REAL ESTATE PRINCIPLES & PRACTICES FINAL EXAM QUESTIONS AND CORRECT ANSWERS

REAL ESTATE PRINCIPLES & PRACTICES FINAL EXAM QUESTIONS AND CORRECT ANSWERS "A buyer has just made the final payment on his mortgage loan to his bank. The buyer will regain his full legal title once what is recorded? - CORRECT ANSWER Satisfaction of mortgage" "A builder built a structure with six stories. Several years later, an ordinance was passed in that area banning any building higher than four stories. The building should be allowed to continue in its existing state because of a - CORRECT ANSWER nonconforming use." "In funding a loan that is secured by a residence, the lender is required to disclose all costs involved in obtaining the financing. This consumer protection is provided by the - CORRECT ANSWER Truth in Lending Act." "Which of the following contains no warranties at all and may convey no title at all, depending on the grantor's interest in the property when the deed is executed? - CORRECT ANSWER Quitclaim deed (The quitclaim deed (nonwarranty deed) provides the grantee with the least protection of any deed. It carries no covenant or warranties and conveys only such interest, if any, that the grantor may have when the deed is delivered.)" "Police power does NOT include - CORRECT ANSWER deed restrictions (Police powers include planning, zoning, subdivision regulations, building codes, and environmental protection legislation. Police power does not include deed restrictions." "Novation - CORRECT ANSWER Substituting a new obligation for an old one or substituting new parties to an existing obligation." "he principle that is the basis for the sales comparison approach is the principle of - CORRECT ANSWER substitution" "The National Do Not Call Registry - CORRECT ANSWER is a list of telephone numbers from consumers who have indicated their preference to limit the telemarketing calls they receive." "Which tax advantage is NOT associated with owner-occupied personal dwellings? - CORRECT ANSWER Ability to depreciate the property" "All these freehold estates can pass by inheritance - CORRECT ANSWER The types of freehold estates that can be transferred include: fee simple estate (can pass by inheritance); defeasible fee estate (can pass by inheritance); pur autre vie estate (can pass by inheritance), and ordinary conventional life estate with remainder or reversion (does not pass by inheritance)." "Which of the following items are NOT usually prorated between the seller and buyer at closing? - CORRECT ANSWER Tenant security deposits" "The market value of a parcel of land is - CORRECT ANSWER an estimate of the present worth of future benefits." "A seller wants to net $72,000 on the sale of his home. He has agreed to pay a brokerage commission of 6%. What is the minimum sales price that will ensure that the seller will net his $72,000? - CORRECT ANSWER 76,596" "A borrower defaulted on his mortgage loan payments, and the lender foreclosed. At the foreclosure sale, the property sold for $64,000; the unpaid loan balance at the time of foreclosure was $78,000. What must the lender do in an attempt to recover the $14,000 that is still owed? - CORRECT ANSWER Seek a deficiency judgment" "A buyer is financing her new house with a fixed rate mortgage for $394,000 for 30 years at a 6% interest rate. Her monthly principal and interest payment will be $2,364. If the buyer takes all 30 years to pay off this loan, what will be the total interest paid over the life of her loan? (Use a 30-day month/360-day year for calculations.) - CORRECT ANSWER $457,040" "A borrower has been approved for a 6.5% fixed rate 30-year mortgage loan for $138,000. He will be closing on September 27. What will be the interim interest entry on the settlement statement? - CORRECT ANSWER 99.67" "A property manager should make efforts to do all the following EXCEPT - CORRECT ANSWER reinvest the profits by making capital improvements on the property." "Which law does NOT specifically pertain to residential property management and related tasks? - CORRECT ANSWER Real Estate Settlement Procedures Act" "Someone seeking to be excused from the dictates of a zoning ordinance because of hardship should request a - CORRECT ANSWER variance A variance may also be sought to allow a deviation from an ordinance due to unique circumstances. To get a variance, the property owner must prove that there is no other reasonable use for the property and the property owner will suffer a substantial hardship if the variance is not granted. The hardship also must not have been created by the property owner." "On the settlement statement, the earnest money deposit appears as a - CORRECT ANSWER credit to the buyer." "Which statement is TRUE regarding North Carolina trust account records? - CORRECT ANSWER The North Carolina Real Estate Commission requires that records be kept for a period of three years." "The buyer agent has found a property that meets his client's detailed list of required features. The listing firm is offering the selling agent a $1,500 bonus for a signed contract by the end of the month. In