A home inspection revealed that black mold is present in a home. answer:
What should the buyer's agent tell the buyer? D: seek expert advise
A. That black mold is toxic, and that the buyer should not buy the A buyer's agent typically does not have expertise in environmental hazards. The proper step,
house for the matters in a transaction outside the agent's expertise, is to advise the principal to seek
B. That mold is commonplace, and can be cleaned up with bleach expert advice. In this case, that would be a mold remediation specialist.
C. To require the seller to remedy the problem
D. To seek expert advice
A seller wants to net $60,000 from a transaction, but will have to Answer:
pay off a mortgage and other fees, at a total cost of $181,800. The C: $260,000
seller will also need to pay a 7% commission. What will the
property need to sell for? Start by adding the desired net and the other cost, including the mortgage ($60,000 + $181,800
+ $241,800).
A. $241,800 Subtract the commission percentage from 100% (100% -7%=93%)
B. $258,726 Then divide the total by that percentage ($241,800 / .93 = $260,000)
C. $260,000
D. $276,060 Since the agent bases her commission on the total selling price, you can't simply add 7% of the
costs and profit to the selling price or you wont quite have her full commission. You need a
price that the agent can take 7% from and still satisfy the seller's goals. A fuller explanation is
found in the section on seller's net problems in ch. 18 of Fundamentals.
A buyer asks the buyer's agent to write an offer on terms that don't answer:
match the listing agreement. The buyer's agent refuses to write the B. Buyer's agent is permitted to unilaterally terminate the agency relationship
offer and then, in writing, unilaterally terminates the agency
relationship with the buyer. Which is true? An agent may unilaterally renounce an agency relationship. Termination of the agency may
involve a breach of contract; if so, the agent could be liable to the principal for damages
A. Buyer's agent will be subject to disciplinary action resulting from the breach. However, breach of contract isn't in itself grounds for disciplinary
B. Buyer's agent is permitted to unilaterally terminate the agency action. Failure to present an offer is grounds for disciplinary action; but here, since the agent
relationship didn't write the offer, no offer exists yet. (An agent is free to renounce rather than help the
C. Buyer's agent is allowed to terminate the agency, but must write principal do something pointless or unwise.)
the offer before terminating
D. Buyer's agent is not permitted to write such an offer
Closing is set for August 1. The seller has already paid the answer
property taxes for the year, totaling $6,000. How much of that B: $2,500
amount is the buyer's responsibility?
Since the buyer is taking title on August 1, she's responsible for the property taxes for the
A. $2,000 remaining five months of the year (August, September, October, November, and December).
B. $2,500 Divide the annual taxes by 12 to find the monthly amount: $6, - $500. Multiply that
C. $3,000 figure by 5 to determine the buyer's share of taxes: 5 x $500 = $2500 (Generally the state will
D. $3,500 tell you when to treat all months as equal, but here even set of dollar amounts in the answers
lets you know that)
The IRS issues rules that determine when a real estate agent is an answer
employee and when he is an independent contractor. Which of the B. The brokerage may require an independent contractor to have a cell phone
following statements on that topic is FALSE?
This question is a bit dated but you may encounter something similar on the license exam. That
A: The brokerage may allow an independent contractor to place said, one of the key differences between employees and independent contractors is the level of
her own ads but the ads must conform with the firm's advertising supervision; an independent contractor uses his judgment how to perform a task, while an
rules employee receives specific instructions on how to accomplish each task.
B. The brokerage may require an independent contractor to have a
cell phone An instruction to carry a particular equipment doesn't particularly suggest an independent
C. The brokerage will take taxes from an employee's paycheck contractor
D. The brokerage will tell an employee when to work certain relationship, making B the only possible answer. But certainly all agents carry cell phones now
hours whether instructed to do so or not.
