Exam Question Master 1

Exam Question Master 1 T/F - Real estate professionals provide knowledge of market conditions - ANS True The product that real estate licensees market is - ANS Expert Information Real estate professionals provide expert information in three areas: - ANS Property transfer, market conditions, and how to market real estate and businesses. D.B.P.R (Department of Business and Professional Regulation) main office location - ANS - Located in Tallahassee, FL. DRE (Division of Real Estate) main office location - ANS FS mandated that the DRE offices and the principle office of the Commission be located in Orlando, FL. Target Market - ANS A specific group of prospects chosen because of its demographic, financial, and lifestyle characteristics. Farm Area (Target Market) - ANS A selected geographical area or a group of people from which to solicit real estate business and to which a real estate licensee devotes special attention and study. Follow-up - ANS What a sales associate does after a sale to maintain customer contact and goodwill. T/F - Follow-up refers to returning phone calls to prospective buyers in a timely manner. - ANS False - Follow-up is what a sales associate does for buyers and sellers after the sale (closing) to promote customer loyalty. T/F - Real estate professionals who specialize in the sale, purchase, and lease of businesses must hold a commercial license. - ANS False - In Florida, an active real estate sales associate or broker license is required to market business opportunities. No license distinction is made regarding the type of real estate. Five Major Sales Specialties - ANS Residential, Commercial, Industrial, Agricultural, Businesses Residential - ANS Residential sales associates need to know the best access routes and locations of schools, shopping facilities, and recreation facilities. They must be able to explain property taxes, homestead exemptions, restrictive covenants, and approximate utility costs in the area. One of the more important aspects of residential sales is knowing how to help prospective buyers obtain financing. Most real estate licensees specialize in the sale and purchase of owner-occupied residential property. Commercial - ANS Real estate professionals who specialize in commercial sales need expertise regarding income-producing properties, investment analysis, and the various techniques for increasing after-tax cash flow. Improved residential property of more than four units, retail stores, office buildings, and shopping centers are examples of income-producing commercial properties. Industrial - ANS Real estate licensees who provide real estate expertise of industrial real estate must have technical knowledge of the needs of different industries, such as transportation requirements, industrial construction methods, and local land-use restrictions affecting industrial properties. Many industrial brokers are developing and marketing industrial subdivisions. Agricultural - ANS Professionals who specialize in the sale of farms and agricultural land must be familiar with the operation of farms and the economic problems associated with the various types of farming. Real estate licensees who specialize in agricultural real estate are knowledgeable about farm operations and the federal programs affecting farm operations. Businesses - ANS Real estate licensees who engage in the sale, purchase, or lease of businesses are called business brokers. A business opportunity involves the sale or lease of an existing business, including the sale of tangible and intangible assets. In most states, if real property is an asset of the business, a real estate broker's license is required to sell the business. There is a presumption in Florida law that businesses will have some sort of real property involved, either land with physical improvements (such as a building) or a long-term lease. For this reason, in Florida, an active current real estate license is required to sell or lease business opportunities. Business Brokers - ANS Real estate licensees who engage in the sale, purchase, or lease of businesses. Business Opportunity - ANS The real estate activity dealing in the sale, purchase, or lease of businesses. Property Management - ANS The leasing, managing, marketing, and overall maintenance of property for others. A professional service conducted by a person or company hired to maintain and manage property on behalf of property owners. The scope of the work the property manager performs is detailed in the management agreement. Property Manager - ANS - The property owner's local representative who manages properties for various owners. - Primary duties are to secure and keep tenants, to provide financial records and accounts, and to provide upkeep and maintenance of the properties. - Primary charge is to protect the owner's investment and to maximize the owner's return on the investment. Rental Agent - ANS A person who, for a fee, acts as an intermediary between a person seeking to lease a housing accommodation and a property owner seeking to acquire a lease for a housing accommodation. Rental agents who are paid on a transaction basis must be licensed real estate agents. Salaried employees who work in an onsite rental office in a leasing capacity are exempt from a real estate license, provided they are not paid on a transactional basis. Absentee Owner - ANS A property holder who does not reside on the property and who usually relies on a property manager to supervise the investment. Community Association Manager - ANS A person who holds a CAM license to manage community associations of more than 10 units and associations with annual budgets in excess of $100,000. T/F A property manager is responsible for protecting the owner's investment. - ANS T T/F Rental agents manage the property once a tenant is secured. - ANS F Appraisal - ANS The process of developing and communicating an opinion of a property's value based on supportable evidence and approved methods as of a certain date. One who is registered, licensed, or certified by the DBPR and provides an estimate of value. - ANS Appraiser T/F Real estate licensees must abide by USPAP when preparing CMAs and BPOs. - ANS F T/F The Uniform Standards of Professional Appraisal Practice are standards of practice when conducting appraisals of real property that must be followed by appraisers but not real estate licensees. - ANS The statement is false. Florida law requires appraisers, real estate brokers, broker associates, and sales associates to abide by the Uniform Standards of Professional Appraisal Practice when conducting appraisals of real property. T/F An individual who offers to negotiate the terms of residential mortgage loan applications for compensation must be licensed as a real estate broker. - ANS F T/F Sources of real estate financing include commercial banks, savings associations, credit unions, and mortgage companies. - ANS T Land acquisition - ANS Developers and builders acquire raw land and then prepare the site for construction. They must carefully study zoning and land-use plans to determine what type of development is permissible. During this phase, the developer seeks approval for the proposed project from the local municipality. The developer incurs costs for engineering plans, attorney fees, surveys, and application fees. Subdividing - ANS The process of converting parcels of land into smaller units or lots. Development - ANS The process of improving raw land so that it can be put to productive use. Recording the subdivision plat map - ANS Before work can begin, most local governments require that developers submit a subdivision plat map of a new development for review by the applicable government planning board (Commission). Subdivision plat map - ANS An engineer's plan for land use superimposed on a map of the land to be