Real Estate Exam 3

Lenders typically won't pay for which of the following?

A)Title evidence B)More than 3% of the buyer's closing costs C)Repairs ANSWER D)All of these The answer is all of these. There are several charges and items the lender will not pay. It is always good to have a good closer who knows what the lender will or will not pay.

In a short sale, the lender sometimes looks to the seller's agent to do which of the following?

ANSWER: A)All of these B)Prove that the offer reflects the current market C)Provide a marketing history D)Make up some of the shortfall by reducing the commission Explanation: The answer is all of these. Lenders are looking to make sure they are able to get a fair price and increase their bottom line.

At closing, a lender typically will NOT allow payment for which of the following?

ANSWER: All of these B)A home inspection report C)More than 3% of the buyer's closing costs D)Utility bills

Mortgage fraud is investigated by all of the following:

B)the Federal Bureau of Investigation. C) the U.S. Department of Justice. D)the Minnesota Department of Commerce.

Which situation can cause a delay in a short sale?

Bankruptcy

The BEST way to determine whether there are encroachments associated with properties is to

Conduct a land survey to determine improvement locations. The best way to determine the location of improvements and issues of encroachment is to have a land survey of the property.

Lenders will request what piece of information from the buyer's agent?

Copy of the earnest money check. Lenders need copies of Purchase Agreement and Earnest Money Check to determine the terms and conditions of the sale and to ensure all details of the financing are addressed.

What does the buyers closing worksheet (not closing statement) include?

Date of Closing Names of parties involved in transaction Seller's and Buyer's contact information **** Listing company's primary broker's information is NOT required

Items required to bring to closing

Driver's License /photo ID Cashier's/Certified Check Hazard Insurance Binder and paid receipt. -- Historic memorabilia is a gesture of a goodwill and is nice, but not required

What would be covered by a title insurance policy?

Heretofore unknown ownership claims arising after closing

When the closing company prepares the HUD-1 statement, they will include what on the closing statement?

Seller's closing costs. The HUD-1 is a standard closing statement that itemizes the seller's and buyer's expenses and transaction costs. The form does not address matters of title defects, listing price or the form of ownership the buyer has chosen.

According to federal law, a lender must provide a borrower with a good-faith estimate of expenses within how many days of loan application?

The answer is 3 days. Good-faith estimate of expenses must be given to a consumer within three days of the time of application.

Generally when a mortgage is in default for more than ____ days, the mortgage is considered delinquent.

The answer is 30. Mortgages that have payments more than 30 days past due are considered delinquent.

The federal EPA recommended what action level for exposure to radon?

The answer is 4.0 pc/L. The federal EPA standard has been 4.0 pc/L (pico-curie) through 2009; however, lowering the exposure level has been discussed.

The redemption period for an abandoned property in Minnesota can be reduced to

The answer is 5 weeks. If the property is abandoned according to the statute, the lender can accelerate the redemption period.

The typical redemption period in Minnesota for a residential foreclosure is

The answer is 6 months. The most common statutory redemption period is six months. There are other types of redemption periods.

Which material has pores in the facing material that open in the presence of excessive moisture and close with low humidity?

The answer is DryrightTM. This is a newer technology in building materials.

Which of the following is TRUE of homeowners' associations within common interest communities?

The answer is Minnesota law requires common interest communities to have a homeowners' association. All unit owners in a common interest community are members of the unit owners association and vote on association business. The association must meet at least annually and notify unit owners of the meeting. However, unit owners are not required to attend the meeting.

Which of the following is a federal regulation that requires the use of the HUD-1 form as a standard closing statement for government-related financing?

The answer is RESPA. RESPA, or the Real Estate Settlement Procedures Act, requires that the HUD-1 form be used as the standard closing statement of government-related loans.

Once a buyer has applied for a loan with a lender, an appraisal will be ordered. The appraisal will be conducted using which of the following standards?

The answer is USPAP. Various real estate professionals have codes of ethics or professional standards they adhere to when executing their duties. When conducting an appraisal, an appraiser will use the Uniform Standards of Professional Appraisal Procedures (USPAP).

Seller agrees to allow buyer or buyer's representative to gain access to the property for purposes of inspections and survey under which time period?