A tenant has already paid his $1,200 rent for the month for a Correct Answer: B
single-family property. The property's owner sells it to a new 36% of students missed this question
buyer, with closing occurring on the 15th of June. The parties
decide the seller is entitled to rent for the closing date. On the The rent has already been paid to the seller, so the seller will need to give some of that rent to
settlement statement, the prorated rent will appear as a: the buyer. The buyer's prorated share will be a debit for the seller and a credit for the buyer on
the settlement statement. The seller's share is for the 1st through the 15th (15 days), and the
buyer's share is for the 16th through the 30th (also 15 days), so the $1,200 can be divided in
A. $600 debit for the buyer and a $600 credit for the seller half. The settlement statement will show a $600 debit for the seller and a $600 credit for the
B. $600 debit for the seller and a $600 credit for the buyer buyer.
C. $1,200 credit for the buyer
D. $1,200 credit for the seller
Mineral rights associated with real property are always: Correct Answer: B
27% of students missed this question
A. conveyed along with the surface rights to the property
B. separable and divisible Mineral rights may be sold separately from the land. However, they are appurtenant to the land
C. sold separately from the property and will be
D. an interest in personal property conveyed with the land unless there is an agreement otherwise.
John, Kevin, and Lyle own a property as tenants in common, but Correct Answer: D
only Kevin and Lyle live on the property. John would like to sell
the property for redevelopment, but Kevin and Lyle refuse. What When co-owners can't agree on whether to sell or how to divide their property, one or more of
is John's best option? them may file a
partition action to terminate the co-ownership. If there isn't a feasible way to physically divide
A. Charge Kevin and Lyle rent the property, the
B. Create a trust to manage the property court will order that the property be sold and the sale proceeds be divided between the former
C. Evict Kevin and Lyle co-owners.
D. Obtain a court order to sell the property
,W, age 17, enters into an installment contract to purchase a five- Answer: B
year-old car from S, an adult. From a legal point of view, the
contract is: The contract is voidable by the minor, but not by the other party.
A. void
B. voidable by W only
C. voidable by S only
D. voidable by either S or W
An investor wants to invest $250,000 in the development of a strip Answer: D
mall by taking out a loan secured by a residential property that he 22% of students missed this question
owns. Will the Truth in Lending Act apply to this transaction?
The Truth in Lending Act covers consumer loans--loans used for personal, family, or
A. Yes, because the loan is for less than $500,000 household purposes. Since
B. Yes, because the loan is secured by residential property this borrower is going to use the proceeds for a commercial purpose (developing a business
C. No, because the loan is for more than $50,000 property), TILA does not apply, even if the loan is secured by owner-occupied residential
D. No, because this is a commercial transaction property. (By contrast, if the proceeds of a loan against real property are used to send a child to
college, for example, then TILA would apply.)
While preparing a competitive market analysis, an agent finds four Correct Answer: D
comparables to choose from. Comparable 1 sold for $180,000 13
months ago under normal conditions. Comparable 2 sold for
$190,000 14 months ago under normal conditions. Comparable 3 Ideally, comparable sales should have occurred within the past six months. A sale older than
sold for $175,000 10 months ago as a foreclosure. Comparable 4 six months can be used if there's no choice and adjustments for inflation are made.
sold for $180,000 16 months ago as a foreclosure. The agent Comparables generally must have sold under normal conditions, which rules out answers A, B,
should use: C, since those all include at least one foreclosure.
A. the oldest two This leaves D as the best answer. The agent should try to cast a wider net for comparables,
B. the newest two even if that means using houses that need more adjustments for features or are located farther
C. all four away.
D. none of them, because they are all older than nine months
An investor rents a property to a tenant. For tax purposes, Correct Answer: C
depreciation on this property is based 56% of students missed this question
on:
Depreciation is deducted from how much the owner has spent on the property: initial basis plus
A. market value, plus capital improvements, minus land value capital expenditures. The value of the land must also be subtracted from what is depreciable;
