Real Estate Final Exam
While reviewing her purchase contract, Jeanette's client asked, "What does this inspection contingency do?" How should Jeanette frame her response? "Like all contingencies, it means you'll get your earnest money deposit back if you back out of the contract because of the contingency." "That contingency means you can terminate the contract without penalty for any reason related to the home inspection results." "The inspection contingency gives you the legal right to terminate the contract if the seller refuses to fix the items you request." "The inspection contingency is designed to protect you in case the home inspector finds something wrong with the property that can't be fixed or that makes you uncomfortable."
"The inspection contingency is designed to protect you in case the home inspector finds something wrong with the property that can't be fixed or that makes you uncomfortable." A general statement explaining the purpose of the contingency is appropriate. Interpreting the implications of what happens if the buyer terminates the contract is an example of unauthorized practice of law.
Your buyer client Heather just signed a purchase agreement for a $520,000 home. The LTVR is 60%. How much is Heather putting down on the purchase? $208,000 $220,000 $300,000 $312,000
$208,000 A 60% LTVR means that Heather is financing 60% of her purchase and putting down 40%. Forty percent of $520,000 is $208,000 ($520,000 x 0.40).
A buyer with a $250,000 loan has a monthly principal and interest payment of $2,042.71. If $1,145.83 is interest, what is the new principal balance after the first payment is applied? $247,957.29 $248,854.17 $249,103.12 $250,000.10
$249,103.12 If $1,145.83 of the total payment is interest, that leaves $896.88 to be applied to principal: $250,000 - $896.88 = $249,103.12.
A home sells for $225,000. Per the listing agreement, the total commission is 7% of the sales price. The listing brokerage will split the full commission with the buyer's broker 50/50. Kiko the seller's listing agent has a 70/30 split arrangement with her brokerage, with Kiko receiving the "70". After sharing the commission with the buyer's broker and her commission split with her brokerage, how much will Kiko receive? $15,750 $2,362.50 $5,512.50 $7,875
$5,512.50 The total commission is $225,000 × .07 = $15,750. After Devin takes half, Sheila and Kiko are left with the other half to split, which is $7,875. Kiko receives 70% of this other half, or $7,875 × .70 = $5,512.50 in commission.
What are the typical voltage levels in U.S. households? 100/200 120/240 150/250 150/300
120/240 Larger appliances like dryers demand 240 volts, but most small electrical needs can be serviced with 120 volts. Question 29
Which of the following is a violation of federal fair housing law? A landlord refuses to rent to anyone under the age of 30. A private homeowner advertises a private house share using the phrase: "No minorities." A private homeowner lives in a duplex and won't rent the other half to a pregnant woman. A private homeowner lives in a triplex and won't rent one of the units to a family.
A private homeowner advertises a private house share using the phrase: "No minorities." Discriminatory advertising is never allowed.
To which party does a licensee need to provide the Consumer Guide to Agency Relationships? A current client who receives an offer to purchase A current client who's ready to make a purchase offer A prospective client who's contemplating a commercial real estate transaction A prospective client who's contemplating a residential real estate transaction
A prospective client who's contemplating a residential real estate transaction The Consumer Guide to Agency Relationships applies to prospective clients contemplating a residential real estate purchase.
Which of these is the best example of an estate from period to period? After Morgan's one-year lease expired, he continued to lease the property with no defined end date. John's lease terminated automatically and was inheritable. Peggy's lease expired, but she wouldn't leave the apartment. Ricardo's lease had no specified end date and required reasonable notice to terminate.
After Morgan's one-year lease expired, he continued to lease the property with no defined end date. An estate from period to period (periodic) typically begins with a defined term and then, at the end of the term and with both parties' permission, continues on a periodic basis (e.g., month to month).
Which of the following items would be considered a truth in advertising violation according to FTC guidelines? -An advertisement lists the square footage of the living area as 3,145 feet, which doesn't include storage outbuildings. -An advertisement states "HVAC unit like new!" when in fact the unit is used but has had most of the parts replaced recently. -An MLS listing shows a property as available even though the parties closed on the transaction three weeks ago. -The licensee's name in an ad is followed by the designation REALTOR®. The licensee is a member of NAR.
