation: When zoning ordinances and private restrictions conflict, the more restrictive of the two prevails.

3. Which of the following pieces of information must a listing agent convey to a seller? A. A potential buyer confides that he plans to violate zoning restrictions B. A potential buyer is a member of a racial minority C. A potential buyer, who has asked for the seller to take back a purchase money mortgage, has abused his credit in the past D. The neighborhood where the seller plans to move is seeing more minorities moving in

C. Explanation: A listing agent owes the duty of loyalty to his principal, the seller. If the listing agent discovers information that suggests that selling to a particular buyer could be detrimental to the seller (perhaps, for example, the buyer lets slip some problems obtaining financing in the past), that should be disclosed to the seller.

59. Darren and Martin are agents for a large brokerage firm. They decide that Darren will specialize in listing and selling houses on the north side of the river and Martin will specialize in listing and selling houses on the south side of the river. Such a practice is: A. illegal, because only designated brokers may agree to this kind of arrangement B. illegal, because both federal and state laws prohibit market allocation C. legal, because the agreement was to increase efficiency (and thus it did not restrict trade) D. legal, because the prohibition against market allocation does not apply to agents working for the same firm

D 59. Darren and Martin are agents for a large brokerage firm. They decide that Darren will specialize in listing and selling houses on the north side of the river and Martin will specialize in listing and selling houses on the south side of the river. Such a practice is: Your Answer: C; Correct Answer: D A. illegal, because only designated brokers may agree to this kind of arrangement B. illegal, because both federal and state laws prohibit market allocation C. legal, because the agreement was to increase efficiency (and thus it did not restrict trade) D. legal, because the prohibition against market allocation does not apply to agents working for the same firm Explanation: If Darren and Martin worked for competing brokerage firms, this would be market allocation, and a violation of the Sherman Act. However, because they work for the same firm, they are technically not in competition with each other and their actions are legal.

71. When people own property in joint tenancy, it means that: A. only two people can share ownership of the real estate B. none of the owners can sell their interest C. each person's interest in the property is inheritable D. there is a right of survivorship

D Explanation: A joint tenancy is characterized by the right of survivorship, where upon the death of one joint tenant, that tenant's interest automatically passes to the other tenants (co-owners). Any number of people can own in joint tenancy, providing the unities are adhered to, including that they take title at the same time and in the same deed.

98. An apartment building was built in 1960. An apartment is being rented to a couple with no children. Which of the following is true? A. The rules on lead-based paint don't apply unless the tenants have children B. The rules on lead-based paint don't apply to tenants, only purchasers C. The tenants must receive a ten-day window in order to test for lead-based paint D. The tenants should sign the lead-based paint disclosure and receive a pamphlet on lead-based paint

D Explanation: A landlord must disclose the location of any known lead-based paint, provide a copy of any report concerning lead-based paint if the property has been inspected, and give tenants a copy of the lead-based paint pamphlet. Tenants do not receive the ten-day period in which to have the home tested for lead-based paint that buyers do.

132. The Director may impose all of the following penalties on a licensee for violating the license law, EXCEPT: A. additional remedial education B. license revocation C. license suspension D. requiring licensee to pay for costs of formal hearing

D Explanation: A licensee may have her license revoked or suspended, or be required to complete additional education. However, a licensee is never required to pay for the costs of a disciplinary hearing (other than the costs of preparing a transcript, if she wishes to appeal the findings).

104. A percolation test will examine the: A. likelihood of landslides or subsidence B. presence of toxic contamination in soil C. roofing material's ability to repel rain D. soil's ability to absorb and retain water

D Explanation: A percolation test measures the soil's ability to absorb and retain water. The test is usually performed to determine whether a property is suitable for a septic system that will meet applicable health standards.

