Real Estate National Exam #2

A seller with unquestionable ownership claim on a property the past 10 years is said to have what kind of title? A. Clear B. Colored C. Extinguished D. Cloudy

A. Clear Explanation The definition of clear title includes being free from any significant liens, encumbrances, defects, doubtful questions of law or fact, and that a reasonably informed person would be convinced of the parcel's ability to be sold or mortgaged at a fair market value. If there is any doubt then the title is deemed cloudy, or colored. In North Carolina, if any doubts on title exist then they are "extinguished" - or become obsolete - after 30 years time due to the Marketable Title Act.

Which approach to value would an appraiser use when determining an estimate of market value for a church? A. Cost Approach B. Gross Income Multiplier C. Sales Comparison D. Income Approach

A. Cost Approach Explanation When a type of property is not sold often an appraiser would use the cost approach to value - typically for schools, post offices, churches, stadiums, etc. An amount is calculated to build new, less and estimated amount for depreciation and then land & improvements are added in. The appriaser will estimate the economic life of the property and the effective age. NOTE: This is the only approach that takes depreciation into account. The income approach is common for office buildings and rental property which may include the gross income / gross rent multiplier. The sales comparison approach is based on recently sold property and is the preferred method for valuing residential property.

An appurtenance is an item or a right said to "run with the land." Which of the following is an example of an intangible appurtenance? A. HOA covenants B. trees C. neighbor's encroaching driveway D. fence

A. HOA covenants Explanation All of these are examples of appurtenances; however the trees, fence, and encroaching driveway are tangible. They can be seen and touched. The HOA covenants are things that cannot be seen such as height or material restrictions. HOA's may restrict the owners' use of the property, by limiting paint colors, number of cars that can be parked in the driveway, permitted mailbox, etc.

Which of the following would be subject to ad valorem, real property taxes? A. A detached, two-car garage B. A stack of lumber which will be used to build a deck on the back of the house C. A manufactured home D. A boat stored at one's home

A. A detached, two-car garage Explanation The two-car garage would meet the definition of real property and, therefore would be subject to the ad valorem (according to the value) tax. Manufactured homes are mobile homes and are taxed as personal property until they are permanently attached to land. A boat tax may become a lien against the real property when it is not paid, but it is originally taxed as personal property (chattel). The lumber is just personal property until the deck is built and attached to the land.

An investor purchased a building for rental income. Two units rent for $750 per month and the remaining 4 rent for $925 per month. Vacancy rates are 3%. A property manager was hired at a 10% management fee and this person created an operating budget factoring in property taxes of $3,211, operating expenses of $5,000, debt service of $3,000 per month, and reserves of $8,000. What estimated NOI according to the operating budget? A. $38,264.20 B. $44,317.00 C. $46,264.20 D. $60,528.00

A. $38,264.20 Explanation The formula for determining net operating income is GIVEN: ((G)Gross (I)Income) - ((V)Vacancy & collection) = ((E)effective gross income / total anticipated revenue - operating Expenses) = (N)Net operating income. Potential Gross Income: $62,400 = (2 units X $750 + 4 units X $925) X 12 months - vacancy and losses - $ 1,872 = EGI $60,528 - operating expenses - $22,263.80 =NOI $38,264.20 We recommend that you create a flashcard that asks how to calculate net operating income. The answer side should have: GI - V&C = EGI - OP EXP = NOI *Effective Gross Income may be called Total Anticipated Revenue *No depreciation, debt service or capital improvements *Property taxes and repair reserves are operating expenses The operating expenses are $6,052.80 in property management fees plus $3,211 in property taxes plus $5,000 miscellaneous expenses and $8,000 in reserves. The answer choice of $44,317 neglected to include the 10% management fee. The answer choice of $46,264.20 neglected to include the reserves.

A buyer is consider a 30-year mortgage at 4% interest or a 25-year mortgage at 3.5% interest. The buyer will pay annual taxes and insurance of $3,600. What is the payment difference per month when the purchase price is $250,000, the buyer makes a 10% down payment and closing is scheduled for May 30th? AMORTIZATION CHART: Loan Term 15-Years 25-Years 30-Years Interest Rate: 3 1/2% 7.15 5.01 4.49 3 3/4% 7.27 5.14 4.63 4% 7.40 5.28 4.78 4 1/4% 7.53 5.42 4.92 4 1/2% 7.65 5.56 5.07 A. $51.75 B. $57.50 C. $49,005 D. $54,450

A. $51.75 Explanation Read the question carefully!! It is asking what is the difference in the monthly payment between a 25-year loan and 30-year loan. Annual property tax and insurance are a distractor. A mortgage factor represents a dollar amount per month per thousand dollars borrowed. Loan amount: $250,000 X 90% = $225,000. 25-year loan monthly P&I payment: $225,000 / 1,000 X $5.01 = $1,127.50 30-year loan monthly P&I payment: $225,000 / 1,000 X $4.78 = $1,075.50 Monthly Payment Difference: $1,127.25 - $1,075.50 = $51.75

Lola's monthly debt service is $1,518.07. She purchased her house for $225,500 with an 88% LTV and 4.5% interest rate. Using the mortgage factor chart, what term is her loan for? AMORTIZATION CHART: Loan Term 15-Years 25-Years 30-Years Interest Rate: 4% 7.40 5.28 4.78 4.25% 7.53 5.42 4.92 4.5% 7.65 5.56 5.07 4.75% 7.78 5.71 5.22 A. 15 year term B. 20 year term C. 25 year term D. 30 year term

A. 15 year term Explanation $225,500 purchase price X 88% LTV = $198,440 loan amount. The monthly P&I of $1,518.07 divided by the loan per 1,000s is 7.65. Looking at the chart provided, a rate of 4.5% interest with a 7.65 factor indicates the loan term is 15 years.

Which of the following buyers might best be served by an FHA 203(b) loan? A. A buyer who has a modest but decent credit score and limited funds for a down payment B. A buyer who wishes to purchase a residential condo for investment purposes but needs a low down payment C. A buyer who is a veteran of the marine corps and wants to purchase a home with as little out of pocket as possible D. A buyer with a high credit score and large down payment who wants the best possible rate

A. A buyer who has a modest but decent credit score and limited funds for a down payment Explanation A buyer with modest but decent credit and limited money for a down payment would be best served by the FHA program. FHA is not for investment properties. Veterans might be better served by VA. Conventional borrowers will most likely find cheaper loans if they have large DP and top-notch credit scores

Which of the following classes would have protections under the Federal Fair Housing Act? A. A pregnant, single woman B. A military veteran C. Same Sex couple D. An elderly couple

A. A pregnant, single woman Explanation A pregnant woman would fall into the class known as familial status. A same-sex couple is not afforded the protections of the FHAct (but are protected under the Realtor Code of Ethics). Elderly couples are not covered under the Act although a veteran may have some protections under the Servicemembers Civil Relief Act.

Which of the following would create a general agency relationship? A. Property Management Agreement B. Exclusive Right to Sell Listing Agreement C. Exclusive Listing Agreement D. Power of Attorney

A. Property Management Agreement Explanation With general agency a licensee has a limited ability to bind in certain circumstances. The property management agreement typically permits a licensee to sign the lease on behalf of his/her client (the landlord). Listing a property for sale or representing a buyer is a special agency relationship. The licensee has no ability to make decisions such as binding the seller or buyer to a sales contract. A power of attorney or attorney, in fact, creates a universal agent relationship where someone is appointed to make decisions on behalf of another and is permitted to sign and bind the principal to all contracts.