An MLS listing shows a property as available even though the parties closed on the transaction three weeks ago. Truth in advertising rules require licensees to keep MLS information up to date.
Octogenarians Gertie and Frank met in Sunset Living, a skilled nursing center for people with advanced Alzheimer's disease, where they're both residents. They fell in love and get hitched, signing a marriage certificate. This is an example of ______ contract. An executory An implied An invalid A valid
An invalid An invalid contract is one that's missing at least one of the required elements. In this case, neither party has the legal capacity to enter into a contract due to their advanced Alzheimer's disease.
An appraiser is comparing income from a multi-tenant office building to comparable properties, so he converts the income for each property to ______. Annual dollars per room Annual dollars per square foot Annual dollars per tenant Tenants per square foot
Annual dollars per square foot Appraisers compare rents from similar properties by converting to a common unit of measurement. For commercial properties, this is typically by annual dollars per square foot.
Investors who maintain strong relationships with local ________ will have a source of information about trends in commercial property values and net operating incomes. Appraisers Financial analysts Government officials Real estate investment bloggers
Appraisers Appraisers who work with commercial properties have a current understanding of trends in income and property values.
Appraisers need general data, including information about the physical characteristics of a market area. Which of the following is a good source for this type of information? Area maps Financial statements Register of Deeds Tax assessor records
Area maps Appraisers will find information about the physical characteristics, climate, and natural resources from area maps and other sources.
In Kentucky, you can't work as a property manager for an owner without a signed, written property management agreement. Once the agreement terms have been set, ______. Both the agent and the property owner must sign the agreement, the owner receives a copy with the lease attached, and the owner certifies receipt of the agreement copy Both the agent and the property owner must sign the agreement, the owner receives the original, and the agent certifies receipt of the agreement copy The property owner signs off on the agreement, and the property manager receives a copy Verbally or in writing, both parties acknowledge the terms of the agreement, and the property manager must certify receipt of the agreement
Both the agent and the property owner must sign the agreement, the owner receives a copy with the lease attached, and the owner certifies receipt of the agreement copy Both the agent and the property owner must sign the agreement. The owner should receive a copy with the lease attached, and the owner certifies receipt of the agreement copy.
How does appraiser Maribel measure depreciation when using the capitalized value method? By applying a capitalization rate to an income comparison of similar properties By comparing the structure's effective age at the time it's appraised with the structure's total economic life By estimating the property's loss in value for both curable and incurable items of depreciation By using comparable properties' sales prices to figure out the value of a depreciated item
By applying a capitalization rate to an income comparison of similar properties First, the appraiser calculates the loss in income—due to depreciation—by comparing the income similar properties produce. Next, the appraiser applies a capitalization rate to that income amount to determine its impact on the property's overall value.
How does an appraiser begin an appraisal? By estimating the value of the land By gathering and analyzing data By identifying the data needed By stating the problem
By stating the problem First, the appraiser states the problem, noting the purpose of the appraisal, the interest to be appraised, the type of value to be estimated, and the date of the value estimate.
Which of the following is the highest federal level of licensure an appraiser can attain? Appraiser Trainee Certified General Real Property Appraiser Certified Residential Real Property Appraiser Licensed Real Property Appraiser
Certified General Real Property Appraiser A Certified General Real Property Appraiser must have a minimum of 3,000 hours (at least 1,500 in non-residential properties) of acceptable experience obtained over at least 30 months. This type of appraiser is authorized to appraise all types of real property.
Which document is signed and agreed to at closing and reconciles what the final financial obligations are for both the buyer and seller? Affidavit of title Closing disclosure Sales agreement Title insurance policy
Closing disclosure The closing statement document is signed and agreed to at closing and reconciles what the final financial obligations are for both the buyer and seller.
The information on the Condominium Seller Certificate is provided by the ______. Condominium association Seller Seller's agent State
Condominium association The condominium association is responsible for completing the Condominium Seller Certificate upon the request of the seller.
Which one of the following is true about title to a property? Constructive notice to the public of interest in a parcel of real estate occurs when the deed is recorded and physical possession of the property is taken. The last party to record has priority. The seller is responsible for paying for title insurance. Title is finalized with the simple transfer of the deed.
Constructive notice to the public of interest in a parcel of real estate occurs when the deed is recorded and physical possession of the property is taken. Recording and possession give the public constructive notice that ownership has changed hands. It also protects the buyer from others' claims on the property.