developed. The subdivision plat map indicates the proposed size and location of individual building lots, streets, and public utilities, including water and sewer lines, and other clarifying information Dedication - ANS An offer of land for some public use, by an owner, together with acceptance by or on behalf of the public. T/F A subdivision plat map usually must be submitted to the local government planning board. - ANS T T/F A gift of land by a developer to a local government to be used for streets and sidewalks is called dedication. - ANS T speculative (spec) homes - ANS Building "on speculation" involves purchasing one or more lots and constructing a home (or homes) without a buyer in advance of construction (no presale). Custom homes - ANS A custom builder constructs homes under contract with a buyer, often using building plans provided by architects or buyers. Tract Homes - ANS Tract homes are a type of speculative building. A new subdivision will typically feature several model homes. Buyers select a floor plan from the models and a lot on which to build in the new subdivision. The Role of Government - Local Government - ANS Impacts the real estate business through property taxation and regulatory activities such as occupational licensing, business tax receipts, building permits, building moratoriums, zoning, and building codes. The Role of Government - State Government - ANS owns and manages a large amount of land and identifies coastal regions and other areas that are protected from development. State documentary and intangible taxes are required when ownership to real property is transferred or pledged as collateral for a mortgage. The Role of Government - The Federal Government - ANS impacts the real estate business through its fiscal and monetary policies. Various agencies influencing the real estate field include the Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Environmental Protection Agency (EPA), and the Internal Revenue Service (IRS). Subsequent units will cover in greater detail the role of the various units of government in the real estate business. T/F - The three categories of residential construction are spec homes, custom homes, and tract homes. - ANS T T/F - Purchasing one or more residential lots and constructing homes on the lots without first finding a buyer for the new construction is called building on speculation. - ANS T The NAR - ANS created the REALTOR® Code of Ethics and Standards of Practice. The NAR REALTOR® Code of Ethics and Standards of Practice emphasizes fair dealings in three major areas: - ANS (1) with clients, (2) with other real estate brokers, and (3) with the general public. NAR's fundamental strength is the local - ANS association of REALTORS® The largest trade organization in the world is - ANS the National Association of REALTORS® (NAR). A REALTOR® is a real estate licensee who is - ANS a member of the NAR. An important service created by NAR is the - ANS MLS (multiple service listing) The MLS - ANS The MLS is a database that allows real estate brokers representing sellers under a listing contract to share information about properties with real estate brokers who may represent potential buyers. The MLS compiles the listings of all member brokers, making the property information available to all brokers and their associates. T/F - The multiple listing service is a database that allows real estate licensees to share information about properties with other real estate licensees. - ANS T T/F - A person who is licensed by the Florida Department of Business and Professional Regulation (DBPR) is called a REALTOR®. - ANS F Summary of important points - ANS Real estate brokers provide specialized service for others in return for compensation in the form of a commission, fee, or other valuable consideration. Real estate professionals provide expert knowledge of property transfer, market conditions, and how to market real estate and businesses. The five major sales specialties are (1) residential, (2) commercial, (3) industrial, (4) agricultural, and (5) businesses. Farm area refers to a selected and limited geographic area to which a sales associate devotes special attention and study. Target marketing involves expertise in locating prospects. Business opportunity brokerage involves the sale or lease of an existing business. A real estate license is required to sell and lease business opportunities for others. Property management is a professional service conducted by a person or company hired to maintain and manage property on behalf of property owners. Absentee owners are property owners who do not reside on the property and who often rely on a professional property manager to manage the investment. Federal and state laws require appraisals that involve a federally related transaction to be prepared by a state-certified or licensed appraiser. When preparing appraisals, Florida law requires appraisers and real estate licensees to abide by the Uniform Standards of Professional Appraisal Practice (USPAP). The USPAP is a set of guidelines (standards of practice) to follow when conducting appraisal services. Real estate licensees may not represent themselves as state-certified, registered, or licensed appraisers unless they also hold those licenses. A comparative market analysis (CMA) is a marketing tool that is prepared for a potential buyer or seller based on recent sales of similar properties, properties currently on the market, and recent expired listings. A CMA may not b What type of license or other credential is required for an individual to engage in the sale, purchase, or lease of businesses for others? - ANS The answer is real estate license. Individuals and business entities engaged in the sale, purchase, or lease of businesses must qualify and be licensed as active real estate licensees. An individual who, for a fee, finds tenants for available properties in a community is called - ANS Rental Agent The sales associate who worked with the buyers in the transaction sets up an appointment with the buyers to visit them six weeks after the sale. The sales associate routinely makes a visit after the title closing to thank the buyers for choosing her real estate company and to extend an offer to help with the buyers' future real estate needs. What type of service is the sales associate providing? - ANS Follow-Up A developer transfers privately owned streets in a subdivision to the city with the agreement that the city will maintain the streets in the future. This process is called - ANS Dedication A map that indicates the size and location of individual lots, streets, and public utilities within a new development is called - ANS a subdivision plat map. An individual who takes residential mortgage loan applications or offers to negotiate the terms of residential mortgage loan applications for compensation must hold which license? - ANS Mortgage loan originator Which term best describes a property owner who is NOT a resident of the property? - ANS Absentee Owner Which term may only be used by members affiliated with the NAR? - ANS REALTOR® A marketing tool used by real estate licensees in the process of soliciting for listings that is intended to help sellers determine an asking price is called - ANS comparative market analysis (CMA) A couple tours several model homes in a new subdivision. The couple decides to purchase one of the available lots and have the builder construct one of the model floor plans on the lot. Which type of construction is this? - ANS A Tract Home Which statement concerning broker's price opinions (BPOs) is TRUE? - ANS The answer is the payment for a BPO must be paid to the broker and not directly to the sales associate who prepared the BPO. If a sales associate or broker associate performs a BPO, the compensation must be paid to the broker and not directly to the associate