North Carolina, does the buyer agent have to disclose the bonus to his buyer-client before writing an offer? - CORRECT ANSWER Yes because all compensation must be disclosed to a broker's client is a timely manner." "Assuming that the listing broker and the selling broker in a transaction split the commission equally, what was the sales price of the property if the commission rate was 6.5% and the listing broker received $2,593.50? - CORRECT ANSWER $79,800" "Assume a house is sold for $84,500, and the commission rate is 7%. The commission is split so that 60% goes to the selling broker, and 40% goes to the listing broker. Each broker splits her share of the commission evenly with the provisional broker responsible for procuring the sale. How much will the provisional broker who personally listed the property receive from this sale? - CORRECT ANSWER $1,183" "Discount points on a real estate loan are usually an expense to the buyer. The value of points is - CORRECT ANSWER determined by the market." "When the subdivision developer built the roads and installed the utilities throughout the neighborhood, what type of easement was given to the utility providers? - CORRECT ANSWER Easement in gross" "A broker-in-charge in North Carolina is responsible for all the following EXCEPT - CORRECT ANSWER supervision of all provisional brokers in the firm even if there are multiple office locations." "A $125,000 home is being built in a residential neighborhood. The block next to it is going to be rezoned to allow a mix of residential and retail uses. Because of this future zoning change, the value of the home dropped to $100,000. This is due to the principle of - CORRECT ANSWER anticipation." "Gabriel obtains his first license in August 2019. Which of the following statements is TRUE? - CORRECT ANSWER He will have to pay renewal fees by June 30, 2020, if he wants his license to remain current." "The assessed value of a parcel of land is $64,000 and the local ad valorem tax rate is $.72 per $100. Which of the following is the correct tax proration in accordance with customary practice if the closing is April 28? - CORRECT ANSWER Seller will be debited $151.04, and buyer will be credited $151.04." "The legal practice of oral buyer agency in North Carolina requires - CORRECT ANSWER the relationship be put in writing before presenting an offer." "Which of the following statements is FALSE about the North Carolina Time Share Act? - CORRECT ANSWER In North Carolina, any payments received by a time share developer or broker must be deposited in a trust or escrow account in an insured bank or savings and loan in North Carolina and remain there for 3 days or upon cancellation by the purchaser, whichever occurs first." "Which of the following statements is TRUE about subdivisions in North Carolina? - CORRECT ANSWER Just because streets have been dedicated for public use and approved by the North Carolina Department of Transportation, does not mean that the Department of Transportation has assumed responsibility for maintenance of the streets." "In North Carolina, a trustee is the conditional holder of title to mortgaged real estate. North Carolina is considered what type of state? - CORRECT ANSWER Title theory There are two different legal theories about the effect of mortgaging property—the title theory and the lien theory. Under the lien theory, which is the older, more traditional approach, a two-party mortgage instrument is used as security for the debt. The borrower (mortgagor) retains both legal and equitable title to the property. North Carolina follows the title theory." "A real estate loan that uses both real estate and personal property as collateral is known as a - CORRECT ANSWER package mortgage." "Which of the following statements is FALSE about manufactured homes in North Carolina? - CORRECT ANSWER A modular home has a vehicle identification number." A buyer's agent owes a duty of to the seller. - CORRECT ANSWER Reasonable skill, care, and honesty" "An appraiser can calculate the annual gross rent multiplier by - CORRECT ANSWER Dividing the price by the annual gross income" "A homeowner sells his home to a buyer and agrees to finance $15,000.00 of the purchase price on an installment note. The $15,000.00 on the closing statement will be . entered as: - CORRECT ANSWER Credit Buyer and Debit Seller" "The vendor/owner retains naked legal title at the time of sale but gives possession to vendee/buyer under a - CORRECT ANSWER Installment Land Contract" "A lessor believes the desirability and sales volume of a large retail store will increase dramatically in the next few years. In negotiating a long-term lease for the premises, the lessor would ask for which type of lease? - CORRECT ANSWER Percentage" "As part of a purchase agreement, the seller agreed to complete a roof repair, prior to closing. The seller has now changed his or her mind and refuses to complete the repair. What rights does the buyer have? - CORRECT ANSWER Rescission" "A broker offers a listing agreement giving the broker's office sole permission to sell the property for a period