74. Carl is housebound and never goes outside. Neighbor Salvador plants a vegetable garden on a corner of Carl's property that is not visible from the main house. After the required period of time, Salvador claims a prescriptive easement over this portion of Carl's land. This easement is: A. not valid, because Salvador had a duty to inform Carl of his intended use B. not valid, because Carl didn't know of the use and had no chance to formally object C. valid, because Salvador's vegetable garden is a productive use of the land D. valid, because the use was open, and Carl's knowledge of the use isn't considered

D Explanation: A prescriptive easement requires a use that is open and notorious, meaning that it should be reasonably apparent to the landowner. Someone establishing an easement by prescription is not expected to find out whether the true owner is living on the property, what his limitations are, or whether he is actually aware of the prescriptive use. The rule only requires actions that would be enough to put the typical owner on notice that his property interest is threatened

64. ABC Realty signed a property management agreement to manage property for XYZ Apartment Rentals. Do they have an agency agreement and, if so, what kind of agency authority has been created? A. No; to create an agency relationship, they would have to sign a listing agreement B. No; XYZ has only hired ABC Realty to manage the properties, not to be its agent C. Yes; ABC has been hired by XYZ to be a special agent D. Yes; ABC has been hired by XYZ to be a general agent

D Explanation: A property management agreement creates a general agency relationship, in which the agent (ABC Realty) is authorized to handle all of the principal's (XYZ Apartment Rentals) affairs in one or more specified areas.

119. A property manager needs a real estate license when engaged in which of the following activities? A. Managing property owned by the company that employs her B. Managing self-owned property C. Managing a self-storage facility D. Third-party property management

D Explanation: A property manager who manages property for third parties must be licensed. Licensing exemptions exist for persons who manage property they own or on behalf of a group they belong to, and for managers of self-storage facilities.

27. Siobhan listed her property with ABC Realty. She asks her agent, Robert, to draft deed covenants that will prevent a buyer from subdividing the land in the future. She'd also like the agent to create a trust from the sale, to benefit her disabled sister. Robert's reply should be: A. I can draft the trust, but an attorney will need to draft the covenants B. I can draft both of these documents C. I can draft the covenants, but an attorney will need to draft the trust D. I can't help you with either of these things; you'll need to contact an attorney

D Explanation: A real estate licensee is limited to filling in the blanks on a printed form drafted by attorneys. Going beyond that, by drafting covenants or trust documents, for example, would be considered the unauthorized practice of law.

49. A real estate agent made a listing presentation to a property owner. The owner was impressed with the agent and signed a listing agreement. The owner told the agent that he was married, but his wife was in the hospital and could not sign the listing agreement. He asked the agent to proceed with the listing anyway, because they were in a hurry to sell the house. In these circumstances, the agent should: A. do as the seller asks; the agent can get the wife's signature later B. do as the seller asks, because dower rights give the husband the right to list the marital property C. refuse to take the listing, because the seller clearly has an ulterior motive for trying to sell the property while his wife is ill, and the agent should not get mixed up in a fraudulent transaction D. refuse to take the listing, but tell the seller that as soon as the wife signs the listing they can proceed with trying to find a buyer

D Explanation: All of the owners of a property should sign the listing agreement. In addition, the spouse of any married owner should sign the agreement, even if they may not have any ownership interest.

110. Licensee A and Licensee B form a team, working together within the brokerage they work for. Licensee A is listed as the agent on a purchase and sale agreement, but it was Licensee B who negotiated the transaction. Which of the following is true? A. Licensee A cannot be paid because B negotiated the transaction B. Licensee B cannot be paid because A's name is the only one on the agreement C. Licensee A, as team leader, will pay Licensee B D. Licensee B must receive payment from the brokerage

D Explanation: An affiliated licensee may receive compensation only from the firm who employs her. If two affiliated licensees will split a commission, it must be handled by their firm or firms.

81. A mortgage often includes a clause requiring the lender's consent before another borrower may assume the mortgage. This clause is called a/an: A. power of sale clause B. subordination clause C. defeasance clause D. alienation clause (due-on-sale clause)

D Explanation: An alienation clause (or due-on-sale clause) prevents assumption without the lender's consent by stipulating that the loan balance is due and payable in full if the property is sold.