who prepared the BPO. The five major sales specialties do NOT include - ANS Mixed-use property What authority originates from the U.S. Constitution and relates to protection of health and welfare of citizens at local levels? A) Situs B) Community protection power C) Escheat D) Police power - ANS D) Police power Police power - The authority of government to protect the property, life, health, and welfare of its citizens. Situs refers to prospective buyers' preference for a certain area. Escheat provides for a government, normally a state government, to take the property of an owner who dies intestate and who has no known heirs entitled to receive the property. The power of escheat is a practical solution to ensure that property is always owned by someone. You have been hired to appraise the local public library building. The approach that is likely to be the MOST relevant is the A) comparable sales approach. B) income approach. C) public land and property approach. D) cost approach. - ANS D) cost approach. single-family homes / a vacant lot in an established neighborhood - sales comparison approach income-producing property - income approach special-purpose properties like hospitals, schools, or government buildings, newly constructed homes, cross-checking the other two approaches - cost approach Three claimants are requesting relief from the Real Estate Recovery Fund. All three claimants were named in a single judgment (the same real estate transaction). What is the maximum payment from the Recovery Fund for this claim? A) $75,000 B) $1,000,000 C) $150,000 D) $50,000 - ANS D) $50,000 The maximum payment from the fund for a single transaction is $50,000 T / F - Brokers and sales associates should NOT prepare deeds, mortgages, or promissory notes. - ANS T - Unless they are also attorneys, brokers and sales associates who prepare such legal documents could jeopardize their real estate licenses. T / F - A buyer brokerage agreement is an employment contract between the brokerage and a buyer. - ANS T - A buyer brokerage agreement is an employment contract with a buyer. T / F - The statute of limitations for an oral contract is five years. - ANS F - The statute of limitations for an oral contract is four years. T / F - Love and affection is an example of valuable consideration. - ANS F - Love and affection is an example of good consideration because it cannot be measured in terms of money. T / F - An implied contract is one in which some or all of the obligations or conditions of a contract are NOT stated expressly. - ANS T - With an implied contract, the obligations or conditions of the contract may be reasonably implied by the acts of the parties or by the nature of the transaction. T / F - A signed sale contract between the time of signing and the time of title closing is an executed contract. - ANS F - A sale contract between the time of signing and the time the title is conveyed from the grantor to the grantee is an executory contract. T / F - A real estate contract that includes a radon gas contingency is a voidable contract. - ANS T - A real estate contract that includes a radon contingency is voidable because if the contingency is not satisfied and released, the offer and acceptance element of an enforceable contract is not met. T / F - A real estate sale contract is an example of a bilateral contract. - ANS T - A bilateral contract obligates both parties to perform in accordance with the terms of the contract. A sale contract is a bilateral contract because both the seller and the buyer are obligated to perform. T / F - The person making an offer is the offeree. - ANS F - The offeree is the person receiving the offer. makes offer - offeror receives offer - offeree T / F - An electronic signature can be accepted as part of a real estate contract. - ANS T - Letters and other written communications, including a signature, may be sent by electronic means or facsimile, and will be considered part of the contract. T / F - A counteroffer will extend an offer. - ANS F - A counteroffer kills the original offer. The original law requiring that the annual percentage rate (APR) be disclosed to consumers was the A) Florida "Little FTC Act." B) Equal Credit Opportunity Act. C) Truth in Lending Act. D) Real Estate Settlement Procedures Act. - ANS C. Truth in Lending Act (TILA) Constructive notice is A) notarizing a conveyance. B) information advertised in the newspaper. C) provided by recording in the public records. D) information learned by reading, seeing, or hearing. - ANS C) provided by recording in the public records. A developer who wants to develop a new subdivision must submit A) a subdivision plat map to the planning commission. B) a site plan to the zoning board of adjustment. C) an existing land-use study to the planning commission. D) a thoroughfare study to the Department of Transportation. - ANS A) a subdivision plat map to the planning commission. Which individual must hold an active real estate license? A) A person who sells time-share periods for customers B) A person employed by Meadow Hills Cemetery to sell cemetery lots C) A salaried employee of an oil company who buys and sells land on behalf of the company D) An executor of a will who is selling the real property of a deceased individual - ANS A) A person who sells time-share periods for customers A woman has homesteaded her residence. Her home has an assessed value of $279,000. She is a nonveteran who is totally and permanently disabled as a result of a serious car accident. She is also legally blind. What is her cumulative county tax exemption on her homesteaded residence? A) $51,000 B) $50,500 C) $55,000 D) $26,000 - ANS A) $51,000 homestead over 75k = -50k (does not apply to school board tax rate - only city and county) disabled nonvet = -500 blind = -500 if she was a totally disabled veteran, she would be 100% exempt /// also disabled veterans under 100% but over 10% = -5000 if she were a widow that would be another - 500 remember that the "tax exemption" is the exemptions added up, the "taxable value of a home" is the value minus all the exceptions, and the cost of property taxes is a different calculation all together involving mills and a separate equation for city/county plus school board (see next card) A widow owns a homestead that is assessed for $90,000. The city tax rate is 7.6 mills; the county rate is 8.2 mills; and the school board rate is 9.1 mills. What will the owner owe in property taxes? - ANS City & County Taxes $90,000-25,000-25,000-500=$39,500 7.6 mills+8.2 mills=15.8 mills÷1000=.0158 39,500x.0158=$624.10 School Board $90,000-25,000-500=$64,500 9.1÷1000=.0091 64,500x.0091=$586.95 $624.10+$586.95=$1,211.05 The Florida Real Estate Commission is empowered by law to A) impose prison sentences up to 60 days. B) fine or otherwise discipline licensees. C) levy fines up to, but not exceeding, $500. D) assess damages resulting from breach-of-contract suits. - ANS B) fine or otherwise discipline licensees. The FREC ordinarily has no authority or jurisdiction over breach-of-contract actions. Nor are they empowered to levy or impose fines or imprisonment as penalties for certain crimes Which statement does NOT describe a planned unit development? A) A variety of types of housing may be used. B) The open space areas are maintained by a community association. C) Industrial parks are a welcomed offshoot of the PUD concept. D) Dwelling units are typically clustered, with planned green space areas between clusters. - ANS C) Industrial parks are a welcomed offshoot of the PUD concept. process of elimination - we know a variety of housing types may be used, common areas are maintained by associations, clusters and green space between clusters - I mean that option literally doesn't describe a PUD nor is it true. A real estate brokerage company is a transaction broker for a