The answer is a mutually agreeable time. This is negotiated between the buyer and seller.

To close the transaction, the buyer and seller typically hire

The answer is a title company. The buyer and seller will each hire a title company and/or an attorney to facilitate the closing. They may hire the same company.

Which of these is NOT a form of residential investment real estate?

The answer is a warehouse. Residential real estate includes single-family homes, four-plexes, and multi-tenant rental properties such as apartments.

Title insurance provides protection for the buyer-owner in the event a title problem is discovered

The answer is after the closing. Title insurance provides protection in the event a title problem is discovered after the closing.

According to the Federal Fair Housing Act, all of the following are protected categories EXCEPT

The answer is age. Age is not a category protected by the Federal Fair Housing Act.

In addition to all of the protected categories included in the Federal Fair Housing Act, the Minnesota Human Rights Act adds all of the following EXCEPT

The answer is age. Neither the Federal Fair Housing Act nor the Minnesota Human Rights Act includes age as a protected category.

Cities may have ordinances and regulations governing residential rentals within their boundaries. Which of these would be an example of such regulations?

The answer is all of these are examples. Cities may require inspections of units to determine compliance with codes, education programs for landlord and tenants, and permits may be required for units to be occupied.

Typically an agent will submit which of the following to the office administrator along with the closing worksheet?

The answer is all of these are typically included. The tracking of documents and details of a transaction are important to ensuring a timely and successful closing. Therefore, brokers often require copies of the earnest checks, purchase agreements, and accompanying addendums be kept in company records.

Which of the following are interior wall coverings?

The answer is all of these. Log, board, and lath and plaster are all types of interior wall coverings; however, the most common interior wall covering used today is sheetrock (drywall).

An effective method for reducing radon in homes is

The answer is all of these. Radon mitigation is aggressively approached by addressing all three components: increasing ventilation, balancing pressure, and controlling entry.

The short sale seller should be advised to consult with

The answer is an attorney. It is always a good practice to have the short sale seller consult an attorney to see if this is a good way to proceed.

Flopping means

The answer is an immediate sale after closing to an undisclosed buyer at a higher price. This is fraud and a scam. The buyer purchases a short sale property for a low price and immediately sells it to an undisclosed buyer to achieve a large profit.

In a condominium development, all of the following would be considered limited common elements EXCEPT

The answer is any lawn area contiguous to the unit. Limited common elements are common elements that are exclusive to the unit. The lawn or ground is a common element.

Which type of property can be converted into a common interest community?

The answer is any property. Any type of property can be condoed, that is, converted to a common interest community.

All of the following are common interest communities EXCEPT

The answer is apartment buildings. Occupants of rental units do not have any ownership interest in the property.

When a lender calculates the annual percentage rate (APR) on a loan, all of the following are considered in the calculation EXCEPT

The answer is appraisal and credit report charges. When determining the annual percentage rate (APR) a lender will include only those charges associated with obtaining credit, such items as nominal interest rate, buyer paid discount points, and loan application fees or charges.

When determining whether to work with the distressed property seller, what is one situation that can cause problems with negotiations between the seller and the lender?

The answer is bankruptcy. If a seller files for bankruptcy protection, there can be no negotiations between the seller and the lender.

The transfer of ownership as it relates to liquid petroleum gas stored in tanks on property is handled in which of the following ways?

The answer is buyer and seller prorate cost of remaining fuel. Prorating the cost of the remaining fuel makes it fair for both parties.

Where does the closing typically take place?

The answer is buyer's title company. The closing usually takes place at the buyer's closing/title company.

A copy of the appraisal report is typically shared with which of the following?

The answer is buyer. The buyer is entitled to know the value determined by the appraisal on the property being purchased since it is a buyer charge for the service. Sellers, home inspectors, and county assessors are not entitled to receive copies of the appraisal.

Federal law requires lenders to obtain an appraisal for each home mortgage they fund. Who pays for the appraisal?

The answer is buyer. The buyer pays for the appraisal. The appraisal is completed on behalf of the lender. The buyer may obtain a copy of the appraisal.

Which of these is NOT required to be given to the prospective purchaser of a common interest community?