of 120 days. The sellers want to reserve the right to sell the property themselves without paying a commission. In this situation, the listing agreement that will BEST protect both parties' interests is a(n) - CORRECT ANSWER Exclusive Agency listing" "An easement created by adverse use would be an easement by - CORRECT ANSWER Prescription" "A seller revealed the property has no termites, but upon an inspection of the premises, the buyer learned there were termites. The buyer chose to go through with the contract and close. This is an example of - CORRECT ANSWER Waiver" "Persons or groups specifically exempted from discriminatory practices by the Civil Rights Act of 1968 include - CORRECT ANSWER Religious groups limiting leases on nonprofit housing to the members of its religion" "An appraiser used 80% of the value arrived at by the market comparison approach, 20% of the value arrived at with the cost approach, and 0% of the value by the income approach. This approach to value is known as - CORRECT ANSWER Reconciliation" "Eight years ago, a 15,000 square foot warehouse cost $40.00 per sq. ft. to rebuild. Its economic life is 50 years. The land is valued at $170,000.00. Today, the property is valued at - CORRECT ANSWER $674,000.00 15,000 X $40.00 = $600,000. $600,000 / 50 (economic life)= $12,000 (straight line depreciation per year) x 8 (effective age) = $96,000 subtracted from $600,000 = $504,000 plus $170,000 (land value) = $674,000.00" "Conveyance of a riding lawn mower included in a residential property sale would be by a - CORRECT ANSWER Bill of sale" "Who will receive excess funds (if any) at a foreclosure sale? - CORRECT ANSWER Mortgagor" "Under the 1988 Fair Housing Amendment Act, families with children may be - CORRECT ANSWER Required to supervise children using the swimming pool" "A loan whose payments do not fully liquidate the loan and thus requires a large final payment, is known as - CORRECT ANSWER Partially amortized loan" "Which of the following statements is true regarding depreciation? - CORRECT ANSWER Depreciation is a loss in value from any cause." "The present value of future income defines the - CORRECT ANSWER Income approach" "An ad used a term that triggered full disclosure of loan terms. The ad stated - CORRECT ANSWER $10,000 down" "When a lessee abandons the premises prior to the end of the term but leaves the property in good condition, what liability does the lessee have to the lessor? - CORRECT ANSWER Rent due for the remaining lease period or until a new lessee begins to pay rent" "A recapture clause in a lease allows - CORRECT ANSWER The lessor to terminate a lease if the lessee does not achieve a specific volume of sales" "A married couple sells their principal residence of 20 years for $750,000.00. The adjusted cost basis is $100,000.00. How much of their gain is taxable? - CORRECT ANSWER $150,000.00" "A builder increased the size of condominiums he was building from 1,500 to 2,200 square feet. He discovered that his cost increased by $70,000 per unit, while the increase in market value of the larger units was only $35,000. This is an example of the principle of - CORRECT ANSWER Diminishing returns" "Associate Jones has Kathy under contract to purchase Lonnie's property. Jones will receive commission from whom? - CORRECT ANSWER Jone's employing broker" "Brownfields were created by three previous owners. They are responsible for - CORRECT ANSWER The entire cleanup cost" "Which of the following would be considered artificial monuments? - CORRECT ANSWER Fences and sidewalks" "Real property becomes personal property through - CORRECT ANSWER Severance" "How much is Mr. Xi willing to pay for the property? The property produces an annual gross income of $52,000 and net operating costs are $6,000. The capitalization rate for comparable properties in the area is 8%. Interest on his loan will be 5%. Cap Rate is 8%. - CORRECT ANSWER $575,000 In order to determine the value of a single property, you must determine the NOI and then divide the NOI by the CAP Rate. $46,000/.08 = (Value) $575,000" "A third party that administers a trust on behalf of the beneficiary and carries out the wishes of the trustor is the - CORRECT ANSWER Trustee" "is an example of redlining. - CORRECT ANSWER A lender refusing to lend in a specific area" "The primary function of FannieMae (FNMA) is to - CORRECT ANSWER Buy and sell mortgages in the secondary mortgage market" "A homeowner sells his home to a buyer and agrees to finance $15,000.00 of the purchase price on an installment note. The $15,000.00 on the closing statement will be . entered as: - CORRECT ANSWER Credit Buyer and Debit Seller" "A broker's authority under a listing contract includes - CORRECT ANSWER Only the authority granted or implied" "In order to qualify for a tax-deferred exchange, a seller must complete the acquisition of another property within how many days of closing the first transaction? - CORRECT ANSWER 180 days" "If a husband and wife want a property they own together to automatically belong to the other when one of them dies, the best way for them