REAL ESTATE FINAL EXAM 2024/2025 QUESTIONS AND CERTIFIED ANSWERS

REAL ESTATE FINAL EXAM 2024/2025 QUESTIONS AND CERTIFIED ANSWERS "Which of the following types of ownership CANNOT be created by operation of law, but must be created by the parties' expressed intent? • 1 Community property • 2 Tenancy in common • 3 Condominium ownership • 4 Tenancy by the entireties - CORRECT ANSWER • 4 Tenancy by the entireties Tenancy by the entireties is a form of ownership that husbands and wives can choose or create by deciding to do so and declaring it as such in contracts and deeds. Tenancy in common is put in motion by state law. Community Property is a law of ownership that exists in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and some other states. Tenancy by the Entireties is an estate that is recognized in some states between husband and wife, who have equal right of possession and enjoyment during their joint lives and with the right of survivorship--that is when one dies, the property goes to the surviving tenant. (In many states, if couples do not specify "Joint Tenancy," this form of ownership will be automatically assumed.) Tenancy in Common is a type of joint ownership by parties NOT married, that allows a person to sell his share or leave it in a will without the consent of the other owners. If a person dies without a will, his share goes to his heirs, not to the other owners." "Personal property includes all of the following EXCEPT • 1 chattels. • 2 fructus industriales. • 3 emblements. • 4 fixtures. - CORRECT ANSWER • 4 fixtures. "Chattel" is a legal term that means personal property. Emblements and fructus industriales refer to profit from crops that are grown as a result of a person's labor, such as corn, as opposed to those that occur naturally, such as grass or minerals. By the custom of English common law, they are considered personal property. By contrast, a fixture is considered attached to a property and thus part of the structure." "A person who has complete control over a parcel of real estate is said to own a • 1 leasehold estate. • 2 fee simple estate. • 3 life estate. • 4 defeasible fee estate. - CORRECT ANSWER • 2 fee simple estate. All the other options have conditions attached. A leasehold estate is, as the name implies, leased property. Similarly, a life estate gives a person ownership or control of a property only for the duration of his or her natural life. "Defeasible estates" give a person or entity control over a property only so long as certain conditions are met or avoided. For example, a community might be deeded a property on the condition that it be used only for building a school, or land willed to a child on the condition it never be used for commercial development. If the community tries to use the property for a recreation complex or the heir tries to sell to a retail developer, control would automatically revert to another party and the deed would become void." "A portion of Wendell's building was inadvertently built on Ginny's land. This is called an • 1 accretion. • 2 avulsion. • 3 encroachment. • 4 easement. - CORRECT ANSWER • 3 encroachment. The principal attributes of an encroachment are: 1) It is accidental and 2) it involves only part of a structure. Typically, the issue would be resolved by selling Wendell an easement or a lease or, if practical, actually moving the structure." "The purchase of a ticket for a professional sporting event gives the bearer what? • 1 An easement right to park his car • 2 A license to enter and claim a seat for the duration of the game • 3 Partial ownership in the professional sporting team • 4 A license to sell food and beverages at the sporting event - CORRECT ANSWER • 2 A license to enter and claim a seat for the duration of the game Easements grant access, not use. Commercial licenses, such as those required to sell beverages, souvenirs or services, cover extended periods. Although tickets to sporting events, concerts, shows and the like are technically licenses, they differ from most in their degree of restriction. For example, a concert ticket does not give the bearer the right to sit anywhere he or she chooses or wander backstage to meet the performers." "Jim and Sandy are next-door neighbors. Sandy tells Jim that he can store his camper in her yard for a few weeks until she needs the space. Sandy did not charge Jim rent for the use of her yard. Sandy has given Jim a(n) what? • 1 Easement appurtenant • 2 Easement by necessity • 3 Estate in land • 4 License - CORRECT ANSWER • 4 License Granting the use of property for a defined period for a specific purpose is almost always a form of licensing. Easements grant only access, not ownership, use or occupancy rights. Further, that access is generally for the benefit of the property owner, such as maintaining utilities or sidewalks." "Owner Stan has been defaulting on mortgage payments and owes more than his property is worth. Stan's lender is allowing him to sell the property for less money than necessary to satisfy the loan. The bank has permitted Stan to do what? • 1 Commit tax fraud • 2 Short sale the property • 3 Deed the property to HUD • 4 "Flip" the property - CORRECT ANSWER • 2 Short sale the property Short sales avoid the delay and expense of a foreclosure sale. The lender usually forgives the mortgage balance owed after the sale." "A defaulting borrower who faces foreclosure may avoid court actions and costs by voluntarily deeding the property to the mortgagee. This is accomplished with a __________, which transfers legal title to the lienholder. • 1 short sale • 2 deficiency judgment • 3 deed in lieu of foreclosure • 4 caveat emptor - CORRECT ANSWER • 3 deed in lieu of foreclosure With the deed in lieu option, a borrower voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. The transfer, however, does not terminate any existing liens on the property." "In a gift of a parcel of real estate, one of the two owners was given an undivided 60 percent interest and the other received an undivided 40 percent interest. The two owners hold their interests as what? • 1 Cooperative owners • 2 Joint tenants • 3 Community property owners • 4 Tenants in common - CORRECT ANSWER • 4 Tenants in common In order to create joint tenancy, some form of relationship must exist between the parties involved, whether business, spousal or other. Because their interests were acquired as a gift, the parties in this instance become tenants in common, with all the ownership benefits of joint tenancy, but not the survivorship rights." "To create a joint tenancy relationship in the ownership of real estate, there must be unities of • 1 desires, ownership, claim of right, and possession. • 2 title, interest, liens, and survivorship. • 3 possession, time, interest, and title. • 4 ownership, possession, heirs, and title. - CORRECT ANSWER • 3 possession, time, interest, and title. This essentially means that all parties to the agreement share equally in all aspects of the property, including the length of time it's been held. That means if one party sells or transfers interest in a joint tenancy relationship, his or her place is taken by another in the same capacity." "What is a Schedule of Exceptions on a title policy? • 1 Encumbrances • 2 Tax liens • 3 List of things not insured in the policy • 4 Defects - CORRECT ANSWER • 3 List of things not insured in the policy Almost no title insurance policy protects against all conceivable events. As the name suggests, the Schedule of Exceptions is a specific list of items not covered and can include things such as unrecorded mechanic's liens, assessments, water