Kentucky Real Estate Mock Test 1 Questions With Correct Answers

If a broker's branch office is 75 miles from his main office, the person managing this branch office must: - Answer Have been licensed for 2 years averaging 20 hours per week in the business. Which of the following is NOT true regarding a sale-leaseback? - Answer The ownership of the property never transfers. Dino owns property rights located on Lake Michigan where he docks his yacht. His water rights are called: - Answer Littoral rights Which of the following is NOT a duty of the real estate agent: - Answer To accept offer on behalf a client. After receiving recommendations from the KY Assoc of REALTOR, the governor appoints: - Answer 5 commissioners, four of whom have had an active license for the past 10 years. A seller listed her property for $100,000 and told her agent not to present her with any offer les than $99,000. 3 days later a buyer wanted to make a written offer of $95,000. The agent... - Answer Must present the buyer's offer to the seller. Which of the following would not be a disciplinary action of the KREC? - Answer A jail term - KREC cannot send a licensee to jail. Ann conveys a life estate to Paul based on the life of Troy. Paul has 2 children who live with him and help him care for Troy. What is the status of the life estate if Paul predeceases Troy? - Answer The property would revert to Paul's children, so long as Troy was alive. A life estate pur autre vie means tha the life estate is based on a 3rd party- in this instance, Paul or his heirs would have a life estate to the property o long as Troy was alive. Which of the following is NOT true regarding title insurance: - Answer The mortgagee's policy is for the value of the property - it's for the loan balance and decreases as each payment is made on the loan. When a lender charges more interest than is legally allowed, it is known as - Answer Usury A buyer made an offer on a property which was accepted by the seller. Three days before the closing, the title was found to be defective and the buyer negated the contract. Under these circumstances the - Answer brokerage has earned a commission because it found a ready, willing and able buyer A leasehold estate that automatically renews for the original term is a/an - Answer Periodic Tenancy The seller accepted a signed offer. The earnest money must - Answer be placed in the broker's escrow account within 3 business days A tenant leased a commercial space for a dance studio. The tenant purchased and installed mirrors on all the walls in the practice room. Which of the following statements is NOT true in this situation: - Answer The mirror are legally classified as fixtures; the mirror are legally classified as TRADE FIXTURES, or the personal property of a tenant that is installed for the use of business. Which of the following would relieve the lessee of any obligation to make the rental payments? - Answer Constructive eviction Dr. Wilder bought a home for $125,000. She obtained a 90% mortgage at an interest rate of 8% for 30 years. Other expenses included title insurance of $425, 2 discount points, 1% origination fee, and attorney fees of $250. Taxes of $955 for the year have been paid. If the closing takes place on June 23, how much money does Dr. Wilder need to bring to the closing? (Use 360 days in a year and the seller is responsible for the day of closing.) - Answer $17,248.20 Buyer Credits: $125,000 x 90% = $112,500 Loan Buyer Debits: $125,000 - Sale Price $112,500 Loan x 8% = $9,000 Annual Interest $9,000 ÷ 360 = $25 Daily Interest Rate $25 x 8 days = $200 (Buyer would owe interest from June 23 - June 30.) $425 - Title Insurance $112,500 x 2% = $2,250 Discount Points $112,500 x 1% = $1,125 Origination Fee $250 Attorney Fee $955 ÷ 360 = $2.65 Daily Tax Rate June 23 - December 30 = 188 days $2.65 x 188 days = $498.20 Debit to buyer for taxes. Total debits: $125,000 + $200 + 425 + 2,250 + 1,125 + 250 + 498.20 = $129,748.20 Total credits: $112,500 $129,748.20 - 112,500 = $17,248.20 A veteran's offer of $65,000 was accepted. She made a $3,000 down payment on the property. The seller agreed to pay the 4 discount points and a 6% commission. If the seller owned the property free and clear, the seller will net - Answer $58,620 Step 1 $65,000 - $3,000 = $62,000 Step 2 $62,000 x 4% = $2,480 Step 3 $65,000 x 6% = $3,900 Step 4 $65,000 - 2,480 - 3,900 = $58,620 Which of the following is NOT an executory, bilateral contract? - Answer Open Listing An open listing is an executory contract, meaning there are duties and obligations to perform, but it is a unilateral contract because only one party is obligated to perform. (The seller is obligated to pay if the brokerage brings a ready willing and able buyer. The brokerage has no duties to perform.) Which of the following terms is associated with a security that is being sold across state lines? - Answer Interstate The