B. market value, plus rental income, minus land value land does not wear out, so depreciation doesn't apply.
C. price, plus capital improvements, minus land value
D. price, plus rental income, minus land value
Property management for residential property is different from Correct answer: B
property management for commercial property, in that a manager
would be more concerned about: A commercial tenant may need to expand into remodeled adjacent units, if its operations grow,
so a property manager will want to consider that possibility when helping a commercial tenant
A. a written lease for a residential tenant than for a commercial find the right space. However, this is not usually a concern for residential tenants. By contrast,
tenant a written lease, a security deposit, and a check of credit scores are all common in both
B. future space needs of a commercial tenant than of a residential commercial and residential leases.
tenant
C. the credit rating of a commercial tenant than of a residential
tenant
D. the security deposit of a commercial tenant than of a residential
tenant
When part of the land is removed, but the boundaries of a property Correct Answer: C
generally stay the same, it is 29% of students missed this question
known as:
Avulsion refers to a sudden change in a property due to natural forces. For example, avulsion
A. accretion occurs when a meandering river suddenly changes course. Land that used to be contiguous but
B. adverse possession is now on the wrong side of the river still belongs to the original owner. The original
C. avulsion boundaries typically remain the same, but now they extend across the water.
D. partition
An apartment building is right where a new city park is going to Correct Answer: C
be built. The city condemns it. Can the city terminate the leases of 22% of students missed this question
the building's tenants?
According to the Uniform Relocation Act, tenants whose leases terminate because of the
A. No, because this is a violation of the federal Fair Housing Act condemnation of their residence are entitled to at least 90 days' notice and assistance with
B. No; if the government forces a landlord to breach a contract relocation, including payment of moving expenses. (A residential tenant is not likely to have a
with a tenant, it is violating the Landlord-Tenant Act compensable interest in the property. The tenant does not have an ownership interest, and from
C. Yes, if notice is provided to the tenants and they receive an appraisal perspective a residential leasehold interest is unlikely to have any financial value.)
relocation assistance
D. Yes, if the tenants receive just compensation from the city
An offer is dated June 4. The offer is accepted on June 7. The Correct Answer: B
buyers are approved for a loan and satisfy the financing
contingency on June 9. The transaction closes on June 28. The The date on which acceptance occurs is considered to be the date of the contract. In this case,
date of the contract that would be
is: June 7.
A. June 4
B. June 7
C. June 9
D. June 28
, A couple with children would like to buy a house that was built in Correct Answer: B
1950. The home was recently remodeled, with completely new
paint and plumbing. In this situation, what does the agent always A seller of a house built before 1978 must always give buyers a copy of a pamphlet on lead-
have to do? 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.
A. Ensure that the paint used during the remodel is lead-free The agent must make sure that the seller takes these steps.
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
A buyers' purchase and sale agreement contained a financing Correct Answer: C
contingency. The buyers applied for a loan with a local lender,
who verbally informed them that their loan application was Under the Fair Credit Reporting Act, when a lender takes an adverse action on the basis of a
denied. The buyers' agent should: 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
A. ask the sellers to provide a purchase money loan instead information, so that the consumer can verify and, if necessary, contest that information.
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
A former mansion has been divided into three apartments. The Correct Answer: B
best approach to finding the property's value is: 31% of students missed this question
A. cost The income approach is appropriate for properties that are oriented toward generating income
B. income for the property's owner. That would be true even if the property originally was intended as a
C. reconciliation single-family residence.
D. sales comparison
A residential property manager should inform prospective tenants Correct Answer: B
about:
A property manager should inform tenants about the property's amenities; however, he
A. a neighbor who is an alcoholic shouldn't misrepresent the amenities (for instance, if a pool were about to be removed, he
B. the planned removal of a swimming pool would want to let a prospective tenant know that before the tenant signs the lease).
C. the property's appraised value Antidiscrimination laws would prohibit a manager from letting a prospective tenant know
D. the racial composition of the tenants about an alcoholic resident (which would be discrimination on the basis of disability) or the
race of the other tenants, and while he could legally tell the prospective tenant about the
property's appraised value, that's likely to be of little interest to a tenant.
A rural lot runs 500 feet east/west along its northern boundary, and Correct Answer: B
600 feet east/west along its southern boundary. Its eastern 37% of students missed this question
boundary runs 200 feet due north/south, while its western
boundary runs 224 feet in a diagonal northeast/southwest It's best to diagram this type of problem to solve it. Once you draw it, you would then break it
direction. The cost of the land is $6 per square foot. down into a
What is the cost of this lot? triangle at left and a rectangle at right. The rectangle at right is 500 feet in length and 200 feet
in height (500
A. $600,000 feet × 200 feet = 100,000 square feet). The triangle on the left side is 200 feet in height and
B. $660,000 100 feet at its base
C. $672,000 (200 feet x 100 feet × 1/2 = 10,000 square feet).
D. $720,000
You can ignore the 224 foot diagonal side, which does not factor into your calculations
(remember, the formula for a triangle's area is 1/2 × Base × Height; the hypotenuse or diagonal
is not part of the equation.)