rights and mining claims." "Owner Grace's property has been foreclosed. After the property was sold for $340,000, she still owed $60,000 to the lender. The lender may be able to get a personal judgment against Grace for the $60,000. This is called a • 1 leverage lien. • 2 partition lawsuit. • 3 reverse foreclosure judgment. • 4 deficiency judgment. - CORRECT ANSWER • 4 deficiency judgment. A deficiency judgment enables the lender to attach and foreclose a judgment lien on other real or personal property the borrower owns.The lender's ability to pursue such a judgment may be limited, however." "Which of the following liens does not need to be recorded to be valid? • 1 Materialman's lien • 2 Real estate tax lien • 3 Judgment lien • 4 Mechanic's lien - CORRECT ANSWER • 2 Real estate tax lien The requirement for individuals to record liens is due in part to the necessity of correctly identifying the complainant. For example, not just "Jones Contracting," but the specific Jones Contracting that performed the work and is owed the money. Because they bear the authority of government and are easily identified, liens by taxing authorities do not need to be recorded." "A homeowner owned a house on a lot. The front ten feet of the lot were taken by eminent domain for a sidewalk. Would the homeowner be entitled to compensation? • 1 Yes. The land was taken for public use by eminent domain. • 2 Yes. He must be paid for the use of the sidewalk. • 3 No. He still had use of the house and lot. • 4 No. Compensation is not given on land taken for public use. - CORRECT ANSWER • 1 Yes. The land was taken for public use by eminent domain. Governments and municipalities can only seize property (other than in criminal cases) for the public good and through eminent domain, which is a process, not an arbitrary action. Part of that process involves determining fair compensation to the owner." "The covenant in a deed which states that the grantor is the owner and has the right to convey the title is called • 1 covenant of power. • 2 covenant of warranty forever. • 3 covenant of seisin. • 4 covenant against encumbrances. - CORRECT ANSWER • 3 covenant of seisin. Another outgrowth of the feudal system, "seisen" derives from the French meaning to "sit upon or own" and gives owners the right to sell or transfer property at will." "The recording of a deed • 1 is all that is required to transfer the title to real estate. • 2 gives constructive notice of the ownership of real property. • 3 insures the interest in a parcel of real estate. • 4 warrants the title to real property. - CORRECT ANSWER • 2 gives constructive notice of the ownership of real property. Recording a deed does not convey, insure or warrant ownership. However, it does protect the owner's interest in a property by serving notice that the recorded owner is the only recognized holder of title. This places a larger burden of proof and process on someone trying to assert a prior ownership interest and/or claiming a deedholder's title is clouded." "Which of the following provides a buyer with the best assurance of clear, marketable title? • 1 Certificate of title • 2 Title insurance • 3 Abstract of title • 4 General warranty deed - CORRECT ANSWER • 2 Title insurance Title insurance provides the best assurance of marketable title." "What do liens and easements have in common? • 1 Both are encumbrances. • 2 Both must be on the public record to be valid. • 3 Neither can be done without the consent of the owner. • 4 Both are money claims against the property. - CORRECT ANSWER • 1 Both are encumbrances. Liens are, of course, serious in that they indicate the owner has failed to pay a debt secured directly or indirectly by the property. Easements, on the other hand, are generally a practical necessity for most residential properties." "Broker Kiki is trying to sell a unique $15,000,000 mansion in South Beach. What advertising medium would probably be the best option for Kiki to sell this particular property? • 1 A magazine ad • 2 A billboard ad • 3 A telephone directory ad • 4 A radio ad - CORRECT ANSWER • 1 A magazine ad A magazine ad, although significantly more expensive than newspaper advertising, could be just what a firm needs to attract wealthy clients to their upscale offerings. Or a specialty magazine could be the appropriate venue for a particularly unique property." "When a claim is settled by a title insurance company, the company acquires all rights and claims of the insured against any other person who is responsible for the loss. This is known as what? • 1 Caveat emptor • 2 Surety bonding • 3 Subordination • 4 Subrogation - CORRECT ANSWER • 4 Subrogation For example, let's say Amanda buys a property and the seller provides a general warranty deed stipulating clear title. However, that turns out not to be the case and a third party provides a valid claim to a share of the property. Since Amada took out title insurance, the title insurance company negotiates and pays a settlement with the claimant on Amanda's behalf. Amanda's right to sue the seller then transfers to the title insurance company, which will take action to recover the amount they paid on Amanda's behalf." "Which of the following would be used to clear a defect from the title records? • 1 A lis pendens • 2 An estoppel certificate • 3 A suit to quiet title • 4 A writ of attachment - CORRECT ANSWER • 3 A suit to quiet title A owner might bring a "quiet title" action to correct a minor mistake in the property description or to remove an easement that's been unused for years. Additionally, they are used when a third party tries to asset some right to the property through a dubious claim. The suit "quiets the mouth" of that person and establishes a clear title." "A bill of sale is used to transfer the ownership of what? • 1 Real property • 2 Fixtures • 3 Personal property • 4 Appurtenances - CORRECT ANSWER • 3 Personal property Personal property differs from "real property" in a number of respects, most importantly its portability. Cars, furniture, clothing, paintings, jewelry, appliances and just about any other non-food item one buys are examples of personal property." "All real estate sales must be reported to the Internal Revenue Service after closing. The sale must be reported on • 1 a W-2. • 2 a Form-2555. • 3 a Form-1099. • 4 a Form-5305. - CORRECT ANSWER • 3 a Form-1099. The responsibility for filling out and submitting the 1099 generally falls to the person who conducted the closing." "When the preliminary title report reveals the existence of an easement on the property, it indicates that the easement is a(n) • 1 lien. • 2 encumbrance. • 3 encroachment. • 4 tenement. - CORRECT ANSWER • 2 encumbrance. Anything that limits a person's use of a property is an encumbrance. Easements limit use in that they generally prohibit any kind of permanent structure on the area in question. For example, if a homeowner wanted to build a swimming pool in an area of his back yard and the local sewer company had an easement for pipes running under that area, he would have to find another location for his pool, even if it was not as desirable." "The Federal Fair Housing Act states that a prima facie case against a broker for discrimination be established after a complaint has been received because the broker has failed to do which of the following? • 1 The broker has failed to display a HUD Equal Opportunity poster. • 2 The broker has failed to hire any minority salespeople. • 3 The broker has failed to join the NAACP anti-discriminatory task force. • 4 The broker has failed to attend mandatory classes on fair