42. An easement appurtenant is one that: A. can only be created by prescription B. is of more benefit to the servient tenant than the dominant tenant C. is given to a commercial tenant D. runs with the land

D Explanation: An easement appurtenant runs with the land; in other words, subsequent owners of the properties that benefit from or are burdened by the easement will also be subject to the easement. An easement appurtenant benefits the dominant tenant, not the servient tenant.

88. Gail gives ABC Realty a listing that stipulates it is the only real estate firm authorized to list her home. At the same time she insists on including a provision that would allow her to sell the home herself without paying a commission to ABC. Which of the following types of listings would serve that purpose? A. Non-exclusive listing B. Exclusive right to sell listing C. Exclusive open listing D. Exclusive agency listing

D Explanation: An exclusive agency listing agreement entitles the brokerage to a commission if anyone other than the seller finds a buyer for the property during the listing's term.

53. Agent Bob receives a deposit with a written offer that includes a five-day acceptance clause. On the second day, Buyer Martha notifies Agent Bob that she is withdrawing her offer and wants her deposit returned. Seller Lou hasn't accepted the offer yet. In this situation: A. Bob notifies Lou that Martha is withdrawing her offer, and Bob and Lou each keep half of the deposit B. Bob keeps the entire deposit as his commission C. Martha can't withdraw her offer; it must remain open for the full five days D. Martha has the right to revoke her offer and get her money back at any time before Lou accepts the offer

D Explanation: An offer can be revoked at any time prior to notification of acceptance.

37. Of the following types of contracts, which one is a unilateral contract? A. Escrow instructions B. Exclusive right-to-sell listing C. Lease D. Option

D Explanation: An option is a unilateral contract; in other words, only one party is obligated to act. Exercising the option creates a bilateral purchase and sale contract.

34. Two parties enter into an option agreement, scheduled to end in December. However, in October the optionee decides he doesn't want to buy the property. What should the parties do in order to terminate the option? A. Complete a formal statement of novation B. Exercise the option's contingency clause C. File an interpleader action so a court can void the contract D. Nothing; the option will expire automatically

D Explanation: An optionee must take an affirmative step to exercise an option, by giving written notice of acceptance to the optionor. If the optionee does not do so by the end of the option period, the option automatically expires.

140. A real estate agent from Oregon is involved in a commercial property transaction in Washington. The agent from Oregon must do all of the following EXCEPT: A. associate with a Washington brokerage B. provide a copy of the out-of-state real estate license to the Washington firm C. deposit all records in the transaction with the firm in Washington D. register with the Department of Licensing at least 20 days before engaging in brokerage activities

D Explanation: An out-of-state licensee may handle commercial real estate transactions in Washington without a Washington license if she works in cooperation with a brokerage in Washington. The Washington firm must have custody of the out-of-state broker's records concerning the in-state transaction, and it must be given a copy of the out-of-state broker's license. Out-of-state licensees aren't required to register with the Department of Licensing.

139. Under the Uniform Regulation of Business and Professions Act (URBPA), which of the following actions by a licensee would constitute unprofessional conduct? A. Allowing an unlicensed assistant to submit property information to the multiple listing service B. Being convicted of a gross misdemeanor related to a motor vehicle accident C. Failure to include in an advertisement the designated broker's name and telephone number of the brokerage D. Failure to provide a buyer with a property disclosure form

D Explanation: Depending on the circumstances, failure to provide a property disclosure form in a transaction where one is required could be considered incompetence, negligence, or malpractice that harms another; or it could be considered misrepresentation in the conduct of real estate activities. Either way, it is a violation of the Uniform Regulation of Business and Professions Act. An advertisement must include the firm's name as licensed, but not the name of the firm's designated broker or the telephone number.

