Rockwell Test Answers
A square parcel measures 1/8 of a mile by 1/8 of a mile. How many acres is this property? A.10 B.20 C.40 D.80
A.10 One-eighth of a mile is equivalent to 660 feet (5,280 feet ÷ 8 = 660 feet). Multiply to find its square footage (660 feet × 660 feet = 435,600 square feet), and then divide to find the number of acres (435,600 square feet ÷ 43,560 square feet per acre = 10 acres).
A parcel that measures 1/4 of a mile by 1/4 of a mile is:
1/16 of a section.
How many townships fit into a tract?
16.
1 square acre is how many feet on one side?
208.71 ft.
How many miles is one side of a tract? (re: government survey)
24 miles.
How many sections fit into a township?
36.
How many miles is one side of a township?
6 miles.
Once the buyer receives the seller disclosure statement, she may rescind the purchase and sale agreement within: A.3 days B.4 days C.5 days D.7 days
A.3 days The buyer has three days from receiving the seller disclosure statement to either approve and accept the statement and continue with the transaction, or rescind the purchase and sale agreement. If the buyer decides to rescind the agreement, he must notify the seller in writing within that three-day window.
Which is true regarding a standard 203(b) FHA loan? A.An FHA appraisal is required B.No downpayment is required C.Secondary financing from an institutional lender may be used for the downpayment D.The maximum loan term is 20 years
A.An FHA appraisal is required FHA loans require an appraisal by an appraiser who has met the educational and certification requirements for inclusion on the FHA's roster of approved appraisers. Secondary financing provided by a close family member is allowed, but secondary financing from an institutional lender is not allowed.
An investor looks at a property listed for $150,000, with a monthly net operating income of $1,000. He decides instead to offer $120,000. What kind of income approach analysis would he have used to arrive at that conclusion? A.Capitalization rate B.Competitive market analysis C.Gross rent multiplier D.Initial basis
A.Capitalization rate If an investor is using a method that focuses on a property's net income as a means of finding its value, he is using a capitalization rate approach to solving the problem. He needs to multiply the monthly net income by 12 to find the annual net income, however, since the capitalization formula relies on annual income. (While the gross rent multiplier method could use monthly income to determine value, that approach involves gross, not net, income.)
Which law prohibits discrimination in real estate transactions based on race, with no exceptions? A.Civil Rights Act of 1866 B.Civil Rights Act of 1964 C.Civil Rights Act of 1968 D.Fair Housing Act
A.Civil Rights Act of 1866 The Civil Rights Act of 1866 prevents discrimination based on race or color in any real estate transaction, without exception. The 1964 Act is limited to programs where the federal government offers financial assistance, while the Fair Housing Act (a part of the 1968 Act) is limited to residential transactions and has several exemptions.
Which of the following is true concerning federal fair housing laws? A.Enforcement may be brought about by filing a complaint with the Dept. of Housing and Urban Development B.Parts of these laws were overturned by the Supreme Court in the case of Jones v. Alfred H. Mayer Co. C.They only apply to racial discrimination D.They preempt state-level antidiscrimination laws
A.Enforcement may be brought about by filing a complaint with the Dept. of Housing and Urban Development The Fair Housing Act is enforced through the Department of Housing and Urban Development's Office of Fair Housing and Equal Opportunity. Jones v. Mayer upheld the application of the Civil Rights Act of 1866 in sale or rental of real property. State laws are not preempted by federal antidiscrimination laws; in some cases, they may be more strict than federal law.
Mary, in an effort to shore up a rocky marriage, wrote a quitclaim deed that transferred her interest in her property to a joint tenancy with her husband, instead of a tenancy in common. She told her husband about this, but the document was never recorded. They later divorced, by which point the deed had been lost. Does Mary's now ex-husband have a valid claim on the property? A.No, although if the deed had been recorded it would have provided constructive notice B.No, because he didn't sign the deed C.Yes, because a court will consider oral evidence about a contract D.Yes, because quitclaim deeds do not require the signature of the grantee to transfer title
A.No, although if the deed had been recorded it would have provided constructive notice Mary's ex-husband couldn't enforce the transfer in court because the only evidence of the deed is oral evidence, which is generally unacceptable as proof of a transfer of real estate. If the deed had been recorded, the recorded document would provide the public at large with constructive notice of the transfer, and it would also satisfy a court.
For how long is a deed restriction valid? A.Potentially forever B.Only as to the first purchaser of the property C.Only if the restriction is a covenant, not a condition D.Until a subsequent buyer and seller agree to release it
A.Potentially forever Deed restrictions run with the land, which means that they bind all subsequent owners of the property. Although they may be terminated under certain circumstances, most restrictions are valid indefinitely and could last forever.
A real estate agent lists Harold's home, which he owns as a life estate. Harold's children hold the remainder interest. Which of the following is true? A.Someone who buys Harold's life estate receives only the interest held by Harold B.Harold's children need to sign the listing agreement C.The buyer will automatically receive a fee simple absolute interest D.Since a life estate cannot be sold, the listing is invalid
A.Someone who buys Harold's life estate receives only the interest held by Harold The buyer would be purchasing only the life estate held by the seller, not a fee simple absolute. After the sale, Harold would still be the measuring life; so when Harold died, the buyer's interest would terminate and the property would pass to Harold's children in fee simple. (Buying a life estate is rare; when it does occur, it's usually a step in acquiring fee simple ownership of the property. To acquire ownership in fee simple, the buyer would need to buy Harold's life estate and also buy the children's remainder interest.)
A real estate agent is working with buyers who are interested in a house in a new rural subdivision. She tells the buyers that the developer will pave the streets. However, she didn't verify this statement; she assumed that was the case, based on the developer's previous subdivisions. If the buyers rely on this statement and decide to buy the house, and the streets never get paved, who is potentially liable? A.The agent, for engaging in misrepresentation through an unverified statement B.The county, which is ultimately responsible for rural roads C.The developer, for not providing paving as expected D.Nobody, as this is a "let the buyer beware" situation
A.The agent, for engaging in misrepresentation through an unverified statement A licensee owes all parties the duty of acting honestly and in good faith. Even an unintentional misrepresentation can be constructive fraud, so the buyers could sue for damages.