The answer is certificate of title. Prospective purchasers of a common interest community property will receive a disclosure on the association rules and regulations, declaration, annual budget, and financial statements. A certificate of title is used in Torrens or registered property.

At the time of listing, which is a typical way to determine fair market value of a distressed property?

The answer is competitive market analysis (CMA). The CMA is the tool real estate agents use to determine the listing price and market value of the property.

If the CIC is NOT approved by FNMA, the only method of institutional financing will be

The answer is conventional or insured conventional loans. For units in the building to be eligible for FHA and VA financing, the CIC must be approved by the Federal National Mortgage Association (FNMA). Seller financing is not institutional financing.

Property insurance for unit owners is obtained in which of the following ways?

The answer is covered under unit owners' insurance policy. Mortgage and title insurance do not cover property. Individual unit owners purchase their own insurance for their individual unit and property. The association purchases coverage for the common elements.

What happens to the earnest money at closing? The earnest money is

The answer is credited to the buyer. The earnest money will be credited to the buyer, and applied to the purchase price.

Which of the following is an advantage of a tankless water heater system?

The answer is efficiency. Tankless water heaters have become the standard in Europe because of efficiency and the small amount of space needed.

SEER or EER rate an air conditioner's

The answer is energy efficiency. A rating of 16 or higher is considered excellent.

A common form of sheet foam is

The answer is expanded polystyrene. Also known as bead board, builders can purchase expanded polystyrene in a wide variety of thicknesses, and it is popular for home insulation.

Imminent default occurs when the borrower is

The answer is facing hardship and will not be able to make payments. Default occurs when a borrower is not keeping a promise or covenant in the mortgage. Imminent default means that a borrower is on the verge of violating a promise or covenant in the mortgage.

What is the function of insulation?

The answer is filter and slow the passage of air. Another function of insulation is to redirect heat energy.

A licensee representing a tenant in lease negotiations would be expected to provide all of the following representation services EXCEPT

The answer is financing guidance. Since leasing does not involve the tenant obtaining a loan, there is no financing.

A lender is required to provide a borrower with which of the following when applying for credit?

The answer is good-faith estimate of expenses. According to the Real Estate Settlement Procedures Act (RESPA), a consumer applying for credit must receive a copy of a good-faith estimate of expenses at the time of application, but no later than three days after the application.

When financing the purchase of real estate, a buyer would need to bring proof of which of the following items to closing?

The answer is homeowners' insurance. Lenders will require the borrower/buyer to bring proof of property insurance to closing to ensure the property is insured against loss that could affect the lender. Mortgage insurance, credit reports, and title insurance may all be considered in a real estate transaction, but not delivered by the buyer at closing.

When would you contact the loan officer to begin processing the loan for your buyer?

The answer is immediately after the purchase agreement is finalized. Getting the loan is crucial. The lender should be contacted immediately after the purchase agreement is finalized.

According to the subdivision of land, boundaries and access section of the purchase agreement, the seller warranties all of the following EXCEPT

The answer is improvements on premises for two years. The seller does not warrant improvement on the property in the purchase agreement. The seller discloses condition of real property in the seller's property disclosure.

How are the condominium bylaws, rules, and regulations established?

The answer is in the declaration. The rules, bylaws, and regulations are created when the declaration forming the CIC is recorded.

When posting signage promoting residential rental property, what does a property manager NOT have to do?

The answer is include the property manager's telephone number. The broker's name would need to be on any signage. While it is generally a good idea to include a contact phone number on a marketing sign, including the broker's telephone number is not a requirement. Familiarity and compliance with sign ordinances and association regulations is required.

Which statement is FALSE regarding the advantages of owning residential investment real estate?

The answer is it provides for tax deduction of both principal and interest payments. Ownership of rental real estate affords certain tax advantages, including deductibility of interest on debt service, property taxes, and depreciation of improvements.

Should a buyer choose to rescind a purchase agreement on a common interest community property, which of the following is TRUE of the earnest money paid by the buyer?

The answer is it will be returned to the buyer. The buyer's right to rescind a purchase agreement after receiving the required disclosure acts is a form of contingency. Therefore, it will allow the buyer to rescind the agreement and receive a refund of any earnest money that has been paid.