Which of the following ads would be in compliance with Federal Fair Housing laws when an owner is renting out a room in their home? A. Room for rent to a female applicant with for $400 per month with shared expenses for utilities. B. Room for rent - $800 per month. No children allowed. C. Room for rent to a Christian male for $500 per month with shared expenses for utilities. D. Room for rent - $700 per month. No Muslims Allowed.

A. Room for rent to a female applicant with for $400 per month with shared expenses for utilities. Explanation Federal Fair Housing legislation protects against discrimination on the basis of Race, Color, Religion, Sex, Handicap, National Origin and Familial Status (recall FRESH CORN). Technically an owner has a limited ability to discriminate when a broker is not involved, and discriminatory advertising is not used. The owner can "silently discriminate". NOTE: There is an exemption to sex when renting out a room in an owner-occupied unit. It is not a violation to market a rental that is limited by sex. No other protected class can be used - religion or familial status for example.

Regarding mortgages, what is the name of the document used to release the lien and acknowledge the loan has been paid in full? A. Satisfaction of mortgage B. Habendum clause C. Deed of trust release D. Defeasance clause

A. Satisfaction of mortgage Explanation The instrument that is recorded to release a lien against a property is called a satisfaction of mortgage. The defeasance clause in the mortgage note requires the bank to record the document upon the borrower's "defeat" of the mortgage, meaning final payment has been made. Deed of trust release sounds like a probable answer, however recall that a deed of trust is signed in title theory states, not in lien theory states. The habendum clause contained in a deed defines the level of ownership or the types of interest and rights that the buyer/grantee will be entitled to.

At the settlement meeting a buyer asks his broker about the deductibility of certain closing expenses on his/her income tax return. Which of the following statements is TRUE? A. The buyer should seek accounting advice from a licensed professional. B. The broker cannot answer the question at this time without obtaining further financial details from the buyer. C. The broker should ask the attorney to answer the questions as this is a matter of law. D. The buyer should itemize rather than using the standard deduction as interest expense is tax deductible.

A. The buyer should seek accounting advice from a licensed professional. Explanation Unless a broker is alos a CPA, he/she should refrain from giving tax advice to his/her client. The best course of action is to advise the buyer to discuss tax issues with a tax professional. Not all buyers will benefit from the mortgage interest deduction when the amount of interest, property taxes and other itemized deductions do not exceed the standard deduction.

All of the following may result in a real estate sales contract being terminated, EXCEPT: A. The buyer's is unable to obtain a specific loan. B. The sale is completed. C. The seller declares bankruptcy. D. The buyer signs the contract under duress.

A. The buyer's is unable to obtain a specific loan. Explanation Buyer's inability to obtain the specific loan included in the contract does not mean that the contract will fail. The buyer may be able to find another source of funds and complete the contract. A contract terminates once the obligations have been fully performed or discharged. Contracts are generally terminated when a party files for bankruptcy protection. A contract is terminated if duress was used to form the contract. Duress is the threat of harm unless a party acts.

A firm is acting as subagent to the seller in a transaction. An agent of the firm showed the property to a buyer that disclosed they would pay more than the list price of the home. The agent of the firm did not disclose this information to the seller. Has the agent violated his fiduciary responsibility to the seller? A. Yes. The agent has a duty to disclose the information to the seller as he is acting as subagent to the seller. B. Yes. A listing broker always has a duty to disclose personal information learned about a buyer. C. No. A listing broker cannot disclose price or other material terms contained in a buyer's offer. D. No. The agent represents the buyer and therefore must conceal the personal information.

A. Yes. The agent has a duty to disclose the information to the seller as he is acting as subagent to the seller. Explanation When a firm and its agents are acting as subagent to the seller all fiduciary duties are owed to the seller. The firm and agents must disclose information that is learned about the buyer even if it weakens the buyer's bargaining position. The broker must conceal information about the seller unless it rises to the level of material fact.

A borrower will still owe the lender money at the end of the loan term. This is an example of: A. a balloon payment loan. B. a blanket loan. C. a term loan. D. a buydown loan.

A. a balloon payment loan. Explanation Often for commercial property, a lender may originate a loan whose payment is based on an amortization rate for a longer period than the actual term of the loan (10 year loan / 30 year amortization). This will result in a balloon payment to the lender at the end of the repayment period.A term loan is an interest-only loan - that is often interest-only for a limited time. A buydown is a temporary reduction in the interest rate that is charged versus the payment of discount points would reduce the rate for the entire loan term. A blanket mortgage is used to finance multiple pr

Which party MOST likely has the authority to levy special assessment fees against a property? A. Local municipality's zoning compliance officer B. HOA board C. Other homeowners in the same neighborhood D. Builder who created the subdivision

B. HOA board Explanation Special assessments can be levied by the government or a property's HOA board. Of the available answer choices, the HOA board is the best. Other homeowners in the same neighborhood, the builder who established the neighborhood, and the municipal zoning compliance officer are all parties who may enforce compliance with either private or public land use restrictions, but not create a special assessment.

A buyer purchases a share of stock and enters into a lease. This is an example of: A. a co-op. B. a condo. C. a townhouse. D. a leased fee estate.

A. a co-op. Explanation When a buyer purchases a co-op, they do not directly own the unit itself. They purchase a share of stock and enter into a proprietary lease. A leased fee interest is the interest of the owner when they rent out the property and the tenant has a leasehold interest. When a buyer purchases a condo, they own the airspace of the unit itself as well as co-ownership of the common areas. When a buyer purchases a townhouse, they own the unit itself as well as the land that it rests upon. The common areas are owned by the HOA. NOTE: With both townhouse and condo ownership there can be limited common elements such as storage, parking or a garage. Townhouse and condo ownership may be residential or commercial.

To be compliant with CAN-SPAM laws, all marketing emails must contain which of the following? A. a physical business address B. written permission from the recipient C. images and text in the body of the email D. an opt-in button or link

A. a physical business address Explanation A physical business address must be included in all unsolicited emails sent. Written permission is not required but encouraged. An opt-out link or button, not opt-in, must be included. Email can be text, graphic, or both text and graphic (images and visuals).

Which of the following is one of the five rights associated with the bundle of rights in property ownership? A. control B. fee simple C. ejectment D. freehold

A. control Explanation The bundle of rights includes disposition, quiet enjoyment, exclusion, possession, and legal control. These rights are commonly referred to as DEEP-C. Freehold and fee simple refer to owning property permanently as opposed to leasing the property. Ejectment is associated with evicting tenants.