The market price of a property would be best defined as: A.the amount paid to obtain the property B.the initial basis, plus capital improvements and minus depreciation C.the price that the property would likely bring in a sale under normal circumstances D.the value of the property to a particular owner
A.the amount paid to obtain the property Market price is simply the price that someone paid in an actual transaction—it's not an estimate of value.
The cash price for a property and APR may be advertised. However, if other terms such as the downpayment or interest rate are stated in the ad, then: A.all the important terms of the loan must be included in the ad B.the APR is all that is necessary to include in the ad C.the lender's phone number must be included D.the ad violates the fair housing laws
A.all the important terms of the loan must be included in the ad If a real estate advertisement contains "triggering" terms such as the downpayment amount or interest rate, the Truth in Lending Act applies and the ad must also disclose the downpayment amount, the terms of repayment and the annual percentage rate.
The purchase and sale agreement has been signed and the seller has completed the seller disclosure form. A windstorm damages the property. The seller's agent is obligated to: A.contact the buyer's agent and inform him B.amend the seller disclosure form C.terminate the purchase and sale agreement D.subtract the cost of repairing the damage from the purchase price
A.contact the buyer's agent and inform him If the condition of the property changes or other new information comes to light that makes the original disclosure statement inaccurate, the seller must give an amended disclosure statement to the buyer or take corrective action so that the original statement is accurate again. The seller's agent isn't supposed to amend the disclosure statement himself, but the duty to disclose material facts would compel the agent to notify the other party.
Jones and Smith live across the street from each other in a subdivision that has deed restrictions prohibiting the keeping of large animals as pets. Jones realizes that Smith is keeping a pet Shetland pony in the backyard. Jones can: A.enforce the deed restriction against Smith via lawsuit B.do nothing, because Smith's ownership rights take precedence over deed restrictions C.do nothing, because only a next-door neighbor can enforce such a deed restriction against Smith D.notify the local zoning authority, who will investigate
A.enforce the deed restriction against Smith via lawsuit Jones or any other homeowner in the subdivision can file a suit for an injunction against Smith; it isn't necessary to be a next-door neighbor.
A primary advantage of owning a property in severalty is: A.flexibility B.inheritability C.joint occupancy D.shared risk
A.flexibility Property owned by only one person ("in severalty") gives that owner more flexibility to use or dispose of the property than she would have if she shared ownership. By definition, ownership in severalty doesn't involve joint occupancy or shared risk. And properties held in fee simple are generally inheritable whether there's only one owner or more than one.
Your buyers have found their dream home. The market is currently very active, and the home has already received two offers. The buyers want to make their offer more attractive, without increasing their risk or expense, so you recommend that they: A.include a personal statement with their offer B.waive all contingencies C.offer a smaller earnest money deposit D.All of the above
A.include a personal statement with their offer In a multiple offer situation, a written statement from a buyer may make the offer more personal, and therefore more appealing, to the seller.
The property description in a deed reads: "Starting at the old stone well, then going south 120 feet, west 400 feet, north 80 feet, and east 210 feet." This description is: A.invalid, because it doesn't return to the point of beginning B.invalid, because it uses a point of beginning that is man-made C.valid, because it returns to the point of beginning D.valid, because all descriptions must start with a man-made point of beginning
A.invalid, because it doesn't return to the point of beginning This property description is invalid, because it does not return to the point of beginning. The courses and distances stated in a metes and bounds description must describe the entire perimeter of the parcel, starting and ending at the same point. A man-made object (a monument) may be used as the point of beginning, although that isn't a requirement.
Unless the purchase agreement or other contract states differently, an earnest money check given to a real estate licensee shall be made out to the: A.licensee's firm, as licensed B.closing or escrow agent C.seller D.appropriate multiple listing association
A.licensee's firm, as licensed. The question and answer correctly state the law; however, it is common practice for the buyer to name an escrow agent in the offer and make out the check to that company.
A real estate broker represents the seller in a transaction involving an investment property. Several months later, the new owner asks the broker if he would act as property manager for that property. The broker may take this position: A.only if his designated broker allows it B.only if the broker and the buyer are not related C.only if the broker does not work for compensation D.only if the broker works for a third party rather than the buyer
A.only if his designated broker allows it A broker represents his brokerage firm, and cannot act without the designated (or managing) broker's knowledge and permission.
For income tax purposes, a homeowner can deduct: A.property taxes B.principal payments on a mortgage C.capital expenditures D.the adjusted basis
A.property taxes A real property owner can deduct the property taxes she pays, up to a certain limit.
The seller listed the property for $95,000. Assuming that their listing agreement is typical, the broker would NOT be entitled to a commission if the seller: A.rejected a $90,000 offer from a financially qualified buyer B.accepted a $90,000 offer from a financially qualified buyer C.accepted a $95,000 offer, but his title turned out to be unmarketable D.rejected a $95,000 offer from a financially qualified buyer
A.rejected a $90,000 offer from a financially qualified buyer A broker isn't entitled to a commission if the seller rejects an offer that doesn't meet the terms in the listing agreement, such as a below-listing-price offer as in answer A. Since the question is asking about when a commission is not due, answer A is the right choice.If an offer meets the seller's terms as stated in the listing agreement (in this case, a price of $95,000) and the buyer is financially able to buy, the broker is entitled to a commission whether the seller accepts the offer or not.
Q makes a full-time living selling real estate, even though Q does not have a real estate license. Q's activities are legal if Q: A.sells his own property B.sells raw land only C.is a relative of a developer D.is a salaried employee of a real estate brokerage firm
A.sells his own property Anyone acting as a principal (in this case the seller) can buy and sell without a license.
Mineral rights associated with real property are always: A.conveyed along with the surface rights to the property B.separable and divisible C.sold separately from the property D.an interest in personal property
B. separable and divisible Mineral rights may be sold separately from the land. However, they are appurtenant to the land and will be conveyed with the land unless there is an agreement otherwise.
