Final Exam - Washington Real Estate Practices: 30-hour Broker Prelicensing v3.0 Questions and Answers

Final Exam - Washington Real Estate Practices: 30-hour Broker Prelicensing v3.0 Questions and Answers How many square yards of carpeting will be required to cover a great room floor that measures 22 feet by 26 feet and an adjoining hallway floor measuring 4 feet by 12 feet? 22 feet x 26 feet = 572 square feet 4 feet x 12 feet = 48 square feet 572 square feet + 48 square feet = 620 square feet 620 square feet / 9 = 68.89 square yards Most lenders require borrowers The answer is who are divorced to provide a copy of the divorce decree. Most lenders require borrowers who work for a salary to provide W-2s for the past two years and at least one month's pay stubs. Self-employed individuals will be asked to provide the tax returns for the prior two years. Owners of rental properties will be asked to provide copies of the rental agreements and tax returns for the prior two years. Other documents that may be required include statements for checking, savings, and stock and mutual funds accounts. If divorced, borrowers will be asked for a copy of the divorce decree. Non-U.S. citizens must provide a copy of the front and back of their green cards, and nonresident aliens must present a copy of the H-1 or L-1 visa. How many months will it take for $12,000 to yield $650 at 8% interest? $12,000 x .08 = $960 $650/$960 = .68 .68 x 12 = 8.16 (8 months when rounded) Holding an open house targeted to just brokers is a great way to introduce the property to a group who has contact with many prospective buyers. A home inspection will cover all of the following major categories EXCEPT appliances and personal property that are not included in the sale of the home. Which of the following loans is subject to the requirements of the Truth in Lending Act (TILA) as implemented by Regulation Z? The answer is a $195,000 loan to purchase an existing single-family home. Regulation Z covers consumer credit that is for personal, family, or household purposes and does not cover loans for the construction of a home, reverse mortgages, or home equity lines of credit. The fair housing laws permit a religious organization to The answer is give preference to members of the religion, as long as that property is not used for commercial purposes. The law permits a religious organization to restrict the sale, rental, and occupancy of any dwellings it operates only to persons of that religion or to give preference to members of the religion, as long as membership in the organization is not restricted on the basis of race, color, or national origin and as long as that property is not used for commercial purposes. All contingencies are regarded the same negative way by the other party. This statement is The answer is false, as some contingencies, such as a financing contingency in an offer from an approved buyer, have very little impact on the strength of an offer. Not all contingencies are created the same. In fact, some contingencies, like a home inspection contingency, are so commonplace that it is odd if they are not in the offer. Which of the following is NOT something that a structural pest inspector looks for during an inspection? Presence of toxic mold Under which of these circumstances would current listings continue to be in effect? The answer is if the listing designated broker were to fall into a coma. A listing agreement is a personal service contract between the sellers and the real estate firm, which cannot exist as a licensed real estate firm without a designated broker. Whether the listing designated broker were to die, the brokerage firm were to go out of business, or if a designated broker were to lose her license to broker real estate transactions through a disciplinary action, the disposition of any current listing agreements would be the same: they would no longer be in effect. However, a medical crisis on the part of the designated broker would not automatically cause the current listings to be terminated as the firm still has a managing broker that the Department has provided the endorsement of designated broker. Standard forms are used for many aspects of a broker's real estate work. If NWMLS Form 21, Residential Purchase and Sale Agreement is selected by the broker, what is she probably about to do? The answer is assist the buyer in writing an offer. Even though the Residential Purchase and Sale Agreement is called a contract form, it isn't a contract until there has been an offer and an acceptance (and all other elements required of a valid and enforceable real estate purchase contract under common law and Washington's statutory law). A marketing plan for a property that a broker plans to list The answer is keeps both the client and broker organized, can be used as a roadmap to a successful sale, and is both a high-level strategic plan for selling the property as well as an integrated series of detailed steps to carry out the strategic plan. While the client may be interested in the financial health and stability of the firm, this is usually private information and will not normally be shared with clients. What the client should be focused on is how the broker and her firm plan to market the property and manage the process to result in a successful sale. This is what a marketing plan should do. Which of the following is NOT a disciplinary action that can be imposed on a broker by the director of the Washington Department of Licensing? The answer is a fine of no more than $7,000 per violation. The fine is not to exceed $5,000 per violation. The amounts that are credited to the buyer on the closing statement include The answer is the earnest money deposit. The selling price, rent owed by not yet collected, and interest paid in advance are credited to the seller. How many cubic feet are in a container measuring 5 feet, 8 inches by 4 yards by 2 feet? The answer is 136.01. 