A seller hired a listing firm to market his home for a quick sale. The firm agreed to accept $10,000 in payment no matter what. This form of compensation is best described as which of the following? A. flat fee B. net amount C. success fee D. retainer fee

A. flat fee Explanation Brokerage fees can be calculated as a commission or percentage of the gross sales price, a flat fee such as the specific sum of $10,000 described in the problem. A brokerage could agree to compensation where they keep the amount over what the seller desires to net as compensation, which describes a specific type of listing agreement known as a net listing. In the latter, the seller only seeks X amount of money and if anything more comes into the transaction then it all goes to the listing firm. Conversely, if nothing over X comes into the transaction the listing firm sees no payment. Success fees an

A salesperson lists a property for sale. The seller enters into a legally binding contract. The salesperson receives the earnest money check from the buyer's broker. The salesperson: A. must deliver the earnest money deposit to his broker. B. may deposit the funds with the escrow agent without the consent of the buyer and seller. C. may deposit the check in his personal checking account until the settlement meeting. D. must deposit the funds in his broker's trust account.

A. must deliver the earnest money deposit to his broker. Explanation A salesperson must deliver the earnest money deposit (EMD) collected to his/her broker so that the broker may deposit it into the trust/escrow account within the required time period. Client funds can never be deposited into a personal account. A trust or escrow account gives public notice that the funds are the property of another. NOTE: In some states the buyer and seller can agree to appoint an escrow agent that will abide by the sales contract with regard to the EMD distribution in the event of closing or breach of contract.

A naturally occurring gas that can seep into homes or buildings and can cause cancer is known as: A. radon. B. asbestos. C. polychlorinated biphenyls. D. carbon dioxide.

A. radon. Explanation Radon is a naturally occurring gas that in high concentrations (4.0 pico cures per liter of air or higher) may cause lung cancer. It is odorless, colorless and the level can only be determined by testing. Mitigation systems can be installed to vent the gas out of the property. Carbon dioxide occurs when fossil fuels are burned. Many states require carbon dioxide detectors when the property has a garage, fireplace or fuel-burning appliance. Polychlorinated biphenyls are used as coolant in electrical equipment. Asbestos may be found in insulation, floor tiles, ceiling tiles, popcorn ceilings and siding in older homes. It is a danger when it becomes friable - airborne - and causes lung cancer.

In which case would a conflict of interest most likely arise? A. An agent notifies the listing agent that they are self-representing and are interested in purchasing the listing. B. A sub-agent to the seller assists his/her brother in the purchase of a home. C. An agent working as a sub-agent of the seller notifies the seller of confidential information the buyer shared. D. An agent working for the buyer notifies the listing agent that the buyer is his/her sister.

B. A sub-agent to the seller assists his/her brother in the purchase of a home. Explanation Since the agent is working for the seller (i.e. a subagent of seller), it would be a conflict to bring an offer from a family member or close friend. The selling agent would need to be a buyer's agent to avoid the conflict. A subagent of the seller must disclose personal and confidential information learned about the buyer to the seller.

The calculation of the probable sale price of a property performed by a licensed real estate agent for a bank is best known as a(an): A. Comparative Market Analysis. B. Broker Price Opinion. C. Appraisal. D. Property Valuation.

B. Broker Price Opinion. Explanation A broker price opinion (BPO) is typically prepared for a lender before listing a foreclosed property for sale or before a lender decidies to consent to a short sale. Property valuation and appraisals are performed by licensed appraisers where the appraiser determines an estimate of market value for that given date. A CMA is prepared for a buyer or seller that is represented by a real estate agent prior to listing a property for sale or making an offer to purchase. A BPO is commonly prepared for a bank. The work product of a CMA & BPO are essentially the same.

Which of the following loan terms describes a situation where a builder prepays mortgage interest to temporarily lower the interest rate in the early years of the loan? A. Construction loan B. Buydown C. Growing Equity loan D. Discount Points

B. Buydown Explanation A buydown is a temporary reduction in the interest rate. The interest rate would step up over time.When discount points are paid, the interest rate is reduced for the entire loan term. Discount points are prepaid interest. Construction loans are risky since the collateral has not been fully built. A growing equity mortgage sets adjustment dates where the payment is increased to more rapidly pay off the mortgage balance.

Which of the following is an advantage of owning real property? A. Real estate is immune from swings in the financial markets B. Favorable tax treatment C. Real estate always appreciates D. Liquidity

B. Favorable tax treatment Explanation Real estate receives favorable tax treatment by way of depreciation, favorable treatment of capital gains, and the ability to deduct mortgage interest on one's home. Real estate is said to be "illiquid" because you can't convert it to cash unless you can sell it or borrow money against it. While RE often appreciates, there is no guarantee of that and RE is not immune from local or national market conditions

Which of the following statements would constitute a "trigger term" under truth in lending Regulation Z? A. Homeowner association dues of $75 per month B. Purchase this lovely home with only $5,000 down and payments of $1,200 per month C. D.

B. Purchase this lovely home with only $5,000 down and payments of $1,200 per month Explanation Only the answer provides specific finance terms that would trigger the disclosure of the material terms of the loan. The others are too vague or not loan terms. Trigger terms for Regulation Z are more commonly down payment, monthly payment and interest rate. When triggered disclosure of the amount borrowed, APR, number of payments, etc. are required.NOTE: APR is not a trigger in an advertisement. If the advertisement triggers Regulation Z disclosures, then APR would have to be disclosed.

Which of the following would constitute a material fact that a listing agent would be obligated to disclose to a buyer? A. The previous occupant of the property was a drug dealer B. The agent is aware that the roof has damage and leaks in heavy rains C. The seller would take an offer at less than the marketed price D. The 1950s era house has aluminum wiring

B. The agent is aware that the roof has damage and leaks in heavy rains Explanation The answer is that the agent must disclose known roof damage even if it is not currently an active leak. No obligation to disclose regarding previous tenant being a criminal (unless they had manufactured "meth" in the home). A listing agent should never disclose that the seller would take less, unless the seller instructed him/her to do so. Aluminum wiring was typical of 1950s era housing and would not be disclosed unless it had a defect.

A property at 1010 Ridge Ln. is subject to a one-year lease agreement, with four months remaining on the term. The owner gifts the property to one of his sons. Which of the following statements is TRUE? A. Lease agreements terminate unless the new owner executes a new lease with the tenant. B. The lease agreement is binding upon the new owner for the remainder of the lease term. C. The new owner can terminate the lease by providing at least 90 days' notice. D. Either party would be entitled to terminate the lease agreement by providing at least 30 days' notice.

B. The lease agreement is binding upon the new owner for the remainder of the lease term. Explanation Lease agreements run with the land and are binding upon the new owner. When a property is foreclosed and subsequently sold to a party that will owner occupy, there is a possibility to issue a 90-day notice to terminate the lease. Note, that in the State Exam, at will leases can terminate without prior notice.

All of the following statements are TRUE about the lending process, EXCEPT: A. One of the most important factors for obtaining a loan is proof of stable income. B. The lender may be referred to as the obligor, mortgagor, or promisor. C. Loan underwriting involves verification of down payment, reserves, and employment. D, During the prequalification process, the lender will obtain debt ratios, credit scores and credit history.

B. The lender may be referred to as the obligor, mortgagor, or promisor. Explanation The lender is referred to as the oblige, mortgagee or promisee as they are receiving the mortgage or security interest in the property that is financed. The borrower is known as the obligor, mortgagor or promisor. One way to recall this is that the lender gets the "ees" and borrower has "ors." It is important to prove to the bank that you have stable income. Lenders have many criteria for evaluating the creditworthiness of a borrower, including a review of asset statements, verification of income, credit scores and overall credit history.