to take title is as - CORRECT ANSWER Joint tenants" "Which is an example of the Gross Rent Multiplier? - CORRECT ANSWER Annual Rental Income of $80,000 and a sales price of $640,000 = 8 GRM" "Proper recordation of documents affecting title and interest to real property legally provides - CORRECT ANSWER Constructive notice" "Which of the following statements regarding a valid option contract is CORRECT? - CORRECT ANSWER If the option is not exercised, the optionor/owner retains the option consideration" "The clause that changes the priority of a loan, making it secondary to a later recorded loan is known as a(n) - CORRECT ANSWER Subordination clause" "A mortgage insurance premium (MIP) is associated with what type of loan? - CORRECT ANSWER FHA" "At the moment the seller and the buyer enter into a sales contract, a buyer's interest in the real property is known as - CORRECT ANSWER Equitable title" "An enforceable contract for the sale of real estate must be - CORRECT ANSWER In writing" "The arrangement between an owner of commercial property and a broker who agrees to procure renters, collect rents, and collects security deposits is commonly known as - CORRECT ANSWER A management agreement" "Total rents declined $1,000 per month as a result of the city banning on-street parking in front and along side a small office building. Assuming a capitalization rate of 8%, the building suffered a decline in value of - CORRECT ANSWER $150,000.00 $1,000 x 12 = $12,000 (annual rent) divided by 8% = $150,000" "A broker associate is listing a home with 2,000 square feet of living area. The owner insists on a listing price that reflects $95 per square foot of living area, plus $54,000 for the building site, and includes a 5% sales commission. The list price will be - CORRECT ANSWER $256,842.00 2,000 square feet X $95 = $190,000 + $54,000 = $244,000 $244,000 divided by 95% (0.95) = $256,842.11. Remember, the value of the home and land is 95% of the amount it must sell for to yield a 5% commission. The commission is NOT based on the $244,000." "The use of more than one appraisal method with different weights assigned to each method describes - CORRECT ANSWER Reconciliation" "A buyer purchased a commercial lot based on the seller's fraudulent representation as to lot size, zoning, and water connections. If unable to use the parcel as intended, the buyer would BEST seek the remedy of - CORRECT ANSWER Rescission" "The right to buy a property at a yet-to-be determined price, where the seller is free not to sell, is a - CORRECT ANSWER Right of first refusal" "One licensee is a seller's agent, while another licensee in the same firm is the buyer's agent in the same transaction. This is an example of - CORRECT ANSWER Designated agency or Dual-agency" "The last monthly interest payment on a mortgage was $825.77. If the interest rate was 7.2%, what was the balance due on the principal? - CORRECT ANSWER $137,628 $825.77 x 12 = Interest for 1 year. Interest for 1 year divided by 7.2% = $137,628" "Variations in the VA funding fee are based on the - CORRECT ANSWER 1.Down payment amount 3.Number of VA loans the veteran has had CORRECT ANSWER 4.Both #1 and #3 are correct" "Property managers may receive additional compensation for all of the following EXCEPT - CORRECT ANSWER Payments from suppliers for doing business with them" "In the case of a sublease, which of the following statements is true? - CORRECT ANSWER The sublessor is liable for damage caused by the sublessee." "Real property is donated for public use by means of - CORRECT ANSWER Dedication" "Exemptions to the Foreign Investment in Real Property Tax Act (FIRPTA) withholding would be - CORRECT ANSWER Personal residences under $300,000" "Death of one of the principals will terminate which type of contract? - CORRECT ANSWER Exclusive Right-to-Sell Listing Contract" "The intent of the parties, method of attachment, adaptation, and agreement are all legal tests for determining whether an item is - CORRECT ANSWER Transferred by bill of sale or remains with the property" "Starting at the northwest corner of Section 1, proceed in a southeasterly direction to the northeast corner of Section 12. From there, proceed west two miles to the southeast corner of Section 3. Proceed from there in a northeasterly direction to the point of beginning. What is the total acreage of the parcel described? - CORRECT ANSWER 640 acres The described parcel bisects Section 1 (320 acres) and Section 2. The 2 half sections (320 + 320) = one full section" "A client came down with lead poisoning. Most likely, it did not come from - CORRECT ANSWER Electromagnetic energy" "What would be the best record of the entire history of title to a property? - CORRECT ANSWER Abstract of title" "After closing and taking possession of a home, the buyer found that the seller had removed the chandelier. The buyer - CORRECT ANSWER Must turn to the inclusions section of the Buy/Sell Contract to determine his or her rights" "A buyer closes on a new home purchased from the builder, and within 3 months of living there, the roof fails. Who is liable? - CORRECT