If market conditions change between the time a comparable property was sold and the time the appraisal is made, which of the following must be adjusted by an appraiser using the sales comparison approach? Date of sale Location Physical features Terms and conditions of sale
Date of sale The appraiser will adjust the date of sale, usually with a percentage adjustment, in order to account for the overall change in market conditions.
In an amortized loan, the interest portion of the mortgage payment generally ______ over the life of the loan. Decreases Has no bearing on the total Increases Remains the same
Decreases The interest portion of the payment generally decreases over the life of the mortgage loan as the principal portion increases.
Which of the following is a private agreement that impacts the use of the land? Assessment Deed restriction Encroachment Encumbrance
Deed restriction A deed restriction involves a private agreement.
What's the difference between direct capitalization and yield capitalization when appraising income property? Direct capitalization deducts expenses from the investment before capitalizing income, while yield capitalization capitalizes the entire return from the investment without deducting expenses. Direct capitalization uses a rent multiplier, while yield capitalization uses a yield multiplier. Direct capitalization uses a time span of one year into the future, while yield capitalization capitalizes income for the entire holding period of the property. Direct capitalization uses figures from the property's operating statement, while yield capitalization uses market estimates.
Direct capitalization uses a time span of one year into the future, while yield capitalization capitalizes income for the entire holding period of the property. Direct capitalization assesses value based on potential income for the following year. Yield capitalization capitalizes income based on the entire holding period.
In the third step of the market extraction method, an appraiser calculates the depreciation rate for a comparable property by ______. Adding the dollar amount of depreciation to the improvements' age Dividing the dollar amount of depreciation by the reproduction cost Multiplying the dollar amount of depreciation by the improvements' age Subtracting the dollar amount of depreciation from the improvements' age
Dividing the dollar amount of depreciation by the reproduction cost In the third step of the market extraction method, an appraiser divides the dollar amount of depreciation by the reproduction cost to figure out the depreciation rate. (This must be shown as a percent of the total depreciation per year.)
Which real property ownership right protects the owner from harassment or interference? Control Disposition Enjoyment Possession
Enjoyment The right of enjoyment provides the right to possess the land without harassment or interference.
In an air conditioning system, what takes heat from the air and brings it to the refrigerant? Compressor Condenser Evaporator Recycler
Evaporator In an air conditioning system, the evaporator takes heat from the air and transports it to the refrigerant, resulting in cooler air.
Which of the following agreements gives you the sole right to represent a buyer? Exclusive listing agreement Exclusive right-to-list agreement Exclusive right-to-represent agreement Exclusive right-to-sell agreement
Exclusive right-to-represent agreement An exclusive right-to-represent agreement is the most popular form of a buyer representation agreement because it gives the licensee the sole right to represent the buyer.
In addition to the one major tenant, how many tenants does a neighborhood shopping center normally have? Five to 20 Four to 15 Three to 10 Two to eight
Five to 20 Additional tenants—typically five to 20 of them—may include financial offices, clothing and/or shoe stores, furniture stores, and other service businesses.
Wendell just listed Barb's home. Barb told him that there weren't any easements on the property, and Wendell hasn't seen a copy of the survey. What is Wendell's responsibility relative to the disclosure of any easements? He only needs to disclose easements if they're known. He should commission a survey if an existing one can't be found. He should do a title search to confirm any easements. He should require his seller to do online research in the county records database.
He only needs to disclose easements if they're known. Sellers and listing agents must only disclose easements of which they have actual knowledge. If neither are aware of any easements, then the buyer will typically discover them during due diligence.
When an appraiser determines a property's potential gross income for a property, the ______ provides information about trends that may influence market rent. Comparable rent Economic rent Historical rent National rent
Historical rent Historical rent can help the appraiser adjust for trends regarding income for similar properties.
Muriel is an appraiser who's using the cost approach. She's looking for any defects in design and makes note of the poor floor plan, the non-existent kitchen, and the lack of closet space and bathrooms. These are definite signs of _______. Incurable external obsolescence Incurable functional obsolescence Opinion of value Physical deterioration
Incurable functional obsolescence Incurable functional obsolescence refers to a defect that can't be easily fixed or economically justified.