All of the following would be a potential consequence when a sales contract is breached, EXCEPT: A. liquidated damages. B. collateral damages. C. compensatory damages. D. consequential damages.

B. collateral damages. Explanation Collateral damage is not a term associated with real estate, it is a common military term. Liquidated damages are damages that are defined and agreed upon at the time of contract formation. Compensatory (money) damages make the injured party whole, for actual losses sustained. Consequential damages are compensation for losses associated with the foreseeable loss associated with the breach.

A buyer submitted an offer on a brick ranch house. The seller was thrilled with the proposed sales price and earnest money but needed settlement to happen on a different day for family reasons. The seller struck through the buyer's proposed settlement date, wrote in an alternative, initialed next to this change and dated it. Then the listing agent gave the form back to the buyer who figured this was such a small and understandable request from the seller that the buyer immediately signed and communicated to the seller. Now they're under contract. Which of the following best describes what the buyer signed? A. offer B. conditional acceptance offer C. contract D. option

B. conditional acceptance offer Explanation When a buyer or seller makes a change to any terms in an offer it may be referred to as a counteroffer or conditional acceptance offer. For an offer to become a contract, the offeree has to unconditionally accept the offer and communication of acceptance must be made to the offeror (or his/her agent). A legally binding contract was not formed when the offeree signs. The acceptance is lacking communication. An option is a specialized contract where a buyer has a contractual right to buy, or choose not to buy, at a future date. NOTE: The exam can use conditional acceptance offer or counteroffer.

A tenant has failed to make the rental payment by the due date. The property manager has issued a 10-day notice to pay or quit. In the event that the tenant does not pay the bill, the property manager should: A. remove tenant's property. B. file for summary ejectment. C. turn off the utilities. D. change the locks.

B. file for summary ejectment. Explanation The landlord and property manager must use judicial means to evict a tenant from the property. They will file for summary ejectment and a magistrate will hear the case. The landlord or property manager cannot use "self-help" by turning off the utilities, changing the locks or removing the tenant's property

The term equity can best be described as: A. the ratio of the loan amount to the fair market value of the home. B. the down payment the buyer used to purchase the home. C. the difference between the first mortgage loan amount and the market value of a home. D. the difference between the current market value and total amount owed on all outstanding liens on the property.

C. the difference between the current market value and total amount owed on all outstanding liens on the property. Explanation Equity is the difference between the fair market value of the property and the amount owed (all liens). It is increased when a borrower makes additional principal payments, the borrower improves the property in a way that increases its value, or the property appreciates.

A buyer purchased a property for $375,000 by obtaining an 80% conventional loan at 6.5% interest for 30-years. Property taxes have been paid for the year by the seller for $2,880. The seller is responsible for the day of settlement. The buyer is obligated to pay $5,000 in closing costs. At the time of mortgage application the buyer paid $15 for a credit report and $400 for an appraisal. The annual property insurance of $700 is due at closing. The lender required the borrower to pay 4 months of taxes and 2 months of insurance into the escrow account. The buyer is required to pay interim interest to the lender. What is the cash due at closing, rounded to the nearest dollar from the buyer at settlement if closing is scheduled for September 23rd? A. B. $82,986 C. D.

B.$82,986 Explanation When an item has been paid at mortgage application or outside closing, ignore. Sales price $375,000 - loan $300,000 + Taxes $776 + closing cost $5,000 + property insurance $700 + tax escrow $960 + insurance escrow $116.67 + interim interest $433.33 = Buyer due $82,986 Property Tax: $2,880 / 360 X 97 days = $776 Interim Interest: $300,000 X 6.5% / 360 X 8 days = $433.33

A property is listed for $475,000 with Sell Fast Realty under an exclusive right to sell listing agreement. The seller has agreed to pay 7% on the first $150,000; 6% on the next $150,000; and 4% on the remainder of the sales price. How much commission will be earned by the selling firm if the property sells for $465,000 and compensation is split evenly between the listing and selling firms? A. $26,500 B. $26,100 C. $13,250

C. $13,050 Explanation Commission is based upon the sales price of $465,000 and calculated as follows: $150,000 X 7% = $10,500 $150,000 X 6% = $ 9,000 $165,000 X 4% = $ 6,600 Total commission is $26,100 which is split between the 2 firms evenly, so $13,050.

This year a tenant paid $56,000 in rent. Her percentage lease agreement stipulated that she pay $3,000 per month in fixed rent and 4 percent on all sales above $250,000. This year her gross sales were: A. $250,000 B. $500,000 C. $750,000 D. $1,000,000

C. $750,000 Explanation Base rent: $3,000 X 12 months = $36,000 Percentage rent: $56,000 total rent - $36,000 base rent = $20,000 4% Sales: $20,000 ÷ 4% = $500,000 Total Sales: $500,000 + $250,000 = $750,000

Which property type would typically cost more to build per square foot? A. 2-Story Colonial B.. 2-Story Bungalow C. 1-Story Ranch D. A-Frame

C. 1-Story Ranch Explanation A 1-story ranch-style home costs more to build as they take up more land. When building 1.5-2 story homes, a builder can sell more square footage on less land, which allows for more homes to be built.

A lender charged a borrower an origination fee of 1%. The borrower opted to pay two discount points to reduce the overall interest to 5.75% on her $368,000 loan. What is the yield to the lender? A. 0.0575% B. 5.875% C. 6% D. 0.06125%

C. 6% Explanation The yield on a loan is the profit generated from the interest rate and discount points paid. The origination fee must be ignored in this case. Each discount point purchased reduces the rate by 1/8th of a percent. Two discount points reduce the interest rate by 1/4. Add the 5.75% interest rate plus the 0.25% in discount points for a total of yield of 6%. Origination fees cover the lender costs for originating the loan. Discount points are prepaid interest that lowers the stated rate on the loan, thus lowering the borrower's monthly payments.

An MLS listing advertising a property stated that the "washer and dryer in laundry room convey." During negotiations, the buyer agent failed to put the washer and dryer in the personal property section of the contract. At the final walkthrough, the buyers discovered that the seller had taken the washer and dryer. Which of the following best describes the repercussions of this? A. The listing agent would be subject to disciplinary action for not assuring that the contract included the personal property. B. The seller should return the washer and dryer to the property since s/he had agreed to provide them in the MLS representation C. According to the parol evidence rule, the washer and dryer will not convey as written agreements take precedence of any preliminary agreement to the contrary D. The buyer's agent would be required by the real estate Commission to buy the purchaser a washer and dryer set since his/her negligence cost the buyer the appliances

C. According to the parol evidence rule, the washer and dryer will not convey as written agreements take precedence of any preliminary agreement to the contrary Explanation The parol evidence rule would apply here as preliminary negotiations were never committed to the written offer, therefore, the seller is not required to convey. The MLS advertisement is an offer to leave the washer & dryer; that offer must be accepted by including it in the offer to purchase. The listing agent would not be subject to discipline since the seller is unarmed, however the buyer's agent could be liable. The Commission never requires an agent to reimburse an injured client

Which of the following statements is TRUE about agent compensation? A. Gift cards, laptops and travel certificates are considered nominal gifts, not compensation. B. Compensation can be paid directly to a salesperson from his/her client. C. All Compensation is negotiable and not regulated by the Real Estate Commission, REALTOR Association or MLS. D. The seller is only obligated to pay commission when it is referenced in the sales contract.