housing. - CORRECT ANSWER • 1 The broker has failed to display a HUD Equal Opportunity poster. Included among Fair Housing regulations is the requirement that the HUD Equal Opportunity signage be prominently displayed." "A broker is discussing a new listing with a prospective Mexican-American buyer. The buyer wants to inspect the property immediately, but the owner of said property has instructed the broker, in writing, not to show the house during the owner's three-week absence. The buyer insists on viewing the property. The broker should • 1 show the property to avoid a violation of the Federal Fair Housing Act. • 2 request the Real Estate Commission arbitrate the problem. • 3 inform the buyer of the seller's instructions. • 4 notify the nearest HUD office. - CORRECT ANSWER • 3 inform the buyer of the seller's instructions. Following an owner's lawful instructions is not only allowable, but a responsibility of the licensee. However, if the owner instructed the broker to tell minority buyers that he was out of town when he was not in order to avoid selling to a minority, the broker would be in violation of the law if he acted as the owner requested." "A three-story apartment complex built in 1965 does not meet with the handicapped access provisions for the 1988 Fair Housing Act. The owner must • 1 make the ground floor handicapped accessible. • 2 make the 1st and 2nd floors accessible. • 3 make the entire building accessible. • 4 the owner doesn't have to comply since it's less than 4 stories. - CORRECT ANSWER • 1 make the ground floor handicapped accessible. Because the building was constructed before the 1991 standards went into effect, only the first floor needs to be modified." "Carl Chauvinist, the owner of an apartment complex, lives in one unit of a triplex and routinely refuses to rent either of the other two units to a female. Can he do this? • 1 Yes. He may do this if he does not use a broker or discriminate in advertising. • 2 Yes. He may do this if he doesn't ask the tenant's age. • 3 No. Carl can never discriminate on sex. • 4 No. Carl must live in a single family home to discriminate. - CORRECT ANSWER • 1 Yes. He may do this if he does not use a broker or discriminate in advertising. Although laws vary by state as to number of units that fall under this type of provision, if a person owns and lives in a unit, he or she is entitled to practice a certain measure of discrimination. The view is that a person's dwelling (which includes units such as duplexes and triplexes) enjoys a degree of "sanctity" and the person may choose whom he or she brings into their "home."" "An aggrieved party with a Fair Housing violation claim has how long to file a complaint with the Department of Housing and Urban Development? • 1 1 month • 2 6 months • 3 1 year • 4 3 years - CORRECT ANSWER • 3 1 year If the complaint is not filed within one year, a person may still file a civil suit in a Federal Court." "A void contract is one that is • 1 not in writing. • 2 not legally enforceable. • 3 rescindable by agreement. 4 voidable by only one of the parties. - CORRECT ANSWER • 2 not legally enforceable. In order to be enforceable, real estate contracts must meet the legal requirements for contracts in general. For example, a contract signed by a minor or a "seller" who doesn't own the property in question was never legal to begin with and is thus "void."" "The essential elements of a contract include all of the following EXCEPT • 1 offer and acceptance. • 2 notarized signatures. • 3 competent parties. • 4 consideration. - CORRECT ANSWER • 2 notarized signatures. A contract sets forth the terms and conditions of a real estate transaction, but does not itself transfer ownership. Thus it does not need to be notarized." "If, upon the receipt of an offer to purchase his property under certain conditions, the seller makes a counteroffer, the prospective buyer is • 1 bound by his original offer. • 2 bound to accept the counteroffer. • 3 bound by whichever offer is lower. • 4 relieved of his original offer. - CORRECT ANSWER • 4 relieved of his original offer. Offers are "one-time-only" events that must be accepted or rejected. Once the seller made a counter-proposal, he rejected the buyer's offer and no contract exists. The buyer is under no obligation to continue and is entitled to have any earnest money that accompanied the offer returned immediately." "When a prospective buyer makes a written purchase offer that the seller accepts, then the • 1 buyer may take possession of the real estate. • 2 seller grants the buyer ownership rights. • 3 buyer receives legal title to the property. • 4 buyer receives equitable title to the property. - CORRECT ANSWER • 4 buyer receives equitable title to the property. "Equitable title" means that the prospective buyer has obtained the right to acquire ownership of a property currently owned and occupied by another." "H agrees to purchase V's real estate for $230,000 and deposits $6,900 earnest money with Broker L. However, V is unable to clear the title to the property, and H demands the return of his earnest money as provided in the purchase contract. Broker L should • 1 deduct his commission and return the balance to H. • 2 deduct his commission and give the balance to V. • 3 return the entire amount to H. • 4 give the entire amount to V to dispose of as he decides. - CORRECT ANSWER • 3 return the entire amount to H. Brokers and salespeople only earn their commission when a transaction closes. Since the transaction was never completed, no commission is owed. Additionally, H is entitled to have all his earnest money returned since it was the seller, not he, who defaulted on the contract." "A buyer makes an earnest money deposit of $10,000 on a $300,000 property and then withdraws her offer before the seller can accept it. The broker is responsible for disposing of the earnest money by • 1 turning it over to the seller. • 2 deducting the commission and giving the balance to the seller. • 3 returning it to the buyer. • 4 depositing it in his or her trust account. - CORRECT ANSWER • 3 returning it to the buyer. A contract only exists when it is both offered by the buyer and accepted by the seller. Since the second part of this requirement was never fulfilled, the buyer is entitled to have his earnest money returned." "Broker K arrives to present a purchase offer to Mrs. D, an 80 year old invalid who is not always of sound mind, and finds her son and her daughter-in-law present. In the presence of Broker K, both individuals persistently urge D to accept the offer, even though it is much lower than the price she has been asking for her home. If D accepts the offer, she may later claim that • 1 broker K should not have brought her such a low offer for her property. • 2 she was under undue duress from her son and daughter-in-law, and, therefore, the contract is voidable. • 3 broker K defrauded her by allowing her son and daughter-in-law to see the purchase offer he brought to her. • 4 her consumer protection rights have been usurped by her son and daughter-in-law. - CORRECT ANSWER • 2 she was under undue duress from her son and daughter-in-law, and, therefore, the contract is voidable. "Duress" is the application of coercion or pressure to influence a person to act in a way contrary to his/her best interests. Further, since voluntary participation is a key condition of any contract, Mrs. D could well be successful in such an action. A voidable contract is one that is able to be voided because Mrs D was under duress or undue influence." "Which of the following closing costs is typically paid by the buyer? • 