ANSWER The builder may be liable" "A business organizational form in which general partner(s) are liable for all debts and actions is called a - CORRECT ANSWER General partnership" “A property owner is selling a rectangular lot that has 150' of road frontage and is 375' deep. If the owner sells the lot for $50,000 per acre, what would be the sales price per front foot? - CORRECT ANSWER 430.40" "Under the concept of riparian rights, North Carolina owners of property adjacent to navigable rivers or streams have the right to use the water and - CORRECT ANSWER are considered to own the land to the edge of the water." "The Lead-Based Paint Hazard Reduction Act requires that in residential transactions subject to the Act, a - CORRECT ANSWER prospective buyer be given the EPA lead hazard informational pamphlet and a disclosure statement about the presence of lead in the property." "An appraiser is using the cost approach to value. After determining the replacement cost of the building, she will - CORRECT ANSWER both estimate depreciation on the building and add the land value that was determined by the sales comparison approach." "A home is purchased under a land contract. Until the contract is paid in full, the buyer has - CORRECT ANSWER equitable title to the property." "A tenancy for years is a tenancy that - CORRECT ANSWER expires on a specific date" "An offer to purchase real estate is a binding contract after it has been signed, communicated, and accepted by whom? - CORRECT ANSWER buyer and seller" "What is the Truth in Lending Act? - CORRECT ANSWER Made credit card companies and loaning to provide all information to clients" "Which of the following statements is TRUE about the sale of property that has been the owner's principal residence for the last 10 years? - CORRECT ANSWER The amount of the capital gain is determined from contrasting the realized amount from the sale of the real property to that property's cost basis" "To be valid in North Carolina, a deed must include - CORRECT ANSWER words of conveyance. {A valid deed must contain certain essential elements, including the following: deed must be in writing; grantor must have the legal capacity to execute a deed; grantee named with reasonable certainty must be identified; there must be adequate words of conveyance; there must be an accurate legal description of the property conveyed; deed must be signed by the grantors; deed must be delivered to and voluntarily accepted by the grantee. Deeds do not have to be sealed in North Carolina to be valid.)" "In North Carolina, the last day that real estate taxes for the current year may be paid without penalty is - CORRECT ANSWER by January 5 of the next year." "A real estate loan indicates that if the title transfers to the property, the lender must be paid in full immediately. This is known as - CORRECT ANSWER alienation." "While using the NCBA/NCAR 2-T Offer to Purchase and Contract, buyer and seller agree upon a 45-day due diligence period. Which of the following is TRUE? - CORRECT ANSWER Buyer has no obligation to purchase the property during the due diligence period and may be entitled to a full refund of any earnest money deposit paid." "what are specific liens - CORRECT ANSWER Special assessments, Mortgage or deed of trust, Real property taxes" "The principal balance on a loan is $98,763 and the monthly debt service payment is $584.00. The interest rate on the loan is 5.75%. What is the balance of the principal after the next monthly payment has been made? - CORRECT ANSWER $98,652.24" "The method that is the most reliable in estimating the value of an owner-occupied, single-family residence is the - CORRECT ANSWER sales comparison approach." "Which is TRUE of a term mortgage loan? - CORRECT ANSWER The entire principal amount is due at the end of the term." "Which of the following statements made by a broker would potentially be a violation of antitrust laws? - CORRECT ANSWER My competitor's fees are so low that no other brokerage firm will cooperate with that firm. (The most common antitrust violations are price -fixing, group boycotting, and allocation of customers or markets. Brokers must independently determine commission rates or fees only for their own firms. These decisions must be based on the broker's business judgment and revenue requirements without input from other brokers.)" "The deed that contains covenants against all encumbrances that would affect the title conveyed and assures quiet enjoyment is the - CORRECT ANSWER general warranty deed" "Which statement is TRUE of an adjustable rate mortgage loan? - CORRECT ANSWER Negative amortization is possible if there is a payment cap." "Each legitimate comparable should be as similar as possible in all the following - CORRECT ANSWER location, square footage, date of sale" "Which of the following does NOT terminate an offer? - CORRECT ANSWER an offer from a third party" "The main purpose of the property manager is to - CORRECT ANSWER obtain the highest possible net income for the landlord." "Which of the following loan terms will be considered a trigger