C. All Compensation is negotiable and not regulated by the Real Estate Commission, REALTOR Association or MLS. Explanation Compensation is negotiable between the client and the firm. The Sherman Antitrust Act regulates against price-fixing and boycotting. A firm can set the commission rate charged, however cannot collude with other brokerages to keep rates high. The payment of compensation and how it is calculated is referenced in a Listing Agreement or Buyer's Agency Agreement. Two things that can never be included in a sales contract: reference to commission/compensation and disclaimer of liability. Compensation must flow through the brokerage and paid by the firm's broker-in-charge. Compensation can include commission, gift cards, laptops and travel certificates.

Which of the following statements is true regarding environmental issues in real estate? A. Radon can be detected by its distinct odor B. Mold has been identified by the EPA as a major health concern in arid environments C. Asbestos can be abated through a process known as encapsulation D. Lead-based paint is one of the leading causes of lung cancer in the United States

C. Asbestos can be abated through a process known as encapsulation Explanation Encapsulation is an acceptable method for the abatement of asbestos. Radon is a colorless, odorless gas and can be remediated by ventilation. Lead-based paint has been associated with neurological damage. Mold is typically a problem in moist areas.

The seller of a house, under contract, dies during the contract period. His son, the sole heir to the estate, desires to keep the house. Which of the following is true? A. An administrator will be appointed for the estate to determine the disposition of the property. B. The death of the father terminates the contract so the son will not be forced to sell. C. Death does not terminate a contract for real property so the heir will be required to complete the contract. D. The property will escheat to the State and the State can dispose of the property at a public auction.

C. Death does not terminate a contract for real property so the heir will be required to complete the contract. Explanation Death does not terminate a contract (although it may terminate an agency agreement). The property will go to his heirs or devisees (if he has a will), but they can be compelled to complete the contract.NOTE: It is important to understand the impact of death on an offer or contract. Death terminates offers, but does not terminate contracts. The heirs are required to honor the contract or risk being sued for specific performance.

A tenant rents a house for an initial term of 18 months starting April 20, 2018 through September 20, 2019 for $950 per month. This lease requires a 60-day notice to vacate. The tenant most likely has which type of leasehold interest? A. Estate at Will B. Estate at Sufferance C. Estate from Period to Period D. Estate for Years

C. Estate from Period to Period Explanation Most apartment/house leases are estates from period to period because they are characterized by the auto-renewal and do not terminate unless notice to vacate is provided. And estate for years is like a vacation rental with a firm start and end date and no auto-renewing. An estate at will is for an indefinite time period while an estate at sufferance occurs when a PREVIOUS leasehold expired and the tenant refuses to leave despite the owner demanding them to leave.

The primary difference between an installment land contract and an option contract is A. The option contract indicates that if the seller wants to sell, the buyer must buy. B. There is no difference; these are different terms for the same contract. C. If the buyer buys under an option contract, they will receive legal title to the property. Under an installment land contract they will receive equitable title. D. An installment land contract is also known as a contract for title.

C. If the buyer buys under an option contract, they will receive legal title to the property. Under an installment land contract they will receive equitable title. Explanation A buyer that has an option to purchase will have legal title to the property once they close on the sale. Under an installment land contract or contract for deed, the buyer has equitable title until final payment has been made.

VA loans are assumable by qualified veterans and nonveterans. Based on this piece of information, which of the following is true regarding VA loans? A. VA loans do not require a minimum buyer qualification ratio B. Non-veterans who assume VA loans must pay a mortgage insurance premium to replace the veterans funding fee C. VA loans do not contain a due on sale clause as do most conventional loans D. VA loans are not bought and sold on the secondary market but instead traded as commodities

D. VA loans do not contain a due on sale clause as do most conventional loans Explanation Most loans today are not assumable as they contain a due on sale or alienation clause in the deed of trust; VA loans do not have a due on sale clause since VA loans are assumable (same with FHA). VA buyers do have to qualify based on a ratio in relation to living expenses and VA loans are packaged and sold by secondary market institutions. Non-veterans who assume VA loans, take over the note under the same terms as written in the mortgage contract.

A buyer is interested in purchasing a tenant-occupied rental property. After reviewing the property, the buyer asks the seller if the refrigerator can be included in the sale. The seller verbally agrees. Will the buyer acquire the refrigerator as part of the transaction? A. Yes, because it is a rented property all personal property conveys with the sale. B. Yes, because the seller agreed to convey the refrigerator. C. No, because the refrigerator was not included in the offer to purchase and contract. D. No, because personal property may not be conveyed in an investment property conveyance.

C. No, because the refrigerator was not included in the offer to purchase and contract. Explanation The obligations between the buyer and seller are referenced in the WRITTEN offer to purchase and contract. Verbal agreements are not enforceable as the contract is the final expression between the 2 parties. Regardless of the type of sale, investment or owner-occupied, a buyer and seller can agree to transfer personal property or not. This question may cause confusion as it does not state if the tenant or the seller owns the refrigerator. The seller may not be entitled to transfer the property as he/she does not own it.

A buyer that is illiterate enters into a contract to purchase a commercial property. The buyer claims that the contract is not binding since they did not understand the terms. Is the buyer accurate? A. No. The contract is legally binding between the illiterate buyer and the seller. B. Yes. A contract must have mutual agreement and therefore, the contract is void. C. No. A contract with an illiterate buyer is void as they cannot form a legal contract. D. Yes. A contract must have a meeting of the minds and therefore, the contract is void.

C. No. The contract is legally binding between the illiterate buyer and the seller. Explanation An illiterate person (cannot read) can enter into a valid and enforceable contract as the terms to the contract may be explained to them. If the seller had read the contract and failed to explain it accurately, the buyer could have terminated the contract as there would be no meeting of the minds. Based on the information contained in the question, the buyer and seller had mutually agreed to enter into the contract without duress or undue influence.

Josh and Sarah are a married couple looking to purchase a residential property. They are considering taking title to the property as tenants in common and ask the broker that is working for them how they should take title to the property. Which of the following is the BEST response from the broker? A. Taking title as joint tenants without the right of survivorship provides a greater amount of protection. B. Taking title as tenants in common provides the greatest amount of protection from claims. C. Taking title to a property can be accomplished in different ways, and you should advise the clients to consult an attorney for advice. D. Taking title as tenancy by the entireties would provide a greater amount of protection.

C. Taking title to a property can be accomplished in different ways, and you should advise the clients to consult an attorney for advice. Explanation Brokers need to be careful not to be seen as practicing law without a license. It is not the responsibility of a broker to counsel a buyer on the different ways in which title can be transferred. It is best to refer the buyer to an attorney so they can advise them as to the best course of action.

A limited services listing agent failed to discover and disclose an obvious discrepancy in square footage that was placed into a multiple listing service. The buyer learned of the mistake after closing. Which of the following statements is TRUE? A. The agent has done nothing wrong as he disclaimed that there may be errors in the MLS B. The seller is guilty of a negligent omission for not recognizing the mistake C. The agent is guilty of a negligent misrepresentation D. Listing agents are required, by rule, to measure homes

C. The agent is guilty of a negligent misrepresentation Explanation This is certainly a misrepresentation, likely a negligent one, because the agent did not do enough diligence to be minimally competent. Disclaimers are not a defense against misrepresentations. Sellers owe nothing to buyers. Agents are not required to measure homes (although it is highly suggested).NOTE: It is important to know the difference between a misrepresentation (a lie), omission (withholding information) and false promises (making promises to induce the sale that are not kept).