Axel is using the cost service index method to find the reproduction cost of a structure. By what other name is this method known? Index Quantity survey Square-foot Unit-in-place
Index The index method is also known as the cost service index method because it uses a cost reporting or indexing service to determine both the current cost index and the cost index at the time of construction.
Which type of industrial building is often utilized by start-ups because it combines office space with manufacturing and warehousing space? Heavy manufacturing plant Industrial incubator Industrial park Loft
Industrial incubator Industrial incubators are buildings that combine office, manufacturing, and warehousing space into a single building that is usually only about 5,000 to 25,000 square feet.
A thorough identification of the property, which provides the reader with a true picture of the property being valued, is located in the ______ section of the narrative appraisal report. Certificate of appraisal Factual data Introduction Overview and summary
Introduction Beyond merely identifying the address and type of building, the appraiser will include neighborhood, boundaries, adjacent streets and roadways, access points, development ratio of the area, size, improvements, and more in the introduction.
The Kentucky Real Estate Commission can ______ during its investigation into alleged license law violations. Detain a licensee Issue subpoenas Pay witnesses up to $10,000 Withhold evidence from a licensee
Issue subpoenas In addition to issuing subpoenas, KREC may also collect evidence, administer oaths, and go to brokerage offices in order to inspect pertinent documents when investigating a complaint.
Which of these is an example of severability? -Jules and Katrina are under contract for the purchase of Katrina's house. A dispute arises over some contract terms, and they end up in court. The court rules one of the terms invalid but leaves the remainder of the contract in force. -Mark's contract with Reuben states that either party may sever the contract if any contract term is only partially performed. -Misty's lease agreement with Thomas contains a provision that permits her to sever the lease if Thomas doesn't remodel the apartment as promised. -Ricardo and Timothy are under contract in the sale of Ricardo's office building. Ricardo's tenant leases gives him the option to sever the lease agreements upon sale of the building.
Jules and Katrina are under contract for the purchase of Katrina's house. A dispute arises over some contract terms, and they end up in court. The court rules one of the terms invalid but leaves the remainder of the contract in force. Severability refers to the concept that a court can strike down one or more contract terms while leaving the remainder in place.
A mortgage is a legally binding document that creates a lien on a piece of property and gives the lender the right to foreclose on the property if the borrower defaults. Who or what entity is considered the mortgagee? Borrower Lender Loan Property
Lender The lender holds the mortgage on the property, so the lender is the mortgagee.
Most real estate sale contracts include an agreement by the buyer to pay the seller a specified amount of damages if the buyer breaches the contract. Which of the following is this agreement describing? Compensatory damages Compulsory damages Liquidated damages Punitive damages
Liquidated damages In real estate contracts, "liquidated" means the buyer agrees to pay the seller a specified amount of damages if the buyer breaches the contract.
Roger just discovered that his loan includes a hidden balloon payment, so now he must ________. Make one large final payment to pay off the principal Make one large initial payment to pay down the principal Pay off the interest with a second mortgage Pay off the interest with higher payments for the first year
Make one large final payment to pay off the principal With a balloon payment, the principal of the loan isn't actually addressed until the last payment. This means that borrowers must make one large balloon payment in order to pay off the principal of the loan.
John is considering purchasing an office building and is trying to determine whether or not it's a good investment. The methods of income approach he may use when estimating the value are all of the following EXCEPT for which? Market or sales comparison The capitalization method The gross income multiplier The gross rent multiplier
Market or sales comparison Properties that rely heavily on rental income often use the income approach to estimate their value. Three ways to estimate value are the capitalization method, the gross income multiplier, and the gross rent multiplier.
Determining who the buyers of subdivision homes are, the market niche to target, and whether to have different price points for various phases of development are all considerations in the ___________. Environmental assessment Feasibility study Marketing strategy Subdivision lot release plan
Marketing strategy These are all considerations for the marketing strategy, and when it comes to the marketing strategy, sooner is better—this plan should be in place before ground is broken.
Which one of the following statements about community property rights is true? All 50 states have community property rights. Community property rights are illegal in all 50 states. Nine states have community property rights. Only nine states out of 50 do not have community property rights.
