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How many square feet in one acre? - ✔✔There are 43,560 square feet in an acre Mr. and Mrs. Conners sold their home and paid an 8% commission to their realtor. Assuming no other fees, if they walked away from the sale with $306,000, about how much did their house sell for? - ✔✔$332, To solve this problem, set up an equation using P for the answer you seek: You know that the seller walked away with $306,000. If the agent was to take 8% of the selling price (P), then the seller received 92% of the selling price. So, the equation would look like this: Amount seller received (306,000) = P (selling price) x 92% (0.92) 306,000 = P x 0.92 To isolate P (the unknown) on one side, divide both sides of the equation by 0.92 and you have: 306,0000.92=P Divide and you have the actual answer: 332,608.695 etc. Notice that the question says "about," so round to find the correct answer among the choices given: $332, Which of the following is a violation of the Fair Housing act? - ✔✔not allowing a service dog in an apartment complex that doesn't allow pets According to Fair Housing laws, a handicapped individual who needs a service dog is permitted to have one even if animals are not generally allowed on the property. However, the person is responsible to pay for any damage the animal causes when their tenancy is up. In new multiple-story housing properties, accommodations must be made on the first floor only. According to Fair Housing laws, which of these people is not considered disabled? - ✔✔a former convict According to Fair Housing laws, people whose mental or physical condition limits their performance of major life activities is "disabled." So, alcoholics, drug addicts, and HIV-infected people are considered disabled, but having been a convict does not qualify as a disability. Sarah owns a warehouse and has decided to sell it as an open listing. She has contacted three brokers to sell it for her, Brokers A, B, and C. If Broker B makes the sale, who gets the commission? - ✔✔Broker B
In an open listing, whichever broker sells the property gets the commission. What information would be unethical for a listing agent to share with a potential buyer? - ✔✔"The seller is very eager for an offer because he lost his job and found a new one in a different state." It is inappropriate for a listing agent to tell a prospective buyer personal information about the seller, even if it may encourage a sale. The only exception would be in the case of a seller instructing the agent to do so. Doing so would be a confidentiality breach on the part of the listing agent. The broker should answer all questions related to the property honestly. A subdivision has a rule that each home in the neighborhood be at least 2,500 square feet. This is an example of which concept? - ✔✔restrictive covenant Restrictive covenants are created by neighborhood developers or associations to ensure that the neighborhood maintains certain standards. Examples include minimum housing size, restrictions on architectural style, or mandated underground sprinkling. Which of the following describes a transaction brokerage? - ✔✔The broker does not represent either party, but provides general information and services to each. In a transaction brokerage, the broker may help with general information or services, but she is not looking out for the specific interests of either the buying or selling party. Who takes the biggest risk in an open listing? - ✔✔the agent In an open listing, the seller will only pay the agent if the agent finds the buyer. Because the seller can have many agents in an open listing, only the agent who finds the buyer will be compensated. This means the agents who do not produce a buyer will receive no compensation. An agency contract is being terminated. In which scenario might there be damages owed to one of the parties? - ✔✔The agent resigns from the contract because he is overloaded with homes to sell.
All rights and privileges belonging to the land (air, soil, water, etc.) are appurtenances. Which of these is a fixture? - ✔✔window blinds Fixtures are articles of personal property that are attached (screwed in, etc.) and become real property. When window blinds are screwed into the house, they become part of the improvement that is part of the real property. A ____ is a promise of real property, kept by the lender to secure the loan. - ✔✔estate at sufferance The legal definition of a note, as it applies to Real Estate, is a promise of real property to secure a loan. While the complete term is promissory note, today's professionals simply use the term note and you should know that it refers to promissory note. The word promise in the question was a clue to the correct answer (A mortgage is also a representation of debt obligation that the borrower keeps. The lender gets the note.) All of these are good examples of severance except ____. - ✔✔dividing a single room into two rooms Severance is converting real property to personal property. When it is removed, it turns back into personal property Which lien is required by law to be paid first? - ✔✔Delinquent property taxes Government entities make sure they are the first ones to get a crack at the money when repayment becomes possible Which of these is not a type of leasehold estate? - ✔✔estate in perpetuity There is no such estate as "estate in perpetuity." All other answer choices are types of leasehold estates.