All the following statements are correct regarding RESPA (Real Estate Settlement Procedures Act), EXCEPT which of the following? A. The lender is not permitted to charge a fee for preparation of the closing disclosure. B. The borrower obtaining a federally-related mortgage must receive the closing disclosure at least 3-business days prior to settlement. C. The borrower has a 3-day rescission period when obtaining a home equity loan, refinancing or FHA reverse mortgage. D. The lender must provide the loan estimate within 3-business days from application.

C. The borrower has a 3-day rescission period when obtaining a home equity loan, refinancing or FHA reverse mortgage. Explanation The 3-day right of rescission when obtaining a home equity loan, refinancing, or reverse mortgage is provided under Truth in Lending Regulation Z, not RESPA. The remaining answers are correct. One way to remember what RESPA covers is "Kids Eat Up Boogers Dirt and Lead." No Kickbacks allowed among settlement service providers; Escrow account limitations (aggregate accounting adjustment); Uniform settlement statement (closing disclosure); Booklet ("Settlement Costs and You"); Disclosure of loan servicing; and Loan estimate within 3-business days of mortgage application.

A lender is determining whether to grant a loan to a borrower. Which of the following would not be a consideration of the lender? A. Stability of the borrower's income B. The gross monthly income and recurring monthly debts C. The fact that the borrower receives social security D. The appraised value of the property

C. The fact that the borrower receives social security Explanation Under the Equal Credit Opportunity Act, the lender cannot discriminate against a borrower since they receive public assistance or disability income. A lender will check the borrower's debt to income ratio by looking at monthly gross income and projected monthly recurring debt obligations. Lenders look for stable income to limit the risk of default. A lender often requires an appraisal prior to lending to again limit the bank's risk.

A homeowner received a building permit from the city to construct a storage building in the back yard of a house in a residential subdivision. The homeowner's association had a covenant that forbade any outbuildings or accessory dwellings. Which of the following statements is TRUE? A. The municipality's ordinances will be given the greatest weight B. The owner could pursue a variance with the city to override the HOA covenant C. The most restrictive between the zoning ordinance and restrictive covenants will rule D. The HOA has no authority to be more punitive than the city

C. The most restrictive between the zoning ordinance and restrictive covenants will rule Explanation In a conflict between the zoning ordinance and restrictive covenants, the most restrictive will apply. This is true with any laws federal, state or private restrictions that have been placed on a property. A restrictive/protective covenant cannot violate public law. They are often more restrictive than zoning laws.When a buyer purchases a property in a neighborhood with restrictive/protective covenants they agree to be bound by the rules. A municipality does not care what mailbox is used, have a list of approved colors or if you leave your garage door open.

A buyer working with a selling agent decides not to sign buyer agency. During the offer negotiations, the buyer mentions he is not willing to budge on the proposed closing date because he must be settled before starting a new job later this year. The selling agent agrees that's reasonable and thinks nothing further of the conversation. That night the listing agent submits the offer to the listing agent with no mention of the buyer's firmness on the closing date. The listing agent gives the offer to the seller with no mention of the buyer's firmness on the closing date either. Ultimately the seller counters with a different, further out closing date to which the buyer declines. Should either agent have disclosed the detail about the buyer's preference on closing dates? A. No, the buyer should not have shared confidential information about himself considering neither the selling agent nor the listing agent represented him as a client. B. Yes, the listing agent should have told the seller but was incapable of sharing this detail. The selling agent was correct in not sharing the detail with the listing agent. C. Yes, the selling agent violated agency duties because he knew the closing date preference yet did not say anything. The listing agent did not violate agency because this agent knew nothing about the buyer's closing date preference. D. No, the selling agent owes confidentiality to the buyer-client and was correct to not mention the buyer's closing date preference to either the listing agent or the seller.

C. Yes, the selling agent violated agency duties because he knew the closing date preference yet did not say anything. The listing agent did not violate agency because this agent knew nothing about the buyer's closing date preference. Explanation

A broker has sent unsolicited faxes to local real estate brokers regarding his recent listing of a 1920's Victorian home. This fax must include: A. detailed financial information under Regulation Z. B. the identification of the current owner of the property. C. a prominent opt-out from future marketing from the broker. D. a fair housing logo under HUD regulation 203b.

C. a prominent opt-out from future marketing from the broker. Explanation A broker that is marketing by sending faxes must include a prominent opt-out provision, similar to the requirements of Can-Spam for emails. Regulation Z does require disclosure of certain financial information, however only when triggered by disclosing payment, down payment, interest rates or other factors. While HUD does recommend a broker include the fair housing logo to demonstrate their commitment to fair housing, it is not required nor is it required under regulation 203b. FHA 203b loans are the most common for the purchase of residential 1-4 unit owner-occupied dwellings when a buyer has limited down payment funds or cannot otherwise qualify for a conventional loan. Salesman are not required to disclose the seller's name in an advertisement, however cannot use a "blind ad" where they fail to disclose that they are licensed, or when affiliated with a brokerage the firm that they are affiliated with.

When a broker finds a ready, willing and able buyer to purchase a property the seller will be obligated to pay compensation: A. which is known as a finder fee. B. due to the protection cause. C. as they are procuring cause. D. which is known as a success fee.

C. as they are procuring cause. Explanation Brokers are entitled to compensation when they have a valid listing agreement should they locate a ready, willing and able buyer to purchase the property, which is also called "being the procuring cause." The protection period, found in a listing agreement, protects a broker for a period of time after the listing agreement expires. A success fee is paid to a buyer's agent that is due and payable upon the formation of a legally binding sales contract.

Which of the following is an example of a listing contract a licensee could use to establish agency with a seller? A. oral B. closed C. open D. exclusive net

C. open Explanation The 3 types of listing agreements are Open, Exclusive Agency, and Exclusive Right to Sell. Listing agency can never be oral in NC. Oral listing agreements are not permissible. Closed and exclusive net are not real forms of listing agreements.

A commercial property needs additional parking spaces in order to accommodate the current tenant's business. The property owner should: A. seek spot zoning. B. seek a rezoning. C. seek a variance. D. seek a special use permit.

C. seek a variance. Explanation When an owner is not seeking a change in use for a property, rather a deviation from current rules, such as additional parking spaces they would seek a variance. Rezoning is used when you are changing the use from residential to commercial or farm land to residential. A special use exception has been planned for where a developer would not have to go through the typical rezoning when building something for the public good (hospital, affordable housing, etc.). Spot zoning is changing the use for one property rather than the area - which is not favored.

Public regulations of land use include overseeing which of the following? A. restrictive covenants B. deed restrictions C. subdivision plans D. protective covenants

C. subdivision plans Explanation State and local governing bodies regulate many uses of land including where subdivision are allowed and what standards the subdivision must meet such as lot size, utility access, dwelling type, and more. Restrictive covenants, also known as protective covenants, and deed restrictions are examples of private land use restrictions describing rules a homeowner must abide by for a specific parcel or neighborhood.

