WA State Broker's License Mock Exam #2 Flashcards
(132 cards)
1
Q
- Which of the following loans would be subject to the Truth in Lending Act?
A
A loan to a first-time home buyer
Explanation: The Truth in Lending Act applies to the consumer loans. It doesn’t cover loans for business, commercial, or agricultuarl purposes, or loans to corporation or other ogranizations
2
Q
- Art sold his house, which was not encumbered with a mortgage. Closing expenses were $5,264, and he paid a comission of 7% of the selling price. He received a check at closing for $372,316. What did the house sell for?
A
$406,000
Explanation: The house sold for $372,316 plus whatever was subtracted from the sales proceeds at closing (that is, the seller’s selling expenses). Thus, to get the sales proce (so we can determine the commission), you first add the selling costs to the sale proceeds. $5,264 + $372,316 = $377,580. Then use the seller’s net formula. That is, divide the sales price by the commission rate subtracted from 100 (100% - 7% = 93%). $377,580 / .93 = $406,000.
3
Q
- Frank gives Stella an option to buy his house. Stella, as the optionee, is obligated to:
A
pay consideration for the option right
Explanation: Some consideration must pass from optionee to optionor. A mere statement of consideration is not adequate. Recording the option is advisable, but not required.
4
Q
- A corn field with a depth of 900 feet and a frontage of 484 feet is bisected by an access road, leaving two triangular lots. If the land sells for $2,000 per acre, how much is each lot worth ?
A
$10,000
Explanation: Each lot is worth $10,000. One way to solve this problem is to find the area of one of the triangular lots. Use the triangle area formula, Area = 1/2 Base x Height (900 feet x 484 feet x .5 = 217,800 square feet). Convert this to acreage (217,800 square feet / 43,560 sqaure feet per acre = 5 arcres), and then multiply by the cost per acre (5 acres x $2,000 = $10,000). Alternatively, you can use the rectangle area formula (Area = Length x Width) to find the are of the entire corn field (900 feet x 484 feet = 435,600 square feet), divide to convert the square footage to acreage (435,600 sqaure feet / 43,560 square feet per acre = 10 acres), multiply by the cost (10 acres x $2,000 = $20,000), and divide by 2 to find the cost of one of the lots ($20,000 / 2 = $10,000).
5
Q
- Which is a list of duties owed to a principal by an agent?
A
Loyalty, confidentiality, reasonable care, accounting
Explanation: Duties that an agent owes to all parties (including the principal) are reasonable skill and care, honesty and good faith, presenting written communications, disclosre of materials facts, accounting, proviidng an agency law pamphlet, and making an agency disclosure. In addiiton, an agent owes the principal the duties of loyalty, disclosure of conflicts of interest, confidentiality, advising the princial to obtain expert advice, and good faith and continous effort. Compensation, indemnification, and performance are not duties an agent owes the principal.
6
Q
- Ajax Realty lists a propery for a seller at a commission rate of 8%. The multiple listing service provides that a listing brokerage will split commissions at a 50-50 rate. Baron Realty, a cooperating brokerage, finds a buyer for the property, at a price of $300,000. How much will the seller owe Ajax Realty at closing?
A
$24,000
Explanation: Under the terms of the listing agreemnt, the seller will pay the listing firm (Ajax) 8 % of the sales price ($300,000 x .08 = $24,000). The seller is not a party to the MLS commission split agreement. It’s up to Ajax to share half of the money with Baron Realty in fulfillment of the commission split agreement; the seller owes Ajax the full commission amount, not half.
7
Q
- A buyer enters into a buyer agency agreement with a real estate licensee to negotiate the purchase of a particular FSBO property. The buyer then enters into a purchase and sale agreement, but the property he agreed to buy is a subsequently condemned. Which of the following is true?
A
The agency is terminated
Explanation: An agency agreement for the purchase or sale of a particular property terminates if the subject matter of the agency (the property) is extinguished; condemnation of the property is one form extinciton of the subject matter can take. The buyer and agent can look for another property, but they would need to form another agency relationship first. Practically speaking, that’s not very difficult (especially in states where an agency relationship can be formed simply by beginning to provide brokerage services to a buyer).
8
Q
- A right held by one or more persons to use the possess property to the exclusion of other is a/an:
A
fee simple estate
Explanation: An easement allows the use of property, but is not a possessory right. An estate, in contrast, is an interst in land that is or may become posessory. (A fee simple estate is the most common type of estate.)
9
Q
- A new subdivision requries payment of homeowners association dues. If unpaid, what type of lien do they create?
A
Specific lien that encumbers the property
Explanation: Unpaid homeowners association dues create specific lien, meaning that the lien attaches only to a particular piece of property. A lien is an encumbrance, so it is not terminated by the sale of the property and would affect the next buyer’s title.
10
Q
A homewoner in a recently built subdividiosn plans to build an extra bedroom extending from the back of his house. Nobody in the subdivision has added on to their houses in a similar manner yet. What would the homeowner need to obtain before he could begin work on this project?
A
Building permit
Explanation: A property owner must obtain a buildling permit from the city or county before making signnificant alterations to an existing building.
11
Q
Barker is declared incompetent by a court, and his daughter Marge is appointed to handle his affairs. After several years, Marge asks her sister Beth to take over her duties. Beth then lists Barker’s property for sale. Woulud a sale for Barker’s property be valid under these circumstances?
A
No, Beth hasn’t been designated by a court to handle Barker’s affairs.
Explanation: An incompetenet person’s property may be sold, but the deed must be signed by a court-appointed guardian. The court would have to appoint Beth as Barker’s guardian instead of Marge, the sisters can’t simply make this change themselves.
12
Q
- Peter plans to sell a number of different properties. He enters into an agreement with Agent Carla, in which she agrees to act as Peter’s special agent. Under this agreement, How many properties can Carla list for Peter?
A
A special agent may perform watever legal acts have been authoriazed by the principal, so Carla can list many properties as are stated in teh agreement
Explanation: A special agent may perform whatever legal acts the principal has authorized the agent to perform. There is not limit on the number of listed properities that one agency agreement can cover. Since Carla’s authority is limited in time and scope, she is still considered a special agent.