Which of the following is an example of dual agency? - ✔✔an agent who represents both the buyer and the seller When an agent represents both the buyer and the seller, this is called dual agency. When acting on behalf of a principal, an agent must ____. - ✔✔put the principal's interests before their own As a fiduciary of the principal, an agent is legally and ethically obligated to protect the principal's interests over their own for the duration of the agent-principal relationship. Which of the following is never allowed? - ✔✔a salesperson with an expired license presenting an offer A salesperson with an expired license cannot present offers until their license is reinstated. Broker Katie obtains an exclusive agency listing with seller Steve. Katie creates marketing materials and runs open houses for Steve's home. Then, Steve finds a buyer on his own and sells the house without Katie's help. What fee is Katie owed? - ✔✔Katie has not earned a fee. In an exclusive agency listing, the seller does not owe the broker a fee if the seller procures their own buyer. Note that the question specifically says "exclusive agency listing," not "exclusive right to sell listing." Who usually pays a real estate commission? - ✔✔the seller of the property Almost always, the commission is paid by the seller of the property. This is true even if the commission is to be split among the seller's agent and the buyer's agent. Foreclosure occurs when a ____ seizes and sells a borrower's ____ after the borrower has failed to ____ the lender - ✔✔lender, collateral, repay
Real estate agents will earn their money once a piece of property is ____. - ✔✔sold or exchanged Once the paperwork is signed for a sale or transfer, the real estate agents earn their pay. ____ indicates ownership of property, in real estate terms. - ✔✔Title While title indicates ownership, it is not a physical thing. The deed is the physical proof of a title. Joan sells her house to her brother Mike on a handshake. This contract is: - ✔✔unenforceable In order of a contract of sale to be valid, there must be signatures from both parties. When ownership of a piece of real estate goes from one person to another, it is called a(n) ____. - ✔✔transfer Transfer describes the legal exchanges of property between two individuals. Conveyed can mean the same as transferred. A buyer and seller agree to wait until the seller's listing is expired to make the sale in order to avoid paying the broker his share. How can the broker get his commission? - ✔✔Prove in court he was the procuring cause of sale. A court will likely grant commission to a real estate broker if he can prove he was the procuring cause of sale, even if the listing has expired. Legally, this is referred to as a broker protection clause. A contract can become voidable if one of the parties was being victimized because ____. - ✔✔they were misled, they were a minor, they did not agree voluntarily All three provide legal cause for the contracted to be voided.
While title indicates ownership, it is not a physical thing. The deed is the physical proof of a title. - ✔✔name of grantee Although recording lets others know of the deed's existence and is probably a great idea, it is not required for a deed to be a valid document. Many lenders require that it be recorded, but recording is not required to make the deed valid An express contract can be ____. - ✔✔enforced only if it is in writing An express contract can be written or oral, as long as the terms are clearly stated. To form an express contract, you must have an offer by one party and acceptance by another party. A good example of an implied contract is ____. - ✔✔after a written lease expires, rent is paid and the check cashed The owner shows through his actions that the contract is still valid, even though it is now simply implied. Which of the following is not true regarding a contract of sale? - ✔✔It is acceptable to refer to a document that is in the public record if the property description is very complex. Signatures on a contract of sale do not have to be notarized. The other options are all true regarding contracts of sale. Preprinted contracts are typically used in residential transactions, and if something is not desired/not applicable, both parties need to initial the alterations they make. Deed restrictions and easements on a property are considered ____ when written into the deed. - ✔✔exceptions and reservations Exceptions and reservations are restrictions or limitations explicitly described in the deed. In a real estate transaction, the ____ is the current owner of the property and is conveying his or her property to someone else. - ✔✔grantor
What are the four elements required of every valid and enforceable contract? - ✔✔competent parties; legal purpose; offer and acceptance; and consideration Every legal contact must have parties of sound mind, a clear legal purpose, and agreement between parties, and consideration, which is something of value given in exchange for something of value. In real estate, consideration is usually some sort of monetary payment. The ____, also known as the words of conveyance, includes the words that describe exactly what rights the grantee is receiving. - ✔✔granting clause The granting clause specifies what you really own when you own a piece of real estate. How does a home equity line of credit differ from a second mortgage? - ✔✔With a home equity line of credit the borrower can draw money as they need it. In a traditional second mortgage, a borrower would take all of the money loaned to them at one time. In a home equity line of credit the borrower may take up to a specified amount, but they do not need to take that amount in full or all at one time. What is the primary advantage of a biweekly mortgage? - ✔✔faster loan payoff Because there are 26 2-week periods each year, those with a biweekly mortgage will make 13 yearly payments instead of 12. This results in a faster loan payoff, typically between 18-22 years. While easier budgeting and a better interest rate may be true in certain mortgage scenarios, the primary advantage of a biweekly mortgage is faster loan payoff. When a property is released from a mortgage because it has been paid off by the borrower, what document does the lender provide to prove this to be true? - ✔✔satisfaction piece A satisfaction piece is a document from the lender that states the property has been paid off and is released from the lien.