buyer. The buyer wants to purchase a new home so the sales associate takes him to three model centers listed by three competing real estate companies. The sales associate must give a written no brokerage relationship notice to A) no one. B) the model home employees at each model center. C) the buyer. D) the owner-developer of each new homes subdivision. - ANS A) no one. no brokerage relationship notices are for nonrepresentation relationships only Within what period of time must landlords of five or more units notify tenants in writing of the method used to hold security deposits? A) 15 days B) 30 days C) 21 days D) 3 business days - ANS B) 30 days Landlords of five or more units must notify the tenant in writing within 30 days telling them which method is used to hold the tenant's deposit: (1) non-interest-bearing Florida bank, (2) interest-bearing Florida bank, or (3) posted bond. The statute of limitations is the authority that outlines the A) remedies available in case of breach. B) period of time during which a contract may be enforced. C) requirement that real estate sale contracts be in writing. D) essential elements of a contract. - ANS B) period of time during which a contract may be enforced. ■ Written contracts—five years ■ Oral contracts—four years ■ Partly written and partly oral—five years for the written portion and four years for the oral portion A provision in all mortgages that allows the delinquent mortgagor to avoid foreclosure by paying all the back mortgage payments, late penalties, and costs of collection up until the time of foreclosure sale is the A) due-on-sale clause. B) acceleration clause. C) equity of redemption. D) defeasance clause. - ANS C) equity of redemption due-on-sale - Upon sale (alienation) of property by the borrower, loan is due immediately and payable to lender Acceleration - Upon default by the borrower, accelerates the entire debt due and payable to lender Defeasance - title theory, requires lender to convey legal title to borrower once debt is repaid; lien theory, requires lender to release mortgage lien when the debt is repaid (Borrower defeats the mortgage) Sales associate Terry Stoufer may have which information entered on his license, if applicable? A) Terry Stoufer, LLC B) Terry Stoufer Enterprises, LLC C) Best Homes, Inc. D) Terry's Real Estate Services - ANS A) Terry Stoufer, LLC - A license may only contain the licensee's legal name plus LLC, PA, or PLLC For application and licensing purposes, a Florida resident is a person who has resided in Florida continuously in A) a Florida residence for two months. B) a recreational vehicle for four months. C) a Florida hotel for six weeks. D) an apartment in Florida for four weeks. - ANS B) a recreational vehicle for four months. - the rule is 4 months or more in the state regardless of how temporary the living situation was. A prospective borrower is applying for a conventional fixed-rate loan. The borrower's monthly gross income is $6,500. The borrower's projected monthly PITI is $1,372, the PMI is $150, and, based on a credit report, the borrower has the following long-term obligations: Car payment: $400 Student loan: $390 Credit cards: $250 What is the borrower's total obligations ratio, and does it meet the lender's required threshold for a conventional mortgage loan? A) .3710 or 37.1% TOR is greater than the TOR threshold for a conventional loan B) .3941 or 39.4% TOR is greater than the TOR threshold for a conventional loan C) .2341 or 23.4% TOR is less than the TOR threshold for a conventional loan D) .3941 or 39.4% TOR is less than the TOR threshold for a conventional loan - ANS B) .3941 or 39.4% TOR is greater than the TOR threshold for a conventional loan The max TOR for a conventional loan is 36%. (max HER is 28%) (PITI + PMI + LTO) ÷ monthly gross income = TOR (1372+150+400+390+250) ÷ 6500 = 0.3941 or 39.4% which is more than allowed for a conventional loan A couple has a combined monthly gross income of $6,737, a monthly mortgage payment of $1,420, a PMI premium of $96, and additional monthly obligations including the following: ■ Car payment: $460 ■ Student loan: $200 ■ Credit card: $150 a. What is the couple's housing expense ratio? b. What is the couple's total obligations ratio? c. Does the couple qualify for a conventional mortgage? - ANS a. $1,420 PITI + $96 PMI = $1,516 total monthly housing expense $1,516 ÷ $6,737 monthly gross income = .2250 or 22.5% HER b. PITI + PMI + LTO = $1,516 + $460 car + $200 loan + $150 credit = $2,326 total monthly obligations $2,326 ÷ $6,737 monthly gross income = .3452 or 34.5% TOR c. To qualify for a conventional mortgage loan, the borrower must have an HER that does not exceed 28%. The borrower's HER is 22.5%. To qualify for a conventional mortgage loan, the borrower's TOR must not exceed 36%. The borrower's TOR is 34.5%, which is less than 36%. The borrower meets the TOR and HER ratio requirement for a conventional mortgage. What are the max TOR and HER ratios for Conventional, FHA, and VA loans? - ANS Conventional - 28% HER; 36% TOR FHA - 31% HER; 43% TOR VA - 41% TOR; no HER What is the formula for HER? - ANS monthly PITI + PMI ÷ monthly gross income = HER What is the formula for TOR? - ANS (PITI + PMI + LTO) ÷ monthly gross income = TOR Which statement concerning tenancy by the entireties is FALSE? A) The estate includes right of survivorship. B) The deed must specifically state intent to create such a tenancy. C) It is a form of concurrent ownership. D) The property must be owned by a wife and her husband. - ANS B) The deed must specifically state intent to create such a tenancy. every other option perfectly sums up "tenancy by the entireties". It is not mandatory for the deed to reflect this, it is implied. The purchase price of a business minus the value of the tangible assets of that business equals the intangible assets of the business. This includes A) real property. B) goodwill. C) common stock. D) personal property. - ANS B) goodwill. value of business-value of tangible assets=goodwill Goodwill is attributed to a business's reputation and the expectation of continued customer loyalty. Other intangible assets that add value include customer loyalty, licenses, franchises, copyrights, trademarks, and patents. The formula to calculate the overall capitalization rate is A) NOI × value (or price). B) NOI ÷ value (or price). C) debt service × value (or price). D) NOI ÷ owner's equity. - ANS B) NOI ÷ value (or price). This is the triangle with I over R x V - helps explain when to multiply and when to divide. Where: I = Net operating income (NOI) R = Capitalization rate V = Value (or Sale price) Rate × Value = Income Income ÷ Value = Rate Income ÷ Rate = Value Eligible homestead owners may transfer up to what amount of their Save Our Homes (SOH) benefit from their previous homestead to a new homestead? A) $225,000 B) $500,000 C) $100,000 D) $50,000 - ANS B) $500,000 To be eligible, the homeowner must establish a homestead exemption for the new home within 2 tax years of January 1 of the last qualified homestead exemption (not two years after the sale). In effect, only one tax year with no homestead exemption is allowed to transfer the SOH benefit. The duties of a real estate licensee, owed to a buyer or a seller who engages the real estate licensee as a single agent, do NOT include A) loyalty. B) presenting all offers and counteroffers in a timely manner, unless previously directed otherwise in writing. C) dealing honestly and fairly. D) limited confidentiality, unless waived in writing by a party. - ANS D) limited confidentiality, unless waived in writing by a party. Single agents abide by every duty except limited confidentiality and "additional duties that are mutually agreed to" dad, u pea cold Deal honestly and fairly Acct for all funds Disclose all known facts that materially affect