36. Mark is selling his property, which has an unfinished basement. He gets a full-price offer from Susan, but the offer requires Mark to finish the basement prior to closing. Do Mark and Susan have a binding contract? A. Yes, because both parties have made offers to each other B. Yes, because Susan made a full-price offer C. No, because a valid offer must be written and recorded D. No, because Mark has not accepted Susan's offer

D Explanation: For a valid contract to exist, there must be offer and acceptance. An advertisement (like a listing) is not considered an offer, only an invitation to negotiate. The buyer's offer is just that: an offer, without an acceptance.

137. A licensee is about to change her business location. Which of the following should she do? A. Move her license to the new location until the renewal date B. Notify the Director of the Dept. of Licensing by phone C. Notify the Real Estate Program Manager in writing D. Surrender her license, and apply for an updated license with the correct location

D Explanation: If a licensee plans to change her place of employment, the firm's designated broker or the licensee surrenders the license. The Director of the Department of Licensing will then issue a new license for the new location.

78. Buyer Bob and Seller Sam decide to wait until Sam's listing agreement with XYZ Real Estate Agency has expired, to avoid paying a commission. Does the firm (and, by extension, the individual listing agent) have any legal recourse? A. Yes, the listing agent can pursue criminal charges B. Yes, the listing agent can sue Bob under the listing agreement C. Yes, the listing agent can sue Sam under the listing agreement D. No, the listing agent has no further recourse

D Explanation: If a listing agreement does not include an extender clause (a safety clause), the listing agent has no recourse against a buyer and seller who avoid paying a commission by waiting to close until after the listing has expired. For this reason, most listing agreement forms have an extender clause. (Note: this question doesn't involve the license law, so it's a national question and not about Washington law or practice. While the question might be considered tricky, if you face a question like this on the state exam you should assume there is no extender clause since the question doesn't mention one.)

53. A real estate agent takes a listing for a mobile home. He may do this without any additional license if: A. the mobile home contains a minimum of 1,500 square feet B. he holds a real estate securities license C. the listing agreement is clearly identified as a personal property listing D. the listing includes the land on which the mobile home rests

D Explanation: If the listing includes the sale, exchange, or lease of the land on which the mobile home sits, the real estate agent is not required to have any additional kind of license. If the listing does not include the sale, exchange, or lease of the land on which the mobile home sits, an agent would need a mobile home dealer's license (her real estate license would be irrelevant).

102. Jesse, Kim, and Diane own a home together as joint tenants. If Jesse dies, her property interest: A. will be inherited by her children according to the provisions of her will B. must be bequeathed to Kim and Diane in her will C. will be automatically devised to her heirs D. will be automatically transferred (conveyed) to Kim and Diane

D Explanation: Joint tenancy includes the right of survivorship, which means that upon the death of one joint tenant, title passes immediately to the remaining joint tenant(s). The property interest is not subject to probate; the transfer of title is automatic.

136. L's broker's license was issued on October 16, 2012. L's license will expire on: A. December 31, 2012 B. December 31, 2013 C. October 16, 2013 D. October 16, 2014

D Explanation: L's license will expire two years after its issuance: October 16, 2014.

84. An apartment building has eight units; each unit rents for $800 per month. The property can also be expected to earn $4,000 per year from laundry and vending machines. An appraiser estimates that the property typically operates with a 5% bad debt and vacancy factor. What is the property's estimated annual effective gross income? A. $10,080 B. $13,120 C. $76,760 D. $76,960

D Explanation: Multiply the eight units in the building by the monthly rent to find the monthly income (8 x $800 = $6,400). Multiply that by 12 months per year, to find the annual income (12 x $6,400 = $76,800). Calculate what is 5% of that amount ($76,800 x .05 = $3,840), and subtract that amount from the annual income ($76,800 - $3,840 = $72,960). Add the $4,000 in additional revenue (which is not subject to the bad debt and vacancy factor) to find the effective gross income ($72,960 + $4,000 = $76,960).