13
Q
- A buyer and a seller enter into a purchase and sale agreement. The agreement provides that closing must take place by September 30. A clause states that a party’s failure to be ready by a date specified in the contract will constitute a breach of the contract. What is the anme of this cluase?
A
A time is of the essence clause
Explanation: A contract clause that makes failure to meet a stated deadline a material breach of the contract is called a “time is of the essence” clause. A time is of the essence clause does not have to be a stand-alone privision; it may be part of another person.
14
Q
- Interest on a loan for a home purchase is which type of interest
A
Simple
Explanation: The interest paid on real estate loans is simple interest.
15
Q
- Which of the following is a primary market lender?
A
Mortgage banking company
Explanation: A mortgage banker is a primary market lender, meaning that it originates loans directly to property buyers. Under the traditional distinction between a mortgage banker and a motgage broker, a motgage broker negotiates loans, bringing borrowers and lenders together for a fee, but (unlike a mortgage banker) is not a lender.
16
Q
- A buyer who is concerned with whether a property’s soil is suitable for construction of a septic system would, as part of the inspection process, order a/an:
A
percolation test
Explanation: A percoloation test, which measures the soil’s capacity to absorb water, is usually to determine whether a property is suitable for a septic system that will meet applicable health standards.
17
Q
- Adjusted basis is:
A
initial basis, plus capital expenditures, less depreciation
Explanation: Adjusted basis in the intital basis, plus capial expenditures, less depreciation.
18
Q
- Which of teh folowing rental transactions would be covered by (not exempt from) the Fair Housing Act even if no real estate agent were invovled?
A
Rental of a unit in a triplex, using no descriminatory advertising
Explanation: A residential rental transaction can be exempt from the Fair Housing Act if the property is a single-family home and the owner has no more than three such homes, or if the proprety has not more than four units and the owner is residing on the property. Option C does not indicate that the onwer is occupying one of the units in the triplex, so the Fair Housing Act would apply to the transaction.
19
Q
- What is the most important consideration for a property manager who is deciding on appropriate rental rates?
A
The rental rates for similar properties in the same market.
Explanation: In a market analysis, the manager examines competing rental properties to help him to set appropriate rental rates.
20
Q
- A living room needs to be a re-carpeted. It measures 18 long by 15 feet wide. How many square yards of carpet will need to be purchased?
A
30
Explanation: First, multiply the length and width to find the square footage (18 ft x 15 ft = 270 sq. ft). Then, because there are 9 square feet in a square yard, divide by 9 to convert to square yards (270 / 9 = 30 square yards).
21
Q
- A deed that is not signed by the seller is still considered valid as long as it:
A
is signed by an authorized attorney in fact
Explanation: The document used to assign legal rights to another person–for exampe, authorizing someone else to sign a contrct and/or deed on one’s behalf – is a power of attorney. The person who is appointed to act is known as an attorney in fact.
22
Q
- A write of attachment, an easement in gross, and a special assessment all have what in common?
A
They’re encumbrances
Explanation:
Writs of attachment and special assessments are financial encumbrances (liens), while an easement is a nonfinacial excumbrance (one that affects the use of the property,) but all three are encumbrances.
23
Q
- A potential buyer gives a seller an offer that doesn’t meet the seller’s demands in the listing. What has the buyer given?
A
Offer to purchase
Explanation:
An offer simply must epress a willingness to contract, and be certain in its terms. It does not need to match the seller’s listing. (Note that the listing is not an offer, it’s an ad; it can’t simply be accepted to form a binding contract. So the buyer’s offer is the first offer in the typical transaction, not a counteroffer.)
24
Q
- Ed knows that his basement leaks, but doesn’t disclose this to Sally, the buyer. Ed has also instructed his agent to keep the informaiton confidential. After the sale closes, Sally finds out that the basement leaks, and she sues for fraud and misrepresentation. Sally can sue:
A
both the listing agent and the seller
Explanation:
In this example, both the seller and the listing agent acted to conceal a latent defect from a buyer, and they both may be liable to the buyer for damages.
25
25. An exclusive lisiting agreement is an example of a/an:
express contract
Explanation: A listing agreement is an express contract (an express contract is one that is stated in words--written or spoken--rather than impled by actions, and a listing agreement is stated in words: it's a written agreement). Unlike an open listing, an exclusive listing agreement is bilateral contract, not unilateral.
26
26. Which of the following clauses relates to a a mortgage loan default and requires immediate payment of the debt?
Acceleration clause
Explanation: An accelartion clause allows the lender to accelerate the loan (demanding immediate payment of the entire amount owed) if the borrower fails to pay as agreed or defaults on any other aspect of the loan agreement.
27
27. B purchases a small commercial property, and he finances it with a 65% loan. The lender charges 9.25% annual interest and three discount points. The discount points:
increase the lender's upfront yield
Explanation: Discount points are percentage of the principal amount of a loan, collected by the lender at the time of the loan is orginated, to give the lender an immediate yield over and above the interest. While the discount points decrease the nominal (promissory note) interest rate, they don't decrease the annual percentage rate; the APR takes the discount points into consideration.
28
28. Which of the following statements regarding the Real Estate Settlement Procedures Act (RESPA) is true?
The borrower is entitled to a loan estimate showing settlement costs within three days of submitting an application.
Explanation: Under RESPA, a lender is required to give a prospective borrower a good faith estimate of the settlement costs (closing costs) within three days after a written loan application is submitted, unless the application is turned down within that period. (Under the TRID rule, the good faith estimate must be presented on a loan estimate form.) Neither commercial transactions nor seller-financial transactoins are covered by RESPA, and RESPA does not limit the interest rate l lenders can charge.
29
29. A developer lists 20 different properties in a subdivision, with four different licensees. Each licensee gets her own model unit to work from. Which of the following is true?
Each model must display the Fair Housing logo
Explanation: HUD regulations require the display of a Fair Housing poster with the Equal Housing Opportunity logo in any place of business where the business where the business involves the selling or renting of dwellings.
30
30. A property manager manages two large apartment buildings. They're older buy well-maintained properties with a 96% occupancy rate. Based on analysis of market rates, the property manager should:
raise rents, if competitieve market analysis confims this
Explanation: Certainly the manager should raise (or lower) the rents if a competitive market analysis confirms the move. Only anser C is definitely ture in all cases--the CMA determines that level to set rents. (While answer A has some appeal, it's not the best asnwer: there might be reasons not to lower rents even to achieve higher occupancy. For example, perhaps a major employer is expanding soon and it would be a mistake to lock these units in a cheap prices.)