value Use skill, care, diligence Present all offers and counteroffers in a timely manner Exercise limited confidentiality Additional duties mutually agreed Confidentiality Obedience Loyalty Disclosure (full) How much personal money may a broker place in a property management escrow account? A) $1,000 B) $5,000 C) None D) $200 - ANS B) $5,000 A broker is allowed to place in a sales escrow account up to $1,000 of personal or brokerage funds and up to $5,000 in a property management escrow account. Sales escrow - $1000 Property Management escrow acct - $5000 Combo - $5000 A tenant signed a 10-year lease requiring a monthly base rent of $1,900, plus 2% of all monthly gross sales volume over $95,000. The tenant also must pay all property taxes, insurance, and other costs normally considered property owner's costs. This is a A) variable sale lease. B) fixed lease. C) net lease. D) gross lease. - ANS C) net lease. (An agreement for the tenant to pay fixed rent plus property costs, such as taxes, insurance, and utilities.) Leases - Variable lease, the tenant pays specified rent increases at set future dates - tied to an index like CPI (inflation) - Fixed lease isn't really an option... its more of a characteristic of Gross or Net leases - Gross - Tenant pays a fixed rent; Landlord pay property expenses / Example: residential lease - Net - Tenant pays fixed rent plus property expenses / Example: Commercial Lease other kinds of leases: - Percentage Lease - Rent based on gross sales of tenant - Ground Lease - Long-term lease on the land, Tenant may erect a building Which action is NOT a requirement under the TILA-RESPA Integrated Disclosure Rule (TRID)? A) Give mortgage applicants the loan estimate within three business days of receiving the loan application B) Give mortgage applicants a list of competing lenders so they can comparison shop for the best rate C) Require that mortgage applicants receive the information booklet, Your Home Loan Toolkit, within three business days of loan application D) Give mortgage applicants the Closing Disclosure at least three business days before closing - ANS B) Give mortgage applicants a list of competing lenders so they can comparison shop for the best rate loan estimate and "your home loan tool kit" booklet within three days of loan application, and the closing disclosure at least three days before closing are 3 of the biggest factors of TRID 3 - 3 - 3 The owner of a hardware store has filed for bankruptcy and the real estate is up for sale. The money that the property will bring at auction is BEST described as which type of value? A) Salvage value B) Liquidation value C) Going-concern value D) Investment value - ANS B) Liquidation value Liquidation value is the value associated with a rapid sale. (foreclosure sale or bankruptcy auction) salvage value is the estimated amount for which improvements can be sold at the end of a structure's useful life (scrap value) Going-concern value is the value of an income-producing property or business characterized by a significant operating history. (involves goodwill and tangible assets of company) Investment value is the price an investor would pay, given the investor's own financing requirements and income tax situation. This type of value is personal to a particular investor. other types of value: - Assessed value is the value used as a basis for property taxation. - Insurance value - estimate of the amount of money required to replace a structure in the event of some catastrophic event such as fire. - Market value is the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale under certain guidelines published by Fannie Mae and Freddie Mac Which expense is subtracted to derive NOI? A) Vacancy and collection losses B) Mortgage payments C) Depreciation D) Income taxes - ANS A) Vacancy and collection losses Income approach Potential Gross Income PGI - Vacancy & Collection Losses -V&C + Other non rental Income +OI = Effective Gross Income EGI - Operating Expenses -OE =Net Operating Income NOI Operating Expenses - Fixed Expenses - Variable Expense - Reserves for Replacements Operating Expenses do NOT include: Any business expense, depreciation*, mortgage payments* (debt service) or income taxes*. The best answer would be "operating expenses" however the options force you to pick vacancy and collection losses Income Approach - Suppose your client is considering construction of a 10-unit apartment building. You are estimating the value of the vacant property zoned for apartments. Your survey of other apartment projects of similar size and quality in the market area reveals that each of the proposed new apartments could be competitive if rented at $665 per month. The survey also discloses that an annual vacancy and collection loss rate of 10% is typical for the area. By using normal costs of operation, a pro forma statement can be developed to indicate the probable annual NOI. Begin by estimating the potential gross income ($665 rent × 10 units × 12 months = PGI). - ANS Income approach - PGI-V&CL+OI=EGI /// EGI-OE=NOI Potential annual gross income $79,800 Vacancy and collection losses (10%) - 7,980 Effective annual gross income $71,820 Expenses (per year): Taxes $5,494 Insurance 996 Management 24,600 Repairs and maintenance 4,100 Reserve for replacements + 1,800 Total annual operating expenses $36,990 Effective annual gross income $71,820 Total annual operating expenses - 36,990 NOI $34,830 An appraiser has assigned the following weights to three adjusted sale prices: Comparable 1: $322,500, 40% weight Comparable 2: $319,000, 35% weight Comparable 3: $312,000, 25% weight What is the estimated market value of the subject property? A)$317,425 B)$286,225 C)$270,275 D)$318,650 - ANS D)$318,650 multiply the prices by the decimal of their weight $322,500x.4=129000 $319,000x.35=111650 $312,000x.25=78000 129000+111650+78000=318650 A licensee makes a statement that is material to the transaction as though it were a fact when the licensee does not know whether the statement is true or false, and the buyer relies on the statement. As a result of the statement made by the licensee, the buyer suffers damages. This situation constitutes A)breach of trust. B)deceptive services. C)culpable negligence. D)fraud. - ANS D)fraud. fraud is the intent to misrepresent a material fact or to deceive in order to gain an unfair advantage or to harm another person. Misrepresentation is the misstatement of fact or the omission or concealment of a factual matter. Misrepresentation can lead to fraud. The elements of a cause of action for fraud are that the (1) licensee made a misstatement or failed to disclose a material fact, (2) licensee either knew or should have known that the statement was not accurate or that the undisclosed information should have been disclosed, (3) party to whom the statement was made relied on the misstatement, and (4) party to whom the statement was made was damaged as a result. Culpable negligence involves negligent conduct that, while not intentional, involves a disregard of the consequences likely to result for one's actions. Brokers may be charged with culpable negligence if they do not give ordinary, careful attention to their brokerage and do not exercise reasonable control over the brokerage's agents. Breach of trust Failure to do or perform what has been promised. If a broker invites trust and then betrays that trust, the broker is guilty of breach of trust. The penalty for breach of trust for a first violation is a $1,000 to $2,500 administrative fine and a 30-day suspension to revocation "deceptive services" is not a term found in the book A developer purchased three oceanfront lots, each measuring 75 by 110 feet, for $20 per square foot. The developer later sold the lots for $200,000 each. What was the developer's percentage of profit on the sale of the three lots? (Round