Which government entity was created to encourage low-income housing? - ✔✔GNMA (Ginnie Mae) While all of these are second mortgage markets and Freddie Mac does have multiple low-income housing programs, only Ginnie Mae was created to encourage low-income housing. A loan for a new house has an origination fee of one point. If the loan is for $275,000, what would the cost of that point be? - ✔✔$2, One point is equal to 1% of the total loan amount. If the loan is $275,000, than the amount would be: $275,000 * .01= $2, What is the purpose of underwriting? - ✔✔to determine the risks of making a loan Mortgage lenders use a process called underwriting to assess the risks of making a loan. To assess a potential borrower's risk, they look at factors such as salary, credit history, and terms of employment. If a borrower puts down 10% on their home loan, what is the loan-to-value ratio? - ✔✔90% If a loan has a 90% loan-to-value ratio, the borrower is responsible for putting down 10%. Most conventional home loans have a loan-to-value ratio of 80%. A homeowner is buying a new home but hasn't sold their old one. Which type of loan would they obtain in the short term and pay back as soon as their old house is sold? - ✔✔swing A swing loan (also sometimes referred to as a "bridge" or "gap" loan) is a short term loan that allows borrowers to borrow against their current property in order to buy a new one. They are typically taken out when the borrower wants to buy a bigger home but hasn't sold their current property Which is not one of the "three c's" of underwriting? - ✔✔conformity
group of answers in which none of them is the answer you might have in mind. When this happens, find an answer that is correct and choose that one. In this case, you might have been thinking that I = PRT (I = Principal x Rate x Time), and that would be correct, but it is not one of the choices. Be ready for confusing questions like this one when you take this test. Which of these is a tool the Federal Reserve can use to control/influence monetary policy and supply? - ✔✔raising and lowering reserve requirements for banks, buying and selling securities on the open market, setting the discount rate All three are used by the Fed to establish the monetary supply What financial instrument is given by a borrower to the lender as promise to repay a debt? - ✔✔a note A note, or promissory note, is evidence of a debt that can be resold. A mortgage is a ____. - ✔✔written contract pledging real property owned to secure a debt The mortgage along with the note are given to the lender to obtain a loan. Gradual liquidation through periodic payments of principal and interest is called ____. - ✔✔an amortized loan Amortized loans are the norm in most residential Real Estate and gradually lower the owed amount through monthly payments to principal and interest. How does an ARM mortgage differ from a fixed rate mortgage? - ✔✔ARM stands for adjustable rate mortgage, whose rate may vary with changes in interest rates Fixed rate mortgages are locked in at the same rate for the life of the loan, while ARM mortgages have a rate that can "float" or "ride" market rates. A foreclosure sale is ____. - ✔✔an auction sale to the highest bidder
A foreclosure sale occurs when the owner cannot sell the property via short sale. If it doesn't sell in a foreclosure auction, it becomes property of the lending institution. A mortgage lien is placed on real estate by ____. - ✔✔a lender in exchange for funds to buy the real estate A mortgage lien secures the lender's interest in the real property and provides recourse in the event of default. A promissory note must contain the following three things: ____. - ✔✔the amount of the loan, the term of the loan, and the interest rate of the loan The amount of the loan, the term of the loan, and the interest rate are all essential to understanding the loan and determining monthly payments, and therefore must be included in the promissory note. A borrower in a title theory state repays his loan in full, and fulfills any other obligations of the loan. The lender now holds ____. - ✔✔no title At the start of a loan under title theory, the lender holds legal title and the borrower holds equitable title. When the loan is paid in full, and all other conditions of the loan are fulfilled, the lender transfers legal title to the borrower through a Deed of Reconveyance. The borrower now holds legal AND equitable title, and the lender holds no title. Under lien theory, the mortgagee receives ____. - ✔✔the right to place a lien on the property Under lien theory, the mortgagor (borrower) receives legal and equitable title to the real property, and the mortgagee (lender) receives the right to place a lien on the property. A VA loan would most likely be used by ____. - ✔✔a veteran or active-duty member of the U.S. military
Which of the following would not be considered a finance charge? - ✔✔seller's points A finance charge is any charge made by the lender of credit that the borrower is directly or indirectly required to pay. The borrower is not responsible to pay the seller's points, but is responsible for items such as finder's fees, appraisal fees, and interest. When real estate agents represent the buyer and not the seller of a piece of property, they are engaging in ____. - ✔✔buyer agency Agency is the term for representation in a real estate transaction. The principal, in this case, the buyer, gives legal authority to an agent to act on the principal's behalf when dealing with a third party. If you are representing both the buyer and the seller of a piece of real estate, it's called ____. - ✔✔dual agency While dual agency is not legal in all states, in some states a real estate agent is allowed to represent both the buyer and seller of a piece of real estate. Dual agency is sometimes referred to as "limited agency." In a ____, the real estate agent represents only the buyer or the seller of a piece of property. - ✔✔single agency relationship In a single agency relationship, a real estate agent is hired by either the buyer or the seller and must keep that party's best interests in mind. ____ is when an individual can be paid for brokering a real estate transaction, yet represent neither the buyer nor the seller. - ✔✔transactional brokerage Transactional brokerage is only legal in some states, and care must be taken to see what the duties and responsibilities are for the agents brokering a deal if they are not representing either side of the deal.