31
31. Moe has appurtenant easement over Ray's land. Ray's land is called a/an:
servient estate
Explanation: Moe is the dominant tenant and Moe's land is the dominant tenant (estate), benefited by the easement. Ray is the servient tenant and Ray's land is the servient tenement (estate), burdened by the easement.
32
32. Which of the following would a landlord need to disclose to prospective tenants?
Presence of asbestos
Explanation: Landlords must disclose the presence of asbestos and other environemental hazards on the property.
33
33. Which of the following is true regarding an oral agreement for the sale of real property? It is:
unenforceable; it violates the statute of frauds
34
34. Which of the following would MOST Likely happen in a land contract?
The vendor retains the title to the property until the final payment is made
Explanation: The vendor (seller) retains legal (not equitable) title to the property unti the final payments is made. The vendee (buyer) receives possesion and equitable title while making installment payments. The vendee is also usually responsible for property taxes, insurance, repairs, and upkeep during the contract term.
35
35. A seller lists a 1.1 acre vacant residential lot, asking $10,000. His brother decides to offer the financing himself. The broker runs an ad say, "A $3,000 downpayment will get you beautiful residential acreage." Ismore credit information required?
Yes, because the downpayment amount was given.
Explanation: Under the advertising requirements of theTruth in Lending Act Regulation Z (which apply to consumer loans secured by real property, including vacnat land), if an ad contains a specific triggering term such as the downpayment amount, the the annual percentage rate and the other terms of reapyment must also be disclosed in the ad.
36
36. Which of the following pieces of information may an apartment property manager gather about applicants?
Employment history
Explanation: A property manager gathers information about rental applicants' employment history to gauge their ability to pay rent. National origin is a protected class under the Fair Housing Act, and asking about it violates the act.
Age alone isn't a protected class and many rental applicaitons ask for birthd date, but we think if a similar question is encountered on the state exam, the answer Employment history is more logical since it's more central to what landlords need to know. Social affiliation isn't protected by fair housing laws directly, but it can implicate familial status and religion, which are protected classes.
37
37. An owner sells a property, and the buyer is going to a make a 20% downpayment. The lender requires the buyer to pay two disocunt points, which turn out to total $1,000. What was the purchase price?
$62,500
Explanation: The purchase price was $62,500. This question is simply two separate percentages 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 that 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).
38
38. A person takes control of an abandoned farmhouse and begins to modernize it. She notifies the property's owner of her intention to do so and hears nothing back. Eventually she would be able to take title to this property through:
adverse possession
Explanation: If a non-owner takes exclusive possession of a property without the owner's permission (the "hostile" requirement), in an open and notorious manner, and holds it for the required period of time, she can take title through adverse possession. In the situation described in the question, notifying the owner satisfies the open and notorious requirement.
39
39. Alex owns 35 acres of vacant land that he would like to deed to a local wildlife conservancy. However, a title search revelas that timber rights and an easement to use the property were sold Giant Lumber Company in 1963. Since the lumber company went out of business in 1987, Alex should:
seek advice from an attorney, since the easement may still be valid.
Explanation: Even though the original easement holder no longer exists, a commercial easement in gross can be assisnged. So the easement rights may have been transferred to another company, and it would be prudent to ask an attorney to investigate.
40
40. An agent performing brokerage services owes all of the following duties, except:
perform independent visual inspection of the property to question
Explanation: In Washignton, a licensee is under no obligatoin to perform an inspection of the property or investigage any other matters that she has not specifically agreed to investigate.
41
41. A loan is set up so that the borrower's payments are the same size each month. Each payment is partly interest and partly principal, and the loan's balance at the end of the loan term will be zero. Which type of loan is this?
fully amortized
Explanation:
The regular payments on a fully armortized loan include both principal and interest and will pay off the entire amount aowed by the end of the loan term, so so ballon payments will be necesary.
42
42. Which of the following actions by a real estate gent would be illegal?
Showing only houses located in mostly Latino neighborhoods to a Latino family
Explanation: If a real estate agent channels prospective buyers toward particular neighborhoods because of their national origin, that is steering, a violation of the federal Fair Housing Act.
43
43. Which of the following is a requirement for a valid lease?
lease expiration
Explanation: A lease generally needs an expiration date, either the date an esetate for eyars will end, or the date a periodic estate will renew unless proper notice of termination has been given.
44
44. A subdivision that deed restrictoins that create a community nature train from the rea ten feet of every owner's property. One owner decided that he wanted to use that part of this yard to have a storage shed instead. If the other owners wnat to keep him from doing that, they should:
file for an injunction in the appropriate court
Explanation: Homeowners who wish to enforce a deed restriction against another owner who plains to violate the restriction may do so by seeking an injunction, which is a legal order that prohibits a person from taking a particular action.
45
45. A homeowner with a mortgage sells his home to a purchaser who agrees to assume the mortgage. The purchaser applies for and obtains the lender's approval and the seller is released from liability for the mortgage. This is an example of:
novation
Explanation: This assumption is actually a novation, because the lender released the seller from liabilty. The purchaser has entered into a new loan agreement with the lender that replaces the original agreement between the seller and the lender.
46
46. Bartholomew leases several acres from Stan so he can grow strawberries. However, when Bartholomew arrives at teh property to plant his strawberries, he realizeds that Stan is already farming the acreage. Bartholomew does not have to pay rent to Stan because of the:
covenant of quiet enjoyment
Explanation: Every lease includes an impleid covenant of quiete enjoyment. This is the promise that the tenant's possession will not be disturbed, either by the landlord or by a third party with a lawful claim to the property. A breach of teh implied covenant of quiet enjoyment may be considered constructive eviction, releasing the tenant from the duty to pay rent as agreed.
47
47. A buyer is planning to purchase a property where he can operate a small mechanic's shop out of his home. He eventually finds a property he likes, and tells the lsting agent his plans. However, after closing he finds out that there are deed restrictiions that prevent him from operating such a business from his home. Which of the following is true?