to nearest percentage.) A)25% B)21% C)18% D)2% - ANS B)21% money spent: 75ftx110ft=8250ftx3lots=24750ftx20$=495000 profit from sale 200000x3==105000 profit 105000/495000=.212121 = 21% Which type of appraisal technique is unique to business appraisal? A)Liquidation analysis B)Asset appreciation analysis C)Stock, bond, and debenture analysis D)Working capital analysis - ANS A)Liquidation analysis "Asset appreciation analysis", "Working capital analysis" and "Stock, bond and debenture analysis" are not in the book. The methods of appraising a business are comparable sales analysis, reproduction or replacement cost, income analysis, and liquidation analysis. An investor wanted to build a motel. A broker showed him three choice sites zoned hotel-motel. The investor promised to decide on a site in three weeks, so the broker took a two-week vacation. When the broker returned, the investor bought one of these sites. The broker sold the site, not knowing that the zoning on that site had been changed to industrial. Which is correct? A)The property owner is guilty of fraud. B)The broker is guilty of fraud. C)The broker is guilty of culpable negligence. D)The broker is not guilty of wrongdoing. - ANS C)The broker is guilty of culpable negligence. Culpable negligence involves negligent conduct that, while not intentional, involves a disregard of the consequences likely to result for one's actions. Brokers may be charged with culpable negligence if they do not give ordinary, careful attention to their brokerage and do not exercise reasonable control over the brokerage's agents. Which survey term is associated with a metes-and-bounds description? A)Section B)Township C)Point of beginning D)Range - ANS C)Point of beginning the other three options are associated with the govt survey system legal description POB is unique to metes-and-bounds, the most accurate method of three methods to describe both regularly and irregularly shaped parcels. The method is based on distances (metes) and directions (bounds). Metes-and-bounds descriptions begin and end with a starting point called a point of beginning (POB). metes and bounds distance and directions Failure to comply with the statute of frauds will result in A) a revocation of licensure. B) an illegal contract. C) a charge of fraud. D) an unenforceable contract. - ANS D) an unenforceable contract. The statute of frauds requires that contracts conveying an interest in real property be *in writing* and signed to be enforceable. The statute of frauds applies to purchase-and-sale contracts, option contracts, and lease agreements and listing agreements of more than one year. If you have located a township numbered T2S, R4E, the township due south of that township is A) T2S, R3E. B) T3S, R4E. C) T2N, R1E. D) T2S, R5E. - ANS B)T3S, R4E. draw it out - range is n&s, townships are e&w, T2S is 2nd block down (south) from the T base, met by r4E is left (east) of center on the 4th block. one skip south from there brings you to T3S, R4E A homesteaded property is located in Jupiter, Florida, in Palm Beach County. The property has been assessed at $185,000. The city tax rate is 8.8 mills, the county tax rate is 9.3 mills, and the school board levy is 6.5 mills. The owner is a widow and has qualified for and received homestead tax exemption. How much will the owner pay in property taxes? A) $3,308.70 B) $3,471.20 C) $3,923.70 D) $3,483.50 - ANS B) $3,471.20 city and county: =134500 8.8+9.3=18.1/1000=.0181 134500x.0181=2,434.45 school board =159500 6.5/1000=.0065x159500=1,036.75 2434.45+1036.75=3,471.20 A real estate license may be revoked without prejudice for which action? A) Issuance of a license by mistake of the Commission B) Culpable negligence C) Failure to account or deliver escrow funds D) Conversion - ANS A) Issuance of a license by mistake of the Commission Which federal law made bait-and-switch advertising a federal offense? A) Truth in Lending Act (TILA) B) Federal Reserve System (FRS) C) Equal Credit Opportunity Act (ECOA) D) Real Estate Settlement Procedures Act (RESPA) - ANS A) Truth in Lending Act (TILA) TILA makes bait-and-switch advertising a federal offense. The DBPR may issue which penalty for an initial offense of a minor violation by a licensee? A) Subpoena to appear B) Final order C) Notice of assignment D) Notice of noncompliance - ANS D) Notice of noncompliance The DBPR may issue a notice of noncompliance as a first response to a minor violation notice of assignment is not a thing, and the other two options pertain to formal complaints A broker's license was involuntary inactive for two years and one month. To operate again as an active licensee, the broker must complete A) 60 hours of the broker's post-licensing education course, 28 hours of continuing education, and pass the broker's licensing exam. B) FREC Course II and pass the broker's licensing exam. C) 42 hours of continuing education and pass the continuing education course exam. D) FREC Course I and pass the sales associate's licensing exam. - ANS D) FREC Course I and pass the sales associate's licensing exam. involuntary inactive status for over two years makes a license null and void, requiring a person to start from scratch. Which disclosure must be given to the buyer of both new and resale residential condominium units? A) Declaration B) Governance form C) Prospectus D) Estimated operating budget - ANS A) Declaration The declaration of condominium is an important condominium document because it is the document that creates the condominium. Creation of the condominium occurs when the declaration is recorded in the official records of the county where the property is located. the other 3 are Articles of incorporation, Bylaws and FAQ's. Estimated operating budget and Prospectus are specifically for new condos In addition to the four condominium documents previously discussed, unit owners of resale condominium units must give buyers three additional disclosures: Most recent year-end financial report Rules of the association Governance form In Florida, real property is assessed on January 1 of each year, and property taxes become a lien on the property on A) December 31, the same year. B) April 1, the next year. C) January 1, the same year. D) November 1, the same year. - ANS C) January 1, the same year. A broker received a $5,000 deposit from a buyer on Tuesday at 1:00 pm. The seller will not be available until Monday. The broker's normal banking day is Monday. The broker is required to deposit the $5,000 before the end of A) the next business day. B) business on Wednesday. C) business on Thursday. D) business on Friday. - ANS D) business on Friday. ■ Sales associates (and broker associates) must deliver escrow deposits to their broker by the end of the next business day following receipt of the funds. ■ Brokers must deposit escrow funds by the end of the third business day following receipt of the funds. Day 0 - Associate receives deposit from buyer Day 1 - Associate gives deposit to broker by end of day Day 2 - Day 3 - Broker must deposit deposit by end of day When computing the deadline for the broker to deposit the funds, the day the buyer (or tenant) gives the funds to the brokerage is not counted in the broker's three business days. AKA when the buyer skips the associate, the broker has an extra day to deposit the funds. A real estate company represents a motel owner who wishes to list one of his motels for sale. The owner has told the listing agent that he does not want to sell the motel to any racial minorities. Which statement is TRUE? A) Because this is not a sale of a residential dwelling under the Fair Housing Act, the listing agent may honor the owner's instructions. B) The listing agent may not refuse to show or sell the motel to a minority buyer; however, the owner may refuse to sell to certain individuals if he sells the