8 inches / 12 = .667 feet .667 feet + 5 feet = 5.667 feet 4 yards x 3 = 12 feet 5.667 feet x 12 feet x 2 feet = 136.01 cubic feet (rounded) In general, state and local governments may pass laws and regulations regarding discrimination that supplement, but not override, federal provisions. Which of the following is consistent with the responsibilities or authority of a special agent? The answer is a special agent is an agent who has limited authority to conduct a single transaction for a principal. A special agent's authority is limited to a specific task. For example, real estate brokers employed to find a purchaser for a property (seller's agent) are special agents with authority only to negotiate that one sale. In the basic relationship between designated brokers and affiliated licensees (brokers and managing brokers), the affiliated licensees are The answer is agents of the designated brokers. In the basic relationship between designated brokers and affiliated licensees (brokers and managing brokers), the affiliated licensees are agents of the designated brokers. The designated broker's firm is the principal of the brokers who are licensed with it. These brokers, as agents of the firm, owe duties to the firm. How many acres are there in 828,560 square feet? The answer is 19.02. 828,560 square feet/43,560 square feet = 19.02 acres The Statute of Frauds The answer is is an English law from 1676 titled "An Act for the Prevention of Frauds and Perjuries." The Statute of Frauds, which has been adopted in Washington, requires that certain contracts be in writing and signed for the contracts to be enforceable in a court. Keep in mind that a contract may be valid since it meets the four elements of a valid contract, but if the contract is oral, it may still not be enforceable if it falls under the Statute of Frauds. The Multiple Listing Service (MLS) allows a seller's home to be exposed to a huge number of potential buyers and has a cooperating commission-sharing structure between the listing firms and the firms who are representing buyers. The four MOST common sources of revenue for a real estate brokerage firm are commission income, property management fees, investment income, and referral income. Which of the following sources contains information about the difference between a client and a customer and the duties owed to each? The Law of Real Estate Agency pamphlet The federal Fair Housing Act prohibits a practice known as steering, which The answer is can happen even with good intentions; a discriminatory intent is not required to be shown. For example, a single mom with three small children is looking at apartments in a high rise. The lowest floor opens to a courtyard with a playground; all other floors have apartments with balconies. The representative of the building, fearing that one of the children may fall from the higher floors—and thinking how nice it would be for the children to have easy access to the playground—only shows the mom apartments on the first floor. Even though the representative's intentions were good, illegal steering has occurred. It is the tenant's (or a buyer's) decision where to live and as such, must be shown a representative cross-section of properties. If a brokerage joins a franchise and the original company dissolves and re-forms, The answer is the original company has gone out of business. A brokerage that joins a franchise may not be considered to have gone out of business if the entity remains, and the designated broker is the same person as before the brokerage joined the franchise. If the original company were to dissolve and re-form as a new company, then it will have gone out of business, and all of the existing listing agreements would have to be signed again, in the name of the new brokerage, or of the new broker. The Residential Purchase and Sale Agreement is used to The answer is document the purchase and sale of a specific property. These contracts are used to document the meeting of the minds between a seller and a buyer for the mutual purchase and sale of a specific property. The difference between the evaluation that takes place during a home inspection and what is required to be examined during an appraisal is that The answer is the home inspection is a much more extensive and detailed examination of the property than the list of items that are required to be evaluated by an appraiser for the FHA and VA loan programs. A home inspection is an evaluation of the condition of a home carried out by a state-licensed home inspector. For FHA and VA loans, the appraiser is also expected to check to see whether the home's condition conforms to a list of items that the FHA and VA have deemed to be important. (Note that each loan type has its own particular list of items.) Curb appeal means what prospective buyers see from the street and as they walk to the front of the home. Which situation requires disclosure? The fact that the water heater has a small leak and that the seller must wipe up excess water at the end of each day Which of the following terms is defined as a principal's responsibility for the conduct of the principal's agent? The answer is vicarious liability. Washington law limits a principal's vicarious liability to a few exceptions. These include instances where the principal authorized the act, or the error, or omission by the principal's agent. The Growth Management Act provides a blueprint to counteract threats to the environment. The Real Estate Settlement Procedures Act (RESPA) applies to the activities of The answer is lenders financing the purchase of residential properties. RESPA was enacted to protect consumers from abusive lending practices and applies to residential properties financed by federally-related mortgage loans. One of the first steps the mortgage broker takes in initiating the