Add the two components together (100,000 square feet + 10,000 square feet = 110,000 square
feet) and then multiply by the cost per square foot (110,000 square feet × $6 per square foot =
$660,000) to find its price.
22. What information does an appraiser need in order to calculate Correct Answer: D
a capitalization rate? 52% of students missed this question
A. Price and gross income In order to calculate a property's value, an appraiser using the income approach would need to
B. Price and net income know the property's net income and capitalization rate. So, conversely, if the appraiser wanted
C. Value and gross income to find the capitalization rate, he would need to know the property's value and net income.
D. Value and net income
To avoid tenant problems, a landlord is best off using a Correct Answer: D
standardized lease form that includes: 30% of students missed this question
A. a copy of the Uniform Landlord Tenant Act Including the rules that govern the tenancy in the lease itself helps prevent disputes between
B. a warranty of quiet enjoyment landlord and tenant.
C. a tenancy at will provision
D. specific rules and regulations
Rudiger purchases a home for $200,000, and receives an 80% loan Correct Answer: A
from his bank. He has to pay three discount points to receive the 27% of students missed this question
loan. He is also responsible for a 1% origination fee and a $300
appraisal. The seller paid a 6% commission to the listing To calculate the discount points, first find the loan amount ($200,000 x .8 = $160,000). Then
brokerage. What is the amount of the discount points that he paid? multiply that by the percentage of the loan represented by the discount points ($160,000 x .03
= $4,800). Since the question only specified discount points, you would not include the
A. $4,800 origination fee in your calculations (and you certainly wouldn't need to know the cost of the
B. $6,000 appraisal or the commission).
C. $6,400
D. $7,500
What should the buyer's agent tell the buyer? D: seek expert advise
A. That black mold is toxic, and that the buyer should not buy the A buyer's agent typically does not have expertise in environmental hazards. The proper step,
house for the matters in a transaction outside the agent's expertise, is to advise the principal to seek
B. That mold is commonplace, and can be cleaned up with bleach expert advice. In this case, that would be a mold remediation specialist.
C. To require the seller to remedy the problem
D. To seek expert advice
A seller wants to net $60,000 from a transaction, but will have to Answer:
pay off a mortgage and other fees, at a total cost of $181,800. The C: $260,000
seller will also need to pay a 7% commission. What will the
property need to sell for? Start by adding the desired net and the other cost, including the mortgage ($60,000 + $181,800
+ $241,800).
A. $241,800 Subtract the commission percentage from 100% (100% -7%=93%)
B. $258,726 Then divide the total by that percentage ($241,800 / .93 = $260,000)
C. $260,000
D. $276,060 Since the agent bases her commission on the total selling price, you can't simply add 7% of the
costs and profit to the selling price or you wont quite have her full commission. You need a
price that the agent can take 7% from and still satisfy the seller's goals. A fuller explanation is
found in the section on seller's net problems in ch. 18 of Fundamentals.
A buyer asks the buyer's agent to write an offer on terms that don't answer:
match the listing agreement. The buyer's agent refuses to write the B. Buyer's agent is permitted to unilaterally terminate the agency relationship
offer and then, in writing, unilaterally terminates the agency
relationship with the buyer. Which is true? An agent may unilaterally renounce an agency relationship. Termination of the agency may
involve a breach of contract; if so, the agent could be liable to the principal for damages
A. Buyer's agent will be subject to disciplinary action resulting from the breach. However, breach of contract isn't in itself grounds for disciplinary
B. Buyer's agent is permitted to unilaterally terminate the agency action. Failure to present an offer is grounds for disciplinary action; but here, since the agent
relationship didn't write the offer, no offer exists yet. (An agent is free to renounce rather than help the
C. Buyer's agent is allowed to terminate the agency, but must write principal do something pointless or unwise.)
the offer before terminating
D. Buyer's agent is not permitted to write such an offer
Closing is set for August 1. The seller has already paid the answer
property taxes for the year, totaling $6,000. How much of that B: $2,500
amount is the buyer's responsibility?