percentage lease agreement provides for the following terms: a monthly rent of $500 and 5% of the annual gross sales of the lease over $300,000. The total rent paid at the end of the year was $12,250. What was the gross volume of business for the year? - Answer $425,000 $500 x 12 = $6,000 $12,250 - 6,000 = $6,250 $6,260 ÷ 5% = $125,000 $300,000 + 125,000 = $425,000 A borrower purchased mortgagee's title insurance on a property. After the final payment was made on the mortgage, a title defect was found. The borrower would have recourse through the - Answer previous owner if a general warranty deed was transferred at the closing. Most lenders require the borrower to purchase the mortgagee's title insurance, which covers the lender. The mortgagee's title policy decreases as each payment is made and once the loan is paid in full the coverage stops. In this situation, the borrower would have recourse through the previous owner if a general warrant deed was transferred at closing. Which of the following mortgages would include both real and personal property? - Answer Package mortgage A package mortgage would include both real and personal property. This type of mortgage may be used in resort communities where the condo or house is furnished and the buyer can simply move in. An 80% loan was negotiated with an interest rate of 10%. The first month's interest payment was $833.33. What was the sale price of the property? - Answer $125,000 $833.33 x 12 = $9,999.96 $9,996.96 ÷ 10% = $99,999.60 $99,996.96 ÷ 80% = $124,999.50 or $125,000 Which of the following is not required to secure a sales associate Kentucky Real Estate License? - Answer Be at least twenty-one years of age The optionee's attorney met with the optionor and presented the signed document wherein his client exercised her option. An option contract that has been exercised is a/an - Answer bilateral, executory contract. An option contract is a unilateral contract because only the seller is obligated to perform or sell if the buyer wants to buy. When the buyer says, "I'm going to exercise my option and purchase the property." the option contract becomes a bilateral, executory contract. Both buyer and sellers have duties to perform. A person dies testate. The person named to settle the estate would MOST LIKELY be called - Answer an executor If it is determined that the complaint contains prima facie evidence, how many days does the licensee have to answer? - Answer 20 days Broker Nelson appointed Julia, as only agent representing the seller and Barron as the only agent representing the buyer. Broker Nelson's agency policy is that of - Answer designated agency When a real estate firm has an in-house dual agency, where an individual agent is designated to represent only the interests of the seller the same instance for the buyer. A person would be a special agent in which of the following transactions? - Answer When a person has been given the authority to sign closing documents for the seller. A special agent is also known as a limited agent. A special agent is given limited authority, such as signing closing documents for the seller The minimum amount that Kentucky law requires that may be maintained in the Recovery Fund is - Answer $400,000 In a percentage lease the tenant agreed to pay $650 fixed rent per month and 3% of the gross sales over $75,000. If the sales were $150,000 this year, what was the total rent paid for the year? - Answer $10,050 Step 1 $650 x 12 = $7,800 Step 2 $150,000 - $75,000 = $75,000 Step 3 $75,000 x 3% = $2,250 Step 3 $7,800 + 2,250 = $10,050 An agent changed her surname. The agent - Answer must give written notification to the KREC of the change. 324.330 requires written notification to the KREC of a change of surname. There is no time frame, but it should take place in a timely manner. Please note.Licensees shall annually file their telephone numbers and email addresses with the Commission. A suit to quiet title would be filed under which of the following circumstances? - Answer When there is an adverse possession claim on the property. Mr. Singleton's primary residence cost $250,000. During his period of ownership he added a tennis court at a cost of $10,000 and made other improvements at a cost of $20,000. Two years later he sold the property for $350,000 and paid a 7% commission. If he buys another home for $350,000, how much capital gains can he defer? - Answer $0 because there is no deferment of capital gains on a principal place of residence. There is no deferment of capital gains when selling a principal place of residence. A capital gain is deferred on investment property if IRS guidelines are followed. What party is responsible for giving the Condominium Certificate to the Homeowner's Association for completion? - Answer Seller Which of the following would be an example of external obsolescence? - Answer A neighbor who doesn't maintain his property.