loan process for buyer-borrowers is to The answer is contact one or more lenders and share complete information about a borrower's income and debts. A mortgage broker will prequalify a borrower and then send the borrower's information to a number of different lenders. These lenders will then determine whether the borrower will qualify for one or more of the products they offer and will pre-approve the borrower if the borrower's financial factors (ratios, credit, work history) allow this. A borrower was charged $862 on a $12,000 loan for one year. What was the rate of interest? The answer is 7.18%. $862/$12,000 = 7.18% A home inspection contingency The answer is does very little to weaken an offer as it is a very common and expected contingency. It can be included in offers on as-is homes, as all as-is means is that the seller is not going to make any requested repairs. However, in this case, if the buyer learns through the inspection that the problems with the home are just too great, the buyer can still opt to terminate the contract. Plottage is defined as the higher total land value that may result when there is a merging or consolidation of adjacent lots by separate land owners into one larger lot. A broker who has been at a firm for two years is preparing to leave her current real estate firm and join another. The broker is filling a box with transaction files that contain information about the listings she has sold and about the buyers to whom she has sold homes, intending to take this box home for storage. What is the BEST response by the managing broker? "You can't do this! The transaction files are the property of the firm and must stay in the firm's office." Advertising with social media is advantageous to sellers because posting on a personal or company page is free and some social media services allow for inexpensive advertising to very targeted audiences. Which of the following is TRUE about the closing? The answer is the seller generally agrees to pay document preparation costs, filing fees, and half of the escrow closing costs. There are certain items that are commonly charged specifically to a seller at closing. Normally, a seller agrees to pay half of the escrow closing costs, document preparation costs, filing fees, and the cost of the title insurance policy (that will protect the purchaser). The seller also generally pays the real estate commission, unpaid property taxes, unpaid assessments, any prepayment penalties, and any charges the seller agrees to pay for the buyer, such as discount points. These reflect how the escrow agent will disburse the funds owed to the seller. Which of the following activities occurs at closing? The answer is the final settlement statement is prepared and sent to all parties by the escrow agent, reflecting all settlement costs. The title company informs the escrow agent of the recording number. All costs are reflected on the final settlement statement that is sent to the parties at closing. At this point, the escrow agent disburses all of the funds to the appropriate parties. Items that are paid include lenders or mortgage brokers' fees, liens, mortgage payoffs, other encumbrances, real estate broker commissions, transactional costs, and the net sale proceeds to the sellers. Which appraisal approach would an appraiser MOST likely use to determine the value of a typical single family home? The answer is the sales comparison approach. This method uses the features and characteristics of homes that are similar to the subject property and adjusts these comparables by dollar amounts that reflect the differences between the comparables and the subject property in order to arrive at a value of the subject property. Using the principle of substitution, this is one of the most straight forward ways to determine the market value of a home. A rectangular lot measures 60 feet wide and has an area of 1,200 square yards. What is the depth of the lot? The answer is 180 feet. 1,200 square yards × 9 = 10,800 square feet area = length × width 10,800 = length × 60 10,800 ÷ 60 = 180 feet In Washington, dual agency is allowed only with proper disclosures and with written consent of the buyer and the seller. The goal of every real estate negotiation is to have the buyer and seller reach a meeting of the minds through the offer and acceptance process. Which of the following is TRUE about a lease-purchase contract (also known as a lease-option)? If the tenant/purchaser decides to not exercise the option to purchase, the option payment will be forfeited to the property owner. What factors should the broker evaluate when looking at an area and a home in order to use it in developing a CMA for a single family home? The answer is the appearance and condition of the property to be listed as well as the neighborhood where it is located. Obviously, illegal factors (race and religion under the Fair Housing Act, as amended, and using a maximum commission rate under anti-trust laws) cannot be taken into account in a CMA; additionally, real estate pricing must always be viewed on a local basis, so national statistics are of little use in developing this CMA. Someone who is receiving salary or wages, is often eligible for benefits, and has tax withholding is generally regarded as an employee. A broker has a listing appointment with a seller. In order to help the seller determine the listing price for the seller's home, the broker will develop a comparative market analysis to share with the seller. What is the BEST source of data that the broker can use for the CMA? The answer is data from the local multiple listing service about how much properties in the neighborhood have sold for in the past few months. The MLS database is by far the very best source for information to do a CMA since it contains objective, complete information and reflects sale prices that almost always include some