133. Which of the following would not be considered a nominal earnest money deposit, subject to the pooled interest-bearing account requirement? A. $5,000 in the form of a personal check B. $7,500 in the form of cash C. $10,000 in the form of certified funds D. $11,000 in the form of a cashier's check

D Explanation: Nominal earnest money deposits are $10,000 or less.

85. A licensee who is taking a listing on a property finds a number of problems that need to be fixed, such as several leaking faucets and an electrical system that intermittently cuts out. This would be an example of: A. economic obsolescence B. external obsolescence C. functional obsolescence D. physical deterioration

D Explanation: Physical deterioration is a loss in value caused by wear and tear or by damage. The problems mentioned in the question would probably be classified as curable physical deterioration (deferred maintenance), since it's likely that the cost of correcting them could be recovered in the sales price when the property is sold.

10. Which of the following statements about prepayment penalties is true? A. Both the FHA and VA loan programs impose prepayment penalties B. FHA loans include prepayment penalties, but VA loans do not C. VA loans include prepayment penalties, but FHA loans do not D. Neither the FHA nor VA loan programs allow prepayment penalties

D Explanation: Prepayment penalties are not allowed by either the FHA or VA loan programs. Borrowers are allowed to prepay part or all of their loans at their own discretion.

125. Which of the following is EXEMPT from the pooled interest-bearing account requirement? A. All earnest money deposits for residential transactions B. Earnest money deposits of no more than $10,000 C. Earnest money deposits of no more than $5,500 D. Property management trust funds

D Explanation: Property management trust funds are exempt. The pooled interest-bearing account requirement applies to earnest money deposits of $10,000 or less.

87. As a property manager, you may: A. advertise that units are available, even when they're not B. use different application forms for minority applicants C. require credit checks for some applicants, but not for others D. offer inducements to prospective tenants

D Explanation: Property managers may offer inducements to attract tenants; a common example is waiving the first month's rent. A property manager should perform credit checks on all prospective tenants, not just some, since arbitrary application of the requirement could give rise to the charge that the manager is violating antidiscrimination laws.

93. Allen begins providing construction services on May 2 and records a construction lien on May 5. Bart begins providing services on May 3 and records a construction lien on May 4. On May 10, a judgment lien against the property is recorded. The property's owner also receives notice on May 10 that he is in arrears on his property tax payments. Which lien has lien priority? A. Allen's lien B. Bart's lien C. Judgment lien D. Tax lien

D Explanation: Property tax liens take priority over other liens, including construction liens. Allen's lien still takes priority over Bart's lien, as construction liens take priority based on the date of the start of construction, but the tax lien takes priority over both. Property tax liens get recorded automatically when levied.

70. The full cost of which of the following could be an income tax deduction for an investment property owner? A. Adding a swimming pool B. Installing a new HVAC system C. Prepaying additional principal on the mortgage D. Repainting the building

D Explanation: Repairs to keep an investment property in ordinary operating condition are deductible in the year they are performed. This would include repainting. Adding a pool or installing a new furnace would be considered capital expenditures, which have tax advantages too but are not deductible in the year they are made (although capital expenditures may be gradually deducted over a set number of years in the form of depreciation deductions).

123. Who is responsible for preparing and conducting real estate license examinations? A. The Department of Licensing B. The Director C. The Attorney General D. The Real Estate Commission

D Explanation: The Real Estate Commission has that responsibility, though they delegate it to a professional testing service.

106. Who is responsible for the earnest money deposit? A. The listing firm B. The selling firm C. The mortgage company D. The firm to which the check is made payable

D Explanation: The firm or individual to whom the check is made payable has a responsibility to see that the money is deposited in a trust account on behalf of the buyer; this is usually the selling firm.

72. Chin, a home seller, is talking to his real estate agent. He mentions that he rents the backup generator; it doesn't belong to him. The generator would be considered: A. a fixture B. a natural attachment C. a trade fixture D. personal property

D Explanation: The generator is the personal property of the company that owns it. While it might remain on the property after possession of the property changes hands, it still belongs to the rental company and they could reclaim it according to the terms of their contract.