Some states have ____ that require agents to disclose who they are representing to the buyers. - ✔✔agency disclosure laws Agency disclosure laws help clear up confusion over whose interests are being represented in a transaction. These laws are in place to protect buyers from being mislead by agents who are actually representing the sellers. When the agent and the principal agree that the agent will represent the principal, it is called ____. - ✔✔express agency With express agency, both the agent and principal must come to a verbal or written agreement about representation. When the agent and the principal have not officially agreed that the agent will represent the buyer, but their actions imply this, it is called ____. - ✔✔implied agency Legally, if both parties have taken actions toward a sale, then the agent and principal have entered into an implied agency. When a principal doesn't stop an agent from going beyond his or her normal line of duties, this is called ____. - ✔✔agency by estoppel Agency by estoppel is created when agents perform duties outside of what they would normally do, though related to what their initial task was. When an agreement is formed between an agent and a principal after a sale is confirmed, this is called ____. - ✔✔agency by ratification If an agent sells a piece of property without any contract or permission from the principal, the principal may create an agency by ratification by approving the sale anyway When an agent is invested in a project outside his or her agent status, this is called ____. - ✔✔agency coupled with an interest
The financed amount is ____. - ✔✔the entire loan amount, minus prepaid fees and the downpayment, plus extras such as fees being financed The financed amount gives the total amount of the loan, and is used to calculate the monthly payments that a debtor owes to a creditor. Buyers should receive a settlement statement ____. - ✔✔prior to closing Formerly known as a HUD-1 statement, this statement itemizes the various charges, fees, and monies that make up the financed amount. The annual percentage rate is ____. - ✔✔a rate that includes interest expense plus any fees or extras that are included in the loan amount An APR is useful because it takes interest and fees and extras into account, giving a rate representative of the the total amount a debtor will owe. Because of this, it will be higher than the nominal interest rate. On a loan with a variable interest rate, the rate is usually tied to ____. - ✔✔a benchmark rate, such as LIBOR or the interest rate that a Treasury bond pays Variable interest rates are usually tied to LIBOR or the interest rate on a Treasury bond. This means that a debtor's payment can fluctuate over the life of the loan. Depending upon how things go, this could be a blessing or a curse. PITI consists of ____. - ✔✔principal, interest, prorated taxes by month, and insurance by month PITI refers to everything that is contained in a loan's monthly payment, which is principal, interest, prorated taxes by month, and insurance by month. When a person or entity uses the land of another for a specific purpose, it is known as a(n): - ✔✔easement
The most common types of easements are access, utility, and drainage easements. Which of the following is NOT considered realty? - ✔✔lumber "Realty" is defined as land and everything permanently attached to it. Bricks mortared together in a wall are considered permanently attached to the land, whereas free lumber is not as it could easily be moved. Mr. Smith has died. By what rights does his wife lay claim to his property? - ✔✔dower Dower rights grant a wife (or child) interest in her husband's estate. Curtesy laws recognize the rights of a husband in the event of his wife's death. A person has been using another person's land for 30 years without permission. They may have a legal claim to the land by which means of ownership? - ✔✔adverse possession Adverse possession laws are very old laws found in every state. The idea behind this type of possession is that if the true owner is so disinterested in the land they own that they allow someone else to use it for a long period of time (depending on the state, 7-40 years), the person using it has rights based on the fact they were treating the property as their own. A condominium is legally defined as: - ✔✔a community where homeowners have the title to one piece of individual property and the right to use community property shared with others Condominium is a legal term that describes land ownership. In a condominium, a person has a title and exclusive ownership to a piece of property (typically a house or unit), and shared access to other community areas. This may include parks, pool areas, and parking lots, but these areas do not define what a condo is, nor are condominiums required to have these structures. A community where the owner owns a portion of shares of stock is called a cooperative. A stream and large rock are referenced in a property description. Which type of land description would this be considered? - ✔✔metes and bounds