1 Private mortgage insurance (PMI) • 2 Broker's commission • 3 Satisfy existing liens • 4 A flip tax - CORRECT ANSWER • 1 Private mortgage insurance (PMI) A buyer has to pay private mortage insurance if they did not have a 20%+ down payment (unless they have a VA or FHA loan). The others are paid by the seller" "A(n) _______ is when an owner takes his property off the market for a definite period of time in exchange for some consideration, but he grants the right to purchase the property within that period for a stated price. • 1 option • 2 contract of sale • 3 right of first refusal • 4 installment agreement - CORRECT ANSWER • 1 option It's important to note that options generally give flexibility to only one side of the transaction. For example, let's say Barney is expecting a big promotion in six months and wants to buy Fred's house for $300,000 if it comes through. In exchange for keeping his home off the market for six months and agreeing to sell it to Barney for $300,000 at Barney's option, Barney gives Fred $3,000. The $3,000 is Fred's to keep no matter what. However, Barney is not obligated to buy Fred's house; it's his choice. Further, if he does get the promotion and wants to exercise his option, Fred must sell Barney his home for $300,000, even if market conditions have now made it worth more." "Which of the following is TRUE of buyer-brokerage contracts in Michigan? • 1 The appropriate form must be used for the contract to be valid. • 2 The contract must be in writing to be enforceable. • 3 Such contracts are not regulated. • 4 Such contracts are illegal. - CORRECT ANSWER • 2 The contract must be in writing to be enforceable. The buyer-brokerage agreement is an employment contract and must be in writing to be enforceable in Michigan." "John has started taking real estate re-licensing classes and agrees to help his neighbor sell her house for 3% commission. The house is sold and closing takes place 1 day after John receives his salesperson's license, but the neighbor refuses to pay the commission. Can John sue to recover the commission fee? • 1 Yes, Michigan law permits enforcement of an oral agreement in these circumstances. • 2 No, Michigan law prohibits lawsuits to collect commissions unless the injured party is a licensed broker whose license was in effect at the time the agreement was made. • 3 Yes, because John was formally enrolled in real estate education, the agreement is seen as professional and binding. • 4 No, because his commission rate was less than 5%. - CORRECT ANSWER • 2 No, Michigan law prohibits lawsuits to collect commissions unless the injured party is a licensed broker whose license was in effect at the time the agreement was made. John cannot sue because his license was not active when the agreement was made." "Which of the following type of agency relationship is NOT recognized in Michigan? • 1 Designated agency • 2 Disclosed dual agency • 3 Subagency 4 Transaction brokerage agency - CORRECT ANSWER • 4 Transaction brokerage agency Single agency (on behalf of either buyer or seller) and disclosed dual agency are the only types of agency relationships recognized in Michigan." "According to the Michigan Board of Real Estate Brokers and Salespersons, which of the following is NOT a required element of a listing agreement? • 1 Exact expiration date • 2 Signatures of both broker and seller • 3 Qualified expert's report of property condition • 4 True copy forwarded to the seller after signing - CORRECT ANSWER • 3 Qualified expert's report of property condition The rules regarding listing agreements call for an exact expiration date, signatures of both the broker and the seller, and a true copy to be made for the seller after signing." "In which of the following circumstances is a seller's disclosure statement NOT required? • 1 If the property is a commercial property. • 2 If the seller is listing the property as "for sale by owner". • 3 If the seller has not resided at the property for 1 year or more. • 4 If the buyer is the current tenant of the property. - CORRECT ANSWER • 1 If the property is a commercial property. Seller property disclosure forms are mandatory in the sale of 1- to 4-dwelling units, whether or not the buyer or seller has resided on the premises recently. However, seller property disclosure forms are NOT required in the sale of commercial properties." "The seller accepts an offer from the buyer before providing the seller's disclosure statement. Which of the following actions may the buyer take? • 1 The buyer may withdraw from proceedings any time prior to the closing. • 2 The buyer may sue the seller for not providing the mandatory disclosure statement. • 3 The buyer may sue the broker after closing for failure to provide the disclosure statement. • 4 The buyer must request a seller's disclosure statement within 72 hours of the seller's acceptance of their offer or the buyer will have no legal grounds to terminate the agreement. - CORRECT ANSWER • 1 The buyer may withdraw from proceedings any time prior to the closing. If the sellers did not provide the buyers with a seller's disclosure statement before accepting the buyers' offer, the buyers have the right to back out of the agreement at any time before the closing." "A prospective buyer contacts a real estate office and tells the agent that he is interested in the area but is not ready to sign any agreements just yet. Which of the following may the agent NOT do? • 1 The agent can provide information on mortgage interest rates and terms. • 2 The agent can explain to the buyer about buyer agency seller agency, and dual agency. • 3 The agent can prequalify the buyer for a mortgage. • 4 The agent can provide information on properties for sale in the area. - CORRECT ANSWER • 3 The agent can prequalify the buyer for a mortgage. An agent cannot obtain confidential information about a buyer without first entering into a buyer agency relationship. Thus, the agent may NOT prequalify the buyer for a mortgage." "Which of the following pieces of information is NOT considered confidential in a dual agency relationship? • 1 The buyer's financial situation • 2 That the buyer's offer exceeds the seller's minimum price • 3 That the buyer would actually be willing and able to pay more than they offered • 4 Comparable market data for the seller after the buyer has requested and received such information - CORRECT ANSWER • 4 Comparable market data for the seller after the buyer has requested and received such information Any information about the buyer's or seller's finances or minimum/maximum acceptable price is to be kept confidential, but comparable market data may be shared with the seller after the buyer has requested and received such information." "At which point must an agency relationship be formally established between the broker and a buyer or seller? • 1 Prior to receiving any information that is considered confidential • 2 Prior to showing any properties or making a substantial business contact • 3 At least by the time that a written offer is tendered and accepted • 4 At any time before the closing - CORRECT ANSWER • 1 Prior to receiving any information that is considered confidential The brokerage relationship with a buyer or seller must be determined before receiving any type of information that could be considered confidential." "Which of the following entities administers the real estate license law in Michigan? • 1 Michigan Association of Realtors • 2 Michigan Board of Real Estate Brokers and Salespersons • 3 Michigan Department of Civil Rights • 4 Department of Housing and Urban Development (HUD) - CORRECT