A mortgage includes a prepayment penalty of 3% of the loan's balance at the time of payoff, if the owner pays off the entire balance before a specified date. Monthly amortized principal and interest payments are $1,484.40, with a 5% annual interest rate. The borrower's balance after making the January 1st payment was $44,731.15. On February 1st, he made the next payment as scheduled, and then after that, paid off the entire remaining balance. What would the prepayment penalty be? A.$290.30 B.$1,257.20 C.$1,302.99 D.$1,319.37
B.$1,257.20 The first step is to calculate by how much the February 1st mortgage payment would reduce the principal balance. Start with the balance after the January payment and calculate how much annual interest the borrower would owe on that ($44,731.15 × .05 = $2,236.56 annual interest). Then divide that by 12, since this is a monthly payment ($2,236.56 ÷ 12 = $186.38 monthly interest). Subtract that interest from the total payment amount to find how much that payment will reduce the loan's principal ($1,484.40 - $186.38 = $1,298.02); this is important—otherwise, you are calculating the penalty on interest that hasn't accrued yet (interest on a real estate loan isn't due till the end of a payment period). Subtract that amount from the previous balance to find what the balance will be after making the February payment ($44,731.15 - $1,298.02 = $43,433.13). Multiply that balance by 3% to find the amount of the prepayment penalty ($43,433.13 × .03 = $1,302.99). [Note: alternatively, the interest rate itself may be divided by 12 and the result multiplied by the balance after the January payment and then proceed from there.]
An owner sells a property, and the buyer is going to make a 20% downpayment. The lender requires the buyer to pay two discount points, which turn out to total $1,000. What was the purchase price? A.$50,000 B.$62,500 C.$75,000 D.$200,000
B.$62,500 The purchase price was $62,500. This question is simply two separate percentage problems. First, find the loan amount. Two discount points is 2% of the loan amount, so divide the value of the discount points by 2% to determine that this was a $50,000 loan ($1,000 ÷ .02 = $50,000). The 20% downpayment means this is an 80% loan. Now you can use the loan amount and the loan-to-value ratio to find the purchase price. To calculate the purchase price, divide the loan amount by 80% ($50,000 ÷ .80 = $62,500).
Jamie's house is mostly rectangular, measuring 30 feet by 40 feet. There is also an enclosed triangular foyer (a fully walled-in entry area) in front, measuring four feet across, four feet along the perpendicular side, and 5.7 feet along the diagonal side. In the back, there is a screened porch, which is 40 feet long and 5 feet deep. To the side, there is an attached garage, which measures 10 feet by 20 feet. What is the square footage of the living area? A.1,200 B.1,208 C.1,408 D.1,608
B.1,208 Keep in mind that a house's square footage is based on its outside dimensions, but excludes garages and porches. So, you would only need to calculate the area of the main part of the house (30 feet × 40 feet = 1,200 square feet) and the odd triangular foyer (4 feet × 4 feet × 1/2 = 8 square feet.) (Remember, the formula for the area of a triangle is 1/2 or .5 × H × B—you don't use the diagonal or hypotenuse.) Add the two together to find the square footage is 1,208 square feet.
TILA requires the lender to provide the buyer with an estimate of loan costs within: A.2 days after the loan application is submitted B.3 days after the loan application is submitted C.5 days after the loan application is submitted D.10 days after the loan application is submitted
B.3 days after the loan application is submitted In a residential mortgage transaction, the lender must give the loan applicant an estimate of loan charges within three days of receiving the written loan application.
After a disciplinary hearing, if the Director imposes sanctions, the licensee may appeal the Director's order within: A.six months, by filing an appeal with the court of appeals B.30 days, by filing an appeal with the superior court C.two months, by filing an appeal with the superior court D.30 days, by filing an appeal with an appellate administrative judge
B.30 days, by filing an appeal with the superior court A licensee may appeal the Director's order within 30 days after the date the order was issued, by filing an appeal with the superior court.
Which of the following items is most likely to cause title to be unmarketable? A.Recorded CC&Rs B.Adverse possession C.An encroachment that does not materially affect the property's value D.Reserved mineral rights
B.Adverse possession Adverse possession would typically cause title to be unmarketable. The purchase and sale agreement form states that CC&Rs of record, easements and encroachments that do not interfere with the property's use or value, and reserved oil or mineral rights do not render title unmarketable.
If B fails to renew his license by the expiration date: A.it is automatically canceled, and B must requalify for the license B.B can renew the license within a year by paying a renewal fee and a late fee C.B is subject to disciplinary action D.B's license becomes inactive for six months
B.B can renew the license within a year by paying a renewal fee and a late fee A licensee can renew his license within one year after the expiration date by paying the renewal fee and a late penalty.
By what right would a railroad company acquire private land necessary for a new railway line? A.Partition action B.Eminent domain C.Suit in federal court D.Condemnation
B.Eminent domain A state government may delegate the power of eminent domain to local governments, and to private entities that serve the public, such as utility companies and railroads. Eminent domain is the right; condemnation is the process.
A licensee's unlicensed assistant has failed to complete the paperwork for the last ten closings. Under the Uniform Regulation of Business and Professions Act, the licensee may be subject to disciplinary action on what grounds? A.Aiding or abetting an unlicensed person to perform real estate activities that require a license B.Failure to supervise staff adequately C.Failure to follow proper document handling procedures D.Being party to a concealment in conduct of real estate activities
B.Failure to supervise staff adequately A licensee has the duty, under URBPA, to adequately supervise or oversee staff, whether employees or independent contractors. Failure to do so is grounds for disciplinary action.