term under the Truth in Lending Act? - CORRECT ANSWER monthly payment amount, Number of payments, Annual interest rate" "A cloud on title to a property may be cured by - CORRECT ANSWER obtaining quitclaim deeds from the party or parties with possible interests in the property." "A broker receives an earnest money deposit with a written offer that indicates that the buyer will leave the offer open for the seller's acceptance for 10 days. On the fifth day, and prior to acceptance by the seller, the buyer notifies the broker that he is withdrawing his offer and demands the return of the deposit. In this situation, which statement is TRUE? - CORRECT ANSWER The offeror has the right to withdraw the offer and have the deposit returned any time before contract acceptance." "The North Carolina Real Estate Commission has the power to - CORRECT ANSWER regulate the brokerage activities of licensees." "A woman grants a life estate to her grandson and stipulates that on the grandson's death, the title to the property will pass to her son-in-law. This second estate is known as an estate - CORRECT ANSWER A) in remainder interest." "A subject property is an 1,800-square-foot house with 3 bedrooms, 1½ baths, a 2-car garage and a deck that is listed for $163,500. A great comparable for the subject property sold for $166,200 and has 1,850 square feet, 3 bedrooms, 2 baths, a 1-car garage and a deck. The comparable property closed 2 months ago, and appreciation in the area has averaged 6% per year. Estimate a market value for the subject property, using the following market values: full bathroom = $2,000; 2-car garage = $5,000; additional square footage = $55 per square foot. - CORRECT ANSWER $166,612" "Which of the following statements is TRUE about the North Carolina Real Estate Commission's Working with Real Estate Agents brochure? - CORRECT ANSWER The licensee must provide the brochure in all sales transactions, including commercial sales." "A house cost $330,000 four years ago and just sold at a 5% profit. What was the sales price? - CORRECT ANSWER $346,500" "A typical promissory note for an FHA-insured loan may contain all the following - CORRECT ANSWER a mortgage insurance requirement, an alienation clause, an acceleration clause." "Provisional brokers - CORRECT ANSWER must successfully complete three postlicensing courses." "When brokers advertise on social media, they - CORRECT ANSWER must comply with NCREC rules regarding advertising and marketing." "Which type of listing provides the strongest protection of the broker's interests? - CORRECT ANSWER Exclusive right to sell" "Which contract does NOT have to be in writing to be enforceable in North Carolina? - CORRECT ANSWER two year lease" "A property is being appraised for loan purposes. The property is an elegant old mansion that has been converted into three apartments. Which approach to value is the appraiser most likely to use? - CORRECT ANSWER Income capitalization approach" "A purchaser buys a home for $143,900 and assumes the seller's loan balance of $109,700. How much excise tax will be paid at closing? - CORRECT ANSWER $288.00" "The North Carolina law that provides that a contract to sell land is not protected against a third party unless recorded is called the - CORRECT ANSWER The Connor Act is a state law that provides that many types of real estate documents are not valid as to third parties unless they are recorded. The documents covered include deeds, mortgages, installment land contracts, assignments, options, leases of more than three years, easements, and restrictive covenants." "The commission rate is 7¾% on a sale of $50,000. What is the dollar amount of the commission? - CORRECT ANSWER $3,875" "A man sold his house for $105,000. He owned the house for five years and made a profit of 25% on the sale over his previous purchase price. How much was originally paid for the house? - CORRECT ANSWER $84,000" "Which of the following situations present at signing would result in a void contract? - CORRECT ANSWER The seller has been declared incompetent by a court." "A seller wants to net $65,000 from the sale of her house after paying the broker's 6% fee based on gross sales price. Her gross sales price needs to be - CORRECT ANSWER $69,149." "A leasehold estate that automatically renews itself at each expiration is a - CORRECT ANSWER periodic tenancy." "Which of the following statements is FALSE about a property management contract? - CORRECT ANSWER It is not necessary if the landlord resides in another country." "In North Carolina, a seller's agent must disclose the agency status to a prospective buyer no later than - CORRECT ANSWER at first substantial contact." "A broker found a buyer for a seller's house. The buyer put down an earnest money deposit with the broker, and the parties signed a sales contract. Before the sale was closed, a title search revealed a defect in the seller's title, making it impossible for the seller to deliver good title. Which statement is TRUE? - CORRECT ANSWER The buyer was entitled to cancel the sale without penalty." "If the annual net income