76. A movie theater was built ten years ago. If the neighborhood is now zoned entirely residential, the movie theater: A. will have to be torn down B. must be remodeled to better conform to the neighborhood's intended use C. will be allowed to continue if the owner obtains a conditional use permit D. will be allowed to continue since it was built before the new zoning law went into effect

D Explanation: The movie theater is an example of a nonconforming use, which predates a zoning change. Nonconforming uses are generally allowed to continue, although they may not be enlarged, or resumed if they are stopped.

76. To be enforceable, a contract for the sale of real estate must be in writing and signed by the parties. This is true because of which law? A. Real Estate License Law B. Uniform Commercial Code C. Real Estate Settlement Procedures Act D. Statute of Frauds

D Explanation: The statute of frauds requires certain contracts, including virtually all real estate contracts, to be in writing.

8. The parties negotiate the sale of a property by writing letters to each other (in the old-fashioned way, by hand). Their agreement is: A. invalid; the parties must meet with each other in person B. invalid; the parties must use a preprinted form C. invalid; each letter is only a counteroffer to the previous letter D. valid; under the statute of frauds, contracts to sell real estate are enforceable if they are in writing

D Explanation: The statute of frauds requires contracts for the sale of real estate to be in writing. Simple notes, memoranda, or a series of letters can be sufficient to meet the requirement, as long as they identify the property adequately, indicate agreement between the parties, and are signed by the parties.

113. Unlicensed staff members in a real estate office can do which of the following without obtaining a real estate license? A. Discuss listings over the phone B. Show properties to interested parties C. Host open houses provided they don't discuss terms of sale D. Anything that is not covered by Washington real estate license law

D Explanation: They may do anything that is not covered by Washington real estate license law; for instance, placing lockboxes on listed properties or providing accounting services for the employing brokerage firm.

98. A homeowner with a mortgage sells his home to a purchaser who agrees to assume the mortgage. The purchaser applies for and obtains the lender's approval, and the seller is released from liability for the mortgage. This is an example of: A. assignment B. subrogation C. subordination D. novation

D Explanation: This is a novation, because the lender has approved the purchaser and released the seller from liability. The purchaser has entered into a new loan agreement with the lender that replaces the original agreement between the seller and the lender.

7. A buyer would like protection against any unknown encumbrances on the property she plans to buy. The greatest protection would come from: A. a home inspection B. a survey C. an abstract of title D. title insurance

D Explanation: Title insurance offers protection against latent or undiscovered defects in the title. Buyers almost always protect their interests with a title insurance policy.

123. A 30 clock-hour course must be completed to activate a license that has been inactive for more than: A. six months B. one year C. two years D. three years

D Explanation: To activate a license that has been inactive for more than three years, the licensee must complete a 30 clock-hour course.

55. A property seller and a real estate agent entered into a listing agreement. Even though the seller found the buyer, the agent still collected a commission. What kind of listing agreement did they have? A. Net listing B. Open listing C. Exclusive agency listing D. Exclusive right to sell listing

D Explanation: Under an exclusive right to sell listing agreement, the real estate agent is entitled to a commission regardless of who finds the buyer.

84. A seller lists a 1.1 acre vacant residential lot, asking $10,000. His broker decides to offer the financing himself. The broker runs an ad saying, "A $3,000 downpayment will get you beautiful residential acreage." Is more credit information required? A. No, because Regulation Z doesn't apply to vacant land B. No, because the value was under $25,000 C. Yes, because a real estate broker is offering financing D. Yes, because the downpayment amount was given

D Explanation: Under the advertising requirements of the Truth in Lending Act and Regulation Z (which apply to consumer loans secured by real property, including vacant land), if an ad contains a specific triggering term such as the downpayment amount, then the annual percentage rate and the other terms of repayment must also be disclosed in the ad.