A couple with children would like to buy a house that was built in 1950. The home was recently remodeled, with completely new paint and plumbing. In this situation, what does the agent always have to do? A.Ensure that the paint used during the remodel is lead-free B.Make sure the buyers receive a pamphlet on lead-based paint C.Provide them with a copy of a recent lead inspection report D.Nothing; the house was remodeled so lead-based paint rules don't apply
B.Make sure the buyers receive a pamphlet on lead-based paint A seller of a house built before 1978 must always give buyers a copy of a pamphlet on lead-based paint prepared by the Environmental Protection Agency. If (but only if) the property has been inspected for lead-based paint, the seller must also give a copy of the inspection report. The agent must make sure that the seller takes these steps.
A licensee locates what seems like a ready, willing, and able buyer. However, the deal falls through at closing because the buyer can't obtain necessary financing. At the same time, though, the seller turns out to be unable to provide marketable title. Does the seller still owe a commission to the listing agent in this case? A.No, because the sale didn't close B.No, because there was no ready, willing, and able buyer C.Yes, because the licensee saw the transaction through to the closing date D.Yes, because the seller has an absolute duty to provide marketable title at closing
B.No, because there was no ready, willing, and able buyer A seller becomes obligated to pay a commission as soon as a ready, willing, and able buyer is found. A buyer who lacks the financial ability to complete the purchase isn't "able," however. While in some cases a failure to close excuses the seller's duty to pay a commission, that makes answer A only sometimes true. B is true without qualification and therefore the better answer.
Real estate license fees are put into the: A.Director's personal account B.Real Estate Commission Account C.Real Estate Education Fund D.Washington Association of Realtors trust account
B.Real Estate Commission Account Real estate license fees (application fees, renewal fees, etc.) are placed in the Real Estate Commission Account in the state treasury.
Which party is usually responsible for the costs of modifications or repairs made as a result of unsatisfactory inspection results? A.Buyer B.Seller C.Listing agent D.None of the above
B.Seller Typically, if a buyer deems an inspection report unsatisfactory, he will give the seller an opportunity to make repairs. If the seller chooses to make the repairs, the work is usually paid for by the seller.
A buyer and seller sign a contract for deed. Two weeks later, the buyer is declared mentally incompetent. The buyer's guardian contacts the seller and says that he can continue to make the buyer's payments as agreed. Which of the following is true? A.The buyer can disaffirm the contract within a reasonable period of time B.The buyer can finish out the contract as the buyer's guardian has proposed C.The seller can agree to receive payments from the guardian and if the payments become unreliable, the seller can then cancel the contract D.The contract is automatically voided because of the buyer's incapacity, regardless of what the guardian wants
B.The buyer can finish out the contract as the buyer's guardian has proposed If a person is declared incompetent after signing a contract, the contract is voidable if the guardian establishes that the person was incompetent when the contract was signed, even though not yet officially declared incompetent. No facts state that this has happened, however. Therefore B is a somewhat better answer.
A minor leases an apartment right before he turns 18. Immediately after he reaches the age of majority, he contacts the landlord and says he's terminating the lease. Which is true? A.This is possible only if the landlord already knew the tenant was a minor, and not if the tenant initially misled the landlord about his age B.This is possible, because he notified the landlord within a reasonable amount of time after having reached the age of majority C.This isn't possible, because tenants are subject to caveat emptor D.This isn't possible, because the tenant can't void the lease after having taken possession
B.This is possible, because he notified the landlord within a reasonable amount of time after having reached the age of majority A person can usually void a contract he entered into as a minor; however, once he reaches majority he has to act fairly quickly. Here the tenant appears to have done so.
Sam takes possession of an unused farm and begins growing crops. He sends the farm's owner a letter describing his actions. Can Sam ever become owner of the farm? A.Yes, because he is putting the land to productive use B.Yes, as long as he maintains possession C.No, because adverse possession requires that the true owner be unaware of the possession D.No, because his possession is not hostile to the owner's interest
B.Yes, as long as he maintains possession As long as Sam maintains exclusive and uninterrupted possession for the required period of time, he will become the owner of the property (although he may need to file a quiet title action to perfect title). The owner does not need to know about the possession, but the possession must be obvious enough to put an average owner on notice that her interest in the property is threatened. Sam's letter satisfies that requirement.
Tina is representing the buyers in a transaction; she described the property's boundaries to her clients without clarifying that she was not sure that the boundaries were exactly precise. The buyers, upon taking possession, built a fence along the boundaries that she described, but the neighbors then filed suit because the fence didn't follow the actual boundaries and encroached on their land. Can Tina be held liable for misrepresentation? A.Yes, because any offer must include a photocopied legal description of the property B.Yes, because she reasonably knew that the described boundaries might not have been correct C.No, because the description was not in writing D.No, because the buyers were duty-bound to perform their own survey
B.Yes, because she reasonably knew that the described boundaries might not have been correct An agent's duty of honesty and good faith requires her to avoid inaccuracies in statements to all parties to a transaction. This includes even unintentional misrepresentation, which could be considered constructive fraud.
A contract for deed wouldn't be a good idea if the seller's mortgage has a/an: A.acceleration clause B.alienation clause C.defeasance clause D.subordination clause
B.alienation clause An alienation clause gives the lender the right to accelerate the loan if the borrower sells the property, including by land contract. So in general a contract for deed on property subject to an alienation clause would be ill-advised. That's because most sellers wouldn't have enough money to pay off their mortgage (a land contract typically doesn't produce significant sale proceeds at closing).Note that answer A is wrong because while an acceleration clause also gives the lender the right to accelerate the loan, that right only kicks in when the borrower breaches the loan agreement (selling the property isn't considered a breach).
A former mansion has been divided into three apartments. The best approach to finding the property's value is: A.cost B.income C.reconciliation D.sales comparison
B.income The income approach is appropriate for properties that are oriented toward generating income for the property's owner. That would be true even if the property originally was intended as a single-family residence.
A limited partnership is a preferable method of owning real estate investment properties because: A.all owners share equal control over the direction of the investment B.it allows persons with less capital available to still participate in real estate projects C.ownership is divided among the shareholders D.taxation is similar to that of a corporation
B.it allows persons with less capital available to still participate in real estate projects. Limited partners often invest smaller amounts in a project than the general partners, and they also have limited liability, which means they are protected from becoming personally liable for the partnership's debts.