Since the buyer is taking title on August 1, she's responsible for the property taxes for the
A. $2,000 remaining five months of the year (August, September, October, November, and December).
B. $2,500 Divide the annual taxes by 12 to find the monthly amount: $6, - $500. Multiply that
C. $3,000 figure by 5 to determine the buyer's share of taxes: 5 x $500 = $2500 (Generally the state will
D. $3,500 tell you when to treat all months as equal, but here even set of dollar amounts in the answers
lets you know that)
The IRS issues rules that determine when a real estate agent is an answer
employee and when he is an independent contractor. Which of the B. The brokerage may require an independent contractor to have a cell phone
following statements on that topic is FALSE?
This question is a bit dated but you may encounter something similar on the license exam. That
A: The brokerage may allow an independent contractor to place said, one of the key differences between employees and independent contractors is the level of
her own ads but the ads must conform with the firm's advertising supervision; an independent contractor uses his judgment how to perform a task, while an
rules employee receives specific instructions on how to accomplish each task.
B. The brokerage may require an independent contractor to have a
cell phone An instruction to carry a particular equipment doesn't particularly suggest an independent
C. The brokerage will take taxes from an employee's paycheck contractor
D. The brokerage will tell an employee when to work certain relationship, making B the only possible answer. But certainly all agents carry cell phones now
hours whether instructed to do so or not.
A tenant has already paid his $1,200 rent for the month for a Correct Answer: B
single-family property. The property's owner sells it to a new 36% of students missed this question
buyer, with closing occurring on the 15th of June. The parties
decide the seller is entitled to rent for the closing date. On the The rent has already been paid to the seller, so the seller will need to give some of that rent to
settlement statement, the prorated rent will appear as a: the buyer. The buyer's prorated share will be a debit for the seller and a credit for the buyer on
the settlement statement. The seller's share is for the 1st through the 15th (15 days), and the
buyer's share is for the 16th through the 30th (also 15 days), so the $1,200 can be divided in
A. $600 debit for the buyer and a $600 credit for the seller half. The settlement statement will show a $600 debit for the seller and a $600 credit for the
B. $600 debit for the seller and a $600 credit for the buyer buyer.
C. $1,200 credit for the buyer
D. $1,200 credit for the seller
Mineral rights associated with real property are always: Correct Answer: B
27% of students missed this question
A. conveyed along with the surface rights to the property
B. separable and divisible Mineral rights may be sold separately from the land. However, they are appurtenant to the land
C. sold separately from the property and will be
D. an interest in personal property conveyed with the land unless there is an agreement otherwise.
John, Kevin, and Lyle own a property as tenants in common, but Correct Answer: D
only Kevin and Lyle live on the property. John would like to sell
the property for redevelopment, but Kevin and Lyle refuse. What When co-owners can't agree on whether to sell or how to divide their property, one or more of
is John's best option? them may file a
partition action to terminate the co-ownership. If there isn't a feasible way to physically divide
A. Charge Kevin and Lyle rent the property, the
B. Create a trust to manage the property court will order that the property be sold and the sale proceeds be divided between the former
C. Evict Kevin and Lyle co-owners.
D. Obtain a court order to sell the property
,W, age 17, enters into an installment contract to purchase a five- Answer: B
year-old car from S, an adult. From a legal point of view, the
contract is: The contract is voidable by the minor, but not by the other party.
A. void
B. voidable by W only
C. voidable by S only
D. voidable by either S or W
An investor wants to invest $250,000 in the development of a strip Answer: D
mall by taking out a loan secured by a residential property that he 22% of students missed this question
owns. Will the Truth in Lending Act apply to this transaction?