ANSWER • 2 Michigan Board of Real Estate Brokers and Salespersons The Michigan Board of Real Estate Brokers and Salespersons administers the license law while the Department of Civil Rights deals with fair housing complaints and HUD (federal agency) oversees housing issues. The state associate of Realtors is a trade association." "Who selects the members of the Michigan Board of Real Estate Brokers? • 1 Real estate licensees • 2 Michigan Association of Realtors • 3 The Governor • 4 The Michigan House of Representatives - CORRECT ANSWER • 3 The Governor The Governor appoints members to the Michigan Board of Real Estate Brokers and Salespersons with the advice and consent of the Senate." "Which of the following is required under Michigan law? • 1 Sellers must divulge all known material defects that might affect the sale. • 2 Brokers must reveal any material defects that might affect the sale even if the seller has already done so in the seller's disclosure statement. • 3 The broker must keep all information shared by the seller confidential. • 4 The broker must share all relevant information provided by the seller. - CORRECT ANSWER • 1 Sellers must divulge all known material defects that might affect the sale. The state of Michigan requires sellers to reveal any known material defects that might affect the sale." "Which of the following actions is under the authority of the Michigan Board of Real Estate Brokers and Salespersons? • 1 Writing rules and regulations for real estate licensees to follow • 2 Administering licensing exams at the testing sites • 3 Enacting the laws that real estate licensees must follow • 4 Composing examination questions for the state licensing exam - CORRECT ANSWER • 1 Writing rules and regulations for real estate licensees to follow The Michigan Board of Real Estate Brokers and Salespersons has the authority to write the rules and regulations that have the force of law while the legislature is charged with enacting law. An independent testing service writes test questions and administers the exams for state licensure." "In the following situations, which is NOT grounds for the Michigan Board of Real Estate Brokers and Salespersons to initiate an investigation of a licensee? • 1 The Board votes to investigate a random selection of licensees on an annual basis in an attempt to uncover illegal practices. • 2 A consumer has written a letter to the Board complaining about a brokerage's failure to appropriately represent her interests. Based on the letter the Board decides to investigate the supervising broker. • 3 By its own initiative the Board decides to investigate a licensee rumored to be in violation of license laws requiring disclosure statements. • 4 Based on rumors of unfair and illegal practices, a member of the Board makes a motion to investigate a licensee suspected of corrupt practice. - CORRECT ANSWER • 1 The Board votes to investigate a random selection of licensees on an annual basis in an attempt to uncover illegal practices. The Board may investigate for any legitimate reason based on a motion passed by members, their own initiative, or a written complaint from a customer but not based on random selection." "In Michigan, which of the following individuals needs a real estate license? • 1 Two business partners selling an apartment they own jointly. • 2 Patty Lehmann is a leasing agent who employs 2 other leasing agents. • 3 A tenant of an apartment complex who receives half off her monthly rent for the referral of prospective tenants. • 4 A licensed attorney acting under a power of attorney to convey real estate to the nephew of a deceased client. - CORRECT ANSWER • 2 Patty Lehmann is a leasing agent who employs 2 other leasing agents. A person who employs any apartment leasing agents is required to be a licensed real estate broker or salesperson. Neither someone selling their own property, nor a tenant receiving a consideration of half of 1 month's rent, nor anyone holding a power of attorney needs to be a licensed real estate agent." "Which of the following facts does NOT have to be disclosed in a listing contract? • 1 The seller's net return • 2 The property's condition • 3 Any special compensation • 4 The disposition of earnest money in the event of default of buyer or seller - CORRECT ANSWER • 1 The seller's net return The seller's net return does not need to be discussed in a listing contract." "Which of the following activities is NOT considered to be "engaging in the real estate business"? • 1 Collecting apartment rent • 2 Building residential homes • 3 Selling residential homes • 4 Reselling manufactured houses - CORRECT ANSWER • 2 Building residential homes Selling real estate, reselling manufactured homes and collecting rent for use of real estate are all considered real estate business activities. Builders of residential homes fall under the jurisdiction of residential builders licensing requirements." "An applicant for the real estate licensing exam in Michigan must submit which of the following along with an application? • 1 A current photo • 2 A sworn statement attesting to the applicant's character • 3 An appropriate fee • 4 A recommendation letter from a real estate education instructor - CORRECT ANSWER • 3 An appropriate fee The appropriate fee must accompany all applications for the licensing exam in Michigan." "A non-licensed office manager performs the following activities; coordinating the flow of paperwork, preparing advertising copy, and hiring and supervising clerical support staff. Is she in violation of the license law? • 1 Yes, because she is performing duties that require a real estate license. • 2 Yes, because all people working in a broker's office in direct contact with confidential information are required to hold a salesperson's license. • 3 No, she is not in violation of the license law because she is performing non-real estate activities that do not require licensure. • 4 Yes, because an office manager is required to hold a valid real estate license, regardless of her duties. - CORRECT ANSWER • 3 No, she is not in violation of the license law because she is performing non-real estate activities that do not require licensure. The office manager is NOT in violation of the license law because all of the activities specified are non-real estate activities which do not require licensure." "Which of the following is NOT a requirement for obtaining a broker's license in Michigan? • 1 Upstanding moral character • 2 Active employment as a licensed salesperson for at least 3 years (or equivalent) • 3 Completion of 90 hours of approved post-license real estate education coursework • 4 Minimum age of 23 - CORRECT ANSWER • 4 Minimum age of 23 The minimum age for a broker candidate is 18 years of age. Broker candidates must show evidence of completion of 90 hours of approved real estate courses, active status as a licensed salesperson for at least 3 years and good moral character." "For what period of time will a passing score on a licensing examination be valid? • 1 90 days • 2 6 months • 3 1 year • 4 2 years - CORRECT ANSWER • 3 1 year A passing examination score is valid for a period of 1 year from the date of examination." "Which of the following transactions requires a real estate license? • 1 The daughter of a couple living abroad has written authorization to sell her parents' home. • 2 An entrepreneur negotiates the sales of businesses, including equipment and buildings, for a fee. • 3 An apartment superintendent shows units to prospective tenants as part of his general duties. • 4 An individual owns and personally manages a 6-unit