According to Washington license law, a licensee who is acting as a property manager must give the owner a summary statement for all of the following, except: A.rent receipts B.property condition C.outstanding balances D.owner's contributions
B.property condition A summary statement is a brief report showing the property's financial status over a certain period of time, such as one month or one quarter. It would not include a report on the managed property's physical condition.
Cluster zoning, which allows smaller lot sizes and reduced frontages, is suitable if a development: A.includes both commercial and residential uses B.still has a density ratio consistent with the general plan C.abuts a wetland or other sensitive site D.abuts state- or city-owned land
B.still has a density ratio consistent with the general plan Cluster zoning is an approach to zoning that allows developments in suburban or rural areas to have smaller lot sizes and higher density, but also more shared green space. However, a development cannot exceed the limits on density established in the general plan (the community's comprehensive plan).
Prior to acceptance, an offer may legally be terminated by: A.the offeree B.the offeror C.the agent D.the seller
B.the offeror At any point up until the offer is accepted, the offeror is permitted to terminate the offer. This is true even if the offer has a stated termination date.
If a buyer wants to protect herself against unrecorded encumbrances, she should: A.assume the seller's standard policy of title insurance B.order a survey C.request a title insurance policy that has the fewest exceptions D.have her attorney prepare an abstract of title
C. request a title insurance policy that has the fewest exceptions To protect against unrecorded encumbrances, a buyer would need a title insurance policy that goes beyond standard coverage, which is generally limited to title defects related to matters of public record. The buyer should request extended coverage or (in a residential transaction) homeowner's title coverage, which provide greater protection than standard coverage. (Note that a survey doesn't address encumbrances; it only addresses encroachments.)
A commercial building is valued at $1,600,000 if its annual net income is capitalized at a rate of 20%. If the operating expenses total 40% of the gross income, what is the approximate annual gross income? A.$128,000 B.$192,000 C.$533,333.33 D.$800,000
C.$533,333.33 First, calculate the annual net income, using the capitalization formula ($1,600,000 x .2 = $320,000). Now you need to use the percentage formula to calculate the gross income, but don't use the percentage of the gross income that is taken up by the operating expenses (which is 40% or .4); instead, you will want to use the percentage of the gross income that is not taken up by the operating expenses (percentages are most usefully expressed as decimals, so 1 - .4, or .6).Calculate the gross income ($320,000 ÷ .6 = $533,333.33). You can double-check your math by calculating what is 40% of the gross income ($533,333.33 x .4 = $213,333.33), and subtracting that amount (which represents the operating expenses) from the gross income to verify the net income ($533,333.33 - $213,333.33 = $320,000).
Ned and Carla buy a house that is listed at $105,000; their offer for $5,000 less than that is accepted. They obtain a loan with an 80% loan-to-value ratio. The loan is for 30 years with a 5.5% interest rate. Taxes for the year are $4,000; insurance for the year is $800. Calculate their monthly PITI payment. Be sure to use the amortization table. A.$454 B.$467 C.$854 D.$867
C.$854 The monthly PITI payment incorporates not just the principal and interest on the loan, but also a monthly share of taxes and insurance. The first step is to find the principal and interest portion using the amortization table that is provided; for a 30-year loan at 5.5% interest, the P & I portion is $454. The taxes are given as an annual figure, so the next step is to divide that by 12 months ($4,000 ÷ 12 = $333). You'll need to do the same thing for the annual insurance amount ($800 ÷ 12 = $67). Add the three numbers to arrive at a total monthly payment of $854 ($454 + $333 + $67).
In a government survey description, one side of a section is how many feet long? A.100 B.2,640 C.5,280 D.43,560
C.5,280 A section is one square mile, with each side measuring one mile long. One mile equals 5,280 feet.
In a VA transaction, who pays the points? A.The buyer B.The seller C.As negotiated between the buyer and seller D.The government
C.As negotiated between the buyer and seller Discount points paid in a VA loan transaction may be paid by the buyer, the seller, or a third party, depending on what the parties negotiate.
Which of the following is not an important component of an inspection report? A.Identify signs that the property may require a specialized type of inspection (such as environmental) B.Projecting a future budget for repair or remodeling work C.Providing an estimated valuation for the property D.Summarizing areas that need or will need repairs
C.Providing an estimated valuation for the property It is not the job of an inspector to estimate a value for the property; that is the job of an appraiser. An inspector looks for problems that will require repairs and notes if there are red flags indicating that a specialized inspection is needed.
A federal law requires lenders to give a booklet about shopping for a home loan to all prospective borrowers within three business days of loan application. What law is this? A.Fraud Enforcement and Recovery Act B.Home Loan Disclosure Act C.RESPA D.Truth in Lending Act
C.RESPA RESPA requires, among other things, that lenders give prospective borrowers a copy of a booklet about closing costs and the home buying process, entitled "Your Home Loan Toolkit."
When a buyer is ready to make an offer, who may NOT prepare the offer? A.The buyer B.The buyer's lawyer C.The buyer's agent, writing the terms of the contract himself D.The buyer's agent, using a pre-printed purchase and sale agreement form
C.The buyer's agent, writing the terms of the contract himself A real estate agent is not permitted to draft all the provision of a contract for a buyer (this would constitute the unauthorized practice of law). However, a real estate agent can fill out a pre-printed purchase and sale agreement.
K buys a piece of landlocked property from L on the condition that L provide an easement across the property for ingress and egress. The easement isn't recorded. K later sells the property. Is the easement still valid for the new owner?
C.Yes, because an easement of this type runs with the land, rather than belonging to an individual Easements ordinarily need to be in writing and recorded in order to run with the land, but if the use is by necessity or apparent from past use, an easement can run with the land even if it's neither in writing nor recorded. This question involves either past use or necessity, so C is the best answer here.
