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REAL ESTATE
NATIONAL PRACTICE QUIZ 3
| Question | Answer |
|---|---|
| A broker helps a buyer and a seller with paperwork but does not have fiduciary obligations to either party. The broker's activity in this situation is that of | a transaction broker.the disclosure is improper—and possibly illegal—regardless of the salesperson's motives. Such action is an example of the salespersons failure to obey the seller and maintain confidentiality—both breaches of fiduciary duties |
| A legally enforceable contract in which two parties exchange promises to do something for each other is known as | a bilateral contract. |
| All of the following are examples of a property manager's duties EXCEPT | accepting a rebate from a service provider. |
| A building is 250 feet wide, 350 feet long, and six stories high (each story 12 feet in height). How much does the building cost at $0.98 per cubic foot? | multiply width × length × height: 250 × 350 × 12 = 1,050,000 cubic feet (for each floor). The cost per floor is 1,050,000 × $0.98 = $1,029,000. The building is six stories high, so to find the total cost multiply 6 × $1,029,000 = $6,174,000. |
| Which of the following is TRUE about a holdover tenant? | The landlord may evict the tenant. |
| The main difference between a purchase money mortgage and a contract for deed is | how title is held. |
| All of the following events terminate an agency relationship EXCEPT | an appraisal with a value less than the selling price |
| The buyer secured a loan with a 75% loan-to-value ratio. The interest rate was 7.125%, and the term was for 30 years. The first month's interest payment was $477.82. What was the appraised value of the property? | $477.82 × 12 = $5,733.84 Annual interest $5,733.84 ÷ 7.125% (.07125) = $80,475 $80,475 ÷ 75% (.75) = $107,300 |
| A purchaser makes a 10% down payment on a house and acquires an 80% first mortgage from a lender. The seller takes back a purchase money mortgage from the buyer for the remaining 10%. In this arrangement, | the seller has financed a portion of the purchase price and placed a junior lien on the property. |
| A purchaser negotiates a mortgage loan in which she will make equal monthly payments over a period of 30 years, with the balance of the loan being zero at the end of that term. The purchaser has negotiated | fully amortized loan. A loan with equal, constant payments which result in a zero balance at the end of the term is a fully amortized loan. |
| The lease agreement for Julia's Fine Arts store was as follows: $1,200 fixed monthly rent plus 4% commission on all sales over $850,000. This year, her gross sales were $1,500,000. How much was paid in rent? | determine the base fixed rent, $1,200 × 12 = $14,400. Step 2: determine the percentage rent, $1,500,000 – $850,000 = $650,000 amount to be used for percentage charge. $650,000 × 4% (.04) = $26,000 $26,000 + $14,400 = $40,400 |
| A broker deposits earnest money into the company operations account. This action is | commingling of funds and is illegal. The mixing of trust funds with a broker's personal funds is commingling |
| The provision in a mortgage or deed of trust that permits the lender, upon the default of the borrower, to proceed to a foreclosure sale without a court action is | power-of-sale clause. A power-of-sale clause in a mortgage permits the lender to foreclose and sell a mortgaged property that is in default without any court action. |
| The income approach as used by an appraiser makes use of which of the following? | capitalization. Capitalization is a method of estimating today the future value of an income stream |
| A salesperson lists a residence. Owner confides to salesperson that a lower price would be acceptable. Salesperson tells a prospective buyer that seller will accept up to 5k < the asking price for the property. Which statement is TRUE? | the disclosure is improper—and possibly illegal—regardless of the salesperson's motives. Such action is an example of the salespersons failure to obey the seller and maintain confidentiality—both breaches of fiduciary duties |
| An agency relationship in which a broker represents both the seller and the buyer in the same transaction would require all of following EXCEPT | both the seller and buyer are required to allow the broker to share price, terms, and motivations with the other party. |
| Which of the following types of insurance would protect the owner from liability when an employee has been injured? | workers' compensation. Workers' compensation would protect the owner from liability should an employee be injured |
| Personal property includes all of the following EXCEPT | built-in bookcase. The key word is built-in; since the bookcase is attached, it is real property |
| Which of the following is a specific, involuntary lien? | real estate property tax lien. A real estate property tax lien is always on a specific piece of real estate; it happens without permission of the property owner, so it is involuntary |
| Couple declined to purch owner's title policy at closing, but lender req them to purch a mort title policy. He said he had an ownership in the prop bc his spouse sold prop while in another country. If claim is true, are the buyers covered under policy | no, because the buyers are not covered by the mortgagee's policy. The couple decided not to purchase an owner's title policy, which would have covered them in this situation |
| Property managers may not commingle funds. This means property managers should | place a security deposit check into the management’s trust account |
| A listing contract must be signed by | both the seller and the listing broker. All parties identified in the listing contract must sign it, including all individuals who have a legal interest in the party. |
| A buyer makes an offer on a seller's house, and the seller accepts. Both parties sign the sales contract. At this point, the buyer has what type of title to the property? | equitable. The seller holds legal title until closing and the buyer's interest in the property is recognized in the buyer holding equitable title. |
| spouse has gross of $102k and other spouse$72k a year. Monthly car payments of $875,cc payments of $620, and grocery expenses $1,200. Lender uses debt ratios of 28% and 36% to qualify them, what is the max monthly housing expense they will qualify for? | $102,000 + $72,000 = $174,000 ÷ 12 = $14,500 Monthly $14,500 × 28% (.28) = $4,060 $14,500 × 36% (.36) = $5,220 $5,220 − $1,495 ($875 + $620) = $3,725 other recurring debt |
| In a limited partnership, | each limited partner is liable for no more than her investment. In a limited partnership, each limited partner can be held liable for losses only to the extent of her investment. |
| All of the following occupancy terms are negotiated between a property manager and a prospective tenant EXCEPT | the amount of cash flow. Cash flow is the money left after a property pays for itself; a tenant would not be given this knowledge |