Nine states have community property rights. Nine states have community property rights: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska gives married couples the option of taking property as community property. Question 18
Appraiser Johann is appraising a single-family home for an FHA loan. Must the lender who hired him comply with the Appraiser Independence Requirements (AIR)? No, because FHA loans and lenders don't have to comply with AIR. No, because these requirements don't apply to lenders; they only apply to appraisers and real estate professionals. Yes, because AIR applies to all single-family homes where a loan is involved. Yes, because all lenders must comply with AIR for all single-family homes or properties with up to four dwelling units.
No, because FHA loans and lenders don't have to comply with AIR. AIR applies to conventional loans used to purchase a single-family dwelling of one to four units. They don't apply to federally insured or guaranteed loans, like FHA or VA loans.
Mary, who's suffering from Alzheimer's disease, signs a contract to buy Edgar's home. Before the deal closes, it's determined that Mary lacks legal capacity to enter into a contract. Which party is permitted to void the contract? Nobody Only the buyer, Mary Only the seller, Edgar The seller or the seller's agent
Only the buyer, Mary If a party lacks legal capacity but enters into a contract anyway, the contract is voidable by the party lacking the capacity.
If there's an overall change in market value, what type of adjustment can an appraiser use to show the overall effect of the change? Dollar adjustment Gross adjustment Net adjustment Percentage adjustment
Percentage adjustment Appraisers can use percentage adjustments to account for an overall change in market value.
In terms of encumbrances, what's a license? Permission to alter someone's land or property Permission to do something on another's land while also possessing an interest or ownership in the land Permission to do something on one's own land Permission without possession, interest, or ownership
Permission without possession, interest, or ownership A license is permission to do something on another's land without actually possessing any interest or ownership in the land.
Janson Industries worked with architects and engineers to draw up plans for a planned community that will include residential, shopping, dining, and entertainment uses within the community itself. As a property that falls under mixed-use zoning, what does the company have to provide to the planning commission? By-laws Covenant Easements Plat map
Plat map PUD developers have to file detailed plat maps with their planning boards, and the maps should show all of the desired uses for the development.
What type of arrangement allows the buyer to retain title to the property, but places a security interest in the property on behalf of the seller? A straight-term loan Land contract Purchase money mortgage Wrap-around mortgage
Purchase money mortgage Purchase money mortgages allow the buyer to retain title to the property, but the seller has security interest in the property.
The Real Estate Settlement Procedures Act is a consumer protection statute that ______. - Prohibits lenders from denying credit to an applicant for a mortgage based solely on the location of the property in a certain geographic area - Regulates the type and amount of fees and commissions that settlement service providers may charge to borrowers in a residential real estate transaction - Requires lenders to disclose all credit terms in an advertisement for credit if any of the terms are given - Requires lenders to provide the consumer with certain disclosures for residential real estate transactions and prohibits kickbacks among settlement service providers
Requires lenders to provide the consumer with certain disclosures for residential real estate transactions and prohibits kickbacks among settlement service providers RESPA is a law that seeks to protect borrowers by making the settlement process clear and affordable. Disclosures about credit and prohibition of kickbacks among settlement service providers are the main components of the law.
Trent is at a(n) ______ auction, meaning that there's a confidential minimum amount that will be accepted as the winning bid. Absolute Minimum bid One money Reserve
Reserve In a reserve auction, the seller has set a minimum amount for the winning bid, but bidders aren't told what that amount is.
Which of the following line items appears on the appraiser's reconstructed operating statement? Building depreciation charges Capital improvements Income taxes Reserves to cover the cost of roof replacement
Reserves to cover the cost of roof replacement The appraiser's statement includes reserves estimated to cover the cost of replacing items that wear out over a period of years, such as roof replacement.
In the KREC Exclusive Right to Sell Agency Contract Course Project Exercise, in which section did you enter the list price? Section 1, after the seller's name and property address Section 2, as the gross price Section 3, after the contract beginning date and time Section 8, in the flat fee field
Section 2, as the gross price The Gross Price field in Section 2 reflects the list price, as does Section 15 which includes other details related to the property.