property "for sale by owner." C) To refuse to sell or lease any real property based on a party's race is a violation of the federal Civil Rights Act of 1866. D) It is a violation of the Fair Housing Act to abide by the owner's wishes. - ANS C) To refuse to sell or lease any real property based on a party's race is a violation of the federal Civil Rights Act of 1866. The Civil Rights Act of 1866 prohibits all racial discrimination all the time. Which entity may NOT be registered as a real estate brokerage? A) Sole proprietorship B) Corporation sole C) Partnership D) Corporation for profit - ANS B) Corporation sole A corporation sole is an ecclesiastical or church organization, they cannot be registered as a real estate broker. Other entities that may not or need not be registered as a real estate brokerage are "joint Ventures", "Business Trust", "Cooperative Associations" or "Unincorporated Associations" Entities that MAY register as a brokerage: Corporations (foreign and domestic, for profit or not for profit) General Partnerships Limited Partnerships Limited Liability Companies Limited Liability Partnerships Sole Proprietorships Which governmental entity must be informed when the FREC takes disciplinary action against a real estate licensee? A) Florida Department of Administrative Law B) County courthouse where the licensee resides C) Division of Florida Condominiums, Timeshares, and Mobile Homes D) Division of Firearms and Tobacco - ANS C) Division of Florida Condominiums, Timeshares, and Mobile Homes FREC must inform the Division of Florida Condominiums, Timeshares, and Mobile Homes when any disciplinary action is taken by the FREC against any of its licensees. A licensed real estate broker has been hired by a lender to appraise a home for a buyer who has applied for an FHA loan. Which statement is TRUE regarding this situation? A) The broker is required to be a state-certified appraiser to perform this appraisal assignment. B) The broker may not accept this appraisal assignment because to do so is a conflict of interest. C) The broker may not charge for this assignment. D) The broker's license entitles him to appraise this property. - ANS A) The broker is required to be a state-certified appraiser to perform this appraisal assignment. Real estate licensees may perform appraisals for compensation; however, the appraisal services must not involve federally related transactions such as an FHA loan. Real estate licensees who are not state-certified appraisers are cautioned to get a statement in writing from the client that the appraisal is not associated with a federally related transaction and does not require the services of a state-certified appraiser before accepting the assignment. Which statement is FALSE regarding a corporation for profit that is doing business as a real estate broker? A) All stockholders must be registered with the FREC as inactive brokers. B) There must be at least one officer who is an active real estate broker. C) The broker must file the articles of incorporation with the Florida Department of State. D) The corporation must be registered with the FREC. - ANS A) All stockholders must be registered with the FREC as inactive brokers. A corporation is formed by filing articles of incorporation with the Florida Department of State. The owners of the corporation are the stockholders. At least one of the officers or directors must be licensed as an active broker (the principal broker or qualifying broker). I cant find anything about the brokerage needing to register with the FREC, perhaps that is assumed when they register with the DPBR or that they must register with FREC to become brokers? Which statement concerning characteristics of the real estate market is FALSE? A) Land is indestructible. B) Real estate is immobile. C) The real estate market is organized and controlled centrally. D) The market is slow to respond to changes in supply and demand. - ANS C) The real estate market is organized and controlled centrally. Land IS indestructible. Real estate IS immobile. The market IS slow to respond to changes in supply and demand. Government controls influence the real estate market through zoning, building codes, taxes, etc. Which secondary market participant is a guarantor of government-insured and government-guaranteed loans? A) Fannie Mae B) Freddie Mac C) HUD D) Ginnie Mae - ANS D) Ginnie Mae Ginnie Mae exists to solely guarantee the security of federally insured loans and federally guaranteed loans. You are appraising a five-year-old, single-family home. The livable area is 60 feet by 50 feet. The garage is 24 feet by 20 feet. According to figures obtained from a cost-estimating service, the base construction cost per square foot of livable area is $103 and $92 per square foot for the garage. Calculate the reproduction cost new of the structure. A) $303,720 B) $353,160 C) $358,440 D) $345,440 - ANS B) $353,160 Reproduction - duplicate Replacement - same function / different materials 60x50=3000x103=309000 24x20=480x92=44160 309000+44160=353160 An example of an ad valorem tax is A) a property tax. B) a special assessment. C) an income tax. D) a zoning tax. - ANS A) a property tax. ad valorem tax is based on the value of the property. A homeowner originally purchased a new home for $244,900. During the period of ownership, the homeowner spent $27,000 in capital improvements. The homeowner sold the home 16 years later for $329,900. The homeowner paid a brokerage fee of 6% of the sale price and paid other closing costs totaling $2,750. What was the homeowner's capital gain from the sale? A) $35,510 B) $35,456 C) $85,000 D) $62,456 - ANS B) $35,456 spent on the house 244900+27000=271900 figuring out brokerage fee 329900x.06=19,794 brokerage fee plus other closing costs 19794+2750=22,544 add all expenses 271900+22544=294,444 subtract from sale price ,444=35,456 in capital gain A buyer or seller must be given a brokerage relationship disclosure for which transaction? A) Purchaser of 15 acres of land zoned for 15 residential homes B) Purchaser of an auctioned residential property C) Purchaser of a single-family home working with a single agent buyer's broker D) Owner who lists a 10-unit town house property - ANS C) Purchaser of a single-family home working with a single agent buyer's broker written disclosures are required only for residential sale transactions when the brokerage firm acts in the capacity of a single agent or in a no brokerage relationship. Written disclosures are not required when the brokerage firm acts in the capacity of transaction broker because this relationship is presumed under Florida law. Residential sale transactions are defined as: ■ improved residential property of four or fewer units; ■ unimproved residential property zoned for four or fewer units; and ■ agricultural property of 10 or fewer acres. Brokerage relationship disclosure requirements do not apply to transactions involving nonresidential real estate, business opportunities, and lease agreements (see the following text box). Furthermore, brokerage relationship disclosure documents are not required for the auction or appraisal of real estate. TYPES OF TRANSACTIONS THAT DO NOT REQUIRE BROKERAGE RELATIONSHIP DISCLOSURES ■ Nonresidential transactions ■ Rent or lease agreements (except when there is an option to purchase residential property) ■ Business opportunities (except for property with four or fewer residential units) ■ Auctions ■ Appraisals Requirements of a valid deed do NOT include A) good or valuable consideration. B) voluntary delivery and acceptance. C) signature of two witnesses. D) signature of a competent grantee. - ANS D) signature of a competent grantee. ■ In writing (statute of frauds) ■ Names of the grantor and the grantee ■ Grantor must be of legal capacity (competent and of legal age) ■ Consideration must be described ■ Granting clause (words of conveyance) ■ Legal description ■ Signed by the grantor and two witnesses (deeds do not have to be acknowledged, notarized, or recorded to be valid in Florida, but if the grantee wants to give constructive notice of ownership, the deed must be notarized before it can be recorded in public records) ■ Voluntary delivery and voluntary acceptance of the deed Important facts concerning the grantee include the following: ■ The grantee does not have to be competent. ■ The grantee does not sign the deed (there is no signature line for the grantee) In relation to section 1 of a township, section 12 is due A) west. B) east. C) south. D) north. - ANS C) south. 