Since teh agent knew the buyer's intended use, the agent should have investigated wheterh it was feasible or informed the buyer that he or his agent shoudl investigate
Explanation: The seller's agent does not ow ea duy of loyalty to the buyer, so he is not required to investigate anything on the buyer's behalf. However, the duy of honesty and good faith would likely compel him to at least recommend to the buyer that he or his agent should investigage the matter further. The listing agent should know that the zoning or deed restricitions would prevent most residential properties from beign used for a mechanic's shop; the issue is a material fact and not advising the buyer to look into it could lead to a lawsuit.
48
48. Which of teh following is the propert method for determining the growss income multiplier?
Divid sales price by gross income
Explanation: The gross income multiplier method involves dividng a comparable's sales price by its gross income to determine the multiplier.
49
49. TempWorks leased space form Consiolidated Properties for an eight-year term. The lease did not include aprovision regarding assignment of the lease. Two years later, Super Temps budget out TempWorks. TemWorks can:
assign its leashold estate to SuperTemps
Explanation: Absent aprovision in the elase to the contrary, a tenant may assign or sublease the leased space.
50
50. Which of teh following is a latent defect that would need to be disclosed?
A crack in the basement wall that is covered by paneling.
Explanation: A latent defect is a problem that woul not be discovered by ordinary inspection. If a crack is obscured by paneling, it is not liekly to be observed and therefore must be disclosed to prospective buyers. The other options are all planingly visible upon spection and therefore are not latent defect.
51
51. A landlord occasionally uses his mast key to enter rental houses that he owns while residents are away. He avoids giving notice because he's lookding for undisclosed pets, and damage or phsyical problems, and the like. This would be:
not allowed under teh implied covenant of quiet enjoyment
Explanation: A landlord may enter the leased premises only with adnvance notice or the tenatl's permission. Entry without notice or permission is a breach of the impled convenant quiet enjoyment, the landlord's promise that the tenant's exclusive possession of the property will not be disturbed.
52
52. The closing date is August 16. The property's fair market value is $180,000. In this community, property is assessed at 50% of its market value, and taxes are applied aa 55 miles per dollar or assessed value. using a 365-day calendar year and assuming the buyer is responsible for the closing day, what would the buyer's prorated share of the annual property taxes be?
$1,871.28
Explanation: This problem two requires two steps: finding the annual property taxes, and then prorating them. Begin with the tax assessment problem. The assessed value is 50% of the market value ($180,000 x .5 = $90,000). The tax is calculated using mills, which are equivalent to one-tenth of a cent, so 55 miles equals 5.5.cents on the dollar ($90,000 x .055 = $4,950). Next, prorate the annual tax amount. First find the pier deim amount usinga 365-day year ($4,950 / 365 = $13.56). Calculate the number of days fo which the buyer is responsible (16 in August, including the closing date, 30 in September, 31 in October, 30 in November, and 31 in December = 138 days). Multiply the number of days by the per diem rate to find the amount the buyer must pay at closing, to cover teh remainder of the year's taxes ($13.56 x 138 = $1,871.28).
53
53. A buyer is looking at a house in the neighborhood with newly installed sidewalks. When the buery asks about taxes, the seller assures her that the hoem isn't subject to any special assessments. The buyer's agent should:
advise the buyer that the property may be subject to special assessments and recommend that the buyer look into it.
Explanation: advise the buyer that the property may be subject to special assessments and recommend that the buyer look into it.
54
54. Which of the following pieces of information must a listing agent convery to a seller?
A potential buyer, who has asked for he seller to take back purchase money mortgage, has abused her credit in the past.
Explanation: The information needs to be disclosed as a material fact, since it affects a party's abilty to perform her contractual duties.
55
55. Maria has a lease begins on June 1 and ends on December 1 of that same year. Maria has a:
term tenancy
Explanation: A term teantncy, also known as an estate for years, is a tenancy for any fixed period of time (even for less than one year).
56
56. Bob builds a fence extending 20 feet onto the neighboring property. He uses the land for 15 years without knowledge of the neighboring owner, who lives in another city. When Bobo wants to list property for sale, including the extra 20-foot strip, which of the following is true?
The land is his to sell, having passed through adverse possession.
Explanation: Bob's possession of the land meets all of the criteria for adverse possession: he occupied that land in an open and notorious manner and without the owner's permission, and his exclusive occupancy continued for the requred period of time. Hostile intent does not require confrontraion. (Bob may need to file a quiet title action, though to perform to the title before proceeding with the sale.)
57
57. A deed restriction is a covenant that:
restricts future owners of the proeprty
Explanation: A deede restriciton (also called a restrictive covenant) is a private agreement that limits uses of property. It runs with the land, so it affects future owners of the property. While deed restrictions can potentially last forever, there are a number of ways they may be terminated.
58
58. The paries negotiate the sale of a property by writing letters to each other (in the old-fashioned way, by hand). Their agreement is:
valid; under the statute of frauds, contract to sell rel estaet are enforceable if they are in writing.
Explanation: The statue of frauds requires contracts for the sale of real estate to be in writing. Simple notes, memoranda, or a serios of letters can be sufficient to meet the requirement, as long as they identify the property adequately indicate agreement between teh parties, and are signed by the parties.
59
59. A home is built on a hillside with underground springs that cause the groudn to soften from time to time. The owner, who has been had the property for three years with no problems, sells the house withougt mentioning the underground springs. The listing agent is also aware of the springs bust says nothing. A year leater, the buyer realizes that a corner of the house is sinking. She is entitled to sue:
both the listing agent and the seller
Explanation: The agent's failure to tell the buyer about teh springs (a known materail fact) amounted to misrepresentation by omission, and the agent may be liable to teh buyer. If th seller knew about the springs, the seller could also be liable to the buyer for misrepresentation. And even if the seller did not know about the springs, in many states the seller could be held vicariously liable for his agent's misrepresentation.
60
60. The primary purpsoe of the Truth and Lengind Act (Regulation 2) is to require the lender to:
disclose the complex cost of creidt to consumer laon applicants
Explanation: The Truth in Lending Act requeirs lenders to disclose financing costs to applicants for consumer loans, including consumer laons secured by real estate. (A consumer loan advertisemetn must state teh APR and other information about finance charges only if it includes one or more triggering terms, such as a specfic payment amount.)