At closing, a sale doesn't go through because the seller's anticipated transfer to another city gets suddenly postponed, and the seller no longer wants to sell. Does the seller owe the listing agent a commission in this situation? A.No, because the sale didn't close B.No, because this was a circumstance outside the seller's control C.Yes, because the seller won't provide marketable title, which is considered a default D.Yes, unless the buyer and seller agreed to mutually cancel the transaction
C.Yes, because the seller won't provide marketable title, which is considered a default The listing agent has earned a commission when a ready, willing, and able buyer is found. If the seller backs out after accepting the offer, even if the buyer agrees to a rescission, the commission is still due.
An apartment building is right where a new city park is going to be built. The city condemns it. Can the city terminate the leases of the building's tenants? A.No, because this is a violation of the federal Fair Housing Act B.No; if the government forces a landlord to breach a contract with a tenant, it is violating the Landlord-Tenant Act C.Yes, if notice is provided to the tenants and they receive relocation assistance D.Yes, if the tenants receive just compensation from the city
C.Yes, if notice is provided to the tenants and they receive relocation assistance According to the Uniform Relocation Act, tenants whose leases terminate because of the condemnation of their residence are entitled to at least 90 days' notice and assistance with relocation, including payment of moving expenses. (A residential tenant is not likely to have a compensable interest in the property. The tenant does not have an ownership interest, and from an appraisal perspective a residential leasehold interest is unlikely to have any financial value.)
A buyer received a warranty deed when she took title to a property. The seller's cousin showed up several months later and claimed an ownership interest in the property. The buyer would be protected against this claim by the warranty deed's: A.covenant against encumbrances B.covenant of hostile enjoyment C.covenant of seisin D.covenant of freehold warranty
C.covenant of seisin The covenant of seisin protects the buyer in this case. It promises that the grantor actually owns the property interest being transferred to the grantee. (The covenant of warranty might also apply here, but that's not one of the answer options; there is no such thing as a covenant of freehold warranty.)
The primary purpose of the Truth in Lending Act (Regulation Z) is to require the lender to: A.provide the borrower with a statement showing its aggregate interest charge for similar properties in today's marketplace B.include in any advertisement about available financing the annual percentage rate, plus the applicable finance charges C.disclose the complete cost of credit to consumer loan applicants D.reveal the true cost of all real estate loans, except purchase money loans
C.disclose the complete cost of credit to consumer loan applicants The Truth in Lending Act requires lenders to disclose financing costs to applicants for consumer loans, including consumer loans secured by real estate. (A consumer loan advertisement must state the APR and other information about finance charges only if it includes one or more triggering terms, such as a specific payment amount.)
An owner-occupied property qualifies for its state's homestead exemption from property taxes. Shortly after closing, the new assessed value of the property is issued, and the property tax amount increases significantly. The selling agent is obligated to: A.contact the closing agent and ask for details on the assessment B.contest the increased assessed value with local authorities C.do nothing D.tell the buyer that the tax amount has increased
C.do nothing New information that is material and comes to light after the disclosure statement has been given to the buyer should be disclosed in an amended statement. Higher property taxes are material if the increase is great enough that the buyer might reconsider the transaction. However, material facts that are discovered after closing do not need to be disclosed, and the buyer no longer has a right of rescission. (Note: Some states provide a partial property tax exemption for property that qualifies as the owner's homestead.)
Client trust funds must be placed in an interest-bearing trust account in all of the following cases EXCEPT: A.when a buyer makes an earnest money deposit in the amount of $1,000 B.when a buyer makes an earnest money deposit in the amount of $5,500 C.for property management accounts D.for commercial real estate trust accounts
C.for property management accounts Property management trust accounts don't have to be interest-bearing, nor are they subject to the pooled interest-bearing account requirements that apply to other real estate trust funds.
The entity that determines the maximum number of people who may legally live in a rental unit is the: A.Department of Housing and Urban Development B.state government C.local health department and zoning authority D.property owner
C.local health department and zoning authority Among the many things that local agencies such as a city's health department or zoning authority might determine is the maximum occupancy of each dwelling in a particular area.
All of the following are characteristics of FHA-insured loans, except: A.mortgage insurance premiums B.owner-occupancy requirement C.no downpayment D.more lenient underwriting standards
C.no downpayment FHA-insured loans require a downpayment, although the borrower's contribution (minimum cash investment) can be as small as 3.5% of the sales price or appraised value. VA loans do not require a downpayment.
An increasingly common land use pattern allows for subdivisions with smaller lot sizes and little or no setback and sideyard requirements while keeping the same density ratios. These are known as: A.horizontal property divisions B.downzoning C.planned unit developments D.spot zoning
C.planned unit developments A planned unit development is a subdivision where lot sizes are smaller and dwellings are grouped closer together, and there are significant amounts of open space.
An investor rents a property to a tenant. For tax purposes, depreciation on this property is based on: A.market value, plus capital improvements, minus land value B.market value, plus rental income, minus land value C.price, plus capital improvements, minus land value D.price, plus rental income, minus land value
C.price, plus capital improvements, minus land value. Adjusted basis is calculated by starting with initial basis (the cost of obtaining the property), adding capital expenditures, and then subtracting depreciation deductions. The value of the land must also be subtracted from what is depreciable; land does not wear out, so depreciation doesn't apply.
A property manager would like to have his son perform maintenance duties on the managed property. The manager needs to provide all of the following to the owner, EXCEPT: A.disclosure of the family relationship B.opportunity for the owner to decline C.proof that the son is a licensed and bonded contractor D.rates that will be charged
C.proof that the son is a licensed and bonded contractor A property manager may arrange for contractor services (such as maintenance services) on the property with the owner's consent. The manager must disclose the manager's relationship to the service provider and the rates that will be charged. The service provider doesn't necessarily have to be a licensed contractor, though.
The deed that states that there is a conveyance of interest, if any, is the: A.grant deed B.bargain and sale deed C.quitclaim deed D.special warranty deed
C.quitclaim deed When signing a quitclaim deed, the grantor is saying, "I hereby quitclaim, remise, and release whatever interest I have in the property, if any."
