Rockwell Cram Exam #4 Questions with Correct Solutions 100% Verified

Tina is representing the buyers in a transaction; she described the property's boundaries to her clients without clarifying that she was not sure that the boundaries were exactly precise. The buyers, upon taking possession, built a fence along the boundaries that she described, but the neighbors then filed suit because the fence didn't follow the actual boundaries and encroached on their land. Can Tina be held liable for misrepresentation? - Yes, because she reasonably knew that the described boundaries might not have been correct A mortgage includes a prepayment penalty of 3% of the loan's balance at the time of payoff, if the owner pays off the entire balance before a specified date. Monthly amortized principal and interest payments are $1,484.40, with a 5% annual interest rate. The borrower's balance after making the January 1st payment was $44,731.15. On February 1st, he made the next payment as scheduled, and then after that, paid off the entire remaining balance. What would the prepayment penalty be? - $1,302.99 A real estate agent completed a listing agreement form, which the sellers signed. At what point should the agent give the sellers a copy of the form? - Immediately after they sign the listing form An investor bought four adjacent lots for $88,000 each, and then combined them and divided them into five lots of equal size. These five lots were then sold for $72,000 each. What is the investor's percentage of gross profit? - 2.27% Two parties enter into an option agreement, scheduled to end in December. However, in October the optionee decides he doesn't want to buy the property. What should the parties do in order to terminate the option? - Nothing; the option will expire automatically A property produces a 12% rate of return. The property's net income is $10,500 per month. Using the capitalization method, what is the property's market value? - $1,050,000 Of the following types of contracts, which one is a unilateral contract? - Option The capitalized value of a property is $280,000, the capitalization rate is 10%, and the operating expenses are 76% of the annual gross income. What is the gross income? - $116,667 As a result of Federal Reserve action, interest rates for residential loans go down. Which of the following is most likely to occur as a result? - There will be an increase in sale prices for homes One tax advantage of investing in real estate is: - sheltering of income A property sold for $410,000. The seller has a mortgage outstanding, with a balance of $170,000 that will need to be paid off. The seller owes his real estate agent a 6% commission. The seller also agreed to pay 3% in discount points as a buydown, to help the buyer receive a loan with a 95% LTV. Finally, the seller must pay another $8,000 in closing costs. After all costs are paid, how much will the seller net? - $195,715 Darren and Martin are agents for a large brokerage firm. They decide that Darren will specialize in listing and selling houses on the north side of the river and Martin will specialize in listing and selling houses on the south side of the river. Such a practice is: - legal, because the prohibition against market allocation does not apply to agents working for the same firm Which of the following entities would participate in the primary market for mortgage lending? - Commercial bank One of the economic characteristics of real estate is: - scarcity Milo is filing his federal income tax return. He can deduct: - the interest paid on his mortgage A contract gives a person the right to purchase property for a particular price within a certain timeframe. This contract is a/an: - option Of the following, which would have the greatest effect on the supply of real estate in a particular market? - Size of labor force Which of the following will terminate a lease? - Mutual agreement Sheila obtained a home loan from a commercial lender and paid for a mortgagee's title policy. Who would this policy protect? - Only the lender Under Title VIII of the Civil Rights Act of 1968, certain transactions are exempt. Which one of the situations below would be exempted and not a violation of the act? - An unlisted home that is for sale by owner, where the only advertising is a sign in front of the property that reads simply "For Sale" and the owner owns only one other home Price fixing (including setting commission rates in a community) is prohibited by the: - Sherman Antitrust Act and state antitrust laws A federal law requires lenders to give a booklet about shopping for a home loan to all prospective borrowers within three business days of loan application. What law is this? - RESPA Carl is housebound and never goes outside. Neighbor Salvador plants a vegetable garden on a corner of Carl's property that is not visible from the main house. After the required period of time, Salvador claims a prescriptive easement over this portion of Carl's land. This easement is: - valid, because the use was open, and Carl's knowledge of the use isn't considered A seller complains that the seller's agent is showing other properties to buyers that compete with the seller's property. Which of the following is true? - Seller's agent is not breaching the duty of loyalty When a borrower makes payments on a fully amortized loan, her debt service payments will cover: - both principal and interest on the loan