73. Which of the following would characterize a tenancy in common? A. Only available to married persons B. Requirement of equal interests C. Right of survivorship D. Tenants can will a partial interest in the property

D Explanation: Unlike joint tenancy, a tenant in common can deed or will her share of the property to someone else. There is no right of survivorship, and no requirement of equal interests, in a tenancy in common.

133. Washington state's real estate agency law does not address which of the following? A. Definition of dual agency B. Creation and termination of agency relationships C. Vicarious liability of principal and licensee D. Penalties for not disclosing agency status

D Explanation: Washington's real estate agency law is found in the Real Estate Brokerage Relationships Act (RCW chapter 18.86). It addresses the topics listed in answers A - C (definition of dual agency, creation and termination of agency, and vicarious liability), but there is no reference in the law to penalties for not disclosing agency status. Penalties are found in the license law (RCW chapter 18.85).

17. A property manager decides to offer some additional services beyond what is specified in the property management agreement. She may do so after: A. giving the tenants 30 days' notice B. obtaining written authorization from the owner C. providing notice to the Department of Licensing D. the management agreement is amended in writing

D Explanation: Whenever the duties and powers of a property manager change, the property management agreement (the document that describes the scope of a property manager's authority) must be amended.

15. After listing a property for sale, a licensee learns that the property was used as a beer hall during Prohibition, for illegal drug sales in 2003, and as a homeless shelter in 2009. What is the licensee's duty regarding property disclosures? A. All of these uses must be disclosed B. Only the most recent use must be disclosed C. The drug sales must be disclosed D. None of these uses must be disclosed

D Explanation: While any of these prior uses might stigmatize the property, none of them are material facts that would have to be disclosed by a seller or a seller's agent. There would be an exception if a prior use adversely affected the property's physical condition. For example, if the property had been used for illegal drug manufacturing, which may leave behind harmful chemical residues, this would have to be disclosed. However, the question refers only to drug sales, not drug manufacturing.

55. One tax advantage of investing in real estate is: A. high liquidity B. low risk C. homestead protection D. sheltering of income

D Real estate investment is often thought of as a "tax shelter" because it serves to partially shelter investors from income tax liability

6. A deed restriction is a covenant that: A. controls housing costs in a subdivision B. lasts forever C. prevents the property from becoming encumbered D. restricts future owners of the property

D. Explanation: A deed restriction is a private agreement that limits uses of a property. It runs with the land, so it affects future owners of the property. While it potentially could last forever, there are a number of ways in which a deed restriction may be terminated.

5. Bob builds a fence extending 20 feet onto the neighboring property. He uses the land for 15 years without the knowledge of the neighboring owner, who lives in another city. When Bob wants to list his property for sale, including the extra 20-foot strip, which of the following is true? A. Adverse possession does not apply because the neighboring owner did not know about Bob's possession of the land B. Adverse possession does not apply since Bob did not pay taxes on the land during those 15 years C. Bob has not proven hostile intent, because there has not been a confrontation with the neighboring owner D. The land is his to sell, having passed through adverse possession

D. Explanation: Bob's possession of the land meets all of the criteria for adverse possession: he occupied the land, his use was open and notorious, it was exclusive, and for the required period of time. Hostile intent does not require confrontation. (Bob may need to file a quiet title action, though, to perfect the title before proceeding with the sale.)

74. A buyer accepts a general warranty deed from a seller, believing that the seller is the sole owner of the property. The buyer later finds out that the seller is only a co-owner. Has a covenant in the general warranty deed been violated? A. No, the only covenant in a general warranty deed promises that the previous owner didn't encumber the property B. No, the principle of caveat emptor controls matters concerning a deed C. Yes, there is a covenant providing equitable title

D. Explanation: The general warranty deed contains a covenant of the right to convey, meaning that the grantor either has title to the interest or is an agent of the owner with the authority to transfer the interest.