Net listings are strongly discouraged because they are likely to be unfair to the: A.broker B.buyer C.seller D.All of the above
C.seller In a net listing, the seller agrees to accept a certain amount of money from the sale and the listing broker receives any surplus beyond that. This arrangement is likely to be unfair to an uninformed seller. The broker could end up collecting a far larger commission than a broker who charges an ordinary percentage-based commission would have (while performing no extra work to justify the higher amount).
The comparable has a two-car garage and the subject property only has a one-car garage. The appraiser estimates that space for a second car contributes about $800 to the value of a home. To take this into account, the appraiser will: A.add $800 to the sales price of the subject property B.add $800 to the sales price of the comparable property C.subtract $800 from the sales price of the comparable property D.subtract $800 from the sales price of the subject property
C.subtract $800 from the sales price of the comparable property Since the comparable has a feature the subject property lacks, the appraiser will subtract the value of that feature ($800) from the sales price of the comparable property. The resulting figure will suggest what the comparable might have been worth if it, like the subject property, only had a one-car garage. (Note that the sales price of the subject property is not an appropriate consideration in appraising its market value.)
A buyers' purchase and sale agreement contained a financing contingency. The buyers applied for a loan with a local lender, who verbally informed them that their loan application was denied. The buyers' agent should: A.ask the sellers to provide a purchase money loan instead B.have the sellers extend the contingency deadline C.tell the buyers about their right to receive the denial in writing D.terminate the agency relationship
C.tell the buyers about their right to receive the denial in writing Under the Fair Credit Reporting Act, when a lender takes an adverse action on the basis of a credit report, the applicant or borrower must receive written notice of that action. The consumer should also be notified of which consumer reporting agency provided that information, so that the consumer can verify and, if necessary, contest that information.
18. A buyers' purchase and sale agreement contained a financing contingency. The buyers applied for a loan with a local lender, who verbally informed them that their loan application was denied. The buyers' agent should: A.ask the sellers to provide a purchase money loan instead B.have the sellers extend the contingency deadline C.tell the buyers about their right to receive the denial in writing D.terminate the agency relationship
C.tell the buyers about their right to receive the denial in writing. Under the Fair Credit Reporting Act, when a lender takes an adverse action on the basis of a credit report, the applicant or borrower must receive written notice of that action. The consumer should also be notified of which consumer reporting agency provided that information, so that the consumer can verify and, if necessary, contest that information.
Most conventional loans contain an alienation clause which prohibits: A.the sale of the property B.prepayment of the loan C.the loan from being assumed without the lender's consent D.increases or decreases in the loan's interest rate
C.the loan from being assumed without the lender's consent. The alienation clause, also called the due-on-sale clause, prohibits the assumption of the loan. It means that if the property is sold, the loan must be paid off (unless the lender agrees to assumption of the loan by a particular buyer).
An apartment building has eight units; each unit rents for $800 per month. The property can also be expected to earn $4,000 per year from laundry and vending machines. An appraiser estimates that the property typically operates with a 5% vacancy factor. What is the property's estimated annual effective gross income? A.$10,080 B.$13,120 C.$76,760 D.$76,960
D.$76,960 Multiply the eight units in the building by the monthly rent to find the monthly income (8 × $800 = $6,400). Multiply that by 12 months per year, to find the annual income (12 × $6,400 = $76,800). Calculate what is 5% of that amount ($76,800 × .05 = $3,840), and subtract that amount from the annual income ($76,800 − $3,840 = $72,960). Add the $4,000 in additional revenue (which is not subject to the vacancy factor) to find the effective gross income ($72,960 + $4,000 = $76,960).Note regarding vending machine income: this problem states that $4,000 is expected, suggesting that the appraiser used past year average vending income (which inherently takes into account vacancies).
After the sale of a property in a 1031 exchange, the seller must close on the new property within: A.10 days B.30 days C.45 days D.180 days
D.180 days Once a Section 1031 exchange (tax-deferred or "tax-free" exchange) has been arranged, the parties must close the transaction within 180 days.
The federal Fair Housing Act prohibits discrimination on the basis of: A.race, religion, color, national origin B.mental/physical disability C.familial status D.All of the above
D.All of the above The federal Fair Housing Act prohibits discrimination on the basis of race, religion, color, sex, national origin, disability, or familial status.
Unlicensed staff members in a real estate office can do which of the following without obtaining a real estate license? A.Discuss listings over the phone B.Show properties to interested parties C.Host open houses provided they don't discuss terms of sale D.Anything that is not covered by Washington real estate license law
D.Anything that is not covered by Washington real estate license law Unlicensed assistants may do anything that isn't covered by Washington real estate license law, such as bookkeeping or placing for sale signs. Unlicensed assistants can't host open houses, though. They can act as a greeter, but a licensee would need to be present to discuss financing and condition issues, for example.
Which of the following actions by a developer would require a zoning variance or a rezone, because it would result in a more intensive use of the land? A.Deed restriction prohibiting further subdivision of individual lots B.Deed restriction prohibiting painting houses non-earth-tone colors C.Fewer outbuildings placed on each lot than allowed by law D.Increase in number of lots per acre
D.Increase in number of lots per acre D is the only possible answer. An increased number of lots per acre would be a more intensive use than before and since developers tend to build to the zoning limit, an increase in the number of lots per acre would likely require either a variance or a rezone.
The full cost of which of the following is the most likely deductible as an expense in the year incurred from the income taxes of the owner of an investment property? A.Adding a swimming pool B.Installing a new HVAC system C.Prepaying additional principal on the mortgage D.Repainting the building
D.Repainting the building Repairs to keep an investment property in ordinary operating condition are deductible in the year they are performed. This would include repainting. Adding a pool or installing a new furnace would be considered capital expenditures, which have tax advantages too, but are not deductible in the year they are made (although capital expenditures may be gradually deducted over a set number of years in the form of depreciation deductions).
Who is responsible for the earnest money deposit? A.The listing firm B.The selling firm C.The mortgage company D.The firm to which the check is made payable
D.The firm to which the check is made payable The firm or individual to whom the check is made payable has a responsibility to see that the money is deposited in a trust account on behalf of the buyer; this is usually the selling firm.