6 5 4 3 2 1 7 8 9 10 11 12 13 24 25 36 A prospective tenant purchased a rental list from a broker and then rented a duplex that the list said included all utilities. The tenant discovered that only water was included in the rent and notified the broker within the legislated time limit. The tenant is entitled to A) 75% of the rental list fee. B) nothing unless the request for a refund is made in writing. C) no refund because the tenant agreed to rent the property. D) 100% of the fee paid. - ANS D) 100% of the fee paid. ■ The receipt must state that a prospective tenant who does not obtain a rental is entitled to be repaid 75% of the fee paid if requested within 30 days of the contract/receipt date. ■ If the information provided to the prospective tenant is not current or is inaccurate in any material respect, the broker must repay 100% of the fee to the prospective tenant on demand. A sales associate who is employed by an owner-developer who owns properties in the name of various entities may be issued A) multiple licenses. B) a commercial license. C) a group license. D) a branch office license. - ANS C) a group license. group license is a right granted a sales associate or broker associate to work various properties owned by affiliated entities under one owner developer. Multiple licenses are issued to a broker who qualifies as the broker for more than one business entity. Sales associates and broker associates may not hold multiple licenses. commercial license is not in the book, and branch office license is associated with registering a branch office. A seller transfers title to a buyer with a general warranty deed. In which clause of the deed does the seller define the quality of ownership interest conveyed to the buyer? A) Covenant of further assurance B) Habendum C) Seisin D) Covenant of quiet enjoyment - ANS B) Habendum habendum clause - A provision in a deed to real property that stipulates the estate or interest the grantee is to receive and the type of title conveyed. Covenant of seisin - Grantor owns the property and has the right to convey the property to the grantee Covenant of further assurance. The grantor promises to sign and deliver any legal instrument in the future that might be required to make the title good. Covenant of quiet enjoyment. The grantor guarantees peaceful possession undisturbed by hostile claims of title. A man is a 72-year-old retired college professor. The local lender to whom the man applied for a 30-year mortgage denied the man's loan application, even though he has sufficient income from his pension plan and an excellent credit history. A) The lender's actions violate the Equal Credit Opportunity Act. B) The lender's actions are legal because it is unlikely that the man will survive the term of the loan. C) This is a violation of fair housing laws. D) This is an example of redlining. - ANS A) The lender's actions violate the Equal Credit Opportunity Act. Financial institutions and firms engaged in extending credit must make credit available with fairness and without discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or receipt of income from public assistance programs A residential zone requires at least 7,500 square feet per lot. The developer is reserving 25 percent of the land for streets, sidewalks, and a community center. The tract of land for the development consists of 175 acres. How many residential lots are available for development? A) 762 B) 254 C) 813 D) 1,106 - ANS A) 762 acres to feet/lot min - green space 175x43560=7,623,000/7500=1016-25% 1016x.75=762 A real estate broker is accused of taking money from the company escrow account to pay personal expenses. The broker decides that she does not want to go through the hearing process so the broker turns over her real estate license to the DBPR. What term describes this situation? A) Voluntary relinquishment for permanent revocation B) Emergency suspension C) Suspension D) Revocation - ANS A) Voluntary relinquishment for permanent revocation A licensee-respondent may choose to avoid a disciplinary hearing and relinquish the real estate license in lieu of discipline, permanently revoking the license. In a deed, the warranty of quiet enjoyment pertains to A) property that is completely vacated. B) guaranteed satisfaction with the property. C) peace and tranquility on and around the property. D) peaceful possession undisturbed by others' claims of title. - ANS D) peaceful possession undisturbed by others' claims of title. Quiet enjoyment A provision in a deed guaranteeing that the buyer may enjoy possession of the property in peace and without disturbance by reason of other claims on the title by the seller or anyone else. If a seller refuses to pay a broker her sales commission after the residential property is sold, the broker may A) refuse to permit the closing to occur. B) keep the binder deposit as just compensation. C) file a vendor's lien on the owner's property. D) file a suit in the courts for her commission. - ANS D) file a suit in the courts for her commission. When a buyer or a seller refuses to pay a broker's commission after the commission has been earned, the broker must file a lawsuit and obtain a judgment for the commission owed. Depreciation (cost recovery) A) does not include the mortgaged portion of an apartment building in the amount to be depreciated. B) is an allowable deduction on investment property that requires no current outlay of cash. C) includes the cost of land in the amount to be depreciated. D) may be taken on a principal residence. - ANS B) is an allowable deduction on investment property that requires no current outlay of cash. Depreciation provides favorable tax relief as an allowable deduction that requires no current outlay of cash A mortgage in which changes in the interest rate may cause changes in the monthly payment amount is called A) an escalator mortgage. B) a partially amortized mortgage. C) a graduated-payment mortgage. D) an adjustable-rate mortgage. - ANS D) an adjustable-rate mortgage. partially amortized is the balloon payment one, the other two options are made up A title theory state is one in which a mortgage A) creates only an encumbrance on title to a property. B) transfers title to the lender or escrow agent until the loan is paid. C) creates a joint tenancy for the lender until the loan is paid. D) creates a tenancy in common until the loan is paid. - ANS B) transfers title to the lender or escrow agent until the loan is paid. Today, most states, including Florida, are lien theory states. The borrower retains title to the property. The lender is protected with a lien on the real property to secure the payment of the mortgage debt. If the borrower defaults on the mortgage debt, the lender will foreclose to recover the money owed. Which element is NOT essential in a valid real estate sale contract? A) A legal objective or purpose B) An earnest money deposit C) The vendor's signature D) Competent parties - ANS B) An earnest money deposit Earnest money is not required to make the contract valid. However, it shows the buyer's intent to go through with the transaction. A single agent broker received an offer on a