The Truth in Lending Act covers consumer loans--loans used for personal, family, or
A. Yes, because the loan is for less than $500,000 household purposes. Since
B. Yes, because the loan is secured by residential property this borrower is going to use the proceeds for a commercial purpose (developing a business
C. No, because the loan is for more than $50,000 property), TILA does not apply, even if the loan is secured by owner-occupied residential
D. No, because this is a commercial transaction property. (By contrast, if the proceeds of a loan against real property are used to send a child to
college, for example, then TILA would apply.)
While preparing a competitive market analysis, an agent finds four Correct Answer: D
comparables to choose from. Comparable 1 sold for $180,000 13
months ago under normal conditions. Comparable 2 sold for
$190,000 14 months ago under normal conditions. Comparable 3 Ideally, comparable sales should have occurred within the past six months. A sale older than
sold for $175,000 10 months ago as a foreclosure. Comparable 4 six months can be used if there's no choice and adjustments for inflation are made.
sold for $180,000 16 months ago as a foreclosure. The agent Comparables generally must have sold under normal conditions, which rules out answers A, B,
should use: C, since those all include at least one foreclosure.
A. the oldest two This leaves D as the best answer. The agent should try to cast a wider net for comparables,
B. the newest two even if that means using houses that need more adjustments for features or are located farther
C. all four away.
D. none of them, because they are all older than nine months
An investor rents a property to a tenant. For tax purposes, Correct Answer: C
depreciation on this property is based 56% of students missed this question
on:
Depreciation is deducted from how much the owner has spent on the property: initial basis plus
A. market value, plus capital improvements, minus land value capital expenditures. The value of the land must also be subtracted from what is depreciable;
B. market value, plus rental income, minus land value land does not wear out, so depreciation doesn't apply.
C. price, plus capital improvements, minus land value
D. price, plus rental income, minus land value
Property management for residential property is different from Correct answer: B
property management for commercial property, in that a manager
would be more concerned about: A commercial tenant may need to expand into remodeled adjacent units, if its operations grow,
so a property manager will want to consider that possibility when helping a commercial tenant
A. a written lease for a residential tenant than for a commercial find the right space. However, this is not usually a concern for residential tenants. By contrast,
tenant a written lease, a security deposit, and a check of credit scores are all common in both
B. future space needs of a commercial tenant than of a residential commercial and residential leases.
tenant
C. the credit rating of a commercial tenant than of a residential
tenant
D. the security deposit of a commercial tenant than of a residential
tenant
When part of the land is removed, but the boundaries of a property Correct Answer: C
generally stay the same, it is 29% of students missed this question
known as:
Avulsion refers to a sudden change in a property due to natural forces. For example, avulsion
A. accretion occurs when a meandering river suddenly changes course. Land that used to be contiguous but
B. adverse possession is now on the wrong side of the river still belongs to the original owner. The original
C. avulsion boundaries typically remain the same, but now they extend across the water.
D. partition
An apartment building is right where a new city park is going to Correct Answer: C
be built. The city condemns it. Can the city terminate the leases of 22% of students missed this question
the building's tenants?
According to the Uniform Relocation Act, tenants whose leases terminate because of the
A. No, because this is a violation of the federal Fair Housing Act condemnation of their residence are entitled to at least 90 days' notice and assistance with
B. No; if the government forces a landlord to breach a contract relocation, including payment of moving expenses. (A residential tenant is not likely to have a
with a tenant, it is violating the Landlord-Tenant Act compensable interest in the property. The tenant does not have an ownership interest, and from
C. Yes, if notice is provided to the tenants and they receive an appraisal perspective a residential leasehold interest is unlikely to have any financial value.)
relocation assistance
D. Yes, if the tenants receive just compensation from the city
An offer is dated June 4. The offer is accepted on June 7. The Correct Answer: B
buyers are approved for a loan and satisfy the financing
contingency on June 9. The transaction closes on June 28. The The date on which acceptance occurs is considered to be the date of the contract. In this case,
date of the contract that would be
is: June 7.
A. June 4
B. June 7
C. June 9
D. June 28
, A couple with children would like to buy a house that was built in Correct Answer: B
1950. The home was recently remodeled, with completely new
paint and plumbing. In this situation, what does the agent always A seller of a house built before 1978 must always give buyers a copy of a pamphlet on lead-
have to do? 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.