of a commercial property remains constant and the capitalization rate increases, the value of the property will - CORRECT ANSWER decrease (The rate of return is called the capitalization (or cap) rate and is determined by comparing the relationship of NOI to the sales prices of similar properties that have sold in the current market. Note that the cap rate is inversely related to the market value of the property; as one goes up, the other goes down.)" "The CAN-SPAM Act - CORRECT ANSWER establishes standards for the sending of commercial email." "A house is three blocks away from an international airport. This is an example of - CORRECT ANSWER economic obsolescence. (Caused by factors outside the subject property, economic (environmental or external or locational), obsolescence cannot be considered curable. Economic obsolescence also may be called locational obsolescence.)" "The sellers agree to an open listing for their house with only ABC Realty and Homes Realty. Open listings are not allowed to be entered into the local multiple listing service. The house is sold by a licensee with XYZ Realty. Which statement is TRUE regarding the sellers' obligation to pay commission? - CORRECT ANSWER Only XYZ Realty is entitled to the commission." "The effect of discount points is - CORRECT ANSWER both an increase in the lender's yield and a decrease in the borrower's interest rate." "A broker who fails to renew his license for more than two years - CORRECT ANSWER will have to start all over as though he never had a license" "Acceleration is a loan provision that says - CORRECT ANSWER the lender can call the loan due and payable in full if the borrower defaults." "Property management contracts are NOT required to contain - CORRECT ANSWER ) an automatic renewal clause." "Property management contracts are NOT required to contain - CORRECT ANSWER an automatic renewal clause." "A woman purchased a condominium unit and obtained financing from a local savings association. In this situation, which best identifies the buyer's role under a deed of trust? - CORRECT ANSWER grantor" "Which of the following statements is TRUE about the North Carolina Residential Property Disclosure Act? - CORRECT ANSWER Buyers have a rescission period after contract formation, if they do not receive the information required by the Act." "A broker enters into a listing agreement with a seller wherein the seller will receive $120,000 from the sale of a vacant lot and the broker will receive any sales proceeds exceeding that amount as commission. This type of agreement is called - CORRECT ANSWER a net listing. If the listing calls for a net fee, the agreement is referred to as called a net listing. A net listing provision refers to the amount of money the seller will receive if the property is sold. The seller's property is listed for this net amount, and the broker is free to offer the property for sale at any price higher than the listing price. Although not illegal in North Carolina, this type of listing is not recommended because of an obvious conflict of interest." "If a person is being compensated, which of the following activities does NOT require an active North Carolina real estate license? - CORRECT ANSWER Negotiating the sale of personally owned real estate" "The buyers enter into a purchase contract with the sellers to buy the sellers' house for $84,500. The buyers deposit $2,000 as earnest money and obtain a new mortgage loan for $67,600. The purchase contract provides for a March 15 settlement. The buyers and sellers prorate the year's estimated real estate taxes (using the 360-day method) of $880.96. The taxes are unpaid and will be paid later in the year by the buyers. The buyers have additional closing costs of $1,250, and the sellers have other closing costs of $850. How much cash must the buyers bring to the settlement? - CORRECT ANSWER $15,966 explanation-$84,500 purchase price less $67,600 loan, less $2,000 deposit, less $183.53 prorated taxes, plus $1,250 closing costs = $15,966.47 rounded to $15,966; proration of taxes: $880.96 ÷ 360 days = $2.447 per day × 75 days (Jan 1-Mar 15) = $183.25 credit buyer/debit seller" "A promissory note given with a mortgage would be the - CORRECT ANSWER Primary promise to repay the debt" "When a property goes into foreclosure and then the owner executes a lease, _______ when the property changes ownership. - CORRECT ANSWER The lease terminates" "A woman resided in her personal residence for 7 years. She married last month and deeded a one-half (1/2) interest in her home to her husband. She moved to his house and listed her home for sale. Upon sale, the maximum exclusion of capital gains tax is - CORRECT ANSWER $250,000" "Oral or verbal evidence may not be used to change a contract that has been put in writing due to ___________ - CORRECT ANSWER The parol evidence rule" "A husband and wife buy a home but fail to specify what form of legal ownership they preferred. What form of ownership are they presumed to have taken? - CORRECT ANSWER Tenancy in common" "A wife's right to a legal life estate in her husband's home