apartment building including collecting rents, showing available units, and providing maintenance. - CORRECT ANSWER • 2 An entrepreneur negotiates the sales of businesses, including equipment and buildings, for a fee. A real estate license IS required to sell a building, although it is not required to negotiate a sale for which written authorization is given, or to manage one's own building. Superintendents who show units in the course of normal work are specifically exempt from the requirement to hold a license." "Which of the following is an applicant for a real estate license in Michigan NOT required to do? • 1 Be pre-approved to join the National Association of Realtors • 2 Show proof of passing the license examination • 3 Be at least 18 years old 4 Complete 40 hours of the real estate pre-licensure course - CORRECT ANSWER • 1 Be pre-approved to join the National Association of Realtors All applicants must be 18 years old, have completed 40 hours of pre-licensing education, and have passed the license examination before they can qualify for a license. Licensees do not have to become Realtors." "What penalty may an unlicensed individual who engages in activities deemed to constitute real estate business face for a first-time offense? • 1 A fine not to exceed $250 • 2 Imprisonment of not more than 30 days • 3 A fine not to exceed $500, imprisonment not to exceed 90 days, or both. • 4 Community service of 90 hours - CORRECT ANSWER • 3 A fine not to exceed $500, imprisonment not to exceed 90 days, or both. An unlicensed individual charged with a first-time misdemeanor of performing activities requiring a license may be subject to a penalty of a fine not to exceed $500, imprisonment not to exceed 90 days, or both." "On what date do real estate salespersons' licenses expire in Michigan? - CORRECT ANSWER • 2 October 31st every 3 years Real estate salespersons' licenses expire every 3 years on October 31st." "Which of the following is NOT a requirement to renew a salesperson's license? • 1 Complete 6 hours of continuing education per year of every license-cycle with a minimum of 2 hours of real estate rules/law per year. • 2 Pay the renewal fee applicable to the year of license-cycle. • 3 Provide documentation from the employing broker. • 4 Hold a valid Michigan driving license. - CORRECT ANSWER • 4 Hold a valid Michigan driving license. All salespersons renewing their license must have completed the necessary continuing education, pay the applicable renewal fee and provide documentation for the employing broker." "What is the deadline to renew an expired license without financial penalty? • 1 There is no grace period without financial penalty after the expiration date. • 2 30 days • 3 60 days • 4 90 days - CORRECT ANSWER • 1 There is no grace period without financial penalty after the expiration date. A licensee with an expired license has 60 days to remit both the required license fee and a late renewal fee in order to renew the expired license. However, there is no grace period without financial penalty after the expiration date." "Which of the following must a salesperson do BEFORE placing a "For Sale" sign on a listed property? • 1 List the property • 2 Obtain the property owner's consent • 3 Get the neighbors' permission • 4 Get permission from their broker - CORRECT ANSWER • 2 Obtain the property owner's consent A broker may install a "for Sale" sign on the property after obtaining permission from the owner of the property." "A salesperson who has failed to renew her license for 3 years. Which of the following steps is she NOT required to do in order to reinstate her license. • 1 Take a 40 hour salesperson pre-license class. • 2 Take and pass the state salesperson's licensing exam. • 3 Complete a new application for licensure. • 4 Submit a written appeal to the Michigan Board of Real Estate Brokers and Salespersons petitioning for reinstatement of the expired license. - CORRECT ANSWER • 4 Submit a written appeal to the Michigan Board of Real Estate Brokers and Salespersons petitioning for reinstatement of the expired license. A salesperson who fails to renew a license within 3 full years is required to make a new application, remit the appropriate fee, complete a 40 hour pre-licensure course, and take and pass the salesperson's licensing exam." "A real estate salesperson, has let his license lapse for 27 months. What must he do to renew the license at this point? • 1 Complete 6 hours of approved continuing education for the licensing year and submit a new application along with the appropriate fee. • 2 Submit an application, the appropriate fee, and a letter explaining the licensee's reasons for allowing the license to lapse for a prolonged period of time. • 3 Retake the state licensing exam and submit a new application with the appropriate fee. • 4 Remit the required licensing fee along with a late renewal fee of $75 for each full or partial twelve-month period since license expiration. - CORRECT ANSWER • 1 Complete 6 hours of approved continuing education for the licensing year and submit a new application along with the appropriate fee. To renew a license at this point, the salesperson must complete 6 hours of approved continuing education coursework and submit a new application with the required fees." "Which of the following activities may an unlicensed real estate assistant NOT perform? • 1 Assemble and collate legal documents for a closing • 2 Prepare and distribute promotional flyers and materials • 3 Compute commission checks for active agents • 4 Clarify the details of simple contract documents for prospective buyers - CORRECT ANSWER • 4 Clarify the details of simple contract documents for prospective buyers An unlicensed real estate assistant may NOT explain simple contract documents to a buyer but may perform a range of secretarial duties under the supervision and approval of the licensee for whom they work." "A broker wishes to open a branch office in a neighboring town 12 miles from the main office. Which of the following criteria does the branch office NOT have to fulfill? • 1 Have a branch office license issued by the Department. • 2 Under the direct supervision of an associate broker. • 3 Have an actual physical location and not be a "virtual office". • 4 Have a business name that is the same as the name to which the license was issued. - CORRECT ANSWER • 2 Under the direct supervision of an associate broker. Only a branch office located MORE than 25 miles from the city limits in which the broker maintains his or her main office must be under the personal, direct supervision of an associate broker." "An Indiana resident wishes to obtain a Michigan real estate broker's license. What must he do? • 1 Establish a principal place of business in Michigan or be licensed under a resident Michigan broker • 2 File an irrevocable consent agreement in Indiana • 3 Be a licensed salesperson or broker in any state • 4 Complete all education course requirements in Indiana - CORRECT ANSWER • 1 Establish a principal place of business in Michigan or be licensed under a resident Michigan broker A nonresident who wishes to be licensed in Michigan must establish a principal place of business in Michigan or be licensed under a resident Michigan broker. He must also file an irrevocable consent agreement in Michigan." "Which of the following MUST a licensee do if they change the address of their business location? • 1 The licensee MUST give written notice to the BBB. • 2 The licensee MUST change all letterheads on business stationary. • 3 The licensee MUST give written notice to the Michigan Association of Realtors. • 4 The licensee MUST give written notice to the Department. - CORRECT ANSWER • 4 The licensee MUST give written notice to the Department. If a licensee changes the address of either a principal or branch business location, he or she must give written notice to the Department." "Records of transactions, including bank accounts or deposits referred to in these regulations, shall be • 1 destroyed once the transaction has closed. • 2 sent to the Department to maintain. • 3 available during usual business hours for inspection by the Department. • 4 kept only in digital formats. - CORRECT ANSWER • 3 available during usual business hours for inspection by the Department. The records of transactions, including bank accounts or deposits referred to in these regulations, shall be available during usual business hours for inspection by the Department." "A seller listed his house for sale with a broker and signed a listing agreement for 5 months. 