In the KREC Real Estate Purchase Offer or Contract Course Project Exercise, what did you select in Section 14, Lead-Based Paint Disclosure? -Buyer desires to conduct a risk assessment or inspection of the property to determine the presence of lead-based paint and lead-based paint hazards. -Seller has delivered copies of prior lead-based paint test results and reports and Buyers acknowledge receipt of same. -The Property was built before 1978. However, Buyer waives the right to conduct a risk assessment or inspection of the property for lead-based paint and /or hazards of lead-based paint. -The Property was not built before 1978, therefore lead-based paint requirements are not applicable.
Seller has delivered copies of prior lead-based paint test results and reports and Buyers acknowledge receipt of same. The property was built before 1978, so some sort of disclosure is required. In this case, the seller has test results, which will be provided to the buyer. The buyer also has 10 days to have testing completed and the buyer can cancel if the test results are unsatisfactory.
Why would a buyer want to know whether any additions or alterations were made to a property? So the buyer can decide whether a price reduction is in order So the buyer can determine if permits were pulled So the buyer can remove these items prior to closing So the buyer can use the same contractor for additional additions and alterations
So the buyer can determine if permits were pulled If additions or alterations were made, a buyer will want to know whether permits were pulled. Unpermitted work may not be up to code and could lead to problems down the road for the buyer.
Denise is a real estate licensee performing a market analysis. She uses the rule of three, which means that she selects three comparables that ______. Are located no more than three miles apart Each have three similar factors to the subject property Have been on the market no more than three months before an offer was accepted Sold in the last three months
Sold in the last three months The rule of three says that at least three comparables should be used, and they should have sold within the last three months, if possible.
In Kentucky, if you're convicted of a misdemeanor, why might your real estate license be in jeopardy? Any kind of conviction is an example of breach of fiduciary duties. Any misdemeanor conviction may result in license sanctions. Some misdemeanor convictions are considered improper conduct. You can't apply for a real estate license if you've been convicted of a misdemeanor.
Some misdemeanor convictions are considered improper conduct. A felony conviction and some misdemeanor convictions are considered improper conduct.
Which of the four methods used to find the reproduction cost of a structure is most often used by appraisers? Index Quantity survey Square-foot Unit-in-place
Square-foot The square-foot method is typically used by appraisers to estimate construction costs. It's more accurate than the index method and less time consuming than the unit-in-place or quantity survey methods.
What type of heating system uses a boiler to produce steam, which is transferred to rooms through a pipe? Forced warm air system Hot water system Radiant system Steam system
Steam system A steam system uses a boiler to produce steam to heat a home. This is slightly different from a hot water system in which the water is heated, but not to the point that it becomes steam.
Blane owns a barbershop. He polls his customers and learns that they tend to come from less than a mile away. That's probably because Blane's store is in which type of location? Factory outlet mall Neighborhood center Regional shopping center Strip mall
Strip mall Strip malls tend to offer goods and services for a very local area of one mile or less.
What is the term for sites identified by the EPA under the Comprehensive Environmental Response, Compensation, and Liability Act? CERCLA site Hazardous Environment Community Clean-up (HECC) site Superfund site Waste Remediation Environmental Need (WREN) site
Superfund site A Superfund site is a site identified by the EPA as requiring clean-up of hazardous waste under CERCLA.
A real estate auction may result from a foreclosure, a voluntary sale, or a(n) ______. Encumbrance Mechanic's lien Personal loan default Tax lien
Tax lien Property may be auctioned involuntarily as a result of unpaid taxes or a mortgage that's in foreclosure.
Which of the following entities is responsible for establishing minimum licensing qualifications for appraisers? Appraisal Practices Board (APB) The Appraisal Qualifications Board (AQB) The Appraisal Standards Board (ASB) The Uniform Standards of Professional Appraisal Practice (USPAP) Board
The Appraisal Qualifications Board (AQB) While the AQB is responsible for establishing minimum licensing qualifications and for reviewing and adjusting those requirements on a regular basis, states may also establish more stringent requirements.
Centennial Development is constructing a new condo. The exterior of the building is 60 feet square. Which of these about the air lot is true? The air lot above the condo extends to the middle of the adjacent streets. The air lot is the same area as the condominium building. The air lot is the same perimeter as the condo and the lot on which it's built. The air lot perimeter is the same as the condominium's perimeter.
The air lot is the same perimeter as the condo and the lot on which it's built. Picture a box drawn over the property boundaries. The perimeter of this box is the perimeter of the air lot.