Of the following, which is the best definition of a fee simple estate? A.Title and ownership without limitations B.An estate for years C.A leasehold interest in property that is supported by consideration D.The greatest interest one can own in land
D.The greatest interest one can own in land The fee simple estate is the highest and most complete form of land ownership. Answer A goes too far, since a fee simple estate is owned subject to limitations, such as liens or other encumbrances, and also government regulations (and sometimes private restrictions as well).
Which of the following would be considered a design deficiency, at least in newer homes? A.More bathrooms than bedrooms B.Kitchen too close to garage C.Bedrooms not visible from living room D.There's no place in the kitchen for casual eating
D.There's no place in the kitchen for casual eating It's considered a design deficiency if a kitchen is too cramped to allow even a small area for eating.
A home inspection revealed that black mold is present in a home. What should the buyer's agent tell the buyer? A.That black mold is toxic, and that the buyer should not buy the house B.That mold is commonplace, and can be cleaned up with bleach C.To require the seller to remedy the problem D.To seek expert advice
D.To seek expert advice A buyer's agent typically does not have expertise in environmental hazards. The proper step, for matters in a transaction outside the agent's expertise, is to advise the principal to seek expert advice. In this case, that would be a mold remediation specialist.
What information does an appraiser need in order to calculate a capitalization rate? A.Price and gross income B.Price and net income C.Value and gross income D.Value and net income
D.Value and net income In order to calculate a property's value, an appraiser using the income approach would need to know the property's net income and capitalization rate. So, conversely, if the appraiser wanted to find the capitalization rate, he would need to know the property's value and net income.
A buyer accepts a warranty deed from a seller, believing that the seller is the sole owner of the property. The buyer later finds out that the seller is only a co-owner. Has a covenant in the warranty deed been violated? A.No, the only covenant in a general warranty deed promises that the previous owner didn't encumber the property B.No, the principle of caveat emptor controls matters concerning a deed C.Yes, there is a covenant providing equitable title D.Yes, there is a covenant providing marketable title
D.Yes, there is a covenant providing marketable title Together with the covenant against encumbrances, the covenant of quiet enjoyment is essentially a promise that the seller is conveying marketable title to the buyer. A legitimate claim of an ownership interest by a third party violates that promise.(Marketable title means a title clear of defects, objectionable encumbrances, or other claims that might lead an informed and prudent buyer to decide against purchasing the property. Equitable title describes the interest that a buyer has under a purchase and sale agreement, before the transaction closes and the buyer receives full legal title.)
The police powers of the government include: A.defeasance B.foreclosure C.lis pendens D.building codes and zoning regulations
D.building codes and zoning regulations The government's police power is its authority to adopt laws that are necessary for the protection of the public's health, safety, morals, and general welfare. Land use laws such as building codes and zoning regulations are based on the police power.
Encroachments are: A.spoken permission to use someone else's property B.activities that interfere with a neighboring owner's use of his property C.protected against by standard title insurance D.considered a trespass
D.considered a trespass An encroachment is considered a trespass if it violates a neighboring owner's right to possession, and can be the basis for an ejectment action.
In place of three years of actual full-time real estate sales experience, a managing broker license applicant can qualify to take the managing broker's examination with: A.six months of experience as a real estate attorney B.five years of experience as a commercial insurance agent C.two years of experience as a resident apartment manager D.five years of experience as a mortgage loan broker
D.five years of experience as a mortgage loan broker Examples of real estate-related experience that will qualify include five years of experience in escrow, mortgage finance, appraising, property management, land development, investment, etc. (Only one year of experience is required for a real estate attorney, though.)
All of the following places are appropriate for the display of a license EXCEPT: A.on a designated broker's office wall B.in the front window of a brokerage office C.above a filing cabinet in a brokerage office D.in the licensee's personnel file in the designated broker's office
D.in the licensee's personnel file in the designated broker's office State law requires that all licenses must be displayed "prominently" in the brokerage office. A license in a file cabinet isn't prominently displayed.
A lease is most likely to be a net lease if it requires the tenant to pay: A.a portion of the tenant's business income B.periodic rent increases based on a measure of inflation like the Consumer Price Index C.utilities D.property taxes
D.property taxes Net leases require the tenant to pay some or all of a property's operating expenses, such as property taxes, insurance, and maintenance. A net lease also requires a tenant to pay utilities, but so do many gross leases (for instance, most apartment rentals require tenants to pay their electric bill); a gross lease, however, will never require a tenant to pay property taxes.
Ryan needs to replace his roof; not having the cash available, he decides to borrow several thousand dollars through a home equity line of credit, which is a: A.fully amortized fixed-term loan B.loan financing the purchase of both real and personal property C.loan with smaller payments at first and larger payments later D.secured loan
D.secured loan A home equity line of credit is a revolving credit account rather than a loan with a fixed term and amount. Unlike a credit card, though, it is secured by the borrower's real property.
A letter of intent: A.contains all terms and conditions of a contractual agreement B.is generally binding C.is used regularly in small residential transactions D.sets out basics prior to negotiation
D.sets out basics prior to negotiation A letter of intent is not a contract and isn't binding. It's just a preliminary statement that lays out parameters for negotiation of a contract.
A property investor sells his 100-acre rural parcel of land with the restriction that the buyer may not divide the land into parcels smaller than one acre each. This restriction is: A.invalid; this restriction violates the rule against perpetuities B.invalid; one cannot put private restrictions on rural land C.valid; restrictions are always valid on agricultural land D.valid; this restriction doesn't violate public policy
D.valid; this restriction doesn't violate public policy Deed restrictions are generally valid, so long as they aren't unconstitutional, a violation of a law, or contrary to judicial determinations of public policy. For example, deed restrictions prohibiting sale to non-white buyers violate fair housing law and are invalid.
What is the most important test for determining whether an item is a fixture or personal property?
Intention of annexor.
What are the duties of a life tenant?
To not commit waste and to allow for reasonable inspection by the remainderman.