| All of the following terms are associated with the economic characteristics of real estate EXCEPT | license. A license is the permission to use another's property and is not an economic characteristic of property. |
| Which of the following requires that real estate sales contracts be in writing? | statute of frauds. The statute of frauds requires all transfers of interests in real estate be in writing; the exception is a lease of 3 years or less. |
| A property is now worth $117,978. If it has appreciated 6% each year for the past two years, what was the original investment? | Year 1: $117,978 ÷ 106% (100% + 6%) (1.06) = $111,300 Year 2: $111,300 ÷ 106% (1.06) = $105,000 |
| A salesperson working with a customer knows the neighborhood he is showing is very near an airport with low-flying planes that create a lot of noise. The salesperson should disclose the level of airplane noise in the neighborhood because it is | material fact. A material fact is information that, if known, could change a buyer's decision to purchase a property. Airplane noise is a material fact and should be disclosed to the buyer. |
| To protect against charges of fraud, the prudent broker/agent will obtain information about all of the following EXCEPT | sidewalk cracks. Obtaining information about sidewalk cracks would not help protect the agent against charges of fraud. |
| A property owner has a large parcel of land surveyed into lots and streets, and then files a subdivision plat. Each lot can legally be described by use of which of the following? | lot and block system. The lot and block system is often used to describe property in subdivisions. |
| A sales associate for XYZ Realty listed and sold a $175,000 home. The seller paid a 6% commission, of which the sales associate received 2% for listing the property and 1.5% for selling the property. How much was the brokerage's share of the commission? | Total commission = $175,000 × 6% (.06) = $10,500. Sales associate's share = 3.5% (2% + 1.5%) $175,000 × 3.5% (.035) = $6,125. $10,500 – $6,125= $4,375 for the brokerage. Or 6% – 3.5% = 2.5% for the brokerage times the sales price. |
| If the amount realized at a sheriff's sale as part of a mortgage foreclosure is more than the amount of the indebtedness and expenses, then the excess belongs to | mortgagor. The mortgagor, or borrower, receives any money remaining from a foreclosure sale after paying the debt and any other liens. |
| The primary purpose of a deed is to | transfer title rights. Title is the right to or the ownership of land. A deed is the document by which the owner transfers the title to real property |
| While looking at a property, the potential buyers ask their salesperson if a fence is the boundary line of the property. The salesperson should recommend that the buyers | have a survey conducted. To determine the exact boundaries of a property, a survey is recommended. Some lenders require a survey to confirm the legal description of the property. |
| Avoid, control, transfer, or retain are the four alternative techniques of | risk management. Risk management used these four techniques to help businesses determine how to handle various risk issues. |
| If upon receipt of an offer to purchase his property the seller makes a counteroffer, the original offer is | terminated. When the original offer is rejected by the seller, it ceases to exist and is considered to be terminated |
| To insert additional terms into the offer, a real estate professional would use | addendum. The purpose of an addendum is to legally change any of the provisions of the offer or to insert new terms. Amendments modify executory contracts. |
| To find the value of a property, if the net operating income and the capitalization rate are known, an appraiser using the income approach to value would | divide the net operating income by the capitalization rate. To find the value, the net operating income (NOI) is divided by the capitalization rate |
| A contract for the sale of real estate that does not state the consideration and provides no basis on which the consideration could be determined is considered | void. Consideration is an essential element of a real estate contract, along with competent parties, meeting of the minds, lawful objective, and in writing |
| How many acres are in one square mile? | 640 acres |
| A guest slips on an icy apartment building stair and is hospitalized. A claim against the building owner for medical expenses may be paid under which of the following policies held by the owner? | liability. Casualty insurance covers losses such as theft, burglary, and vandalism. Workers' compensation covers injuries to worker on the job. Fire and hazard covers direct loss due to damage. |
| How many cubic yards of concrete must a builder buy to pour a sidewalk that measures 45' × 3.25' and is five inches thick? | 5'' ÷ 12'' = .4167' 45' × 3.25' × .4167' = 60.9423 cubic ft. 60.9423 ÷ 27 = 2.2571 cubic yds. |
| Couple enters to see a prop listed w/ another brokerage. Salesperson calls agent+makes appt to show prop. W/o a sig, salesperson recommends they secure an inspection. He confides, owners are getting divorce +want to sell quickly. Salesperson has created | an implied agency relationship with the buyers. |
| Under which of the following listing agreements can owners of listed property sell the property on their own without having to pay the listing broker a commission? | open listing and exclusive agency listing. In an exclusive agency listing, one brokerage is authorized to act as the exclusive agent of the principal |
| Under what conditions, if any, should a real estate licensee suggest a professional property inspection? | for every transaction. Real estate licensees should always encourage buyers to consult professional experts to determine the condition of the property |
| An owner of a 4plex has one unit that rents for $450/mo, unit that rents for $475/month, and 2 units that rent for $500/mo. The vacancy rate is 4%, and the monthly expenses average $350. If the rate of return on the property is 10%, what is the value? | The answer is $179,760. |
| Which of the following are NOT costs or expenses of owning a home? | taxes on personal property. Personal property is not real estate. Nonhomeowners and homeowners may pay taxes on personal property. |
| Buyer looks at a house listed +asks broker if it is connected to the city water. Broker does not know answer, but it is imp to a sale, says "yes." If the pros relies on this statement, purch the house, + finds out there is no sewer system, the broker | may face court action resulting in cancellation of the sale and money damages. The broker misrepresents a material fact important to the buyer's decision to purchase the house. |
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