The title company will issue a title commitment addressing anything affecting which of the following?

The answer is items affecting marketable title to said property. Title insurance companies don't inspect or comment on the condition of improvements and repairs or the type and amount of property insurance needed for the property. Title insurance companies will address items that affect the condition of title and its marketability.

When a property manager uses credit reports to determine qualifications of an applicant for residential rental property, which statement is FALSE?

The answer is landlords must cover fees required to create and issue the credit report. Landlords and property managers may charge an applicant a fee to obtain a credit report. The landlord or property manager must obtain written permission for the applicant to request a credit report, and the written permission must spell out the criteria of how the information in the report will used in the screening process.

Very old houses often had plumbing made out of which material?

The answer is lead. Lead plumbing was the primary plumbing material through the end of the 1800s. Lead in water is most likely from pipe or solder in older service connections or older plumbing inside homes, from which lead leaks into the water through leaching.

If the purchase is being financed, what form of title insurance will the lender require the borrower to purchase to cover the lender's interests?

The answer is lender's policy. If the purchase is being financed, the lender will require the borrowers to purchase a lender's title insurance policy to cover the lender's interest.

A mortgagee's title insurance policy protects the interests of which person or entity against defects discovered after closing?

The answer is lender. The mortgagee is the lender. A mortgagee's title insurance policy protects the lender's interests against title issues discovered after closing.

The property marketing brochure should include which of the following to ensure compliance with state law?

The answer is listing brokerage name. State law requires the broker's name be listed in all advertisements and promotions of property listed with the broker.

Your client, the buyer, is satisfied with the results of the home inspection. According to the Minnesota Association of REALTORS® Purchase Agreement, what must the buyer do to satisfy the inspection contingency?

The answer is nothing. If the buyer is satisfied with the condition of the property, no additional steps are required. The inspection contingency will expire according to the purchase agreement.

The buyer and seller have signed and delivered a purchase agreement. The closing must occur

The answer is on or before the date in the purchase agreement. The closing must occur by the date stipulated in the purchase agreement.

The buyer has the right to inspect and review the HUD-1 form how many days prior to closing?

The answer is one day. The buyer has the right to inspect the HUD-1 closing statement one day before closing to compare the good-faith estimate of expense to actual expense. However, the buyer must notify the closer that they wish to inspect the closing statement.

MNAR's New Construction Purchase Agreement contains a provision that is NOT included in MNAR's standard Purchase Agreement regarding

The answer is price protection. Proration of taxes, delivery of marketable title, and a statement regarding mechanic's liens are contained in both purchase agreements. The price protection provision only appears in the new construction purchase agreement.

Buyers finance the purchase of a condominium through the

The answer is primary mortgage market. Buyers finance condominium purchases through traditional sources. Some sellers may offer seller financing.

Which product was first used by NASA?

The answer is radiant barriers. Radiant products were first used by NASA to protect astronauts from the extreme temperatures of outer space and were perfected by Clark Beck to keep over 95% of the heat energy from reaching the astronaut's body.

Your client, a real estate developer, asks you how to create a condominium in Minnesota. You advise your client to

The answer is record a declaration. The Minnesota Common Interest Ownership Act requires a declaration be recorded to create a condominium.

Cellulose insulation is derived from

The answer is recycled newspaper. Cellulose is 100% natural, and 75-80% of it is made from recycled newsprint.

Once the lender receives the required documents on a short sale, the lender could do all of the following EXCEPT

The answer is reject the offer and cease negotiations. Lenders do not accept or reject offers. Lenders approve or reject the loan payoff associated with an offer the seller has accepted.

What qualifies as a hardship for a short sale?

The answer is relocation. Both mandatory relocation and a mortgage payment adjustment qualify as hardships needed to pursue at short sale.

Insulation R-values represent

The answer is resistance to heat. The bigger R-value of a particular insulation, the greater the resistance it has to heat.

Which material is a urea formaldehyde-based foam that expands slowly and with little pressure?

The answer is retro foam. This spray foam technology is great for insulating closed cavities.

The MOST significant way to slow the entry of radon into a home is

The answer is sealing the attic. According to the Environmental Protection Agency (EPA), sealing the attic is the best way to prevent radon from leaking into a home because it slows the amount of air being pulled up from the basement.