A. Ensure that the paint used during the remodel is lead-free The agent must make sure that the seller takes these steps.
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
A buyers' purchase and sale agreement contained a financing Correct Answer: C
contingency. The buyers applied for a loan with a local lender,
who verbally informed them that their loan application was Under the Fair Credit Reporting Act, when a lender takes an adverse action on the basis of a
denied. The buyers' agent should: 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
A. ask the sellers to provide a purchase money loan instead information, so that the consumer can verify and, if necessary, contest that information.
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
A former mansion has been divided into three apartments. The Correct Answer: B
best approach to finding the property's value is: 31% of students missed this question
A. cost The income approach is appropriate for properties that are oriented toward generating income
B. income for the property's owner. That would be true even if the property originally was intended as a
C. reconciliation single-family residence.
D. sales comparison
A residential property manager should inform prospective tenants Correct Answer: B
about:
A property manager should inform tenants about the property's amenities; however, he
A. a neighbor who is an alcoholic shouldn't misrepresent the amenities (for instance, if a pool were about to be removed, he
B. the planned removal of a swimming pool would want to let a prospective tenant know that before the tenant signs the lease).
C. the property's appraised value Antidiscrimination laws would prohibit a manager from letting a prospective tenant know
D. the racial composition of the tenants about an alcoholic resident (which would be discrimination on the basis of disability) or the
race of the other tenants, and while he could legally tell the prospective tenant about the
property's appraised value, that's likely to be of little interest to a tenant.
A rural lot runs 500 feet east/west along its northern boundary, and Correct Answer: B
600 feet east/west along its southern boundary. Its eastern 37% of students missed this question
boundary runs 200 feet due north/south, while its western
boundary runs 224 feet in a diagonal northeast/southwest It's best to diagram this type of problem to solve it. Once you draw it, you would then break it
direction. The cost of the land is $6 per square foot. down into a
What is the cost of this lot? triangle at left and a rectangle at right. The rectangle at right is 500 feet in length and 200 feet
in height (500
A. $600,000 feet × 200 feet = 100,000 square feet). The triangle on the left side is 200 feet in height and
B. $660,000 100 feet at its base
C. $672,000 (200 feet x 100 feet × 1/2 = 10,000 square feet).
D. $720,000
You can ignore the 224 foot diagonal side, which does not factor into your calculations
(remember, the formula for a triangle's area is 1/2 × Base × Height; the hypotenuse or diagonal
is not part of the equation.)
Add the two components together (100,000 square feet + 10,000 square feet = 110,000 square
feet) and then multiply by the cost per square foot (110,000 square feet × $6 per square foot =
$660,000) to find its price.
22. What information does an appraiser need in order to calculate Correct Answer: D
a capitalization rate? 52% of students missed this question
A. Price and gross income In order to calculate a property's value, an appraiser using the income approach would need to
B. Price and net income know the property's net income and capitalization rate. So, conversely, if the appraiser wanted
C. Value and gross income to find the capitalization rate, he would need to know the property's value and net income.
D. Value and net income
To avoid tenant problems, a landlord is best off using a Correct Answer: D
standardized lease form that includes: 30% of students missed this question
A. a copy of the Uniform Landlord Tenant Act Including the rules that govern the tenancy in the lease itself helps prevent disputes between
B. a warranty of quiet enjoyment landlord and tenant.
C. a tenancy at will provision
D. specific rules and regulations
Rudiger purchases a home for $200,000, and receives an 80% loan Correct Answer: A
from his bank. He has to pay three discount points to receive the 27% of students missed this question
loan. He is also responsible for a 1% origination fee and a $300
appraisal. The seller paid a 6% commission to the listing To calculate the discount points, first find the loan amount ($200,000 x .8 = $160,000). Then
brokerage. What is the amount of the discount points that he paid? multiply that by the percentage of the loan represented by the discount points ($160,000 x .03
= $4,800). Since the question only specified discount points, you would not include the
A. $4,800 origination fee in your calculations (and you certainly wouldn't need to know the cost of the
B. $6,000 appraisal or the commission).
C. $6,400
D. $7,500