61
61. A seller wanting to get an estimate of the value of her property before settling on a listing price should obtain a/an:
fee appraisal
Explanation: An appraisal is an estaimate of a property's value, as of a given date. A seller would obtain an appraisal from a fee appraiser, an independent appraiser hired to value aparticular property for a fee.
62
62. Agent Amy has a listing on an investment proeprty where she will get a $4,000 commission if it sells. She has another lsiting on an investment property wher she'll get a $5,000 commission if it sells. If she arranges an exchange of the two properties, her commission would be:
the desiganted broker for the firm providing amangement services
Explanation: A real estate agent who arraanges a Section 1031 exchange (and who is often referred to as a 1031 faciliataor) may receive compensation from both parties to the exchange.
63
63. A property management agreement is amended to take into account some changing circumstances. The amendment must signed by the owner and:
the desiganted broekr for teh firm providing mangement services
Explanation: A property management agreement is a contract between a proerty owner and the real estate firm that provides teh mangemetn services. It is not a contract between the proeprty owner and an individual licensee, aothough in some cases a licensee may sign on behalf of his brokerage.
64
64. Which of teh follwing people might bring a suit for specific performance?
A buyer in a real estate transactoin in which the seller backed out one day before closing.
Explanation: Courts generally grant speccific performance only when teh object of a sales contract is unique and monetary damanges would not be sufficient to put the nonbreaching party in teh position she would have ben in if teh contract had been performed. That's the situation for a real estate buyer, aas well as for purchaser of items such as jewelry or artwork.
65
65. After listing a ome for sale, the broker learns that a fence is encroaching on the seller's property. When discussing the property with prospective purchasers, the broker should:
disclosure the encroachment and suggest the buyers talk to an attorney before making the purchase
Explanation: The encroachment must be disclosed to the buyers immediately, and tey should be advised to discuss teh amater with their attorney.
66
66. Once a lender issues a VA-guaranteed loan, the veteran:
immediately becomes liable for the guaranteed amount
Explanation: A VA loan borrowr who later defaults may be liable to the VA in some situations; in all situations, his guarantly entitlement (which he could use to obtain another VA loan) won't be restored unti lhe reimbureses the VA.
67
67. A propety manager decides to offer some additional services beyond what is specified in the property mangement agreement. She may do so after:
the amangement agreement is amended in writing signed by the owner and designated broker
Explanation: Whenever the duties and powers of a property manager change, the property mangement agreement (the codument that describes the scope of a proerty manager's authority) must be amended.
68
68. A property's real estaet taxes are $250 per month, paid at the end of the year. The property is sold and the clsoing date is May 15. which of the folowing options is closet to what the seller's share of the taxes would be?
$1,125
Explanation: The seller is responsible for the taxes for the first four and half months of the year (January, Febrauray, March, April, and half of May). $250 x 4.5 = $1,125.
69
69. An optionee's rights can be assigned uder al lfo the following circumstances, except when the:
option money is in the orm of a promissory note
Explanation: If teh option money is in the form of a promissiory note (in other words, the option hasn't been paid for yet), the optionee cannot assign it.
70
70. An older retail building has narrow hallways and window air conditioning units rather than central AC. These wold be example of:
functional obsolescence
Explanation: Functional obsolescense includes both undersirable or out-of-date desgn elements (such as the narrow hallwyas) and undesirable or out-of-date fixtures or appliances (such as the window units).
71
71. A seller lists his house and sells it "as is" to a buyer. Shortly after the sale closes, teh uyer finds a large hole in teh gournd next to the house. The holse, which has caused significant damage to the foundation, was almost certianly intentially concealed with leaves and branches. Which of the following is correct?
Both the seller and the licensee may be liable
Explanation:
Even property is sold "as is," sellers and real estate agents have a duty to discose any known latent or other material facts. Here, whoever conceleaed teh hoel-whether it was the seller, the licensee, or both of them--would be lieable for misrepresentation. If only one of them covered upt eh hole, teh other one could also be liable if he or she was aware of teh deceoption and failed to say anything about it to the buyer. Also, even if the seller knew nothing about the problem, in many states, teh seller could be vicariously liable if it was the seller's agent who concealed the hole.
72
72. A contract for the purchase and sale of real property does not contain an adequate land description. The agreement is:
unenforceable
Explanation: A real estate purchase and sale agreemtn without an adequate description fo the propety does not fufill the requirements of teh statute of fruads, so as a general rule it will be unenforceable.
73
73. In a dual agency, which of teh following duties can the paries agree with the agent that they will waive?
The duty to submit additional offers after acdeptance has been reached
Explanation: Agents have duties to principles that can't be waived, invluding the duty of loyalty, the duty to disclose conflicts of interest, and the duyt to recommend expert advice when necesary. Ordinarily, agents must also discloseall offers, but eh agent and paries may agree that no more offers need to be submitted once a sales contract has been formed.
74
74. Which of the following is the most commonly used type of disclosure?
Seller disclosure statement
Explanation: In Washington, seller disclosure statements are by far the most commonly used type of disclosure statement, used in almost all transactoins with only a few exceptions (such as agricultural land or foreclosures).
75
75. A mortgage, and the associated mortgaeg note, are both examples of:
contract
Explanation: A security instrument (such as a mortgage) and a promissory note are both contracts between borrower and lender. The proemissory note is a promise to repay money and the mortgage pledge the subject property as security for the loan.
76
76. To obtain a 100% loan, with no downpayment, a borrower would most likely need to use a/an:
VA loan
Explanation: One of the defining characteristics of a VA loan is that a borrower can borrow up to 100% of teh sales price appraised value, whichever is less. In other words, in many cases, a downpayment can be entirely avoided.
77
77. A real estaet licensee is performing a competitieve market analysis. He locateds a comparable property that is slightly older than the subject property. The age of teh comparable makes it worth $2,000 less. The comparable has a small proch worth $1,000 that the subject property lacks. If the comparable sold for $269,500 recentlyk what the estimated value of the subject property?