A seller's closing worksheet, not closing statement, would include all of the following EXCEPT

The answer is seller's appraisal report. The seller's closing worksheet would include the date of closing, commission splits, and the location of the property's abstract of title.

At closing, which party signs the HUD-1 and several disclosure forms and receives a proceeds check?

The answer is seller. The sellers sign the HUD-1, several disclosure forms, and the deed. If there are sale proceeds, the seller is given a check in the amount at the bottom of the closing statement.

An agent has entered into their first lease listing with a property owner. The agent must be prepared to represent the owner and perform all of the following services EXCEPT

The answer is signing the lease. Without additional approval, a licensee cannot contractually bind a client.

Action for specific performance or actual damages as a result of default in a purchase agreement must begin within how many months after cause for such action has arisen?

The answer is six months. Action for performance or actual damages must be initiated within six months of the cause of action.

Which statement about refinancing a distressed mortgage is FALSE?

The answer is the borrower doesn't need to meet underwriting requirements. Borrowers wishing to refinance distressed property will need to meet the normal mortgage underwriting criteria and be current with their existing mortgage. Some lenders may allow refinancing of up to 125% loan to value of the property and refinancing could result in a reduction in the amount of the monthly mortgage payment.

Who signs the purchase agreement in a short sale?

The answer is the buyer and seller. The purchase agreement is always between the buyer and seller. The lender approval is a contingency.

The agent submits the closing worksheet to the title company along with all of the following EXCEPT

The answer is the buyer's and seller's price, terms, and motivations. The buyer's and seller's price, terms, and motivations must be kept confidential forever. Only the price and terms in the agreement are disclosed.

A buyer is looking to finance the purchase of a property. If the property appraisal indicated that the value of the real estate is more than the agreed upon sale price in the purchase agreement, which of the following statements is TRUE?

The answer is the loan to value for the property is the lesser of the appraised price or sale price. The lender will start the loan-to-value ratio at the appraised price or sale price, whichever is less.

Once a title search has been conducted and title issues have been discovered, all of the following are true about defects EXCEPT

The answer is the seller has up to 30 days after closing to clear title defects. The seller will need to clear title defects or issues before closing or after closing they become the buyer's issues to resolve. Sellers and buyers could mutually agree to a delay in closing to allow time for the seller to clear a title issue or the buyer could cancel the agreement.

When a short sale occurs, which of the following is TRUE?

The answer is the seller must accept the offer, subject to lender approval. Property that is being sold on a short sale may be marketed and financed through conventional industry methods. Lenders will often have costs and a portion of the loan balance that are not covered in the short sale, therefore lenders are required to give final approval of the sale.

Which of these is a possible condition a lender will place on a short sale approval?

The answer is the seller must sign a promissory note to cover the shortfall. The lender can require the borrower to sign a promissory note for part or all of the deficiency.

Conduction is known as

The answer is the transfer of heat between two objects. This is caused by a temperature difference between the parts.

A good-faith estimate of expenses associated with the financing of real estate must be provided in residential loans within ________________ of the consumer making application for a loan.

The answer is three business days. The good-faith estimate of expenses is required to be given to consumers at the time of application or within three business days of making application for financing.

According to Minnesota law, a security deposit must be returned to the tenant within how many weeks of the end of the lease?

The answer is three weeks. Landlords are required to return security deposits to the tenant within three weeks of the termination of the lease.

If there is to be a buyer's home inspection, it must occur

The answer is within the time frames specified in the purchase agreement. The buyer and seller negotiate and agree to time frame parameters in the purchase agreement.

Foam insulation can be used in the exterior walls of older houses

The answer is without removing the plaster. New methods of blowing in foam from the exterior through small holes or receptor areas is one application. The foam expands rapidly and fills the available space, creating a very efficient insulation in older homes as well as new homes.

What title services will the buyer receive from the seller in a real estate transaction?

Updated abstract of title Title Search Title examination

When preparing the seller's estimated selling expense, which of these is NOT typically a seller expense?

the answer is mortgage registry tax. The mortgage registry tax is a buyer charge because the buyer is the one obtaining the mortgage.