2 months later he decided the house was no longer for sale. Which of the following statements is TRUE? • 1 The seller is required by law to leave his house on the market for the full 5 months. • 2 The seller has canceled the agreement and there are no penalties. • 3 The Department will decide if the seller's action was justified. • 4 The seller has withdrawn the broker's authority to sell the property and may be subject to a penalty. - CORRECT ANSWER • 4 The seller has withdrawn the broker's authority to sell the property and may be subject to a penalty. The seller may cancel the listing agreement at any time but he may be responsible for some penalties or expenses. There is no involvement from the Department." "An owner wants to list his single-family home for sale. Which of the following statements is TRUE? • 1 If he is a licensed attorney, he may list his property himself without engaging the services of a real estate licensee. • 2 He does not need a real estate license to sell his house on his own. • 3 He must first obtain a real estate license to be eligible to sell real estate, including his own home. • 4 He must apply for and receive a temporary license from the Michigan Board of Real Estate Brokers and Salespersons to legally sell his house. - CORRECT ANSWER • 2 He does not need a real estate license to sell his house on his own. In Michigan, ANY property owner may sell or rent his or her own house without obtaining a real estate license." "Which of the following steps is required of an applicant for a real estate salesperson's license in Michigan? • 1 Demonstrate United States citizenship • 2 Provide evidence of an associate degree or equivalent in real estate from an approved school • 3 Complete a 40 hour course in the general principles of real estate • 4 Complete an application for licensure and submit it, along with a statement of goals and a recommendation from a sponsoring broker - CORRECT ANSWER • 3 Complete a 40 hour course in the general principles of real estate The first step an individual must take in obtaining a Michigan real estate salesperson's license is to complete an approved 40 hour course in general real estate principles. Neither a college degree nor citizenship is a requirement." "The annual continuing education requirement in Michigan can be satisfied by which of the following? • 1 6 hours of coursework offered by an approved CE provider • 2 A 4 hour course on real estate office management software offered through the local community college • 3 An approved professional internship of at least 15 hours with a broker other than the sponsoring broker • 4 Documentation of weekly supervision with the sponsoring broker over the course of 52 weeks to discuss professional issues related to the licensee's development - CORRECT ANSWER • 1 6 hours of coursework offered by an approved CE provider To renew a Michigan salesperson's license, the licensee must complete a 6 hour course offered by an approved CE sponsor." "Who administers over the Michigan real estate license laws? • 1 Michigan Board of Real Estate Brokers and Salespersons • 2 Michigan Association of Realtors • 3 Department of Licensing and Regulatory Affairs (LARA) • 4 Better Business Bureau - CORRECT ANSWER • 3 Department of Licensing and Regulatory Affairs (LARA) Department of Licensing and Regulatory Affairs (LARE) administers Michigan's real estate license laws." "A broker holds a Michigan broker's license but claims Illinois as his home state. Which of the following is true? • 1 He is exempt from the requirement to maintain a place of business in Michigan as long as he has an office in Illinois. • 2 He must maintain a physical office in Michigan regardless of whether or not he operates an office in Illinois and agree to "Consent to Service in Illinois". • 3 He need not maintain a physical office in Michigan as long as he employs at least one Michigan licensee as a salesperson or associate broker. • 4 As long as he concurrently maintains an active broker's license in Illinois, he is exempt from any requirement to maintain physical office space in Michigan. - CORRECT ANSWER • 2 He must maintain a physical office in Michigan regardless of whether or not he operates an office in Illinois and agree to "Consent to Service in Illinois". Barry must maintain a physical office in Michigan to retain his Michigan broker's license." "Which one of the following circumstances would NOT warrant revocation of a broker's license in Michigan? • 1 Acceptance of a commission rate above 8% • 2 Felony conviction • 3 Intermingling escrow funds with personal accounts • 4 Incomplete or misidentification of status as a real estate licensee in advertising materials - CORRECT ANSWER • 1 Acceptance of a commission rate above 8% Since commission rates are always negotiable, acceptance of an above-average commission rate does not warrant revocation of a license. However, intermingling funds, felony conviction, and failure to identify licensee status in advertising materials may all result in revocation of a licensee's license." "Which of the following is NOT a type of real estate license in Michigan? • 1 Associate broker • 2 Salesperson • 3 Salesperson apprentice • 4 Branch office - CORRECT ANSWER • 3 Salesperson apprentice The 4 types of real estate license are salesperson, associate broker, broker and branch office." "A salesperson's license may be revoked in which of the following circumstances? • 1 She establishes an exclusive-right-to-sell listing contract with sellers. • 2 She sells her primary residence without engaging a broker's aid. • 3 She represents a buyer in a transaction after providing information on agency relationships. 4 She deposits a buyer's earnest money into her personal savings account. - CORRECT ANSWER • 1 A real estate partnership Associate broker and salesperson licenses are issued ONLY to individuals. A broker's license may be issued to an individual, sole proprietorship, partnership, association, common law trust or a combination of those entities." "Which of the following is a salesperson's license NOT issued to? • 1 A real estate partnership • 2 A 19 year old college dropout • 3 A 50 year old who moved to Michigan in the last year • 4 A 30 year old property manager - CORRECT ANSWER • 1 A real estate partnership Associate broker and salesperson licenses are issued ONLY to individuals. A broker's license may be issued to an individual, sole proprietorship, partnership, association, common law trust or a combination of those entities." "What are the two distinct categories within an associate broker license? • 1 Principal associate broker and under-30 associate broker • 2 Principal associate broker and managing broker • 3 Residential broker and commercial broker • 4 Principal associate broker and nonprincipal associate broker - CORRECT ANSWER • 4 Principal associate broker and nonprincipal associate broker There are two categories of responsibility within an associate broker license; principal associate broker and nonprincipal associate broker." "Which business card would be appropiate?