$270,500
Explanation: To estimate the value fo teh subject property, adjust eh comparable's sales price to reflect what is wold sell for if it were identical to the subject property. Add $2,000 to the comparable's sales price (to make it more liek the subject property, which is newer), and then subtract $1,000 from teh comparable's sales price (again, to make it more liek the subject property, which lacks a porch). ($269,500 / $2,000 - $1,000 = $270,500)
78
78. Which of teh folowing actions is a requirement under the Real Estaet Settlement Procedures Act?
Seller is prohibited from choosing a title insurance company for the buyer.
Explanation: One of the requirements imposed by RESPA is that the seller may not require the bueyr to use a paricular title company.
79
79. The manager of a six-story, 18-unit apartment buiding, carefully screens tenant applications to mae sure that tenants who use wheelchairs as assigned to the first floor This:
A. is allowed if there's no elevator to the upper floors
Explanation:
The Fair Housing Act has wheelchair-acessibilty requirments for apartments complexes built since 1991. However, apratments on the soenc floor or above in teh multi-story buidings do not have to be wheelchair-accessible if there is not elevator in the building.
80
80. Mavis busy a home with a $500,000 sales price. She will be obtaining a loan for 90% of the property's value. SHe is paying two discount points, in order to bring the interst rate down from 5% to a 4.75%. what is the total amoun to cash that she will owe at closing?
$59,000
Explanation:
Mavis will need to make a $50,000 downpayment ($500,00 sales price x .9 = $450,000 loan amount; $500,000 salse price - $450,000 loan = $50,000 downpayment). She will also need to pay discount points ($450,000 loan x .02 = $9,000 discount points). This interest rate is not necessary for answering this problem. Add the downpayment and the discount points for the toal mount due at closing ($50,000 / $9,000 = $59,000).
81
81. Mary, in an effort to shore up a rocky marriage, wrote a quitclaim deed that transferred her interest in her property to a joint tenantcy 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?
Mary's ex-husband couldn't enforce the transfer in court because teh only evidence of tehdeed is oral evidence, which is generally unaccetptable as proof of a transfer of rela 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.
82
82. Special assessments levied against aprperty for local improvements, such as streetlights and sidewalks, are computed on the basis of:
the benefit the property receives from teh improvements
Explanation: As a rule, special assessments are allocated according to teh benefits each property receives, instead of the market value of the property. Thus, a special assessment is not an ad valoriem tax. Sometimes the allocation is based on the front footage of the lot, if the assessment is levied to pay for storm drains, curbs and gutters.
83
83. When the parties to a contract put themselves back into the same positions they were in before they entered into the contract, the contract has been:
rescinded
Explanation: A rescission can be by agreement of teh parties or by order of the court. In either event, a recission calls for each party to return any money or other property previously exchanged.
84
84. The buyers ask a listing agent about a rumor they've heard that a sex offender lives in the neighborhood. The agent should:
inform the buyers where this kind of information can be verifiied.
85
85. Which of the folowing statements is true concerning a lead-based paint disclosure?
It must include an option for the buyer to waive further inspection
Explanation:
For homes build before 1978, buyers (but not tenants) must be given a ten-day period in which to have a home tested for lead-based paint. The inspection, though, is not mandatory; the buyer can decide to forego the inspection.
86
86. A seller owes more on a loan than the property that secures it is likely to sell for. He approaches the lender about a short sale. He should keep in mind :
a short sale could result in a 1099 form from teh lender, or a deficiency judgment.
Explanation: A shore sale is a good option for borrowers who are underwater on a loan but who need to sell; if approved, the lender will allow the borrower to sell teh property for less than is owed on the loan. However, this is not consequence-free for the borrower. It will impact the borrower's credit score, which in turn will limit the borrower's abiity to obtain a loan in the future. In some cases, the lender may reserve the right to seek a deficiency judgement to recover any outstanding balance. And if the ldner writes off a large enough amount of the debt this amount could be considered income from the perspective of the Internal Revenue Service; the lender would document this income on a 1099 form.
87
87. When using the repacemtn cost approach to estimate the value of a home that is three years old, the appraiser should do which of the following?
Determine replacemtn cost and then deduct for depreciation.
Explanation: A replacemtn cost estimate concerns teh cost of repalcing the subject property with one of equivalent utility, not a replica. (The reproduction cost is an estimate of teh cost of the building a replica.)
88
88. Which of the following is the best example of non-discriminatory language, according to HUD's guidelines for the Fair Housing Act?
Female seeking femal roommate
Explanation: The Fair Hosing Act prohibits landlords from discriminating against families with children (except in designated housing for older persons). This includes a prohibition against advertisements that indicate a limit or preference. There is an exception, however, for owner-occupied rentals, such as a femal homeowner seeking a female roommate.
89
89. Through careful management, a property manager increases an aprartment building's monthly income of $3,000 by an additional $500/month. Assuming a cap rate of 8%, what is the increase in the building's value?
$75,000
Explanation: One way to solve teh problem is to calculate the value before the increase ($3,000 x 12 = $36,000; $36,000 / .08 = $450,000) calculate the value after the increase ($3,500 x 12 = $42,00; $42,000 / .08 = $525,000), and then calculate the difference ($525,000- $450,000 = $75,000). Another way would be simply to multiply $500 x 12 ($6,000) and then factor in the capitalization rate ($6,000 / .08 = $75,000).
90
90. A condensed history of the ownership of a property is called a/an:
abstract of title
Explanation: An abstract of title is condensed history of the ownership of a property, summarizing all the information that is in a chain of title. In some states, buyers have an abstract of title examined by an attorney, but for the most part, buyers opt for the fuller protection of the title insurance policy.
91
91. Of the following types of contracts, which one is a unilateral contract:
Option
Explanation: An option is a unilateral contract; in other words, only one party is obligated to act. Exercising the option creates a bilateral purchase and sale contract.
92
92. Which of teh following is the best definition of a material fact?
Knowledge that would affect a buyer's decision whether of not to buy.
93
93. A transaction will include a home warranty. The seller's agent should find out:
which party will be responsbilty for the one-time premium.
94
94. A lender agrees that a seller who owes $400,000 on a mortgage that is a default may list the property at $350,000, which is the current market value of the property. This type of transactoin is known as a:
short sale
Explanation: A short sale involves the sale of a property for whatever price is possible, but for something less than (i.e. "short of") what is owed on the underlying loan.