Which of the following statements regarding the cost of auctioning a property is true? Auctioneers aren't allowed to charge higher fees than real estate licensees, so the cost should be similar. Fees to the seller for an auction are likely far less than for a traditional sale. The auctioneer's fees may well be higher than a commission paid in a traditional sale. The buyer pays most auction fees, so the cost to the seller is minimal.
The auctioneer's fees may well be higher than a commission paid in a traditional sale. The cost of selling a property at auction may be far higher than for a traditional sale. Encourage your clients to get multiple auctioneer bids and carefully weigh the options.
In title theory states, which of the following is true? The borrower and lender hold the title jointly. The borrower doesn't hold the legal title to the property until the loan is paid in full. The borrower receives the title at closing. The lender is not allowed to hold the title.
The borrower doesn't hold the legal title to the property until the loan is paid in full. In title theory states, the borrower doesn't hold the title until the loan is paid in full. Either the lender or a third party holds the title.
Which covenant requires the grantor to execute any necessary legal documents (within his power) necessary to fix title defects discovered after closing? The covenant of further assurances The covenant of seisin The covenant of the right to convey The covenant of warranty
The covenant of further assurances The covenant of further assurances requires grantors to take necessary steps (within their scope of power) to perfect the title conveyed.
Per the KREC Offer to Purchase Commercial Real Estate Agreement, which of the following statements is true regarding the brokers' commission if the transaction fails due to fault of either party? The brokers receive half of their owed commission. The brokers receive no commission. The defaulting party must pay the brokers' commission. The parties must pay an equal share of the brokers' commission.
The defaulting party must pay the brokers' commission. If the transaction fails after acceptance due to fault of either party, the defaulting party will pay the broker's commission, and reasonable attorney fees for the non-defaulting party.
How does the term "break-even point" relate to percentage leases? Sales proceeds must exceed last year's total before the percentage applies. The landlord doesn't charge a percentage of sales until the tenant's sales exceed a break-even point. The landlord must receive enough in rent plus the share of sales to break even on the debt service. The tenant has to break even on expenses before the percentage charge is applied.
The landlord doesn't charge a percentage of sales until the tenant's sales exceed a break-even point. The percentage charge applies when the tenant's sales exceed a break-even point. This point is specified in the lease.
The Siegels are purchasing a commercial investment property and plan to use straight-line depreciation on their financial statements and tax calculations. Which of the following would NOT be included in the Siegels' depreciation basis calculations? The cost of the electrical system upgrades they did after purchase The cost of the title insurance for the property The loan origination and lender fees that they paid at closing The price that they paid for the property, minus any land costs
The loan origination and lender fees that they paid at closing The depreciable basis is made up of the sales price plus any acquisition costs, such as title insurance, and capital improvements. Loan costs aren't included in the basis, but something like electrical system upgrades are capital improvements.
You represent Kyle, who's buying his first home. He signs a contract to buy Wendy's home. The contract includes the following phrase: "Time is of the essence." You correctly advise Kyle that this phrase means ______. The buyer should complete the sale as quickly as possible. The parties should sign the contract quickly. The parties will be held in strict compliance to any timeframes specified in the contract. The property may be depreciated over time.
The parties will be held in strict compliance to any timeframes specified in the contract. "Time is of the essence" means that the parties will be held in strict compliance to any timeframes specified in the contract. However, it can also mean that the parties are agreeing to proceed in good faith and not unduly delay the process.
Which of these is the best definition of a property's market value? The amount the lender agrees to loan to the buyer The buyer's offer price The list price The probable sales price
The probable sales price Market value is the probable sales price of a property if the property were sold under normal market conditions.
Per the KREC Offer to Purchase Commercial Real Estate Agreement, what happens if the seller can't convey a marketable title to the buyer? The seller has to pay for all of the title examination costs. The seller must default and pay the buyer damages. The seller must request a postponement of the transaction until all defects have been remedied. The seller must sell the property to the buyer at a reduced price.
The seller has to pay for all of the title examination costs. If the title is defective and the defects can't be remedied, the seller has to pay all of the title examination costs.
In what way is a townhome similar to a condominium? They are both detached structures. They are both multi-family dwellings. They both typically have detached garages. They both typically have HOA dues.