Review Later A. Add the difference in value to the comparable property B. Subtract the difference in value from the subject property C. Add the difference in value to the subject property D. Subtract the difference in value from the comparable property

D Subtract the difference in value from the comparable property Explanation Adjustments under the sales comparison approach are made to the closed comparable properties. Since the comparable has more square footage than the subject property, the comparable property is considered better or superior and a subtraction to the comparable's sold price must be made. Subtracting the value of the additional square footage in effect makes the comparable more similar to the subject property. The adjusted price is now a better reflection of the subject property's potential value. Comp Superior = Subtract Comp Inferior = Increase ***Never Adjust the Subject Property***

Which of the following is the best example of a contingency? A. A contract states the seller reserves the right to cross the property after the transaction closes to access the family cemetery in the back. B. A contract states the buyer will pay a price of $312,000 plus expenses for a hotel since the seller had to move out earlier than planned. C. A contract states the seller will pay for a home warranty to be selected by the buyer. D. A contract states the buyer will buy the home only if the attorney approves the sale.

D. A contract states the buyer will buy the home only if the attorney approves the sale. Explanation Contingencies give the buyer and/or seller the mutually agreed upon right to back out of a contract if certain conditions are not met. In this case, if the attorney does not approve the sale the buyer will have the contractual right to terminate. Sellers paying for a home warranty, sellers creating an easement as part of the contract, or buyers paying for some seller costs are all negotiable terms and provisions between buyers and sellers. When those conditions are not met as agreed in the contract, a breach would occur.

Betty offers to purchase a property deeded to Sally. Sally accepts the offer without her husband Sam signing. Which of the following statements is TRUE? A. The resulting purchase contract is voidable on Sam's behalf as he did not sign the purchase contract. B. Sally can sign on her husbands behalf when the agent witnesses Sam granting permission. C. A legally binding contract is formed as Sally is the sole owner of the property evidenced by the deed, which is only in her name. D. A valid contract does not exist, as Sam's signature must be included in the contract for sale.

D. A valid contract does not exist, as Sam's signature must be included in the contract for sale. Explanation While one spouse may purchase a property on her own, both spouses must agree to the sale of the property ("One to buy; two to sell"). All owners must sign the offer to form a legally binding valid contract for the sale of real property. Power of Attorney must be provided for a party to sign on behalf of another - and the agent witnessing a conversation over the phone would not be valid. A voidable contract means that one party can legally back out of the contract while the other party is obligated to perform. This occurs when a contract is formed and one party is a minor or when a party was drunk at the time of signature.

Which of the following is TRUE about property valuation? A. A licensed appraiser calculates a BPO and commonly reports a probable sales price range. B. A CMA is the best indication of what a property will sell for as it is prepared by a licensed appraiser. C. The Income Approach is the recommended approach when valuing residential property. D. An appraisal is best defined as an estimate of market value prepared by a licensed appraiser and is good for that date.

D. An appraisal is best defined as an estimate of market value prepared by a licensed appraiser and is good for that date. Explanation CMA's and BPO's are prepared by salespeople or brokers, not appraisers. A BPO or Broker Price Opinion is commonly prepared for a lender that may be foreclosing on a property or deciding if they should agree to a short sale. A CMA or Comparative Market Analysis is the same report as a BPO but is typically performed for a buyer or seller. A licensee calculates the probable sales price of a home and it is typically presented as a range. The appraiser calculates an estimate of the market value of the home that is good for that date. The market price is the amount that the property sold for. An appraiser performs an appraisal. A broker performs BPOs and CMAs. The Sales Comparison Approach is the best option when determining the estimate of market value or probable sales price for a residential property.

Under the law of agency, when an agent is given a broad range of powers in an ongoing relationship, where actions are limited to certain defined tasks, is known as what type of agent? A. Designated agent B. Universal agent C. Special agent D. General agent

D. General agent Explanation A general agent is given broad authority but in a narrow field (think property manager or an agent's relationship with the firm). Universal Agency is not common in brokerage practice but would be common for someone representing an incapacitated family member under a power of attorney (aka attorney-in-fact). Special agency arises when an agent represents the buyer, seller or tenant. Their actions are limited to gathering information and presenting it to the client and the agent has no capacity to sign or make decisions. For designated agency to form, you must first have dual agency. Dual agency forms when the same firm represents both buyer and seller in the transaction. With designated dual agency, you must have 2 agents that are appointed by the Broker-in-Charge. Neither agent can be aware of personal / confidential information about the other client at the time of designation (buyer's agent cannot be aware of seller info and seller's agent cannot be aware of buyer info). It is not possible for a BIC & PB to act as designated agents as the BIC has supervisory duties over the provisional broker. One way to recall this is: "No BIC & PB and no P&C".

Which of the following measurements uses meridian and range lines? A. Plat maps B. Metes and bounds C. Other legal description D. Government rectangular survey method

D. Government rectangular survey method Explanation The Government Rectangular Survey System uses meridians and range lines. It is important to know that the principal meridian runs north to south and the base line runs east to west. There are 36 sections in a township, 640 acres in a section and town center (school and municipal buildings) are commonly located in section 16. The metes and bounds property description is used in the 13 original colonies and Texas, and references monuments (metal rods, concrete, rock, barn, etc.). It starts at the point of beginning and ends back at the point of beginning, otherwise is considered imperfect. A property can also be reference by the recorded deed book and page or plat map book and page or other legal description that often lists out lot, block, and section.

A valid contract exists when which of the following is present? A. An otherwise binding and enforceable contract exists yet neither party can sue the other for performance B. Reality of consent is absent. C. Both parties promise to do or not do something for a lawful reason and good consideration D. Legally competent parties demonstrate a meeting of the minds for a lawful purpose and good consideration

D. Legally competent parties demonstrate a meeting of the minds for a lawful purpose and good consideration Explanation A valid contract must have legally competent parties (legal age, not drunk, not high, not adjudicated insane), who reach mutual assent (evidence by offer and acceptance in real estate), for a legal objective, and lawful consideration. Both parties exchanging promises describes a bilateral contract but does not clarify the type of validity. A contract where neither party can sue the other for performance is unenforceable. Failure to reach reality of consent often indicates a voidable contract.

Under the Federal Fair Housing Act of 1968 and its amendments, which of the following is NOT a protected class? A. Foreign born individuals B. Families C. Individuals with AIDS D. Married couples

D. Married couples Explanation Marital status is not a protected class under Federal Fair Housing laws. One way to recall the protected classes under the Federal Fair Housing Act is F.R.E.S.H. C.O.R.N. A broker or seller that has hired a broker cannot discriminate based upon Familial status, Race, Sex, Handicap or disability, Color, Religion or National origin. Familial status refers to families with children under the age of 18 or pregnant/expectant mothers. Persons with HIV or AIDS are protected under the handicap or disability protection. A seller that does not hire a broker to market the property has limited ability to discriminate so long as they do not market that they won't rent to a protected class or tell the person that they are discriminating against them. There are limits on the number of transactions that the seller can be a part of, where they cannot sell more than one unit every 2 years and cannot own more than 3 units at one time. An owner can discriminate when renting out units in an owner-occupied building under the same restrictions above.

In order to calculate the area of a rectangular one-story ranch home, a broker would... A. Multiply length X width X height. B. Multiply pi X radius2. C. Multiply 1/2 base X height. D. Multiply length X width.