95
95. An investor looks at a property listed for $150,000 with a montly net operating income of $1,000. He decides instead to offer $120,000. What kind of income approach analysis would he have to arrive at the conclusion?
Capitalization rate
Explanation: If an investor is using a method that focues on a property's net income as a mens of finding its value, he would be using a captializatoin rate approach to solving the problem. He would need to multiply the montly net income by 12 to find the annual net income, however, since the capialization formula relies on annual income. While a gross rent multiplier approach could rely on monythly income in order to determine value, this approach uses gross, not net, income.
96
96. One of teh provissions of teh Housing for Older Person Act:
regulate that in qualifed projects, at least 80% of the units must be occupied by persons 55 years or older.
Explanation: The Housing for Older Persons Act establishes criteria for proects that are exempt from prohibitions against familial status discrimination. This exemption includes projects with at least 80% of teh units occupied by at least one person 55 years or older. The act, however, does not require that projects must provide facilities and services for elderly persons.
97
97. Bob's property has a fair market value of $190,000. If is in a county where properties are assessed at 50% of value, and the tax rate is $55 per $1,000 of assess valu. what's Bob's annual property tax?
$5,225
Explanation:
The first step in calculating a tax problem is to find the property's assess value ($190,000 x .05 = $95,000). Divide the assessed value by $1,000 to find the number of increments ($95,000 / $1,000 = 95) and then multiply by the tax rate to find the annual tax bill (95 x $55 = $5,225).
98
98. Martha gave Hannah the right to purchase the vacant lot of $65,000. Hannah paid Martha $1,200 for the right. Hannah is the:
optionee
Explanation: Marth gave teh option to Hannah, so Martha is the optioner and Hannah is the optionee.
99
99. A seller complains that the seller's agent is shwoing other properties to buyers that compete with the seller's property. Which of teh following is true?
Seller's agent is not breaching the duty of loyalty.
Explanation:
A seller's agent has a duty of loyalty to that seller. However, teh licensee will most likely have other clients besides teh seller. Showing the buyers competing properties for sale doesn't in and of itself breach that duty of loyalty to the seller or create a conflict of interest. (The NWMLS listing agreement form specially authorizes teh agent to show competing properties.)
100
100. A buyer would be protected from risk of loss due to a filed heating system through:
a home protectoin plan
Explanation: A home protectoin plan is a short-term warrantly that a home buyer may purchase at closing (sometimes a seller pays for it on the buyer's behalf). The buyer will be reimbursed for expenses related to the failure of covered systems or appliances, usually only during the first few years of ownership.
101
101. The Thompsons, a retired couple, need more income. Their lender offers a type of loan in which the lender will send the couple a montly check for as long as the couple lives on the property, in exchange for a lien against the equity in their property. The lender is referring to a/an:
reverse mortgage
Explanation: A reverse mortgage (also called a reverse equity or reverse annuity mortgage) is designed for homeowning borrowers in tehir retirement yeras who need a cash flow. Instead, of loaning teh entire amount agreed upon all at once, the lender (mortgagee) makes monthly loan distributions to the borrower (mortgagor) for so long as the borrower occupies the residence.
102
102. Maya and Andrew are real estate agents who work for competing brokerages. They don't liek a new discount broker and decide together not to show any of the new broker's listings. This is a violation of the Sherman Act because it's:
a group boycott
Explanation: A group boycott would include an agreemetn between two competitiors to exclude other companies from fiar participation in real estate activities.
103
103. In an option:
the option agreemetn must clearly state all the terms and conditions of the sale
Explanation: The option agreement also servies as teh sale contract once the option is exercised, so all terms and conditions of the sale need to be included in the option agreement. Option money is oridinarily not applied to the purchase price; it's an incentive that the seller keeps regardless of whether the sale happens.
104
104. A licensee takes a listing from his sister. He should:
disclose the relationship if acting as a dual agent.
Explanation: A licensee must disclose conflicts of interest to a principal. In a dual agency, this would include disclosing a conflict of interst with a principal (such as representing a family member) to that principal.
105
105. A couple in their 70s with no liens on their home would like some extra income, but don't want to make monthly loan payments. What kind of loan mighta lender offer them?
A reverse equity loan, since they are over 62 and have a sufficient equity in their home.
Explanation: If the borrower meets the lender's requirements (the borrower must usually be over the age of 62 or 65 and have little or no outstanding debt on the property), a reverse equity loan will allow the borrower to receive a monthly check from -- racther than making monthly payments to -- the lender.
106
106. H quits a broker position with XYZ Realty. When must H's designated broker return her license to the Director?
Immediately
Explanation: The license must be returned to teh Director immediately, wihtout conditions.
107
107. A licensee fails to attend a scheduled disciplinary hearing. What happens?
The hearing is held without the licensee present
Explanation: If a licensee does not show up for a disciplinary hearing, the hearing proceeds without the licensee present.
108
108. A broker arranges a transaction while working for ABC Realty. Before teh transaction closes, the broker's license becomes inactive. Which statemetn about the borker's commission is true?
ABC Realty can pay the commissiontot the broker
Explanation: A broker may receive a commission as long as she was properly licensed at the tiem she procured a promise for the payment of compensation.
109
109. Under the Washington real estate license law, soemoen must have a license in order to:
cold call listing prospects and offer to perform broekrage services. A person must have a real estate license to solicit members of teh public and offer to perform real estate brokerage services on their behalf.
110
110. After a licensee's first renewal is complete, in order to renew the license again, the licensee must furnish proof that she has successfully completed how many clock hours in approved real estate courses?
30
Explanation: Teh requirement is 30 clock hours for the second renenwal and for each subsequent renewal. Of course, when teh licensee renews for the first time, she must complete 90 clock hours; 30 hours in adivanced real estaet practices, 30 hours in real estate law, and another 30 hours in elective courses.
111
111. Washington's Real Estate Brokerage Relationship Act:
requires a pamphlet on agency relationship to be given to all parties before any written agreement.
Explanation: Washington's real estae agency statute requires agents to give the pamphlet on agency relationships to all parties. The duty of confidentiality applies only to a principal, not to all parties.
112
112. A managing broekr asks his brokerage firm to release his license and listings so he can form his own firm. The firm must:
Surrender the icnes immediately but not the listings.