They both typically have HOA dues. Like condominiums, townhomes are single-family homes, and they both often have a homeowners association to which owners must pay dues.
Which of the following statements about restrictive covenants is true? They are permanent and follow the land forever. They are temporary and have a specific time limit. They may run with the land forever, or they may have a time limit. They must last at least 30 years.
They may run with the land forever, or they may have a time limit. Restrictive covenants may run with the land forever and appear on future deeds, or they may have a time limit.
Why would licensees use the MAAP method? To calculate their gross commission for a transaction To determine which property facts they need to disclose To establish whether or not a fair housing violation has occurred To report another licensee for an ethics violation
To determine which property facts they need to disclose Licensees use the MAAP method to determine which property facts they need to disclose by asking, "Is the information Material? Is it Adverse? Do you have Actual knowledge of it? Does it affect the property's Physical condition?"
Regulation Z codifies the rules of the ______. Equal Credit Opportunity Act Home Mortgage Disclosure Act Real Estate Settlement Procedures Act Truth in Lending Act
Truth in Lending Act Regulation Z stipulates the rules for implementing the Truth in Lending Act.
Which entity guarantees loans? Federal Deposit Insurance Corporation Federal Housing Administration U.S. Department of the Interior U.S. Department of Veterans Affairs
U.S. Department of Veterans Affairs The VA guarantees loans against default. VA loans are for veterans only and require no down payment.
The ______ can offer direct loans to farmers and ranchers. The loans are funded by congressional appropriation. American Agricultural Lending Service Farm Credit System USDA Farm Service Agency USDA Rural Development Program
USDA Farm Service Agency Direct loans are available to farmers and ranchers through the USDA Farm Service Agency, funded by congressional appropriation.
How long does the borrower have to pay private mortgage insurance? 12 years 20 years Until 50% of the original loan is paid off Until the borrower reaches a 22% equity position
Until the borrower reaches a 22% equity position PMI is cancelled when a borrower reaches a 22% equity position. This is based on payments of principal made toward the original loan balance and not on current market value.
Which industrial property type offers flexible-use buildings that are good for storing large quantities of goods? Lofts Manufacturing Self-storage facilities Warehouses
Warehouses Warehouses are a flexible investment property type that can be used by many industrial firms for the storage of goods.
In Kentucky, reciprocal licensing is _____. -When an active license from another state is recognized as valid in Kentucky, enabling the licensee to perform real estate activities legally. -When an active license from another state is traded in for a valid Kentucky real estate license of equivalent level. -When someone holding an active license in another state meets eligibility requirements and applies for a Kentucky license equivalent to their existing, out-of-state license. -When someone holding an active license in another state signs a cooperation agreement with a Kentucky broker in order to perform limited real estate activities in Kentucky.
When someone holding an active license in another state meets eligibility requirements and applies for a Kentucky license equivalent to their existing, out-of-state license. Reciprocal licensing offers the opportunity for someone who is actively licensed in another state, and wants to perform real estate activities within Kentucky, to apply for an equivalent Kentucky license after meeting a series of eligibility requirements.
The amount of money returned from an investment is the ______. Capitalization Cash flow Reversion Yield
Yield Yield and cash flow both describe return on investment, but cash flow is the amount of income after expenses are deducted.
Which of the following best and most comprehensively describes the overall importance of accurate, detailed property management reports? a. Accurate monthly reports are used to create accurate annual expense reports and forecasts for a concise year-over-year profit and loss projection. b. Accurate reporting provides a clear picture of the property's physical and financial status, and helps in identifying property-related trends so appropriate adjustments can be made. c. Accurate reporting provides detailed statistics to the owner for use in planning and budgeting maintenance for next year. d. Inaccurate reports may lead to poor decisions regarding necessary property improvements.
b. Accurate reporting provides a clear picture of the property's physical and financial status, and helps in identifying property-related trends so appropriate adjustments can be made. While all of these are true, only one considers the comprehensive affect reports have on the overall management of property. Reporting involves financials, as well as other areas of interest. They are not limited to expense reports and forecasting, maintenance budgeting, or property improvements. Accurate reporting in all areas helps the owner (and the property manager) make the best decisions in all of those areas, plus identifying property-related trends and making adjustments accordingly.