D. Multiply length X width. Explanation To calculate the area of a rectangle, a broker would multiply length X width. Volume is calculated by taking length X width X height. The area of a circle is calculated by multiplying pi X radius squared. The area of a triangle is calculated by multiplying ½ base X height.

Contracts to convey an interest in real property must be in writing, to be enforceable, according to what law? A. The Law of Contracts B. Conner Act C. Parol Evidence Rule D. Statute of Frauds

D. Statute of Frauds Explanation The Statute of Frauds requires that contracts for real property be in writing to be enforceable (exceptions for short-term leases of less than 3 years). The Conner Act is an NC act that requires certain conveyance to be recorded to protect from third party claims. The law of contracts does not require all contracts to be in writing. The parol Evidence Rule states that the written contract takes precedence over any unwritten agreement to the contrary.

A buyer is making an offer on a property listed by an agent without agreeing to representation. The listing agent prepares the offer and the buyer signs. The listing agent emails the offer to the seller and sets an appointment to review the terms in person. At the meeting the seller agrees to the offer and signs it in the presence of the listing agent. The listing agent calls the buyer and leaves a message informing the buyer of acceptance. Has a legally binding contract been formed? A. No. The buyer must receive a copy of the written contract. B. Yes. The contract was formed when the agent witnessed the seller signing. C. No. The buyer has to listen to the message to from a contract. D. Yes. The contract was formed when the agent left the voicemail to the buyer.

D. Yes. The contract was formed when the agent left the voicemail to the buyer. Explanation When the buyer is not represented by a licensee, the buyer must be notified of the seller acceptance to form a legally binding contract. The notification can be made by any reasonable means - telephone (voicemail), mail, or personal delivery. Receipt of the written document is not required.

The Sherman Anti-Trust act precludes all of the following, EXCEPT which of the following? A. establishing a commission rate that multiple brokers with different offices will charge to their clients. B. not allowing a buyer to select a home inspector since the broker knows that they like to "kill deals." C. boycotting a discount service provider based on the rate of commission that will be paid to a buyer's agent. D. a brokerage setting the rate of commission that it will charge to all of their clients.

D. a brokerage setting the rate of commission that it will charge to all of their clients. Explanation Under the Sherman Antitrust Act, there can be no price fixing or boycotting. Price fixing refers to colluding with others to set the minimum commission rate that will be charged. A broker should avoid using the terms usual, customary, or that this is the rate that everyone charges. In addition, a broker should not boycott, or refuse to work with a service provider. The buyer is entitled to choose the service provider for inspections, lenders, title insurance, closing attorney, etc.

The doctrine of caveat emptor can best be described as: A. a fiduciary of the buyer is responsible for disclosures to his/her buyer client. B. a false and misleading statement by a seller cannot be held against them in court. C. an attorney review of buyer's documents is recommended before purchasing a property. D. a buyer is responsible for his/her investigations into a purchased property.

D. a buyer is responsible for his/her investigations into a purchased property. Explanation Caveat emptor means "let the buyer beware," which means that the buyer is responsible for his/her inspections, i.e., the seller owes the buyer nothing. A seller cannot intentionally lie to or mislead the buyer and cannot conceal defects without risking damages. Fiduciaries of buyers should assist buyers in determining issues with property but that is not what caveat emptor means. It may be a good idea to have an attorney review all documents, but it does not define caveat emptor.

Federal antitrust laws prevent salespeople and brokers from collectively restricting consumer choice. The goal is to avoid creating a monopoly. Examples of prohibited activities under antitrust laws include which of the following? A. steering B. false appraisals C. undisclosed dual agency D. allocation of markets

D. allocation of markets Explanation While all four answer choices are examples of prohibited activities, only allocation of markets falls under anti-trust laws. Allocation of markets refers to dividing a geographic area into "territories" where consumers only have one vendor to service a given section. This restricts consumer choice and lends to generating a monopoly. Steering is prohibited in fair housing laws. False or inflated appraisals are prohibited in lending to avoid loan fraud. Undisclosed dual agency is prohibited in agency laws and by license law and Commission rules.

To make modifications to a contract, an agent would use: A. an addendum. B. an indemnification clause. C. a contingency clause. D. an amendment.

D. an amendment. Explanation Once a legally binding contract is formed, an amendment is used to change the terms of the contract. An addendum is a provision that is added at the time of contract negotiation to add a contingency or additional language. Indemnification is an agreement to hold another party harmless in the event of a lawsuit by being responsible for the potential loss. Under an option contract, all terms of sale are agreed to upfront. This includes the purchase price, steps to exercise the option, the period of time the optionee has to decide to "opt-in" to purchase the property, etc. The seller is obligated to the sell, but the buyer is not obligated to buy.

In general, property managers under a written property management agreement are responsible for paying all of the following as part of operating expenses except: A. real property taxes B. annual insurance policies C. remodeling in a mold damaged unit D. annual income taxes

D. annual income taxes Explanation Property managers should never pay someone else's IRS income taxes. A CPA (Certified Public Accountant) would typically handle that task. Common property manager duties include property maintenance and overseeing operating expenses to include payment of ad valorem property taxes and coverage under insurance policies.

A split-level home with immaculate 1970s burnt orange shag carpet and avocado green bathroom fixtures is an example of: A. economic obsolescence B. physical deterioration C. straight line depreciation D. functional obsolescence

D. functional obsolescence Explanation Functional obsolescence refers to items not in keeping with today's standards, fashion preferences, or desires. The carpet and fixtures are not damaged, so physical deterioration does not apply. Economic obsolescence refers to conditions surrounding the property, such as new roads creating a change in traffic patterns. Straight line, or age, depreciation is a different method for establishing a property's value in the cost approach used by appraisers.

Buyers who finance a purchase with a purchase money mortgage receive which kind of title at closing? A. neither legal nor equitable title B. both legal and equitable title C. equitable title D. legal title

D. legal title Explanation A purchase money mortgage is one type of seller financing where the seller functions similar to how a lending institution would. Title to the property is transferred at closing. Equitable title refers to borrowers being allowed to possess or occupy property which is pledged as collateral for debt while legal title is held by someone else. Borrowers do receive legal title with purchase money mortgages.

When agents encourage minority consumers to rent or purchase property in one area over another because the agent indicated there are more "people like you", the agent is probably guilty of: A. panic peddling. B. blockbusting. C. redlining. D. steering.

D. steering. Explanation Panic peddling and blockbusting are synonyms for a fair housing violation where agents scare homeowners into selling for fear if they don't that their property values will dramatically drop due to a protected class member moving into the area. Redlining is commonly associated with illegal financing practices where certain areas are not issued loans because of the presence of protected class members. Steering is a practice where agents showing, or withhold showing, certain properties based on the potential buyer's membership of a protected class. All four answer choices are violations of fair housing laws.

A property's value will most likely increase if which of the following happens? A. supply increases B. transferability from the lender is easily obtained C. demand decreases D. the buyer's utility needs are met

D. the buyer's utility needs are met Explanation The four elements of value are demand, utility, scarcity, and transferability: DUST. Value increases with high demand, low supply, a consumer's current or future needs for the property are met (utility), and the seller can transfer ownership.