Explanation: If a licensee terminates a relationship with a brokerage firm, the firm must surrender the license immediately. The listings, however, belong to the irm and not to the individual license, so they will stay with the firm.
113
113. A real estate agent took a $3,000 case earnest money deposit on Friday morning. She had another appointment on Friday afternoon and didn't want to misplace the money over the weekend so she deposited it into her persnoal bank account. First thing on Monday mornining, she transferred the money to her firm's trust acount. She has:
commingled funds
Explanation: the real estate agent has violated state laws concerning trust fund handling, bu commingling trust funds with her own personal funds.
114
114. Who is responsible for preparing and conducting real estate license examinations?
The Real Estate Commission
Explanation:
The Real Estate Commission has that responsibilty, though they delegate it to a professional testing service.
115
115. A dual-state brokerage firm doing business in Washington must:
maintain a trust account in Washington if holding any funds in trust
Explanation: A dual-state broekrage must maintain a trust account in Washington depository institutions if holding funds in trust for Washington clients.
116
116. Which of the following is EXEMPT from the pooled interest-bearing account requirements?
Property managment trust funds
Explanations: Property mangement trust funds are exempt. The pooled interest bearing account requirements applies to earnest money deposits of $10,000 or less.
117
117. Z, a real estate licensee, has been certified by the Department of Social and Health Services, as not in compliance with his court-ordered child support payments. What disciplinary action is available to the Director of the Department of Licensing?
Suspend Z's license
Explanation: The Director can suspend Z's license until X has repaid the deliquency or otherwise coplied with the order. The Director's authority to revoke a license or issue a cease and desist order doesn't extend to ases of failure to pay child support.
118
118. Which of the following is NOT a purpose of the Center for Real Estate Research?
Establish listing prices for properties
Explanatoin: The Center for Real Estate Research studies local economic conditions and proposes changes to real estae education curricula. It does not have a role in establishing listing prices.
119
119. Which of teh follwing statements about a blind ad is true?
It fails to identify the advertiser as a real estate agent
Explanation: The license law requires licensee ads to include the name of their real estate firm as licensed (or one of teh firm's licensed assumed names), An ad tha tmotis the firm name is called a blind ad and is prohibited.
120
120. In the course of business, a firm earns property managemnent fees that are to be paid out of teh trust account. The fees msut be taken out of teh acount:
monthly
Explantion:They must be removed from teh trust account at least on a monthly basis.
121
121. An applicant passes the broker's examination. At what point can she legally begin selling real estate?
When teh application is submitted to the Department of Licensing
Explanation: Selling a business opportunity that includes real estate for compensatoin requires a real estate license. (An oral lisitng agreement does not violate teh license law. It simply isn't enforceable if the seller refuses to pay teh brokerage commission.)
122
122. L owns a bookstore and the lot it sits on. He hires M, a high school Engish teacher, to find a buyer for the business and property. He agrees to pay her $5,000. M finds a buyer and L pays her $5,000. Has M violated the real estate license law?
Yes, because selling a business opportunity that includes real estate for pay requires a license
123
123. Which of teh follwoing statemetns regarding pooled interest-bearing trust accounts is true?
Earnest money deposits over $10,000 can be paced in separate trust accounts.
Explanation: Earnest meony deposits of $10,000 or less msut be placed in a pooled interest-bearing trust account (property mangaemetn accounts are exempted from this requirement). Deposits over $10,000 do not have to be palced in the pooled accounts, but they can be.
124
124. An attorney at law is exempt from real estate licensing laws when:
arranging the sale or real property while setting a client's estate
Explanation: An attorney at law is exempted from licensing requirements when performing her duties as an attorney. The exemption doesn't apply to an attorney who provides real estate brokerage service not directly connected to a client matter.
125
125. When does an active license become inactive?
When it is delivered to the Director for any reason
Explanation: A license becomes inatctive when it is delivered to the Director of the Department of Licensing for any reason.
126
Broker Q is licensed under Designated Broker K. Q negotiated an unusually complex transaction that worked to the advantage of both the buyer and the seller. The buyer and seller agreed to pay Q bonus for the services rendered. Q can accept the bous from:
K
Explanation: Q csn only be compensated by K, his designated broker. The buyer and seller could pay the bonus to K, who would then decide waht portion of the bonus should be paid to Q.
127
135. In a disciplinary action, the Director of the Department of Licensing can do any of the following, EXCEPT:
award damanges to individuals defrauded by real estate licensees.
Explanation:
The Director cannont aware damages to vicitms of real estaet fraud. Many staets have what is called a "recover fund" from which victims of real estate fruad can revoer a least part of theri losses. Washingtond eons't hav esuch a remedy for the consumer, however.
128
136. A real estate broker is:
an affliated licensee
Explanation: A real estaet broker is considered the brokerage firm's affiliated licensee.
129
137. If an agent fails to renew a license within one year after expiration, the license is considered:
cancelled
Explanation:
The license law requires that all advertisign must indlude the brokerage firm's name, as licensed, so the name of ABC Real Estate would need to appear in all advertising. (The team name may also be included, but it doesn't have to be.)
130
138. A group of affiliated licensees form a team, the XYZ Team, within teh brokerage they work for (ABC Real Estate). ABC has a firm license, but XYZ does not. Whose name must appear in all the advertising of those affiliated licensees?
ABC Real Estate
Explanation:
The license law requires that al ladvertising must include the roekrage firm's name, as licensed, so the name of ABC Real Estate would need to appear in all advertising. (The team name may also be included, but it doesn't have to be.)
131
139. The Director may impose all of the following penalties on a licensee for violating the license law, EXCEPT:
requiring licensee to pay for costs of formal hearing
Explanation: A licenses may have her license revoked or suspended, or be required to complete additional education. However, a licensee is never required to pay for the costs of a disciplinary hearing (other than the costs of preparing a transcript, if she wishes to apepal the findings).
132
140. Licensee A and Licensee B form a team, working together within the brokerage they work for. Licensee A is listed as the agent on purchase and sale agreement, but it was Licensee B who negotiated the transaction. Which of the followinging is true?
License B must receive paymen (if any) from the brokerage
Explanation:
An affiliated licensee may receive compensation only from teh firm who employes her. If two affiliated licensees will split a commission, it must be handled by the firm or firms.