• 1 Roy Walters, Real Estate Salesperson, Residential Property Specialist. Sponsoring broker: Willie James. • 2 Roy Walters, Real Estate Salesperson, Residential Property Specialist. 505 Waters St., Suite B. • 3 Roy Walters, Real Estate Salesperson, Residential Property Specialist. Licensed since January 1999. License number 52HJ2323. • 4 Roy Walters, Real Estate Salesperson, Residential Property Specialist. License valid through October 31 of current year. - CORRECT ANSWER • 1 Roy Walters, Real Estate Salesperson, Residential Property Specialist. Sponsoring broker: Willie James. All advertising must be done in the sponsoring broker's name, but the licensee need not specify street address or license information (including license number, year licensed, or license expiration date)." "Can an associate broker hold more than 1 broker license simultaneously? • 1 All principal and nonprincipal brokers MAY hold more than 1 associate broker license at a time. • 2 A principal broker MAY hold more than 1 associate broker license at a time; a nonprincipal broker may NOT hold more than 1 associate broker license at a time. • 3 Neither a principal or nonprincipal broker is allowed hold more than 1 associate broker license at a time. • 4 A nonprincipal broker MAY hold more than 1 associate broker license at a time; a principal broker may NOT hold more than 1 associate broker license at a time. - CORRECT ANSWER • 2 A principal broker MAY hold more than 1 associate broker license at a time; a nonprincipal broker may NOT hold more than 1 associate broker license at a time. A nonprincipal will not be issued more than 1 associate real estate broker's license as a nonprincipal, but a principal broker may hold 1 or more associate real estate broker's licenses as a principal." "Holding a law degree or masters degree in business administration will automatically will automatically earn ____ hours of real estate education towards a broker's license. • 1 40 hours • 2 20 hours • 3 60 hours • 4 30 hours - CORRECT ANSWER • 3 60 hours Holding a law degree or masters degree in business administration will automatically will automatically earn 60 hours of real estate education towards a broker's license." “Which entity is prohibited from collecting taxes on real property? • 1 Counties • 2 Townships • 3 Cities • 4 The Federal Government - CORRECT ANSWER • 4 The Federal Government There are no federal taxes on real property. The Constitution of the United States specifically prohibits such taxes. The federal government does, however, tax income derived from real property and gains realized on the sale of real property. The federal government can impose a tax lien against property for failure to pay any tax due the Internal Revenue Service." "The right to control one's property includes all of the following EXCEPT • 1 the right to invite people on the property. • 2 the right to exclude the utilities meter reader. • 3 the right to erect "no trespassing" signs. • 4 the right to enjoy pride of ownership. - CORRECT ANSWER • 2 the right to exclude the utilities meter reader. This right to enter and work on a property is granted to utility companies (water, sewer, gas and electric) as well as telephone and cable companies. Essentially, if a company provides a service and owns the equipment (e.g., phone and cable lines), they are usually granted an easement." "Which of the following is/are considered to be personal property? • 1 Wood-burning fireplace • 2 Furnace • 3 Bathtubs • 4 Lamps - CORRECT ANSWER • 4 Lamps The concept of personal property typically comes into play at the time of sale. Things that are part of the house--bathroom fixtures, fireplaces, carpeting and such--go with the sale. (Unless specifically excluded, as can happen in the case of a dining room chandelier or one or two other objects with which the owners have an emotional attachment.) Furniture, rugs, lamps and other portable items that are not "nailed down" constitute personal property and are not included in the sale." "The word "improvement" would refer to all of the following EXCEPT • 1 streets. • 2 a sanitary sewer system. • 3 trade fixtures. • 4 the foundation. - CORRECT ANSWER • 3 trade fixtures. The term "trade fixture" refers to an item installed by a tenant in a rented commercial property that he or she removes at the end of the occupancy." "All of the following are physical characteristics of land EXCEPT • 1 indestructibility. • 2 uniqueness. • 3 immobility. • 4 scarcity. - CORRECT ANSWER • 4 scarcity. Scarcity is a fundamental economic concept that holds that the rarer and more desirable something is, the more valuable it will be. For example, professional athletes are highly paid because only the smallest percentage of people have the ability to perform at that level. Land is "scarce" because there is a finite amount available and, as Will Rogers once said, "They ain't making any more of it."" "Jack owns a leasehold interest in a property whose owners or tenants agree to use the property on a periodic, non-overlapping basis. With what type of property does Jack have this leasehold interest? • 1 A cooperative • 2 A time-share • 3 A condominium • 4 A planned-urban development - CORRECT ANSWER • 2 A time-share Time-shares are most common with vacation and resort properties. Time-share arrangements provide for equal sharing of the property's expenses among the owners." "If the owner of the dominant tenement becomes the owner of the servient tenement and merges the two properties, what happens? • 1 The easement becomes dormant. • 2 The easement is unaffected. • 3 The easement is terminated. • 4 The properties retain their former status. - CORRECT ANSWER • 3 The easement is terminated. "Dominant" and "servient" tenements involve two adjacent properties in which an easement is involved. For example, let's say Bridle Creek Farms and Barnstable Farms are separate parcels divided by a country lane that provides access to the county road system. The lane is owned by Bridle Creek, but the deeds of both properties stipulate that Barnstable Farms shall have unrestricted access for the purpose of accessing county roads. That access is an easement. Thus, if the owner of Barnstable Farms buys Bridle Creek Farms, the need for the easement disappears." "Homeowner Tanya acquired the ownership of land that was deposited by a river running through her property by • 1 reliction. • 2 succession. • 3 avulsion. • 4 accretion. - CORRECT ANSWER • 4 accretion. Accretion means the addition to a parcel of land by sand or soil deposits due to the action of a river or other body of water over time. Avulsion refers to the loss of land as a result of its being washed away by sudden or unexpected action of nature, such as a flash flood that re-routes a river." "The rights of the owner of property located along the banks of a river are called • 1 littoral rights. • 2 prior appropriation rights. • 3 riparian rights. • 4 hereditament rights. - CORRECT ANSWER 3 riparian rights. "Littoral" and "prior appropriation" are different kinds of water rights: in the first case, navigation rights to an ocean or other large body of water; in the second, the right to use a water source for irrigation. A heredi