upon his death is known as - CORRECT ANSWER Dower" "A purchaser is paying $350,000 for a property with a loan of $150,000. What is the down payment percentage? - CORRECT ANSWER 57.14% If you know the total and the part and want to find the percentage, divide the part by the total. The downpayment is $350,000 - $150,000 (loan amount), which is $200,000. $200,000 divided by $350,000 is 57.14%." "A home warranty does NOT cover - CORRECT ANSWER Developer encumbrances" "A method used to control density and overcrowding by restricting setbacks, building height, or the ratio of open area is known as - CORRECT ANSWER Bulk" "Real property transfers when a sole person dies leaving no will by - CORRECT ANSWER Descent" "A broker offers buyers one-stop shopping by providing title insurance, home inspection, mortgage origination, and other like services. This is an example of - CORRECT ANSWER A controlled business arrangement" "'M's purchase offer affords the seller three days to accept. One day after making the offer, and before acceptance, 'M' wants to withdraw the offer. 'M's buyer agent should inform 'M' that the - CORRECT ANSWER Offer may be withdrawn without penalty" "A residential lease provided that the landlord would supply water. The water to the building was cut off because the landlord had not paid the water bill. The tenant can leave the premises with no further lease obligations based on - CORRECT ANSWER Constructive eviction" "The term "quiet enjoyment" refers to - CORRECT ANSWER The tenant's right to use without owner's or other party's interference" "A conveyance from 'A' to 'B' for life and then to 'C' if 'C' is still alive. 'C' must outlive 'B' in order to obtain the property. 'C' has what interest in the property? - CORRECT ANSWER Contingent remainder interest" "Which of the following is NOT required for a deed to be valid? - CORRECT ANSWER Recordation" "The state wants to condemn and take a strip of land that bisects Farmer Brown's farm. The farm value will decrease far more than the per-acre value offered for the land taken. Farmer Brown should seek - CORRECT ANSWER Severance damages" "A property has a net operating income of $24,000.00 per year, and 8% is an appropriate capitalization rate. If the value of the land is $115,000.00, how much of the value is attributable to the building? - CORRECT ANSWER $185,000.00 (NOI) $24,000 divided by 8% = $300,000 value. $300,000 − $115,000 = $185,000" "is a situation where a property owner violates the property rights of his or her neighbor by having something built on the neighbor's land or by allowing something to hang over onto the neighbor's property - CORRECT ANSWER Encroachment" "An easement presumed by implication of law to be granted to the purchaser of land which is landlocked by seller's property is an - CORRECT ANSWER Easement by necessity" "An area where residential density is described overall, but the developer is allowed flexibility in placing the residences in groups interspersed with open space is - CORRECT ANSWER Cluster Zoning" "The legal right of a government to take private property for public use is known as - CORRECT ANSWER Eminent domain" "In the sales comparison approach to appraisal, a comparable property next door has a garage worth $6,000.00. Subject property has no garage. In completing his or her analysis, an appraiser will - CORRECT ANSWER Lower the price of the comparable property with the garage" "A home 42 feet by 36 feet was built 15 years ago on a lot now valued at $27,900.00. The home would have a current value equal to a reproduction cost of $108.00 per square foot if it were not for depreciation. The depreciation of the house is due to its flat roof, which must be resurfaced at a cost of $4.00 per square foot. To the nearest thousand, the current value of the property is - CORRECT ANSWER $185,000.00 42' X 36' = 1,512 square feet X $108.00 = $163,296.00; then 1,512 sq. ft. X $4.00 = $6,048.00, which is subtracted from $163,296. = $157,248; plus land = $185,148.00" "The legislation demanding that loan origination fees be disclosed to borrowers is known as - CORRECT ANSWER Real Estate Settlement Procedures Act and the Truth in Lending Act" "Broker A is preparing a closing statement on a house that sold for $150,000. Broker A holds the buyer's $5,000 earnest money deposit. The Buyer will put a $30,000 down payment. The remaining purchase price will be financed by a new mortgage on which the buyer will pay a 2 point loan origination fee. The buyer will pay $1,600.00 in miscellaneous closing expenses. Current year real estate taxes are $1,500, to which Buyer will receive a credit from seller for the remaining 6 months. On a June 30 closing, how much cash will the buyer owe at closing? - CORRECT ANSWER $28,250.00 Buyer Debits = $150k purchase price, $1,600 misc closing costs and $2,400 loan origination totaling $154,000. Buyer Credits = $5,000 earnest, Loan of $120,000 and $750 proration of this years taxes not yet due (but payable at the end of the year) for a total of $125,750. $154,000 minus $125,750 equals $28,250 Buyer must bring to closing."