level of commission payment. All these factors allow the broker to do an apples-to-apples comparison, allowing for the calculation of the most appropriate range of probable market values Which of the following is FALSE regarding conveying information about the divorce of any of the principals to a real estate transaction? The answer is the seller's agent is obligated to disclose a suspicion that her clients are arguing a lot and may not stay together. Just as the listing broker's disclosure that her clients are divorcing would likely be considered confidential information that could work against the sellers' best interest, so could the seller's agent's disclosure that her clients are having marital problems. A broker learned that a new law had passed and how that new law applied to the contract forms she was using. What is the MOST likely way the broker learned about this? The answer is from a continuing education course. On the job training is very helpful and useful, but it is not a substitute for the technical information and updates that are taught during a continuing education class. When a VA appraisal is lower than the purchase price agreed upon by a veteran (buyer) and seller, The answer is the veteran may choose to accept the appraisal and just pay the difference between the contract price and the appraised value. As in the case of most types of loans, a VA lender will base the VA loan on the lesser of the amount that has been agreed upon in the contract by the buyer and seller and the appraised value. When an appraisal comes in lower than the sales price, the purchaser (the veteran) has three choices: the veteran may attempt to renegotiate the contract price, the veteran may pay the difference between the contract price and the appraised value, or it is possible to request that the lender or local VA office review the appraisal to determine if there are errors present in the appraisal. Which of the following are business records of the firm that should be maintained by the managing/supervising broker? Bank records for operating accounts A borrower has been approved for a loan of $5,000 at 8% interest. The loan will be repaid in nine months. What amount will be repaid at that time? The answer is $5,300. $5,000 x .08 = $400 $400/12 x 9 months = $300 $5,000 + $300 = $5,300 A buyer has been asked in a seller's counteroffer to increase the amount of his earnest money deposit. The buyer's original offer included an earnest money amount of $500; the seller is now asking for that amount to be increased to $2,000. Why would the seller do this? The answer is the seller is concerned that the buyer may breach the contact, and if the buyer does breach, the seller wants much more than $500 as liquidated damages. Liquidated damages are damages that are pre-specified in the contract. In the case of a typical real estate contract, a breach of the contract by the buyer will result in the seller receiving the buyer's earnest money deposit as liquidated damages. A contract was made with a 16 year old and an adult. Which element is this contract lacking? The answer is competent parties. Both parties must be the age of majority (i.e., 18 years old). There is a special exception in this situation, however, which keeps this contract from being void. When making a contract with a minor, this contract is voidable, rather than void, at the option of the minor. A listing contract creates a special agency relationship in which the real estate firm is retained for one, sole transaction, on a specific property. Both state and local governments are obligated to manage growth in Washington by The answer is designating urban growth areas. Both state and local governments are obligated to manage growth in Washington by carrying out the following actions: identifying and protecting critical areas and natural resource lands, designating urban growth areas, preparing comprehensive plans, and implementing the comprehensive plans through capital investments and development regulations. If a business has an objective to work with property owners to maintain their properties, find tenants to occupy the properties, and address the day-to-day concerns of the tenants and owners, then a sample form attached to the business plan used to illustrate the contract that would be used for these services would be The answer is a property management agreement. If the business will center on property management services, then a property management agreement will be the primary contract that the business will use. This agreement is between the firm and the owner and spells out the rights and responsibilities of each. The primary reason a business would decide to have a business plan is The answer is a business plan clearly sets out what the business is intended to accomplish and how it will be done. A business plan is used by business owner(s) to describe what the objectives and goals are for the business, to give a guideline for carrying out the necessary research and planning to form a solid foundation for the business, and to describe how the objectives and goals will be met. A broker works on a 50/50 commission split with her firm. If she lists a house at $156,000 for 6% commission and sells it for $154,000, how much will she receive? The answer is $4,620. $154,000 × 0.06 = $9,240 total commission $9,240 × 0.50 = $4,620 broker's share When does the closing actually occur? When the funds are disbursed and the deed is recorded A negotiation for the sale of real property begins when The answer is the buyer or buyer's broker delivers an offer to the seller. An offer that has been communicated to the other party is what begins the negotiation process. Providing the pamphlet on the law of real estate agency is a duty that brokers owe to all parties to whom they provide real estate brokerage services. A valid contract has four elements: mutuality, consideration, legal object, and The answer is competent parties. In writing and signed is only a requirement for contracts that are also covered under the Statute of Frauds. Many contracts can be oral, which means that they are not covered under the Statute of Frauds and only need to comply with these four basic elements of a valid contract. Which of the following is TRUE regarding open houses? The answer is the listing broker should request that the owner not be at the open house. Owners should never be present during open houses or during times when their home is being shown. They will tend to damage their own interest in a future negotiation by disclosing information that doesn't require disclosure, by attempting to bargain with prospective buyers, and by even arguing with those who make critical remarks about the property. It is the job of the broker to negotiate, and the owner's comments can create real problems when he attempts to assume this role. The relationship between the designated broker and the broker may be terminated The answer is unilaterally by either the designated broker or by the broker or the managing broker. This relationship may be terminated unilaterally by either the designated broker or by the broker or the managing broker. Notice of this termination must be given to the Director by the designated broker without delay, and the notice must be accompanied by and include the surrender of the broker's or managing broker's license. For an FHA-insured loan, The answer is an authorized FHA appraiser carries out the appraisal. For an FHA-insured loan, an authorized FHA appraiser carries out the appraisal, but not all appraisers are authorized by the FHA. The Department of Housing and Urban Development (HUD) requires additional education and training for its appraisers, and it requires state licensing or certification. The appraiser also must be approved by the lender to conduct FHA appraisals. Although fair housing laws prohibit many forms of discrimination, the protected classes do NOT include smokers. A seller owns 8 acres of commercially zoned property. If he sells it for $10.15 per square foot, what is the selling price? The answer is $3,537,072. 8 acres x 43,560 square feet = 348,480 square feet 348,480 square feet x $10.15 = $3,537,072 Lis pendens means a notice of a pending legal action. There are several diverse skills that a broker needs to be successful in the real estate business. Being able to manage time and work independently are two of these skills. Why are these two skills important? The answer is brokers who are successful are very busy with a number of different transactions, listings, and buyer services happening at the same time; thus, the ability to work independent and manage time are crucial. Brokers must perform several duties at once and cannot rely on another to make sure that this is being done; however, this doesn't mean that the broker should not look to his managing/designated broker for training, supervision, and help in problem solving. It just means that the broker should not expect his managing/designated broker to organize his work and direct when he provides service. With an exclusive agency listing agreement, The answer is if the residential real property is sold through the real estate firm, the firm would get paid. An exclusive agency sale and listing agreement is used when sellers have given a real estate firm the right to collect a commission for the successful sale and closing of the sellers' residential real property if the residential real property is sold through the listing firm or any other real estate firm. If the sellers sell the property on their own with no real estate firm involved, the sellers do not have to pay a commission to the listing firm. A broker is holding an initial meeting with the buyer. After presenting The Law of Real Estate Agency pamphlet and discussing the possibility of representing this buyer, the buyer is ready to sign a Buyer's Representation (Agency) Agreement. However, when the buyer reads the paragraph about commissions, he is hesitant as he doesn't want to pay the broker's firm any commissions or fees out of his own pocket. What should the broker tell the buyer? "The majority of the homes you will see are listed on the MLS, and the seller, through the listing firm, has agreed to pay what we call a cooperating commission to the real estate firm that represents the buyer who purchases the seller's home. The amount the seller pays that is shared with our firm will offset most, if not all, of the commission that you are agreeing to pay in our listing contract with you." A buyer provided an earnest money deposit. The selling broker's firm is typically willing to accept a personal check. The buyer and the seller have a serious problem regarding a real estate transaction. The seller, having second thoughts, decides to back out of the Residential Purchase and Sale Agreement. The buyer, having wanted this particular property by the lake for many years, sues the seller. Assuming the buyer wins the lawsuit, which remedy makes the MOST sense in this situation? The answer is specific performance. Specific performance is a remedy the court would order that would force the seller to sell his property to the buyer; in other words, the seller would have to do exactly what he said he would do under the contract (i.e., specifically perform the contract). Because this particular property is unique from all others, nothing else is fair to the buyer. Any monetary damages, whether these be a larger amount under compensatory or a much smaller amount under nominal damages, will not be satisfactory as no amount of money will take the place of that exact property. Which of the following duties is owed to a client but NOT to a customer? The answer is confidentiality. Brokers have fewer specific obligations to customers than to clients.